Eutelsat Communications today reported revenues for the Third Quarter and Nine Months ended 31 March 2017.
Rodolphe Belmer, Chief Executive Officer, commented: “Revenues for the Third Quarter were in line with our expectations, with a solid underlying performance in Broadcast. In consequence we affirm our revenue target for the Full Year with an outturn around the middle of our range of objectives.
During the quarter, we have made solid commercial progress, with an outcome of the Department of Defense Spring renewal campaign in line with expectations as well as the sale of new and renewal capacity at a number of our Video neighbourhoods. We have continued to maximise capex efficiencies notably with the agreement to host the EGNOS navigation system payload on EUTELSAT 5 West B and the contract with Blue Origin to further diversify our options for access to space. We have made significant headway on our strategic roadmap, with the closure of the first phase of the ViaSat partnership agreement. These elements enable us to look the medium term return to growth with confidence.”
During the Third Quarter, Eutelsat made further headway with
A solid commercial performance notably comprising:
An outcome of the Spring renewal campaign with the US Department of Defense in line with our expectations;
The signature with NTV-PLUS of a multi-year, multi-transponder contract covering the Express-AT2 satellite to reach homes in Far Eastern Russia and incremental capacity on the Express-AT1 satellite to consolidate coverage of Siberia;
The multi-year renewal of a HOTBIRD transponder by SRG SSR, Switzerland’s public broadcaster;
A multi-year contract with Ethiopia’s Information Network Security Agency for a new TV platform at the 7/8° West neighbourhood.
Continued progress on Capex efficiency via:
A hosted payload, with the selection of Eutelsat by the European Global Navigation Satellite Systems Agency (GSA) for the development, integration and operation of the next-generation EGNOS payload on EUTELSAT 5 West B, a contract valued at c. €100 million. Service is scheduled to start in FY 2019-20 for a duration of 15 years;
Greater choice in the launcher market through a contract with Blue Origin for a launch on the New Glenn rocket in the 2021-2022 timeframe, further diversifying options for access to space.
Further progress on the deployment plan, with the entry into service in January of EUTELSAT 117 West B over the Americas;
The closing of the partnership arrangement combining Eutelsat’s established European broadband business with ViaSat’s broadband technology and Internet Service Provider (ISP) expertise.
THIRD QUARTER REVENUES
Third Quarter revenues stood at €364.3 million, down 4.2% at constant currency and perimeter. On a reported basis, revenues were down 4.9% reflecting a 1.9 point negative perimeter effect (reflecting the disposal of Alterna’TV, Wins/DHI and DSAT Cinema) and a 1.2 point positive currency effect.
Quarter-on-quarter, revenues were down 1.6% on a reported basis and down 2.9% on a like-for-like basis.
Unless otherwise stated, all variations indicated below are on a like-for-like basis.
Video Applications (64% of revenues)
Third Quarter revenues for Video Applications amounted to €228.1 million, down 4.1% year-on-year. Revenues from Broadcast were down 3.5% year-on-year with the negative impact of the rationalisation of capacity at the HOTBIRD position and lower revenues from FRANSAT more than offsetting the contribution of incremental capacity launched during the course of last year (mainly EUTELSAT 36C for Sub-Saharan Africa). Without these two negative elements, Broadcast revenues would have been slightly growing.
Professional Video revenues were down 9.1% year-on-year, reflecting continued pressure on contribution services in this application.
Revenues were down by 0.9% quarter-on-quarter. This sequential decline was fully attributable to Professional Video, with Broadcast revenues broadly stable, despite the end of the contract with Orange TV from 1 January 2017, reflecting sustained performance in emerging markets.
At 31 March 2017, the total number of channels broadcast by Eutelsat satellites stood at 6,356, up 3.2% year-on-year. HD penetration continued to rise, representing 16.6% of channels compared to 13.1% a year earlier, or 1,057 channels, up from 807 (+31%) a year earlier.
On the commercial front, a multi-year, multi-transponder contract was signed with NTV-PLUS covering the Express-AT2 satellite at 140° East to reach homes in Far East Russia and incremental capacity on the Express-AT1 satellite at 56° East to consolidate coverage of Siberia. Elsewhere, a multi-year contract with Ethiopia’s INSA agency was also finalised for a new TV platform at 7/8° West neighbourhood, while SRG SSR, Switzerland’s public broadcaster renewed a HOTBIRD transponder on a multi-year basis.
Fixed Data (12% of revenues)
Third Quarter revenues for Fixed Data stood at €42.1 million, down 12.6% year-on-year. They continued to reflect ongoing pricing pressure in all geographies, albeit at a slightly slowing pace.
Quarter-on-quarter revenues were down by 1.4%.
Government Services (12% of revenues)
In the Third Quarter, Government Services revenues stood at €45.2 million, down 3.0% year-on-year, reflecting the carry-over effect of lower renewals in the US Department of Defense Spring 2016 campaign. They were broadly unchanged quarter-on-quarter.
The latest round of contract renewals with the US administration (Spring 2017) resulted in an estimated renewal rate of approximately 85% and new contracts represented an additional three 36-MHz equivalent transponders.
Fixed Broadband (7% of revenues)
In the Third Quarter, Fixed Broadband revenues stood at €24.2 million, up 36.0% year-on-year, reflecting the positive effect of the entry into service in May 2016 of EUTELSAT 65 West A on which the Ka-band payload is fully leased, and resilient trends in European broadband.
Mobile Connectivity (5% of revenues)
In the Third Quarter, Mobile Connectivity revenues stood at €17.2 million, up 21.1% year-on-year, reflecting mainly the full-quarter effect of the agreement with Taqnia for the sale of four spotbeams on the High Throughput payload of the EUTELSAT 3B satellite.
Other revenues amounted to €7.5 million in the Third Quarter versus €15.2 million a year earlier and €14.5 million in the Second Quarter.
Since 1 January 2017 Other Revenues no longer include revenues related to the agreements with SES at 28.5° East.
OPERATIONAL AND UTILISED TRANSPONDERS
The number of operational 36 MHz-equivalent transponders stood at 1,374 at 31 March 2017, up by 48 units compared with end-December 2016, reflecting principally the entry into service of EUTELSAT 117 West B in January. As a result, the fill rate stood at 68.2% at end-March 2017 versus 70.9% at end-December 2016, reflecting this new capacity and to a lesser extent the end of a contract with Orange TV.
The backlog  stood at €5.2 billion at 31 March 2017, versus €5.3 billion at end December 2016, and €5.9 billion a year earlier, reflecting natural consumption in the absence of significant renewals.
The backlog was equivalent to 3.4 times 2015-16 revenues. Video Applications represented 84% of the backlog.
NINE MONTH REVENUES
Revenues for the first nine months stood at €1,119.4 million, down 2.0% like-for-like. On a reported basis, they were down 3.3%, reflecting a 1.7 point negative perimeter effect (disposal of Alterna’TV, Wins/DHI and DSAT Cinema) and a 0.4 point positive currency effect.
Based on the performance of the First Nine Months, the group confirms its financial objectives for the current and next two years:
Relative to our objective of a decline in Revenues between -3% to -1% (at constant currency and perimeter) the outturn for the current year is expected around the middle of this range. For FY 2017-18, we maintain our expectation of broadly flat revenues, with a return to modest growth in FY 2018-19.
Following the implementation of the ‘LEAP’ cost-savings plan, the EBITDA margin (at constant currency) is expected above 76% for both FY 2016-17 and FY 2017-18 and heading towards 77% in FY 2018-19.
Cash Capex will stand at an average of €420 million per annum for the period July 2016 to June 2019, after taking account of future investments in Very High Throughput Satellite (VHTS) capacity.
Discretionary Free Cash Flow is expected to see three-year CAGR in excess of 10%, with FY 2015-16 as the base year.
The Group is committed to maintaining a sound financial structure to support its investment grade credit rating and aims at a net debt / EBITDA ratio below 3.3x.