SES: First quarter 2018 results

SES S.A. announced solid financial results for the three months ended 31 March 2018. Group revenue and EBITDA were delivered in line with the company’s expectations, with strong underlying revenue growth in SES Networks.

Key financial highlights

  • Reported revenue EUR 477.6 million (Q1 2017: EUR 540.6 million), down -4.9% at constant FX(1)

  • Underlying revenue(2) EUR 474.5 million; stable (YOY) at constant FX(1) (SES Video: -3.6% and SES Networks +8.5%)

  • EBITDA margin of 63.7% (Q1 2017: 66.2%); 64.8% excluding a EUR 5.0 million restructuring provision as part of SES’s on-going optimisation programme

  • Net profit of EUR 98.2 million (Q1 2017: EUR 128.4 million)

  • Financial outlook remains unchanged and an update will be provided with the H1 2018 results announcement following the internal review by the incoming CEO and CFO

Steve Collar, President and CEO, commented: “We have made a solid start to 2018 with our Q1 results in line with our expectations. I am particularly pleased to see the underlying growth that we anticipated in our SES Networks business coming through, fuelled by strong performance in our aeronautical Mobility and Government business segments. More than 351 million households now rely on SES Video for their content while the number of channels carried across the SES system increased by more than 150 year-on-year to stand at nearly 7,800.”

“Our strong focus on execution across the business continues, as evidenced by three successful launches in the quarter and the entry into service of SES-15 early in Q1. This satellite has already become a prime satellite for the North American aeronautical market, with GoGo transferring more than 200 aircraft to the satellite within the first month of service launch and Global Eagle Entertainment taking significant incremental capacity to serve its airline customers. SES-16/GovSat-1 is on station and has begun to serve Government customers across Europe, Middle East and Africa. SES-14 will further expand our aeronautical capabilities in the Americas when it enters service later this year, while the four recently launched O3b satellites will also bring much needed capacity and capability to our low latency broadband network towards the end of Q2.”

“We signed important business during the course of the quarter, with long-term renewals at our core video neighbourhoods contracted at like-for-like pricing. We have also secured important customer commitments across all Networks’ verticals with Fixed Data business in Africa (CETel) and Asia (mu Space), aeronautical (STECCOM), Maritime (Carnival) and Government where we have signed multiple agreements with the U.S. Government to deliver service across our MEO and GEO fleet, as well as extending and growing our commitment to serve humanitarian and peace keeping operations.”

Key business highlights

  • Group revenue of EUR 477.6 million (Q1 2017: EUR 540.6 million) and EBITDA of 304.4 million (Q1 2017: EUR 357.6 million) was in line with the company’s expectations. Q1 2018 underlying revenue (excluding periodic and other) was EUR 474.5 million, representing a stable development compared with Q1 2017 at constant FX.

  • SES Video’s underlying revenue of EUR 321.5 million was EUR 12.2 million (or 3.6%) lower than Q1 2017 at constant FX including a reduction of EUR 9.2 million from the combined impact of IFRS 15 accounting changes and satellite health. Excluding these temporary factors, underlying revenue was 0.9% below Q1 2017.

  • SES Networks’ underlying revenue of EUR 153.0 million was EUR 12.0 million (or 8.5%) higher than Q1 2017 at constant FX. This reflected strong positive contributions from Mobility (+30.4%) and Government (+13.0%), while Fixed Data revenue (-6.0%) was affected by the lost revenues as a result of the satellite health issues that occurred in H2 2017.

  • Periodic and other revenue in Q1 2018 was EUR 3.1 million compared with EUR 27.7 million in Q1 2017 at constant FX which included an important up-front contribution from the sale of capacity to Global Eagle Entertainment.

  • EBITDA margin of 63.7% (Q1 2017: 66.2%) included a restructuring provision of EUR 5.0 million associated with SES’s on-going optimisation programme. Excluding this item, the EBITDA margin was 64.8%. A further provision of EUR 5-7 million is expected to be taken in Q2 2018, bringing the total amount to EUR 10-12 million.

  • Net profit attributable to SES shareholders of EUR 98.2 million (Q1 2017: EUR 128.4 million) included a positive tax contribution related to the recognition of a deferred tax asset following the entry into service of SES-16/GovSat-1 which is not expected to repeat.

  • Net debt to EBITDA ratio (per the rating agency methodology) was 3.41 times (Q1 2017: 3.05 times). This increased from 3.27 times at Q4 2017 due mainly to the decrease in 12-month rolling EBITDA caused by FX, lower periodic and other revenue, IFRS 15 accounting change and the restructuring provision, as well as the higher proportion of capital expenditure and interest payments in Q1 2018. Net debt to EBITDA is expected to be below 3.3 times at the end of 2018.

  • In March 2018, SES secured an eight-year EUR 500 million Euro Bond at a low annual coupon of 1.625% which allows SES to refinance an upcoming debt maturity at more favourable terms.

  • SES’s fully protected contract backlog at the end of Q1 2018 stood at EUR 7.2 billion (Q1 2017: EUR 7.2 billion at constant FX). Over 85% of the 2018 expected group revenue is already contractually committed.

  • The current financial outlook, as presented in February 2018, remains unchanged and an update will be provided with the H1 2018 results announcement, following the internal review by the incoming CEO and CFO.

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