SES announces half year 2018 results


SES S.A. announced solid financial results for the six months ended 30 June 2018, in line with the company’s expectations, with double-digit underlying growth in SES Networks driving an increase in overall underlying group revenue.

Key financial highlights

  • Reported revenue of EUR 981.4 million (H1 2017: EUR 1,048.7 million), down 0.5% at constant FX(1)

  • Underlying revenue(2) of EUR 961.4 million; up 1.5%(1) (SES Video: -2.3%(1,2) and SES Networks +10.6%(1,2))

  • H1 2018 EBITDA margin of 63.3% (H1 2017: 65.5%); 64.1% excluding restructuring charge of EUR 8.4 million

  • Net profit attributable to SES shareholders of EUR 227.7 million (H1 2017: EUR 275.5 million)

  • Free Cash Flow before financing of EUR 438.7 million, up 16.9% compared with H1 2017

  • Reaffirming revenue and EBITDA outlook for 2018 with revenue expected within the top half of the range and supporting the previously implied group EBITDA of over EUR 1,270 million, albeit at modestly lower EBITDA margin

  • Reaffirming 2020 revenue outlook for SES Networks with a more prudent forecast for SES Video. Updated 2020 EBITDA margin better reflects business mix going forward, with growing contribution of Networks and lower expectation for Video

Steve Collar, President and CEO, commented: “We have delivered a strong first half of 2018, fully in line with our expectations and continuing our momentum from the first quarter. It is pleasing to see that our underlying revenues are growing again, fuelled by sustained performance from our Networks business and in particular from our aeronautical and government customer segments.

“Our strong focus on execution in the core of our business delivered important renewals at our video neighbourhoods in Western Europe and the U.S., while we also secured new agreements to expand video platforms in Latin America and Eastern Europe.

“Strong sales execution in SES Networks delivered important new contracts across all verticals, including in our Fixed Data business, as well as Mobility which continues to grow strongly. We also secured important new agreements in both our U.S. and Global government businesses and the strong growth in the first half of 2018 was underscored with the recent signature of an important 'Blanket Purchase Agreement' with the U.S. Government for services on our O3b fleet.

“We have completed the review of the outlook, as described during our Q1 2018 results, and we are pleased to reaffirm our revenue and EBITDA outlook for 2018. Our expectation is that we will be able to deliver revenue within the top half of the range and deliver on our implied EBITDA, albeit with a modestly lower EBITDA margin. 2020 also looks solid. We have trimmed our expectations of our video business and adjusted our forecast EBITDA margin, reflecting the growing importance of SES Networks in our business mix and the end-to-end managed service nature of that business. Overall the picture for SES is a healthy one with a large and profitable video business, coupled with a dynamic and differentiated Networks business delivering double-digit year-on-year growth for the foreseeable future.

“On the topic of U.S. C-band, I am pleased with the FCC’s emphasis on the protection of incumbent users from harmful interference and the positioning of our market-based solution as a lead proposal in its recent meeting. Our solution will be able to deliver a landmark win-win, freeing up important spectrum quickly to support mid-band 5G roll-out across the U.S. while protecting and enhancing our video distribution neighbourhoods for the tens of millions of households that they serve.”

Key business highlights

  • Group revenue of EUR 981.4 million and EBITDA of EUR 621.1 million was in line with the company’s expectations, with underlying revenue (excluding periodic and other) of EUR 961.4 million growing by 1.5% (at constant FX).

  • The implementation of IFRS 15 accounting change is now expected to have no negative impact (previously EUR 15-20 million) as the standard makes an allowance for a transitional adjustment. The 2018 outlook has been restated accordingly, adding back the EUR 15-20 million, and an amount of EUR 10.4 million has been recorded in H1 2018 revenue.

  • SES Video’s underlying revenue of EUR 650.0 million in H1 2018 was 2.3% lower than H1 2017 at constant FX with growth in video services offsetting lower video distribution revenue. Q2 2018 underlying revenue of EUR 328.5 million included a EUR 10.4 million transitional adjustment, as noted above.

  • Important renewals were signed across SES’ core video neighbourhoods (including Viacom, M7 Group and Comcast). These complemented multi-year agreements in Latin America (PCTV) and Central and Eastern Europe (Telekom Srbija). MX1 signed additional business, notably to support the distribution of UHD broadcasting of the FIFA World Cup.

  • SES Networks’ underlying revenue of EUR 311.4 million was 10.6% higher than H1 2017 at constant FX. Mobility (+30.9%) and Government (+17.4%) delivered strong growth, while Fixed Data revenue (-5.6%) was lower than the prior period. SES Networks’ underlying revenue in Q2 2018 was EUR 158.4 million (up 12.7% versus Q2 2017 at constant FX).

  • The business continued to build momentum and secured important new agreements across all Networks’ verticals with Fixed Data business (Wateen Telekom and Our Telekom); in Mobility (STECCOM and MSC) and in Government (Burkina Faso and the European Space Agency), as well as a Blanket Purchase Agreement with the U.S. Department of Defense.

  • Periodic and other revenue in H1 2018 was EUR 20.0 million compared with EUR 39.6 million in H1 2017 at constant FX which included a significant up-front contribution from the sale of transponders to Global Eagle Entertainment.

  • EBITDA margin of 63.3% included a restructuring charge of EUR 8.4 million associated with the group’s on-going optimisation programme. Excluding this item, the EBITDA margin was 64.1%.

  • Net profit attributable to SES shareholders of EUR 227.7 million in H1 2018 included a positive tax contribution related to the recognition of a deferred tax asset following the entry into service of SES-16/GovSat-1 in Q1 2018, as well as the transfer of the O3b Jersey business to Luxembourg in Q2 2018.

  • Net debt to EBITDA ratio (as per the rating agency methodology) of 3.53 times increased from 3.27 times at Q4 2017 due mainly to the decrease in 12-month rolling EBITDA caused by FX and lower periodic and other revenue, as well as the higher proportion of capital expenditure, interest and dividend payments in the first half of 2018. The net debt to EBITDA ratio is expected to be below 3.30 times by the end of 2018.

  • SES’s fully protected contract backlog at 30 June 2018 stood at EUR 7.1 billion (30 June 2017: EUR 7.4 billion at constant FX). Over 90% of the 2018 expected group revenue is already contractually committed.

  • Reported revenue of EUR 981.4 million (H1 2017: EUR 1,048.7 million), down 0.5% at constant FX(1)

  • Underlying revenue(2) of EUR 961.4 million; up 1.5%(1) (SES Video: -2.3%(1,2) and SES Networks +10.6%(1,2))

  • H1 2018 EBITDA margin of 63.3% (H1 2017: 65.5%); 64.1% excluding restructuring charge of EUR 8.4 million

  • Net profit attributable to SES shareholders of EUR 227.7 million (H1 2017: EUR 275.5 million)

  • Free Cash Flow before financing of EUR 438.7 million, up 16.9% compared with H1 2017

  • Reaffirming revenue and EBITDA outlook for 2018 with revenue expected within the top half of the range and supporting the previously implied group EBITDA of over EUR 1,270 million, albeit at modestly lower EBITDA margin

  • Reaffirming 2020 revenue outlook for SES Networks with a more prudent forecast for SES Video. Updated 2020 EBITDA margin better reflects business mix going forward, with growing contribution of Networks and lower expectation for Video

Steve Collar, President and CEO, commented: “We have delivered a strong first half of 2018, fully in line with our expectations and continuing our momentum from the first quarter. It is pleasing to see that our underlying revenues are growing again, fuelled by sustained performance from our Networks business and in particular from our aeronautical and government customer segments.

“Our strong focus on execution in the core of our business delivered important renewals at our video neighbourhoods in Western Europe and the U.S., while we also secured new agreements to expand video platforms in Latin America and Eastern Europe.

“Strong sales execution in SES Networks delivered important new contracts across all verticals, including in our Fixed Data business, as well as Mobility which continues to grow strongly. We also secured important new agreements in both our U.S. and Global government businesses and the strong growth in the first half of 2018 was underscored with the recent signature of an important 'Blanket Purchase Agreement' with the U.S. Government for services on our O3b fleet.

“We have completed the review of the outlook, as described during our Q1 2018 results, and we are pleased to reaffirm our revenue and EBITDA outlook for 2018. Our expectation is that we will be able to deliver revenue within the top half of the range and deliver on our implied EBITDA, albeit with a modestly lower EBITDA margin. 2020 also looks solid. We have trimmed our expectations of our video business and adjusted our forecast EBITDA margin, reflecting the growing importance of SES Networks in our business mix and the end-to-end managed service nature of that business. Overall the picture for SES is a healthy one with a large and profitable video business, coupled with a dynamic and differentiated Networks business delivering double-digit year-on-year growth for the foreseeable future.

“On the topic of U.S. C-band, I am pleased with the FCC’s emphasis on the protection of incumbent users from harmful interference and the positioning of our market-based solution as a lead proposal in its recent meeting. Our solution will be able to deliver a landmark win-win, freeing up important spectrum quickly to support mid-band 5G roll-out across the U.S. while protecting and enhancing our video distribution neighbourhoods for the tens of millions of households that they serve.”

Key business highlights

  • Group revenue of EUR 981.4 million and EBITDA of EUR 621.1 million was in line with the company’s expectations, with underlying revenue (excluding periodic and other) of EUR 961.4 million growing by 1.5% (at constant FX).

  • The implementation of IFRS 15 accounting change is now expected to have no negative impact (previously EUR 15-20 million) as the standard makes an allowance for a transitional adjustment. The 2018 outlook has been restated accordingly, adding back the EUR 15-20 million, and an amount of EUR 10.4 million has been recorded in H1 2018 revenue.

  • SES Video’s underlying revenue of EUR 650.0 million in H1 2018 was 2.3% lower than H1 2017 at constant FX with growth in video services offsetting lower video distribution revenue. Q2 2018 underlying revenue of EUR 328.5 million included a EUR 10.4 million transitional adjustment, as noted above.

  • Important renewals were signed across SES’ core video neighbourhoods (including Viacom, M7 Group and Comcast). These complemented multi-year agreements in Latin America (PCTV) and Central and Eastern Europe (Telekom Srbija). MX1 signed additional business, notably to support the distribution of UHD broadcasting of the FIFA World Cup.

  • SES Networks’ underlying revenue of EUR 311.4 million was 10.6% higher than H1 2017 at constant FX. Mobility (+30.9%) and Government (+17.4%) delivered strong growth, while Fixed Data revenue (-5.6%) was lower than the prior period. SES Networks’ underlying revenue in Q2 2018 was EUR 158.4 million (up 12.7% versus Q2 2017 at constant FX).

  • The business continued to build momentum and secured important new agreements across all Networks’ verticals with Fixed Data business (Wateen Telekom and Our Telekom); in Mobility (STECCOM and MSC) and in Government (Burkina Faso and the European Space Agency), as well as a Blanket Purchase Agreement with the U.S. Department of Defense.

  • Periodic and other revenue in H1 2018 was EUR 20.0 million compared with EUR 39.6 million in H1 2017 at constant FX which included a significant up-front contribution from the sale of transponders to Global Eagle Entertainment.

  • EBITDA margin of 63.3% included a restructuring charge of EUR 8.4 million associated with the group’s on-going optimisation programme. Excluding this item, the EBITDA margin was 64.1%.

  • Net profit attributable to SES shareholders of EUR 227.7 million in H1 2018 included a positive tax contribution related to the recognition of a deferred tax asset following the entry into service of SES-16/GovSat-1 in Q1 2018, as well as the transfer of the O3b Jersey business to Luxembourg in Q2 2018.

  • Net debt to EBITDA ratio (as per the rating agency methodology) of 3.53 times increased from 3.27 times at Q4 2017 due mainly to the decrease in 12-month rolling EBITDA caused by FX and lower periodic and other revenue, as well as the higher proportion of capital expenditure, interest and dividend payments in the first half of 2018. The net debt to EBITDA ratio is expected to be below 3.30 times by the end of 2018.

  • SES’s fully protected contract backlog at 30 June 2018 stood at EUR 7.1 billion (30 June 2017: EUR 7.4 billion at constant FX). Over 90% of the 2018 expected group revenue is already contractually committed.

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