Reported revenue up 12.2%, net profit increase
of 11.5%
SES (Euronext Paris:SESG) (LuxX:SESG) announced financial
results for the three months ended 31 March 2017.
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The successful launch of SES-10 on
SpaceX’s first ever mission using a flight-proven rocket serving
the Andean Community for direct-to-home broadcasting as well as
enterprise and mobility services- Credit: SpaceX
Delivering return to (like for like) growth in revenue and
profitability
- Revenue EUR 540.6 million, up 12.2%
over prior period (up 1.0% like for like1)
- EBITDA margin 66.2% and operating
profit margin 34.5% (Q1 2016: 67.6% and 32.2% like for like1)
- Net profit attributable to SES
shareholders of EUR 128.4 million, up 11.5% over prior period
- Net debt to EBITDA ratio2 3.05 times
(Q1 2016: 2.43 times), in line with SES’s financial framework
Improved business mix supporting growth acceleration,
re-affirming outlook for FY 2017
- Substantial contract backlog of EUR 7.8
billion (Q1 2016: EUR 7.6 billion)
- HDTV +6% (YOY) to 2,496 HDTV channels;
total TV channels increased 4% (YOY) to 7,610 channels
- Return to growth in Enterprise driven
by enhanced go-to-market capabilities
- Additional Mobility contracts signed
with Global Eagle Entertainment and Gogo using existing assets
- Return to growth in Government
underpinned by expanding market reach
Karim Michel Sabbagh, President and CEO, commented: “The
first quarter 2017 results were fully in line with our
expectations. SES returned to growth in Q1 2017 with all of our
data-centric markets developing positively, and we remain well
placed to deliver sustained growth in all four of our market
verticals.
The restructuring of SES’s go-to-market organisation model, with
the creation of two natural business units, represents a further
acceleration of our market-centric strategy. With SES Video and SES
Networks, we are coalescing our differentiated capabilities to best
serve customers globally.
The launch of SES-10 on SpaceX’s first ever mission using a
flight-proven rocket was a further step towards more efficient
launch capabilities, and is yet another demonstration of SES’s
strategy of working with our industrial partners to be at the
forefront of innovation.”
1 Comparative figures are restated at constant FX to neutralise
currency variations and assuming that RR Media and O3b had been
consolidated from 1 January 2016. For Q1 2016, reported EBITDA
margin was 74.0% and operating profit margin was 44.5%2 Based on
rating agency methodology (treats hybrid bonds as 50% debt and 50%
equity). Under IFRS (treats hybrid bonds as 100% equity), net debt
to EBITDA ratio was 2.60 times at 31 March 2017 (31 March 2016:
2.43 times)
OPERATIONAL REVIEW
In April 2017, the Board approved a restructuring of SES’s
go-to-market organisation model with the creation of two highly
focused communities – SES Video and SES Networks. The new
organisation, which will be implemented during 2017, allows SES to
deliver increasingly differentiated and essential satellite-enabled
communication solutions to clients in the video and data-centric
verticals.
Ferdinand Kayser, formerly Chief Commercial Officer, was
appointed CEO of SES Video. Steve Collar, formerly CEO of O3b, was
appointed CEO of SES Networks, which comprises the Enterprise,
Mobility and Government verticals and integrates O3b.
Video: 65% of group revenue (Q1 2016: 71%)
- Reported revenue up 4.5% to EUR 353.4
million (-4.2% like for like)
- Lower periodic and services revenue
were largely behind the movement in (like for like) revenue
- Contribution from further HD/UHD growth
and new capacity in fast-growing markets support stable to slight
growth (like for like) outlook for FY 2017
Lower periodic and services revenue in Q1 2017 largely accounted
for the (like for like) revenue reduction over the prior period.
The balance reflected a modest volume movement related to the
timing of MPEG-4 expansion in line with the group’s long-term
objective of sustaining the upgrade of the viewing experience to
High Definition (HD) and Ultra High Definition (UHD).
As at 31 March 2017, the SES global fleet carried 7,610 total TV
channels, which was 4% higher than 31 March 2016. SES’s HDTV
channel count grew by 6%, year-on-year, to 2,496 channels, while
the SES satellite network now also carries 22 commercial UHD
channels (31 March 2016: 15). 63% of total TV channels are
broadcast in MPEG-4 (31 March 2016: 57%).
SES’s satellite fleet is broadcasting video content to 325
million households around the world, which represents an increase
of around 8 million households (or 3%) over the prior year.
The main highlights in Video included:
- SPI International/FILMBOX Channels
Group signed a multi-year capacity agreement to extend audience
reach in Latin America and broadcast 10 HDTV channels to the
region;
- Media Broadcast Satellite and SES
agreed a multi-year capacity extension contract for use of a full
transponder at 19.2 degrees East to continue to serve customers in
Germany, Austria and Switzerland;
- SES’s UHD trials in North America
continued to gain momentum by adding seven additional U.S. cable
operators to the test platform, which is now working with 15 cable
operators across the U.S.;
- SES announced a collaborative agreement
with Verizon for testing of UHD in North America to drive the
overall development of UHD delivery solutions for Verizon Fios,
which is currently serving over 4.5 million video subscribers in
the U.S.; and
- Successful launch of SES-10, on
SpaceX’s first ever mission using a flight-proven rocket, which
will serve the Andean Community (Bolivia, Columbia, Ecuador and
Peru) for direct-to-home broadcasting as well as enterprise and
mobility services.
In addition, MX1 secured a long-term contract renewal and
expanded agreement with Beta Film Ltd. for a range of media
services, including content management, using the MX1 360 platform.
MX1 360 is a centralised, cloud-based media asset management
solution, which was also recently contracted by the Israel Premier
Football League to provide an end-to-end service for live editing
of sports content.
In January 2017, MX1 and Sky Deutschland agreed a multi-year
contract extension for the provision of back-up services to enable
business continuity. The agreement includes playout and turnaround
services, such as encoding, multiplexing and encryption, and uplink
services.
In April 2017, a multi-year distribution agreement was signed
between MX1 and VUBIQUITY. The new service offers broadcasters, TV
channels and rights holders the ability to aggregate content and
reach millions of viewers in the U.S. and worldwide, quickly and
simply through a single platform. This was followed by an agreement
for MX1 to support the linear broadcasting requirements for a major
global video on demand platform.
Enterprise: 13% of group revenue (Q1 2016: 12%)
- Reported revenue up 19.7% to EUR 71.7
million (+0.6% like for like)
- Further capacity increases by existing
O3b clients supporting overall trend of return to growth in
Enterprise, in line with expectations for FY 2017 (like for like)
revenue development
- Building positive traction for SES
(GEO) Enterprise+ services
The main highlights in Enterprise included:
- Intersat signed a multi-year capacity
agreement for the delivery of internet solutions across Africa,
using the SES Enterprise+ Broadband service. The agreement included
a new C-band capacity lease as well as the renewal of Ku-band
capacity and supporting teleport services;
- Palau Telecoms increased network
capacity for the fifth time in under two years, nearly doubling its
capacity requirement since going live on the O3b Medium Earth Orbit
(MEO) network;
- Timor Telecom extended their contract
for O3b services, which now delivers more than one gigabit per
second of low latency connectivity delivered to two sites operated
by Timor Telecom; and
- Presta Bist Telecoms increased by 66%
its contracted capacity with O3b in response to rising demand for
reliable, high-speed broadband in the Republic of Chad.
Mobility: 9% of group revenue (Q1 2016: 5%)
- Reported revenue up 126.4% to EUR 50.5
million (+63.3% like for like)
- Q1 2017 included upfront contribution
from Global Eagle Entertainment (GEE) related to AMC-3
contract
- Continued expansion of aeronautical and
maritime solutions underpin strong growth outlook for FY 2017
The main highlights in Mobility included:
- GEE announced the acquisition of a
Ku-band payload on SES’s AMC-3 satellite to boost capacity for
customers in North America, the Gulf of Mexico and the
Caribbean;
- Satcom Global contracted capacity on
both SES’s existing fleet and upcoming next generation hybrid
satellites with high throughput payloads, as well as ground network
infrastructure, to support delivery of seamless and high-speed
connectivity solutions to maritime, offshore and land
customers;
- SES and Gilat Satellite Networks
announced a strategic collaboration to deliver connectivity for
small yachts and vessels in the Caribbean, the Mediterranean and
North Sea, as well as Southeast Asia; and
- Gogo signed a new contract to use
capacity on 12 Ku-band transponders, and supporting ground
infrastructure, to expand high-speed inflight connectivity services
over the U.S. and Canada.
The agreements with GEE and Gogo reflect SES’s unique approach
of leveraging its global fleet, including non-station-kept
satellites, to support growth opportunities across the Mobility
sector.
Government: 11% of group revenue (Q1 2016: 12%)
- Reported revenue up 4.5% to EUR 59.4
million (+2.4% like for like)
- NATO Alliance Ground Surveillance (AGS)
contract and growth in O3b Government driving return to growth, in
line with expectations of stable to slight (like for like) revenue
growth for FY 2017
The main highlights in Government included:
- SES Government Solutions (SES GS)
continued to benefit from increasing stabilisation in U.S.
Government demand, which continues to recover from the impact of
the U.S. budget sequestration;
- SES and the Luxembourg Ministry of
Foreign Affairs extended a contract to maintain and support SATMED,
a satellite-enabled e-health platform, until 2020; and
- SES launched the Rapid Response Vehicle
(RRV), a new Government+ solution, capable of delivering
multi-orbit (GEO-MEO) and multi-frequency connectivity for a broad
range of government missions.
Future satellite capacity
On 30 March 2017, SES-10 was successfully launched into space on
board a SpaceX Falcon 9 rocket, becoming the first geostationary
satellite to launch on a flight-proven first-stage rocket booster.
The satellite is expected to begin commercial service by the end of
May 2017 and will provide capabilities for direct-to-home
broadcasting, enterprise and mobility services.
In April 2017, SES and Thales Alenia Space announced the
addition of a powerful Digital Transparent Processor (DTP) on board
SES-17. The fully digital SES-17 spacecraft will provide customers
with an unsurpassed ability to efficiently and flexibly modify
their networks in real time. This will enable customers to deliver
high-speed connectivity in a more efficient and cost effective
manner.
COMMITTED LAUNCH SCHEDULE
Satellite Region Application Launch
Date SES-10 Latin America Video, Enterprise Launched
(March 2017)
SES-11 North America Video, Enterprise H2 2017
SES-12(1) Asia-Pacific Video, Enterprise, Mobility H2
2017
SES-14(1) Latin America Video, Enterprise,
Mobility H2 2017
SES-15(1) North America Enterprise,
Mobility, Government Q2 2017
SES-16/GovSat-1(2)
Europe/MENA Government H2 2017
O3b (satellites 13-16) Global
Enterprise, Mobility, Government H1 2018
O3b (satellites
17-20) Global Enterprise, Mobility, Government H2 2019
SES-17 Americas Enterprise, Mobility,
Government 2020
1) To be positioned using electric orbit
raising (entry into service typically four to six months after
launch)
2) Procured by LuxGovSat
FINANCIAL REVIEW
Reported revenue was 12.2% higher than the prior period,
including the contribution from RR Media (acquired on 6 July 2016)
and O3b (consolidated on 1 August 2016). On a like for like basis
(at constant FX and assuming that RR Media and O3b had been
consolidated from 1 January 2016), revenue grew by 1.0% compared
with the prior year.
REVENUE BY MARKET VERTICAL
EUR million Q1 2017 Q1 2016 Change
(reported) Change (like for like)(1) Video
353.4 338.4 +4.5% -4.2%
Enterprise 71.7 59.9
+19.7% +0.6%
Mobility 50.5 22.3 +126.4% +63.3%
Government 59.4 56.8 +4.5% +2.4%
Other(2) 5.6 4.2 n/m n/m
Group Total
540.6 481.6 +12.2% +1.0%
1) At constant FX and assuming RR Media
and O3b had been consolidated from 1 January 2016
2) Other includes revenue not directly
applicable to a particular vertical and revenue contributions from
interim missions
Operating expenses of EUR 183.0 million (Q1 2016: EUR
125.4 million) were EUR 9.7 million (or 5.6%) higher on a like for
like basis, mainly due to higher variable costs associated with O3b
and HD+.
Reported EBITDA of EUR 357.6 million was 0.4% higher than
the prior period (-1.2% like for like). The reported EBITDA
margin of 66.2% compared to the Q1 2016 margin of 74.0% as
reported and 67.6% like for like.
Depreciation and amortisation expense increased from EUR
142.0 million in Q1 2016 to EUR 170.9 million due to the
consolidation of O3b and RR Media. Like for like depreciation and
amortisation was 9.7% lower than the prior period reflecting lower
depreciation on the O3b fleet and a net reduction in the
depreciation on the GEO fleet, which more than offset additional
depreciation from new capacity added.
Operating profit of EUR 186.7 million was 12.9% lower
(+8.2% like for like) than the prior period. Consequently, the
group’s operating profit margin was 34.5% (Q1 2016: 44.5% as
reported and 32.2% like for like).
Net financing costs of EUR 29.7 million (Q1 2016: EUR
42.6 million) included a net foreign exchange gain of EUR 7.1
million (Q1 2016: loss of EUR 3.5 million). Net interest expense
was in line with the prior year, as the additional finance costs
from RR Media and O3b were offset by lower same scope net interest
and higher capitalised interest.
As presented using IFRS recognition principles, net financing
costs exclude the interest payments for the EUR 1.3 billion of
hybrid bonds issued during 2016 at an average coupon of 5.05%.
The group’s income tax expense of EUR 27.7 million (Q1
2016: EUR 27.6 million) represented an effective tax rate of
17.7% (Q1 2016: 16.1%).
As a result of the consolidation of O3b on 1 August 2016, the
group’s share of associates’ results (net of tax) was nil
(Q1 2016: loss of EUR 28.3 million).
Net profit attributable to SES shareholders of EUR 128.4
million (Q1 2016: EUR 115.1 million) represented an increase of
11.5% over the prior period.
The group’s net debt to EBITDA ratio was 3.05 times as at
31 March 2017 (31 March 2016: 2.43 times), based on the treatment
of SES’s hybrid bonds as 50% debt and 50% equity.
Financial Outlook reaffirmed
The financial outlook aims to provide shareholders with an
understanding of SES’s growth trajectory, drivers and strategy
execution in each of the market verticals, as well as the group’s
long-term value creation potential.
For FY 2017, on a like for like basis1, SES is targeting stable
to slight revenue growth across Video and Government, complemented
by a return to growth in Enterprise and strong growth for
Mobility.
SES’s future revenue trajectory will benefit from the
significant contribution of recently added and forthcoming GEO and
MEO investments expected to be launched by end-2019, which are
expected to generate incremental annualised revenue of up to
EUR 750 million (equivalent to around 35% of 2016 group
revenue) at ‘steady-state’.
SES’s EBITDA margin1 is expected to be broadly stable for FY
2017 and FY 2018 and rising slightly thereafter, while operating
profit margin1 is expected to significantly improve to more than
40% in the medium term.
These foundations will allow SES’s to significantly grow Return
on Invested Capital (ROIC)2 to over 10% in the medium term.
1 On a like for like basis, assuming RR Media and O3b had been
consolidated on 1 January 2016. On this basis, Full Year 2016
EBITDA margin of 66.7% and Full Year 2016 Operating profit margin
(before gain on deemed disposal of equity interest) of 33.3%2 Net
Operating Profit After Tax (NOPAT) divided by average of opening
and closing shareholders’ equity plus Net Debt
CONSOLIDATED INCOME STATEMENT
FOR THE THREE MONTHS ENDED 31
MARCH
EUR million Q1 2017 Q1 2016
Average EUR/U.S. Dollar exchange rate 1.0631 1.0898
Revenue 540.6 481.6
Operating expenses
(183.0) (125.4)
EBITDA(1)
357.6 356.2
EBITDA margin 66.2% 74.0%
Depreciation and amortisation expense
(170.9)
(142.0)
Operating profit 186.7 214.2
Operating
profit margin 34.5% 44.5% Net
financing costs
(29.7) (42.6)
Profit before tax
157.0 171.6 Income tax expense
(27.7) (27.6)
Profit after tax 129.3 144.0
Share of associates’ results (net of tax)
-- (28.3) Non-controlling interests
(0.9) (0.6)
Profit attributable to owners of the parent
128.4 115.1
1) Earnings before interest, tax,
depreciation and amortisation
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under: https://www.ses.com/news/whitepapers
Presentation of Results:
A presentation of the results for investors and analysts will be
hosted at 9.30 CEST on 28 April 2017, and will be broadcast via
webcast and conference call. The details for the conference call
and webcast are as follows:
Belgium +32 (0)2 620 0138 France +33 (0)1 76
77 22 29 Germany +49 (0)69 2222 10619 Luxembourg +352 342 080 8654
U.K. +44 (0)20 3427 1910 U.S.A. +1 646 254 3363 Confirmation
code: 2692273 Webcast registration:
http://edge.media-server.com/m/go/SES_Q1_2017
The presentation will be available for download from the
Investors section of the SES website (www.ses.com), and a replay
will be available for two weeks from the Investors section of the
SES website.
About SES
SES is the world-leading satellite operator and the first to
deliver a differentiated and scalable GEO-MEO offering worldwide,
with more than 50 satellites in Geostationary Earth Orbit (GEO) and
12 in Medium Earth Orbit (MEO). SES focuses on value-added,
end-to-end solutions in two key business units; SES Video and SES
Networks. The company provides satellite communications services to
broadcasters, content and internet service providers, mobile and
fixed network operators, governments and institutions. SES’s
portfolio includes the ASTRA satellite system, which has the
largest Direct-to-Home (DTH) television reach in Europe, O3b
Networks, a global managed data communications service provider,
and MX1, a leading media service provider that offers a full suite
of innovative digital video and media services. Further information
available at: www.ses.com
Disclaimer
This presentation does not, in any jurisdiction, and in
particular not in the U.S., constitute or form part of, and should
not be construed as, any offer for sale of, or solicitation of any
offer to buy, or any investment advice in connection with, any
securities of SES nor should it or any part of it form the basis
of, or be relied on in connection with, any contract or commitment
whatsoever.
No representation or warranty, express or implied, is or will be
made by SES, its directors, officers or advisors or any other
person as to the accuracy, completeness or fairness of the
information or opinions contained in this presentation, and any
reliance you place on them will be at your sole risk. Without
prejudice to the foregoing, none of SES or its directors, officers
or advisors accept any liability whatsoever for any loss however
arising, directly or indirectly, from use of this presentation or
its contents or otherwise arising in connection therewith.
This presentation includes “forward-looking statements”. All
statements other than statements of historical fact included in
this presentation, including, without limitation, those regarding
SES’s financial position, business strategy, plans and objectives
of management for future operations (including development plans
and objectives relating to SES products and services) are
forward-looking statements. Such forward-looking statements involve
known and unknown risks, uncertainties and other important factors
that could cause the actual results, performance or achievements of
SES to be materially different from future results, performance or
achievements expressed or implied by such forward-looking
statements. Such forward-looking statements are based on numerous
assumptions regarding SES and its subsidiaries and affiliates,
present and future business strategies and the environment in which
SES will operate in the future and such assumptions may or may not
prove to be correct. These forward-looking statements speak only as
at the date of this presentation. Forward-looking statements
contained in this presentation regarding past trends or activities
should not be taken as a representation that such trends or
activities will continue in the future. SES and its directors,
officers and advisors do not undertake any obligation to update or
revise any forward-looking statements, whether as a result of new
information, future events or otherwise.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170427006938/en/
SESRichard WhiteingInvestor RelationsTel: +352 710 725
261Richard.Whiteing@ses.comorMarkus PayerCorporate
CommunicationsTel: +352 710 725 500Markus.Payer@ses.com
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