“Solid YTD performance and value creation
initiatives on track”
SES S.A. announced financial results
for the nine months ended 30 September 2020.
This press release features multimedia. View
the full release here:
https://www.businesswire.com/news/home/20201104005829/en/
SES S.A.: YTD 2020 Results
Solid performance with continued strong underlying growth
across Networks
- Networks revenue +7.5% year-on-year(1,2); Q3 2020 Video revenue
stable quarter-on-quarter(1,2)
- Adjusted EBITDA(3) EUR 883 million representing 62.6% margin
with recurring operating expenses reduced 3.7% year-on-year
On track to deliver on FY 2020 financial outlook
- Over 97% of group revenue outlook (EUR 1,860-1,900 million(4))
already contracted
- ‘Exceptional’ COVID-19 cost mitigations of around EUR 50
million underpin Adjusted EBITDA(3) outlook (EUR 1,120-1,160
million(4))
Strong progress across four key initiatives that will drive
substantial long-term value
- On track to clear U.S. C-band by the stated deadlines and
realise the full USD 4 billion of accelerated relocation
payments
- Simplify & Amplify initiatives implemented unlocking EUR
40-50 million of annual EBITDA optimisations from 2021 onwards;
having concluded its investigation, the SES Board has decided not
to pursue a separation of Networks within SES at this time
- Building the multi-orbit ‘Network of the Future’ through launch
and interoperability of SES-17 and O3b mPOWER. Positioned to
capture growth resulting from the projected three-fold increase in
addressable market(5); USD 0.5 billion of contract backlog secured
across the programmes with commercial traction increasing as launch
approaches
- Foundational and expanded partnership with Microsoft and Azure
Orbital at the heart of ‘cloud-first’ strategy to transform service
delivery, expand service offerings and enhance customer
experience
Steve Collar, CEO of SES, commented: “Our solid
performance continued into the third quarter, despite ongoing
COVID-19 headwinds, with sustained growth across Networks and
stable revenue quarter-on-quarter in our Video business. We were
delighted to announce a substantial extension of our relationship
with Canal+ across three orbital locations and valued at over EUR
230 million, as well as a meaningful extension of our strategic
partnership with Microsoft as an Azure Orbital connectivity partner
and satellite partner for Azure Modular Data Centres. We took
measures early in the development of the COVID-19 pandemic to
protect the bottom line and the benefits of these cost-saving
measures are reflected in our resilient Adjusted EBITDA
performance. Execution remains the priority with the business well
placed to deliver on our full year outlook.
We are executing strongly on the four transformational
initiatives which, together with ongoing execution in the core of
the business, will deliver substantial value for our shareholders.
I am particularly pleased with the progress being made towards
repurposing U.S. C-band with the transition plan fully on track,
the FCC auction due to start next month and deadline for realising
the first relocation payment now only 13 months away. We have fully
implemented measures to focus the business, simplify operations and
unlock EUR 40-50 million of annualised EBITDA savings from 2021. We
have chosen not to pursue the separation of Networks within SES at
this time in favour of driving strong operational focus within our
Video and Networks businesses.
We are already strongly differentiated in Networks and, with the
launches of SES-17 and O3b mPOWER less than a year away, we are
continuing to deliver on our vision for cloud-enabled, multi-orbit,
seamless, automated and flexible network services. We have already
signed USD 500 million in contract backlog for SES-17 and O3b
mPOWER and will report regularly on our progress as we move towards
launch of our ‘Network of the Future’. An important enabler for
this network is our cloud-first strategy. With SES now an Azure
Orbital connectivity provider, our partnership with Microsoft has
extended to co-located O3b mPOWER gateways ensuring that Azure is
only ever one hop away for our customers.”
Key business and financial highlights
SES regularly uses Alternative Performance Measures (APM) to
present the performance of the Group and believes that these APMs
are relevant to enhance understanding of the financial performance
and financial position.
EUR million
YTD 2020
YTD 2019
∆ as Reported
∆ at constant FX
Average EUR/USD exchange rate
1.12
1.13
Revenue
1,410
1,452
-2.9%
-2.9%
Adjusted EBITDA
883
904
-2.3%
-2.5%
Net profit
154
250
-38.3%
-38.1%
- Group revenue of EUR 1,410 million included EUR 9 million of
periodic and other revenue (YTD 2019: EUR 18 million). Underlying
revenue (excluding periodic and other) declined by 2.3%
(year-on-year at constant FX) to EUR 1,401 million.
- Video underlying revenue of EUR 832 million (-8.1% at constant
FX) reflected the combination of lower Distribution revenue
(-7.3%), from ‘right-sizing’ of capacity by customers in mature
markets, and lower Services revenue (-10.3%) due to reduced
exposure to low margin activities and the impact of COVID-19 on
Sports & Events revenue. Q3 2020 underlying revenue (EUR 273
million) was in line with the previous quarter at constant FX.
- Networks underlying revenue grew, for the third consecutive
year, by 7.5% at constant FX to EUR 569 million with double-digit
growth in Mobility (+17.9%) and a return to growth in Fixed Data
(+6.4%), while Government (+1.3%) benefited from new business
secured since Q2 2020 and which contributed to sequential growth in
overall Networks revenue to EUR 189 million in Q3 2020.
- Adjusted EBITDA of EUR 883 million represented an Adjusted
EBITDA margin of 62.6% (YTD 2019: 62.3%). YTD 2020 operating
expenses (excluding restructuring and C-Band) were 3.7% lower
year-on-year at EUR 527 million.
- Adjusted EBITDA excludes a restructuring charge of EUR 28
million in relation to the Simplify & Amplify transformation
programme (YTD 2019: EUR 14 million) and EUR 21 million (YTD 2019:
nil) of operating expenses associated with the accelerated
repurposing of U.S. C-band spectrum.
- Depreciation and amortisation expense of EUR 537 million was
3.7% lower (year-on-year) as the impact of new satellites was more
than offset by other satellites reaching the end of their
depreciable life, as well as increases in the depreciable life of
certain assets.
- The reduction in net profit to EUR 154 million in YTD 2020
mainly reflected the combination of the lower reported EBITDA
(including the restructuring and C-band expenses noted above) and
net foreign exchange losses compared to YTD 2019, which also
included an income tax benefit of EUR 16 million. These items
offset the positive contribution from lower depreciation,
amortisation and net interest expenses.
- The Adjusted Net Debt to Adjusted EBITDA ratio of 3.2 times
(including 50% of the hybrid bonds as debt, per the rating agency
methodology) was lower (YTD 2019: 3.4 times).
- Fully protected contract backlog at 30 September 2020 was EUR
5.8 billion (gross backlog of EUR 6.3 billion when including
backlog subject to contractual break clauses). This includes USD
0.5 billion of future total revenue secured across SES-17 and O3b
mPOWER which remain on track to begin commercial service during the
second half of 2022.
- The outlook for FY 2020 revenue and Adjusted EBITDA, as well as
the forecast for capital expenditure (representing net cash
absorbed by investing activities excluding acquisitions and
financial investments), presented with the H1 2020 results, are all
on track.
Operational performance and commentary
REVENUE BY BUSINESS UNIT
Revenue (at reported
FX)
Change (year-on-year) at
constant FX
EUR million
Q1 2020
Q2 2020
Q3 2020
YTD 2020
Q1 2020
Q2 2020
Q3 2020
YTD 2020
Average EUR/USD FX rate
1.11
1.10
1.17
1.12
Video Distribution
212
211
205
628
-8.5%
-6.6%
-7.7%
-7.6%
- Underlying
212
211
205
628
-8.2%
-6.6%
-7.1%
-7.3%
Video Services
70
66
68
204
-6.7%
-12.5%
-11.7%
-10.3%
- Underlying
70
66
68
204
-6.7%
-12.5%
-11.7%
-10.3%
Video (total)
282
277
273
832
-8.1%
-8.1%
-8.7%
-8.3%
- Underlying
282
277
273
832
-7.8%
-8.1%
-8.3%
-8.1%
Government
70
72
74
216
-0.5%
-3.8%
+6.2%
+0.5%
- Underlying
70
72
74
216
-0.5%
-1.5%
+6.2%
+1.3%
Fixed Data
69
62
60
191
+14.3%
+4.9%
+0.5%
+6.6%
- Underlying
61
62
60
183
+1.6%
+7.9%
+10.3%
+6.4%
- Periodic
8
--
--
8
n/m
n/m
n/m
n/m
Mobility
58
57
55
170
+13.6%
+16.9%
+9.3%
+13.2%
- Underlying
58
57
55
170
+28.8%
+16.9%
+9.3%
+17.9%
Networks (total)
197
191
189
577
+8.4%
+4.6%
+5.2%
+6.0%
- Underlying
189
191
189
569
+7.7%
+6.5%
+8.4%
+7.5%
- Periodic
8
--
--
8
n/m
n/m
n/m
n/m
Sub-total
479
468
462
1,409
-2.0%
-3.3%
-3.5%
-2.9%
- Underlying
471
468
462
1,401
-2.2%
-2.6%
-2.1%
-2.3%
- Periodic
8
--
--
8
n/m
n/m
n/m
n/m
Other
--
1
--
1
n/m
n/m
n/m
n/m
Group Total
479
469
462
1,410
-1.9%
-3.3%
-3.5%
-2.9%
“Underlying” revenue represents the core business of capacity
sales, as well as associated services and equipment. This revenue
may be impacted by changes in launch schedule and satellite health
status. “Periodic” revenue separates revenues that are not directly
related to or would distort the underlying business trends on a
quarterly basis. Periodic revenue includes: the outright sale of
transponders or transponder equivalents; accelerated revenue from
hosted payloads during construction; termination fees; insurance
proceeds; certain interim satellite missions and other such items
when material. “Other” includes revenue not directly applicable to
Video or Networks
Video: 59% of group revenue (YTD 2019: 62%)
At 30 September 2020, SES carried a total of 8,157 TV channels
to viewers around the world including 2,964 channels in High
Definition and Ultra High Definition (up 1% year-on-year). 69% of
total TV channels are now broadcast in MPEG-4 with an additional 4%
in HEVC.
Video Distribution In
Europe, modest volume reductions on some long-term renewals secured
in late 2019 led to lower year-on-year revenue, albeit utilisation
rates across SES’ industry-leading European Video neighbourhoods
remained strong. North American development was impacted by ongoing
‘right-sizing’ of volume across U.S. cable neighbourhoods and the
reduction in the wholesale business, resulting in lower overall
year-on-year revenue. In the International markets, the
contribution of new revenue secured is yet to fully offset the
impact of challenging trading environments, leading to a modest
revenue reduction (year-on-year).
Video Services The decision
to reduce exposure to low margin services activities, and
postponement or cancellation of sports and events in H1 2020 due to
COVID-19, led to lower year-on-year revenue. HD+ revenue was lower
(year-on-year) due to reduced hardware sales as part of the ongoing
shift to software solutions in partnership with TV set
manufacturers and a modest reduction in the number of paying
subscribers compared with Q3 2019, although the number of paying
HD+ subscribers has improved over the last nine months.
Networks: 41% of group revenue (YTD 2019: 38%)
Government Strong
contributions from new business in both the U.S. Government and
Global Government businesses during the third quarter led to
overall growth (year-on-year) in YTD 2020 underlying revenue. U.S.
Government revenue was ahead (year-on-year) benefiting from the
contribution of new business signed in the first half of 2020 for
both additional MEO- and GEO-enabled network solutions. In Global
Government, YTD 2020 revenue was stable overall, with an improved
revenue run-rate compensating for the additional revenue in the
prior period related to the completion of certain milestone-driven
institutional projects.
Fixed Data Positive outturns
across the Americas and Asia-Pacific regions, as well as from new
business in energy and cloud, more than offset lower wholesale
revenue in Europe and contributed to overall growth (year-on-year)
in Fixed Data. Growth in the Americas was supported by new and
incremental managed services to tier one telecommunications
companies and Mobile Networks Operators to deploy 4G networks and
government funded rural WiFi projects. The successful deployment of
broadband access and mobile connectivity services to rural
communities on behalf of SES’ customers, notably using SES-12 and
MEO-enabled high throughput capabilities contributed to growth in
Asia-Pacific.
Mobility Double-digit growth
(year-on-year) in the Aeronautical segment reflected the full year
contribution of new business signed with several service providers
during 2019. Similarly, in the Maritime segment, the full revenue
contribution of expanded services with key cruise customers signed
in 2019 and a good trajectory in commercial shipping over the last
12 months led to double-digit growth (year-on-year) in revenue.
As the vast majority of SES’ commercial contracts, including in
Mobility, are fixed, the performance was largely unaffected by the
impact of COVID-19 on customers and end markets served by SES in
the Cruise and Commercial Aviation segments. Nevertheless, it is
expected that the development of both existing revenue and pace of
new business will continue to be impacted by COVID-19 in the near
term.
Future satellite launches
Satellite
Region
Application
Launch Date
SES-17
Americas
Fixed Data, Mobility, Government
Q3 2021
O3b mPOWER (satellites 1-3)
Global
Fixed Data, Mobility, Government
Q3 2021
O3b mPOWER (satellites 4-6)
Global
Fixed Data, Mobility, Government
Q1 2022
O3b mPOWER (satellites 7-9)
Global
Fixed Data, Mobility, Government
H2 2022
SES-18 & SES-19
North America
Video (U.S. C-band accelerated
clearing)
H2 2022
SES-20 & SES-21
North America
Video (U.S. C-band accelerated
clearing)
H2 2022
O3b mPOWER (satellites 10-11)
Global
Fixed Data, Mobility, Government
H2 2024
CONSOLIDATED INCOME STATEMENT
Nine months ended 30 September
EUR million
2020
2019
Revenue
1,410
1,452
Operating expenses
(576)
(562)
EBITDA
834
890
Depreciation and impairment
expense
(472)
(491)
Amortisation expense
(65)
(66)
Operating profit
297
333
Net financing costs
(135)
(115)
Profit before tax
162
218
Income tax expense
(14)
16
Profit after tax
148
234
Non-controlling interests
6
16
Net profit
154
250
Earnings per share (in EUR)
(2)
Class A shares
0.26
0.47
Class B shares
0.10
0.19
1) Net profit attributable to owners of the parent
2) Earnings per share is calculated as profit attributable to
owners of the parent divided by the weighted average number of
shares outstanding during the year, as adjusted to reflect the
economic rights of each class of share. For the purposes of the EPS
calculation only, the net profit for the year attributable to
ordinary shareholders has been adjusted to include the assumed
coupon, net of tax, on the perpetual bonds of EUR 36.5 million (YTD
Sept 2019: EUR 36.5 million). Fully diluted earnings per share are
not significantly different from basic earnings per share.
EUR million
2020
2019
Adjusted EBITDA
883
904
C-Band operating expenses
(21)
-
Restructuring expenses
(28)
(14)
EBITDA
834
890
QUARTERLY INCOME STATEMENT (AS REPORTED)
EUR million
Q1 2019
Q2 2019
Q3 2019
Q4 2019
Q1 2020
Q2 2020
Q3 2020
Average EUR/USD FX rate
1.15
1.12
1.12
1.10
1.11
1.10
1.17
Revenue
481
481
490
532
479
469
462
Operating expenses
(191)
(186)
(185)
(205)
(194)
(207)
(175)
EBITDA
290
295
305
327
285
262
287
Depreciation and impairment
expense
(156)
(167)
(168)
(206)
(158)
(161)
(153)
Amortisation and impairment
expense
(21)
(25)
(20)
(89)
(23)
(21)
(21)
Operating profit
113
103
117
32
104
80
113
Operating profit
margin
23.6%
21.4%
23.7%
6.2%
21.8%
17.0%
24.4%
Net financing costs
(38)
(44)
(33)
(50)
(46)
(45)
(44)
Profit before tax
75
59
84
(18)
58
35
69
Income tax benefit/(expense)
(7)
30
(7)
60
(9)
(1)
(4)
Non-controlling interests
4
8
4
4
2
2
2
Net Profit
72
97
81
46
51
36
67
Earnings per share (in EUR)
(1)
Class A shares
0.13
0.19
0.15
0.07
0.09
0.05
0.12
Class B shares
0.05
0.07
0.07
0.03
0.03
0.02
0.05
Adjusted EBITDA
298
297
308
333
288
294
301
Adjusted EBITDA margin
62.1%
61.9%
62.8%
62.7%
60.1%
62.8%
65.1%
C-Band operating expenses
-
-
-
-
-
(14)
(7)
Restructuring expenses
(8)
(3)
(3)
(6)
(3)
(18)
(7)
EBITDA
290
294
305
327
285
262
287
1) Earnings per share is calculated as profit attributable to
owners of the parent divided by the weighted average number of
shares outstanding during the year, as adjusted to reflect the
economic rights of each class of share. For the purposes of the EPS
calculation only, the net profit for the year attributable to
ordinary shareholders has been adjusted to include the coupon, net
of tax, on the perpetual bonds. Fully diluted earnings per share
are not significantly different from basic earnings per share.
QUARTERLY OPERATING PROFIT (AT CONSTANT FX)
EUR million
Q1 2019
Q2 2019
Q3 2019
Q4 2019
Q1 2020
Q2 2020
Q3 2020
Average EUR/USD FX rate
1.17
1.17
1.17
1.17
1.17
1.17
1.17
Revenue
476
471
480
515
466
455
462
Operating expenses
(188)
(181)
(180)
(196)
(187)
(198)
(175)
EBITDA
288
290
300
319
279
257
287
Depreciation and impairment
expense
(154)
(162)
(164)
(198)
(153)
(155)
(153)
Amortisation and impairment
expense
(21)
(25)
(20)
(84)
(22)
(21)
(21)
Operating profit
113
103
116
37
104
81
113
Adjusted EBITDA
296
293
303
325
282
288
301
C-Band operating expenses
-
-
-
-
-
(13)
(7)
Restructuring expenses
(8)
(3)
(3)
(6)
(3)
(18)
(7)
EBITDA
288
290
300
319
279
257
287
ALTERNATIVE PERFORMANCE MEASURES
SES regularly uses Alternative Performance Measures (‘APM’) to
present the performance of the Group and believes that these APMs
are relevant to enhance understanding of the financial performance
and financial position. These measures may not be comparable to
similarly titled measures used by other companies and are not
measurements under IFRS or any other body of generally accepted
accounting principles, and thus should not be considered
substitutes for the information contained in the Group’s financial
statements.
Alternative Performance Measure
Definition
Adjusted EBITDA
EBITDA adjusted to exclude material
exceptional and non-recurring items. In 2020 the primary
exceptional and non-recurring items are restructuring charges
announced in the framework of SES’ ‘Simplify and Amplify’
programme, and the net impact of the repurposing of U.S. C-Band
spectrum.
Adjusted Net debt to Adjusted
EBITDA
Adjusted net debt to Adjusted EBITDA,
represents the ratio of net debt plus 50% of the group’s hybrid
bonds (per the rating agency methodology) divided by the last 12
months’ (rolling) Adjusted EBITDA.
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Presentation of Results:
A presentation of the results for investors and analysts will be
hosted at 9.30 CET on 5 November 2020 and will be broadcast via
webcast and conference call. The details for the conference call
and webcast are as follows:
U.K. (Standard International Access): +44 (0) 20 3003 2666
France: +33 (0) 1 7037 7166 Germany: +49 (0) 30 3001 90612 U.S.A.:
+1 212 999 6659
Confirmation code: SES
Webcast registration:
https://channel.royalcast.com/webcast/ses/20201105_1/
The presentation is available for download from
https://www.ses.com/investors and a replay will be available
shortly after the conclusion of the presentation.
About SES
SES has a bold vision to deliver amazing experiences everywhere
on earth by distributing the highest quality video content and
providing seamless connectivity around the world. As the leader in
global content connectivity solutions, SES operates the world’s
only multi-orbit constellation of satellites with the unique
combination of global coverage and high performance, including the
commercially proven, low latency Medium Earth Orbit O3b system. By
leveraging a vast and intelligent, cloud-enabled network, SES is
able to deliver high quality connectivity solutions anywhere on
land, at sea or in the air, and is a trusted partner to the world’s
leading telecommunications companies, mobile network operators,
governments, connectivity and cloud service providers,
broadcasters, video platform operators and content owners. SES’s
video network carries over 8,000 channels and has an unparalleled
reach of over 367 million households, delivering managed media
services for both linear and non-linear content. The company is
listed on Paris and Luxembourg stock exchanges (Ticker: SESG).
Further information is available at: www.ses.com.
Disclaimer
This presentation does not, in any jurisdiction, including
without limitation 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 occur or 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.
1 Excluding periodic and other revenue (disclosed
separately) that are not directly related to or otherwise distort
the underlying business trends
2 At constant FX which refers to comparative figures
restated at the current period FX to neutralise currency
variations
3 Excluding restructuring charge and operating expenses
recognised in relation to U.S. C-Band repurposing (disclosed
separately)
4 Financial outlook assumes a EUR/USD FX rate of EUR 1 =
USD 1.15, nominal satellite health and launch schedule
5 Source: Northern Sky Research (June 2020) Networks
global industry capacity revenue growth over the next 10 years
(2020-2029)
View source
version on businesswire.com: https://www.businesswire.com/news/home/20201104005829/en/
Richard Whiteing Investor Relations Tel: +352 710 725 261
richard.whiteing@ses.com
Suzanne Ong External Communications Tel: +352 710 725 500
suzanne.ong@ses.com
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