SES Reports Further Growth in First Half

SES S.A., one of the world’s leading satellite operators (Paris:SESG) (LuxX:SESG), reports financial results for the six months to 30 June 2010.

Romain Bausch, President and CEO, stated: "SES continued to implement its growth strategy during the first six months of the year, launching and bringing into service three new satellites. These satellites brought important replacement and incremental capacity, for the U.S., Europe, the Middle East, Africa and the Indian Ocean region. We are negotiating the disposal of ND SatCom as part of our strategy to focus services activities on developing demand for capacity on our satellites. The overall development of group activities and the financial result for the period is entirely in line with our previous guidance.”

Financial and Business Overview

Reported revenue grew by 4.5% to EUR 844.9 million, whilst reported EBITDA grew by 3.3% to EUR 632.7 million, yielding a margin of 74.9%. Recurring revenue growth was 4.6%, delivering a rise of 3.8% at the EBITDA level.

EBITDA grew at a slightly lower rate than Revenue, mainly as a consequence of the relative increase in contribution from services activities, which yield a lower margin. Operating Profit grew by 4.5% to EUR 386.3 million.

Principal developments in the period were the addition of new capacity following the entry into commercial service of NSS-12 in January and of ASTRA 3B in June. The SES-1 satellite was launched in May and brought into commercial service in mid-June, further mitigating the solar array circuit failure risk on the U.S. satellite fleet.

Other developments included the completion of the ProtoStar 2 acquisition, which will bring new capacity for the Indian and South East Asian markets.

New DTH platforms were established, in Puerto Rico, where Claro TV began transmissions, and notably in Africa, where Wananchi started operations in Kenya and Top TV began transmissions in South Africa. In the European markets, television channel growth continued to drive demand, with additional momentum coming from the accelerating growth of HD TV offerings. Sogecable and M7 further extended their HD offerings with capacity at ASTRA.

Satellite continues to play an important role by enabling the universal availability of TV programming initially distributed through digital terrestrial broadcasts, such as in France, where TNTSAT has seen record growth in the last six months.

There were no further instances of solar array circuit anomalies requiring commercially available capacity reductions on susceptible Lockheed Martin A2100 satellites, since the last disclosure in April.

SES ASTRA

SES ASTRA’s technical reach rose to 125 million TV homes, three million greater than the year before. For the first time, satellite’s reach outperforms that of cable in Europe, with 77 million satellite and 71 million cable households. HD channel growth continued, with 135 HD channels now broadcast via the ASTRA system.

The launch of ASTRA 3B and subsequent entry into service on 16 June added 21 transponders of new capacity. Twelve of these comprise the Middle East beam, which is now fully contracted, with eight transponders being contracted by Artel for corporate and government networks.

A second contract for hosted payload services, EGNOS 2, was concluded with the European Commission. The services will be carried out on ASTRA 5B and will provide navigational overlay services within Europe.

In March, SES ASTRA took full ownership of SES SIRIUS via the purchase from Swedish Space Corporation of the 10% it did not already own. SES SIRIUS operations are now fully integrated under the SES ASTRA segment.

In Spain, Sogecable has further developed its collaboration with SES ASTRA, increasing its HDTV offering on its Digital+ platform. SES ASTRA is providing two additional transponders at the prime orbital position of 19.2E.

Two transponders were contracted with M7 group for delivery of HD TV programming for the Netherlands from 23.5E, while in South Africa, Top TV of On Digital Media, began its new pay-TV offering with three transponders on the ASTRA 4A satellite. In addition, APS provides related uplink services to Top TV.

Broadband via satellite operations through ASTRA2Connect were extended with agreements signed with GSE of Italy for remote energy installation monitoring and with NASK of Poland for consumer and corporate network connectivity. In France, an agreement was signed with Wibox for delivery of broadband into areas without terrestrial network connectivity.

In the German market, HD+, the high definition services platform, has enjoyed considerable success, with over 1 million smart cards now already shipped to equipment manufacturers. With a broad range of some 20 HD+ set top box models available, the offer can also be accessed with other receivers via a CI+ module, of which over 100,000 have been sold.

In France, TNTSAT, the digital terrestrial offer via satellite, continued its strong growth with a total of 2.3 million receivers now sold into the market since its launch in March 2007.

SES WORLD SKIES

In the first half, SES WORLD SKIES continued its business development in key markets around the world. The first notable event was the entry into service of the NSS-12 satellite during January, delivering incremental capacity for the Indian Ocean region and Central Asia. The bulk of the additional capacity on this satellite has been contracted and is expected to be in commercial use by the end of this year.

The SES-1 satellite was launched in May and brought into commercial service in mid-June. This satellite replaces AMC-4 and AMC-2 which had been co-located at 101W. These satellites are in the process of being relocated to serve at other orbital positions: AMC-4 is planned to operate at the 67W orbital position, by agreement with the Andean Community; AMC-2 is flying at 79W where it will take over from AMC-5 and to provide continuity of service up to end of current contracts.

The purchase of ProtoStar-2 (renamed SES-7) has been completed. The satellite will be relocated to the orbital position 108.2E where it will be co-located with NSS-11 and provide further depth for services in the region, in particular for the Indian market, as of the third quarter of the year.

Strong progress was made in delivery of DTH platforms. In Puerto Rico, Claro TV began commercial operations on AMC-21; in Kenya, the Wananchi DTH and IP service platform initiated service on NSS-12; and Vietnamese operator AVG unveiled its DTH platform on NSS-6.

The HD TV programming line-up in the U.S. was extended, with HSN taking further capacity for HD programming on AMC-10, whereas Retro TV increased its SD offering by taking an additional two transponders’ capacity on AMC-7.

Government services activities were refocused with the reorganisation of Americom Government Services. The unit has been renamed SES WORLD SKIES U.S. Government Solutions (“USGS”) and will be increasing its emphasis on bandwidth sales, with correspondingly improved margins. A new hub was brought into service near Washington DC for the Department of Defense global operations, enhancing USGS’ ability to deliver additional capacity into the DoD global network.

Finally, a replacement satellite, SES-6, was ordered from Astrium. SES-6 will replace NSS-806 in the Atlantic Ocean region, almost doubling capacity and enhancing coverage in both C and Ku-bands for North, Central and South America. The spacecraft is scheduled for launch early in 2013.

Change in Presentation Concerning ND SatCom

During the last quarter, the Company indicated its intention to dispose of its controlling interest in ND SatCom, a supplier of satellite communication systems and equipment, which is part of the SES ASTRA segment. Management is committed to the execution of a plan to this effect and is involved in active discussions with different parties.

For these reasons, ND SatCom is being disclosed in the 2010 interim condensed financial statements as a ‘Discontinued operation’ under the provisions of IFRS 5, with the impact of the interest in ND SatCom being shown under the heading ‘Discontinued operations’ in the Income Statement and on two dedicated line items in the Statement of Financial Position. Comparative numbers for the prior year have been restated onto the same basis.

For comparative purposes, the following table sets out the reported numbers (“As reported”) against those which would have been reported if IFRS 5 had not been applied (“Proforma with ND SatCom”).

Euro millions		At 30 June 2010		At 30 June 2009			Variance		%
Revenue
- As reported		844.9		808.1			+36.8		+4.5%
- Proforma with ND SatCom		868.4		843.4			+25.0		+3.0%
EBITDA
- As reported		632.7		612.2			+20.5		+3.3%
- Proforma with ND SatCom		625.3		607.0			+18.3		+3.0%

Financial Outlook and Guidance

The results for the first half of the year are in line with our previous guidance and provide a solid base for future growth. Recent commercial agreements underline the growth potential in the markets served. The addition of new capacity on ASTRA 3B, the integration of the SES-7 satellite into the SES fleet, and the start of services on NSS-5 at 340 degrees East is integral to the achievement of our growth targets in 2010 and thereafter.

SES reiterates its guidance of the recurring revenue growth target in a range of 4% to 5% for 2010, with recurring EBITDA increase in line with the recurring revenue growth. Infrastructure activities are expected to continue to deliver a recurring EBITDA margin above 82%. Services activities are expected to deliver a recurring EBITDA margin of between 11% and 15%.

For 2010 to 2012 SES continues to target a compound annual growth rate for recurring revenue of 5%. This growth rate includes the negative impact of the termination of analogue DTH transmissions in Germany, the bulk of which is expected to occur by mid-year 2012. This top line growth translates into a corresponding recurring EBITDA growth.