EUTELSAT First Quarter 2017-18 Revenues

26 October 2017

Eutelsat Communications reported revenues for the First Quarter ended 30 September 2017.

Note: Since its First Half 206-17 results on 9 February 2017, Eutelsat publishes revenues on the basis of five applications: Video, Fixed Data and Government Services (Core Businesses), Fixed Broadband and Mobile Connectivity (Connectivity).

Rodolphe Belmer, Chief Executive Officer, commented: “First Quarter revenues were in line with our expectations. Our key operational metrics were well oriented with a further rise in HD penetration, a stabilisation of the Backlog and an improved Fill Rate on a quarter-on-quarter basis. The Fall renewal campaign with the US Government yielded a favourable outturn, at some 95% in value while the outcomes of Video renewals during the quarter were positive, notably with Polsat on HOTBIRD. Elsewhere we took further measures to optimise Video distribution with the absorption of Noorsat in the MENA region.

For the remainder of the year, revenues in our Core Businesses are on track, and Mobility will further benefit from the entry into service of EUTELSAT 172B in November. However, the late availability of the payload leased on the Al Yah 3 satellite, representing the majority of the capacity dedicated to Konnect Africa, will push out revenues in Fixed Broadband. In recognition of this delay, revenue expectations for FY 2017-18 are mechanically adjusted from ‘broadly stable’ to between -1 and -2%. This adjustment will not affect our ability to attain our other objectives, in particular EBITDA margin and discretionary free cashflow, which are all re-affirmed for the current and future years.”
FIRST QUARTER REVENUES4

First Quarter revenues stood at €349.1 million, down 6.7% at constant currency and perimeter. On a reported basis, revenues were down 9.3% reflecting a €6 million negative perimeter effect (disposal5 of Wins/DHI and DSAT Cinema) and a €5 million negative currency effect.
Excluding ‘Other’ revenues, the underlying applications were down 1.0% like-for-like.

Quarter-on-quarter, revenues were down 2.6% on a reported basis and by -0.2% on a like-for-like basis.

Unless otherwise stated, all variations indicated below are on a like-for-like basis.

Core businesses
Video Applications (65% of revenues)
First Quarter revenues for Video Applications amounted to €223.3 million, down 0.8% year-on-year. Revenues from Broadcast were up 0.5% year-on-year excluding the carry-forward impact of the termination of the TV d’Orange contract last year, with growth coming from Russia (at the 36° East and 56° East orbital positions) and MENA (at the 7/8° West and 7° East orbital positions).

Professional Video revenues continued to reflect ongoing tough conditions.

Revenues were up by 0.7% quarter-on-quarter.
At 30 September 2017, the total number of channels broadcast by Eutelsat satellites stood at 6,755, up 6.6% year-on-year. The number of HD channels stood at 1,210 versus 940 a year earlier, up by 28.7% and represented 17.9% of channels compared to 14.8% a year earlier.
On the commercial front a major contract was renewed with Cyfrowy Polsat at the HOTBIRD position as well as with the distributor, Globecast. Elsewhere, the Group took steps to streamline Video distribution in MENA with the absorption of Noorsat, its largest reseller in the region.

Fixed Data (11% of revenues)
First Quarter revenues for Fixed Data stood at €37.1 million, down 11.7% year-on-year. They continued to reflect ongoing pricing pressure in all geographies.

Quarter-on-quarter revenues were down by 4.7%.

Government Services (12% of revenues)
In the First Quarter, Government Services revenues stood at €41.1 million, up 1.1% year-on-year, reflecting the carry-over effect of the solid commercial performance in FY 2016-17. Revenues were down by 2.0% quarter-on-quarter, reflecting the absence of the positive one-off recorded in the fourth quarter of 2016-17.

The latest round of contract renewals with the US Government (Fall 2017) resulted in an estimated renewal rate of almost 95% in value, with virtually stable volumes and a slight decline in price.

Connectivity
Fixed Broadband (7% of revenues)
Fixed Broadband revenues stood at €22.3 million, down 9.7% year-on-year, reflecting the absence of a positive one-off booked last year related to the phasing of payments by a specific customer. Underlying trends in European Broadband remained resilient, with a decline in subscriber numbers broadly offset by a well-oriented ARPU.
Quarter-on-quarter, revenues were down by 3.5%.

The launch and entry into service of Yahsat’s Al Yah 3 satellite, on which Eutelsat will lease the majority of the capacity dedicated to Konnect Africa, is now definitively delayed, with the start of commercial services on this satellite now expected in June 2018 at the earliest. The attendant postponement of related commercial initiatives, is also affecting revenue generation on the Al Yah 2 satellite. In consequence, the vast majority of revenue expectations from Konnect Africa are pushed out into FY 2018-19.

Mobile Connectivity (5% of revenues)
Mobile Connectivity revenues stood at €18.6 million, up 33.3% year-on-year, reflecting the effect of the Taqnia contract signed last year as well as continued growth on wide-beam capacity with customers including Gogo, Hunter and Panasonic.

Revenues were up by 5.1% quarter-on-quarter.
Revenues will benefit from the entry into service of EUTELSAT 172B in November, on which the incremental HTS payload for in-flight connectivity is partly pre-sold.

Other Revenues Other revenues amounted to €6.8 million in the First Quarter versus €27.1 million a year earlier and €6.0 million in the Fourth Quarter last year.

In Q1 2016-17, they included fees in respect of technical and engineering services provided to a third party operator, termination fees related to the rationalisation of the distribution at HOTBIRD as well as revenues related to the agreements with SES at 28.5° East, which ended on 31 December 2016.

BACKLOG

The backlog8 stood at €5.2 billion at 30 September 2017, versus €5.4 billion at end September 2016, and €5.2 billion at endJune 2017. The sequential stabilization in the Backlog reflects video renewals during the quarter which offset natural consumption.
The backlog was equivalent to 3.5 times 2016-17 revenues, with Video representing 86%.

OUTLOOK

Based on the performance of the First Quarter, revenues from the Core businesses and Mobile Connectivity are on track to meet full year targets. On the other hand, Fixed Broadband revenues will be below expectations mainly due to the delayed availability of the Al Yah 3 satellite.

In consequence, total revenues for FY 2017-18 are now expected at between -1 and -2% (at constant currency and perimeter9), versus ‘broadly stable’ previously.

This outlook is based on the nominal deployment plan hereunder.


GOVERNANCE

The Board of 27 July 2017 proposed, amongst others, the following resolutions to be submitted to the vote of shareholders present at the Annual General Meeting of 8 November 2017: • Approval of the accounts; • Dividend relating to Financial Year 2016-2017; • Appointment of Dominique D’Hinnin (currently permanent representative of FSP) as a Board Member. Following the AGM and subject to the approval of this appointment, Dominique D’Hinnin will replace Michel de Rosen who will step down from his functions as Chairman and Board Member of Eutelsat Communications; Agnès Audier will replace Dominique D’Hinnin as permanent representative of FSP. • Appointment of Esther Gaide, Paul-François Fournier and Didier Leroy as Board Members; • Compensation of corporate officers and compensation policy; • Several financial resolutions.

Subject to the approval of the Annual General Meeting, the Board of Directors will comprise 12 members of which eight independent (Dominique D’Hinnin, FSP (which will be represented by Agnès Audier), Esther Gaide, Didier Leroy, Lord Birt, Ana Garcia Fau, Ross Mc Innes, Carole Piwnica).