SES S.A. announced financial results
for the nine months ended 30
September 2020.
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.