Steve Collar, CEO of SES, commented: “2020 was a strong year for SES. The combination of considerable commercial execution and laser focus on controlling discretionary spending ensured that, despite the COVID-19 environment, we protected the bottom line with Adjusted EBITDA in line with our pre-COVID-19 outlook and at the top end of our mid-year outlook. We successfully executed our Simplify & Amplify programme delivering OpEx savings of €50 million from 2022 onwards, while Net Debt and leverage is at a 5-year low on the back of strong cash generation.

2020 was a landmark year for our US C-band initiative, starting with the FCC’s final Report and Order and ending with the record-breaking spectrum auction, crystallising SES’ opportunity to earn $4 billion in accelerated relocation payments. The clearing is on track and we expect to meet the December 2021 and December 2023 deadlines.

We secured more than €1.3 billion in customer agreements in the year including an important long-term commitment with Canal+ covering multiple orbital positions; contract extensions with public and commercial broadcasters across our prime video neighbourhoods; new MEO-GEO-based solutions for the US Government; new Telco and MNO connectivity solutions in Latin America and Asia; and, in return for supporting customers whose businesses are especially affected by COVID-19, secured additional backlog in Cruise and Aero. Our recently announced renewal and extension with Sky means that, to date, we have added more than €440 million in contract backlog at our core video neighbourhoods since the end of Q3 2020. 2020 was a year like no other for our employees and customers alike. We moved swiftly and successfully into a remote office environment, protecting customer and satellite operations in the process. I could not be more grateful to SES employees for their resilience and commitment to supporting our customers.

2021 represents a year of unique and significant opportunities for SES. It will see us realise the first $1 billion from C-band repurposing and execute on a strong pipeline of commercial opportunities to further grow, driven by the increasing backlog of now $740 million for SES-17 and O3b mPOWER ahead of launch in the second half of 2021. These assets form the bedrock of our unique, multi-orbit value proposition to serve the strong and expanding demand for data across all our segments and will drive sustained, profitable growth for SES in the years ahead.”

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.

• Underlying revenue (excluding periodic and other) declined by 3.0% (year-on-year at constant FX) to €1,867 million.
• Video underlying revenue of €1,108 million (-8.0% at constant FX) reflected the combination of lower Distribution revenue (-7.8%), from ‘right-sizing’ of capacity by customers in mature markets, and lower Services revenue (-8.7%) including the impact of COVID-19 on Sports & Events revenue.
• Networks underlying revenue grew, for the third consecutive year, (+5.3% at constant FX) to €759 million with the contribution from new business signed in 2019 supporting growth in Mobility (+9.0%), expansion of connectivity services driving a return to growth in Fixed Data (+6.7%), while Government (+1.7%) benefited from new business secured during H2 2020.
• Adjusted EBITDA of €1,152 million represented an Adjusted EBITDA margin of 61.4% (2019: 62.4%). 2020 operating expenses (excluding restructuring and US C-band repurposing expenses) were 1.9% lower year-on-year at €724 million including the benefit of measures taken early in 2020 to mitigate of the impact of the COVID-19 environment and to protect the bottom line.
• Adjusted EBITDA excludes restructuring expenses of €40 million (2019: €21 million) in relation to the Simplify & Amplify transformation programme and €33 million (2019: nil) of operating expenses associated with the accelerated repurposing of US C-band spectrum, net of €10 million repurposing income (2019: nil).
• Adjusted Net Profit was lower year-on-year as the impact of lower Adjusted EBITDA, recognition of net foreign exchange losses, and high level of tax income in 2019 was not fully offset by the positive effect of year-on-year reductions in both Depreciation and Amortisation expenses (of 4.5%) and net interest expense (of 9.6%).
• Adjusted Net Profit excludes (net of tax) the restructuring expenses, the US C-band (net) expenses, and impairment expense of €277 million in 2020. This impairment expense was comprised of €183 million spread across eight GEO assets including the impact of COVID-19 on expected future cash flows from definite life assets, €80 million related to the former MX1 business following the integration within the Video infrastructure operations, and €14 million related to orbital slot rights.
• Net cash generated by operating activities (NOCF) of €1,049 million (2019: €1,134 million) represented 97.2% of reported EBITDA (2019: 93.2%). Free cash flow before equity distributions and treasury activities (see page 7) of €665 million was 0.9% higher than 2019 as lower NOCF was offset by lower net cash absorbed by investing activities, which were 34% less than forecasted for 2020.
• Adjusted Net Debt (including 50% of the €1.3 billion hybrid bonds as debt, per the rating agency methodology) of €3,418 million was €505 million (or 12.9%) lower than 2019 and represented an Adjusted Net Debt to Adjusted EBITDA ratio of 2.97 times (2019: 3.17 times). The weighted average interest cost (excluding loan origination costs, commitment fees and hybrid bonds) was reduced to 3.1% (2019: 3.6%), while the weighted average debt maturity was extended to 7.2 years (2019: 7.0 years).
• Fully protected contract backlog at 31 December 2020 was €5.6 billion (gross backlog of €6.1 billion when including backlog subject to contractual break clauses).
• For the year ended 2020, the SES Board of Directors has proposed a dividend of €0.40 per A-share and €0.16 per B-share, consistent with 2019 and the Board’s commitment to maintain a base dividend of €0.40 per A-share and €0.16 per B-share. The dividend, which is subject to shareholders’ approval at the Annual General Meeting on 1 April 2021, will be paid on 22 April 2021.
• For the year ended 2021 (assuming a €/$ FX rate of €1 = $1.20, nominal satellite health and launch schedule) group revenue is expected within a range of €1,760-1,820 million (including €1,000-1,030 million for Video and €750-780 million for Networks) and Adjusted EBITDA (excluding restructuring and US C-Band expenses) within a range of €1,060-1,100 million.
• Capital expenditure (representing net cash absorbed by investing activities excluding acquisitions, financial investments, and US C-band repurposing) is now expected to be €660 million in 2021 and €880 million in 2022 reflecting the important growth investment in SES-17 and O3b mPOWER. Thereafter, Capital Expenditure is expected to reduce significantly to €220 million in 2023, €570 million in 2024, and €340 million in 2025, representing an average annual capital expenditure of €375 million (2023-2025).

Operational performance and commentary

REVENUE BY BUSINESS UNIT

Video: 59% of group revenue (2019: 62%)

At 31 December 2020, SES carried a total of 8,265 TV channels to over 365 million TV homes around the world including 2,981 channels in High Definition and Ultra High Definition. 69% of total TV channels are broadcast in MPEG-4 with an additional 4% in HEVC.

Video Distribution
In Europe, 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 revenue was impacted by ‘right-sizing’ of volume across U.S. cable neighbourhoods and accommodation of customers ahead of C-band clearing, as well as the expected reduction in wholesale business. 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 associated with the former MX1 business, and postponement or cancellation of sports and events in 2020 due to COVID-19, led to lower year-on-year revenue. HD+ revenue was flat (year-on-year) with a shift towards TV-installed software solutions rather than hardware sales, reflecting the strong partnerships with TV set manufacturers. Continued growth in the number of paying subscribers, which improved during 2020, and the positive contribution from the planned increase in the cost to renew a 12-month subscription from March 2021 is expected to support the future development of the platform.

From Q1 2021, revenue from “Video Distribution” and “Video Services” will be reported as a single revenue line (“Video”).

Networks: 41% of group revenue (2019: 38%)

Government
Strong contributions from new business in both the US Government and Global Government businesses during the second half of 2020 led to overall growth (year-on-year) in underlying revenue. US Government revenue was ahead (year-on-year) benefiting from the contribution of new MEO- and GEO-enabled network solutions. Global Government revenue was lower with improved revenue run-rate offsetting less revenue from completion of certain milestone-driven institutional projects which benefited 2019.

Fixed Data
Positive outturns across the Americas, Africa and Asia, as well as from new business in energy and cloud, more than offset lower revenue in Europe and the Pacific 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, mobile networks operators to deploy 4G networks, and government funded rural WiFi projects on behalf of SES’ customers, notably using SES-12 and MEO-enabled high throughput capabilities.

Mobility
High single-digit growth (year-on-year) in Aeronautical reflected the full year contribution of new business signed with several service providers during 2019. Similarly, in Maritime, 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. In Q4 2020, Mobility revenue included an exceptional adjustment related to contract restructuring which is not expected to repeat in future quarters.

As the vast majority of SES’ commercial contracts, including in Mobility, are fixed, the performance was resilient to 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

CONSOLIDATED INCOME STATEMENT

Year ended 31 December

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

At 31 December

CONSOLIDATED STATEMENT OF CASH FLOWS

Year ended 31 December

SUPPLEMENTARY INFORMATION

QUARTERLY INCOME STATEMENT (AS REPORTED)

QUARTERLY OPERATING PROFIT (AT FINANCIAL OUTLOOK FX RATE)

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.