Eutelsat
Communications: First Half 2021-22 Results
February 17, 2022
The Board of Directors of
Eutelsat Communications (ISIN: FR0010221234 /
Euronext Paris: ETL), chaired by Dominique D’Hinnin,
reviewed the financial results for the Half Year
ended 31 December 2021.
Key Financial
Data
|
6M
to Dec.
2020
|
6M to Dec.
2021
|
Change
|
P&L
|
|
|
|
Revenues - €m
|
628.5
|
572.2
|
-9.0%
|
“Operating
Verticals” revenues reported - €m
|
613.1
|
568.7
|
-7.2%
|
“Operating
Verticals” revenues at constant currency and
perimeter - €m
|
588.1
|
563.3
|
-4.2%
|
EBITDA1 -
€m
|
484.1
|
435.7
|
-10.0%
|
EBITDA margin - %1
|
77.0
|
76.1
|
-0.9 pts
|
EBITDA margin at
constant currency - %
|
77.0
|
76.4
|
-0.6 pts
|
Group share of
net income - €m
|
137.4
|
166.0
|
+20.8%
|
Financial
structure
|
|
|
|
Reported
Discretionary Free Cash-Flow - €m1
|
256.9
|
195.0
|
-24.1%
|
Adjusted
Discretionary Free Cash-Flow - €m1
|
265.9
|
203.4
|
-23.5%
|
Net debt - €m
|
2,994.4
|
3,081.0
|
+€86.6m
|
Net debt/EBITDA1
|
3.09x
|
3.53x
|
+0.44 pts
|
Backlog – €bn
|
4.4
|
4.2
|
-4.9%
|
Commenting on the First
Half, Eva Berneke Chief Executive Officer of
Eutelsat Communications, said: “This has been a
satisfactory First Half in financial terms, with
strong free cash flow generation and a further
industry leading EBITDA margin, despite the decline
in revenues, testifying to our fundamentally robust
business model and stringent financial discipline.
The First Half has seen a number of important
commercial and operational milestones, notably with
the entry into service of EUTELSAT QUANTUM, strong
progress on our Fixed Broadband roll-out, the
cementing of our position in OneWeb and the receipt
of the first tranche of our C Band proceeds. Newly
at the helm, I am impressed by the technical
expertise, asset quality and long-term commercial
traction within Eutelsat. Although we have
mechanically revised down our medium-term revenue
expectations on the back of delayed availability of
capacity, I am confident we have the elements in
place to enable us to return to growth from FY
2023-24 and continue to deliver long-term value to
our shareholders.”
KEY
EVENTS
·
New Chief Executive Officer,
Eva Berneke, took office on 1st January
2022.
·
First Half Operating Vertical
revenues down 4.2% on a like-for-like basis, broadly
in line with expectations and within the range of
objectives for the Full Year.
·
Industry-leading
profitability with a 76.4% EBITDA margin in the
First Half at constant currency, despite revenue
decline.
·
Adjusted Discretionary Free
Cash-Flow of €203m, well on track to reach full year
objective.
·
$125m proceeds related to
Phase I of C-Band transition received in December.
·
Sustained progress in our
Fixed Broadband strategy
oFollowing
recent contracts with Hispasat (Spain) and Deutsche
Telekom (Germany), four of the five most populous
European markets are now covered by wholesale or
distribution deals with major operators, including
France (Orange) and Italy (TIM);
oGrowing
momentum in Africa, evidenced by agreements with
Telecom operators Globacom in Nigeria and Vodacom in
Tanzania, and with the service provider Intersat for
Gambia and Guinea Bissau.
·
Successful entry into service
of EUTELSAT QUANTUM bringing unprecedented
flexibility to address government and mobility
markets with four beams out of eight at a
well-advanced stage of commercialization after a few
months of operations
o
Two beams already secured
§
One beam with a customer in
the Middle East for maritime Mobility;
§
One beam in government
services with a USG service provider.
oWell-advanced
discussions for the commercialization of two
additional beams;
o
Strong pipeline of opportunities with both USG and
non-USG customers.
·
Investment in OneWeb closed
making Eutelsat the number two shareholder in one of
the few global LEO constellations, a critical
infrastructure to serve long-term Telecom needs.
·
Updated revenues objectives
o
For FY 2021-22, revenues expected in our predicted
range, albeit in the lower half;
o
For the medium-term, revenue objectives mechanically
revised to reflect delayed availability of KONNECT
VHTS and EUTELSAT 10B;
o
Return to topline growth expected in FY 2023-24 on
the back of incremental capacity.
·
Adjusted DFCF objectives
confirmed.
·
Dividend policy (stable to
progressive dividend) confirmed.
ANALYSIS OF REVENUES2
In € millions
|
6 months to Dec.
2020
|
6 months to Dec.
2021
|
Change
|
Reported
|
Like-for-like3
|
Broadcast
|
378.9
|
350.5
|
-7.5%
|
-7.5%
|
Data &
Professional Video
|
81.4
|
77.8
|
-4.4%
|
-4.1%
|
Government
Services
|
76.9
|
73.9
|
-3.9%
|
-3.8%
|
Fixed Broadband
|
42.1
|
30.1
|
-28.5%
|
+37.3%
|
Mobile
Connectivity
|
33.9
|
36.5
|
+7.7%
|
+9.8%
|
Total
Operating Verticals
|
613.1
|
568.7
|
-7.2%
|
-4.2%
|
Other Revenues4
|
15.4
|
3.5
|
-77.3%
|
NR
|
Total
|
628.5
|
572.2
|
-9.0%
|
-4.7%
|
EUR/USD
exchange rate
|
1.17
|
1.17
|
|
Total revenues in the First
Half stood at €572 million, down 9.0% on a
reported basis and by 4.7% like-for-like.
Revenues of the five
Operating Verticals (ie, excluding ‘Other Revenues’)
stood at €569 million. They were down by 4.2% on a
like-for-like basis excluding a negative perimeter
effect of circa 3 points from the disposal of Euro
Broadband Infrastructure (EBI) on 30 April 2021,
only partly offset by the consolidation of Bigblu
Broadband Europe since 1st October
2020.
Second Quarter revenues
stood at €285 million down 5.0% like-for-like.
Revenues of the five Operating Verticals stood at
€284 million, down 5.1% year-on-year and by 1.0%
quarter-on-quarter on a like-for-like basis.
Unless otherwise stated,
all variations indicated below are on a
like-for-like basis, ie, at constant currency and
perimeter.
Broadcast (62% of
revenues)
First Half Broadcast
revenues were down 7.5% to €351 million, reflecting
mostly three items: lower revenues in Europe due
largely to the carry-forward effect of a slowdown in
the pace of new business last year, the temporary
headwind of the partial renewal of capacity with
Nilesat at 7/8°West, and a negative impact of circa
one point reflecting a positive one-off booked in
the First Quarter of 2020-21 as well as lower
revenues from Fransat.
Second Quarter revenues
stood at €173 million down by 8.6% year-on-year and
3.1% quarter-on-quarter.
The trend is expected to
progressively improve as the comparison basis
becomes easier from the Second Half and the
available capacity at 7/8°West is gradually resold.
Data & Professional
Video (14% of revenues)
First Half revenues
stood at €78 million, down by 4.1% year-on-year.
In Fixed Data (two thirds
of this application), improved volume trends are now
offsetting most of the negative impact of
competitive pressure.
Professional Video (one
third of revenues), recorded a high-single digit
decline on the back of the unfavourable phasing of a
specific contract as well as the ongoing structural
headwinds in this application.
Second Quarter revenues
stood at €39 million, down 6.7% year-on-year, but up
by 1.4% quarter-on-quarter.
We expect the full year
decline for this application to remain broadly
consistent with the trend of the First Half.
Government Services
(13% of revenues)
First Half Government
Services revenues stood at €74 million, down by
3.8%, reflecting the negative carry-forward effect
of USG renewals with, in particular, a 75% renewal
rate in Fall 2021 as a result of the geopolitical
context in MENA, partly offset by new business.
Second Quarter revenues
stood at €37 million, down by 5.9% year-on-year and
by 2.0% quarter-on-quarter.
The Second Half will
reflect the full effect of the above-mentioned
headwinds.
Fixed Broadband (5% of
revenues)
First Half revenues
stood at €30 million, up 37.3% on a like-for-like
basis. This reflected the contribution from the
wholesale agreements with Orange, TIM and, from
November 2021, Hispasat as well as, to a lesser
extent the growth of our African operations.
Second Quarter revenues
stood at €16 million. On a like-for-like basis, they
were up 24.7% year-on-year, and 5.9%
quarter-on-quarter.
The First Half saw
material progress in the roll-out of our Fixed
Broadband strategy with four of the five most
populated countries in Europe now covered by
distribution or wholesale agreements with major
operators. A distribution agreement was signed with
Deutsche Telekom on the EUTELSAT KONNECT satellite
for the German coverage as well as a multi-year
wholesale commitment from Hispasat for the Iberian
capacity on EUTELSAT KONNECT. Both agreements could
be extended to KONNECT VHTS in the future.
In Africa a multi-year,
multi-Gbps wholesale capacity contract was secured
with Globacom, Nigeria’s second largest telecom
operator as well as a service agreement with Vodacom
Tanzania, the country’s leading telecommunications
company. A contract was also signed with Intersat
for the entire capacity covering Gambia and Guinea
Bissau. In addition, several spotbeams on the HTS
payload of the EUTELSAT 65 West A satellite were
selected by Mexican service providers to address
Internet connectivity needs under a
government-sponsored rural schools connectivity
project.
These tailwinds will
benefit the Second Half which will see a
continuation of significant double-digit organic
growth.
Mobile Connectivity
(6% of revenues)
First Half revenues
stood at €37 million, up 9.8% like-for-like,
reflecting in particular the contribution of the
contract with Anuvu. Maritime mobility also
continued to record a sound performance driven by
the ramp-up of contracts with service providers
signed in previous years and the above-mentioned
agreement on EUTELSAT QUANTUM.
Second Quarter revenues
stood at €19 million, up 19.6% year-on-year and by
11.0% quarter-on-quarter.
On the commercial front,
the global partnership with Marlink has been
extended to Asia-Pacific and the Americas, including
incremental capacity commitments on multiple
satellites across our fleet. This comes on top of
the agreement with a customer in the Middle-East on
EUTELSAT QUANTUM for maritime mobility.
This positive dynamic is
expected to translate into double-digit growth for
the Full Year.
Other Revenues
In the First Half,
Other Revenues amounted to €4 million versus
€15 million a year earlier. They included a €2
million negative impact from hedging operations
versus a positive effect of €6 million a year
earlier.
OPERATIONAL AND UTILIZED TRANSPONDERS
The number of operational
transponders at 31 December 2021 stood at 1,380,
broadly stable year-on-year and compared to end-June
2021, with no entry into service of any new regular
capacity or end of stable-orbit life of any
satellite over the last 12 months.
The number of utilized
transponders stood at 974, up by seven units
year-on-year and down by seven units compared to end
June, the latter reflecting notably the return of
capacity by Nilesat.
As a result, the fill
rate stood at 70.6% compared to 70.1% a year earlier
and 71.2% at end-June.
|
31
Dec. 2020
|
30
June 2021
|
31 Dec. 2021
|
Operational
transponders5
|
1,380
|
1,377
|
1,380
|
Utilized
transponders6
|
967
|
981
|
974
|
Fill rate
|
70.1%
|
71.2%
|
70.6%
|
Note:
Based on 36 MHz-equivalent transponders excluding
high throughput capacity, EUTELSAT QUANTUM and
satellites in inclined orbit.
BACKLOG
The backlog7 stood
at €4.2 billion at 31 December 2021 versus 4.4
billion a year earlier and at end June 2021. The
natural erosion of the backlog in the First Half
more than offset the contribution of the partial
renewal with Nilesat and the wholesale contract with
Hispasat.
The backlog was
equivalent to 3.4 times 2020-21 revenues, and
Broadcast represented 64% of the total.
|
31
Dec.
2020
|
30
June
2021
|
31 Dec.
2021
|
Value of
contracts (in billions of euros)
|
4.4
|
4.4
|
4.2
|
In years of
annual revenues based on previous fiscal
year
|
3.4
|
3.5
|
3.4
|
Share of
Broadcast application
|
67%
|
64%
|
64%
|
PROFITABILITY
EBITDA stood
at €436 million at 31 December 2021 compared with
€484 million a year earlier, down by 10.0%. The EBITDA
margin stood at 76.4% at constant currency
(76.1% reported) versus 77.0% a year earlier,
reflecting lower revenues. Opex were €8m lower than
last fiscal year reflecting the favourable effect of
changes in perimeter, lower Bad Debt and continued
strict cost discipline in the legacy businesses. In
the context of the LEAP 2 cost-saving program, €24
million savings have been fully secured for current
fiscal year, in the high end of the 20-25 million
annual savings target range.
Group share of net
income stood at €166 million versus
€137 million a year earlier, up by 20.8% and
representing a margin of 29%. This reflected:
·
Lower depreciation and
amortisation ((€243) million at 31 December 2021
compared with (€260) million a year earlier) as a
result in particular of the disposal of the KA-SAT
satellite and of the end of the amortization period
of certain in-orbit assets.
·
Other operating income of
€84m (compared to expenses of €8 million last year)
including the $125m payment related to Phase I of
C-Band proceeds, partly offset by some asset
impairments.
·
A net financial result of
(€35) million (versus (€47) million a year earlier),
reflecting a favourable evolution of foreign
exchange gains and losses.
·
A tax rate of 24%
(versus 15% last year) reflecting the 30% tax rate
applied to the C-Band proceeds.
·
Negative income from
associates ((€13) million) reflecting the
contribution of the stake in OneWeb since September.
CASH
FLOW
In H1 2021-22, net
cash flow from operating activities amounted to
€363 million, €72 million lower than a year earlier
due principally to the decline in EBITDA.
Cash Capex amounted
to €98 million (versus €117 million last year); it
reflects the phasing of satellite program milestones
and is not representative of the expected Full Year
figure.
Interest and other
fees paid net of interest received amounted
to €70 million versus €61 million last year. All the
coupon payments related to our bond issuances now
fall due in the First Half (four maturities
representing a nominal amount of €2.3bn) whereas in
FY 21, a coupon on a €500 million issue fell due in
the Second Half.
Discretionary Free
Cash-Flow amounted to €195 million
on a reported basis, down €62 million. Adjusted
Discretionary Free Cash-Flow as per the financial
outlook definition8 stood
at €203 million, down €62 million or 23.5%.
FINANCIAL STRUCTURE
At 31 December 2021, net
debt stood at €3,081 million, up €426 million
versus end-June. It mainly reflected, on one hand,
€195 million in Discretionary Free Cash-Flow
generated in the First Half and C-Band proceeds of
$125 million, and on the other, the dividend payment
of €222 million (including minority interests) and
the outflow in respect of inorganic investments of
€495m, mostly OneWeb. Other items (mostly variations
related to leases, structured debt and the foreign
exchange portion of the cross-currency swap)
contributed to the increase in net debt for a net
impact of €14 million.
The net debt to EBITDA
ratio stood at 3.53 times, compared to 3.09
times at end-December 2020 and 2.88 times at
end-June 2021. As a reminder, December represents a
peak in the annual leverage profile reflecting the
timing of the dividend payment. The picture is
exacerbated this year by the timing of the
investment in OneWeb whereas only a quarter of
C-Band proceeds have been received.
The average cost of debt
after hedging stood at 2.5% (2.3% in H1 2020-21).
The weighted average maturity of the Group’s debt
stood at 4.5 years, compared to 4.3 years at
end-December 2020.
Liquidity remained
strong, with undrawn credit lines and cash around
€1.5 billion.
DIVIDEND
The Annual General
Meeting of Shareholders of 4 November 2021 approved
the payment of a dividend of €0.93 per share in
respect of the Financial Year ended 30 June 2021.
The dividend was paid on November 18, 2021.
INVESTMENT IN ONEWEB
On 8 September 2021,
Eutelsat completed its initial investment in OneWeb
of 550 million U.S. dollars announced in April. On 6
October, a call option on a portion of the latest
OneWeb funding round subscribed by Bharti was
exercised for a consideration of 165 million9 U.S.
dollars.
As a result, Eutelsat now
owns 22.9% of OneWeb10.
FLEET
DEPLOYMENT
Nominal deployment
programme
Compared to the last
quarterly update in October 2021, the entry into
service of KONNECT VHTS has been delayed from the
first half to the second half of calendar 2023.
Furthermore, while still expected within the H1 2023
window, the entry into service of the EUTELSAT 10B
satellite has been delayed versus our previous
expectations. This reflects the impact of both
manufacturing delays and their knock-on effects,
including pairing difficulties, related to launch
rescheduling, in the context of global Covid crisis.
All other data remains
unchanged.
Satellite
|
Orbital
position
|
Estimated
entry into
service
(calendar
year)
|
Main
applications
|
Main geographic
coverage
|
Physical
Transponders/
Spot beams
|
Of which
expansion
|
EUTELSAT 10B
|
10° East
|
H1 2023
|
Mobile
Connectivity
|
EMEA
Atlantic & Indian Ocean
|
12
Ku
10 C
>100 Ku spot beams
|
-48 Ku
c. 35 Gbps
|
EUTELSAT HOTBIRD
13G
|
13° East
|
H1 2023
|
Broadcast
|
Europe
MENA
|
80
Ku2
EGNOS payload
|
EGNOS payload
|
KONNECT VHTS
|
To
be
confirmed
|
H2 2023
|
Connectivity
|
Europe
|
~230 Ka spot beams
|
500 Gbps
|
EUTELSAT HOTBIRD
13F
|
13° East
|
Q2/Q3 2023
|
Broadcast
|
Europe
MENA
|
80
Ku2
|
None
|
EUTELSAT 36D
|
36° East
|
H2 2024
|
Broadcast
Government
|
Africa, Russia, Europe
|
70
Ku
UHF payload
|
UHF payload
|
1 Nominal
capacity corresponding to the specifications
of the satellites. Total operational
capacity at the HOTBIRD orbital position
will remain unchanged with 102 physical
transponders operated, once regulatory,
technical and operational constraints are
taken into account.
|
Changes in the fleet
since 30 June 2021
·
EUTELSAT QUANTUM was launched
on 30 July 2021 and entered service in November
2021.
·
The lease agreement for
capacity on the YAHSAT 1B and Al Yah 3 satellites
was terminated in the first quarter of fiscal year
2021-22.
·
EUTELSAT 48E, which was in
inclined orbit, terminated its life in October 2021.
·
EUTELSAT 174A is operating in
inclined orbit since January 2022.
FINANCIAL OUTLOOK
First Half revenues were
broadly in line with expectations, albeit at the
lower end of our guidance range for FY 2021-22. The
geopolitical situation in the Middle East has
resulted in a headwind for Government Services which
already partly materialized in the Fall 2021 renewal
campaign with the US Department of Defence, and is
also expected to impact the Spring 2022 campaign.
Elsewhere, although the available resources are
drawing strong commercial interest, the resale of
capacity at 7/8°West is taking slightly longer than
expected to materialize and will therefore
contribute lower than expected to revenues in FY
2021-22. As a result, we now expect an outturn in
the lower half of our Operating Verticals Revenue
guidance range for the Full Year of €1,110 to €1,150
million11 and
are reducing the top end of this range to €1,130
million.
Elsewhere, the delay in
the availability of both KONNECT VHTS and EUTELSAT
10B has a mechanical effect on our expectations for
subsequent years.
As a result, return to
topline growth in FY 2022-23 is no longer
achievable, although the trend will materially
improve relative to FY 2021-22.
Revenues are now expected
to return to growth in FY 2023-24 on the back of
incremental capacity.
All other objectives are
confirmed as follows:
·
Cash Capex12 not
exceeding €400 million per annum for each of the
next three fiscal years (FY 2021-22 / FY 2022-23 /
FY 2023-24).
·
Adjusted Discretionary Free
Cash Flow of between €400 million and €430 million
in FY 2021-22 at a €/$ rate of 1.20. Adjusted
Discretionary Free Cash Flow is expected to grow in
FY 2022-23 and in FY 2023-24.
·
The LEAP 2 plan aimed at
generating €20-25 million in annual savings by FY
2021-22.
·
Commitment to a sound
financial structure to support our solicited
investment grade credit ratings targeting a
medium-term net debt / EBITDA ratio of around 3x.
The dividend policy of a
stable to progressive dividend is also reiterated.
This outlook is based on
the revised nominal deployment plan outlined above.
|