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SES S.A. announces financial results for the six months ended 30 June 2024

Adel Al-Saleh, CEO of SES, commented: “H1 2024 revenue and Adjusted EBITDA were in line with our expectations reflecting solid execution. We are on track to deliver on our Full Year 2024 financial objectives. Networks, which now represents more than 50% of our business, continued to grow supported by key wins in the government segment, while our Media business secured additional customer commitments to reinforce our solid cash generation fundamentals.

The entry of O3b mPOWER into commercial service in April was a key milestone for SES with committed customers now being deployed onto the system. We remain on track to expand the initial constellation starting with the next launch of satellites 7-8 at the end of this year, followed in 2025 with satellites 9-11 and 2026 with satellites 12-13, accelerating our profitable long-term growth trajectory.

With the launch of ASTRA 1P to 19.2E in June, we are leveraging the latest technological innovation to sustain our most important cash-generative media neighbourhood for the long-term, while simultaneously capturing significant CapEx efficiencies.

We remain focused on strategic execution, which is anchored by efficiency in every aspect of our operations; customer-centric solutions for our Government, Mobility, Fixed Data, and Media clients; and continuous innovation in our intelligent, managed multi-orbit network, while maintaining SES's broadcast quality and global audience.

Lastly, and most significantly, our transformational agreement to acquire Intelsat and the integration of our two companies will, from expected closing the second half of next year, create a stronger multi-orbit operator which will be well positioned to compete with competitive end-to-end solutions in valuable growth segments of the market, strong balance sheet fundamentals, and sustained growth in Adjusted Free Cash Flow driving value for customers and shareholders. We are well underway with our integration planning and regulatory approvals process.”

Key business and financial highlights (at constant FX unless explained otherwise)

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.

€million

H1 2024

H1 2023

∆ as reported

∆ at constant FX

Average €/$ FX rate

1.08

1.08

 

 

Revenue

978

987

-0.9%

-0.6%

Adjusted EBITDA

525

530

-1.1%

-0.9%

Adjusted Net Profit

111

116

-4.5%

n/m

Adjusted Net Debt / Adjusted EBITDA

1.7x

3.6x

n/m

n/m

“At constant FX” refers to comparative figures restated at the current period FX, to neutralise currency variations.

Networks (54% of total revenues) revenue of €523 million increased 5.0% year on year driven by higher revenue in Mobility (+11.1% including periodic revenue of €22 million in Q1 2024) and growth across the Government business (+8.4%). The year on year comparison in Fixed Data (-8.1%) was impacted by the recognition of €7 million of periodic revenue in Q1 2023 which accounted for most of the variance. In H1 2024 the business secured over €310 million of renewals and new business.

Video (46% of total revenues) revenue of €453 million represented a reduction of -6.7% compared with H1 2023, mainly driven by lower revenue in mature markets which were partially offset by double-digit year on year growth in Sports & Events revenue. In H1 2024, the business secured more than €120 million of renewals and new business.

During Q2 2024, a bankruptcy court approved the restructuring plans of SES’s media customer in Brazil. While SES has secured the revenue for Full Year 2024, it is expected that the outcome of this bankruptcy process will result in lower revenue in 2025 equivalent to approximately 5% of annual Media revenue. Through continuous operational efficiency and commercialisation of the group’s deal pipeline, SES expects to at least offset this impact on Adjusted EBITDA starting from 2025.

Adjusted EBITDA of €525 million represented an Adjusted EBITDA margin of 54% (H1 2023: 54%). Adjusted EBITDA excludes significant special items of €20 million in expenses (H1 2023: €31 million expenses) including net U.S. C-band income of €2 million (H1 2023: net expenses of €10 million).

Adjusted Net Profit of €111 million was €5 million lower than H1 2023, in line with the €5 million year on year reduction in Adjusted EBITDA. Adjusted Net Profit included €62 million of interest income (H1 2023: €11 million) which was largely offset by higher year on year Depreciation & Amortisation, mainly arising from a change in accounting treatment of orbital slot licence rights, and higher year on year Income Tax Expense.

Adjusted Net Profit excludes the significant special items highlighted above, as well as non-cash net impairment expense of €25 million (H1 2023: nil) and net tax benefit of €7 million (H1 2023: benefit of €7 million) associated with all the significant special items. The non-cash net impairment expense included a €34 million write down of a GEO satellite in line with the evolution of the Media business in Brazil as outlined above.

Adjusted Free Cash Flow (excluding significant special items) of €146 million was €60 million, or 69.8%, higher year on year including lower year on year investing activities of €200 million (H1 2023: €307 million) and higher interest received of €61 million (H1 2023: €10 million). These items were partly offset by higher year on year cash tax payments and changes in working capital.

Adjusted Net Debt to Adjusted EBITDA ratio (including 50% of €625 million of hybrid bond as debt) at 30 June 2024 was 1.7 times, (30 June 2023: 3.6 times; 31 December 2023: 1.5 times) including cash & cash equivalents of €2.1 billion. In January 2024, SES called and repaid the €550 million hybrid bond and, in June 2024, repaid €150 million of Schuldshein Loans. SES further expects to repay approximately €250 million of additional upcoming debt maturities during 2024-2025.

The total amount of remaining U.S. C-band clearing cost reimbursements expected to be received in future is now approximately $420 million and SES is continuing to engage with insurers regarding the claim of $472 million relating to O3b mPOWER satellites 1-4.

Contract backlog on 30 June 2024 was €3.8 billion (€4.7 billion gross backlog including backlog with contractual break clauses), of which Media backlog was €1.9 billion and Networks backlog was €1.9 billion.

The Full Year 2023 dividend of €0.50 per A-share and €0.20 per B-share was paid to shareholders on 18 April 2024. In October 2024, SES will pay an interim dividend of €0.25 per A-share (€0.10 per B-share) to shareholders, followed by a final dividend (subject to shareholder approval) of at least €0.25 per A-share (€0.10 per B-share) in April 2025.

A share buyback programme of €150 million (started in November 2023) is being executed under the authorisation given by the Annual General Meeting of shareholders. On 30 June 2024, SES had purchased 16 million A-shares at an average price of €5.50 per A-share. To maintain the 2:1 ratio of A-shares to B-shares, as required by the Articles of Association, SES will also be purchasing B-shares (which carry 40% of the economic rights of an A-share) in equal proportion. The total purchase of A-shares and B-shares shall not exceed €150 million. The shares acquired are intended to be cancelled, reducing the total number of voting and economic shares in issue.

For Full Year 2024, group revenue and Adjusted EBITDA (assuming an FX rate of €1=$1.09, nominal satellite health, and nominal launch schedule) are expected to be in the range of €1,940-2,000 million and €950-1,000 million respectively, with growth in Networks revenue expected to mostly offset lower year-on-year Video revenue. Adjusted EBITDA is expected to be in the upper half of the range.

Capital expenditure (net cash absorbed by investing activities excluding acquisitions, financial investments, U.S. C-band repurposing, and assuming an FX rate of €1=$1.09) is expected to be in the range of €500-550 million in 2024 with an average annual capital expenditure of approximately €350 million for the period 2025-2028.

SES Operational performance

REVENUE BY BUSINESS UNIT

 

Revenue (€ million) as reported

Change (YOY) at constant FX

 

Q1 2024

Q2 2024

H1 2024

Q1 2024

Q2 2024

H1 2024

Average €/$ FX rate

1.09

1.08

1.08

 

 

 

Video

228

225

453

-5.2%

-8.2%

-6.7%

 

 

 

 

 

 

 

Networks

268

255

523

+9.6%

+0.7%

+5.0%

Government

125

130

255

+6.1%

+10.7%

+8.4%

Fixed Data

59

55

114

-0.5%

-15.1%

-8.1%

Mobility

84

70

154

+24.5%

-1.5%

+11.1%

Other

2

-

2

n/m

n/m

n/m

Group Total

498

480

978

+2.5%

-3.7%

-0.6%

“At constant FX” refers to comparative figures restated at the current period FX, to neutralise currency variations.

Future SES satellite launches

Satellite

Region

Application

Launch Date

O3b mPOWER (satellites 7-8)

Global

Fixed Data, Mobility, Government

Late 2024

O3b mPOWER (satellites 9-11)

Global

Fixed Data, Mobility, Government

2025

ASTRA 1Q

Europe

Video, Fixed Data, Mobility, Government

2026

SES-26

Africa, Asia, Europe, Middle East

Video, Fixed Data, Mobility, Government

2026

EAGLE-1

Europe

Government

2026

O3b mPOWER (satellites 12-13)

Global

Fixed Data, Mobility, Government

2026

Final launch dates are subject to confirmation by launch providers

Agreement to acquire Intelsat

All financial information in this press release is stated using a foreign exchange (FX) rate of €1: $1.09. Pro forma (combined) revenue and is adjusted to eliminate intercompany transactions. Pro forma leverage is after acquisition costs and related fees. The financial outlook assumes nominal satellite launch schedule and nominal satellite health status.

On 30 April 2024, SES announced an agreement to acquire Intelsat through the purchase of 100% of the equity of Intelsat Holdings S.a.r.l. for a cash consideration of $3.1 billion (€2.8 billion) and certain contingent value rights in respect of a portion of any potential future monetisation of the combined collective usage rights for up to 100 MHz of C-band spectrum.

The transaction, unanimously approved by the Boards of SES and Intelsat, is subject to relevant regulatory clearances and filings expected to be received during H2 2025 and is funded by a €2.1 billion bridge facility and $1 billion term loan concluded in June 2024. Following the transaction announcement, SES’s Investment grade credit rating was re-affirmed by both Fitch (BBB) and Moody’s (Baa3).

Combining the collective capabilities of both companies will create a stronger multi-orbit operator with greater coverage; improved resiliency; expanded suite of vertical solutions to serve customers across the government, mobility, fixed data, and media segments; and enhanced financial resources to maintain strong balance sheet metrics, return cash to shareholders, and profitably invest to enhance the combined company’s growth and competitiveness in a dynamic market.

The transaction is expected to be Free Cash Flow accretive from Year 1 and deliver annual run-rate synergies of €370 million (comprising run-rate operating expense synergies of €210 million and capital expenditure synergies of €160 million) of which approximately 70% are targeted to be executed within the first 3 years of closing.

On a pro forma basis, the combined company is expected to deliver a mid-single digit compound average growth rate (CAGR) in Adjusted EBITDA (for the period 2024E-2028E) from the combination of revenue growth (with approximately 60% of 2023 pro forma revenue coming from growing government, mobility, and fixed data segments) and the realisation of the operating expense synergies.

On closing, Adjusted Net Debt and Adjusted EBITDA for the combined company is expected to be approximately 3.5 times before reducing to below 3 times, consistent with the Board’s commitment to maintaining investment grade credit metrics, benefiting from the expansion of Adjusted Free Cash Flow (AFCF) which is expected to ramp to over €1 billion by 2027E/2028E (assuming annual ‘normalised’ capital expenditure of €600-650 million). Additionally, the FCF expansion, increases the group’s financial flexibility for additional potential shareholder returns (dividend increases and/or share buy backs), as well as incremental profitable investment (subject to meeting the Board’s investment criteria of delivering an internal rate of return of 10% or higher).

Integration and synergies execution planning and regulatory approval process is well underway.

CONSOLIDATED INCOME STATEMENT

€ million

H1 2024

H1 2023

Average €/$ FX rate

1.08

1.08

Revenue

978

987

U.S. C-band repurposing income

5

3

Operating expenses

(478)

(491)

EBITDA

505

499

Depreciation expense

(301)

(294)

Amortisation expense

(68)

(46)

Impairment expense (net)

(25)

-

Operating profit

111

159

Net financing income/(costs)

-

(47)

Profit before tax

111

112

Income tax expense

(38)

(20)

Non-controlling interests

-

-

Net profit attributable to owners of the parent

73

92

 

 

 

Basic and diluted earnings per A-share (in €)(1)

0.15

0.17

Basic and diluted earnings per B-share (in €)(1)

0.06

0.07

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 assumed coupon, net of tax, on the perpetual bonds.

€ million

H1 2024

H1 2023

Adjusted EBITDA

525

530

U.S. C-band income

5

3

U.S. C-band operating expenses

(3)

(13)

Other significant special items

(22)

(21)

EBITDA

505

499

€ million

H1 2024

H1 2023

Adjusted Net Profit

111

116

U.S. C-band income

5

3

U.S. C-band operating expenses

(3)

(13)

Impairment expense (net)

(25)

-

Other significant special items

(22)

(21)

Tax on significant special items

7

7

Net profit attributable to owners of the parent

73

92

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

€ million

30 June 2024

 

31 December 2023

 

Closing €/$ FX rate

 

1.07

 

1.11

 

Property, plant, and equipment

3,193

 

3,042

 

Assets in the course of construction

1,245

 

1,550

 

Intangible assets

947

 

920

 

Other financial assets

24

 

21

 

Trade and other receivables(1)

97

 

87

 

Deferred customer contract costs

2

 

3

 

Deferred tax assets

677

 

671

 

Total non-current assets

6,185

 

6,294

 

Inventories

48

 

55

 

Trade and other receivables(1)

767

 

860

 

Deferred customer contract costs

3

 

2

 

Prepayments

68

 

47

 

Income tax receivable

31

 

19

 

Cash and cash equivalents (A)

2,063

 

2,907

 

Total current assets

2,980

 

3,890

 

Total assets

9,165

 

10,184

 

 

 

 

 

 

Equity attributable to the owners of the parent

3,581

 

3,701

 

Non-controlling interests

54

 

57

 

Total equity

3,635

 

3,758

 

 

 

 

 

 

Borrowings (B)

3,456

 

3,443

 

Provisions

3

 

3

 

Deferred income

318

 

337

 

Deferred tax liabilities

208

 

205

 

Other long-term liabilities

56

 

83

 

Lease liabilities

27

 

23

 

Fixed assets suppliers

303

 

313

 

Total non-current liabilities

4,371

 

4,407

 

Borrowings (C)

16

 

716

 

Provisions

86

 

88

 

Deferred income

254

 

224

 

Trade and other payables

340

 

390

 

Lease liabilities

15

 

16

 

Fixed assets suppliers

425

 

455

 

Income tax liabilities

23

 

130

 

Total current liabilities

1,159

 

2,019

 

Total liabilities

5,530

 

6,426

 

 

 

 

 

 

Total equity and liabilities

9,165

 

10,184

 

Reported Net Debt (B + C – A)

 

1,409

 

1,252

 

1) Trade and other receivables (current and non-current) include €264 million related to U.S. C-band repurposing (31 December 2023: €350 million).

CONSOLIDATED STATEMENT OF CASH FLOWS

€ million

H1 2024

 

H1 2023

 

Profit before tax

111

 

112

 

Taxes paid during the year

(155)

 

(38)

 

Adjustment for non-cash items

 

373

 

356

 

Changes in working capital

 

(78)

 

27

 

Net cash generated by operating activities

251

 

457

 

 

 

 

 

Payments for purchases of intangible assets

(8)

 

(13)

 

Payments for purchases of tangible assets(1)

(132)

 

(209)

 

Interest received

 

85(2)

 

10

 

Payment for acquisition of subsidiary, net cash acquired

 

(4)

 

-

 

Other investing activities

(4)

 

(5)

 

Net cash absorbed by investing activities

(63)

 

(217)

 

 

 

 

 

Proceeds from borrowings

-

 

50

 

Repayment of borrowings

 

(708)

 

(698)

 

Coupon paid on perpetual bond

(31)

 

(31)

 

Dividends paid on ordinary shares(3)

(216)

 

(220)

 

Interest paid on borrowings

(66)

 

(67)

 

Payments for acquisition of treasury shares

 

(65)

 

-

 

Proceeds from treasury shares sold and exercise of stock options

-

 

3

 

Lease payments

(12)

 

(10)

 

Net cash generated/(absorbed) by financing activities

(1,098)

 

(973)

 

 

 

 

 

Net foreign exchange movements

66

 

19

 

Net increase in cash and cash equivalents

(844)

 

(714)

 

Cash and cash equivalents at beginning of the year

2,907

 

1,047

 

Cash and cash equivalents at end of the year

2,063

 

333

 

1) Including net reimbursements of €80 million related to U.S. C-band repurposing (H1 2023: net payments of €87 million). 2) Comprising €61 million interest received on deposit and €24 million interest received in relation to U.S. C-band clearing 3) Net of dividends received on treasury shares of €7 million (H1 2023: €3 million).

€ million

H1 2024

 

H1 2023

Net cash generated by operating activities

251

 

457

Net cash absorbed by investing activities

(63)

 

(217)

Free cash flow before financing activities

188

 

240

Coupon paid on perpetual bond

 

(31)

 

(31)

Interest paid on borrowings

(66)

 

(67)

Lease payments

(12)

 

(10)

Free cash flow before equity distributions and treasury activities

 

79

 

132

Payments for acquisition of subsidiary, net of cash acquired

 

4

 

-

U.S. C-band cash flows (net)

 

33

 

(56)

Payments in respect of other significant special items

 

30

 

10

Adjusted Free Cash Flow

 

146

 

86

SUPPLEMENTARY INFORMATION

QUARTERLY INCOME STATEMENT (AS REPORTED)

€ million

Q1 2023

Q2 2023

Q3 2023

Q4 2023

Q1 2024

Q2 2024

Average €/$ FX rate

1.07

1.08

1.08

1.07

1.09

1.08

Revenue

490

497

507

536

498

480

U.S. C-band income

2

1

2,715

26

1

4

Other income

-

-

-

5

-

-

Operating expenses

(240)

(251)

(251)

(355)

(230)

(248)

EBITDA

252

247

2,971

212

269

236

Depreciation expense

(148)

(146)

(153)

(156)

(139)

(162)

Amortisation expense

(17)

(29)

(21)

(22)

(19)

(49)

Non-cash impairment

-

-

(1,553)

(2,123)

-

(25)

Operating profit

87

72

1,244

(2,089)

111

-

Net financing (costs)/income

(29)

(18)

(2)

7

5

(5)

(Loss)/Profit before tax

58

54

1,242

(2,082)

116

(5)

Income tax benefit/(expense)

(3)

(17)

(472)

316

(43)

5

Non-controlling interests

-

-

-

(1)

-

-

Net (Loss)/Profit attributable to owners of the parent

55

37

770

(1,767)

73

0

 

 

 

 

 

 

 

Basic (loss)/earnings per share

(in €)(1)

 

 

 

 

 

 

Class A shares

0.10

0.07

1.73

(4.04)

0.16

(0.01)

Class B shares

0.04

0.03

0.69

(1.62)

0.06

0.00

 

 

 

 

 

 

 

Adjusted EBITDA

265

265

262

233

275

250

Adjusted EBITDA margin

54%

53%

52%

44%

55%

52%

U.S. C-band income

2

1

2,715

26

1

4

Other Income

-

-

-

5

-

-

U.S. C-band operating expenses

(6)

(7)

(4)

(30)

(2)

(1)

Other significant special items

(9)

(12)

(2)

(22)

(5)

(17)

EBITDA

252

247

2,971

212

269

236

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.

 

Strategies in Satellite Ground Segment 2024 -  4&5 September, London

Register now contact: jmorgan@talksatellite.com

 


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