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.

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

Future SES satellite launches

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

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

CONSOLIDATED STATEMENT OF CASH FLOWS

SUPPLEMENTARY INFORMATION

QUARTERLY INCOME STATEMENT (AS REPORTED)