Eutelsat Reports 2nd Half 2020 Results
Paris, France, February 12, 2021–The Board of Directors of Eutelsat Communications (Euronext Paris: ETL), reported the financial results for the half-year ended 31 December 2020. Rodolphe Belmer Chief Executive Officer (CEO) of Eutelsat said: “Eutelsat has produced a solid First Half performance with Operating Verticals revenues down by 2%, reflecting our resilience in the Covid-19 impacted context, and with an EBITDA margin at 76.7%, despite the costs associated with Broadband ramp-up. Free-cash flow generation at the half year stage already amply covers the dividend paid in November.”
“The past six months have been dynamic from a commercial point of view with the award of a further EGNOS payload to fly on EUTELSAT HOTBIRD 13G, a major wholesale agreement with Telecom Italia for the Italian capacity on EUTELSAT KONNECT and KONNECT VHTS following a similar agreement with Orange in France, and several renewal and new deals in Sub-Saharan African broadcast. From an operational point of view, we have made significant headway on our Broadband strategy with the entry into service of EUTELSAT KONNECT and the reorganization of our retail arm, where the integration of Bigblu Broadband is progressing smoothly. In view of this solid start to the year, we are in a position to absorb the negative perimeter effect linked to Broadband transactions and to raise the low end of our FY 21 revenue objective,” Belmer added.
Highlights of the half-year 2020 results include:
• First Half like-for-like revenues of the Operating Verticals were down -2.1% year-on-year. This solid start of the year enables us to raise the low end of our Full Year revenue objective to between €1,190 million and €1,220 million (versus between €1,180 million and €1,220 million previously). We are also in a position to absorb the net negative perimeter effect linked to Broadband transactions which will affect the second half.
• Continued relative resilience in the Covid-19 context with stable Operating Vertical revenues2 in the Second Quarter compared to the First.
• Sustained profitability, with EBITDA margin at 76.7%, despite revenue decline, and costs associated with Broadband ramp-up including the integration of Bigblu Broadband Europe.
• High level of Free-Cash-Flow generation with First Half Adjusted Discretionary Free-CashFlow of €275 million, amply covering the Full Year dividend paid in November. FY 2021-22 Adjusted Discretionary Free Cash-Flow objective mechanically adjusted to take into account changes in perimeter.
Total revenues in the First Half stood at €629 million, down 1.3% on a reported basis and by 1.6% like-for-like. Revenues of the five Operating Verticals (ie, excluding ‘Other Revenues’) stood at €613 million. They were down by 2.1% on a like-for-like basis excluding a positive perimeter effect of c.0.4 points (consolidation of Bigblu Broadband Europe since 1st October 2020) and a negative currency effect of c. -1.8 points.
Second Quarter revenues stood at €313 million down 1.8% on a reported basis and by 2.4% like-forlike.
Revenues of the five Operating Verticals stood at €306 million, down 2.4% year-on-year and by 0.2% 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 1.8% to €379 million, reflecting predominantly the impact from 1st July of the renegotiation of contract terms with Greece’s Forthnet.
Second Quarter revenues stood at €188 million down by 2.1% year-on-year. On a sequential basis, they were down 0.9% and were stable excluding a positive one-off of circa €2m booked in the first quarter.
As of December 31, 2020, the total number of channels broadcast by Eutelsat satellites stood at 6,608, down 3.9% year-on-year. HD penetration continued to increase, standing at 1,767 channels versus 1,605 a year earlier (+10%), implying a penetration rate of 26.7% up from 23.3% a year earlier.
On the commercial front, the African market remained dynamic with notably the expansion of the contract with Multichoice and the extension of the contract with ZAP, both operating at the 36°East orbital position. On the other hand, we continue to face a broad slowdown in the pace of new business against the current operating backdrop, notably in Europe, which will be reflected in the Second Half. As a reminder, in the first quarter a multi-year agreement was reached with Sky Italia, Eutelsat’s largest broadcast customer for the renewal and consolidation of its capacity agreements at the HOTBIRD position, securing broadly stable revenues for Eutelsat in the medium term.
Data & Professional Video (13% of revenues)
First Half revenues stood at €81 million, down by 4.5% year-on-year. Fixed Data continued to reflect ongoing pricing pressure and highly competitive environment in particular in Latin America, although it is now partially offset by improving volumes reflecting notably the carry-forward effect of new business secured in MENA last year.
Professional Video remained in decline on a year-on-year basis although Occasional Use, which was initially strongly impacted by the Covid-related lockdowns, confirmed its recovery in the past few months following the reinstatement of live sports events
Second Quarter revenues stood at €42 million down 2.7% year-on-year but up by 7.2% quarter-onquarter notably on the back of the rebound of Occasional Use.
On the commercial front, a capacity contract with Liquid Telecom for the provision of VSAT services on the EUTELSAT 7B satellite was renewed and expanded.
Government Services (13% of revenues)
First Half Government Services revenues stood at €77 million, up by 2.5%, with the negative carryforward impact of the US Government renewal campaigns of the past 18 months more than offset by the contribution of the EGNOS payload and by new business.
Second Quarter revenues stood at €39 million, up by 4.5% year-on-year and by 2.1% quarter-on-quarter. 4 As a reminder, Second Half revenues will reflect a tougher comparison basis, as the same period last year included the first-time contribution of EGNOS from mid-February as well as a positive one-off related to the temporary relocation of EUTELSAT 7A in the Fourth Quarter.
On the commercial front, an agreement was signed with the European Global Navigation Satellite Systems Agency (GSA) for a further EGNOS payload to be carried by the EUTELSAT HOTBIRD 13G satellite for a total contract value of €100m over 15 years.
Fixed Broadband (7% of revenues)
First Half revenues stood at €42 million, up 2.3% reflecting notably higher sales of terminals in Europe in a context of increased demand for internet connectivity leading to a positive momentum of the European customer base in the last twelve months.
Second Quarter revenues stood at €22 million. On a like-for-like basis, they were up 0.8% year-on-year, and down by 6.5% compared to the First Quarter which included a high level of terminals sales. In Europe, all the elements are now in place for a progressive return to growth: the KONNECT satellite gradually entered into service from mid-November and is now close to full-speed operations. The integration of Bigblu Broadband is progressing smoothly, and the first retail offers were launched in several countries. In parallel, two wholesale agreements have been inked with Orange and TIM, covering France and Italy respectively, and are starting to generate revenues from the current semester. In Africa, while revenues remain modest, progress has been made notably with a contract to provide connectivity services to the Post Office in Ivory Coast, highlighting the potential of government backed digital inclusion programs, and an agreement with the internet service provider, TelOne, covering Zimbabwe.
Mobile Connectivity (5% of revenues)
First Half revenues stood at 34 million, down 13.9% like-for-like, reflecting the impact of the Covid-19 crisis on Aero Mobility, leading to both a low level of airtime-related revenues on KA-SAT and to the renegotiation of contracts with certain service providers. On the other hand, maritime revenues remained well-oriented thanks to the ramp-up of contracts secured in the last couple of years.
Second Quarter revenues stood at €16 million, down 20.1% year-on-year and by 6.9% quarter-on-quarter. As a reminder, the Second Quarter of FY 2019-20 included the catch-up of a negative one-off booked in the First Quarter for circa €1m.
Other Revenues
In the First Half, Other Revenues amounted to €15 million versus €1 million a year earlier. They included a €6 million positive impact from hedging operations versus a negative impact of (€5) million a year earlier.
Operational and Utilized Transponders
The number of operational transponders at December 31, 2020 stood at 1,380, down by seven units year-on-year, mainly reflecting on one hand lower operational capacity at 5° West following the transfer of services from EUTELSAT 5 West A to EUTELSAT 5 West B in January 2020, and on the other, incremental capacity brought by EUTELSAT 7C in January 2020. Relative to end-June 2020 they were up by four units.
The number of utilized transponders stood at 967, almost unchanged year-on-year and up by seven units compared to end June. As a result, the fill rate progressed to 70.1% compared to 69.7% a year earlier and at end-June.
