Eutelsat Communications Reports Further Growth in Profits for the First Half 2009-2010 - The Group Raises its 2009-2010 Objectives
- Continued Strong Revenue Growth (+9.6%) Across All Business
Applications
- EBITDA[1] Margin Maintained at the Highest Level of Leading Satellite
Operators: 81%
- Record 19.1% Increase in Backlog, Which is Equivalent to 4.2 Years of
Annual Revenues
- High Level of Net Cash Flow From Operating Activities, Representing
62.3% of Revenues
- Revised 2009-2010 Objectives: Revenues Exceeding EUR1,020 Million and
EBITDA Above EUR795 Million
The Board of Directors' meeting of Eutelsat Communications (ISIN: FR0010221234 - Euronext Paris: ETL), under the chairmanship of Giuliano Berretta, met yesterday and reviewed the results for the first half year ended December 31, 2009.
Six months ended December 31 2008 2009 Change
Key elements of consolidated income statement
Revenues EURm 463.5 508.0 +9.6%
EBITDA EURm 375.0 411.6 +9.7%
EBITDA margin % 80.9 81.0 +0.1 pt
Group share of net income EURm 135.2 139.5 +3.2%
Diluted earnings per share EUR 0.615 0.634 +3.1%
Key elements of consolidated cash flow statement
Net cash flow from EURm 353.7 316.4 -10.5%
operating activities
Capital expenditure EURm 140.6 226.1 +60.8%
Operating free cash flow EURm 213.1 90.2 -57.7%
Key elements of financial structure
Net debt EURm 2,408 2,440 +1.3%
Net debt/EBITDA[2] X 3.34 3.13
Backlog
Backlog EURbn 3.5 4.2 +19.1%
Commenting on the first half 2009-2010 results, Michel de Rosen, CEO of Eutelsat Communications, said:
"The strong progress of Eutelsat's results for our first half-year once again underlines the commercial momentum of our markets. It also highlights the efficiency with which our strategy has been implemented over the last years through clearly targeted and entirely self-financed investments. New satellite resources deployed during the past 12 months have been rapidly leased, enabling our revenues to increase by 9% and our backlog by more than 19%. Eutelsat continues to benefit from a very high level of profitability and exceptional visibility on revenues, which now represent more than four years of annual turnover. With this momentum, we are revising upwards our revenue objective to more than EUR1,020 million with EBITDA in excess of EUR795 million for the current fiscal year. For the 2009-2012 period, we are now targeting a compound annual revenue growth rate of more than 7%".
STRONG GROWTH ACROSS ALL BUSINESS APPLICATIONS
Note: Unless otherwise stated, all growth indicators or comparisons are made against the previous fiscal year or December 31, 2008. The share of each application as a percentage of total revenues is calculated excluding "other revenues" and "one-off revenues".
Revenues by business application (in millions of euros)
Change
Six months ended December 31 2008 2009 (in EUR million) (in %)
Video Applications 336.6 361.4 +24.8 +7.4%
Data & Value Added Services 84.2 96.4 +12.2 +14.4%
Data Services 64.5 74.2 +9.8 +15.2%
Value Added Services 19.8 22.2 +2.4 +12.1%
Multi-usage 34.9 44.4 +9.5 +27.1%
Others 7.7 2.7 -5.0 -
Sub-total 463.5 504.9 +41.4 +8.9%
One-off revenues[3] - 3.2 +3.2 -
Total 463.5 508.0 +44.6 +9.6%
At a constant euro-dollar exchange rate, revenue growth would have been 11% compared with the first half of the 2008-2009 fiscal year. Excluding one-off revenues and at a constant euro-dollar exchange rate, growth would have been 10.3%.
VIDEO APPLICATIONS (72% of revenues[4])
Video Applications registered another six months of strong growth (+7.4%), driven by the full effect of contracts activated with the entry into service of three satellites and the redeployment of three further satellites in stable orbit during the second half of the previous fiscal year.
The number of TV channels broadcast by Eutelsat's fleet at December 31, 2009 was up by 230 to 3,448 (+ 7.1% year-on-year). HDTV channels increased by 27 to more than 100 (up 37% year-on-year).
New in-orbit resources in particular enabled:
- Further strengthening of the HOT BIRD(TM) neighbourhood, underscored by
the extension of long-term contracts with anchor customers, including
Sky Italia (Italy) and TPSA for Orange (Poland). At the end of the
first half 2009-2010, the number of channels broadcast at the HOT
BIRD(TM) neighbourhood totalled 1,079, of which 38 in HD;
- Increased capacity to be deployed for rapidly growing markets in the
Middle East, Central and Eastern Europe, Russia and Africa. At
December 31, 2009, the four neighbourhoods specifically addressing
these markets (7degrees West, 7degrees East, 16degrees East, 36degrees
East) were broadcasting 1,330 channels, of which 28 in HD.
DATA and VALUE-ADDED SERVICES (19.2% of revenues)
Data Services registered strong revenue growth of 15.2%, which was sustained by the entry into service in May 2009 of the W2A satellite at 10degrees East. This satellite principally responds to requirements for interconnecting mobile and corporate networks in Africa, Central Asia and the Middle East.
More generally, the Group benefited from the increasing take-up of Internet traffic, its satellites being a solution for backbone Internet connectivity for Internet Service Providers operating in regions beyond range of fibre. New contracts were activated with operators which include Telespazio, France Telecom, ACS Angola, Hughes Network Systems, the London Satellite Exchange, Horizon Satellite, Vizada Networks and British Telecom.
Value-Added Services, which encompass satellite capacity and supply of user equipment and services, continued to post sustained growth of 12.1% driven by strong demand for satellite-based Internet solutions able to close the digital divide in areas beyond terrestrial broadband networks. In the first half 2009-2010 revenues from Value-Added Services were driven by:
- Increased traffic through the installed base of D-STAR terminals which
are principally used for broadband connectivity for enterprises,
schools and communities, in particular in the Middle East and Africa;
- Continued roll-out across Europe of the Tooway(TM) consumer broadband
service. At December 31, 2009 the distribution network for Tooway(TM)
comprised 58 partners in 26 countries. The service was notably recently
selected by SFR in France to offer broadband to homes and businesses
not eligible for ADSL under the label "SHD broadband for all with SFR".
MULTI-USAGE (8.8% of revenues)
Multi-usage services (up 27.1%) continue to benefit from strong demand from governments, notably to serve regions in Central Asia and the Middle East. All contracts coming up for renewal were extended during the first half and new contracts were signed, in particular for capacity on the EUROBIRD(TM) 4A[5] satellite which was relocated in June 2009. At a constant euro-dollar exchange rate, revenue growth would have been 33.5%.
Other revenues and one-off revenues
The decline in "Other revenues" can be attributed to lower gains on currency hedging instruments. In the first half of the previous fiscal year, "Other revenues" also included various invoices to Solaris Mobile.
One-off revenues booked in the first half 2009-2010 correspond to late delivery penalties related to the W2A satellite.
RECORD 19.1% BACKLOG INCREASE TO EUR4.2 BILLION
Backlog[6] main indicators
31/12/08 30/06/09 31/12/09
Value of contracts (in billions of euros) 3.5 3.9 4.2
Weighted average residual life of
contracts (in years) 7.7 7.8 8.2
Share of Video Applications 92% 92% 93%
The EUR670 million increase in backlog reflects the conclusion of significant long-term contracts in markets which include Africa, the Middle East and Russia, notably on the following satellites:
- W7 (36degrees East):
- Renewal of 14 transponders and lease of six additional transponders
by MultiChoice Africa for DStv, the leading pay-TV platform across
sub-Saharan Africa;
- Lease by the Russian operator Intersputnik of 16 transponders to
boost channels offered in the NTV Plus and Tricolor TV platforms.
- ATLANTIC BIRD(TM) 4A (7degrees West):
- Expansion of resources leased by the Egyptian operator Nilesat,
within the framework of the development of this neighbourhood,
jointly operated by both companies, for video broadcasting across
the Middle East, the Gulf and North Africa.
This performance substantially increases the Group's long-term visibility on revenues and on cash flow. The backlog is equivalent to more than 4.2 times annual revenues, with weighted average residual life of contracts exceeding eight years.
8.8% INCREASE IN THE NUMBER OF LEASED TRANSPONDERS
As of December 31, 2009, the Group was operating 609 transponders in stable orbit. This year-on-year increase (+21.6%) reflects the launch of three satellites in the second half of the previous fiscal year and the redeployment of three others, as well as the optimisation of operational resources on the ATLANTIC BIRD(TM) 4A and W2A satellites.
The efficiency with which these operations were conducted enabled the Group to lease 43 additional transponders over the 2009 calendar year, and to significantly improve the operating flexibility of the fleet: the fill rate was brought back to 87.4% as of December 31, 2009.
Fleet evolution
June 30, December 31, June 30, December 31,
2008 2008 2009 2009
Operational transponders[7] 501 501 589 609
Leased transponders[8] 468 489 523 532
Fill rate 93.4% 97.6% 88.8% 87.4%
NB: The W7 satellite is not included in the above table.
FURTHER IMPROVEMENT OF PROFITS
Extract from the consolidated income statement (in millions of euros)[9]
Six months ended December 31 2008 2009 Change(%)
Revenues 463.5 508.0 +9.6%
Operating expenses[10] (88.4) (96.5) +9.1%
EBITDA 375.0 411.6 +9.7%
Depreciation and amortisation[11] (143.4) (157.3) +9.7%
Other operating revenues (costs) 24.6 (0.4) NM
Operating income 256.3 253.9 -0.9%
Financial result (49.8) (40.6) -18.5%
Income tax (71.2) (74.5) +4.6%
Income from equity investments 6.7 7.5 +11.0%
Minority interests (6.8) (6.8) -0.7%
Group share of net income 135.2 139.5 +3.2%
EBITDA margin maintained at the highest level of leading satellite operators
EBITDA is up EUR36.5 million compared to the first half of the previous fiscal year thanks to excellent commercial performance and continued good cost control.
As in previous years, there is some seasonality in the EBITDA margin, which also includes reimbursement of EUR3.2 million of mandatory taxes.
At 81%, the EBITDA margin remains the highest of leading satellite operators.
Group share of net income up to EUR139.5 million
Net income Group share recorded another semester of growth of +3.2%.
This improvement stands out against the EUR25 million non-recurring profit for the disposal of certain rights in Hispasat that boosted the first half of the previous fiscal year.
The year-on-year change in net income consequently reflects the following elements:
- Slight contraction in operating income (by EUR2.4 million) explained by
the absence of the previously mentioned non-recurring profit of EUR25
million[12] and by a EUR13.9 million increase in depreciation
reflecting the entry into service of new satellites and the end of
depreciation of the W2 satellite effective in July 2009.
- EUR9.2 million improvement in net financial charges, mainly due to the
effect of lower interest rates;
- Slightly higher tax charge (up EUR3.3 million) reflecting the rise in
Group profits during the semester;
- EUR0.8 million increase in income from equity investments, reflecting
the excellent commercial and operating performance of Hispasat, the
leading satellite operator in Spanish and Portuguese-language markets,
of which Eutelsat owns 27.69%.
HIGH LEVEL OF NET CASH FLOW FROM OPERATING ACTIVITIES
Net cash flow from operating activities: EUR316.4 million, or 62.3% of revenues
The Group continued to generate strong net cash flow from operating activities, highlighting the strength of its business model. The EUR37.3 million decrease over the first half 2008-2009 can be mainly attributed to:
- Payment in the first half 2009-2010 of a EUR24.9 million income tax
balance related to the fiscal year 2008-2009 compared to a EUR21.6
million reimbursement of income tax in the first half 2008-2009;
- One-off inflow of EUR25 million in the first half 2008-2009[13].
At EUR90.2 million, operating free cash flow remains largely a surplus. The change compared with the first half 2008-2009 is due to increased capital expenditures which amounted to EUR226.1 million. This is fully in line with the 3-year objective disclosed in July 2009 of on average EUR450 million investment par annum. These investments were dedicated to:
- Completion of the W7 programme and the satellite's launch on
November 24, 2009;
- On-going manufacturing of satellites ordered during the previous fiscal
years: W3B, KA-SAT, W3C and ATLANTIC BIRD(TM) 7.
Strengthening of Group financial structure
The net debt[14] to EBITDA ratio improved to 3.13x, down from 3.34x a year ago. It is stable compared to June 30, 2009, despite the 10% dividend increase at EUR156.2 million.
Net debt to EBITDA ratio
At December 31 2008 2009 Change
Net debt at the beginning of the period EURm 2,422 2,326 -96
Net debt at the end of the period EURm 2,408 2,440 +32
Net debt / EBITDA[15] X 3.34 3.13
As a reminder, the Group's financial debt comprises two syndicated facilities:
- EUR1.9 billion (of which EUR300 million undrawn) with maturity ending
in June 2013;
- EUR1.3 billion (of which EUR400 million undrawn) with maturity ending
in November 2011.
During previous fiscal years, the Group put hedging instruments in place against interest rate variations covering a large part of syndicated facilities up to their maturity. The average cost of debt drawn by the Group during the first half 2009-2010 was 3.47%, net of hedging effects.
Since autumn 2009 the two credit rating agencies (Moody's and Standard & Poor's) have upgraded their ratings which stands now investment grade. Eutelsat intends to maintain a solid financial structure, with a net debt to EBITDA ratio below 3.5x, in line with this rating.
GROWTH OBJECTIVES RAISED
Given the excellent performance achieved in the first half of its fiscal year, supported by the successful entry into service of the W7 satellite at 36degreesEast the Group is revising upwards its full year objectives disclosed last July. For the current fiscal year, the Group now targets,
- Revenues above EUR1,020 million, compared to more than EUR1 billion;
- EBITDA in excess of EUR795 million, compared to the previous
objective of over EUR780 million.
In addition, the Group targets revenue CAGR of more than 7% for the period 2009-2012 and reiterates the profitability, capital expenditure and distribution policy objectives for this period that were disclosed on July 31, 2009.
RECENT EVENTS
Continuation of the programme to renew and expand in-orbit resources
During the first half 2009-2010, the Group continued to implement its investment programme which covers the launch of five satellites (W7, W3B, KA-SAT, W3C, ATLANTIC BIRD(TM) 7) from mid-2009 to end-2011.
Entry into service of W7
In November 2009, the W7 satellite (70 operational transponders) was successfully launched to 36degrees East for collocation with W4.
Following the satellite's entry into service in January 2010, the Group now operates more than 650 transponders on its fleet (situation February 18, 2010).
Reconfiguration of capacity at the 16degrees East neighbourhood
At the beginning of January 2010, the W2M satellite was deployed to 16degrees East to be collocated with the EUROBIRD(TM) 16 (formerly ATLANTIC BIRD(TM) 4) and W2 satellites. The SESAT 1 satellite was also redeployed to this position following the entry into service in early January 2010 of W7 at 36degrees East.
This configuration of resources at 16degrees East enabled the Group to manage the failure of the W2 satellite, which took place on January 27, 2010, and to restore all services previously provided through W2 by the end of the following day. Depreciation of W2 ended in July 2009.
This configuration of three satellites enables Eutelsat to operate up to 40 transponders at 16degrees East, and will be maintained until the entry into service of the W3B satellite following its launch between August and September 2010.
Strategic partnership with Asia Broadcast Satellite (ABS)
Within the framework of a strategic partnership agreement signed between Eutelsat and Asia Broadcast Satellite (ABS), the EUROBIRD(TM) 4[16] satellite, operating eight transponders, was redeployed in inclined orbit to 75degrees East and renamed W75/ABS-1B. This agreement enables a commercial offer to be launched at this new orbital position in partnership with ABS to address markets in the Middle East, central Asia and Russia.
Update on satellite launch schedule
Eutelsat has revised the launch arrangements for the W3B satellite. In agreement with the spacecraft's prime contractor, Thales Alenia Space, to safeguard its delivery schedule, W3B will be launched by an Ariane 5 vehicle between August and September 2010. The Long March launch originally assigned for W3B has consequently been reallocated to W3C, for launch between June and September 2011. The KA-SAT satellite will be launched by Proton between November 2010 and January 2011.
The W3B and W3C satellites will enable Eutelsat to renew and expand resources at 16 and 7degrees East, addressing dynamic video markets in Europe, Turkey and Indian Ocean islands. W3C will also significantly boost resources for professional video and data markets in Europe, North Africa and the Middle East. KA-SAT is the first pan-European Ka-band satellite optimised for mass-market delivery of consumer broadband services. It will be able to serve over one million homes beyond range of high-speed terrestrial networks.
---------------------------------
[1] EBITDA is defined as operating income before depreciation,
amortisation and other operating income/charges (impairment
charges, dilution profits (losses), insurance compensations, etc.).
[2] On a twelve months rolling basis.
[3] Non-recurring revenues comprise late delivery penalties and outage
penalties
[4] Percentage calculated excluding "other revenues" and "one-off
revenues"
[5] Formerly W1 which was redeployed to 4° East.
[6] Backlog represents future revenues from capacity lease agreements
(including contracts for satellites yet to be delivered). These
capacity lease agreements can be for the entire operational life of
the satellites.
[7] Number of transponders in stable orbit, excluding spare capacity.
[8] Number of transponders leased on satellites in stable orbit.
[9] For more detail, please refer to Group interim consolidated accounts
at http://www.eutelsat.com.
[10] Operating expenses is defined as the sum of cost of operations and
of sales & administrative expenses.
[11] Comprises amortisation expense of EUR22.2 million corresponding to
the intangible asset "Customer Contracts and Relationships"
identified during the acquisition of Eutelsat S.A. by Eutelsat
Communications.
[12] Exluding this non-recurring item, operating income would have risen
by 9.8%
[13] Following the sale of certain rights in Hispasat.
[14] Net debt includes all bank debt and all liabilities from long-term
lease agreements, less cash and cash equivalents and marketable
securities (net of bank credit balances).
[15] On a twelve months rolling basis
[16] EUROBIRD(TM)4 is now in inclined orbit; its transponders are
therefore no longer included in the fleet's number of operational
transponders.
Documentation
Consolidated accounts are available at http://www.eutelsat.com
Conference call
Eutelsat Communications will also hold a conference call in English for analysts and investors on February 18. The call will begin at 4pm Paris time (New York: 10am, London: 3pm). Call-in numbers are:
- 01-70-99-42-88 (from France)
- +44-207-138-0845 (from Europe)
- +1-212-444-0895 (from United States).
A replay of the call will be available from February 18 at 7:30pm (Paris time) to February 24, midnight, by dialling:
- 01-74-20-28-00 (from France)
- +44-207-111-1244 (from Europe)
- +1-347-366-9565 (from United States).
Access code: 2450623#.
A presentation and consolidated accounts will be available on the Group's website (http://www.eutelsat.com) from 8am (Paris time) on February 18, 2010 and the webcast of the conference call will be available from February 19, 2010.
Financial calendar
The financial calendar below is provided for information purposes only. It is subject to change and will be regularly updated.
- May 11, 2010: financial report for third quarter ended March 31, 2010.
- July 29, 2010: earnings for the full year ended June 30, 2010
About Eutelsat Communications
Eutelsat Communications (Euronext Paris: ETL, ISIN code: FR0010221234) is the holding company of Eutelsat S.A.. With capacity commercialised on 27 satellites that provide coverage over the entire European continent, as well as the Middle East, Africa, India and significant parts of Asia and the Americas, Eutelsat is one of the world's three leading satellite operators in terms of revenues. At 31 December 2009, Eutelsat's satellites were broadcasting more than 3,400 television channels and close to 1,100 radio stations. More than 1,000 channels broadcast via its HOT BIRD(TM) video neighbourhood at 13degrees East which serves over 123 million cable and satellite homes in Europe, the Middle East and North Africa. The Group's satellites also serve a wide range of fixed and mobile telecommunications services, TV contribution markets, corporate networks, and broadband markets for Internet Service Providers and for transport, maritime and in-flight markets. Eutelsat's broadband subsidiary, Skylogic, markets and operates services through teleports in France and Italy that serve enterprises, local communities, government agencies and aid organisations in Europe, Africa, Asia and the Americas. Headquartered in Paris, Eutelsat and its subsidiaries employ 615 commercial, technical and operational employees from 28 countries.
http://www.eutelsat.com
Appendix
Change in net debt (in millions of euros)
Six months ended December 31 2008 2009 Change(%)
Net cash flow from operating activities 353.7 316.4 -10.5%
Capital expenditure (140.6) (226.1) +60.8%
Operating free cash flow 213.1 90.2 -57.7%
Interest and other fees paid, net (49.7) (43.7) -12.1%
Acquisition of minority interests (1.8) (3.1)
Distributions to shareholders
(including minority interests) (141.7) (156.2) +10.2%
Other (5.6) (1.1)
Decrease (increase) in net debt 14.3 (113.9)
Revenue breakdown by application (in percentage of revenues)*
Six months ended December 31 2008 2009
Video Applications 73.8% 72.0%
Data & Value-Added Services 18.5% 19.2%
........of which Data Services 14.1% 14.8%
........of which Value-Added Services 4.3% 4.4%
Multi-usage 7.7% 8.8%
Total 100% 100%
* excluding other revenues and one-off revenues (EUR7.7 million in H1
2008-2009 and EUR5.9 million in H1 2009-2010)
Quarterly revenues by business application
Three months ended
In millions of euros 30/09/2008 31/12/2008 30/09/2009 31/12/2009
Video Applications 166.7 169.8 180.8 180.6
Data & Value-Added Services 41.1 43.2 47.7 48.7
Data Services 31.4 33.1 36.9 37.3
Value-Added Services 9.7 10.1 10.7 11.5
Multi-usage 15.6 19.3 22.9 21.5
Other 3.2 4.5 1.7 1.0
Sub-total 226.7 236.8 253.0 251.8
One-off revenues - - - 3.2
Total 226.7 236.8 253.0 255.0
Channels at video neighbourhoods serving Central and Eastern Europe,
Russia, Middle East, Africa
Orbital position Markets 31/12/2007 31/12/2008 31/12/2009
7degrees West North Africa and the
Middle East 117 158 275
7degrees East Turkey 180 199 191
16degrees East Balkans and Indian Ocean
islands 325 384 410
36degrees East Russia and Africa 336 440 454
Total 958 1,181 1,330
Estimated satellite launch schedule
Satellite Estimated launch Transponders
W3B August - September 2010 53 Ku / 3 Ka
KA-SAT November 2010 - January 2011 > 80 Ka beams
W3C June - September 2011 53 Ku / 3 Ka
ATLANTIC BIRD(TM) 7 September - December 2011 50 Ku
Note: Satellites generally enter into service one to two months after
launch.
For further information
Press
Vanessa O'Connor
Tel. : + 33-1-53-98-38-88
[email protected]
Frederique Gautier
Tel. : + 33-1-53-98-38-88
[email protected]
Investors
Gilles Janvier
Tel. : +33-1-53-98-35-30
[email protected]
SOURCE Eutelsat Communications
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