SES hits mid-year expectations, eyes growth in networks business

Luxembourg-based satellite operator SES has released ''solid'' financial results for the first six months of the year, which it said were in line with the company's expectations despite an overall drop in revenues.

The set of results are the first to be reported under new chief executive officer Steve Collar, who took the reins of the government-backed company in April. 

SES reported revenues worth €981.4 million in the first half of the year, standing below the the same period in 2017 when it exceeded €1 billion.

The company's earnings before interest, taxes, depreciation, and amortisation (EBITDA) margin stood at 63.3%, slightly lower than the 65.5% level it saw last year.

Collar said he was satisfied with the results, which hit company expectations and confirm the decision to invest and focus on its two main business segments – video and networks.

While the video business fell by 2.3% in the first half of this year, compared to 2017, its networks division saw a 10.6% increase in underlying growth, making a positive impact on the group underlying revenue which reported a 1.5% increase.

The growth in SES Networks was driven in particular by new business in the aeronautical and government segments, Collar explained.

Despite the drop in the video business, Collar added the company had renewed video contracts with clients across Western Europe and the US, while also securing new agreements to expand video platforms in Latin America and Eastern Europe.

He described the video segment as ''very stable and robust'' business.

SES recently signed a major ''blanker purchase agreement'' with the US government for services supplied by its O3B fleet of medium earth orbit satellites.

Earlier this year, GovSat's first satellite, which is backed by SES and the Luxembourg government, was also launched by SpaceX from Cape Canaveral, in Florida.

Revenue streams

Currently, SES Networks makes up 32% of the group's revenues, whereas its video activities generate 68% of total revenue.

In the first half of the year, the network business generated €311.4 million in underlying revenue, of which the mobility business claimed 30.9%, government portfolios generated 17.4%, while fixed data revenue saw a decrease of 5.6%.

''We are on the right side of the curve,'' Collar added, arguing that by 2020 the balance will shift from the 30/70 ratio towards a 60/40 proportion in overall revenue streams.

Shareholders

Standing at €227.7 million, the profit attributable to SES shareholders reached a lower level than the same period of 2017 when shareholders saw a net profit of €275.5 million.

However, SES reported higher free cash flows before financing, standing at €438.7 million as of 30 June, up by 16.9% than the same period last year.

The satellite operator, employing nearly 2,000 people, had a contract backlog of €7.1 billion as at 30 June, and secured nearly 95% of its expected group revenue for 2018.

Its operating profit stood at €277.7 million, representing a margin of 28.3%, compared with 29.2% or €306 million, in the first half of 2017.

Winds of change

On 27 April, SES reports a 'good quarter' after experience a 'challenging' 2017, which resulted in a ''rebasing'' of dividends on its A shares by 40%, from €1.34 per share in 2016 to €0.80.

In March 2018, SES launched an eight-year bond, offering senior unsecured fixed rates notes worth €500 million.

SES has been officially under new leadership since 4 April, after former CEO Karim Sabbagh caught the market by surprise in February by announcing he would quit and returned to the Middle East to take up a role at the helm of cyber security firm DarkMatter.

Collar and his senior management have announced plans to "focus on execution, transparency and communication" in the future. SES also reduced the number of its board members from 17 to 15 following a shareholder vote in early April.