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  • Satellite Evolution Group

SES S.A.: Half year 2020 results

SES S.A.: Half year 2020 results

SES S.A. announced financial results for the six months ended 30 June 2020.

Solid H1 performance in line with expectations and continued underlying growth in Networks of +7.1% year-on-year(1,2)

  • Revenue of EUR 947.5 million, -1.5% as reported with underlying revenue 2.4%(1,2) lower than H1 2019

  • Adjusted EBITDA(3) of EUR 582.0 million, -2.3% as reported (-3.5% at constant FX(2)) compared with H1 2019 and representing an Adjusted EBITDA(3) margin of 61.4% including a 2.2% year-on-year reduction in recurring operating expenses

Limited COVID-19 impact in H1 reflecting business resilience with measures in place to mitigate increased headwinds in H2 2020

  • Updated FY 2020 group revenue outlook to EUR 1,860 - 1,900 million(4) in view of expected COVID-19 related revenue development

  • FY 2020 Adjusted EBITDA(3) outlook now EUR 1,120 - 1,160 million(4) including EUR 40 - 60 million of ‘exceptional’ COVID-specific cost mitigation measures implemented to protect the bottom line

Substantially increased visibility of USD 3.97 billion in accelerated relocation payments from U.S. C-Band repurposing and now fully included in SES’ financial projections for the first time

  • Full execution of transition plan underway following unanimous election to accelerate clearing by satellite operators with total clearing costs of USD 1.6 billion and more than USD 1.5 billion expected to be reimbursed from mid-2021

  • First relocation proceeds (linked to success milestone in Q4 2021) to be utilised to strengthen balance sheet with final proceeds (linked to success milestone in Q4 2023) to be used for a mix between return to shareholders, strong balance sheet and any disciplined value-accretive investment

Networks business set to deliver long-term growth through deployment of SES-17 and an enhanced O3b mPOWER constellation

  • EUR 1.8 billion of growth CapEx (2020-2024), including four additional O3b mPOWER satellites(5), de-risking overall investment through launch resilience, enhanced launch cadence, improved constellation efficiency and meaningful expansion in coverage and throughput. Agreement with Boeing to collaborate in the development of commercially based solutions for Government customers

  • EUR 550 million of CapEx deferred from 2020-2021 and total CapEx (2020-2024) flat, both as compared with March 2020 forecast

Significant progress on ‘Simplify & Amplify’ transformation programme

  • On track to deliver EUR 40 - 50 million of Simplify & Amplify related recurring annual EBITDA optimisations from 2021 with significant steps taken in the second quarter to reduce footprint, delayer, increase efficiency and remove positions across the organisation

Strong balance sheet, strong liquidity and a disciplined financial policy

  • Adjusted Net Debt to Adjusted EBITDA(3) ratio 3.3 times(6) consistent with SES’ commitment to investment grade

  • Successful EUR 400 million Euro bond reduces future interest cost and ensures no significant senior debt maturities before 2023


1 Excluding periodic and other revenue (disclosed separately) that are not directly related to or otherwise distort the underlying business trends 2 At constant FX which refers to comparative figures restated at the current period FX to neutralise currency variations 3 Excluding restructuring charge and operating expenses recognised in relation to U.S. C-Band repurposing 4 Financial outlook assumes a EUR/USD exchange rate of EUR 1 = USD 1.15, nominal satellite health and launch schedule 5 Total incremental investment of EUR 480 million of which EUR 250 million over the period of 2020-2024 with the remaining balance thereafter 6 Treats the hybrid bonds as 50% debt and 50% equity, per the rating agency methodology

Steve Collar, CEO of SES, commented: “The business has performed well in the first half of the year, delivering solid revenue in challenging trading conditions, while the benefits of the proactive cost-saving measures that we took early in the development of COVID-19 are also seen in our H1 results. We were particularly pleased to sign a broad distribution agreement with BBC Studios during the quarter, underlining our ability to support premium customers across a range of satellite and terrestrial distribution methods as well as significant extensions with ProSieben in Germany and Austria. On the Networks side, we are seeing a pickup in our Government business after a slower first half, with a new and innovative use of the O3b constellation for the U.S. Government among a number of important deals won and signed in the second quarter.

Notwithstanding the resilience that our business has shown in the first half of the year, we are not immune to the impact that global lockdowns are having on a number of the markets that we serve. We anticipate a slowdown in the pace of new business in the second half of the year and have updated our financial outlook for the full year in view of the challenges faced by a number of our customers, particularly in Mobility and Sports & Events. We were quick and early to initiate exceptional one-off cost reduction measures of EUR 40 - 60 million for 2020 to mitigate the impact of COVID-19 on our bottom line and are tracking well against this target.

Looking beyond COVID-19, 2020 has seen us make great strides in our more than two-year effort to repurpose spectrum in the U.S. for 5G while protecting the broadcast communities that we serve. Following the FCC Report and Order in February and the subsequent decision by all operators to adopt accelerated clearing in May, we are executing strongly on all elements of our clearing and transition plan. We incorporate the financial impact of the C-Band project in our financials for the first time, including clear line of sight to almost USD 4 billion in accelerated relocation payments.

We are also almost a year away from the launches of both SES-17 and O3b mPOWER, two programmes that underpin our multi-orbit, scalable, cloud-enabled network architecture that will drive significant future growth in our Networks business, a business that has already delivered 25% growth over the last three years. We have added four more satellites to the planned O3b mPOWER constellation, adding resilience, an improved launch cadence and a 90% increase in constellation throughput while maintaining our overall capex envelope broadly flat. Significantly, SES and Boeing have agreed to collaborate in the development of commercially based service offerings for Government users, including the development and demonstration of multi-orbit interoperability.

Our global transformation programme, Simplify & Amplify, is on track to deliver annualised cost reductions of EUR 40 - 50 million from 2021 onwards through a combination of sharpened focus, reductions in footprint and wide-reaching efficiency improvements. We have further strengthened our financing position with a 6% year-on-year reported net debt reduction and a new EUR 400 million Euro Bond reducing the cost of debt and enhancing debt maturity profile, with no significant senior debt maturities to refinance before 2023. Overall, we are satisfied with the progress that we are making as a business in what is a challenging, pandemic-dominated year.

Finally, on behalf of everyone at SES, both now and over the last 25 years, I want to pay tribute to Romain Bausch, who has decided to step down from the SES Board of Directors after a quarter of a century of service, dedication and success, firstly as CEO and latterly as Chairman. As we build the future vision for SES, we stand on the shoulders of giants and we could not be more appreciative and grateful for the legacy that Romain has created.”

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