Eutelsat Communications: Full Year 2020-21 Results
- Operating Verticals revenues at the top end of our expected range
- Further high level of Free Cash Flow generation
- Topline to grow from FY 2022-23 with an acceleration in FY 2023-24
- Adjusted Discretionary Free Cash Flow objective for FY 2021-22 raised by €30m; growth from FY 2022-23
- Recommending 5% dividend increase to €0.931 per share
PARIS–(BUSINESS WIRE)–Regulatory News:
The Board of Directors of Eutelsat Communications (ISIN: FR0010221234 – Euronext Paris: ETL), chaired by Dominique D’Hinnin, reviewed the financial results for the year ended 30 June 2021.
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Key Financial Data | FY 2019-20 | FY 2020-21 | Change |
| P&L |
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| Revenues – €m | 1,278.3 | 1,233.9 | -3.5% |
| “Operating Verticals” revenues reported – €m | 1,276.3 | 1,201.2 | -5.9% |
| “Operating Verticals” revenues at constant currency and perimeter – €m | 1,267.5 | 1,225.9 | -3.3% |
| “Operating Verticals” revenues as per financial objectives – €m | – | 1,219.92 | – |
| EBITDA3 – €m | 985.0 | 921.9 | -6.4% |
| EBITDA margin – %3 | 77.1% | 74.7% | – 2.4 pts |
| Operating income – €m | 490.2 | 347.2 | -29.2% |
| Group share of net income – €m | 297.6 | 214.1 | -28.1% |
| Financial structure |
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| Reported Discretionary Free Cash Flow – €m3 | 474.4 | 467.1 | -1.5% |
| Adjusted Discretionary Free Cash Flow – €m3 | 496.5 | 497.6 | +0.2% |
| Net debt – €m | 2,999.4 | 2,655.5 | -€343.9m |
| Net debt/EBITDA – X3 | 3.05 | 2.88 | -0.17x |
| Backlog – €bn | 4.1 | 4.4 | +7.4%4 |
Rodolphe Belmer, Chief Executive Officer of Eutelsat Communications, said: “FY 2020-21 was a solid year with revenues at the high end of our upwardly revised guidance, record high cash generation and a further reduction in our Net Debt / EBITDA ratio. Major commercial highlights included, in Broadcast, the Sky Italia renewal, reflecting the long-term relevance of satellite in Europe and two hosted payloads in Government Services. The year was a turning point for our Connectivity business, in particular Fixed Broadband, with notably the entry into service of EUTELSAT KONNECT as well as major wholesale agreements with Telcos, Orange and TIM, for capacity on both EUTELSAT KONNECT and EUTELSAT KONNECT VHTS. Finally, Eutelsat accomplished a major strategic move, gaining a foothold in the LEO segment through its investment in OneWeb. OneWeb represents an additional growth engine for our Connectivity businesses with strong potential for co-operation thanks to complementarity of resources and assets.
Looking ahead, Operating Verticals revenues for FY 2021-22 are expected between €1,110 and €1,150 million. They will subsequently return to growth from FY 2022-23 with an acceleration in FY 2023-24 on the back of the entry into service of incremental assets with substantial firm precommitments. Our Adjusted Discretionary Free Cash Flow objective for FY 2021-22 is raised by €30m with growth from FY 2022-23. We are also renewing our commitment to strong shareholder returns with a recommended dividend of €0.93, up 5%.”
| EBITDA, EBITDA margin, Net debt / EBITDA ratio, Cash Capex and Discretionary Free-Cash-Flow are considered Alternative Performance Indicators. Their definition and calculation are in appendix 3 of this document. The comparative financial statements as of 30 June 2020 have been restated with respect to the CVAE, which has been reclassified from “Selling, general and administrative expenses” to “Corporate income tax” for an amount of 3.1 million euros in order to align the presentation with the consolidated financial statements as of 30 June 2021. |
| HIGHLIGHTS |
Operating Verticals revenues at the top end of the upgraded range of objectives
- €1,201 million on a reported basis, down 3.3% like-for-like
- €1,220 million at 1.14 €/$ rate, at the high end of our €1,200 to 1,220 million range
Robust financial performance despite tough external context
- High level of cash generation, with reported Discretionary Free Cash flow of €467 million, representing 38% of revenues and record high Adjusted Discretionary Free Cash flow of €498 million.
- Industry-leading profitability with a 74.7% EBITDA margin despite headwind related to covid-linked Bad Debt.
- Sound balance sheet with an improved Net Debt / EBITDA ratio at 2.88x (versus 3.05x last year).
Strong commercial performance with growing backlog representing 3.5 years of revenues
- Broadcast: Sky Italia renewal highlighting the long-term relevance of satellite broadcast in Europe and incremental capacity commitment from Multichoice in sub-Saharan Africa;
- Fixed Data: Multiple deals with new or expanded capacity highlighting the robust demand for Backhaul and Corporate Networks;
- Government Services: New EGNOS payload on EUTELSAT HOTBIRD 13G with a total contract value of €100m over 15 years; EUTELSAT 36D selected by Airbus Defence and Space to carry its latest Ultra High Frequency (UHF) payload;
- Fixed Broadband: Major wholesale agreement with Telecom Italia for the Italian capacity on EUTELSAT KONNECT and KONNECT VHTS, following similar deal with Orange for France.
- Mobile Connectivity: Agreement with Global Eagle for capacity in inclined orbit at 139°West.
Ramp up of Fixed Broadband strategy with significant acceleration expected from FY 2021-22
- Entry into service of EUTELSAT KONNECT with full coverage over Europe and Africa
- Progress in Western Europe:
- Wholesale agreements with Orange and TIM; ongoing discussions with other operators.
- Launch of retail offers in several European countries, following successful integration of Bigblu Broadband Europe.
- Multiple distribution agreements signed in key African markets.
Strategic investment in OneWeb
- Compelling entry point to the LEO segment.
- Additional growth engine for our connectivity businesses.
- Strong potential for co-operation thanks to complementarity of resources and assets.
Well on track to receive C-Band proceeds during FY 2021-22 with completion report to be filed imminently
- Completion report on both phase 1 and phase 2 of the transition to be filed imminently.
- Eutelsat eligible for a pre-tax consideration of $507m of which $125m for phase 1 and $382m for phase 2.
- Proceeds expected in full during FY 2021-22 for both phase 1 and phase 2.
Updated financial objectives extending visibility to FY 2023-24
- Operating Vertical revenues expected between €1,110 million and €1,150 million in FY 2021-22 (at 1.20 €/$ rate),
- Operating vertical revenues expected to grow from FY 2022-23 with an acceleration in FY 2023-24, on the back of the entry into service of new assets with substantial firm precommitments.
- Adjusted Discretionary Free Cash Flow Objective for FY 2021-22 raised by €30m at constant currency; growth from FY 2022-23.
Commitment to strong shareholder returns with recommended dividend of €0.93, up 5%
- Dividend covered more than twice by Reported Discretionary Free Cash Flow.
| ANALYSIS OF REVENUES5 |
| In € millions | FY 2019-20 | FY 2020-21 | Change | |
| Reported | Like-for-like6 | |||
| Broadcast | 784.6 | 741.0 | -5.6% | -4.2% |
| Data & Professional Video | 175.3 | 161.4 | -7.9% | -3.7% |
| Government Services | 161.1 | 151.4 | -6.0% | +0.0% |
| Fixed Broadband | 76.7 | 80.2 | +4.6% | +7.1% |
| Mobile Connectivity | 78.7 | 67.2 | -14.6% | -8.4% |
| Total Operating Verticals | 1,276.3 | 1,201.2 | -5.9% | -3.3% |
| Other Revenues7 | 2.0 | 32.7 | x 16.4 | +35.7% |
| Total | 1,278.3 | 1,233.9 | -3.5% | -2.9% |
| EUR/USD exchange rate | 1.105 | 1.188 |
| |
Total revenues for FY 2020-21 stood at €1,234 million, down 3.5% on a reported basis and by 2.9% like-for-like.
Revenues of the five Operating Verticals (ie, excluding ‘Other Revenues’) stood at €1,201 million. They were down by 3.3% on a like-for-like basis excluding a negative currency effect of c. 2.6 points and a broadly neutral perimeter effect with the consolidation of Bigblu Broadband Europe since 1st October 2020 offset by the disposal of Euro Broadband Infrastructure (EBI) on 30 April 2021.
Fourth Quarter revenues stood at €304 million down 4.8% on a reported basis and by 2.4% like-for-like. Revenues of the five Operating Verticals stood at €294 million, down 2.7% year-on-year and up 1.2% 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)
FY 2020-21 Broadcast revenues were down 4.2% like-for-like to €741 million. They reflected the full-year impact of the renegotiation of contract terms with Forthnet as well as lower revenues in Europe stemming from a slowdown in the pace of new business against the current covid backdrop which is affecting resellers in particular.
Fourth Quarter revenues stood at €180 million, down by 6.6% year-on-year. Quarter-on-quarter, they were broadly stable excluding Fransat.
At 30 June 2021 the total number of channels broadcast by Eutelsat satellites stood at 7,006 up 3.2% year-on-year. HD penetration continued to increase, standing at 1,942 channels versus 1,679 a year earlier (+15.7%), implying a penetration rate of 27.7% compared to 24.7% a year earlier.
On the commercial front, the year was marked by the renewal of the contract with our largest Broadcast customer, Sky Italia, highlighting the long-term resilience of the European Pay-TV segment. We also expanded our commercial relationship with Multichoice which committed for incremental capacity at 36°East, highlighting the potential of the African market.
Conversely, the tough covid-related economic environment led to a lower than usual level of new business throughout the year, particularly in Europe. Nevertheless, there have been some signs of normalization recently, for example with a contract secured with a major global broadcaster for content distribution on EUTELSAT 9B.
Data & Professional Video (13% of revenues)
FY 2020-21 Data & Professional Video revenues stood at €161 million, down by 3.7% year-on-year, a trend which has considerably improved compared to the previous year (-14.1%). Fixed Data, which accounts for more than two thirds of this vertical, is benefiting from improving volumes which largely offset the continued price pressure. Professional Video remains in structural decline, although it enjoyed a recovery in Occasional Use compared to FY 2019-20 which was strongly impacted by the suspension of live sports events.
Fourth Quarter revenues stood at €41 million, up 0.9% year-on-year and 2.1% quarter-on-quarter. They included a one-off sale of equipment for circa €1m.
On the commercial front, the year saw dynamic activity levels highlighting the multiple opportunities in Mobile Backhaul and Corporate Networks. Amongst others we renewed and expanded contracts with Liquid Telecom for VSAT services on EUTELSAT 7B, and with Overon for use of capacity on EUTELSAT 10A and EUTELSAT 10B by Eumetsat, the European weather monitoring agency. Elsewhere new contracts were secured with New Zealand’s Mobile operators to provide 4G mobile backhaul services to the country’s remote offshore territories and with Telespazio for the provision of satellite capacity for rural backhauling in the context of Peru’s national telecommunications programme.
Government Services (13% of revenues)
FY 2020-21 Government Services revenues stood at €151 million, stable on a like-for-like basis. This reflected notably the negative carry-forward effect of renewals with the US Government during the past 18 months (85% in Spring 2020, 80% in Fall 2020, 95% in Spring 2021) and a tough comparison basis in the Fourth Quarter which last year included a positive one-off from the temporary relocation of EUTELSAT 7A.
Conversely revenues benefited from new business as well as from the contribution of the EGNOS payload which entered service on 15 February 2020 on EUTELSAT 5 WEST B.
Fourth Quarter revenues stood at €38 million, down 4.5% year-on-year but up 1.7% quarter-on-quarter.
On the commercial front, the EUTELSAT 36D satellite was selected by Airbus Defence and Space to carry its latest Ultra High Frequency (UHF) payload to support communications over the EMEA region.
Fixed Broadband (7% of revenues)
FY 2020-21 Fixed Broadband revenues stood at €80 million, up 7.1% like-for-like. They reflected the initial revenues generated by Konnect Europe, including the start of the wholesale contracts with Orange from 1st January and TIM from 1st April, as well as growth at our African operations.
Fourth Quarter revenues stood at €18 million, up 34.8% on a year-on-year basis and 16.4% quarter-on-quarter.
FY 2020-21 was marked by significant milestones for our Fixed Broadband operations with the entry into service of the EUTELSAT KONNECT satellite. Progress in Europe included wholesale agreements with Orange and TIM as well as the launch of our retail offers following the integration of BigBlu Broadband Europe. In Africa our distribution capabilities were boosted notably through agreements with Paratus, TelOne, Vox, Coollink, Orange DRC and Facebook.
FY 2021-22 is expected to see the full benefit of these wins as well the materialization of other initiatives resulting in a substantial acceleration of growth.
Mobile Connectivity (5% of revenues)
FY 2020-21 Mobile Connectivity revenues stood at €67 million, down 8.4% like-for-like. Revenues reflected the impact of the Covid crisis on Aero Mobility, reducing revenues from certain service providers and leading to the loss of airtime-related revenues on KA-SAT. On a more positive note, Maritime continued to perform well on the back of the ramp-up of contracts secured in the last couple of years.
On the commercial front, a multi-year multi-transponder agreement was signed with Global Eagle for capacity in inclined orbit at the 139° West orbital position, highlighting the strength of Eutelsat’s in-orbit resources and underlying demand on the Aero Mobility market. In addition, ‘Eutelsat ADVANCE’, the recently launched end-to-end managed connectivity service is showing early traction, having already been adopted by several maritime service providers.
The vertical will continue to face a degree of uncertainty on the timing of recovery; however trends improved in the Fourth Quarter with revenues up 16.0% year-on-year, albeit compared to a low base, and up 11.6% quarter-on-quarter thanks to the contribution of the Global Eagle contract.
Other Revenues
Other Revenues amounted to €33 million versus €2 million a year earlier. They included a positive €16 million impact from hedging operations compared to a negative effect of (€11) million last year.
| OPERATIONAL AND UTILIZED TRANSPONDERS |
The number of operational transponders at 30 June 2021 stood at 1,377 units, almost unchanged year-on-year. The number of utilized transponders stood at 981, up 21 units year-on-year.
As a result, the fill rate stood at 71.2% compared with 69.7% a year ago.
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| 30 June 2020 | 30 June 2021 |
| Operational transponders8 | 1,376 | 1,377 |
| Utilized transponders9 | 960 | 981 |
| Fill rate | 69.7% | 71.2% |
| Note: Based on 36 MHz-equivalent transponders excluding high throughput capacity | ||
| BACKLOG |
At 30 June 2021 the backlog stood at €4.4 billion, up 7.4% at constant currency compared to 30 June 2020. It reflected notably the inclusion of the long-term renewal contract with Sky Italia, the wholesale agreement with Telecom Italia and the additional EGNOS payload on the future EUTELSAT HOTBIRD 13G, partly offset by natural backlog consumption.
The backlog was equivalent to 3.5 times 2020-21 revenues, with Broadcast representing 64%, up from 3.2 years in FY 20.
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| 30 June 2020 | 30 June 2021 |
| Value of contracts (in billions of euros) | 4.1 | 4.4 |
| In years of revenues based on last fiscal year | 3.2 | 3.5 |
| Share of Broadcast | 68% | 64% |
| Note: The backlog represents future revenues from capacity or service agreements and can include contracts for satellites under procurement. | ||
| PROFITABILITY |
EBITDA stood at €922 million versus €985 million at 30 June 2020, down 6.4%. The EBITDA margin stood at 74.7% versus 77.1% a year earlier. This reflected mostly lower revenues, the dilutive impact of the consolidation of Bigblu Broadband Europe and a specific Bad Debt headwind related mostly to Mobile Connectivity customers in the context of the Covid crisis. These elements were partly offset by continued cost discipline with the pursuit of the LEAP 2 plan.
Group share of net income stood at €214 million versus €298 million in FY 2019-20, down by 28.1%. The net margin stood at 17% versus 23% last year. This reflected mainly:
- Lower depreciation and amortisation costs of -€508 million at 30 June 2021 compared with -€531 million a year earlier, due notably to the disposal of KA-SAT and the end of the amortization period of certain assets (EUTELSAT 7A and EUTELSAT 172A) which more than offset the full-year effect of EUTELSAT 7B and EUTELSAT 5 WEST B and the entry into service during the year of EUTELSAT KONNECT.
- ‘Other operating income’ of -€67 million versus +€36 million last year; FY 2020-21 included notably costs related to the Issy-les-Moulineaux headquarters move, the LEAP 2 plan and M&A activity as well as some asset impairments, whereas FY 2019-20 included the insurance proceeds from EUTELSAT 5 West B net of asset impairments.
- A net financial result of -€95 million (versus -€81 million a year earlier), mainly reflecting an unfavourable impact from foreign exchange gains and losses.
- Lower tax, at -€24 million versus -€98 million, last year reflecting notably lower pre-tax profit, the favorable effect of currency and inflation on deferred tax assets and liabilities as well as the two-point reduction in the corporate tax rate in France. As a result, the tax rate stood at 10% (versus 24% last year).
| CASH FLOW |
Net cash flow from operating activities amounted to €889 million, €110 million above last year. The decrease in EBITDA was more than offset by an improved working capital requirement trend reflecting a catch-up compared to FY 2019-20 which was impacted by the Covid crisis. Cash tax was also lower than the previous year which included taxes related to one-off insurance proceeds.
Cash Capex10 amounted to €342 million, well within our €400m average per annum envelope. It was €120 million above FY 2019-20 which reflected milestone delays in the context of the Covid crisis and the insurance proceeds from Eutelsat 5 West B.
Interest and other fees paid net of interest received amounted to €80 million versus €83 million last year.
As a result, Discretionary Free Cash Flow amounted to €467 million on a reported basis. At constant currency and excluding the impact of hedging, one-off costs related to the LEAP 2 plan and the move to the new headquarters, Adjusted DFCF stood at €498m, up 0.2%. Excluding the post-tax effect of the above-mentioned insurance proceeds, it would have been up 12%. This evolution comes on top of a compound annual growth rate exceeding 20% in the previous four years.
Discretionary Free Cash Flow represented 38% of revenues, a record high level.
| FINANCIAL STRUCTURE |
At 30 June 2021 net debt stood at € 2,655 million, a €344m decrease versus end-June 2020. Discretionary Free Cash Flow more than covered the dividend payment (€205 million). Other variations included equity investments and divestments (resulting in a net increase in debt of €15 million), the mark-to-market of the foreign exchange portion of the cross-currency swap (resulting in a net decrease in debt of €34 million) and other items (mostly related to leases and structured debt) contributing to the reduction in net debt for a net €63 million.
The net debt to EBITDA ratio stood at 2.88x, an improvement compared to end-June 2020 (3.05x).
During the year, the Group undertook several successful financing operations:
- The issuance of a €600 million Eurobond with an 8-year maturity and a 1.5% coupon to refinance the June 2021 €500 million maturity which was early redeemed in April 2021.
- An agreement with the European Investment Bank for a €200 million 8-year term loan to finance the KONNECT VHTS program at compelling terms.
- The early repayment of €200 million out of the €600 million Eutelsat Communications term loan maturing in March 2022, taking advantage of the Group’s strong liquidity position.
- The refinancing of the remaining €400m Eutelsat Communications term loan and attendant €200 million undrawn credit line by two facilities for the same amounts with an initial term of five years and slightly improved terms.
- A €200 million undrawn revolving credit facility at the level of Eutelsat S.A. for a period of two years which will provide an additional layer of liquidity in the context of the investment in OneWeb.
- A €200 million undrawn structured credit facility consisting of three tranches repayable in June 2024, June 2025 and June 2026, which also enhances the Group liquidity position.
As a result:
- the weighted average maturity of the Group’s debt significantly improved to stand at 5.0 years, compared to 3.4 years at end-June 2020;
- the average cost of debt after hedging was further reduced to 2.38% versus 2.45% in FY 2019-20;
- the Group’s liquidity position at the end of June 2021 including cash and undrawn credit lines stood at more than €1.9 billion.
| DIVIDEND |
On 29 July 2021 the Board of Directors agreed to recommend to the Annual Meeting of Shareholders on 4 November 2021 a dividend of €0.93 per share, up 5% versus last year], in line with Eutelsat’s commitment to serving a stable to progressive dividend and signalling its strong confidence in the cash generation capabilities of the Group in the long term.
It will be paid on 18 November 2021, subject to the vote of the Annual Meeting of Shareholders.
| OUTLOOK AND FINANCIAL TARGETS |
A growing backlog, sound financial position and solid cash-flow generation ability put Eutelsat in a strong position to face the challenges of FY 2021-22 which is expected to be the last year of organic revenue decline before a return to growth from FY 2022-23.
- The direction of Broadcast revenues is expected to be broadly similar to FY 2020-21, impacted by the carry forward-effect of the slowdown in new business prevalent during most of the year. The trend is expected to improve thereafter.
- Data & Professional Video will continue to decline, albeit at a modest pace thanks to improving volume trends in the Fixed Data segment.
- Government Services revenues will continue to be driven by the outcome of past and upcoming US DoD renewals but will embark the initial contribution of EUTELSAT QUANTUM expected in the Second Half.
- With the full availability of the EUTLSAT KONNECT satellite, Fixed Broadband is set for substantial growth on the back of the full effect of the abovementioned wholesale agreements, the ramp-up of retail operations in Europe and the acceleration of Konnect Africa.
- Mobility will continue to experience a high degree of uncertainty regarding the recovery of the Aero segment but will benefit from the full-year effect of the Global Eagle contract and continued momentum in Maritime.
Taking these elements into account, we expect to generate revenues from the five Operating Verticals of between €1,110-1,150 million in FY 2021-2211. Thanks notably to the firm precommitments secured on EUTELSAT KONNECT VHTS and EUTELSAT 10B and the full-year effect of EUTELSAT QUANTUM, revenues are expected to grow from FY 2022-23 with an acceleration in FY 2023-24.
Cash Capex12 will continue to be contained, and will not exceed €400 million per annum for each of the next three fiscal years (FY 2021-22 / FY 2022-23 / FY 2023-24).
The Group will continue to leverage all measures to maximise cash generation, notably the execution of the LEAP 2 plan, aimed at generating €20-25 million in annual savings by FY 2021-22.
In this context, our objective of Adjusted Discretionary Free Cash Flow for 2021-22 stands at €400-€430 million at a €/$ rate of 1.20, equating to a €30 million uplift at constant currency versus previous guidance of €370-€400 million at the same €/$ rate13. Adjusted Discretionary Free Cash Flow is expected to grow in FY 2022-23 and in FY 2023-24.
Contacts
Media
Joanna Darlington
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Marie-Sophie Ecuer
Tel.: +33 1 53 98 32 45
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Jessica Whyte
Tel.: +33 1 53 98 46 21
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Investors
Joanna Darlington
Tel.: +33 1 53 98 31 07
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Cédric Pugni
Tel.: +33 1 53 98 31 54
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Alexandre Illouz
Tel.: +33 1 53 98 46 81
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