SES S.A. announces financial results for the three months ended 31 March 2021.

Steve Collar, CEO of SES, commented: “We have made a strong start to 2021 with the resilience of our Video business to the fore on the back of a number of important renewals and extensions secured at our core European neighbourhoods. Networks business performance was also solid in Q1, notwithstanding the near-term COVID environment, with new deal flow beginning to pick up. We continue our laser focus on removing cost from the business and minimising discretionary spend with a 7% year-on-year reduction in operating expenses, leading to improving EBITDA margin. In summary, our start to the year puts us firmly on track to deliver on our 2021 financial outlook which remains unchanged.

I am excited by the progress that we are making in securing customer commitments for SES-17 and O3b mPOWER ahead of launch in the second half of 2021, and the level of market interest that we are seeing across all Networks verticals. These important growth investments allow us to offer a significantly expanded set of low latency products and solutions to the market as the world emerges from the COVID environment and demand for connectivity increases exponentially. We are also on course with the clearing of C-band in the US and are continuing to pursue opportunities to create additional shareholder value from further monetisation initiatives.

The share buyback programme that we are announcing today reflects our confidence in the long-term fundamentals of the business. The current share price does not reflect the underlying value of SES and this programme represents an attractive opportunity to deploy capital for the optimal benefit of our shareholders. SES is uniquely positioned with targeted and differentiated growth investments fuelling future top line and EBITDA growth with strong cash flow enhanced by meaningfully lower capital expenditure, as well as the proceeds from our C-band initiative.”

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¹ Excluding restructuring charge and operating expenses recognised in relation to US C-band repurposing (disclosed separately)
² Underlying revenue, excluding periodic and other revenue (disclosed separately) that are not directly related to or otherwise distort the underlying business trends
³ At constant FX which refers to comparative figures restated at the current period FX to neutralise currency variations
⁴ Simplify & Amplify
⁵ Ratio of Adjusted Net Debt (which includes 50% of hybrid bonds as debt, per the rating agency methodology) to Adjusted EBITDA
⁶ Financial outlook assumes a €/$ FX rate of €1 = $1.20, nominal satellite health and launch schedule
⁷ Gross backlog $740 million (fully protected: $605 million)

Key business and financial highlights

SES regularly uses Alternative Performance Measures (APM) to present the performance of the Group and believes that these APMs are relevant to enhance understanding of the financial performance and financial position.

• Underlying revenue (excluding periodic and other) declined by 2.8% year-on-year (at constant FX) to €436 million.
• Video underlying revenue of €263 million represents a reduction of 4.6% year-on-year (at constant FX), compared with -8.0% year-on-year in FY 2020, where lower revenue from mature markets was partially offset by higher revenues generated across International markets and growth in the number of paying consumers subscribing to HD+ in Germany.
• Networks underlying revenue of €173 million was flat compared with Q1 2020 (+0.1% at constant FX) with strong ongoing growth in Government (+8.5%) offsetting COVID-related impacts on Mobility (-9.1%), while Fixed Data (-1.0%) was in line with the prior period.
• Adjusted EBITDA of €268 million represented a higher Adjusted EBITDA margin of 61.4% (Q1 2020: 60.1%) and benefitted from a 6.9% year-on-year reduction (at constant FX) in operating expenses.
• Adjusted EBITDA excludes restructuring expenses of €1 million (Q1 2020: €3 million) and €7 million (Q1 2020: nil) of operating expenses associated with the accelerated repurposing of US C-band spectrum, net of €27 million repurposing income (Q1 2020: nil).
• Adjusted Net Profit (see page 5) improved year-on-year by 41.5% to €75 million as the lower revenue was more than offset by the combination of lower recurring operating expenses, lower depreciation and amortisation expenses, and lower net interest expense. Adjusted Net Profit also included a net foreign exchange gain of €9 million (Q1 2020: loss of €5 million).
• At 31 March 2021, Adjusted Net Debt (including 50% of the €1.3 billion hybrid bonds as debt, per the rating agency methodology) of €3,486 million was €534 million (or 13.3%) lower than Q1 2020 and represented an Adjusted Net Debt to Adjusted EBITDA ratio of 3.08 times (31 March 2020: 3.28 times).
• Fully protected contract backlog at 31 March 2021 was €5.5 billion (gross backlog of €6.1 billion when including backlog subject to contractual break clauses).
• Following the Annual General Meeting on 1 April 2021, where all resolutions were approved, a dividend of €0.40 per A-share and €0.16 per B-share was paid to shareholders on 22 April 2021, consistent with the prior year and the Board’s commitment to maintain a base dividend of €0.40 per A-share and €0.16 per B-share.
• SES has, today, announced a share buyback programme of up to €100 million to be executed by 31 December 2021 under the authorisation given by the Annual General Meeting of shareholders held on 1 April 2021. SES will purchase up to 12 million A-shares and up to 6 million B-shares in equal proportion to maintain the ratio of two A-shares to one B-share, as required by the Articles of Association. The shares acquired under the programme are intended to be cancelled, reducing the total number of voting and economic shares.
• The FY 2021 financial outlook (assuming a €/$ FX rate of €1 = $1.20, nominal satellite health and launch schedule) is unchanged with group revenue expected to be between €1,760-1,820 million (including €1,000-1,030 million for Video and €750-780 million for Networks) and Adjusted EBITDA (excluding restructuring and US C-band expenses) between €1,060-1,100 million.
• Capital expenditure (representing net cash absorbed by investing activities excluding acquisitions, financial investments, and US C-band repurposing) is also unchanged and expected to be €660 million in 2021 and €880 million in 2022 reflecting the growth investment in SES-17 and O3b mPOWER. Thereafter, capital expenditure is expected to reduce significantly to €220 million in 2023, €570 million in 2024, and €340 million in 2025, representing an average annual capital expenditure of €375 million (2023-2025).
• In April 2021, SES joined the United Nations Global Compact, underscoring the Group’s commitment to operating in the most sustainable and responsible way across the business through a purpose-led Environmental, Social, and Governance programme.

Operational performance and commentary

REVENUE BY BUSINESS UNIT

Video: 60% of group revenue

At 31 March 2021, SES carried a total of 8,430 TV channels to 361 million TV homes around the world. This includes 3,098 channels in High Definition and Ultra High Definition which has grown by 4% compared with Q1 2020. 69% of total TV channels are broadcast in MPEG-4 with an additional 4% in HEVC.

The impact from customers ‘right-sizing’ volumes in mature markets (Western Europe and the US), lower US wholesale revenue, and the decision to reduce exposure to low margin services activities led to an overall year-on-year revenue reduction, albeit at a much slower pace of decline as compared with the trend throughout 2020.

International market revenue was higher year-on-year, while continued growth in the number of paying subscribers led to year-on-year growth in HD+ where the combination of an increase in the cost to renew a 12-month subscription from March 2021 and introduction of new Internet Protocol-based solutions into the market are expected to support the future development of the business.

Networks: 40% of group revenue

Government
Strong contribution from new MEO- and GEO-enabled network solutions for the US Government led to overall strong year-on-year growth in revenue compared with Q1 2020 with additional new business wins secured at the end of the quarter expected to contribute to future revenue development. This was complemented by slightly higher year-on-year revenue in Global Government.

Fixed Data
Underlying revenue was consistent with the prior period as lower year-on-year revenue in the Pacific region was balanced with growth in new revenue from tier one mobile network operators in Latin America and additional revenue ramp up in the global cloud segment.

Mobility
The effects of the COVID pandemic on customers in the commercial aviation and cruise segments resulted in lower revenue compared with Q1 2020 which had yet to see an impact from the pandemic at that point in time. This was partly offset by a positive year-on-year performance in commercial shipping revenues.

While the vast majority of commercial contracts across the entire SES business, including in Mobility, are fixed, it is expected that the impact of lower revenue as a result of the COVID environment continues to present a short-term headwind to the development of Mobility revenue, however the long-term growth fundamentals remain in place to drive the pace of new business as demand recovers.

Future satellite launches

CONSOLIDATED INCOME STATEMENT

Three months ended 31 March

SUPPLEMENTARY INFORMATION

QUARTERLY INCOME STATEMENT (AS REPORTED)

QUARTERLY OPERATING PROFIT (AT CONSTANT €/$ FX RATE OF €1:$1.20)

ALTERNATIVE PERFORMANCE MEASURES

SES regularly uses Alternative Performance Measures (‘APM’) to present the performance of the Group and believes that these APMs are relevant to enhance understanding of the financial performance and financial position. These measures may not be comparable to similarly titled measures used by other companies and are not measurements under IFRS or any other body of generally accepted accounting principles, and thus should not be considered substitutes for the information contained in the Group’s financial statements.

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