Luxembourg – SES S.A. has reported financial results for the 12-month period ending September 30, 2013. With a year-to-date (YTD) revenue of EUR 1,378.2 million, the company has seen an increase of 2.4% at constant exchange rates (constant FX) over the prior year period; This revenue increase is 5.7% when excluding the EUR 42.6 million of analogue revenue recorded in 2012. The company has also achieved a YTD EBITDA of EUR 1,009.3 million, an increase of 0.8% at constant FX over the prior year.

The closing net debt/ EBITDA ratio is 3.01  (September 30, 2012: 3.02) while the fully protected contract backlog is EUR 7.4 billion, representing 4.1 times 2012 revenue.

Romain Bausch, President and CEO, commented, “SES has delivered a robust performance in the year to date. We have increased our capacity and are commercialising new market opportunities. Forthcoming launches will further develop this capability and create the conditions for future growth. Our European business, which is almost entirely Video DTH, continues to grow (revenue +5.6%, when excluding analogue). New business and renewals with major customers, including Sky Deutschland and Arqiva, have contributed to an increase in the contract backlog to EUR 7.4 billion. In the International segment (revenue +12.5%) we have added a number of new DTH platforms, in Latin America, Africa, and the Asia-Pacific region. Although the launch schedule continues to be subject to some delays, total revenue growth (excluding analogue) was 5.7%, with considerable momentum from the video business.”

The prior year period included EUR 42.6 million in revenue and EBITDA from four months of analogue DTH transmissions in Germany, which ended on 30 April 2012. This affects the reported year-on-year comparisons with 2013. The results are as follows:

The revenue and EBITDA, ex-analogue and at constant FX, increased by 5.7% and 5.3% respectively. On the other hand, depreciation and amortisation reduced slightly. The effective tax rate is at 13.3%, with the Net Debt/ EBITDA ratio at 3.01. And the contract backlog is at EUR 7.4 billion.

Reported revenue increased by 1.4% versus the prior year period to EUR 1,378.2 million. On a constant FX basis, revenue grew by 2.4%. Excluding analogue and at constant FX, revenue growth was 5.7% year-on-year. This growth was driven primarily by the strong increase in the international segment of 10.3% (+12.5% at constant FX), as new and existing capacity were commercialised. 

Operating costs increased by 6.1%, as the continuing favourable development of services businesses delivered strong revenue growth, with an accompanying increase in associated cost of goods sold. Excluding this, total operating costs increased by only 2.1% at constant FX.

Reported EBITDA decreased by 0.3% versus the prior year period to EUR 1,009.3 million. On a constant FX basis, EBITDA grew by 0.8% with strong growth of 5.3% year-on-year excluding analogue, reflecting absolute gains in both infrastructure and services segments. The overall EBITDA margin was 73.2% (2012: 74.4%; 73.6% excluding analogue), reflecting the analogue switch-off, the favourable development of services activities and an accompanying increase in the associated cost of goods sold. The infrastructure margin was a robust 83.6% (2012: 83.8%; 83.1% excluding analogue), and the aggregate margin for the services businesses rose from 14.2% in the first nine months of 2012 to 15.9% in the current period.

Depreciation and amortisation, as reported, reduced slightly from EUR 386.3 million to EUR 382.4 million year-on-year, while on a constant FX basis there was little change (2012: EUR 382.0 million). Operating profit, as reported, increased by 0.2% from EUR 625.7 million to EUR 626.9 million (+1.2% at constant FX).

Reported net financing charges increased 3.2% year-on-year to EUR 127.4 million. At constant FX net financing charges were flat versus the prior year period with lower financing cost offsetting a one-time charge of EUR 7.5 million taken in Q2.

An increase of EUR 28.0 million in the tax charge delivered an effective tax rate of 13.3% (2012: 7.7%). This, coupled with an increased share of associate’s losses at O3b Networks, resulted in a net profit of EUR 413.4 million, compared to EUR 456.4 million for the same period of the previous year.

Compared to June, 30 2013, the group’s fully protected contract backlog grew from EUR 7.1 billion to EUR 7.4 billion, an amount equivalent to 4.1 times 2012 group revenue.  Important new business and renewals were recorded in the quarter.

Reported third quarter revenue of EUR 467.7 million was flat to the prior year period. On a constant FX basis, revenue increased by 2.9%, despite the favourable impact in the prior year period of the one-time recognition of revenue associated with services rendered with the SES-3 Ka-band payload.

This growth was driven primarily by the strong increase in the international segment of 12.9% (+18.7% at constant FX), as existing capacity was commercialised and the first revenue from Oi in Brazil on SES-6 was recognised. The European segment revenue increased by 3.4% (3.5% at constant FX). Revenue in the North American region decreased by 18.8% (-13.9% at constant FX), mainly due to the one-time Q3 2012 revenue recorded for services rendered on SES-3, as mentioned above.

Operating expenses continued to be tightly managed, delivering a third quarter EBITDA of EUR 347.3 million (+3.2% at constant FX), due to variable cost of sales.  The overall EBITDA margin for the quarter, at constant FX, was strong at 74.3% (2012: 74.0%).Operating profit for the quarter was EUR 218.3 million, an increase of 5.0% on a constant FX basis.

In the third quarter, in-orbit testing was concluded and SES-6 has entered into service at the end of July. Also, the ASTRA 2E satellite was successfully launched at the end of September 2013. 

A new launch date of November 22, 2013 has been set for the launch of SES-8 on SpaceX’s Falcon 9 launcher. SES-8 will commence commercial operations in Q1 2014.

Available transponder capacity increased by 2% compared to September 30, 2012, from 1,440 to 1,469, while utilised capacity rose by 4%, from 1,045 to 1,088 transponders.  At September 30, 2013, the group satellite fleet had a utilisation rate of 74.1%.  

For international utilisation, available satellite capacity increased by 49 transponders. Utilisation increased by 59 transponders, resulting in an overall utilisation rate of 71.0%.  Average revenue per utilised transponder remained stable.

SES operates a number of spacecraft that are susceptible to solar array circuit failures. No reduction in commercial capacity due to additional circuit failures occurred during the quarter.

A multi-transponder, long-term contract for capacity at 28.2 /28.5E was signed with Arqiva. Sky Deutschland continued to expand its DTH operations and during the third quarter secured renewal and additional capacity at SES’ prime orbital position of 19.2E to further develop its business and support new initiatives such as Ultra HD. Sky Deutschland is now using 13 transponders at 19.2E.

HD+ further developed its market penetration. At September 30, 2013, the company had a customer base of 1.28 million paying households. Since the start of the year, HD+ has successfully grown its customer base by 35%. HD+ will expand the range of channels carried and is in advanced negotiations with broadcasters who are planning HD distribution on the HD+ platform. The HD+ Replay service is also expanding, with the addition of access to the media libraries of ProSieben, SAT.1 and kabel eins, which will go live in autumn 2013.

SES Government Solutions continued to perform well, with revenue ahead of the prior year period. The budgetary constraints of the U.S. government had no impact on SES’ activities during the first half of the year. The U.S. government budget difficulties and the recent sequestration are expected to have some influence on satellite operators’ results during the second half of the year. Therefore SES forecasts the corresponding revenues to remain flat year on year, while good growth potential is still foreseen for the medium to long term.

International revenue increased by 12.5% to EUR 392.0 million compared to the prior year period, on a constant FX basis, as new capacity addressing emerging markets was successfully commercialised.

MNC SkyVision took additional capacity on the SES-7 satellite to provide new Chinese-language DTH services in Indonesia. This Ku-band service will complement the existing packages offered by MNC SkyVision in S-band from the same orbital location.

SES holds a minority strategic interest in start-up O3b Networks, which is building a Middle Earth Orbit (MEO) satellite constellation of High Throughput Satellites (HTS). O3b has developed a differentiated service offering that both creates and serves a new market segment, the MEO constellation being capable of delivering higher throughput, lower latency and greater flexibility than geostationary satellites can provide.

O3b Networks launched its first four satellites in June 2013. Following in-orbit tests, O3b has decided to execute modifications to the satellites 5 to 12. Satellites 5 to 8 are expected, subject to confirmation by Arianespace, to be launched in late Q1 2014. Commercial service is expected to start in Q2 2014. Satellites 9 to 12 are expected to be launched in the second half of 2014. By year end 2014, O3b is therefore expected to have 12 satellites in orbit, significantly increasing the network resilience and capacity.

During October 2013, SES issued a €500 million 5-year Euro bond with a coupon of 1.875% (Mid-Swap +73bp), the lowest coupon in the company’s history. The proceeds have been applied to refinance existing debt. The successful offering further strengthens SES’ liquidity profile and reflects the market’s view of SES as a strong investment grade credit, underlining SES’ ability to secure funding on attractive terms.  

At the beginning of September, the tribunal convened under the rules of the International Chamber of Commerce dismissed a first claim by Eutelsat seeking a declaration that SES cannot use the 500 MHz of German frequencies at the 28.2/ 28.5E neighbourhood without breaching a 1999 intersystem coordination agreement between Eutelsat and SES.

Consequently, on October 4, 2013, Eutelsat ceased its transmissions on these frequencies, which are now being operated and commercialised by SES. 

The arbitration continues over remaining claims of Eutelsat, and SES and Eutelsat are in discussions with a view to finding a solution regarding the subject matter of the arbitration.

Despite the later launches of ASTRA 2E and SES-8, SES’ 2013 revenue and EBITDA growth guidance of 3-4% and 2.5-3.5% respectively, is maintained.  This corresponds to a growth rate of 5.5-6.5% for revenue and EBITDA, excluding analogue.These expectations assume that the satellite health status remains nominal.