SES S.A. has announced its financial results for the six months ended 30 June 2015.

HIGHLIGHTS

Development of a global business delivering strong growth in revenue and net profit
- Revenue of €999.1 million, up 6.4% (-2.6% at constant FX1) over prior year period
- Video, Mobility and Government revenues growing, with reduction in Fixed Data
- EBITDA of €740.0 million, up 6.7% (-2.5% at constant FX)
- EBITDA margin of 74.1% (H1 2014: 74.0% at constant FX)
- Profit after tax up 13.9% to €340.0 million; Net operating cash flow up 45.8% to €784.4 million
- Full Year 2015 growth expectations lowered to around -3% for revenue and around -3.5% for EBITDA at constant FX, mainly due to impact of stronger U.S. Dollar in Fixed Data, and reduced capacity available to serve this vertical. Revenue and EBITDA are expected to grow on a reported basis
- Diversified, global revenue profile with 45% in U.S. Dollars driving reported growth from translation benefit

Focusing on new horizons to build differentiating capabilities and generate future growth
- Growing presence in emerging markets, with International now representing around 30% of revenue
- HD TV channels up 13.9% (YOY) to 2,069; five commercial Ultra HD agreements signed
- Fixed data capacity agreements with Airbus Defence and Space, ITC Global, SkyStream and others
- Major mobility contract with Global Eagle Entertainment serving aeronautical connectivity
- Government business benefiting from two new U.S. Government-funded hosted payload agreements
- Three new satellite procurements with significant pre-commitments, expanding future growth potential

Karim Michel Sabbagh, President and CEO, commented: “SES has continued to make progress across the business in H1 2015 in delivering on our clear strategy of globalisation, verticalisation and dematuring. We have grown revenues in the three verticals of Video, Mobility and Government. We are addressing the reduction in renewals and new business in Fixed Data with new technology and customer solutions.

First, SES has continued to globalise, with International now accounting for 30% of revenue. Our technical reach grew by a further 7% to 312 million TV households, a quarter of the global total, benefiting from the development of our presence in the areas with the strongest future growth potential.

Second, we are building differentiating capabilities in four market verticals where satellite has a clear right-to-win. Our HD TV channels grew by a further 13.9% and SES recently signed Europe’s first commercial Ultra HD channel. This was followed by the agreement with Sky Deutschland for additional capacity for UHD broadcasts. This was also complemented by further client agreements for three UHD channels to be launched by the end of this year. SES-14 and SES-15, along with last year’s procurement of SES-12, will give SES a global HTS platform that has already attracted a major Next Generation Data customer in Global Eagle Entertainment which, with Gogo and Panasonic, brings to three the number of major service providers in aeronautical connectivity on the overall SES fleet. We also secured two hosted payload agreements for the U.S. Government and further diversified our government sector activities with the LuxGovSat programme.

Third, we are proactively engaged and looking ahead to how SES can bring technological innovation to bear in shaping the future end-user experience and CapEx efficiency. In this context, SES will play a leading role in dematuring our industry and by doing so will deliver truly differentiated satellite-enabled solutions.

While delivering a strong translation benefit to reported results, the stronger U.S. Dollar has impacted pricing, new business and renewals for Fixed Data customers contracting in U.S. Dollars but invoicing in local currencies. Full Year 2015 revenue and EBITDA expectations at constant FX have been adjusted in acknowledgement of this factor, as well as the delayed launch of SES-9 and satellite health degradation, principally impacting Fixed Data services. Looking to the future, SES is continuing to focus on accelerating towards the important new horizons for building sustainable future growth.”

Financial performance

Group revenue as reported was €999.1 million, representing an increase of 6.4%, which included the translation benefit of the stronger U.S. Dollar. Revenue was 2.6% lower at constant FX, principally due to the lower level of outright transponder sales under the comprehensive agreement with Eutelsat and the impact of the terms of the AMC-15/AMC-16 capacity renewal agreements with EchoStar up to the launch of SES-11 (due in Q4 2016). Adjusting for these events, group revenue was slightly ahead of H1 2014 (at constant FX) with growth in European services and new infrastructure business being offset by the impact of U.S. Government budget sequestration on existing contract renewals, and the transition of capacity contracted by ARSAT to its own satellite.

Reported EBITDA increased 6.7% to €740.0 million. At constant FX, EBITDA was down 2.5% compared with H1 2014 as lower revenue was offset by a 3.0% reduction in operating expenses to €259.1 million. As a result, reported EBITDA margin improved to 74.1% compared with 73.9% as reported (74.0% at constant FX).

Operating profit of €449.9 million was 2.8% higher (down 4.1% at constant FX). This included a 13.2% increase in depreciation and amortisation expense to €290.1 million, where the impact of the stronger U.S. Dollar more than offset a reduction in depreciation of 2.2% at constant FX.

Net financing costs were 40.3% lower at €50.8 million, including foreign exchange gains of €38.5 million from the positive impact of the stronger U.S. Dollar. The benefit of a €3.7 million (or 3.6%) reduction in net interest expense was offset by lower capitalised interest.
The income tax expense of €59.1 million (H1 2014: €53.7 million) represented an effective tax rate of 14.8% (H1 2014: 15.2%).

Profit after tax of €340.0 million was 13.9% higher than the prior year period. This reflects the combination of reduced operating expenses, depreciation and net financing costs on a constant FX basis. These were further augmented by the translation benefits of the stronger U.S. Dollar on revenue and other profit lines.

SES’s share of joint ventures and associates’ result was a loss of €63.0 million for the six months ended 30 June 2015. This loss was €55.8 million higher than the prior year period, which principally reflects non-cash movements associated with O3b Networks’ commencement of commercial operations.

Net profit attributable to SES’s shareholders was €275.4 million (H1 2014: €290.9 million), which represented earnings per share of €0.68 (H1 2014: €0.72).

Net operating cash flow increased 45.8% to €784.4 million.

The Net Debt to EBITDA ratio at 30 June 2015 was 2.69 times (30 June 2014: 2.85 times).