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Eutelsat ticked all of the right boxes in declaring its 3 months and 9 months revenue and profit numbers. But despite a slew of highly positive statements analysts remain concerned that Eutelsat is now introducing various caveats as to future performance.
Total revenues at the Paris-based satellite operator for the 9 months to March 31st stood at €1,090.5 million, up 4.4 per cent on a pro-forma basis at constant currency and excluding non-recurring revenues. The appreciation of the US dollar relative to the euro added two points to top-line growth, particularly represented in Government Services and to a lesser extent in Data Services.
At March 31st, the total number of channels carried by Eutelsat satellites stood at 5,747, up 10.3 per cent year-on-year. HDTV penetration continued to increase, representing 11.7 per cent of channels compared to 10 per cent a year earlier. A total of 672 channels were broadcast in high definition across Eutelsat’s fleet at the end of the third quarter, up from 522 a year earlier.
Q3 revenues themselves were €367.7 million, up 4.5 per cent on a pro-forma basis at constant currency and excluding non-recurring revenues. The impact of the appreciation of the dollar was even more marked during the period, adding 4.4 points to top-line growth.
One of the worries is Russia. Economic uncertainty and the collapse of the Rouble hasn’t helped Eutelsat (or other satellite operators). Eutelsat said: “In the context of the current economic environment in Russia, Eutelsat entered into discussions with its Russian clients with the aim of alleviating some contract terms. These discussions have been partially completed. The impact on third quarter revenues was of around 1 million euros. For fiscal year 2014-2015, the impact is estimated at less than five million euros. For FY 2015-16, the additional impact is estimated in the region of 12 to 15 million euros.”
These concerns over Russia sent the alarm bells ringing at investment bank Jefferies, for example, which in a note to clients said: “Eutelsat has now caveated the FY15-17 growth guidance subject to “no significant deterioration in government services” and “the final outcome of Russian contract negotiations”. On the Russia pay-TV renegotiations, first flagged at the Q2 15 results, Eutelsat has said that they are “partially completed”: the impact on Q3 15 revenue was €1 million and is expected to be <€5 million in FY15 and a further €12-15 million in FY16. Notwithstanding the implied consensus downgrades (-1 per cent to FY16 consensus revenue), Eutelsat feels it is able to absorb this absolute revenue impact within the current guidance. Be reminded that Russia is 5 per cent of revenue currently, but 15 per cent of the expansion capacity over the guidance period,” said analyst Giles Thorne.