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Eutelsat: €5.4bn backlog; No growth until 2018-19

There’s a new sense of quiet optimism at Paris-based satellite operator Eutelsat, which has told analysts (during its Q1 results to September 30th) that it was confirming its current financial objectives and reiterating its guidance for the next two years. The next two years will continue to be tough, but modest revenue growth should return by 2018-19.

A “company wide” cost-saving programme is now underway and more detail on this will emerge in February at the next quarterly statement.

In terms of hard numbers, Q1 revenues were €385 million (up 0.7 per cent like for like) despite Video revenues falling 1.3 per cent to €224.3 million, and Data Services slipping -2.8 per cent to €56.8 million. Its Value-Added revenue stream grew a useful 8.3 per cent to €29.4 million but Government Services (another word for its Military bandwidth sales) fell back 10.7 per cent to €47.1 million.

Eutelsat’s contracted backlog, at €5.4 billion, is well down y-o-y by some €200 million on the end-June figure, and some €600 million since the same time last year. Video revenues represent 85 per cent of its backlog.

The number of TV channels carried stood at 6,336 at the end of June (up 8 per cent y-o-y) with total HDTV penetration rising from 12.3 to 14.8 per cent (940 channels, and HD on Hotbird is at 22 per cent).

However, CEO Rodolphe Belmer stressed that several important steps had been taken on the company’s new strategic roadmap. “Notably the procurement of the Eutelsat 5-WB satellite under the ‘design-to-cost’ policy, generating significant capex savings, as well as progress on non-core asset disposals with Hispasat and Wins. On the operational side, I would highlight the rapid execution of the rationalisation of distribution at the HOTBIRD orbital position and the strong (“above expectations, very positive”) renewal rate with the US Department of Defense during the [autumn] round, confirming the stabilisation in Government Services. In connectivity, we have seen a number of positive developments including the launch of the Russian broadband service on E-36C, the securing of capacity enabling us to launch our African broadband initiative with limited delay despite the loss of the Ka payload on AMOS-6 satellite, and the signing of several contracts for in-flight connectivity highlighting the quality of our in-orbit resources.”

Eutelsat is selling off a couple of assets, notably its 70 per cent stake in maritime connectivity company WINS/DHI (“non core”) and is in the process of selling its 34 per cent stake in Hispasat.  This Hispasat sale is now being valued by an international examiner.

Belmer reported that its important Government Services revenue stream – albeit down 10.7 per cent y-o-y – was now seeing a 90+ per cent renewal rate, and well up on the 65 per cent seen six months ago.

On the downside, connected customers to its Ka-Sat broadband satellite fell to 179,000 (from 190,000 a year ago).  Overall fleet fill rate was also down (to 71.5 per cent from 77.6 per cent a year ago) but in that time the number of transponders on offer had grown by 152 units (to 1,327) and helped by the launch  of five new satellites, all of which delivered incremental capacity into the market. 948 transponder-equivalents were fully leased (up from 912 a year ago).

Deputy CEO Michel Azibert told analysts that its Data Services division was suffering a “tough environment” in all areas.

Eutelsat is anticipating further falls in overall revenue this financial year (to June 30 2017) of some -3 to -1 per cent. During its next Financial Year (2017-18), revenues are expected to be “broadly flat” and then with a return to modest growth in FY 2018-19.

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