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Eutelsat H1 surprises

Eutelsat has reported better than expected half-year numbers. While the headline revenues of €754.4 million were down 0.9 per cent, cost savings and efficiencies helped deliver a respectable level of profitability, with an EBITDA margin of 77.9 per cent (up 0.4 per cent). Net income was up 2.2 per cent at €192 million.

However, Eutelsat is certainly not out of the woods. Most analysts expect the satellite operator to be facing a tough year – or even two – ahead. For example, its all-important Backlog fell back a worrying 8 per cent (€500 million) to €5.3 billion.

Eutelsat’s CEO Rodolph Belmer said that there would be €30 million of cost savings over the next three years. “This semester we have also launched the ‘LEAP’ cost-savings plan, aimed at generating €30 million in annualised savings by fiscal year 2018-19, contributing to the robustness of our Free Cash Flow generation targets and enabling us to raise our EBITDA margin outlook.”

One set of beneficial highlights revolved around the US Government’s Dept. of Defense which resulted in “above expectations” renewals. Other positive news focused on the take-up of HD and Ultra-HD on Eutelsat’s Hot Bird position.

Revenues from its Video segment are well down (3 per cent) and not helping its overall backlog position. Indeed, one analyst expressed concern that Eutelsat is suffering another client cut-back (from Fransat, which is trimming its capacity). Laurie Davison, equity analyst at Deutsche Bank, was brutal in his flash note to clients: “For this business to return to growth, as Eutelsat is targeting in the next 2 years, will require this area to at least stabilise, if not grow. We believe declines will get worse, not better.”

But a somewhat better verdict came from Sami Kassab at Exane/BNP-Paribas, who admitted that number-crunching was challenging because the reporting “for all divisions has been changed making comparisons difficult”. Kassab’s overall verdict was that Eutelsat had delivered a “solid” set of results.

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