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Eutelsat: Strong revenues, but profits dented

February 17, 2012

By Chris Forrester

Paris-based satellite ‘supra-regional’ operator Eutelsat reported “solid” half-year results (to December 31st) on February 17th. Eutelsat reported revenue growth up 4.6 per cent to €602.4 million, and a record order book backlog of €5.3 billion (up a very healthy 9.6 per cent). However, the cost of refinancing €1.8 billion-worth of group debt at the end of last year gave a knock to its net profits, which fell 10 per cent to €156.8m. Eutelsat also had to pay an extra five per cent of French corporate tax which did not help.

“Following the successful entry into service of two new satellites, that have anchored our market position in the Middle East, Africa, Central Europe and the Indian Ocean Islands, our order backlog increased almost 10 per cent to a record €5.3 billion,” said CEO Michel de Rosen (up from €4.9 billion). A headline statement said the operator reaffirmed its goal of generating EBITDA of more than €955 million for the fiscal year representing a very positive outlook. Its EBITDA margin is an industry leading 79.4 per cent (although down from 80.4 per cent a year ago).

One major change over the past few months is a major increase in the free float of its shares following Abertis Telecom’s selling of half of its Eutelsat stake in January. This means that 59 per cent of Eutelsat’s issued shares are now in ‘free float’ which will help stock liquidity. Abertis still holds 15.4 per cent, and Fonds Strategiique D’Investissement is the major shareholder with 25.6 per cent. Two of Abertis’s four Eutelsat directors have resigned as a result of the share disposal.

As to its channel count, Eutelsat is now carrying 4,173 TV channels (as at Dec 31st), of which 283 are in high-def (HD growth is up 45 per cent y-o-y). Eutelsat is now operating 801 transponders, although this includes 82 spotbeams on Ka-Sat. However, as a result Eutelsat’s all-important ‘fill rate’ has slipped back from 90.4 per cent (December 31st 2010) to 76.1 per cent (at December 31st 2011). Video growth rose by 2.9 per cent, but the start performer was in Eutelsat’s ‘multi-usage’ sector, which expanded 29.9 per cent during the year.

Eutelsat’s ‘data services’ segment growth, however, is flat, as is ‘value added services’. Combined these two segments grew by just €1 million y-o-y to €118 million. The value-added segment includes Eutelsat’s Tooway consumer broadband and enterprise services, as well as D-Star products and its service which provides Internet connectivity to high-speed trains and maritime markets.

But Eutelsat’s strong video growth is likely to continue. Over the next three years, Eutelsat has seven satellites entering into its fleet, adding a net 20 per cent additional capacity. Michel de Rosen explained that some specific “headwinds” would challenge Eutelsat this calendar year. Troop withdrawals from Iraq and Afghanistan would lead to a decline in demand. He also talked about delays in professional services being introduced on Ka-Sat would also impact revenues.

Nevertheless, this year’s full-year (to June 30th) guidance remains that revenues will top €1.235 billion, representing a CAGR above seven percent, and looking ahead in the period to 2014, de Rosen said that EBITDA margins would remain above 77 per cent for each year.

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