SES Q1: Not pretty reading
April 4, 2018
SES is due to report its Q1 numbers on April 27th and will have paid out its much-reduced Dividend payment on the April 26th. The reduced dividend, announced February 12th at the same time as the satellite operator replaced its CEO and CFO, didn’t help the company’s share price which, in the words of a bank report issued April 3rd, has suffered a “torrid time”.
April 5th will see new CEO Steve Collar (and CFO Andrew Browne) confirmed at the company’s AGM in Luxembourg. The pair have not been idle this past month or so and have been busy meeting the financial community to explain their plans and expectations for this coming year.
The operator’s Q1 numbers will not be good, and not make pretty reading according to one analyst. Sarah Simon, equity analyst at Berenberg Bank, has reiterated the bank’s ‘HOLD’ advice to clients (with a target price of a slightly reduced €14.80), saying: “While we believe that SES is well positioned to benefit from the strong growth in demand for fixed and mobile data, and that this will drive a return to top-line expansion by the end of this year, in the near term, SES is set to show weak revenue trends due to substantial headwinds relating to satellite health problems, new IFRS standards, a phasing out of certain low margin services activities, and the absence of one-off revenues that boosted last year’s results. We stay on the sidelines until these headwinds ease in H2, at which point it may be easier to make the case that SES is on track to return to growth.”
“We estimate that the headwinds to growth in Q1 will amount to 7.8 per cent; in other words, SES would need to grow by this amount on an underlying basis to report a flat result. Given the phasing of new revenue generating capacity, which is relatively limited in Q1 (SES-15 went live on 1 January, but the other launches will only be operational later in the year) such growth is inconceivable, particularly given the ongoing drag in traditional fixed data and, to a lesser extent, in video. Meanwhile, margins will also be well below the full-year guidance, as SES is taking an above-the-line restructuring charge of €10 million – 12 million in Q1.”
“With a change in both the CEO and CFO, and specific financial targets set for both one and three years, a key focus during our recent management roadshow was on the need for execution. Management stressed its confidence in the ability to deliver on those targets, which call for 3.5 per cent CAGR in revenues and more in terms of EBITDA. Given the capex profile that should drive substantial cash flow growth, and a consequential deleveraging. If management can indeed deliver, SES has great potential. The issue, though, is that Q1 will give little indication of progress or otherwise.”