Satellite operator SES has reported what it describes as “solid” financial results for the three months ended March 31st 2018. Group revenue and EBITDA were delivered in line with the company’s expectations, with strong underlying revenue growth in SES Networks.
“We have made a solid start to 2018 with our Q1 results in line with our expectations,” commented Steve Collar, President and CEO, in his first quarterly report since taking the role. “I am particularly pleased to see the underlying growth that we anticipated in our SES Networks business coming through, fuelled by strong performance in our aeronautical Mobility and Government business segments. More than 351 million households now rely on SES Video for their content while the number of channels carried across the SES system increased by more than 150 year-on-year to stand at nearly 7,800.”
“Our strong focus on execution across the business continues, as evidenced by three successful launches in the quarter and the entry into service of SES-15 early in Q1. This satellite has already become a prime satellite for the North American aeronautical market, with GoGo transferring more than 200 aircraft to the satellite within the first month of service launch and Global Eagle Entertainment taking significant incremental capacity to serve its airline customers. SES-16/GovSat-1 is on station and has begun to serve Government customers across Europe, Middle East and Africa. SES-14 will further expand our aeronautical capabilities in the Americas when it enters service later this year, while the four recently launched O3b satellites will also bring much needed capacity and capability to our low latency broadband network towards the end of Q2.”
“We signed important business during the course of the quarter, with long-term renewals at our core video neighbourhoods contracted at like-for-like pricing. We have also secured important customer commitments across all Networks’ verticals with Fixed Data business in Africa (CETel) and Asia (mu Space), aeronautical (STECCOM), Maritime (Carnival) and Government where we have signed multiple agreements with the U.S. Government to deliver service across our MEO and GEO fleet, as well as extending and growing our commitment to serve humanitarian and peace keeping operations.”
Group revenue of €477.6 million (Q1 2017: €540.6 million) and EBITDA of €304.4 million (Q1 2017: €357.6 million) was in line with the company’s expectations.
SES’s fully-protected contract backlog at the end of Q1 2018 stood at €7.2 billion (Q1 2017: €7.2 billion at constant FX). Over 85 per cent of the 2018 expected group revenue is already contractually committed.
At Q1 2018, SES distributed 7,773 total TV channels globally, up 2 per cent compared with Q1 2017. This positive development reflected growth across European and International markets, while North America was stable. 65.4 per cent of total TV channels are now broadcast in MPEG-4 (Q1 2017: 63.1 per cent).
Acceleration of High Definition (HD) and Ultra HD (UHD) TV channels in Europe was a key driver of a 7 per cent (YOY) growth in the global number of HDTV channels, now totalling 2,665, while the total number of commercial UHD channels increased from 22 to 32 compared with Q1 2017.
Video Distribution underlying revenue in Q1 2018 was 4.2 per cent lower than Q1 2017. European distribution revenue was stable compared with Q1 2017 and SES Video signed important capacity extension agreements with Viacom and M7 Group, as well as launching a new UHD channel for Canal+ in France.
North America decreased as anticipated as a result of the lower volume from the switch-off of SD TV channels that had already been replaced with HD, as well as lower revenue from the occasional use business which was affected by the loss of AMC-9. During Q1 2018, SES Video enabled NBC Sports Group to provide 4K High Dynamic Range satellite distribution of the 2018 Winter Olympics to their affiliates throughout the US.
In International, there is an encouraging commercial pipeline for SES-9 and SES-10 which will support the gradual ramp up of these new assets. This will offset the impact of market conditions which remain challenging in the near term, contributing to lower (year-on-year) underlying revenue. For example, SES Video recently signed an agreement to support Kiwisat in launching a new direct-to-home offering of 130 TV channels (including 90 in HD) in the Caribbean using SES-10.
SES served a total of 351 million TV households in 2017 (compared with 325 million households in 2016) across its video neighbourhoods.
Video Services underlying revenue was 2.0 per cent lower in Q1 2018 versus Q1 2017 due to the impact of IFRS 15 accounting changes which led to a year-on-year reduction of €8.2 million in HD+, with no cash impact. Excluding the accounting change, video services grew by 8.4 per cent (or €6.6 million) year-on-year.
The HD+ business grew as a result of the increase in the annual subscription fee (from €60 per annum to €70 per annum) that was introduced at the start of Q2 2017. The increase in the fee will allow HD+ to expand and enhance the customer experience, as evidenced by the agreement with RTL, for HD+ to broadcast live Formula One Grand Prix races in UHD.
This was complemented by stability in MX1 revenue as new business in Europe, bundling capacity and services, offset non-renewal of certain legacy contracts. The global media services provider is now delivering content aggregation solutions for 1&1, Germany’s first fully cloud-based TV service. TVGE International has contracted MX1 to distribute its video content on linear platforms using satellite, as well as via video-on-demand services and web applications. Agence France-Presse is now using MX1’s cloud-based service (MX1 360) to transmit news feeds to broadcasters around the world.