SES: Confidence returns

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A 12.13 per cent share price rise for satellite operator SES in a single day (to €17.28 on July 27th) is the perfect verdict on a set of results that went down extremely well with the market.  It was also recognition that new CEO Steve Collar has put behind him the terrible 2017 period of management and numbers.

While Collar used words like “cautious” and “prudent” in his half-year presentation to analysts on July 27th, there was little doubt that the prospects of fast-growing SES Networks growth (the non-video portion of the business), and the even more tempting value of the firm’s C-band assets over the US, helped drive confidence in a return to strength for SES.

A report to investors from equity analysts at Deutsche Bank praised the SES diversification work, but was concerned that its investments into O3b and value-added video services were far from “proven winners”.

Collar made it clear that SES will walk away from some low-margin video handling contracts, probably at its MX1 division. Collar also admitted that some channels with low viewership would probably go online over time. SES Video has a growing number of channels (7941 up 3 per cent) on its satellites, and growth in UHD services (38 channels), but digital compression is making inroads into its overall revenue picture.

Collar – and CFO Andrew Browne – have led a detailed examination of the business over the past few months, and the half-yearly results reflect the new reality with trimmed forecasts.

SES Video’s numbers, for example, are now considered “stable” although down -5.6 per cent for its 2020 prospects. However, its fast-growing SES Networks division is likely to be some 9 per cent ahead of current consensus expectations. John-Paul Hemingway, CEO of SES Networks told analysts “we expect to be an equal revenue contributor – if not more (than SES Video) – over the coming years. We are expecting year-on-year double-digit growth, and are looking to double the business over the next five years”.

That was exactly the news that the market wanted. However, analyst after analyst returned to questions on how Collar saw prospects for its glorious C-band revaluation. “We couldn’t live with anything short of what we propose”, said Collar, referring to the freeing up of 100 MHz of C-band spectrum. But it is quite likely that the FCC will be seeking 200-300MHz of spectrum, and Collar said SES (and presumably Intelsat) were also working on that, but firmly declined giving away any more detail.


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