Eutelsat Q3 saved by the tax-man

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Eutelsat has turned in another quarter of disappointing, and in the process issued its fifth downgrade in the past seven quarters. This time, Eutelsat cut its current year’s trading guidance (which ends on June 30th) from “slight growth” (+1 per cent) which it trimmed to “broadly stable” in October, to yesterday’s anticipated cut of -3 per cent for the year.

Deutsche Bank, in its summary, advised clients to “SELL” Eutelsat shares, saying that despite an extra €30 million benefit in tax changes, it is not enough to offset a “sequential worsening” of revenues which now makes any prospects of “slight growth looking hopelessly optimistic”. Indeed, the bank adds that future growth targets and the hopes of additional cash returns “look seriously imperilled by the need to invest to diversify into LEO or MEO [satellites]” in the future.

Not helping, said the bank’s report, is that Eutelsat’s consumer broadband strategy is a “proven flop”.

Sami Kassab, equity analyst at Exane/BNPP and usually a fan of Eutelsat, agreed, saying in his note to clients that the revenue outlook is worse than anticipated.

To summarise, Eutelsaat’s Video division (67 per cent of revenues) was down 3 per cent on last year, Fixed Data was down 14 per cent, Fixed Broadband down 8 per cent, while Government Services was up 5 per cent and Mobile up 10.6 per cent. The overall picture saw revenues of €336.7 million for Q3.

Rodolphe Belmer, CEO, commented: “The Third Quarter of 2018-19 saw the return to growth in Broadcast on a quarter-on-quarter basis, an improvement in the US Government renewal rate and commercial wins in Maritime Mobility. The Konnect Africa broadband service is showing positive indications of demand but its ramp-up has been significantly hindered by some short-term operational issues. Moreover, we are experiencing softer conditions in Fixed Data and Professional Video. In consequence, revenues for the Operating Verticals at the nine-month stage stood at  minus three per cent, and we now expect the outturn for FY 2018-19 to be in a similar range, versus our previous objective of ‘broadly stable’.”


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