Eutelsat misses on all key metrics

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Paris-based Eutelsat has reported its Q1 results, and they were not good. The satellite operator cut its full year guidance as a result of a 17.8 per cent drop in Professional Video revenues (from €52.3 million to €43 million), but every other key division also suffered.

Overall revenues were €316.5 million, down 6.2 per cent when measured against last year’s numbers.

Media analyst Giles Thorne from investment bank Jefferies said this is the second year in a row that Eutelsat had stumbled out of the blocks at the start of its trading year.

While Eutelsat’s all-important Broadcast division saw revenue fall less than €4 million (down 1.8 per cent) to €194.7 million) its other divisions also saw worrying falls. As mentioned, Data & Professional Video crashed 17.8 per cent to €43 million, while Government Services tumbled 7.3 per cent (to 39.3 million), Fixed Broadband was down 2.5 per cent (to €19.9 million) and Mobile Connectivity fell 4.4 per cent (to €19.7 million).

At September 30th 2019, the total number of channels broadcast by Eutelsat satellites stood at 6,976, down 0.3 per cent year-on-year. The number of HD channels stood at 1,582 versus 1,419 a year earlier, up by 11.5 per cent and represented 22.7 per cent of channels compared to 20.3 per cent a year earlier.

Management conceded that the start to the year is “slightly below our expectations” but this is an understatement when CEO Rodolphe Belmer declined to be drawn on whether the bottom of the company’s previous guidance was now at risk.

Belmer said: “Despite our expectation that the revenues profile for the current year will be back-end loaded, the outturn of the First Quarter is slightly below our expectations, notably due to worsening trends in Data & Professional Video and the unplanned return of a couple of transponders in Russia. On the other hand, the coming quarters will benefit from easing comps in Government Services and Data & Professional Video, the contribution of new capacity and the ramp-up of African Broadband.”

During the post-results analysts’ call there was considerable probing on the probable impact of the likely revenue impact on the damaged Eutelsat 5 West B. Management would only say that a review was underway and there would be a statement by the end of November at the latest. One glimmer of hope is that Eutelsat is looking at strategies to extend E-5WB’s life on orbit.

The company’s Broadcast division has suffered a return of transponders from a Russian client, and lost a contract from a pay-TV broadcaster quitting the financially troubled Zimbabwe market.

For the year overall, to June 30th 2020, Eutelsat issued its revenue guidance of €1.28 million – €1.32 million “albeit with an increased likelihood of a landing in the lower half of this range”.

Eutelsat’s contracted backlog also continues to fall. Currently €4.2 billion, and is down €500 million on last year’s €4.7 billion.

Eutelsat said that it would repurchase at least €100 million-worth of its own shares for cancellation starting in the second half of this financial year and completing by the end of June 2022.

Despite the somewhat negative report Jefferies is maintaining its ‘BUY’ recommendation and gives a share price target of €25, although the bank expects Eutelsat’s shares to suffer.


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