Eutelsat’s end of year report (FY/2021 to June 30th) saw revenues of €1.2 billion (in line with consensus expectations of €1.19bn) and helped by a Q4 trading performance that came in 1 per cent ahead of expectations.
Management announced an adjusted free cashflow of €498 million and again ahead of expectations. The results helped Eutelsat to raise it dividend pay-out of 5 per cent to €0.93 per share.
Analysts’ comments were mixed. Sami Kassab of investment bank Exane/BNPP said that the FY/22 revenue outlook looked disappointing. “Video Broadcast is guided to see the same rate of decline as in FY21 despite the absence of the €10m headwind from Greece and improved Covid background. Fixed Broadband is expected to see ‘substantial growth’. Adjusted FCF guidance has been raised by c€30 million to a range of €400-€430 million, well above consensus €377 million.
Kassab added: “Eutelsat’s top line trends are more challenging than expected but the company is generating more cash than expected. Management increase in its dividend suggests it is confident that it will revert to top line growth and guided for such in FY23 with an acceleration in FY24. Given the lacklustre history of top line growth delivery, we believe the market might remain sceptical on the ability to turn around top line trends for now. Given that the FY22 revenue outlook is 2 percent to 5 percent below consensus, we would expect a slightly negative share price reaction at the opening today.”
Giles Thorne from Jefferies said the results made a “solid end to Eutelsat’s year”. He added that the FY22 revenue guide will bring numbers down for this year but FY23 onwards looks well underpinned if management convince on the growth narrative. “Conversely, the FY22 dFCF upgrade (now 10 percent ahead of consensus) is a welcome counterpoint. As is the 5 percent growth in the dividend.”
Jefferies is maintaining a ‘Buy’ rating and share price target of €18.
Rodolphe Belmer, CEO/Eutelsat, said: “FY 2020-21 was a solid year with revenues at the high end of our upwardly revised guidance, record high cash generation and a further reduction in our Net Debt / EBITDA ratio. Major commercial highlights included, in Broadcast, the Sky Italia renewal, reflecting the long-term relevance of satellite in Europe and two hosted payloads in Government Services. The year was a turning point for our Connectivity business, in particular Fixed Broadband, with notably the entry into service of Eutelsat Konnect as well as major wholesale agreements with Telcos, Orange and TIM, for capacity on both Eutelsat Konnect and Eutelsat Konnect VHTS.”
“Finally, Eutelsat accomplished a major strategic move, gaining a foothold in the LEO segment through its investment in OneWeb. OneWeb represents an additional growth engine for our Connectivity businesses with strong potential for co-operation thanks to complementarity of resources and assets.”
Looking ahead, Eutelsat said that its Operating Verticals revenues for FY 2021-22 are expected between €1,110 and €1,150 million. They will subsequently return to growth from FY 2022-23 with an acceleration in FY 2023-24 on the back of the entry into service of incremental assets with substantial firm precommitments.
The company said: “Our Adjusted Discretionary Free Cash Flow objective for FY 2021-22 is raised by €30 million with growth from FY 2022-23. We are also renewing our commitment to strong shareholder returns with a recommended dividend of €0.93, up 5 per cent.”