Eutelsat Communications SA · EURONEXT:ETL
Eutelsat Communications SA — Investor Presentation (November 2019)
62 slides from Eutelsat Communications SA's investor presentation, November 2019
Slide 1: Eutelsat Communications Investor Presentation November 2019
EUTELSAT COMMUNICATIONS Investor Presentation November 2019
Slide 2: Agenda
Agenda 1 FSS Industry 2 Eutelsat in a snapshot 3 Q1 2019-20 performance 4 Outlook 5 Appendix 2
Slide 3: The satellite value chain
The satellite value chain TV broadcasters, Satellite Satellite Satellite Telecoms, Consumers manufacturers launchers operators Governments and businesses 3
Slide 4: Business characteristics
Business characteristics ► High barriers to entry • Finite resource of orbital positions and frequencies, heavily regulated at international level with key commercial orbital positions have already been developed • High upfront CAPEX before operations • High technology and technical expertise throug
Slide 5: Trends in our heritage businesses
Trends in our heritage businesses BROADCAST: STABLE TO SLIGHT DATA & PROFESSIONAL VIDEO: GOVERNMENT SERVICES: GROWTH STRUCTURALLY CHALLENGED POCKETS OF OPPORTUNITY ► Growth in emerging ► Global demand driven ► US DoD demand markets by increasing stabilizing, albeit • Robust channel growth connectivi
Slide 6: Longer-term potential in Video and Connectivity
Longer-term potential in Video and Connectivity VIDEO FIXED AND MOBILE CONNECTIVITY ► Satellite and IPTV set to dominate ► Nascent markets with huge potential global video distribution in the longer term ► Massive growth in bandwidth usage per consumer ► Opportunity to enhance satellite value propos
Slide 7: Video drivers: Channel growth and image quality
Video drivers: Channel growth and image quality CHANNEL GROWTH INCREASED IMAGE QUALITY TV Channels in EMEA and LATAM HD penetration rate by major region ~23,000 49% CAGR: +1.1% ETL footprint 22% Russia and 38% Central Asia 12% 2027 2017 SSA 23% ~20,900 5% MENA 48% 22% LATAM 58% 28% Central 55% Europ
Slide 8: Video drivers: Capacity requirements versus compression technology
Video drivers: Capacity requirements versus compression technology EVOLUTION OF IMAGE QUALITY NUMBER OF CHANNELS PER (NUMBER OF CHANNELS) 36 MHZ TRANSPONDER 25 000 20 000 Format Modulation MPEG-2 MPEG-4 HEVC 15 000 DVB-S ~15 - - SD 10 000 DVB-S2 - ~26 - DVB-S - - - 5 000 HD DVB-S2 - ~9 ~15 0 UHD DVB
Slide 9: Video: Satellite's competitive advantage over OTT / IP
Video: Satellite’s competitive advantage over OTT / IP COST-EFFICIENCY UNIVERSAL REACH SERVICE QUALITY FTTP COVERAGE1 BANDWIDTH REQUIREMENT (Mbps) Cost OTT 1 UHD channel in HEVC 20 1 HD channel in MPEG 4 7 58% 53% Satellite 22% 1 SD channel in MPEG 2 3 # viewers Italy Poland EU Average ► Satellite a
Slide 10: Video: Satellite resilience in Eutelsat's main European markets
Video: Satellite resilience in Eutelsat’s main European markets1 MILLION TV HOMES BY DISTRIBUTION MODE IN IP GAINING SHARE VS. TERRESTRIAL, NOT SATELLITE WESTERN EUROPE 73 73 74 ► Slight increase in total number of TV homes 74 million 26 26 25 ► Satellite reception broadly stable at 7 5 6 c.25 milli
Slide 11: Video: Satellite gaining market share worldwide
Video: Satellite gaining market share worldwide MILLION TV HOMES BY DISTRIBUTION MODE - GLOBAL 1,624 1,720 ► Total number of TV homes to 1,604 increase by 95 million to 1.7 bn by 475 2022 411 426 171 195 247 ► Satellite reception to grow by 50 million homes to 475 million by 2022 566 555 560 ► Satel
Slide 12: Agenda
Agenda 1 FSS Industry 2 Eutelsat in a snapshot 3 Q1 2019-20 performance 4 Outlook 5 Appendix 12
Slide 13: Eutelsat in a snapshot
Eutelsat in a snapshot KEY DATA REVENUE BREAKDOWN BY APPLICATION By geography ► FY 19 revenues of €1.32bn 7% 3% Western Europe Central Europe 10% 30% MENA ► Fleet of 37 satellites; global RCA 10% coverage SSA 7% Americas 9% APAC ► Operating >1,350 transponders 24% Unallocated and others By applicati
Slide 14: Breakdown of revenues by application
Breakdown of revenues by application Direct-to-Home (DTH) Broadcast 62% Cable headends CORE BUSINESSES Data & Mobile backhaul Professional 14% Corporate networks Video Professional Video Government Military Services 12% Security CONNECTIVITY Fixed Internet access for Broadband 6% households and corp
Slide 15: Eutelsat's global network
Eutelsat’s global network 15
Slide 16: Equity story in a nutshell
Equity story in a nutshell Consistent delivery on below-topline objectives despite challenging environment for core businesses Successful execution of cash generation strategy with cash flow/revenue ratio doubled in three years, and DFCF target reached a year early On track for connectivity-driven r
Slide 17: Resilience of Core Broadcast
Resilience of Core Broadcast UNDERLYING STABILITY OF CORE BROADCAST CONTINUED PROGRESSION IN KEY INDICATORS Evolution of Core Broadcast revenues +7% 6,976 6,548 Channel 197 197 198 197 196 195 197 197 193 count June 2017 ex. 25B September 2019 +42% 1,551 1,095 HD Penetration 17% 23% June 2017 ex. 25
Slide 18: Bond and Bank Debt maturity schedule
Bond and Bank Debt maturity schedule ONGOING DEBT OPTIMISATION BOND AND BANK DEBT MATURITY SCHEDULE1 ► Net Debt/EBITDA ratio of 2.98x • Slight reduction vs 30 June 2018 (3.01x) €67m €800m ► Average cost of debt after hedging €600m reduced to 2.6% €500m €200m €53m ► Average weighted maturity of 3.6 y
Slide 19: Shareholder structure
Shareholder structure EUTELSAT SHAREHOLDING STRUCTURE AS OF 30 JUNE 2019 Bpifrance 19.8% CIC1 Free float 6.7% and others 66.0% FSP2 7.5% 1 China Investment Corporation 2 Fonds Stratégique de Participations 19
Slide 20: Agenda
Agenda 1 FSS Industry 2 Eutelsat in a snapshot 3 Q1 2019-20 performance 4 Outlook 5 Appendix 20
Slide 21: Q1 2019-20 Key Events
Q1 2019-20 Key Events Positive outcome of Fall 2019 renewal campaign with USG: 90% renewal rate LEAP 2 cost-savings program underway, aiming to generate opex savings of €20m-€25m by FY22 Procurement of E10B satellite with significant firm pre-commitments, highlighting robust demand in Mobility marke
Slide 22: Q1 Revenues
Q1 Revenues Q1 YOY REVENUE BRIDGE (€M) ► Revenues down 5.2% reported ► Slightly negative perimeter impact -6.2% • Carry-forward of deconsolidation of 5 Eutelsat 25B in August 2018 (2) (0) ► Positive currency effect (20) • •€/$ rate of 1.12 vs 1.16 last year 335 ► Operating verticals down 6.2% 318 li
Slide 23: Q1 Revenues like-for-like by application
Q1 Revenues like-for-like by application REVENUE REVENUES LIKE-FOR-LIKE2 CONTRIBUTION1 (€m) CHANGE Broadcast 62% 195 -1.7% Data & Professional 14% 10% 43 -19.6% Video Government 12% 39 -10.7% Services Fixed 6% 20 -3.3% Broadband Mobile 6% 20 -7.8% Connectivity Total Operating Verticals 317 -6.2% Oth
Slide 24: Broadcast
Broadcast REVENUES (€M) ► Revenues of €195m, down 1.7% y-o-y like-for-like1 • Temporary effect of return of a couple of transponders in Russia • Termination of a contract in SSA 791 ► 6,976 channels at end-Sept. 2019 Q4 198 • -0.3% y-o-y • HD up from 20.3% to 22.7% Q3 198 ► Two multi-year, multi-tra
Slide 25: Channel count
Channel count Channel count reflecting one-off in Africa and end of dual illumination/simulcast Sustained HD ramp-up 6,999 +152 6,976 +11% 1,582 1,419 -95 -80 20% 23% Penetration Sept. 2018 One-off End of Other Sept. 2019 Sept. 2018 Sept. 2019 in SSA double illumination/ simulcast MPEG-4 more advanc
Slide 26: Data & Professional Video
Data & Professional Video REVENUES (€M) ► Revenues of €43m, down 19.6% y-o-y like-for-like1 ► Continuing to reflect: 200 • Highly competitive environment • Ongoing pricing pressure Q4 49 ► Volume losses in Data Q3 48 ► Lower occasional use in Q2 51 Professional Video ► Comparison basis to ease in H2
Slide 27: Government Services
Government Services REVENUES (€M) ► Revenues of €39m, down 10.7% y-o-y like-for-like1 • Carry forward effect of Fall 2018 USG renewal campaign 162 ► USG renewal rate of c.90% in value 40 Q4 in Fall round Q3 40 ► Contribution of EGNOS in the second half subject to availability of the payload Q2 39 Q1
Slide 28: Fixed Broadband
Fixed Broadband REVENUES (€M) ► Revenues of €20m, down 3.3% y-o-y like-for-like1 ► Revenue trends improving in 80 Europe • Continued progression of PPP Q4 21 program • Extension to new countries underway Q3 19 ► Modest contribution from African Q2 20 Broadband at this stage • Expected to ramp up thr
Slide 29: Mobile Connectivity
Mobile Connectivity REVENUES (€M) ► Revenues of €20m, down 7.8% y-o-y like-for-like1 • Negative one-off of circa €1m to be caught up in Q2 • Carry-forward of the end of a temporary 80 wide-beam contract on EUTELSAT 172B in FY 19 21 Q4 • Contribution of contract with UnicomAirNet from January 19 Q3 2
Slide 30: Backlog and Fill Rate
Backlog and Fill Rate BACKLOG (€BN) OPERATIONAL AND LEASED TRANSPONDERS 1,416 1,387 1,387 4.7 4.4 4.2 976 960 966 % 77% 75% 75% Video 30 September 30 June 2019 30 September 30 Sept. 2018 30 June 2019 30 Sept. 2019 2018 2019 Fill 69.0% 69.2% 69.7% rate Operational transponders leased transponders ► 3
Slide 31: To sum up
To sum up No change to our mid-term view on Broadcast as a fundamentally resilient business Full year revenue objectives confirmed, but with increased likelihood of landing in lower half of the range All other elements of our financial objectives also confirmed Ongoing focus on cash-generation lever
Slide 32: Agenda
Agenda 1 FSS Industry 2 Eutelsat in a snapshot 3 Q1 2019-20 performance 4 Outlook 5 Appendix 32
Slide 33: Reminder: Our strategic roadmap
Reminder: Our strategic roadmap Step 1 Step 2: return to growth GROW TOPLINE MAXIMIZE EXTRACT VALUE CAPTURE THE FREE CASH-FLOW FROM THE CORE CONNECTIVITY GENERATION VIDEO BUSINESS OPPORTUNITY 33
Slide 34: Key priorities for FY 2019-20
Key priorities for FY 2019-20 MAXIMIZE EXTRACT VALUE FROM THE CAPTURE THE FREE CASH FLOW CORE CONNECTIVITY GENERATION VIDEO BUSINESS OPPORTUNITY ► Execute on LEAP 2 ► Exploit growth pockets ► Maintain momentum cost savings plan • Market incremental in maritime mobilty capacity on E7C ► Relocate Pari
Slide 35: Leveraging all components of cash-flow to maximize cash generation
Leveraging all components of cash-flow to maximize cash generation Reduction of €74m in FY 19 tax burden after change in French tax territoriality treatment Two successful bond issuances reducing pre-tax cash interest by c.€34m p.a. at run-rate Successful completion of ‘LEAP 1’ cost-saving program w
Slide 36: FY outlook: Revenue trends to improve in coming quarters
FY 20 outlook: Revenue trends to improve in coming quarters EASING COMPS IN GOVERNEMENT SEVERAL TAILWINDS TO SERVICES AND DATA & PV SUPPORT H2 PERFORMANCE FY 19 quarterly revenues at 1.14 €/$ rate 335 328 324 326 ► Incremental capacity on ETL 7C 21 20 20 20 in SSA 20 20 19 21 43 40 40 39 ► Ramp-up o
Slide 37: EUTELSAT 5 West B status
EUTELSAT 5 West B status ► Investigating incident on one of the two solar arrays ► Assessment of the potential impact on the performance ► Satellite mission consisting of • E5WA replacement • EGNOS payload ► Main customers at 5°W include French and Italian DTT and Fransat • c. €30m of revenues gener
Slide 38: Financial outlook based on nominal deployment plan
Financial outlook based on nominal deployment plan OPERATING VERTICALS REVENUES1 ► FY 2019-20: between €1,280m and €1,320m ► FY 2019-20 to FY 2021-22: average of CASH CAPEX €400m2 per year DISCRETIONARY FREE CASH FLOW3 ► FY 2021-22: around €500m ► Maintain investment grade rating LEVERAGE ► Net debt
Slide 39: Future launches
Future launches KONNECT KONNECT EUTELSAT EUTELSAT EUTELSAT Name VHTS HOTBIRD 13F HOTBIRD 13G 10B Orbital TBD TBD TBD 13° East 13° East 10° East Position Launch date1 Q1 2020 Q3 2020 H2 2021 H2 2021 H2 2021 2022 Manufacturer Launcher TBD TBD TBD TBD SSA Flexible Europe Europe Europe EMEA, Atlantic Co
Slide 40: Agenda
Agenda 1 FSS Industry 2 Eutelsat in a snapshot 3 Q1 2019-20 performance 4 Outlook 5 Appendix 40
Slide 41: Appendix
Appendix 5.1 FY 2018-19 financials 5 5.2 Miscellaneous 41
Slide 42: Profitability
Profitability EBITDA (€M) ► EBITDA margin of 78.4% at constant currency versus 1,078 1,032 77.6% in FY 2017-18 despite • Lower revenues • Roll-out costs of Konnect Africa Margin at ► Successful completion of constant 77.6% 78.4%1 currency LEAP 1 opex plan 77.4 77.4 77.5 • €32m in savings versus €30m
Slide 43: Successful completion of LEAP cost-saving program
Successful completion of LEAP 1 cost-saving program BREAKDOWN OF COST SAVINGS ► Targeting external costs ► Adressable cost base of €140m 10% reduced by >20% ► €30m objective exceeded 25% 45% ► Underpinning record EBITDA margin 20% €32m in total savings in FY 19 Technical costs Consulting SG&A* Marke
Slide 44: Net income
Net income Extracts from the FY FY 2018-19 Change consolidated income statement in €m1 2017-18 Revenues 1,391 1,321 -5.0% EBITDA2 1,078 1,032 -4.3% Operating ► Capital gain on sale of E25B 554 526 -5.0% ► Impairment of assets income ► Negative one-off impact of Noorsat integration in FY18 ► Higher c
Slide 45: Discretionary Free Cash Flow
Discretionary Free Cash Flow In €m 439 (323) 31 FX & Impact 848 of E25B 1 (117) (1) 408 (1) Net Cash Flow from Cash Capex Interest and Other Discretionary Free operations fees paid net of Cash Flow interests received Change at constant +13 +35 (9) +39 FX, excl E25B Reported change (33) 35 (9) (7) 1
Slide 46: DFCF/revenue ratio almost doubled in three years
DFCF/ revenue ratio almost doubled in three years DFCF to revenue ratio 16% 28% 30% 31% 1,529 1,478 1,391 1,321 408 415 408 247 FY 2015-16 FY 2016-17 FY 2017-18 FY 2018-19 Total revenues Reported Discretionary Free Cash Flow 46
Slide 47: Further reduction in Net Debt
Further reduction in Net Debt In €m -€169m 65 44 3,242 3,304 408 68 3,073 112 310 Net Debt at Discretionary Equity Lease Dividend paid IFRS 16 Other Net Debt at end-June 18 Free divestments liabilities impact 1 end-June 19 Cash Flow and Export Credit repayments 1 As of 1 July 2018 47
Slide 48: Financial structure
Financial structure NET DEBT / EBITDA RATIO1 ► Net Debt/EBITDA ratio of 2.98x • Slight reduction vs 30 June 2018 (3.01x) • In line with target ► Average cost of debt after hedging 3.01x 2.98x reduced to 2.6% • vs 2.9% in FY 2017-18 ► Average weighted maturity of 3.6 years vs 2.2 years at 30 June 201
Slide 49: Appendix
Appendix 5.1 FY 2018-19 financials 5 5.2 Miscellaneous 49
Slide 50: Launch of 'LEAP 2' cost savings program
Launch of ‘LEAP 2’ cost savings program ► Objective of €20 to 25m savings by FY 22 confirmed ► Multiple measures addressing mainly staff costs • Reduction of c.100 in headcount outside of France • Global hiring freeze in the legacy businesses • Austerity measures within France o Including a global c
Slide 51: Seizing mobility opportunity with EUTELSAT 10B procurement
Seizing mobility opportunity with EUTELSAT 10B procurement MULTI-PAYLOAD SATELLITE COMBINING MATERIAL GROWTH OPPORTUNITY IN MOBILITY COMPLEMENTARY MISSIONS AT COMPETITIVE COST ► Strategically located with unmatched ► Continuity for customers on coverage EUTELSAT 10A • Regular capacity reduced by 60%
Slide 52: Testing market traction in IoT to add a future growth lever
Testing market traction in IoT to add a future growth lever to Connectivity SIGNIFICANT MARKET ELO: AN UNMATCHED VALUE COMPELLING RISK / RETURN OPPORTUNITY PROPOSITION PROFILE ► Strong growth in demand ► Nano-satellite constellation ► Fully scalable • Connected objects to offering global coverage •
Slide 53: Significant progress on all components of cash generation since FY 16
Significant progress on all components of cash generation since FY 16 Item Achievement Status Guidance reduced from €500m to Cash Capex €400m Delivered LEAP 1 program generated €32m Opex savings in FY 19. LEAP 2 targeting In Progress a further €20-25m by FY 22 >€60m savings through Cash interest Sec
Slide 54: DFCF: Implied 3-year CAGR of 6.9% already achieved
DFCF: Implied 3-year CAGR of 6.9% already achieved +€87m In €m +22% 43 91 (44) (48) 45 480 393 FY 17 DFCF * EBITDA Change in WCR & Tax Paid Cash Capex Interest paid FY 19 DFCF * other items *DFCF as per financial objectives definition, ie restated as follows: i) FY 17 excludes contribution of ETL 25
Slide 55: >€600m asset sold in two years at a ~9x average EBITDA multiple
Robust asset disposal program H2 2016 H1 2017 H1 2018 H2 2018 H1 17 H2 17 H2 18 H1 19 49% of 34% stake in Interest Wins/DHI European Hispasat in EUTELSAT Broadband 25B €60m €132m €302m €135m >€600m asset sold in two years at a ~9x average EBITDA multiple 55
Slide 56: Launch of Eutelsat CIRRUS
Launch of Eutelsat CIRRUS… ► State-of-the art, cloud-based Turnkey TV distribution service technology ► Turnkey end-to-end video distribution ► Seamless multi-screen end-user experience enabling combined DTH/OTT offers ► Modular, evolving feature-set • Subscriber management and Multi-screen via clou
Slide 57: Benefiting both Eutelsat and its customers
…benefiting both Eutelsat and its customers MAIN BENEFITS TO OUR CUSTOMERS MAIN BENEFITS TO EUTELSAT ► Simplified delivery logistics ► Improved customer knowledge ► Mutualized cost ► Increased customer loyalty ► Off-the-shelf solutions ► Seize new revenue opportunities • New platforms or projects to
Slide 58: Strong pipeline for Mobile Connectivity
Strong pipeline for Mobile Connectivity CURRENT RESOURCES FUTURE RESOURCES ► KA-SAT ► KONNECT VHTS • Several contracts signed using capacity • Unrivalled Cost/Gbps to serve the fixed on KA-SAT over Europe broadband and mobility applications • Significant distribution commitments with Thales ► EUTELS
Slide 59: Satellite programme Capex profile
Satellite programme Capex profile BREAKDOWN OF TYPICAL TIMING OF CAPEX CAPEX PAYMENTS 30% 30% 40% YEAR 1 YEAR 2 YEAR 3 Others ► Capex generally split equally over three Insurance years prior to launch Launcher Satellite ► Insurance paid in year three 59
Slide 60: HOTBIRD constellation replacement showcasing design-to-cost policy
HOTBIRD constellation replacement showcasing effectiveness of our design-to-cost policy COMPELLING PROCUREMENT TERMS ENHANCED QUALITY OF SERVICE ► Two large satellites replace three for ► Improved wide-beam performance the same number of operational transponders ► Additional high-power superbeam ► I
Slide 61: Satellite economic model: Regular capacity
Satellite economic model1: Regular capacity 1 For a greenfield satellite, using chemical propulsion 61
Slide 62: IR Contacts
IR Contacts Joanna DARLINGTON T: +33 1 53 98 31 07 E: [email protected] Cédric PUGNI T: +33 1 53 98 31 54 E: [email protected] Alexandre ENJALBERT T: +33 1 53 98 46 81 E: [email protected] 62
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