Eutelsat Communications SA · EURONEXT:ETL
Eutelsat Communications SA — Investor Presentation (February 2020)
64 slides from Eutelsat Communications SA's investor presentation, February 2020
Slide 1: Eutelsat Communications Investor Presentation February 2020
EUTELSAT COMMUNICATIONS Investor Presentation February 2020
Slide 2: Agenda
Agenda 1 FSS Industry 2 Eutelsat in a snapshot 3 H1 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 H1 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 39 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 61% 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 +5% 6,879 6,548 Loss of Russian transponders and SSA platform Channel 197 197 198 197 196 197 197 count 195 193 192 June 2017 ex. 25B December 2019 +47% 1,
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 3.2x • vs 31 Dec. 2018 (3.1x) • December representing seasonal peak €67m €800m ► Average cost of debt after hedging €600m reduced to 2.4% €500m €200m €53m • vs 2.8% in H1 2
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 H1 2019-20 performance 4 Outlook 5 Appendix 20
Slide 21: H1 Key financial data
H1 Key financial data First Half Underlying REVENUES €m 2019-20 performance Operating Verticals €636m -4.9%1 Revenues EBITDA margin at 77.9%2 -0.9 pts constant currency Cash Capex (€189)m (€59)m Discretionary €108m -56% Free Cash Flow Net Debt / EBITDA 3.2x +0.1x 1 YoY variation at constant currency
Slide 22: H1 Highlights
H1 Highlights First Half in line with expectations Improving revenue trends for Operating Verticals in Q2 versus Q1 High profitability: EBITDA margin at 78% despite revenue decline Launch of LEAP 2 cost-savings plan to generate €20-25m opex savings by June 2022 High level of shareholder remuneration
Slide 23: Improving trends in the Second Quarter
Improving trends in the Second Quarter Q1 Q2 YoY LFL1 YoY LFL1 QoQ LFL1 Broadcast -1.7% -1.5% -0.2% Data & Professional -19.6% -14.9% +3.3% Video Government -10.7% -4.6% -1.7% Services Fixed Broadband -3.3% -5.5% -3.8% Mobile Connectivity -7.8% +7.1% +8.2% Total Operating Verticals -6.2% -3.7% +0.4%
Slide 24: Successful Launch of EUTELSAT KONNECT
Successful Launch of EUTELSAT KONNECT ► Launched on January 16 ► Entry into service in Q4 2020 ► 75 Gbps of incremental Ka-Band HTS capacity ► Enabling provision of high-speed Broadband services ► Two-fold objective: • Europe: Offload congested beams in zones of high demand • Africa: Enhance coverag
Slide 25: Progress in Mobility and IoT
Progress in Mobility and IoT MOBILITY: PROCUREMENT OF EUTELSAT 10B IOT: DEVELOPMENT OF TWO COMPLEMENTARY WITH FIRM PRE-COMMITMENTS INITIATIVES ADDING A GROWTH LEVER ► Identified shortage of Ku-Band ► Roll-out of ‘IoT FIRST’ for mobility in EMEA • End-to-end managed service ► Multi-payload satellite
Slide 26: First Half 2019-20 revenues
First Half 2019-20 revenues H1 20 Y-O-Y REVENUE BRIDGE (€M) ► Total revenues of €637m, down 3.3% 3 -4.9% ► Slightly negative perimeter 10 impact (2) (33) • Carry-forward of deconsolidation of ETL 25B in August 2018 ► Positive currency effect 658 637 • €/$ rate of 1.11 vs 1.16 last year ► Revenues fr
Slide 27: H1 2019-20 revenues by application
H1 2019-20 revenues by application REVENUE REVENUES LIKE-FOR-LIKE2 CONTRIBUTION1 (€m) CHANGE Broadcast 61% 389 -1.6% Data & Professional 14% 10% 88 -17.3% Video Government Services 12% 78 -7.8% Fixed Broadband 6% 39 -4.4% Mobile 6% 41 -0.6% Connectivity Total Operating Verticals 636 -4.9% Other Reve
Slide 28: Broadcast
Broadcast 61% REVENUES (€M) ► H1 Revenues of €389m, down 1.6% like-for-like1 • Return of a couple of transponders in Russia • Contract termination in SSA 394 389 ► Q2 revenues stable Q-o-Q Q2 196 Q2 195 ► Commercial highlights • Multi-year capacity contract at Hotbird to broadcast RTVE content • Mul
Slide 29: Data & Professional Video
Data & Professional Video 14% REVENUES (€M) ► H1 Revenues of €88m, down 17.3% like-for-like1 ► Continuing to reflect: 104 • Highly competitive environment • Ongoing pricing pressure 88 Q2 51 ► Data volume losses in Q1 in Q2 45 LATAM ► Improving volume trends in Q2 Q1 52 Q1 43 ► Comparison basis to e
Slide 30: Government Services
Government Services 12% REVENUES (€M) ► H1 Revenues of €78m, down 7.8% like-for-like1 82 78 ► Carry forward impact of USG renewal campaigns of past 18 Q2 39 Q2 39 months ► H2 to benefit from: • The contribution of the EGNOS Q1 42 Q1 39 payload on ETL 5 West B • The relocation of EUTELSAT 7A H1 2018-
Slide 31: Fixed Broadband
Fixed Broadband 6% REVENUES (€M) ► H1 Revenues of €39m, down 4.4% like-for-like1 ► Mixed trends in Europe • Continued ramp-up of PPP, gradually 40 extended to new countries 39 • Business constrained by lack of capacity in high demand markets Q2 20 Q2 19 ► Still modest contribution from African Broad
Slide 32: Mobile Connectivity
Mobile Connectivity 6% REVENUES (€M) ► Revenues of €41m, down 0.6% like-for-like1 reflecting: • Carry-forward of the end of a 41 temporary wide-beam contract on ETL 40 172B in FY 19 • Contribution of UnicomAirNet from January 2019 Q2 19 Q2 22 • Ongoing ramp up of capacity contracts on KA-SAT and mar
Slide 33: Backlog and Fill Rate
Backlog and Fill Rate BACKLOG (€BN) OPERATIONAL AND UTILIZED TRANSPONDERS 1,419 1,387 1,387 4.6 4.4 4.3 970 960 966 Broadcast 74% 72% 68% 31 Dec. 2018 30 June 2019 31 Dec. 2019 31 Dec. 2018 30 June 2019 31 Dec. 2019 Fill 68.3% 69.2% 69.7% rate ► 3.3 years of revenues Operational transponders Leased
Slide 34: Agenda
Agenda 1 FSS Industry 2 Eutelsat in a snapshot 3 H1 2019-20 performance 4 Outlook 5 Appendix 34
Slide 35: 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 CONNECTIVITY GENERATION BROADCAST OPPORTUNITY BUSINESS 35
Slide 36: Update on our key priorities for FY 2019-20
Update on our key priorities for FY 2019-20 Execute on LEAP 2 Launched November 2019 Maximize cash Relocate Paris HQ On track to move in June 2020 generation Maintain all levers of FCF Full materialization of cash interest generation under tension and tax savings Extract value Exploit growth pockets
Slide 37: H2 to benefit from easing revenues comps and identified tailwinds
H2 to benefit from easing revenues comps and identified tailwinds EASING COMPS IN GOVERNEMENT SEVERAL TAILWINDS TO SERVICES AND DATA & PV SUPPORT H2 PERFORMANCE Half-Year revenues at 1.14 €/$ rate 663 ► Incremental capacity on ETL 7C 651 41 40 in SSA 40 40 83 79 ► EGNOS Payload on E5WB 105 96 ► Relo
Slide 38: Financial outlook confirmed
Financial outlook confirmed OPERATING VERTICALS REVENUES1 ► FY 2019-20: between €1,270m and €1,315m2 ► FY 2019-20 to FY 2021-22: average of CASH CAPEX €400m3 per year DISCRETIONARY FREE CASH FLOW4 ► FY 2021-22: around €500m ► Maintain investment grade rating LEVERAGE ► Net debt / EBITDA below 3.0x ►
Slide 39: Highly secured dividend
Highly secured dividend SECURED ELEMENTS UNDERPINNING FY 22 DFCF SUBSTANTIAL HEADROOM TO DIVIDEND COVER OBJECTIVE OF c. €500M 600 1.4x 1.5 ~20 ~515 1.0x ~35 500 1 ~50 410 400 0.5 408 115 295 0 300 247 -0.5 200 DFCF to -1 revenues 16% 29% ratio 100 -1.5 0 -2 FY 3y average Headroom Dividend 1 FY 19 DF
Slide 40: Targeted growth capacity to progressively support topline trends
Targeted growth capacity to progressively support topline trends Incremental Key capacity markets 2020 2021 2022 2023 Video June January EUTELSAT 7C 19 Ku Sub-Saharan Africa January Q4 65 Ka spotbeams Broadband KONNECT 75 Gbps Europe/Africa Q3 Q4 EUTELSAT 8 “QUANTUM” Government QUANTUM beams Flexibl
Slide 41: Limited maintenance capex requirement beyond FY 22
Limited maintenance capex requirement beyond FY 22 providing flexibility to further support cash generation TOP 15 ORBITAL POSITIONS BY FY 19 REVENUE ► 15 heritage orbital positions generating c.90% of total Orbital position Launch between revenues FY 23 and FY 28 13°E (Hotbird) No ► Replacement of
Slide 42: To Sum Up
To Sum Up Second Quarter fully in line with expectations and showing improving revenue trends Sequential stability of Broadcast Robust EBITDA margin despite lower revenues and higher Broadband Costs Confirmation of Financial Objectives for FY2020 and beyond Secured DFCF providing substantial headroo
Slide 43: Future launches
Future launches KONNECT EUTELSAT EUTELSAT EUTELSAT 10B Name VHTS HOTBIRD 13F HOTBIRD 13G Orbital TBD TBD 13° East 13° East 10° East Position Launch date1 Q3 2020 H2 2021 H2 2021 H2 2021 2022 Manufacturer Launcher TBD TBD TBD TBD Flexible Europe Europe Europe EMEA, Atlantic & Coverage Indian Ocean Go
Slide 44: Agenda
Agenda 1 FSS Industry 2 Eutelsat in a snapshot 3 H1 2019-20 performance 4 Outlook 5 Appendix 44
Slide 45: Appendix
Appendix 5.1 H1 2019-20 financials 5 5.2 Miscellaneous 45
Slide 46: Profitability
Profitability EBITDA (€M) ► EBITDA margin of 77.9% at 518 496 constant currency vs. 78.8% in H1 2018-19 • Lower revenues • Higher costs associated with Margin at Broadband activities constant 78.8% 77.9%1 currency • Strong cost discipline in core 77.4 77.4 77.5 businesses • No ‘LEAP 2’ benefits at t
Slide 47: Net income
Net income Extracts from the H1 H1 2019-20 Change consolidated income statement in €m1 2018-19 Revenues 658 637 -3.3% EBITDA2 518 496 -4.4% Operating 297 225 -24.0% ► Capital gain related to EUTELSAT 25B income disposal in FY 19 Financial result (53) (41) -22.2% ► Reflecting the benefit of the refin
Slide 48: Discretionary Free Cash-Flow reflecting capex phasing
Discretionary Free Cash-Flow reflecting capex phasing In €m 353 1 (189) (1) 108 (3) FX & perimeter (56) impact 105 (1) Net cash Flow from Cash Capex Interest and Other Discretionary Free operations fees paid net of Cash-flow interest received Change at constant (39) (59) (33) (132) FX & perimeter Re
Slide 49: Evolution of Net Debt
Evolution of Net Debt In €m +€162m 9 3,235 (108) (55) 316 3,073 Net Debt at Discretionary Acquisitions/ Dividend paid Other Net Debt at end-June 19 Free Cash-Flow Disposals end-Dec. 19 49
Slide 50: Financial structure
Financial structure NET DEBT / EBITDA RATIO1 ► Net Debt/EBITDA ratio at 3.2x • vs 3.1x at Dec 31, 2018 ► Average cost of debt after hedging 3.2x reduced to 2.4% 3.1x • vs 2.8% in H1 2018-19 ► Average weighted maturity of 4.2 years • vs 2.7 years at 31 Dec 2018 ► Strong liquidity • €373m cash 31 Dece
Slide 51: Appendix
Appendix 5.1 H1 2019-20 financials 5 5.2 Miscellaneous 51
Slide 52: Channel count
Channel count CHANNEL COUNT HD PENETRATION MPEG-4 7,067 1,605 4,858 4,737 6,879 1,500 +7% -2% -98 -20 -45 -25 Penetration 21% 23% Penetration 69% 69% SSA Russian One-off Net Dec 18 platform txps element channel Dec 19 Dec. 2018 Dec. 2019 Dec. 2018 Dec. 2019 loss ► Channel count reflecting ► HD conti
Slide 53: HOTBIRD channel count
HOTBIRD channel count CHANNEL COUNT HD PENETRATION MPEG-4 978 stable 975 +13% 392 635 346 584 +9% 35% 40% 60% 65% Penetration Penetration Dec. 2018 Dec 2019 Dec. 2018 Dec. 2019 Dec. 2018 Dec. 2019 ► Stable channel count ► HD ramp-up ► MPEG-4 considerably outpacing MPEG-4 more advanced adoption than
Slide 54: 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 55: 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 56: 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 Delivered €400m 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 57: >€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 57
Slide 58: 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 59: …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 60: 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 61: 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 61
Slide 62: 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 63: Satellite economic model: Regular capacity
Satellite economic model1: Regular capacity 1 For a greenfield satellite, using chemical propulsion 63
Slide 64: 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] 64
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