Video segment depresses ‘solid’ half-year for SES

Video segment depresses ‘solid’ half-year for SES
Editor
| 27 July 2018


It may have noted sustained performance from its networks division, in particular from aeronautical and government customers, but a downturn in the video business of SES has applied a corporate brake on the satellite operator during Q2 2018.

SES 12 VAB 2At 30 June 2018, SES showed reported half-yearly revenue of €981.4 million, down 0.5% on an annual basis constant FX or 6.4% in terms of a reported change. It also reported underlying revenue of €961.4 million, a rise of 1.5% compared with the same time in 2017. However, this broke as a 10.6% year-on-year rise for SES Networks but a 2.3% fall for SES Video. Half-yearly EBITDA margin was 63.3%, slipping 2.2 percentage points on an annual basis. Excluding a restructuring charge of €8.4 million, the margin EBITDA would be 64.1%.

Drilling down into business for SES Video, which like at the end of Q2 2017 accounted for two-thirds of overall group business, total revenues for the half year amounted to €658.5 million, down 5,9% on a reported basis and 2.0 at constant FX. Underlying revenues for the six-month period — including core business of capacity sales, as well as associated services and equipment — was €650 million, down 6.2% on a reported basis and 2.3% at constant FX.

SES Video’s underlying business saw revenue growth in video services offsetting lower video distribution cash generation in the second quarter of the half year. Q2 2018 underlying revenue of €328.5 million, including a €10.4 million transitional adjustment, was €3.3 million (or 1.0%) lower at constant FX than the prior period and €10.2 million (or 3.1%) lower at constant FX.

At the end of the first half of the year, SES said that it had distributed 7,941 total TV channels globally, up 3% compared with at the same time in 2017 reflecting positive development across all major regions. Nearly two-thirds of total TV channels are now broadcast in MPEG-4, up 1.5% percentage points on the figure of 63.5% for H1 2017. Acceleration of high-definition (HD) in Europe, North America and International markets led to a year-on-year increase of 7% in the global number of HDTV channels, now totalling 2,765, while the total number of commercial Ultra HD channels also increased from 20 to 38 compared with H1 2017, mainly driven by new UHD TV channels launched in Europe.

The company noted a number of key renewals signed during the quarter across SES’ core video neighbourhoods with companies including Viacom, M7 Group and Comcast. These complemented multi-year agreements in Latin America (PCTV) and Central and Eastern Europe (Telekom Srbija). Also, MX1 signed additional business, notably to support the distribution of UHD broadcasting of the FIFA World Cup.

Going forward and looking to the mid-term, SES reaffirmed a growing 2020 revenue outlook for SES Networks with what it called a ‘more prudent; forecast for SES Video. It said that updated 2020 EBITDA margin better reflected its business mix going forward, with growing contribution of Networks and lower expectation for Video.

Commenting on the results and future prospects, SES president and CEO Steve Collar claimed that the company had delivered a strong first half of 2018, fully in line with expectations and continuing our momentum from the first quarter. “We have completed the review of the outlook, as described during our Q1 2018 results, and we are pleased to reaffirm our revenue and EBITDA outlook for 2018,” he said.

“Our expectation is that we will be able to deliver revenue within the top half of the range and deliver on our implied EBITDA, albeit with a modestly lower EBITDA margin. 2020 also looks solid. We have trimmed our expectations of our video business and adjusted our forecast EBITDA margin...Overall the picture for SES is a healthy one with a large and profitable video business, coupled with a dynamic and differentiated Networks business delivering double-digit year-on-year growth for the foreseeable future.”