SES GLOBAL S.A.: Solid First Half Poised For Profitable Growth
SES GLOBAL, the world’s leading satellite operator (Euronext Paris, Luxembourg and Frankfurt Stock Exchanges: SESG), announces consolidated results for the six months to 30 June 2004.
The results for the period are in line with our guidance and additionally benefit from the release of tax provisions associated with organisational restructuring.
HIGHLIGHTS
- Revenues of EUR 593 million (2003: EUR 642 million) reflect a weaker US dollar and lower contribution by one-time items. Recurring revenues at constant exchange rate and on the same scope are 1.1% ahead;
- EBITDA of EUR 440 million (2003: EUR 515 million) reflects the impact of the weaker US dollar, one-time items and marketing costs in the service provision businesses. Whereas the gross EBITDA margin declined to 74%, the margin in the Group’s primary infrastructure provision segment remains close to 80%;
- Profit of the Group rises 41% from EUR 115 million to EUR 162 million, largely due to the release of tax provisions;
- Video broadcasting services show improving growth;
- Contract backlog rises 8% to EUR 6.9 billion;
- Two satellites, AMC-10 and AMC-11, successfully launched;
- Secondary Offering and listing on Euronext Paris raises free float to 35%.
Romain Bausch, President & CEO, commented, “The first six months of the year were very much as we had expected. For the full year, recurring revenues on a constant exchange rate basis are projected to be unchanged from the 2003 level, and Profit of the Group will also be at the prior year level. The record launch programme of five satellites this year will lead to high capital expenditures in 2004. Nonetheless these expenditures will be fully financed by operating cash flow.”
“While 2004 is a year of transition, SES GLOBAL is in very good shape as we move towards 2005. In 2005 and 2006, our revenues are forecast to deliver strong growth, our principal markets are improving, and our financial position is very solid. SES GLOBAL will continue to invest in attractive growth opportunities, while still generating increasing levels of free cash flow in the coming years, allowing us to consider increasing total returns to shareholders.”
Overview
During the first half of the year, SES GLOBAL has achieved good operational and financial results in what has still been a relatively slow market. The results are consistent with the guidance given earlier in the year and demonstrate the stability of our business. Gross revenues declined, as forecast, mainly due to the weaker US dollar and the absence of one-time items, while same scope recurring revenues grew by 1.1% at constant exchange rate. The Group EBITDA margin declined, as forecast, due to a combination of one-time items and marketing costs associated with the development of service businesses, but remains strong around 80% in our primary infrastructure provision segment. Operating expenses rose in the period, mainly driven by one-time costs, including cost of sales relating to SIRIUS 2 transaction revenues and marketing costs in service businesses which will drive transponder demand. A Group restructuring has also resulted in the release of deferred tax provisions.
During the period we continued to develop the business. Following the sale of SES AMERICOM’s interest in the SIRIUS 2 satellite, we raised our interest in NSAB to 75%, enabling full integration of the company’s European operations within SES ASTRA. We acquired Verestar in the US, which will be fully integrated into SES AMERICOM following regulatory approval and which will expand the AMERICOM Government Services business.
The majority of our business is dedicated to serving the higher-value video broadcasting markets and these will continue to grow as the market evolves. High Definition Television (HDTV) services are gaining momentum in the US. In Europe, where HDTV broadcasting is in its infancy, a number of major broadcasters have confirmed their plans to introduce HDTV services in the next couple of years. The larger bandwidth requirement for broadcasting HDTV is a strong growth driver.
The successful launch during the first half of two replacement satellites for SES AMERICOM’s HD-PRIME neighbourhood will be followed by three more launches towards the end of this year, including the AMC-15 and AMC-16 satellites dedicated to serving EchoStar, as well as WSAT-2 providing coverage of North America, South America, Europe and Africa.
New contracts signed in the period have raised the Group’s contract backlog from EUR 6.4 billion at the end of 2003 to EUR 6.9 billion at June 30, 2004.
Outlook
The outlook is bright for SES GLOBAL. The launch of new satellites and the increase of our backlog underpins our expectations of double-digit percentage growth in revenues in each of 2005 and 2006. The majority of these revenues are from the provision of capacity for video broadcasting.
We will still see a further decline of the Group’s EBITDA margin in the second half of 2004 bringing the full year margin percentage towards the low 70’s, consistent with the guidance given earlier in the year. In the mid-term the Group’s EBITDA margin percentage is expected to rise from the low to the mid 70’s primarily due to the growth of our core video broadcasting business and the related favourable impact on EBITDA.
The combination of increasing revenues and thus improved levels of EBITDA and operating profit, as well as investment in selected growth opportunities, will support the generation of increasing levels of free cash flow.
SES GLOBAL’s management team is dedicated to delivering shareholder value, and will deliver this by developing the business through investments which meet our demanding rate of return criteria; reviewing our capital structure; and by returning cash to shareholders, through our progressive dividend policy and potential share buybacks.
For further information please contact:
|
Mark Roberts Investor Relations Tel. +352 710 725 490 Mark.Roberts@ses-global.com |
Yves Feltes Press Relations Tel. +352 710 725 311 Yves.Feltes@ses-global.com |
Additional information is available on our website www.ses-global.com
PRESS / ANALYST TELECONFERENCESA press teleconference will be held at 11.00 am Betzdorf time today, 20 September 2004. To participate, journalists are requested to call + 44 20 8901 6902 five minutes prior to this time. An investor teleconference will be held at 14.00 pm Betzdorf time today, 20 September 2004. To participate, analysts and investors are requested to call: + 44 208 901 6901 five minutes prior to this time. A presentation, which will be referred to in each call, will be available for download from the Investor Relations section of our website. |
SUMMARY FINANCIAL INFORMATION
-
EUR millions Constant
Exchange
H1
2004H1
2003Variance
%
Variance
%
Revenues
593.2
642.2
(49.0)
-7.6%
(18.9)
-3.1%
Operating expenses
(153.7)
(127.7)
(26.0)
20.4%
(31.7)
26.0%
EBITDA
439.5
514.5
(75.0)
-14.6%
(50.6)
-10.3%
Depreciation
(169.2)
(161.3)
(7.9)
4.9%
(16.3)
10.7%
Amortisation
(85.7)
(139.1)
53.4
-38.4%
45.0
-34.4%
Operating profit
184.6
214.1
(29.5)
-13.8%
(21.9)
-10.6%
Net financing charges
(9.2)
(2.9)
(6.3)
Taxation
3.7
(79.8)
83.5
Share of associates’ result
(0.1)
1.6
(1.7)
Minority interests
(17.0)
(18.4)
1.4
Profit of the Group
162.0
114.6
47.4
Earnings per A-share (EUR)
0.27
0.19
0.08
EBITDA margin
74.1%
80.1%
(6) points
Net income margin
27.3%
17.8%
9.5 points
Net operating cash flow
466.8
527.5
(60.7)
Capital expenditure
207.6
201.8
5.8
Free cash flow
201.4
720.3
(518.9)
Net debt
1,685.2
2,043.1
(357.9)
Net debt / EBITDA
1.9
2.0
(0.1)
Net debt / shareholders’ equity
50.6%
61.2%
(10.6) points
Principal exchange rates used
-
Current period
Prior period
EUR 1 =
Opening
Average
Closing
Opening
Average
Closing
United States dollar (“USD”)
1.26
1.23
1.21
1.05
1.09
1.15
Hong Kong dollar (“HKD”)
9.78
9.61
9.47
8.16
8.52
8.96
Swedish Krona
(“SEK”)
9.05
9.15
9.14
9.14
9.16
9.16
Group revenues
Reported revenues at EUR 593.2 million are EUR 49.0 million, or 7.6%, below the same period of 2003.
Nearly two-thirds of this decline results from the impact of the weaker US dollar on SES AMERICOM and AsiaSat. On a constant exchange rate basis, revenues decreased by EUR 18.9 million, or 3.1%, compared to the first half of 2003.
The decline also reflects the lower level of non-recurring revenues in 2004 compared to the prior year period. Non-recurring revenues represent EUR 50.5 million and were mainly generated on the sale by SES AMERICOM to NSAB of its interest in the SIRIUS 2 satellite.
Excluding the non-recurring items from both years, first-half 2004 revenues at constant exchange rates are 3.5% higher than in the prior year period (and 1.1% higher at constant exchange rates and same scope), reflecting the progress made in securing new business.
Earnings before interest, tax, depreciation and amortisation (“EBITDA”)
The EBITDA for the period of EUR 439.5 million is EUR 75.0 million, or 14.6%, lower than in the comparative period in 2003. On a constant exchange rate basis the reduction is EUR 50.6 million, or 10.3%.
The decline to prior period on a constant exchange rate basis reflects primarily the impact of the non-recurring revenues for the two periods. The contribution of non-recurring items to EBITDA decreased by EUR 59.8 million compared to last year’s reference period. Excluding the impact of these non-recurring items, and at constant exchange rates, EBITDA was EUR 9.3 million or 2.3% higher, than during the prior year period, and the Group’s EBITDA margin was held in line with 2003.
With underlying operating expenses in the infrastructure capacity business held level with the prior period, the EBITDA margin in the Group’s core infrastructure capacity business division at SES AMERICOM and SES ASTRA remained close to 80%.
Depreciation and amortisation
At EUR 169.2 million the Group’s depreciation charge is EUR 7.9 million, or 4.9%, higher than in 2003. On a constant exchange rate basis the increase is EUR 16.3 million, or 10.7%. It reflects the entry into service of three new satellites: AMC-9 in June 2003; AsiaSat 4 in June 2003; and AMC-10 in May 2004. The amortisation charge for the period of EUR 85.7 million is EUR 53.4 million, or 38.4%, lower than in the corresponding period of 2003. On a constant exchange rate basis the decline is EUR 45.0 million, or 34.4%. This reduction is attributable to a non-recurring charge taken in the first half of 2003 arising in the framework of the acquisition of the remaining 50% shareholding in AAP.
Operating profit
The Group’s operating profit is EUR 184.6 million for the six-month period ending June 30, 2004. This represents a reduction of EUR 29.5 million, or 13.8%, compared to the corresponding period of 2003. On a constant exchange rate basis the reduction is EUR 21.9 million, or 10.6%.
The decrease at constant exchange rates reflects the impact of the non-recurring items outlined above and the increased Group depreciation charge noted above.
Net financing charges including value adjustments on financial assets
Total financing costs for the period were EUR 9.2 million, compared to EUR 2.9 million in the same period of the prior year. The development of the finance charge is set out below:
| H1 2004 | H1 2003 | Variance | |
| Net interest expense | 23.1 | 42.1 | (19.0) |
| Capitalised interest | (8.7) | (13.0) | 4.3 |
| Net foreign exchange gains | (0.8) | (27.4) | 26.6 |
| Value adjustments / other | (4.4) | 1.2 | (5.6) |
| Financing charges & value adjustments | 9.2 | 2.9 | 6.3 |
-
A 28% decrease of the average net debt level compared to the prior year period;
-
The impact of a weaker US dollar on dollar-denominated interest charges; and,
-
More favourable borrowing terms achieved through effective management of treasury operations.
A significant drop in net foreign exchange gains, however, offsets the fall in net interest charges. In the first half of 2003 the Group recorded net foreign exchange gains of EUR 27.4 million, primarily on certain US dollar bilateral borrowings. In the current period movement on all such borrowings are posted to the Group’s currency exchange reserve through hedge accounting.
Taxation
For the six months to June 2004 the Group reports tax income of EUR 3.7 million, compared to a tax charge of EUR 79.8 million for the corresponding period of the prior year.
This movement of EUR 83.5 million reflects:
-
The impact of changes to the Group legal structure implemented in both 2003 and 2004. In particular the Group was able to release deferred tax provisions of EUR 46.9 million and to record current year tax credits of EUR 13.0 million within the framework of a re-alignment of the intra-Group shareholding structure;
2. A decrease of EUR 35.8 million in the profit before tax of the current period compared to prior.
Share of associates’ result
The share of associates’ result decreases from EUR 1.6 million in the first six months of 2003 to EUR (0.1) million in 2004. Whilst the Group’s associate Star One in Brazil held its contribution to Group earnings substantially in line with the prior period, the start-up costs of SES ASTRA’s new African affiliate Accelon (formerly IPDirect), and the contribution of AsiaSat’s associate SpeedCast, result in the small net loss from associates.
Minority interest
The allocation of EUR 17.0 million (2003: EUR 18.4 million) relates to the 65.9% minority interest in AsiaSat and the 25% minority interests in NSAB subsequent to its full consolidation from February 2, 2004. Whilst the minority interest in AsiaSat statutory earnings remained in line with 2003, NSAB reports negative statutory net income for the first half of 2004. The allocation of part of this loss to the minority shareholder results in the slight fall in overall minority interests year-on-year. Profit of the Group
Profit of the Group is EUR 162.0 million for the first six months of 2004, an increase of EUR 47.4 million, or 41.3%, over the corresponding period of the prior year.
Earnings per A-Share are EUR 0.27, compared to EUR 0.19 in 2003. Capital expenditure
Cash applied to the acquisition of tangible assets in the period was EUR 207.6 million, similar to the prior year level of EUR 201.8 million.
In 2003, SES ASTRA signed procurement contracts for two satellites, ASTRA 1KR and ASTRA 1L, with targeted launch dates of September 2005 and August 2006 respectively. SES AMERICOM has 5 satellites under construction with launch target dates as follows: AMC-15 in the 4th quarter 2004; WSAT-2 in the 4th Quarter 2004; AMC-16 in December 2004; W-SAT 3 in the 4th quarter of 2005; and AMC-14 in the 1st quarter of 2006.
Cash flow
Net operating cash flow for the period was EUR 466.8 million, a reduction of EUR 60.7 million from the prior period value of EUR 527.5 million. This reflects primarily the lower reported operating profit for the period, but also a smaller reduction in the first half of 2004 in the investment in working capital.
At the free cash flow level, the Group recorded EUR 201.4 million, compared to EUR 720.3 million in the same period of 2003. The decrease of EUR 518.9 million reflects the lower operating cash flow reported above, and an increase of EUR 458.2 million in cash absorbed by investing activities, mainly due to the following exceptional items recorded in 2003: the receipt of insurance proceeds concerning satellites ASTRA 1K and ASTRA 1G, and settlement of swap transactions.
Net debt
During the first six months of 2004, we recorded a gradual strengthening of the USD against the Euro from its year-end value of EUR 1 : USD 1.26. Despite the impact of this development on dollar-denominated borrowings, the Group’s net debt position has continued to decrease and stood at EUR 1,685.2 million at June 30, 2004, compared to EUR 1,699.1 million at year-end 2003, and EUR 2,043.1 million on June 30, 2003.
Contract backlog
Group contract backlog rose from EUR 6.4 billion at the year-end 2003 to EUR 6.9 billion at June 30, 2004. The increase in backlog in the first six months of 2004 arises from new contracts signed by SES AMERICOM with EchoStar and Connexion by Boeing.
Transition to International Financial Reporting Standards (“IFRS”)
In compliance with the European Parliament and Council Regulation 1606/2002 on the application of IFRS adopted on July 19, 2002, the Group will prepare its consolidated financial statements in accordance with IFRS beginning on January 1, 2005. Currently the financial statements of the Group are drawn up in accordance with accounting principles and regulations generally accepted in the Grand Duchy of Luxembourg (“Lux-GAAP”).
In conjunction with its external auditors, the Group is completing a transition programme to identify and quantify all differences between Lux-GAAP and IFRS based on the stable platform of IFRS standards and documentation now available. The Group has followed a policy over recent years of pro-actively adopting IFRS standards wherever possible and hence the impact on the operational financial results of the Group’s individual operations is not expected to be significant.
The Group does however expect a significant impact on the consolidated financial statements. Major consequences will include the cessation of amortisation of goodwill and indefinite life intangible assets, and that AsiaSat will no longer be fully consolidated in the Group’s financial statements.
Segment information
For the six months ended June 30, 2004.
-
EUR million
SES ASTRA
SES AMERICOM
AsiaSat
Other
Participations*
Elimination & consolidation adjustments1
Total
Revenues
351.4
213.1
57.6
7.1
(36.0)
593.2
Operating expenses
(66.0)
(83.1)
(11.7)
(18.1)
25.2
(153.7)
EBITDA
285.4
130.0
45.9
(11.0)
(10.8)
439.5
Depreciation
(88.4)
(62.6)
(15.0)
(3.2)
---
(169.2)
Amortisation
(17.9)
(58.4)
(5.7)
(3.7)
---
(85.7)
Operating profit
179.1
9.0
25.2
(17.9)
(10.8)
184.6
- the fully consolidated Group companies SES GLOBAL S.A., SES GLOBAL Asia S.A. (formerly SES Finance S.A.); SES do Brasil; and SES GLOBAL Finance Inc;
- the proportionately consolidated investments in SATLYNX and NSAB. In February 2004, the Company increased its interest in NSAB from 50% to 75% and the investment is fully consolidated from this point. From this date the results of NSAB are included in the SES ASTRA segment. ; and
- the equity investments in Star One and NahuelSat
CONSOLIDATED PROFIT AND LOSS ACCOUNT
-
EUR million
6 months to 30.06.2004 ¹
6 months to 30.06.2003 ¹
12 months to 31.12.2003 ²
Net turnover
543.9
568.0
1,121.1
Other operating income
49.3
74.2
86.4
Total revenues
593.2
642.2
1,207.5
Staff costs
(40.2)
(40.4)
(78.8)
External & other operating charges
(113.5)
(87.3)
(185.9)
Depreciation
(169.2)
(161.3)
(331.4)
Amortisation
(85.7)
(139.1)
(239.7)
Operating profit
184.6
214.1
371.7
Interest receivable & similar income
22.3
47.9
102.3
Interest payable & similar expenses
(31.5)
(49.2)
(103.4)
Value adjustment on investments
(0.0)
(1.6)
(6.3)
Profit on ordinary activities
175.4
211.2
364.3
Taxes
3.7
(79.8)
(131.2)
Profit for the period
179.1
131.4
233.1
Share of associates’ result
(0.1)
1.6
4.5
Profit attributable to minority interests
(17.0)
(18.4)
(32.2)
Profit of the Group
162.0
114.6
205.4
Weighted basic and diluted earnings per share ³ (in EUR)
A – shares
0.27
0.19
0.34
B – shares
0.11
0.08
0.14
C - shares
0.27
0.19
0.34
¹ The results have been subject to a limited review by the Company’s auditors Ernst & Young
² Taken from the audited consolidated financial statements of SES GLOBAL S.A. for the year ended December 31, 2003
³ Earnings per share is calculated by dividing the net profit attributable to ordinary shareholders for the period by the weighted average number of shares outstanding during the year as adjusted to reflect the economic rights of each class of share.
In February 2004, the Company increased its interest in NSAB from 50% to 75% and the investment is fully consolidated from this point. Previously the investment was accounted for using proportional consolidation.
For the period ended June 30, 2004, the adjusted weighted average number of shares outstanding for each class of shares was: Class A - 310,340,000; Class B - 98,327,134; and Class C - 181,295,672, which corresponds to the position for year ended December 31, 2003.
CONSOLIDATED BALANCE SHEET
-
EUR
million
30.06.2004 1
30.06.2003 ¹
31.12.2003
²
Assets
Intangible
assets
2,773.7
3,052.2
2,760.5
Tangible assets
in use
2,621.5
2,619.0
2,516.6
Payments on
account and assets in the course of
construction
787.6
817.6
686.7
Financial
assets
120.7
132.4
120.2
Inventories
4.0
3.2
3.4
Trade
debtors
113.4
131.2
119.8
Other
debtors
44.9
46.6
37.3
Investments
62.6
22.9
36.2
Cross currency
interest rate swap agreements
73.6
6.2
113.7
Cash at
bank
445.0
193.1
309.7
Prepayments
62.1
64.8
68.4
Deferred tax
assets
4.8
4.2
4.5
Total assets
7,113.9
7,093.4
6,777.0
Liabilities
Capital and
reserves
3,330.2
3,340.2
3,247.8
Minority
interest
285.7
251.1
240.6
Pension and
other provisions
8.8
8.0
10.9
Provisions for
deferred tax
571.1
678.4
635.1
Amounts due
after more than one year
To credit
institutions
431.6
2,207.1
386.9
Notes and
Bonds
1,651.3
-
1,621.9
Other
liabilities
35.4
11.7
32.6
Amounts due
within one year 1 year
To credit
institutions
47.3
29.1
-
Other
liabilities
427.4
234.3
361.2
Deferred
income
325.1
333.5
240.0
Total liabilities
7,113.9
7,093.4
6,777.0
|
EUR million |
30.06.2004 1 |
30.06.2003 ¹ |
31.12.2003 ² |
|
|
|
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
Intangible assets |
2,773.7 |
3,052.2 |
2,760.5 |
|
Tangible assets in use |
2,621.5 |
2,619.0 |
2,516.6 |
|
Payments on account and assets in the course of construction |
787.6 |
817.6 |
686.7 |
|
Financial assets |
120.7 |
132.4 |
120.2 |
|
Inventories |
4.0 |
3.2 |
3.4 |
|
Trade debtors |
113.4 |
131.2 |
119.8 |
|
Other debtors |
44.9 |
46.6 |
37.3 |
|
Investments |
62.6 |
22.9 |
36.2 |
|
Cross currency interest rate swap agreements |
73.6 |
6.2 |
113.7 |
|
Cash at bank |
445.0 |
193.1 |
309.7 |
|
Prepayments |
62.1 |
64.8 |
68.4 |
|
Deferred tax assets |
4.8 |
4.2 |
4.5 |
|
Total assets |
7,113.9 |
7,093.4 |
6,777.0 |
|
|
|
|
|
|
Liabilities |
|
|
|
|
Capital and reserves |
3,330.2 |
3,340.2 |
3,247.8 |
|
Minority interest |
285.7 |
251.1 |
240.6 |
|
Pension and other provisions |
8.8 |
8.0 |
10.9 |
|
Provisions for deferred tax |
571.1 |
678.4 |
635.1 |
|
Amounts due after more than one year |
|
|
|
|
To credit institutions |
431.6 |
2,207.1 |
386.9 |
|
Notes and Bonds |
1,651.3 |
- |
1,621.9 |
|
Other liabilities |
35.4 |
11.7 |
32.6 |
|
Amounts due within one year 1 year |
|
|
|
|
To credit institutions |
47.3 |
29.1 |
- |
|
Other liabilities |
427.4 |
234.3 |
361.2 |
|
Deferred income |
325.1 |
333.5 |
240.0 |
|
Total liabilities |
7,113.9 |
7,093.4 |
6,777.0 |
In February 2004, the Company increased its interest in NSAB from 50% to 75% and the investment is fully consolidated from this point. From this date the results of NSAB are included in the SES ASTRA segment.
¹ The results have been subject to a limited review by the Company’s auditors Ernst & Young
² Taken from the audited consolidated financial statements of SES GLOBAL