Eutelsat Communications SA · EURONEXT:ETL
Eutelsat Communications SA — Investor Presentation (November 2018)
57 slides from Eutelsat Communications SA's investor presentation, November 2018
Slide 1: Eutelsat Communications Investor Presentation November 2018
EUTELSAT COMMUNICATIONS Investor Presentation November 2018
Slide 2: Agenda
Agenda 1 FSS Industry 2 Eutelsat in a snapshot 3 Q1 2018-19 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 & technical expertise through
Slide 5: Trends in our core businesses
Trends in our core businesses FIXED DATA: STRUCTURALLY GOVERNMENT SERVICES: VIDEO: SLIGHT GROWTH CHALLENGED POCKETS OF OPPORTUNITY ► Sustained growth in ► Global demand driven ► US DoD demand emerging markets by increasing stabilizing, albeit • Robust channel growth connectivity needs at lower price
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 ~12 - - 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 main European markets
Video: Satellite resilience in Eutelsat 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 million
Slide 11: Video: Satellite gaining market share worldwide
Video: Satellite gaining market share worldwide MILLION TV HOMES BY DISTRIBUTION MODE - GLOBAL 1624 1720 ► Total number of TV homes to 1604 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 ► Satellit
Slide 12: Agenda
Agenda 1 FSS Industry 2 Eutelsat in a snapshot 3 Q1 2018-19 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 revenues of €1.41bn 5% Western Europe 6% Central Europe 11% 30% MENA ► Fleet of 38 satellites; global RCA coverage 10% SSA Americas 6% 8% APAC ► Operating >1,400 transponders 24% Unallocated and others By application
Slide 14: Breakdown of revenues by Application
Breakdown of revenues by Application Direct-to-Home (DTH) Video 65% Cable headends CORE BUSINESSES Professional Video Government Military Services 13% Security Mobile backhaul Fixed Data 10% Corporate networks CONNECTIVITY Fixed Internet access for Broadband 6% households and corporates Mobile In-fl
Slide 15: Eutelsat's global network
Eutelsat’s global network 15
Slide 16: Bond and Bank Debt maturity schedule
Bond and Bank Debt maturity schedule ONGOING DEBT OPTIMISATION BOND AND BANK DEBT MATURITY SCHEDULE Refinancing Jan ‘19 bond ► Net Debt/EBITDA ratio reduced to 3.0x Pre-hedge: €500m at c. 1.12% • versus 3.2x at 30 June 2017 ex. spread €930m €800m €800m ► Average cost of debt after hedging €200m redu
Slide 17: Shareholder structure
Shareholder structure EUTELSAT SHAREHOLDING STRUCTURE AS OF 30 JUNE 2018 Bpifrance 26.4% Free float and others 59.4% CIC1 6.7% FSP2 7.5% 1 China Investment Corporation 2 Fonds Stratégique de Participations 17
Slide 18: Agenda
Agenda 1 FSS Industry 2 Eutelsat in a snapshot 3 Q1 2018-19 performance 4 Outlook 5 Appendix 18
Slide 19: Q1 2018-19 key events
Q1 2018-19 key events Disposal of non-core interest in ETL 25B satellite for €135m Refinancing of Jan 2019 Bond, extending debt maturity and reducing cash interest by €24m Launch of EUTELSAT CIRRUS hybrid satellite-OTT turnkey solution Progressive roll out of Konnect Africa broadband service Member
Slide 20: Q1 Revenues
Q1 Revenues Q1 YOY REVENUE BRIDGE (€M) ► First Quarter revenues of €335m ► Revenues down 2.7% at -1.8% constant perimeter, currency +1 and accounting standards (4) • Consolidation of Noorsat (5) • Deconsolidation of Eutelsat 25B (6) • Adoption of IFRS 15 349 ► Operating verticals down 1.8% 335 exclu
Slide 21: Revenues: like-for-like change by application
Revenues: like-for-like change by application REVENUE REVENUES LIKE-FOR-LIKE2 CHANGE CONTRIBUTION1 (€m) YoY QoQ CORE BUSINESSES Video 65% 217 -1.7% -0.7% Government 13% 10% 42 +4.2% +1.4% Services Fixed Data 10% 33 -12.1% -5.7% CONNECTIVITY Fixed 6% 20 -7.3% -2.7% Broadband Mobile 6% 21 +10.9% +1.9%
Slide 22: Video
Video 65% REVENUES (€M) ► Revenues of €217m, down 1.7% y-o-y like-for-like1 • High-single digit decline in Professional Video • Lower revenues from FRANSAT 871 ► Core Broadcast excluding FRANSAT Q4 216 stable… ► …and set to improve in coming Q3 218 quarters with • Contract with Orange Slovensko Q2 2
Slide 23: Government Services
Government Services 13% REVENUES (€M) ► Revenues of €42m, up 4.2% y-o-y like-for-like1 • Incremental business at 174°East ► USG renewal rate of c.70% in Fall round 158 • Non-renewal of a single sizeable Q4 40 contract with a specific service provider • Not reflective of underlying market Q3 38 trend
Slide 24: Fixed Data
Fixed Data 10% REVENUES (€M) ► Revenues of €33m, down 12.1% y-o-y like-for-like1 143 ► Highly competitive environment Q4 34 ► Ongoing price pressure Q3 35 ► Latin America the main contributor to revenue decline Q2 36 Q1 37 Q1 33 2 FY 2017-18 FY 2018-19 1 At constant currency, perimeter and accountin
Slide 25: Fixed Broadband
Fixed Broadband 6% REVENUES2 (€M) ► Revenues of €20m, down 7.3% y-o-y like-for-like1 ► Contract expiry for one spotbeam on ETL 3B • Re-contracted to Taqnia in Mobile Connectivity 84 ► Lower revenues for European Q4 21 Broadband • Scarcity of available capacity in Western Q3 21 Europe Q2 21 ► Progres
Slide 26: Mobile Connectivity
Mobile Connectivity 6% REVENUES2 (€M) ► Revenues of €21m, up 10.9% y-o-y like-for-like1 ► YoY variation reflecting: • New contract with Taqnia at 3°East and 70°East 74 • Carry-over effect of entry into service of EUTELSAT 172B Q4 20 • Ongoing ramp up of capacity contracts on KA-SAT Q3 18 ► H2 revenu
Slide 27: Backlog and Fill Rate
Backlog and Fill Rate BACKLOG (€BN) OPERATIONAL AND LEASED TRANSPONDERS 1374 1427 1416 5.2 4.6 4.7 971 976 940 % 86% 83% 77% Video 30 September 30 June 2018 30 September 30 Sept. 2017 30 June 2018 30 Sept. 2018 2017 2018 Fill rate 68.4% 68.1% 69.0% Operational transponders leased transponders ► 3.4
Slide 28: To Sum Up
To Sum Up Global performance of the operating verticals in line with expectations at this stage in the year Core Broadcast revenues stable Concrete measures to maximize cash generation Connectivity strategy progressing Current year topline objective adjusted to take account of one-off contract loss
Slide 29: Agenda
Agenda 1 FSS Industry 2 Eutelsat in a snapshot 3 Q1 2018-19 performance 4 Outlook 5 Appendix 29
Slide 30: Reminder: Our strategic roadmap
Reminder: Our strategic roadmap STEP 1 STEP 2 GROW CASH-FLOW GROW TOPLINE 2016-2019 2020-2025+ Maximise Extracting value Capture Free Cash Flow from our core potential in generation Video Connectivity business 30
Slide 31: Build on our core Video business; capture longer term potential in Connectivity
Build on our core Video business to accelerate growth; capture longer term potential in Connectivity MEDIUM TERM LONG TERM FIXED MOBILE VIDEO BROADBAND CONNECTIVITY Build on our core business Prepare From niche to accelerate growth for scalability to mass market ► Growth potential of Video ► Optimiz
Slide 32: Maximize cash generation: Financial measures
Maximize cash generation: Financial measures CAPEX REDUCTION “LEAP” COST-SAVINGS PLAN ► Implement ‘design to cost’ approach ► Launch of « LEAP », a wide-ranging cost-savings plan with a focus on ► Ground capex under strict control external costs Average annual cash Capex Annualised savings of €30m b
Slide 33: 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 34: Video: Build on our core business to accelerate growth
Video: Build on our core business to accelerate growth OPPORTUNITY FOR FURTHER HARNESSING EXISTING GROWTH POTENTIAL OF VIDEO VALUE CREATION TECHNOLOGY ► Video via satellite ► Greater integration ► Improve efficiency will continue to grow within the IP ecosystem • Compression • Encription ► Distribut
Slide 35: Procurement of KONNECT VHTS shaping our Connectivity strategy
Procurement of KONNECT VHTS shaping our Connectivity strategy ► Core market for Fixed Broadband via satellite of c.5m Significant households in Europe in 2030 addressable ► Global revenues for in-flight Connectivity capacity expected market to exceed €1bn by 2025 Game-changing ► Production costs in
Slide 36: Update on our key priorities for FY 2018-19
Update on our key priorities for FY 2018-19 Deliver full benefits of LEAP On track to deliver on €30m target Secure further interest cost €24m savings in FY 20 secured thanks savings to successful Bond issue Maximise cash HOTBIRD constellation replacement at Achieve further capex compelling terms ge
Slide 37: Financial outlook
Financial outlook OPERATING VERTICALS REVENUES ► Broadly stable in FY 2018-191 (At constant currency, perimeter and ► Return to slight growth from FY 2019-20 accounting standards) EBITDA MARGIN ► Above 78% from FY 2018-19 (At constant currency) Taking into account impact of IFRS 15/16 standards ► FY
Slide 38: Future launches
Future launches EUTELSAT EUTELSAT KONNECT EUTELSAT EUTELSAT Name 7C 5 WEST B KONNECT VHTS HOTBIRD HOTBIRD 13F 13G Orbital 7° East 5° West TBD TBD TBD 13° East 13° East Position Launch date1 Q1 2019 Q1 2019 H2 2019 H2 2019 2021 2021 2021 Manufacturer Launcher TBD TBD TBD MENA Europe Flexible SSA Euro
Slide 39: Agenda
Agenda 1 FSS Industry 2 Eutelsat in a snapshot 3 Q1 2018-19 performance 4 Outlook 5 Appendix 39
Slide 40: Appendix
Appendix 5.1 FY 2017-18 financials 5 5.2 Miscellaneous 40
Slide 41: Profitability
Profitability EBITDA (€M) ► LEAP cost saving plan ahead of track • €24 m of savings against objective 1,134 of €15m 1,077 ► EBITDA margin of 76.9% at constant currency vs. 76.7% in Margin at FY 17 inspite of constant 76.7% 76.9%1 currency • Lower Other revenues’ with less 77.4 77.4 77.5 associated c
Slide 42: Net income
Net income Extracts from the FY FY 2017-18 Change consolidated income statement in €m1 2016-17 Revenues 1,478 1,408 -4.7% EBITDA2 1,134 1,077 -5.0% ► Lower D&A reflecting end of life / full depreciation of Operating 615 553 -10.1% several satellites income ► Capital gain on Wins/DHI last year ; nega
Slide 43: Discretionary Free Cash-Flow up 12%
Discretionary Free Cash-Flow up 12% At constant currency In €m +12% at constant currency (358) Currency 881 (42) impact 1 (108) (1) 415 (1) Net cash Flow from Cash Capex Interest and Other Discretionary Free operations fees paid net of Cash-flow interests received Change -102 +56 +53 +7 FY 2016-17 9
Slide 44: Significant deleveraging
Significant deleveraging In €m -€399m (206) (415) +295 (16) (57) 3,641 3,242 Net Debt at Discretionary Dividends Equity FX portion of Change in Net Debt at end- June 17 Free Cash-Flow paid investments CC Swap fin. leases end-June 18 44
Slide 45: Financial structure
Financial structure NET DEBT / EBITDA RATIO1 ► Net Debt/EBITDA ratio reduced to 3.0x • versus 3.2x at 30 June 2017 3.2x 3.0x ► Average cost of debt after hedging reduced to 2.9% • versus 3.1% in FY 2016-17 ► Average weighted maturity of 2.2 years • versus 3.0 years at 30 June 2017 30 June 2017 30 Ju
Slide 46: Impact of IFRS 15 and IFRS 16 Standards
Impact of IFRS 15 and IFRS 16 Standards ► IFRS 15 and IFRS 16 adopted as of FY 2018-19 ► Main impacts of IFRS 15 • Timing of revenue and cost recognition or reclassifications from costs to revenues • Main items include marketing and technical contributions and SAC and terminals for the Fixed Broadba
Slide 47: Appendix
Appendix 5.1 FY 2017-18 financials 5 5.2 Miscellaneous 47
Slide 48: Focus on HOTBIRD KPIs
Focus on HOTBIRD KPIs 1,002 -4 998 Stable -43 channel count June 2018 Sept. 2018 329 +4% 341 Sustained HD ramp-up, outpacing MPEG4 Penetration 33% 34% June 2018 Sept. 2018 574 +1% 578 MPEG-4 more advanced than HD Penetration 57% 58% June 2018 Sept. 2018 48
Slide 49: Over €600m of asset disposals in two years
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 Over €600m of asset disposals in two years 49
Slide 50: 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 51: 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 52: Progressive launch of Konnect Africa
Progressive launch of Konnect Africa ► Entry into service of Al-Yah 3 capacity at the end of Q1 ► Progressive launch of commercial service ► Konnect Africa now available in eight countries ► Strong interest both from traditional Telecom-related service providers and capillary local partners ► Gradua
Slide 53: Strong pipeline for in-flight Connectivity
Strong pipeline for in-flight Connectivity KA-SAT EUTELSAT 172B OTHER RESOURCES ► Several contracts signed ► Customised HTS ► Contracts with Taqnia for using capacity on payload to support IFEC four HTS Ka-band KA-SAT over Europe growth over APAC spotbeams on ETL 3B and • Finnair widebeam capacity o
Slide 54: 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 54
Slide 55: Design-to-cost: Eutelsat 5 West B case study
Design-to-cost: EUTELSAT 5 West B case study DESIGN-TO-COST LAUNCH Improved match of Shared launch in a coverage with stacked customer configuration on a requirements Proton rocket Lower cost of payload Lower launch cost Smaller platform Lower insurance cost >30%1 in capex savings Improved IRR Enhan
Slide 56: Satellite economic model: Regular capacity
Satellite economic model1: Regular capacity 1 For a greenfield satellite, using chemical propulsion 56
Slide 57: IR Contacts
IR Contacts Joanna DARLINGTON T: +33 1 53 98 31 07 E: jdarlington@eutelsat.com Cédric PUGNI T: +33 1 53 98 31 54 E: cpugni@eutelsat.com Alexandre ENJALBERT T: +33 1 53 98 46 81 E: aenjalbert@eutelsat.com 57
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