Eutelsat Communications Sa · EURONEXT:ETL
Eutelsat Communications Sa — Investor Presentation (August 2019)
62 slides from Eutelsat Communications Sa's investor presentation, August 2019
Slide 1: Eutelsat Communications Investor Presentation August 2019
EUTELSAT COMMUNICATIONS Investor Presentation August 2019
Slide 2: Agenda
Agenda 1 FSS Industry 2 Eutelsat in a snapshot 3 FY 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 and technical expertise throug
Slide 5: Trends in our heritage businesses
Trends in our heritage businesses DATA & PROFESSIONAL VIDEO: GOVERNMENT SERVICES: BROADCAST: SLIGHT GROWTH STRUCTURALLY CHALLENGED POCKETS OF OPPORTUNITY ► Growth in emerging ► Global demand driven ► US DoD demand markets by increasing stabilizing, albeit • Robust channel growth connectivity needs a
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 FY 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 geography1 ► FY 19 revenues of €1.32bn 5% Western Europe 6% Central Europe 11% 30% MENA ► Fleet of 37 satellites; global RCA coverage 10% SSA Americas 6% 8% APAC ► Operating >1,350 transponders 24% Unallocated and others By applicat
Slide 14: Breakdown of revenues by application
Breakdown of revenues by application Direct-to-Home (DTH) Broadcast 60% Cable headends CORE BUSINESSES Data & Mobile backhaul Professional 15% 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 +4% 7,092 6,824 Channel 197 197 198 197 196 195 197 197 count June 2018 ex. 25B June 2019 +13% 1,551 1,375 HD Penetration 20% 22% June 2018 ex. 25B June 20
Slide 18: Bond and Bank Debt maturity schedule
Bond and Bank Debt maturity schedule ONGOING DEBT OPTIMISATION BOND AND BANK DEBT MATURITY SCHEDULE2 Refinancing Jan ‘20 bond ► Net Debt/EBITDA ratio of 2.98x • Slight reduction vs 30 June 2018 (3.01x) €930m €67m €800m ► Average cost of debt after hedging €600m reduced to 2.6% €500m €200m €53m ► Ave
Slide 19: Shareholder structure
Shareholder structure EUTELSAT SHAREHOLDING STRUCTURE AS OF 28 FEBRUARY 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 FY 2018-19 performance 4 Outlook 5 Appendix 20
Slide 21: Highlights of FY 2018-19
Highlights of FY 2018-19 All financial objectives below the topline either met or exceeded Discretionary Free Cash-flow objective exceeded a year ahead of schedule Further measures to maximise cash generation, including debt refinancing, asset disposals and material tax savings Proposed dividend per
Slide 22: All financial objectives below the topline met or exceeded
All financial objectives below the topline met or exceeded Actual Objective Performance Operating Verticals Circa -3% -3.1%1 revenues (at constant currency and perimeter) Above 78% EBITDA margin (at constant currency) 78.4%2 + Cash Capex Average €400m p.a. €323m ++ Discretionary Mid-single digit 3-y
Slide 23: FY 2018-19 revenues
FY 2018-19 revenues FY 19 YOY REVENUE BRIDGE (€M) ► Total revenues of €1,321m, down 5% ► Negative net perimeter impact • Carry-forward effect of Noorsat -3.1% 21 • Deconsolidation of Eutelsat 25B (11) (39) (41) ► Positive currency effect • €/$ rate of 1.14 vs 1.19 last year 1,391 ► Negative swing of
Slide 24: FY 2018-19 revenues by application
FY 2018-19 revenues by application REVENUE REVENUES LIKE-FOR-LIKE2 CONTRIBUTION1 (€m) CHANGE Video 66% 864 CORE BUSINESSES -1.9% Government 12% 10% 162 -1.5% Services Fixed 10% 127 -14.6% Data CONNECTIVITY Fixed 6% 80 -5.6% Broadband Mobile 6% 80 +4.0% Connectivity Total Operating Verticals 1,313 -3
Slide 25: Video
Video 66% REVENUES (€M) ► Revenues of €864m, down 1.9% like-for-like1 • Core broadcast excluding FRANSAT broadly stable 871 864 • Double digit decline in Professional Video Q4 216 Q4 217 ► Q4 revenues down 1.1% YoY but up 0.3% QoQ Q3 218 Q3 215 ► Channel count up 4% YoY • 7,092 channels at end June
Slide 26: Government Services
Government Services 12% REVENUES (€M) ► Revenues of €162m, down 1.5% like- for-like1 • Low level of renewals with USG in FY 19 158 162 • Carry-forward effect of incremental business over APAC at 174°East Q4 40 Q4 40 ► Q4 revenues down 7.9% YoY and 40 Q3 38 Q3 1.5% QoQ ► FY 2019-20 to reflect: Q2 39
Slide 27: Fixed Data
Fixed Data 10% REVENUES (€M) ► Revenues of €127m, down 14.6% like-for-like1 ► Continuing to reflect: 143 • Highly competitive environment 127 • Ongoing price pressure Q4 34 Q4 30 ► Softer volumes in Latin America Q3 35 Q3 30 ► Q4 down 16.4% YoY and 1.4% QoQ Q2 36 Q2 33 ► From FY 2019-20, this vertic
Slide 28: Fixed Broadband
Fixed Broadband 6% REVENUES (€M) ► Revenues of €80m, down 5.6% like-for-like1 • Down 3.5% excl contract expiry for a spotbeam on E3B (recontracted in Mobility) 84 80 ► Lower revenues in European Broadband, but improvement in Q4 Q4 21 Q4 21 • PPP starting to bear fruit Q3 21 ► Konnect Africa: modest
Slide 29: Mobile Connectivity
Mobile Connectivity 6% REVENUES (€M) ► Revenues of €80m, up 4.0% like-for-like1 reflecting: • Start of UnicomAirNet contract in Jan ‘19 • Carry-forward of Taqnia contract at 3° 80 and 70°East 74 • Ongoing ramp-up of capacity contracts Q4 21 on KA-SAT Q4 20 • End of temporary wide-beam contract on ET
Slide 30: Backlog and Fill Rate
Backlog and Fill Rate BACKLOG (€BN) OPERATIONAL AND UTILIZED TRANSPONDERS 1,427 1,387 4.6 4.4 971 960 Video 83% 75% 30 June 2018 30 June 2019 30 June 2018 30 June 2019 Fill rate 68.1% 69.2% Operational transponders Utilized transponders ► 3.3 years of revenues ► Operational txp reflecting disposal o
Slide 31: Agenda
Agenda 1 FSS Industry 2 Eutelsat in a snapshot 3 FY 2018-19 performance 4 Outlook 5 Appendix 31
Slide 32: 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 32
Slide 33: 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 34: 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 35: FY 20: Key trends by Operating Vertical
FY 20: Key trends by Operating Vertical Resilience of core Broadcast Broadcast 60% Entry into service of ETL 7C Data & Professional 15% Ongoing competitive pressure Video Government Entry into service of EGNOS payload 12% Delayed launch of Eutelsat Quantum Services Fixed Improvement in European Broa
Slide 36: Financial outlook
Financial outlook 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 / EBITDA below 3.0x ► Stable to
Slide 37: Future launches
Future launches EUTELSAT KONNECT KONNECT EUTELSAT EUTELSAT Name 5 WEST B VHTS HOTBIRD 13F HOTBIRD 13G Orbital 5° West TBD TBD TBD 13° East 13° East Position Launch date1 Q4 2019 Q4 2019 Q3 2020 H2 2021 H2 2021 H2 2021 Manufacturer Launcher TBD TBD TBD Europe SSA Flexible Europe Europe Europe Coverag
Slide 38: Agenda
Agenda 1 FSS Industry 2 Eutelsat in a snapshot 3 FY 2018-19 performance 4 Outlook 5 Appendix 38
Slide 39: Appendix
Appendix 5.1 FY 2018-19 financials 5 5.2 Miscellaneous 39
Slide 40: 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 41: 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 42: 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 43: 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 44: 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 44
Slide 45: 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 45
Slide 46: 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 47: Appendix
Appendix 5.1 FY 2018-19 financials 5 5.2 Miscellaneous 47
Slide 48: 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 Cash Capex Delivered €500m to €400m LEAP program generating Opex Delivered €32m external cost-savings >€60m savings through Cash interest Secured bond refinancing Asset >€600m asset so
Slide 49: 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 50: >€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 50
Slide 51: Continued rise in channel count
Continued rise in channel count 6,929 +4% 7,092 (105) 6,824 Progressing channel count June 2018 25B Jue 2018 ex. 25B June 2019 1,455 (80) 1,375 +13% 1,551 Sustained HD ramp-up Penetration 21% 20% 22% June 2018 25B June 2018 ex. 25B June 2019 4,674 (85) 4,589 +7% 4,900 MPEG-4 more advanced Penetratio
Slide 52: Focus on HOTBIRD KPIs
Focus on HOTBIRD KPIs CHANNEL COUNT HD PENETRATION MPEG 4 -50 +11% +4% 1002 366 597 574 952 329 33% XX% % 33% 38% % 58% 63% June 2018 June 2019 June 2018 June 2019 June 2018 June 2019 ► Reflects mostly the end of ► HD ramp-up ► MPEG-4 considerably simulcast / dual outpacing MPEG-4 more advanced illu
Slide 53: Several operational achievements to underpin future performance
Several operational achievements to underpin future performance VIDEO FIXED BROABDAND MOBILE CONNECTIVITY ► Proven resilience of ► European Broadband ► Market share gains in core Broadcast PPP starting to bear maritime mobility fruit • Substantial ► Addition of several commercial wins with new DTH p
Slide 54: 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 55: 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 56: European Broadband: launch of PPP starting to bear fruit
European Broadband: launch of PPP starting to bear fruit LAUNCH OF PREFERRED PARTNERSHIP INFLEXION IN NET ADDS DURING Q4-19 PROGRAMME END 2018 Net monthly adds on KA SAT ► Focus on few, selected partners 1 500 ► Incentives to maximise market 1 000 share 500 - ► Lower churn for PPP customers -500 ► T
Slide 57: Strong pipeline for Mobile Connectivity
Strong pipeline for Mobile 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 on ►
Slide 58: 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 58
Slide 59: 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 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: 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 62
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