Eutelsat Communications Sa · EURONEXT:ETL
Eutelsat Communications Sa — Investor Presentation (February 2019)
57 slides from Eutelsat Communications Sa's investor presentation, February 2019
Slide 1: Eutelsat Communications Investor Presentation February 2019
EUTELSAT COMMUNICATIONS Investor Presentation February 2019
Slide 2: Agenda
Agenda 1 FSS Industry 2 Eutelsat in a snapshot 3 H1 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 ► Growth in emerging ► Global demand driven ► US DoD demand markets by increasing stabilizing, albeit • Robust channel growth connectivity needs at lower prices • Increa
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 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 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 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 18 revenues of €1.41bn 5% Western Europe 6% Central Europe 11% 30% MENA ► Fleet of 37 satellites; global RCA coverage 10% SSA Americas 6% 8% APAC ► Operating >1,400 transponders 24% Unallocated and others By applicati
Slide 14: Breakdown of revenues by Application
Breakdown of revenues by Application Direct-to-Home (DTH) Video 66% Cable headends CORE BUSINESSES Professional Video Government Military Services 12% 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: 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 Secured €30m external cost-savings €50m savings through Cash interest Secured bond refinancing Asset >€600m asset sold
Slide 17: Bond and Bank Debt maturity schedule
Bond and Bank Debt maturity schedule ONGOING DEBT OPTIMISATION BOND AND BANK DEBT MATURITY SCHEDULE2 Pre-hedge: ► Net Debt/EBITDA ratio reduced to 3.1x €500m at c. 1.12% • versus 3.3x at 31 December 2017 ex. spread €930m €800m ► Average cost of debt after hedging €200m reduced to 2.2%1 €500m €450m3
Slide 18: 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 18
Slide 19: Agenda
Agenda 1 FSS Industry 2 Eutelsat in a snapshot 3 H1 2018-19 performance 4 Outlook 5 Appendix 19
Slide 20: Maximising cash generation
Maximising cash generation Disposal of non-core interest in ETL 25B satellite for €135m Successful refinancing of Jan 2019 Bond extending debt maturity and reducing cash interest by €24m Multi-launch agreement with Arianespace providing cost-effective access to space HOTBIRD replacement with highly
Slide 21: Extracting value from the core video business
Extracting value from the core video business INCREASE RETURNS: INCREASE REVENUES: HOTBIRD CONSTELLATION RENEWAL PROMISING TAKE UP OF EUTELSAT CIRRUS ► Two large satellites replace ► Eutelsat’s new hybrid satellite- three for the same number of OTT delivery solution operational transponders ► First
Slide 22: Broadband Europe: Overhaul of distribution strategy
Broadband Europe: Overhaul of distribution strategy with focus on specialist and telco partners ► Launch of Preferred Partner Program to revitalize KA-SAT distribution • Reinforce relations with key partners o Exclusive distribution of KA-SAT capacity o Support for SAC, installation and marketing o
Slide 23: Konnect Africa: Progressive roll-out
Konnect Africa: Progressive roll-out BUILDING OUT DISTRIBUTION DEFINING APPROPRIATE PRICING LAUNCH IN FALL 2018 NETWORK STRATEGIES (DRC EXAMPLE) ► Entry into service of ► Wholesale telcos ► Segmented price grid Al-Yah 3 and DTH operators • B2C packages ranging Revenues from $25 (5 GB)toto $75 ► Prog
Slide 24: H1 2018-19 revenues
H1 2018-19 revenues H1 19 Y-O-Y REVENUE BRIDGE (€M) ► Total revenues of €658m, down 4.4% ► Negative net perimeter impact • Consolidation of Noorsat -2.4% 3 • Deconsolidation of Eutelsat 25B (3) (15) (16) ► Positive currency effect • €/$ rate of 1.16 vs 1.17 last year ► Negative swing of -€15m in 688
Slide 25: H1 2018-19 revenues by application
H1 2018-19 revenues by application REVENUE REVENUES LIKE-FOR-LIKE2 CONTRIBUTION1 (€m) CHANGE CORE BUSINESSES Video 66% 432 -2.0% Government 12% 10% 82 +1.7% Services Fixed Data 10% 66 -11.9% CONNECTIVITY Fixed 6% 40 -5.8% Broadband Mobile 6% 40 +6.7% Connectivity Total Operating Verticals 660 -2.4%
Slide 26: Video
Video 66% REVENUES (€M) ► Revenues of €432m, down 2.0% like-for-like1 ► Core broadcast excluding FRANSAT broadly stable ► High-single digit decline in 437 432 Professional Video ► Channel count up 3.8% yoy Q2 219 Q2 215 • 7,067 channels at end December 2018 • HD up from 18.7% to 21.2% ► H1 commercia
Slide 27: Government Services
Government Services 12% REVENUES (€M) ► Revenues of €82m, up 1.7% like-for- 80 82 like1 ► Incremental business at 174°East Q2 39 Q2 39 ► Impact of low outcome of USG Fall 2018 renewals • Non-renewal of a single sizeable contract with a specific service Q1 41 Q1 42 provider • Not reflective of underl
Slide 28: Fixed Data
Fixed Data 10% REVENUES (€M) ► Revenues of €66m, down 11.9% like-for-like1 73 ► Continuing to reflect: 66 • Highly competitive environment • Ongoing price pressure Q2 36 Q2 33 ► Latin America the main contributor to revenue decline ► Framework agreement with Orange Q1 37 Q1 33 • Multi-transponder re
Slide 29: Fixed Broadband
Fixed Broadband 6% REVENUES (€M) ► Revenues of €40m, down 5.8% like-for-like1 ► Contract expiry for a spotbeam on ETL 3B 43 • Re-contracted to Taqnia in Mobile 40 Connectivity • c.-2 points of impact Q2 21 Q2 20 ► Lower revenues for European Broadband • Scarcity of available capacity in certain West
Slide 30: Mobile Connectivity
Mobile Connectivity 6% REVENUES (€M) ► Revenues of €40m, up 6.7% like-for-like1 reflecting: • New contract with Taqnia at 3°East and 70°East 40 37 • Carry-over effect of entry into service of EUTELSAT 172B Q2 19 • Ongoing ramp up of capacity contracts on Q2 19 KA-SAT ► New multi-transponder contract
Slide 31: Backlog and Fill Rate
Backlog and Fill Rate BACKLOG (€BN) OPERATIONAL AND UTILIZED TRANSPONDERS 1416 1427 1419 949 971 970 4.7 4.6 4.6 % 85% 83% 77% Video 31 Dec. 2017 30 June 2018 31 Dec. 2018 Fill 67.0% 68.1% 68.3% 31 Dec. 2017 30 June 2018 31 Dec. 2018 rate Operational transponders Utilized transponders ► 3.3 years of
Slide 32: Agenda
Agenda 1 FSS Industry 2 Eutelsat in a snapshot 3 H1 2018-19 performance 4 Outlook 5 Appendix 32
Slide 33: 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 33
Slide 34: 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 35: Build on our core Video business; capture longer term potential in Connectivity
Build on our core Video business; capture longer term potential in Connectivity to accelerate growth MEDIUM TERM LONG TERM FIXED MOBILE VIDEO BROADBAND CONNECTIVITY Extracting value from the Prepare From niche core business for scalability to mass market ► Growth potential of Video ► Optimize existi
Slide 36: 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 37: 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 38: …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 39: 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 40: 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 and 16 ► FY 2017-
Slide 41: 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 Q2 2019 Q2 2019 H2 2019 H2 2019 2021 2021 2021 Manufacturer Launcher TBD TBD TBD MENA Europe Flexible SSA Euro
Slide 42: Agenda
Agenda 1 FSS Industry 2 Eutelsat in a snapshot 3 H1 2018-19 performance 4 Outlook 5 Appendix 42
Slide 43: Appendix
Appendix 5.1 H1 2018-19 financials 5 5.2 Miscellaneous 43
Slide 44: Profitability
Profitability EBITDA (€M) ► EBITDA margin of 79.0% at constant currency vs. 79.4% in H1 2017-18 546 518 • Lower ‘Other Revenues’ • Roll-out costs of Konnect Africa • Disposal of ETL 25B Margin at • Consolidation of Noorsat constant 79.4% 79.0%1 currency 77.4 77.4 77.5 ► LEAP cost saving plan in line
Slide 45: Net income
Net income Extracts from the H1 H1 2018-19 Change consolidated income statement in €m1 2017-18 Revenues 688 658 -4.4% EBITDA2 546 518 -5.1% Operating 282 297 +5.3% ► Capital gain related to the sale of ETL 25B in Aug’ 18 income Financial result (56) (53) -4.7% ► Reflecting the evolution of foreign e
Slide 46: Discretionary Free Cash-Flow reflecting Capex phasing
Discretionary Free Cash-Flow reflecting Capex phasing In €m 235 10 FX & perimeter impact 379 1 (130) (24) (1) 225 (1) Net cash Flow from Cash Capex Interest and Other Discretionary Free operations fees paid net of Cash-flow interests received Change at constant (22) (77) (3) (102) FX & perimeter Rep
Slide 47: Evolution of Net Debt
Evolution of Net Debt In €m +€63m 44 1 (225) 3,304 (68) 311 3,242 Net Debt at Discretionary Equity Dividend paid IFRS 16 Other Net Debt at end-June 18 Free Cash-Flow divestments impact 1 end-Dec. 18 1 As of 1 July 2018 47
Slide 48: Financial structure
Financial structure NET DEBT / EBITDA RATIO2 ► Net Debt/EBITDA ratio reduced to 3.1x • vs 3.3x at 31 Dec 2017 ► Average cost of debt after hedging reduced to 2.2% when restated from 3.3x the repayment of the Jan. 19 maturity1 3.1x • vs 2.9% in H1 2017-18 ► Average weighted maturity of 3.4 years when
Slide 49: Appendix
Appendix 5.1 H1 2018-19 financials 5 5.2 Miscellaneous 49
Slide 50: Focus on HOTBIRD KPIs
Focus on HOTBIRD KPIs CHANNEL COUNT HD PENETRATION MPEG 4 RAMP UP 346 +7% 584 304 +14% 548 1 002 -24 978 Penetration 30% 35% Penetration 55% 60% Dec. 2017 Dec. 2018 Dec. 2017 Dec. 2018 Dec. 2017 Dec. 2018 ► Lower channel count ► Sustained HD ramp-up, ► MPEG-4 considerably reflects anticipated end ou
Slide 51: Video KPIs
Video KPIs 6,929 +4% 7,067 (105) 6,824 Progressing channel count June 2018 25B June 2018 ex. 25B Dec. 2018 1,455 (80) 1,375 +9% 1,500 Sustained HD ramp-up Penetration 21% 20% 21% June 2018 25B June 2018 ex. 25B Dec. 2018 4,674 (85) 4,589 +6% 4,858 MPEG-4 more advanced than HD Penetration 67% 67% 69%
Slide 52: >€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 52
Slide 53: 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 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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