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SES update

02 March 2020 by jbchevrel

SES offers global satellite broadband communication services and is a leading provider to customers in television (broadcast and pay-TV), enterprise and government. More recently, the company has focused on becoming more vertically interegrated in its video business by increasing its presence in video solutions, while also further differentiating its enterprise offerings with its acquisition of O3b Networks. Other targeted growth areas include satellite-based mobile connectivity, especially for air travel. That credit is a member of the Main since s29 included, before that it was in s19-21. Today SES CDS was the worst performer in the Main. The 5y CDS was wider by +20bp to 110bp mid. In parallel, SES shares fell -30% to the lowest level since 2004. According to Bloomberg, Goldman Sachs said that SES’s results are likely to lead to “material” FCF downgrades, despite a slight change in CAPEX phasing for 2020. The outlook for 2020 was cut, networks unit growth are below expectations and the -50% dividend cut was not expected. The latter made credit outperform equity, but medium term, still bad news for SES. Revenue came at €1984m in FY19 from €2010m in FY18. EBITDA came at €1217m in FY19 from €1256m in FY18. EBITDA margin stable in low 60s. Operating profit came at €365m in FY19 from €391m in FY18. Net profit attributable to shareholders came slightly up, at €296m in FY19 from €292m in FY18. Reported net leverage (net debt/EBITDA) was 3.22x as of the end of FY19, from 3.29x as of the end of FY18. It had been guided at or lower than 3.3x so no bad surprise there, if anything. The presentation reiterates the commitment of SES to investment grade rating. Compared to the previous FY19 outlook, video revenue came lower than the guidance interval, at €1208 vs [1225,1255] guided. Networks revenue also came at the low end of the guidance range, at €745m vs a guided range of [740,775], as well as EBITDA €1223 vs [1220,1265].