At first sight, Eutelsat’s half-year results (to December 31st) are poor, with revenues of €697 million being down 5.7 per cent on the same period last year and on like-for-like trading. The poor numbers extend to Eutelsat’s usually buoyant backlog of contracts in place, but this has tumbled 11.4 per cent (from €5.3 billion to €4.7 billion) which is something of a worry.

Eutelsat’s channel count grew impressively to 6,810, up 7.4 per cent. But video revenue fell 1.2 per cent and thus proving that the price/channel is falling. Eutelsat’s channel growth was flowing from its MENA region, and in particular its acquisition of Noorsat last year.







But CEO Rodolphe Belmer, in his commentary, says that while first-half results were in line with expectations, “with the decline in revenues mostly reflecting, as in the Q1, an unfavourable comparison basis in FY 2017. Profitability was robust, with the EBITDA margin gaining 0.5 points at constant currency to stand at 78.4 per cent, reflecting stronger than expected delivery on the Leap cost savings plan; and we generated an 8 per cent rise in discretionary free cash flow at constant currency, supported by highly effective capex containment.”

Eutelsat’s ‘Leap’ programme is looking across the group at cost savings and trimming costs and expenditure and was ahead of targeted savings.

Belmer added: “The first half also saw a solid commercial performance, notably in Video and Government services, as well as the entry into service of Eutelsat 172B, both of which will support revenues in the Second Half. The integration of Noorsat, acquired to optimise Video distribution in the MENA region, is progressing smoothly. Looking ahead to the remainder of the year, all elements of our financial objectives are confirmed.”

And prospects for the latter half of this calendar year – and H1 2019 for Eutelsat – are looking much better:
Positive outcome of Video contract renewals, notably with Cyfrowy Polsat at the HOTBIRD position
Capacity contract at the 5° West orbital position with SFR-Altice for the distribution of c. 20 HD channels
Favourable outcome of US Government Autumn renewals with a rate of almost 95 per cent in value (versus 85 per cent in Spring 2017 and 90 per cent in Autumn 2016).
Incremental business secured in Government services at 174° East

At December 31st 2017, the total number of channels broadcast by Eutelsat satellites stood at 6,810 up 7.4 per cent year-on-year. HD penetration continued to increase, standing at 1,275 channels versus 997 a year earlier (+28 per cent), implying a penetration rate of 18.7 per cent compared to 15.7 per cent a year earlier.

Operational transponders grew by 90 to 1,416 helped by the entry into service of Eutelsat craft at 117 West B and 172B. Fill rate declined slightly from 70.9 per cent last year to 67 per cent at December 31st.

A note from Exane/BNPP said: “Management has confirmed its -1 per cent to -2 per cent FY revenue outlook. Given the -5.7 per cent reported in H1, this implies a return to growth in H2 18. We expect this to be driven by improving Video trends and Mobility. Management also guided for less capex spending than initially forecast in the current fiscal year (although long term guidance is unchanged).”