SES S.A. announced financial results for the six months ended 30 June 2020 declaring group revenue of EUR 1,860 – 1,900 million (from 1,920 – 2,000 million), including Video revenue of EUR 1,090 – 1,110 million and Networks revenue of EUR 770 – 790 million (from EUR 1,110 – 1,150 million and EUR 800 – 840 million respectively). At 30 June 2020, nearly 95% of the updated FY 2020 group revenue outlook is already contractually committed.
At 30 June 2020, SES carried a total of 8,302 TV channels to viewers around the world including 2,948 channels in High Definition and Ultra High Definition (up 2% year-on-year). 68% of total TV channels are now broadcast in MPEG-4 with an additional 4% in HEVC.
Based on the company release, video market accounts for revenue of EUR 136.4 million in H1 2020 was down 9.6% year-on-year at constant FX. The ongoing shift from hardware to software solutions in partnership with TV set manufacturers, and a modest reduction in the number of paying subscribers, resulted in lower HD+ revenue (year-on-year). Within the remainder of the services segment (formerly MX1), the decision to reduce exposure to low margin activities and the postponement or cancellation of many sports and events due to the COVID-19 global pandemic led to lower (year-on-year) overall revenue.
In government solution, the company recorded revenue of EUR 141.2 million was 1.0% lower at constant FX compared with H1 2019 which had benefited from additional revenue related to the completion of certain milestone-driven institutional projects in Global Government. U.S. Government revenue was slightly up (year-on-year) and is expected to benefit from the future contribution of new business already secured and executing on a strong commercial pipeline, for both additional MEO- and GEO-enabled network solutions. Excluding the milestone-driven projects noted above, Global Government revenue was stable (year-on-year).
According to the company, the underlying revenue for Networks business grew, for the third consecutive year, by 7.1% at constant FX to EUR 379.4 million with double-digit growth in Mobility (+22.6%) and a return to growth in Fixed Data (+4.6%), while Government (-1.0%) is expected to benefit from new business wins that will contribute to revenue from the second half of 2020.
The underlying revenue for fixed data grew by 4.6% (year-on-year) at constant FX to EUR 123.1 million in H1 2020. Growth in the Americas was supported by new and incremental managed services to tier one telecommunications companies and Mobile Networks Operators to deploy 4G networks and government funded rural WiFi projects. The successful deployment of broadband access and mobile connectivity services to rural communities on behalf of SES’ customers, notably using SES-12 and MEO-enabled high throughput capabilities, contributed to growth (year-in-year) in Asia-Pacific. Along with a positive contribution from new business in Energy, and first cloud revenues, these more than offset lower (year-on-year) wholesale capacity revenue in Europe and Africa.
However, mobile satellite services account for 22.6% (year-on-year) at constant FX to EUR 115.1 million with double-digit growth in both Aeronautical and Maritime. Strong growth (year-on-year) in Aeronautical reflected the full year impact of the important new business signed during 2019 and notably utilising SES-15, SES-14 and SES’ Ka-based aero network, as well as connectivity services delivered to the business aviation segment. Similarly, the full revenue contribution of expanded services with key cruise customers continued to drive strong growth (year-on-year) in the Maritime segment.
As the vast majority of SES’ commercial contracts, including in Mobility, are fixed, the H1 2020 performance was largely unaffected by the impact of COVID-19 on customers and end markets served by SES in the Cruise and Commercial Aviation segments. Nevertheless, it is expected that the development of both existing revenue and pace of new business will be impacted during the second half of the 2020.
Notwithstanding the resilience that our business has shown in the first half of the year, we are not immune to the impact that global lockdowns are having on a number of the markets that we serve. We anticipate a slowdown in the pace of new business in the second half of the year and have updated our financial outlook for the full year in view of the challenges faced by a number of our customers, particularly in Mobility and Sports & Events. We were quick and early to initiate exceptional one-off cost reduction measures of EUR 40 – 60 million for 2020 to mitigate the impact of COVID-19 on our bottom line and are tracking well against this target.
Looking beyond COVID-19, 2020 has seen us make great strides in our more than two-year effort to repurpose spectrum in the U.S. for 5G while protecting the broadcast communities that we serve. Following the FCC Report and Order in February and the subsequent decision by all operators to adopt accelerated clearing in May, we are executing strongly on all elements of our clearing and transition plan. We incorporate the financial impact of the C-Band project in our financials for the first time, including clear line of sight to almost USD 4 billion in accelerated relocation payments.
We are also almost a year away from the launches of both SES-17 and O3b mPOWER, two programmes that underpin our multi-orbit, scalable, cloud-enabled network architecture that will drive significant future growth in our Networks business, a business that has already delivered 25% growth over the last three years. We have added four more satellites to the planned O3b mPOWER constellation, adding resilience, an improved launch cadence and a 90% increase in constellation throughput while maintaining our overall capex envelope broadly flat. Significantly, SES and Boeing have agreed to collaborate in the development of commercially based service offerings for Government users, including the development and demonstration of multi-orbit interoperability.
Our global transformation programme, Simplify & Amplify, is on track to deliver annualised cost reductions of EUR 40 – 50 million from 2021 onwards through a combination of sharpened focus, reductions in footprint and wide-reaching efficiency improvements. We have further strengthened our financing position with a 6% year-on-year reported net debt reduction and a new EUR 400 million Euro Bond reducing the cost of debt and enhancing debt maturity profile, with no significant senior debt maturities to refinance before 2023. Overall, we are satisfied with the progress that we are making as a business in what is a challenging, pandemic-dominated year.
Finally, on behalf of everyone at SES, both now and over the last 25 years, I want to pay tribute to Romain Bausch, who has decided to step down from the SES Board of Directors after a quarter of a century of service, dedication and success, firstly as CEO and latterly as Chairman. As we build the future vision for SES, we stand on the shoulders of giants and we could not be more appreciative and grateful for the legacy that Romain has created.”
Steve Collar, CEO of SES, commented: “The business has performed well in the first half of the year, delivering solid revenue in challenging trading conditions, while the benefits of the proactive cost-saving measures that we took early in the development of COVID-19 are also seen in our H1 results. We were particularly pleased to sign a broad distribution agreement with BBC Studios during the quarter, underlining our ability to support premium customers across a range of satellite and terrestrial distribution methods as well as significant extensions with ProSieben in Germany and Austria. On the Networks side, we are seeing a pickup in our Government business after a slower first half, with a new and innovative use of the O3b constellation for the U.S. Government among a number of important deals won and signed in the second quarter.
SES has a bold vision to deliver amazing experiences everywhere on earth by distributing the highest quality video content and providing seamless connectivity around the world. As the leader in global content connectivity solutions, SES operates the world’s only multi-orbit constellation of satellites with the unique combination of global coverage and high performance, including the commercially-proven, low-latency Medium Earth Orbit O3b system. By leveraging a vast and intelligent, cloud-enabled network, SES is able to deliver high-quality connectivity solutions anywhere on land, at sea or in the air, and is a trusted partner to the world’s leading telecommunications companies, mobile network operators, governments, connectivity and cloud service providers, broadcasters, video platform operators and content owners. SES’s video network carries over 8,300 channels and has an unparalleled reach of over 367 million households, delivering managed media services for both linear and non-linear content. The company is listed on Paris and Luxembourg stock exchanges (Ticker: SESG). Further information is available at: www.ses.com.