Video business continues lower orbit but SES claims solid first quarter 2020 | Satellite | News | Rapid TV News
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Despite the ongoing headwinds that the satellite industry has faced for the last two years, leading operator SES believes that it has begun 2020 with performance in line with expectations and with strong underlying revenue growth in its networks, if not video, division.
SES dishes 8May2020 lands
For the quarter ended 31 March 2020, SES reported total revenue of €478.9 million, in line with prior period on a reported basis but down 1.9% compared with the end of the first quarter of 2019 at constant current exchanges. Underlying revenues were €470.8 million, down 2.2% on a year-by-year, and EBITDA of €284.7 million represented a margin of 59.5%, inching back by almost a percentage point yearly.

Drilling down into the revenue lines revealed the clear and sharp contrast in fortunes in the company’s video and network businesses. While video revenues fell 7.8% at constant FX compared with a year earlier, network revenues rose by almost the same percentage. In addition while accounting for 61% of group revenues at the end of the first quarter of 2019, €281.9 million, video now made up 59% of overall business. Total video revenue included no periodic revenue.

Q1 2020 underlying video distribution revenue was 8.2% lower at constant FX than the prior period. In Europe, the effect of modest volume reductions on certain long-term renewals secured in late 2019 contributed to lower (year-on-year) revenue, even though the company assured that utilisation rates across the European video neighbourhoods remained strong. North American revenue decreased year-on-year, primarily driven by the reduction in the wholesale business and what SES called an ongoing ‘right-sizing’ of volume across US cable neighbourhoods. Recently signed new business in the International markets had not yet by 31 March 2020 offset the impact of challenging trading environments in specific markets which drove an overall revenue reduction (year-on-year).

Underlying revenue from video services was down 6.7% at constant FX to €70.4 million compared with the prior period. The company attributed this to lower hardware sales, as business shifted towards a software-based model in partnership with leading TV set manufacturers such as Panasonic and Samsung. This led to revenues from the HD+ business in Germany being lower year-on-year while the number of paying subscribers remained stable.

Within the remainder of services, that which used to be the MX1 line, the company said its decision to reduce exposure to certain low-margin services led to lower (year-on-year) overall revenue. This offset the positive contribution to year-on-year development from value-added products and services including Sports and Events, albeit which SES said were likely to be impacted throughout the remainder of 2020 by the delays and cancellations of several major events due to the Covid-19 global pandemic.

In 2019, SES served a total of 367 million TV households, compared with 355 million households in 2018), across its video neighbourhoods. European reach totalled 168 million TV homes, or over 60% of all TV households in Europe, relying on SES for their video content. North American reach of 69 million TV households (down slightly from the previous year) was a distribution platform for over 60% of TV households in the US SES’ reach in international markets has continued to expand, now serving a total of 130 million TV households across Asia-Pacific, Africa, Latin America and the Middle East.

Looking at the outlook for business throughout 2020, SES CEO Steve Collar noted that even though to date its results have been largely unaffected by Covid-19, the impact of the pandemic on the global economy and on several of the business verticals that it served was ‘profound and that it was inevitable that the company would be impacted as it supported its most affected customers. “We have ‘gone hard and gone early’ in implementing Covid-19 specific measures to mitigate impacts on EBITDA, including substantial limits on discretionary spend in the order of mid-double-digit millions for the year, and removed €180 million from our capital expenditure programme over the next 4 years,” he remarked.

In the first quarter trading statement, Collar added that SES was executing on initiatives that will generate €40–50 million annualised EBITDA optimisation in 2021 and beyond and it was making progress on the potential separation of its video and networks businesses.