SES Revenue Slips 3% in 2020, but Networks Growth on Horizon

SES offices with antennas. Photo Credit: SES

SES has seen an overall fall in revenues and profits for 2020, however its Networks business continues to see growth. The satellite operator announced its full year results on Feb. 25, reporting overall revenues of 1.8 billion euros ($2.19 billion), a drop of 3% compared to the same stage in 2019.

Its Networks business reached 759 million euros ($922.4 million) in revenues in 2020. This marks 27% growth since 2017, and a 5% increase compared to the same stage in 2019. SES highlighted contribution from new business signed in 2019 supporting growth in mobility, expansion of connectivity services driving a return to growth in fixed data, while government benefited from new business secured during the Second Half (H2) of 2020.

SES’s Video business did 1.1 billion euros ($1.34 billion) in revenue, which was an 8% decrease compared to last year. The company said video revenue was in line with expectations and the decrease reflected the combination of lower distribution revenue from “right-sizing” of capacity by customers in mature markets, and lower services revenue, including the impact of COVID-19 on sports and events.

The Networks business now accounts for 41% of group revenue, up from 38% in 2019. It continues to move closer to a 50/50 split. Moving forward, SES said the launches of SES-17 and O3b mPOWER will drive an acceleration of growth in Networks from 2022 onwards and sustained profitable revenue and Adjusted EBITDA growth for SES from 2023.

SES secured more than 1.3 billion euros ($1.58 billion) in customer agreements in the year including a long-term commitment with Canal+ covering multiple orbital positions; contract extensions with public and commercial broadcasters across its prime video neighborhoods; new Medium-Earth Orbit (MEO) and Geostationary (GEO)-based solutions for the U.S. government; new telco and Mobile Network Operator (MNO) connectivity solutions in Latin America and Asia.

CEO Steve Collar looked ahead to 2021 in remarks in the news release: “2021 represents a year of unique and significant opportunities for SES. It will see us realise the first $1 billion from C-band repurposing and execute on a strong pipeline of commercial opportunities to further grow, driven by the increasing backlog of now $740 million for SES-17 and O3b mPOWER ahead of launch in the second half of 2021. These assets form the bedrock of our unique, multi-orbit value proposition to serve the strong and expanding demand for data across all our segments and will drive sustained, profitable growth for SES in the years ahead.”

Analysts’ however were somewhat circumspect in their appraisal of SES’s results. Roshan Ranjit, a satellite equity analyst at Deutsche Bank said in a research note, “Q4 headline revenues of 466 million euros ($566.3 million) (-8.8% year-on-year constant FX, Q3 -3.5%, Q2 -3.3%, Q1 -1.9%) were 3% below consensus and 4% below Deutsche Bank estimates, although the mobility segment included an exceptional adjustment related to contract restructuring. This implies a 1% revenue miss when adjusting for the one off. Within the mix the core Video business did not deteriorate with a slight improvement in the Year-over-Year trends.”

Giles Thorne, a satellite equity analyst at Jefferies said in a research note that SES’s 4Q numbers were -3.2% /-1.6% behind consensus on what he called a “soft set” of revenue numbers. He added, “A soft set of Q4’s (albeit, Video a welcome out-performance) and a soft guide will in our view do little to help the rehabilitation of SES despite its ‘value’ credentials even as it removes 390 million euros ($473.9 million) of CapEx FY21-24 and the C-band process remains on track.”

In separate news, SES announced that Sky UK has extended its contract with SES for satellite capacity in a new agreement that will add over 90 million euros ($109.4 million) in secured backlog. This renewal is in addition to capacity already under contract that extends through 2027. By the end of the renewed contract, Sky UK will have been an SES customer continuously for almost four decades.