SES Projects 10 Percent Growth in 2005 and 2006
PARIS — SES Global said satellite-transponder prices are holding steady in its core video-broadcasting markets in Europe and the United States and that its mixed-bag of financial results in 2004 would, as previously forecast, be followed by growth of at least 10 percent in 2005 and again in 2006.
The company said 2007 would see further growth, even without acquisitions, but it did not give a specific forecast.
“We are succeeding in keeping our average prices for European DTH [direct-to-home broadcast television] and U.S. video distribution to cable companies,” SES Chairman Romain Bausch said, adding that overcapacity in Latin America and Asia continues to put pressure on prices.
In presenting the company’s 2004 financial results Feb. 21, Bausch asked investors to get used to lower EBITDA (Earnings Before Interest Taxes Depreciation and Amortization) margins. Luxembourg-based SES Global historically has been able to post EBITDA margins near 80 percent. They will decline to around 73 percent, according to SES.
But with the decision to diversify into satellite services, EBITDA margins will decline. Bausch said the services sector will be used to feed business to SES Global’s satellite fleet, resulting in more revenue for the company’s core business. The price to be paid for that, he said, is lower pretax profit margins.
SES Global is the world’s largest commercial satellite-fleet operator, with most of its revenues and profit coming from its European SES Astra and U.S. SES Americom subsidiaries.
SES reported overall sales of 1.147 billion euros ($1.49 billion). Sales were down by 5 percent, mainly due to the dollar’s decline relative to the euro. On a constant exchange-rate basis, sales were down 1 percent. Net group profit, at 230 million euros, was up by 12 percent mainly because of a one-time Luxembourg tax benefit.
The company’s total backlog as of Dec. 31 was 6.2 billion euros, down 3 percent from a year earlier in what SES Global Chief Financial Officer Mark Rigolle said was mainly a function of the dollar’s decline against the euro. About 20 percent of SES’s current backlog will be accounted for as sales in 2005, Rigolle said.
The company reported 1.2 billion euros in new contracts in 2004. Most of SES Global’s sales are in the form of multi-year deals for satellite transponder capacity.
The company announced it would increase its dividend to 30 euro cents per share, for a 3 percent annual yield, and also would propose to its shareholders in May a share-buyback program.
Rigolle said an annual dividend yield of 3 percent is not out of line with the global telecommunications sector and would permit the company, even after the share repurchase, to invest in new business opportunities.
SES Global has seen a wholesale reshaping of its competitive landscape in the past year, with its major competitors in the United States and Europe being purchased by private-equity investors.
Bausch said SES Global has also been approached by private-equity companies interested in a possible purchase. Such a move would be almost impossible under SES Global’s current corporate structure, in which the Luxembourg government remains a major shareholder and has veto power over any corporate raider seeking more than 20 percent of the company’s equity.
The Commission of the 25-nation European Union is investigating whether this anti-takeover feature violates EU competition regulations. SES Global changed its bylaws in 2004 to address some of the European Commission’s concerns, but these moves were insufficient and the commission’s investigation into the matter is continuing.
With the sale of SES Global shares in late 2004 by Deutsche Telekom and the company’s move to the larger Euronext stock market in Paris, SES now has a float equivalent to 43 percent of its shares. The company’s share price has risen by more than 25 percent in the past three months despite the Deutsche Telekom move, and the share price did not significantly weaken after the Feb. 21 announcement that the dividend yield would not exceed 3 percent.