SES states that over 80% of its 2020 group revenue has already been contracted.  SES

SES states that over 80% of its 2020 group revenue has already been contracted.  SES

“Part of the idea of the investigation into the separation of our Networks business is firstly to give investors a lot more visibility, but secondly to create real operational focus and, ultimately, strategic flexibility,” SES CEO Steve Collar said during the company’s presentation of its annual results to the press at the Château de Betzdorf. 

Overall the group acheived a 2019 revenue totalling €1.98bn, a year-on-year change of -1.3%, with a net profit totalling €296.2m, an increase of +1.3% year-on-year. The SES Board is proposing a dividend of €0.40 per A share--half of what it paid out last year.

For a second successive year, its Networks business witnessed growth (+4.5%), reaching €745m in 2019, while Video revenue, despite representing 61% of the group’s revenue, came in at €1.2bn—slightly lower than expected, but which SES attributes to a contract that did not close.

“We really want to grow our Networks business, pretty aggressively. That might mean providing that business with access to external capital at some point in time.” Collar, who took on his current role in 2018 before which time he headed up SES Networks, stated that it may be hard for investors currently to decide whether to invest in Networks or Video businesses as both are under one roof.

While he said Video has been “very profitable”, with cash flows generating dividends, that business has changed: it’s no longer very capital-intensive, plus it has reached maturity he said “will flatten into a sustainable long-term proposition”. He added that customers have been rightsizing their commitments over the last 12-18 months.

Networks, while being more capital-intensive with a harder-to-predict trajectory, has seen “double-digit growth over the last couple of years”, a trend Collar says will continue into the future. “That’s not a business you would expect to pay dividends, but instead expect the growth to come through the valuation of the company.”

Share price

When asked about the drop of the SES share price, Collar said this can be explained in part because of the dividend being 50% of what it was last year.  “We’ve done that because we have this unusual CapEx spike in 2021", he said, referring to the “two very large investments, that will drive a tremendous level of growth in the future”, namely O3b mPower and SES-17, totalling around €1bn. 

“That’s very atypical – typically it’s between €400-500mn in any given year, as an average amount of CapEx spread over time,” the CEO added. 

While Collar said the trajectory from 2019 into 2020 was “a little lower than we anticipated”, SES states that over 80% of its 2020 group revenue has already been contracted.