Eutelsat Communications has issued a strong set of results and seems to be thriving despite tough economic conditions. The satellite operator issued its first half year results, Feb 10. Such is the operator’s performance, that Eutelsat is now forecasting stronger revenues for the 2008-2009 financial year. Eutelsat is raising its FY2008-2009 revenue objective to more than 910 million euros ($1.18 billion), up from more than 900 million euros ($1.16 billion). Sarah Simon, a satellite equity analyst at Morgan Stanley believes this increase is still on the conservative side. She said in a research note, “Eutelsat reported stronger than expected revenues, with 7.9 percent revenue growth vs our expectation of six percent. Guidance was raised, as expected, although not by as much as we had thought – the new target is ‘more than 910 million euros for 2008/9’. Our new estimates are well ahead of this guidance – we forecast 934 million euros ($1.21 billion).”

Satellite Sector

Analysts believed that Eutelsat’s strong performance is evidence of the satellite sector’s strength in difficult economic times. Simon says the operator remains an attractive stock for investors in the media sector. She said in a research note, “The investment thesis remains robust: With strong organic growth, strong operating leverage (despite having already very high margins), and excellent visibility over the business, we continue to believe that Eutelsat offers investors a relatively distinctive combination of low risk and attractive growth.” Like Simon, Eric Beaudet, a satellite equity analyst at Natixis Securities said Eutelsat’s results “were proof that the satellite market is weathering the downturn well.”
    Mathieu Robilliard, a satellite equity analyst at Exane BNP Paribas also echoed these sentiments. He said in a research note, “We believe the equity story remains very attractive: this is not just a stock with visibility, but it is becoming a growth story.”

Numbers

The company reported a close to eight percent increase in overall revenues for the six months to the end of December. For the six months to the end of December, the operator reported revenues of 463.5 million euros ($601.4 million), an eight percent increase compared to the same stage last year. Once again, it was the company’s performance in the video applications arena, which fuelled Eutelsat’s revenue growth. For the six months to the end of December, the operator had revenues from video applications of 336.6 million euros ($436.7 million), a 5.4 percent increase compared to the same stage last year. In fact, Eutelsat reported revenue increases all across the different sectors of its business. The company is also successfully riding the HD wave. At the end of December, it had 73 HD channels broadcast via its satellites, more than double compared to the end of Dec. 2007, when it had only 31 HD channels broadcast via its satellites.

“Excellent Shape”

Its actual results were ahead of most analysts’ expectations. Beaudet was very positive about the results. He said in a research note, “Revenues came in just ahead of expectations at 463.5 million euros, (454 million euros expected), up+7.9 percent compared with the same stage last year. This decent performance was driven by robust demand in both the video segment (number of channels broadcast up nine percent year-on-year) and in value added services (+12.4 percent year-on-year). The group’s profitability is thus in excellent shape, with an EBITDA margin of 80.9 percent, above the 78 percent targeted for the year.”
    Other financial metrics were also impressive. Beaudet added, “Operating profit and net profit substantially beat market expectations thanks to an exceptional profit of 25 million euros ($32.32 million) from the sale of pre-emptive rights for shares in Hispasat. The group is now pulling the plug on its efforts to increase its stake in the Hispanic operator, in the face of political reticence for the last seven years. Based on these performances, Eutelsat has upgraded its sales target for 2008/09 (over 910 million euros vs. over 900 million euros previously) and, despite the failure of the W2M satellite launched last December, it is maintaining its target of medium-term growth target of over six percent for 2008/2011.”
    Robilliard added, “Eutelsat has published yet another strong set of results: revenue growth is accelerating from Q1 09: +9.6 percent year-on-year, vs +6.2 percent, which is +3.7 percent above our estimates. This is due to the strong progression of multi usage (low quality), but also data services. Video applications growth remains strong despite more limited capacity and is essentially linked to price increases. Significantly, the average life of contract backlogs has increased.”