Strong revenue and EBITDA growth, bolstered by an exceptional cash item following the insurance payout for the loss of W3B, gave satellite operator Eutelsat a bumper increase in operating cash flow in its half year results.
The company reported a 13.3%…
Strong revenue and EBITDA growth, bolstered by an exceptional cash item following the insurance payout for the loss of W3B, gave satellite operator Eutelsat a bumper increase in operating cash flow in its half year results.
The company reported a 13.3% year-on-year increase in its fiscal H1 2011 revenues to ?575.9m, while EBITDA was up 12.5% to ?463m giving the company an EBITDA margin of 80.4%.
Despite Eutelsat’s capital expenditure increasing by 26.8% in the first half of the fiscal year to ?286.8m, operating free cash flows jumped a massive 172.5% to ?245.8m, predominantly due to the ?161.6m relating to the first payments received from insurers from the loss of the W3B satellite back in October 2010.
With group net debt falling marginally, by 1% to ?2.415bn, the satellite operator’s leverage ratio fell from 3.13x to 2.75x net debt / EBITDA.
Speaking at Eutelsat’s results conference call, chief executive Michel de Rosen said that the cash could be used in four ways. Firstly, to reinvest in the business through increased capital expenditure. The company outlined a capital expenditure programme of approximately ?450m per annum, with six new satellites expected to be launched between mid- 2011 and mid-2013.
Secondly, the cash could be returned to investors through dividend payments. Eutelsat is targeting a shareholder payout ratio in the range of 50% to 75% of the group share of net income over the next two years. In fiscal H1 2011, group share of net income rose by 25.1% to ?174.4m.
Thirdly, the company may look to refinance some of its existing debt, in particular the senior term loan due 2013.
Eutelsat CFO Catherine Guillouard told analysts that Eutelsat was currently weighing up the possibility of a refi and would likely make a decision over the next month or so.
The fourth possible use of the cash would be to make modest acquisitions or invest in new partnerships. However, the company has no plans to make any transformational deals. De Rosen said: “The history of Eutelsat has been one of organic growth. We believe this is something we do well and in the future we want to continue to focus most of our energy on organic growth. It does not mean we are indifferent or blind when opportunities of acquisitions arise. However, the ones we are looking at are of modest size. To give you an example, we decided not to make an offer for Telesat.” Meanwhile, in spite of the increased growth and the fact that the company’s order backlog rose 16.7% to ?4.9bn, Eutelsat has maintained its annual revenue guidance of ?1.12bn for the current fiscal year. Target CAGR also remains the same, at above 7% for the three fiscal years 2013.
In response to analyst questions over why the guidance had not been increased, de Rosen said: “We do want and believe that we will do better than the guidance for the year. Some companies are bolder with their guidance predictions but we are more cautious.”
