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Trading Update: Impact of Covid-19 Crisis on Eutelsat's Operations and Financial ObjectivesRegulatory News: The Board of Directors of Eutelsat (News - Alert) Communications (Paris:ETL) met today. The Board and management are closely monitoring the impact of Covid-19 on the company's operations and financial objectives. During this uncertain period our priorities are safeguarding the health and well-being of our employees and wider communities, working with authorities to halt the spread of Covid-19, and fully supporting our customers.
Business continuity
Impact of Covid-19 on revenues
Nevertheless, certain verticals or sub-verticals are feeling the effects of the current crisis, particularly since mid-March. These include:
Revenues at the end of February were in line with our expectations; however, these effects will be progressively felt in the Third and Fourth quarters of the current Financial Year (2019-20), and are likely to be reflected at least into the early months of FY 2020-21, together with a more generalised slowdown in the pace of new business. Elsewhere, the crisis is affecting the operations of other players in our supply chain, notably satellite manufacturers, launchers, and gateway installers, with the following impacts:
In consequence the revenue ramp-up of these two expansion satellites will be pushed out. This will have no impact on revenues of the current fiscal year, but delays will affect our expectations for FY 2020-21.
Updated Financial outlook
We continue to assess the effect of the crisis on the outer years. While this is ongoing, we are temporarily suspending our objective of Discretionary Free-Cash flow of circa €500 million3 in Fiscal year 2021-22, although we are confident our business will remain highly cash generative. An updated objective will be provided by the end of July. With regard to the other elements of our financial outlook:
As a measure of prudence and in order to preserve maximum financial flexibility during this uncertain period, we are also temporarily suspending our policy of 'a stable to progressive dividend'. The Board of Directors will recommend a dividend cut of 30% in respect of FY 2019-20 to the Annual General Shareholders' meeting in November 2020. Our policy of 'a stable to progressive dividend' will be resumed as soon as circumstances permit, based on our resilient cash-flow generation and robust financial health. The share buyback program of at least €100 million by June 2022 was launched in March with a first tranche of €20 million by July 2020 which is well underway and will be completed in due time. The program will then be suspended until further notice. Financial position Eutelsat's financial profile is strong with:
Rodolphe Belmer, Chief Executive Officer of Eutelsat Communications, said: "In this unprecedented context, our focus is on the health and well-being of our employees and wider communities and on ensuring full business continuity for our customers, at a time when the demand for high quality, reliable connectivity has never been higher. Our activity is resilient compared with many industries, in particular our core Broadcast business. However, certain verticals, notably Mobility, Professional Video and to a lesser extent Fixed Broadband are feeling the effects of the containment measures, and we are adjusting our current year revenue expectations in consequence. Pending analysis of the impact of the crisis on revenues in the outer years, we are temporarily suspending our 2022 Discretionary Free cash flow objective, and as an additional measure of prudence, we will, exceptionally, recommend a 30% cut to this years' dividend. Our combination of resilient heritage activities complemented by connectivity-related growth opportunities, together with our well embedded strategy of strict financial discipline, aimed at preserving a solid liquidity position and strong cash generation capacity, mean we are well placed to withstand the challenges of the current environment and to revert to our regular dividend policy as soon as circumstances permit."
About Eutelsat Communications
For more about Eutelsat go to www.eutelsat.com
1 Based on a €/$ rate assumption of 1.14 and current perimeter. When converted at €/$ rate of 1.10, this would be equivalent to €1,268 million.
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