2015-2016 Reference Document CONTENTS
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2015-2016 Reference Document CONTENTS Letter from Rodolphe Belmer, Chief Executive Officer 02 Letter from Michel de Rosen, Chairman of the Board of Directors 03 Presentation of Eutelsat 01 Communications 05 05 Regulation 99 1.1 Highlights of the financial year, outlook 5.1 Regulations governing frequency assignments and key figures 06 and international coordination 100 1.2 Group activities, main markets and competition 09 5.2 Regulations governing the operation of earth 1.3 In-orbit operations 17 stations, the deployment of networks, the operation of electronic communications 1.4 Management 22 networks and the provision of electronic 1.5 Social and societal responsibility 23 communications services 103 5.3 Regulations governing content 106 5.4 Regulations governing space operations 108 Corporate Governance 25 02 5.5 U.S. export control requirements (regulations 2.1 Composition of the Board of Directors 26 governing the activities of the Group’s suppliers) 109 2.2 Key management personnel 32 5.6 Other provisions applicable to the Group 109 2.3 Compensation and benefits 34 2.4 Report of the Chairman of the Board of Directors of Eutelsat Communications in 06 Financial Information 113 application of Article L. 225-37 of the French Review of Eutelsat Communications’ financial Code de commerce 47 6.1 position 114 2.5 Application of the Afep-Medef Corporate Consolidated financial statements Governance Code 56 6.2 as of 30 June 2016 126 6.3 Annual financial statements as of 30 June 2016 166 03 Sustainable development 57 3.1 Social information 60 07 Other information 181 3.2 Environmental information 68 7.1 Legal information regarding the Group 182 3.3 Information relative to societal commitments Other operational information 188 supporting sustainable development 74 7.2 7.3 Principal shareholders 191 3.4 Methodology and scope 78 7.4 Organisational chart 193 7.5 Legal and arbitration proceedings 197 04 Risk factors 81 7.6 Group property and equipment 197 7.7 Research and development, patents and licenses 197 4.1 Operational risks 82 7.8 Important contracts 198 4.2 Risks relating to changes in the satellite 7.9 Related party transactions 198 telecommunications market 88 7.10 Significant changes in financial and commercial 4.3 Liquidity risks 92 position 199 4.4 Regulatory risks 95 7.11 Relations and conflicts of interest within the 4.5 Market risks 97 administrative and management bodies 199 7.12 Statutory Auditors 199 7.13 Documents available to the public 200 7.14 Responsible person 200 Appendices 203 Glossary 217 EUTELSAT COMMUNICATIONS: CREATING SPACE FOR YOUR COMMUNICATIONS Every day, Eutelsat demonstrates its expertise as a satellite company that contributes essential resources supporting the growth of digital communications. As a player at the heart of the video and broadband markets, the greatest advances are yet to come. Ongoing progress brings with it the prospect of an increased role for satellites in order to optimise the use of spectrum, a valuable and finite resource, and to transform the digital society into an environment of economic and social benefit for all. With these goals in mind, our Group is pursuing a development strategy based on investment and innovation, operational excellence and the creation of lasting value. 30 years of satellite communications €1,529 M revenues for 2015-2016 1,000 employees from 37 different countries 39 satellites operated (1) 274 M television households (2) (1) At 30 June 2016. (2) In direct and indirect audience. 01 EUTELSAT COMMUNICATIONS 2015-2016 Reference Document CONTENTS LETTER FROM THE CHIEF EXECUTIVE OFFICER LETTER FROM RODOLPHE BELMER, Chief Executive Officer Adapting strategy to face industry headwinds, building on the core video business and preparing for the potential in connectivity. FOCUS ON CASH FLOW GENERATION TO DELIVER A STABLE TO PROGRESSIVE DIVIDEND TO SHAREHOLDERS utelsat’s revenues for the Finan- the successful issuance in June 2016 technological operations by broadcasters cial Year 2015-2016 stood at of a 500 million euro 5-year bond at to create additional sources of demand. c.1.5 billion euros, up by 3.6% favourable terms (coupon of 1.125%). These developments will enable us to and by 0.2% at constant curren- extract more value from our capacity. cy year-on-year. EBITDA came As we look ahead, it has become clear Among our newer verticals we see a Eout at 1.16 billion euros and implies a our industry is seeing headwinds in massive opportunity in connectivity: both margin of 76.2%. During the year, Eutelsat certain regions and applications. Among in consumer broadband and mobility – generated discretionary free cash flow of our core verticals, Video is experiencing first in aircraft and in the longer term in around 250 million euros. The net debt to sustained growth in emerging markets cars and other forms of transport. and broad stability in Europe, which EBITDA ratio stood at 3.4. A dividend of should lead to low single-digit growth in 1.10 euros will be submitted for approval at On this basis, we have adapted our the future years. In Data services on the the AGM, up from 1.09 euros last year, and strategy along two main axes: other hand, global demand continues to is recommended to be paid fully in cash. grow in volume but existing overcapacity First, optimizing existing assets, in order This year saw the successful launch is being exacerbated by the arrival of to maximize free cash flow generation and of five satellites: EUTELSAT 8 West B, large HTS systems leading to ongoing thereby shareholder value. To this end we boosting coverage of the Middle East pricing pressure; we expect a low single- have committed to a substantial reduction and North Africa region; EUTELSAT digit decline in revenues over the next in capital expenditure as of fiscal year 36C, strengthening resources for video five years. In Government services, we 2016-2017, coming on top of the savings in financial costs already secured through in Sub-Saharan Africa and Russia, and expect demand from the U.S. Department our refinancing operations. In addition, also for broadband in Russia; EUTELSAT of Defence to stabilize at lower prices in the coming years and we anticipate we are reviewing measures to generate 9B, mainly a replacement satellite for new opportunities with Governments in improvements in the areas of operating video in Europe; EUTELSAT 65 West A, Europe, Asia and the Middle East as well costs and working capital. operating a new orbital position in Latin as in non-military applications. Overall America; finally in June of EUTELSAT 117 we believe this vertical will show broad Second, paving the way for a return to West B, bringing incremental capacity to stability in the medium-term. growth by building on the core Video the Americas. We made further advances business and preparing for the significant in our core video activities with the At the same time our sector offers potential in connectivity. In Video we are number of channels exceeding the 6,000 selected long-term growth opportunities: pursuing actions to enhance the value milestone during this year, with a 26% in Video, our core business, we see scope of our key orbital positions, notably by rise in HD channels, giving a penetration to enhance the satellite value-proposition stimulating HD and ultra-HD take-up and of 14%, and the launch of the first by offering an IP-like viewer experience streamlining our distribution. Elsewhere, commercial UHD channels on our fleet. and we are focusing our technical and in the past months we have launched our On the financial front, we took measures innovation resources on this theme. satellite broadband service in Russia, and to optimise our financial situation with Elsewhere, we expect the outsourcing of we remain confident that we will be able 2015-2016 Reference Document EUTELSAT COMMUNICATIONS 02 LETTER FROM THE CHAIRMAN OF THE BOARD OF DIRECTORS to launch a service in Africa ahead of the return to top line stability and our objective rate of at least 10%. We are committed to launch of our own satellite in 2019. is to return to growth in financial year maintaining a sound financial structure to 2018-2019. During this period, our EBITDA support our investment credit rating and Revenues for financial year 2016-2017 at constant currency and perimeter are margin is expected to remain above 75%, aim at a net debt to EBITDA ratio below expected in the range of minus 3% to while discretionary free cash flow is 3.3. We also commit to serving a stable to minus 1%. Next year we are aiming at a targeted at a compound annual growth progressive dividend to equity holders. LETTER FROM MICHEL DE ROSEN, Chairman of the Board of Directors Building on Eutelsat’s achievements to take the company forward in the evolving satellite communications landscape. INNOVATION AT THE HEART OF OUR SERVICE TO CUSTOMERS utelsat’s Board of Directors shaping digital markets, to build on the I take this opportunity to salute all elected Rodolphe Belmer to achievements of Eutelsat and to take the our employees for their tremendous succeed me as Chief Executive Company forward in the evolving satellite dedication and talent which have made Officer, effective from 1 March communications landscape. possible these accomplishments. 2016, and he will be proposed Their continued energy, expertise and Eas a member of Eutelsat’s Board at It has been my great privilege since 2009 passion will be central in taking Eutelsat the Annual Shareholders’ Meeting of to serve as Eutelsat’s CEO and latterly as to the next level, and I look forward to November 2016.