EU – Baltic States, Technology, Telecomunications

Finally, SES announced its support for the landmark decision taken by the U.S. Federal Communication Commission to enable 5G operations in a portion of the C-Band and deliver a win-win-win solution that has been the focus of all stakeholders since this process began almost three years ago. This decision will accelerate 5G leadership in the US, protect critical broadcast customers and neighbourhoods and deliver substantial value to SES’ shareholders.

Key Highlights

• Group revenue of EUR 1,983.9 million down 1.3% as reported (-3.8% YOY at constant FX)

• Group EBITDA of EUR 1,216.6 million down 3.1% as reported (-5.5% YOY at constant FX)

• Net profit attributable to SES shareholders of EUR 296.2 million up 1.3% as reported

• Net debt reduced by 5.8% (YOY) with net debt to EBITDA of 3.22 times in line with SES’ commitment to Investment Grade

• Free cash flow before financing activities of EUR 826.3 million (2018: EUR 870.5 million) representing 41.7% of group revenue

• A proposed dividend per A-share of EUR 0.40 in view of the short-term investment peak in 2021 and fully covered by 2019 earnings

• 2020 financial outlook (revenue of EUR 1,920 - 2,000 million and EBITDA of EUR 1,150 - 1,210 million) reflects a more prudent view of revenue development in Video and a somewhat lower trajectory of growth exiting 2019 in Networks

• Next phase of strategic transformation launched that includes consideration of the potential separation of Networks business within SES and EBITDA optimisation of EUR 40 - 50 million annually from 2021 onwards.

Steve Collar, CEO, commented: “We are satisfied with our 2019 financial results with EBITDA, net debt to EBITDA and CapEx metrics all in line with the outlook provided last February. Revenue was slightly below our expectations as we missed one important contract on the Video side but continued strong focus on discretionary spending ensured that we met our important EBITDA targets.

With growth of 4.5%, and more than 20% in the last two years, SES Networks continues to expand on the back of strong growth in the Aeronautical, Cruise and Government segments while, in Fixed Data, we signed and deployed several important connectivity networks that will contribute to future growth in 2020 and beyond.

With O3b mPOWER a little over one year away from first launch, we have made great progress in building our seamless, cloud-enabled, automated, multi-orbit global network partnering with Microsoft, Amdocs and Kythera. Pleasingly, we signed our first three O3b mPOWER customers with Carnival Corporation’s Global Experience and Innovation team extending multi-orbit operations to all Princess Cruise Line vessels, as well as agreements with Orange in Africa and a second telco to leverage the unique backhaul capabilities of O3b mPOWER.

Our Video business continues to respond to the ongoing evolution in media consumption with DTH and cable customers ‘right-sizing’ capacity leading to a decline of 7.8% in underlying revenue. Despite this, our technical reach grew to over 365 million households in 2019 and we now carry 3,000 HD and UHD TV channels to audiences around the world. Our updated FY 2020 outlook incorporates a more prudent view of revenue development in Video and a somewhat lower trajectory of growth exiting 2019 in our Networks segments.

The proposed dividend of EUR 0.40 underscores our continued commitment to maintaining SES’ Investment Grade credit rating, providing an attractive return to shareholders while supporting the short-term investment peak in our fast-growing, highly differentiated Networks business. We believe that we have established a unique and non-replicable value proposition within our Networks business with verticals such as Aeronautical, Cruise and Government offering strong growth opportunities that demand focus and scale. Accordingly, we are undertaking a programme of transformation that includes the consideration to separate our Networks business within SES and potentially provide it with access to external capital.

Finally, we are delighted to express our support for the plan that FCC Chairman Ajit Pai announced last Friday to repurpose a portion of the C-Band for 5G operations in the United States. This is a win-win-win outcome that we have worked tirelessly towards for almost three years. Our focus now is in working diligently with our customers to protect and enhance our services to the nearly 120 million households that rely on our satellites for distribution through the largest and most complex spectrum repurposing effort ever undertaken. The resulting accelerated relocation payments will be used to enhance value through pragmatic deleveraging, targeted investments focused on our fast-growing Networks business and return to our shareholders.”

Simplify and Amplify

Today, SES announced the launch of the next phase of strategic transformation to position itself for future growth and deliver maximum value to customers and stakeholders. The programme, called Simplify and Amplify and executed throughout 2020, comprises a series of strategic actions to enable SES to best deliver against its declared purpose of doing the extraordinary in space to deliver amazing experiences everywhere on Earth. It is the next phase in a process that began in 2017 when SES first established distinct units for its video and data businesses. The programme comprises four major initiatives:

• Create Pure-Play Verticals: SES will investigate the creation of two ‘pure-play’ market verticals through the potential separation of its Networks business within SES in order to drive strategic and operational focus, provide increased external visibility and to appropriately configure SES’ overall business for the future. Consideration will include an analysis of a separate capital structure for the Networks business, potentially providing it with access to external capital to accelerate growth and build on the unique value proposition that has been established in the market. This structure also would facilitate a sharp focus on the cash generating and value sustaining priorities within SES's market-leading video business, leveraging its premier direct-to-home (DTH) neighbourhoods and superior global reach.

As a result of the recent adoption by the U.S. Federal Communications Commission (FCC) of its order regarding the repurposing of part of the C-Band spectrum, SES is putting in to place a dedicated team to execute on the most complex and demanding spectrum repurposing ever contemplated. This team will leverage the company's in-house expertise to ensure a seamless process that meets the critical needs of its current customers as well as the FCC's desire to enable 5G leadership for the United States on an accelerated timeline. This is a transformational opportunity to protect SES’s neighbourhoods and current customers, support the nearly 120 million U.S. households that rely on the C-Band for their cable and broadcast programming, and create shareholder value for SES.

• Focus on Core Strengths: The markets in which SES operates have become both more resource intensive and the subject of technological disruption. SES will focus its capabilities and offerings across each of its markets on profitable segments that play to the group's core strengths, doubling down where it makes sense to do so, while exiting, reducing exposure to, or establishing alliances and partnerships to serve, other market segments. This will result in a stronger, more focused SES with world-leading products and solutions in the areas where it excels.

• Simplify Operations: SES expects to realign its resources to support the above initiatives, to simplify operations, maximise efficiency, and make SES easier to do business with. Activities will include the consolidation and reorganisation of some functions to reflect any changes in business scope and structure. In addition, the company plans a comprehensive review of its global footprint. Overall it is expected that SES will generate EBITDA optimisation ramping to EUR 40 - 50 million annually from 2021 as a result of this focus on core strengths and simplification of its business.

• Innovate for the Future: SES will deepen its commitment to innovation to drive the customer solutions demanded in the market today and in the future. SES has led the industry in the development of low-latency NGSO and now multi-orbit architectures along with the integration of network functions and automation. This further commitment to innovation will broaden SES’s leadership in cloud integration through the development of a "cloud practice" focused on creating and driving cloud scale across all target market segments. In addition, the company intends to establish an innovation hub to co-create and incubate solutions together with customers and partners, and develop new technologies and business models through corporate venturing.

About SES

SES has a bold vision to deliver amazing experiences everywhere on earth by distributing the highest quality video content and providing seamless connectivity around the world. As the leader in global content connectivity solutions, SES operates the world’s only multi-orbit constellation of satellites with the unique combination of global coverage and high performance, including the commercially-proven, low-latency Medium Earth Orbit O3b system. By leveraging a vast and intelligent, cloud-enabled network, SES is able to deliver high-quality connectivity solutions anywhere on land, at sea or in the air, and is a trusted partner to the world’s leading telecommunications companies, mobile network operators, governments, connectivity and cloud service providers, broadcasters, video platform operators and content owners. SES’s video network carries over 8,300 channels and has an unparalleled reach of over 355 million households, delivering managed media services for both linear and non-linear content. The company is listed on Paris and Luxembourg stock exchanges (Ticker: SESG). Further information is available at: www.ses.com.