Analyst Report News Operators Satellite

Yahsat reports $43.3m profit in nine months

Yahsat claims to be well positioned for future growth with contracted future revenues of more than $2bn from significant new Commercial and Government deals secured in Q3 2021.

Yahsat has reported a net profit of AED 159m ($43.3m) for the first nine months of 2021 (9M 2021). The top line continued to gain momentum with revenue for the nine months being AED1bn ($284.3m), which is broadly in line with the previous year, demonstrating a strong and sustained performance since Q1 2021.

A strong pipeline across all business lines is set to support further revenue growth, with a number of new Commercial and Government contracts secured and further significant deals already signed as of the date of this announcement.

The company maintained an Adjusted EBITDA margin above 60%, with Adjusted EBITDA for the nine months of AED 628.3m ($171.1m). Normalised Adjusted EBITDA  of AED 643.6m ($175.3m) exceeded prior year by 2.5%, generating a margin of 61.6%, higher than the prior-year margin of 58.3%, reflecting continued cost and working capital efficiencies.

Net Income (profit attributable to shareholders) for the nine months was AED 159m ($43.3m). After adjusting for one-off items, Normalised Net Income of AED 200.1m ($54.5m) exceeded prior year by AED 61.4m ($16.7m) (or 44.3%). Normalised Net Income margin of 19.2% for the nine months significantly exceeded the corresponding margin of 12.9% in prior year.

Underpinning the 9M 2021 results was a resilient Q3 performance, with revenues broadly stable (approximately 1% lower than Q3 2020) and a notable increase in profitability, with Normalised Adjusted EBITDA up by AED 28.9m ($7.9m) (15.3%) and Normalised Net Income up by AED 31.7m ($8.6m) (99.2%).

Yahsat maintained a high cash conversion ratio of approximately 97% for the period ended 30 September 2021, driven by low maintenance related capital expenditure.

The T4-NGS programme, which started in 2020, remains on track with several key contracts now concluded. In June 2021, Yahsat entered into a 15-year T4-NGS capacity services agreement adding more than AED 2,570m (more than $700m) to contracted future revenues. In September 2021, Yahsat selected SpaceX Falcon 9 for the launch of the T4-NGS satellite in 2023 and awarded Cobham SATCOM the contract to deliver a comprehensive mobile broadband system, including ground infrastructure.

The success of the refinancing programme of AED 2,572.6m ($700.5m), which was completed in June 2021, boosted the group’s already strong cash position, and supported a healthy Net Debt to EBITDA ratio of 0.5x as at 30 September 2021.

In October 2021, the Board of Directors of Yahsat endorsed management’s recommendation to update the group’s current dividend policy, allowing it to distribute dividends on a semi-annual basis going forward. The updated policy is subject to shareholder approval at the next AGM in 2022. This reflects the Board’s confidence in the financial strength of the business, a positive outlook on cash flow and Yahsat’s ability to fund future investments.

A final dividend of AED 192.8m ($52.5m) for the financial year 2021 is expected to be paid to all shareholders in April 2022, bringing the total dividend for the year 2021 to AED 385.6m ($105m).

The dividend is expected to grow by at least 2% per year, with the expected dividend payout of 15.96 AE fils in 2022, 16.28 AE fils in 2023 and 16.61 AE fils in 2024.

Commenting on the results, Ali Al Hashemi, Chief Executive Officer at Yahsat said: “We continue to see a strong performance in our revenues coupled with high levels of profitability and cash flow. We are laying the foundations for future growth, by signing new deals across our Commercial and Government businesses, which add to our contracted future revenues and underpin our commitment to a progressive dividend. Our recent appointment by the UAE Government to assess the expansion of our existing fleet with two potential new satellites presents Yahsat with significant additional growth opportunities across the business, further enhancing our longer-term outlook.”

Al Hashemi added: “We remain on track to achieve all our strategic objectives, financially and operationally, supported by the rapid post-pandemic recovery of our business segments globally. We will continue forging partnerships with the world’s most innovative companies to enhance our competitiveness and continue to create value for our customers, shareholders and the UAE.”

Q3 revenues of AED 345.6m ($94.1m) remained robust and were broadly in line with prior year. On a YTD basis, revenues have continued to recover with total revenues of AED 1.0bn ($284.3m) now just 3.1% lower vs. prior year, recovering from -7.3% at Q1 2021.

Revenues from the largest segment, Infrastructure, remained solid with an increase of AED 5.0m ($1.4m) (or 0.8%), year-on-year, to AED 658.2m ($179.2m).

Managed Solutions continued its growth with Q3 2021 revenues of AED 47.3m ($12.9m), outperforming prior year by AED 5.2m ($1.4m) (or 12.4%). During the quarter, it continued to capture new business and grow its contracted future revenues by more than AED 40.4m ($11m). On a year-to-date basis, revenues of AED 154.0m ($41.9m) are now just 4.6% lower than prior year compared to -23.4% at Q1 2021. The year-on-year shortfall reflects temporary Covid-19 related delays to certain projects although, for certain programmes, there is clear evidence that the situation is improving.

Mobility Solutions also reported a strong performance with Q3 revenues of AED 60.7m [($16.5m), in line with Q2. The total revenues of AED 168.5m ($45.9m) for the nine months are 9.4% lower than prior year, significantly better than the year-on-year shortfall of -18.3% at Q1 2021. The recovery is expected to continue into Q4 and beyond, underpinned by the recent signing of a significant three-year distribution contract with a global service provider worth more than AED 316m ($86m) and continued expansion of the Maritime business, in particular across high growth markets in Asia, such as Vietnam.

Data Solutions reported revenues for the nine months of AED 63.4m ($17.3m), AED 13.0m ($3.5m) lower than prior year reflecting the wind-down in July 2021 of a multi-year, opportunistic capacity deal with Eutelsat, complementary to the core data solutions strategy. In parallel, the Consumer Broadband business continued to accelerate with subscriber numbers up 16% in the nine months and corresponding revenues increasing by 24%, underpinned by a rapid expansion of the Direct-to-Market (‘DTM’) model in South Africa. This growth is expected to continue as subscribers continue to ramp up in South Africa and the DTM model is rolled out across other major markets (including Nigeria) in Q4. The pipeline of Enterprise and Carrier Wholesale deals continues to grow with 5 new deals signed in Q3 adding more than AED 40.4m ($11m) to contracted future revenues with several further deals expected to be signed in Q4 with increasing uptake in Cellular Backhaul. As both the Consumer Broadband and Enterprise and Carrier Wholesale businesses increase in scale, Data Solutions is poised for growth in 2022.