SES - comment

The Bonds still benefit from C-Band amnesia. Media revenues are now falling at -10% p.a., much faster than the -5% we had been assuming. But the most notable revenue shortfall was in the Government (€-80m lighter than our forecast), the core segment for any investment thesis. Management indicated that a large global client made an upfront payment of €205m shortly after Q2 closed, which plugs the big WC outflow in the quarter, but we doubt if it would have resulted in additional revenue recognition. €45m outperformance in Aviation could not make up for the €-130m shortfall in Fixed and Maritime (some classification mismatches). Importantly, however, SES did shine again in cost control, so that the resulting EBITDA for the quarter came in close to expectation. Tax and other operating outflows were lighter than forecast, but WC (mentioned above) and CapEx, itself €-100m higher than expected, dropped the quarter's cash generation a whopping €500m below model and only because financing operations in the quarter led to a €130m inflow. Under normal circumstances, this would have been a shocking result, but in light of the recent news about the likely windfall of the upper C-Band auctions, the bonds can feel no pain.