Figures – Memoria Hispasat 2020

The economic results from the 2020 fiscal year must be considered with in the highly complex context that the satellite telecommunications sector is experiencing. For several years now we have been experiencing a process of profound changes to adapt to a different technological scenario derived from the digitization of society. This has forced satellite operators to satellite operators to reinvent their business model, orienting it towards providing data transmission and connectivity services, compared to the traditional model more closely linked to video content broadcasting uses and applications.

In this scenario, the COVID-19 pandemic has added difficulties to the development of commercial activities: it has decreased mobility by plane and boat, sports and cultural event broadcasts and has slowed the roll out of connectivity projects; at the same time it has caused an increase in the volatility of the financial and exchange markets, adversely affecting the exchange rates of the main currencies in the Americas, where the company generates a substantial part of its business figures.

This new scenario offers new challenges and major opportunities in the connectivity field to help bridge the digital divide in the short and medium term.

The company has accelerated the changes it had planned in the process of transformation to reorient its business and which is included in the 2020-2025 Strategic Plan approved in the second half of the year.

As a result, and as a consequence of redefining our strategic priorities, HISPASAT carried out a revision of the valuation of the satellite assets associated to the operation of its traditional business.

As consequence of COVID-19 and the accounting adjustment, 2020 ended with negative result. This represents a point of transition from which it is starting tarts a new stage of transformation in which it will commit to its new projects starting from an amended balance sheet and a solid financial position based on low debt and a strong liquidity position together with the recurrent generation of cash flow well above its annual debt obligations and its portfolio of signed long-term contracts which represent 4.6 times its annual revenues, one of the highest ratios in the entire satellite sector. Based on this, we can state that the company is resilient, has a well-defined mission and features sufficient strengths to do well in the future.

This new scenario offers new challenges and major opportunities in the connectivity field to help bridge the digital divide in the short and medium term.

Key Data

Figures in millions of euros	2020	% vs 2019
Operating Revenue⁽¹⁾	160.50	-10.29%
EBITDA⁽²⁾	119.28	-10.70%
EBITDA Margin	74.32%	-0.46%
Net profit attributed to the parent company ⁽³⁾	-75.65	n/a
Operating Cash Flow (OCF)	161.41	42.25%
Payment of dividends	0.14	-99.66%
Net worth (NW)	684.76	-11.77%
Net Financial Debt (NFD)	173.16	-36.76%
Investments ⁽⁴⁾	58.49	34.00%
Total assets	1.044,19	-10,62%
Leverage (NFD/(NFD+NW))	20,20%	-22,55%
Debt coverage ratio (DFN/EBIDTA) Covenant ⁽⁵⁾	1,49	-29,69%
Solvency ratio (Shareholder Equity/Net Debt) Covenant ⁽⁶⁾	3,91	37,96%

⁽¹⁾ -6,2% excluding exchange rate effect
⁽²⁾ 7% excluding exchange rate effect
⁽³⁾ Including impairment of assets

⁽⁴⁾ IFRS-16 effect excluded
⁽⁵⁾ Calculated as defined in financing contracts
⁽⁶⁾ Calculated as defined in financing contracts

Economic-financial results

Operating revenue

Operating revenue in 2020 reached 160.5 million euros, including the contribution of the result from the consolidated companies by the equity method (157.5 excluding this line item). This amount represents a 10.3% decrease on the revenues from the previous fiscal year, -6.2% excluding the effects of the variations in the exchange rate, and is mainly due to the decreasing trend in the capacity leasing prices that the sector has been experiencing in recent years, additionally weakened in this fiscal year by COVID, a year in which HISPASAT had to address the renewal of large volume capacity contracts with its main clients.

Of the consolidated operating revenue, 155 million euros correspond to revenues due to leases and provision of space capacity services. 61.5 million euros have been generated from the satellites located in the orbital position marketed by the parent company: 30º W, 36º W and 55º W. The 61º W, 70º W and 74º W orbital positions have recorded 93.5 million euros in revenue.

Revenue for space capacity

BY TYPE OF SERVICE

(in millions of euros)

149.5 PERMANENT

4.2 BROADBAND

1.3 OCCASIONAL USE

BY GEOGRAPHICAL AREA

(in millions of euros)

105.2 AMÉRICA

48.5 EUROPE

1.3 OTHERS

Consolidated operating costs and EBITDA

In 2020 the consolidated operating costs were 41.2 million euros, a 4.1 million euros reduction compared to 2019 (9.1%). This change owes mostly to the no ordinary expenditures incurred in the past fiscal year as a consequence both due to the change in the company’s governance and management bodies, as well as the specific extraordinary commercial provisions given in 2019 to correct clients’ accounts, principally in Mexico; all of which combined with lower operating expenditures such as travel or expenditures for trade fairs and other business events, due to mobility restrictions derived from the pandemic.

The resulting consolidated EBITDA is 119.3 million euros, which represents a 74.3% operating margin on the company’s revenues, 0.46% less than in 2019, which remains among the highest in the sector.

Operating result

Because of the process of revising the valuation of the company’s non-financial assets associated with the operation of the traditional business that HISPASAT carried out and which has involved an accounting adjustment in the value of the assets of 122.3 million euros, the operating result shows negative values for a total amount of 116.9 million euros.

In ordinary terms, by isolating the effect of the revision of the asset value, the operating result would have been positive at 5.4 million euros.

This revision of the asset value is corresponding to a fiscal year of financial prudence and transparency derived from reorienting the business and the strategic priorities within a sector-wide context of structural changes, affected additionally by the COVID-19 pandemic, especially during the second quarter of the fiscal year, also causing a significant impairment in the foreign currency exchange environment, especially in the currencies where HISPASAT generates the majority of its revenue.

However, in turn we must highlight that the adjustment recorded for this item does not involve nor does it cause any effect on HISPASAT’s liquidity position in 2020 and will in fact lead to a positive effect on the company’s results in the upcoming fiscal years, which is estimated at 60 million euros over the next five years, as a consequence of the projected lower depreciation costs.

Consolidated results

The consolidated financial result reached the figure of negative 13 million years, taking into account that this amount includes 4.4 million euros in exchange differences mostly caused by the strong depreciation of the Brazilian real compared to the euro, which managed to lose up to 50% of its value compared to its trading rate one year prior. As a yearly average, this depreciation can be estimated at slightly above 25%.

In comparable terms, the negative financial result of 2019, which was -14.5 million euros, incorporated in turn, as an extraordinary effect, the divestment of a financial stake in a satellite constellation project which caused a loss of 4.9 million euros.

The result corresponding to revenues and financial costs corresponding exclusively to assets and liabilities improved in this fiscal year by 2.1 million euros, which represents almost 20% more compared to 2019.

Concerning corporate income taxes, the tax effect of the negative taxable bases, including the deferred effect of the non-financial asset impairment, added to the accounting recognition of specific assets due to deferred taxes which HISPASAT held for deductions generated in 2020 and in previous fiscal years, allowed the company to generate total tax revenues at the close of this fiscal year for an amount of 54.3 million euros compared to a tax expenditure of two million euros in 2019.

Consequently, the net consolidated result of the fiscal year 2020 attributable to the parent company of the HISPASAT Group was -75.6 million euros. Excluding the accounting effects of asset valuation the result of the fiscal year would have been a consolidated net profit attributed to the parent company of the Group amounting to 16.3 million euros compared to 0.5 million euros recorded at the end of 2019.

Dividend

The dividends paid tied to the results of the previous fiscal year represent an amount equal to 0.14 million euros.

Cash flow

The elevated operating cash flow generation in 2020 is worth highlighting as it reached 161.4 million euros signifying a 42.3% increase over that of the previous year and the free cash flow which, once subtracting the payments due to investments at an amount of 58,9 million euros, reached 102.5 million euros, 46.9% higher than in 2019.

This high cash flow generation, more than three times the amount of the annual structured debt payments, is based on three pillars:

The traditional business strength is sustained by a backlog of long-term contracts worth 720 million euros, which represents 4.6 times the annual revenue, a much higher ratio to that of comparable companies in the sector.
The materialised liquidity in the accounts receivable from the balance sheet and especially from the clients account which has decreased 58% compared to the balance at the end of 2019 and whose progression translates, together with the payment received from certain prepaid capacity contracts, directly into generating operative cash flow. The positive change in circulating capital in 2020 provides 46.1 million euros to the operating cash flow.
Protecting the cash flow that the company continues to generate, creating efficiencies both in CAPEX as well as in OPEX and the tax breaks that HISPASAT holds have also contributed to this aim of partially offsetting the effects of the adverse environment.

Cash Flow (millones €, % vs. 2019)	FY20	Vs. FY19
EBITDA	116.3	-10.2%
Impuestos	2.9
Efecto del tipo de cambio	-4.7
Provisiones y otros ajustes	0.9
Fondos de las Operaciones	115.3	-5.7%
Variación del capital circulante	46.1
Cash Flow Operativo	161.4	42.2%
Cash Flow Inversiones	-58.9
Flujo de Caja Libre	102.5	46.9

Financial debt

Evolución deuda_Mesa de trabajo 1 copia 3-INGLÉS

The entirety of the free cash flow generated worth 102.5 million euros has been dedicated to reducing the amount of the total debt, with 4.5 million euros used to pay interest and 0.1 million euros for the payment of the dividend to shareholders from the result of the previous year.
The net financial debt at the end of the year was 273.8 million euros.
The reduction of guarantees and other adjustments defined in the financing contracts to calculate the net debt but which do not involve a movement of cash, for a total amount of 2.8 million euros, complete the bridge that ends with the net debt at the end of 2020 situated at 173.2 million euros, that is to say, 100 million euros less than at the start of the fiscal year.

Regarding the capital structure, HISPASAT maintains a strategy of ensuring a financial structure that optimises the cost of capital with a solid financial position, making the creation of shareholder value compatible with achieving a competitive cost for financing needs.

The capital is regularly monitored in accordance with the leverage ratio, which in 2020 is 20.6%, a nearly 6 percentage point decrease compared to the same indicator in 2019. This ratio is calculated as the Net Financial Debt on the balance sheet (including derivatives and guarantees) divided by the Net Worth plus the Net Financial Debt.

On the other hand, the nominal gross debt (without offsetting the expenditures of formalising debts as a figure on the balance sheet at the end of the fiscal year) rises to 232 million euros, of which 25 million euros correspond to the amount available from the revolving credit line and 207 million euros to the long-term structured debt with ECA loans destined to finance satellite programmes. The average term to maturity of the outstanding structured bank debt at the end of the year is 5.3 years.

Of the 207 million euros of long-term structured debt at the end of 2020, 84% has a fixed interest rate to be paid, while the remaining 16% has a variable interest rate.

Liquidity and cash reserves

HISPASAT’s liquidity policy is able to ensure compliance with the payment commitments we have taken on, diversifying the coverage of financing needs and debt repayments.

The company’s liquidity position is based fundamentally on strong cash generation coming from its operations, with a significant backlog of long-term contracts, together with an existing financial capacity thanks to the availability of lines of credit in both the short- and long-term, allowing it to develop a prudent liquidity risk management policy.

The company has, at the end of 2020, a liquidity position of 220 million euros comprised both by the amount available in cash as well as due to undrawn lines of credit. Net cash generation in this fiscal year has been 49 million euros, compared to a reduction in 2019 of 12.8 million euros and the 12- and 24-month liquidity ratios are 1.7 and 1.5 times, measured as the cash reserves in accounts or available lines of credit and the highly likely receivables from signed contracts, in relation to the commitments and expected payments.

Investment

The investment effort increased 34%, that shows that the fiscal year’s negative results do not compromise the company’s financial situation, which remains very solid.

Investments in tangible and intangible property recorded on the balance sheet, excluding the accounting effect of the application of IFRS-16, have increased to 58.5 million euros compared to the 43.7 million euros in 2019.

89.2% of this investment corresponds to the company’s new satellite, the Amazonas Nexus. Investments in broadband platforms and commercial projects for managed services, in line with the company’s transformation strategy to achieve a progressive verticalization towards businesses with greater added value; as well as a variety of actions in different infrastructures and locations of the ground segment, in addition to the investment in regulatory law consulting and in different innovation projects, totalling 6.3 million euros, which is equal to 5.5% of the total committed investments during the fiscal year.

Anabel Segura, 11
28108 Alcobendas / Madrid
Spain / T +34 91 710 25 40