Annual Report • Apr 3, 2014
Annual Report
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2011 SES Astra and SES World Skies become SES
2009 Investment in O3b Networks
2006 Coverage of 99% of the world's population
2004 Launch of HDTV
1999 First Ka-Band payload in orbit
First SES launch on Proton: ASTRA 1F Digital TV launch
1994 ASTRA 1D launch
ASTRA 1B launch World's first satellite co-location
1989 Start of operations @ 19.2° East
1987 Satellite control facility (SCF) operational 1985 2001
SES acquires New Skies Satellites
Acquisition of GE Americom
Astra reaches 70m households in Europe Second orbital slot: 28.2° East SES lists on Luxembourg Stock Exchange
ASTRA 1E launch
ASTRA 1C launch
Astra reach: 16.6 million households in Europe
1988 ASTRA 1A launches on board Ariane 4 1st satellite optimised for DTH
SES establishes in Luxembourg Europe's first private satellite operator over Europe
2008 SES combines Americom & New Skies into SES World Skies
2010 3rd orbital position 2012 First emergency.lu deployment SES unveils Sat>IP
2013
SES reach: 291 million TV households worldwide SES maiden launch with SpaceX More than 6,200 TV channels 1,800 in HD First Ultra HD demo channel in HEVC
With the very first SES satellite, ASTRA 1A, launched on December 11 1988, SES celebrated 25 years in space in 2013. Since then, the company has grown from a single satellite/one product/one-market business (direct-to-home satellite television in Europe) into a truly global operation. Today SES offers a full portfolio of satellite services on a fleet of 56 active satellites at 37 orbital positions, spanning the globe and covering 99% of the world's population.
25 years ago, Luxembourg became an important player in the world of space-based technological development and broadcasting.
This initial success was followed by many others at SES, a company which has gone from strength to strength, to become Europe's leading satellite telecommunications operator by revenue, with a global presence.
With a worldwide coverage area, our satellites broadcast media content to hundreds of millions of homes and establish flexible and cost-efficient communications services for corporations, telecommunications providers, government agencies and public institutions on all continents.
We commission satellites according to defined specifications (notably with respect to the number of transponders, the orbital positions, the frequency bands and the expected coverage area) with a number of satellite manufacturers in Europe and in the US.
We contract European, Russian and US launch vehicle providers to launch our satellites into geostationary orbit.
We commercialise the capacity on our satellites to public as well as private broadcasters, service providers, governments and institutions, as well as for corporations wishing to build their own satellite communications networks.
We provide, through our subsidiaries, additional services such as uplinking, network management, playout, encryption and broadband via satellite.
To be the world's most customer-focused satellite company in collaboration with our partners.
We, collectively, collaborate with our customers and partners around the world to grow their businesses through our unique, reliable and innovative satellite infrastructure and solutions. Ultimately, these commitments benefit people around the world.
2011 2012 2013
AVERAGE WEIGHTED EARNINGS PER SHARE (euro)
2011 2012 2013
Revenue +5.9% at constant FX, excluding analogue revenue recorded in 2012 2012: EUR 1,828.0 million
Operating profit +7.7% 2012: EUR 790.5 million
Contract backlog +1.3% at constant FX 2012: EUR 7.5 billion
EBITDA +6.2% at constant FX, excluding analogue revenue recorded in 2012 2012: EUR 1,346.6 million
Dividend per Class A share 2012: EUR 0.97
| 01 | Highlights |
|---|---|
| 02 | SES at a glance |
| 04 | Our satellite fleet |
| 06 | Introduction by the President |
| and CEO | |
| 08 | Our technology |
| 10 | Our markets |
| 12 | Supporting vital emergency aid |
| 14 | The Fixed Satellite Services |
| (FSS) market in 2013 | |
| 18 | Market dynamics |
| 20 | Employer of choice |
| 22 | Corporate social responsibility |
| 23 | Corporate governance |
| 24 | Chairman's statement |
| 26 | SES shareholders |
| 27 | Chairman's report on |
| corporate governance and | |
| internal procedures | |
| 51 | Financial review |
| by management | |
| 57 | Consolidated financial |
| 58 | statements Independent auditor's report |
| 59 | Consolidated income statement |
| 60 | Consolidated statement of |
| comprehensive income | |
| 61 | Consolidated statement |
| of financial position | |
| 62 | Consolidated statement of |
| cash flows | |
| 63 | Consolidated statement of |
| changes in shareholders' equity | |
| 64 | Notes to the consolidated |
| financial statements | |
| 107 SES S.A. annual accounts | |
| 108 | Independent auditor's report |
| 109 | Balance sheet |
| 111 | Profit and loss account |
| 111 Statement of changes in | |
| shareholders' equity | |
| 112 | Notes to the annual accounts |
| 120 | Information for shareholders |
For more information, visit our website: www.ses.com
2013 overview
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Corporate governance
23-50
Financial review by
management
Cover and timeline image: SES-8 launch on Falcon 9. Image credit – SpaceX.
Where others see obstacles, we see potential. Where others see challenges, we see possibilities. We go further to meet customer needs and create new opportunities to reach new markets. We create space to grow via satellite.
SES provides the world's leading TV distribution platform via satellite. We broadcast more than 6,200 TV channels of the world's leading broadcasters and reach 291 million homes worldwide, far more than any other operator.
We offer satellite capacity for direct-to-home (DTH) broadcasting, feeds for cable networks and digital terrestrial networks, as well as occasional use and full-time video contribution services. We also offer a wide range of broadcast-related services, such as playout and scheduling, uplinking and encryption, and more.
We support VSAT networks, broadband internet access, mobile backhaul and trunking, maritime and aeronautical communications, and many more services for corporate and telco customers worldwide. Our global satellite fleet and ground infrastructure, combined with our partner teleports around the world, ensures highest-level connectivity with the highest reliability anywhere in the world.
We offer a wide range of secure and reliable communication links for government agencies and international institutions. We also establish communication links for embassies, civil and military agencies, and first response teams in emergency situations. We also provide satellite connectivity for educational and medical purposes. We support digital inclusion programmes in a number of countries around the world. Our offer ranges from the provision of turnkey networks and communications solutions to hosted payloads that are dedicated to a particular mission.
Europe 50% North America 22% International 28%
GEOGRAPHIC SPLIT OF REVENUES 2013
Provides highly competitive broadband solutions
Provides operational services, technical consultancy, high-tech products and integrated solutions to the satellite industry.
SES operates and commercialises satellite transmission capacity worldwide.
SES's space infrastructure offering is complemented by a range of additional value-added services and solutions which are provided by dedicated service companies:
100%
100%
www.ses.com
via satellite.
www.ses-broadband.com
100%
Offers services comprising content management, play-out, multiplexing, encryption and satellite uplinks to broadcasters.
www.ses-ps.com
100% Provides total communications capacity, from satellite bandwidth to customised end-to-end solutions and hosted payloads.
www.ses-gs.com
Broadcasts popular free-to-air TV channels in high definition to the German market.
www.hd-plus.de
SES participations in satellite operators
Ciel is a Canadian satellite service provider bringing television and broadband services to homes and businesses throughout North America from 129° West.
www.cielsatellite.ca
YahLive, a partnership between SES and YahSat of Abu Dhabi, owns and commercialises 23 Ku-band transponders on the YahSat 1A satellite at 52.5° East.
www.yahlive.tv
QuetzSat is a Mexican satellite operator providing direct-to-home (DTH) services from the orbital position 77° West.
www.quetzsat.com
O3b Networks is to provide a new fibre-quality, satellite-based, global internet backbone for telecommunications operators and internet service providers in emerging markets.
www.o3bnetworks.com
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Orbiting 35,786 km above the Earth's surface, our 56 satellites serve a coverage area that is home to 99% of the world's population. They carry 1,487 transponders, a powerful and reliable communication infrastructure.
Our satellite fleet supports our customers' long-term success. In order to upgrade, renew and expand our in-orbit capacity, we conduct an ambitious multi-year investment programme.
In 2013, SES successfully launched three satellites: SES-6 (40.5° West), ASTRA 2E (28.2°/28.5° East) and SES-8 (95° East).
These three satellites added a combined total of 82 transponders to the SES fleet.
SES-6 is located at SES's premier video neighbourhood in Latin America and the Caribbean at 40.5° West. SES-6 replaced the NSS-806 satellite to provide significant capacity expansion. The satellite's expanded Ku-band payload supports DTH platforms. The C-band payload offers incremental capacity to support channel growth at this key cable neighbourhood. Coverage area: North America, Latin America, Europe, Atlantic Ocean.
ASTRA 2E delivers next generation broadcast, VSAT and broadband services in Europe, the Middle East and Africa, and carries Ku- and Ka-band payloads at the prime orbital location of 28.2/28.5°East.
Headquarters
Teleport (owned and partner teleports)
In orbit
To be launched
Inclined
Expected orbital position
To be relocated
SES-8 is co-located with NSS-6 providing growth capacity over Asia-Pacific. The high performance beams support rapidly growing markets in South Asia, Indo-China and provide expansion capacity for DTH, VSAT and government applications.
In early 2014, SES had four satellites under construction, scheduled for launch between 2014 and 2016.
This satellite replacement programme will result in a capacity increase of 111 transponders compared to year-end 2013, with the majority of the new capacity being earmarked to serve demand in the emerging markets of Africa, Latin America and Asia Pacific.
In early 2014, SES ordered SES-10, a powerful new 'growth' satellite, to be deployed at the 67° West orbital position to provide incremental and replacement capacity for DTH broadcasting and other communications services in Central and Latin America.
| Satellite | Launch date | Orbital position | Payload | Manufacturer |
|---|---|---|---|---|
| ASTRA 5B | March 22, 2014 | 31.5° East | Ku-band, Ka-band | Airbus Defence & Space |
| ASTRA 2G | 2014 | 28.2/28.5° East | Ku-band, Ka-band | Airbus Defence & Space |
| SES-9 | 2015 | 108.2° East | Ku-band | Boeing |
| SES-10 | 2016 | 67° West | Ku-band , Ka-band | Airbus Defence & Space |
Status as of March 2014. Data is subject to change.
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2013 was another very successful year for SES. With our sustained investments in the SES satellite fleet, we continued to lay the foundation for the expansion of our business into vibrant developing countries and promising new vertical market segments. Our services businesses also continued to thrive. The solid 2013 financial results clearly illustrate that we delivered on our strategy. Revenue for the year was up 5.9% at EUR 1,862.5 million when excluding the EUR 42.6 million of analogue revenue recorded in 2012. EBITDA increased to EUR 1,364.7 million (i.e. 6.2% when excluding analogue). Profit of the group decreased 12.7% to EUR 566.5 million, an increase of 4.7% excluding a one-off 2012 tax release impact.
During 2013, the SES satellite fleet grew to 55 active spacecraft at 37 orbital positions spanning the globe. The company added three successful satellite launches to its track record, providing replacement as well as incremental capacity to fuel growth in 2014 and beyond:
The launch of ASTRA 5B on board a European Ariane 5 booster slipped into 2014, due to the non-availability of the co-passenger satellite. The satellite was finally launched on March 22, 2014.
In February 2014, SES commissioned another satellite, SES-10, with Airbus Defence and Space (formerly Astrium). SES-10 will significantly grow SES's capacity to serve the thriving markets of Latin America.
SES completed extensive fleet adjustments in order to optimise the use of in-orbit capacity and to secure new frequency rights, the building blocks of the satellite industry. Eleven satellite relocations were performed during 2013.
The year was also marked by the launch of the first batch of four O3b satellites, on June 25, 2013, on board a Soyuz vehicle from the European spaceport in Kourou, French Guiana. Eight additional O3b satellites are planned for launch in 2014 in order to complete the revolutionary new medium-earth network that combines the reach of satellite with the speed of fibre. SES is a major shareholder of O3b, owning a 47% interest.
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Another important development was SES's start of operations at 28.5 degrees East on October 4, 2013, on frequencies previously used by Eutelsat, pursuant to an agreement between SES and the German rights holder Media Broadcast. Since then, we have reached encompassing agreements with Eutelsat that create a secure framework for our respective satellite operations in the major broadcasting and data markets of Europe, the Middle East and Africa. The agreements are beneficial for the whole satellite industry and, above all, for SES's customers and end users, as they will continue to experience optimal satellite services. Last but not least, the agreements allow SES to fully leverage its satellite and fleet investments and to operate its assets and frequency spectrum efficiently. We can now focus on further commercialising our satellite capacity and ensuring excellent services for customers and users worldwide.
In the course of 2013, SES signed important new contracts and renewals. Significant transponder agreements with Arqiva, Sky Deutschland, and Orange Romania for additional digital services respectively a new DTH bouquet for Romania are proof of sustained growth in Europe. On the international side, several important deals validate SES's growth strategy in the emerging markets: Oi in Brazil; Mediascape in the Philippines; IMPTV in Thailand; MNC Sky Vision in Indonesia; Wananchi's Zuku TV in Africa; Platco Digital in South Africa; and StarTimes Communication in Africa. In North America, SES scored key renewals with long-standing customers such as Comcast and Globecast.
As SES launches new satellites such as SES-6 with dedicated mobility beams and expanded footprints to also cover the world's oceans, we are meeting the increasing demand for maritime and aeronautical broadband connectivity. Important contracts in this vertical market segment were signed with blue-chip customers Hughes/Row44, GoGo, Panasonic, KVH, and OmniAccess.
Looking at the services side of SES's business, the deployment of HD+ continued unabated during 2013. The platform, which allows viewers in Germany to access 19 commercial channels in High Definition format (HDTV), counted 1.4 million paying customers at the end of 2013. SES Platform Services also provided a solid performance, as illustrated by a new contract with Turner Broadcasting for the play-out of their channels over Europe, Video on demand (VOD), and the digitalisation of audiovisual content. SES TechCom signed important agreements with respect to the Galileo Data Dissemination Network and the European Data Relay System.
During 2013, SES also launched SES Global Access Services (SGAS), in order to provide customers with access to the world's leading satellite fleet from anywhere in the world. SGAS operates and manages a Global Access Network consisting of 19 owned and partner teleports, a comprehensive fiber-based terrestrial network and numerous points of presence.
At the same time, SES continued to invest in the quality of its unrivalled service delivery to customers, by building two new Satellite Operations Centers (SOCs) in Betzdorf (Luxembourg) and Princeton (New Jersey). Both SOCs will become operational during 2014 to future proof the day-to-day operations of our ever expanding satellite fleet.
In 2013, the company continued to drive innovation in satellite technology, with the first launch of a commercial SES satellite on board a SpaceX/Falcon 9 booster. SES believes that a combination of satellite and launch innovations is poised to significantly lower costs for future SES missions. To that effect, the company is collaborating with the European Space Agency (ESA) and satellite manufacturer OHB of Germany on the ELECTRA programme. The ELECTRA programme is aimed at developing a European small to medium sized all-electric satellite platform that will significantly lower the required launch mass while providing state-of-the-art communications capabilities.
However, innovation at SES is not limited to space technology. The company also fosters new developments in broadcasting technology: In 2013 we launched the industry-first Ultra HD demo channels on our satellite fleet and we are confident that by 2016 we will see the first commercial offers in the market, thus creating new demand for satellite capacity. We also continued deployment of Sat>IP, including a new IP-LNB, to ensure that satellite reception will remain relevant in today's multi-screen environment. We continued to develop hybrid reception solutions with major telecommunications companies around the world.
Drawing on SES's innovative spirit and the creativity of its employees, as well as on our successful track record, I am convinced that SES is well positioned to accommodate the growing Pay-TV demand in emerging markets and to leverage on HD and Ultra HD growth in developed markets going forward. At the same time, we will nurture new verticals like mobility and keep on pushing innovation and technical boundaries.
In 2013, SES celebrated its 25th year in space. SES's very first satellite, ASTRA 1A, was launched on December 11, 1988. For the last 19 years, it has been my privilege to lead the great venture that is SES and to turn a single product/single market business (DTH satellite television in Europe) into a truly global organisation offering a full portfolio of satellite services. During my tenure , the SES fleet has grown from four satellites at the end of 1994 to 56 satellites today.
As this will be my last Annual Report as President and CEO, I would like to thank our shareholders for their trust as well as my colleagues at SES for their continued and relentless support. Over the last months, responsibility for the day-to-day operations has been transferred, in a well-structured process, to my successor Mr. Karim Michel Sabbagh and the SES Executive Committee, which is comprised of some of the most experienced satellite executives in the industry. I am confident that the new SES leadership team will continue to take SES from strength to strength, to the benefit of its customers, employees, shareholders and other stakeholders. I look forward to continuing to serve SES as a Member of the Board of Directors.
Romain Bausch President and CEO
SES looks back at a long history of innovation in the space sector. From its creation as Europe's first private satellite operator in 1985, to the launch of the first satellite dedicated and optimised for DTH-services in 1988, the first co-positioning of two satellites at the same orbital location in 1991, the first commercial Proton launch in 1996, the launch of digital TV that same year, the introduction of HDTV in 2004, of Sat>IP in 2012, and the demonstration of the first Ultra HD transmissions in 2013, innovation is part of SES's DNA.
SAT>IP is a new IP-based architecture for receiving and distributing satellite signals, allowing satellite programmes to be distributed, like traditional IPTV, over any IP network. SAT>IP allows satellite programmes to be received not just on IP capable Set-Top-Boxes but also on other modern IP capable devices: PCs, laptops, tablets, smartphones.
Ultra HD provides four times the resolution of today's HDTV, providing more dramatic action for sporting events and a more compelling experience for premium movies and documentaries. Using the latest satellite solutions for Ultra HD creates exciting new opportunities for both broadcasters and industry partners.
First HEVC transmissions at 3840x2160 pixels
Space-based global air traffic monitoring and control
2013 overview 01-22
Corporate governance 23-50
Consolidated financial statements 57-106 SES S.A. annual accounts 107-120
However, at SES innovation is not limited to space technology. We also foster new developments in broadcasting technology: in 2013 we pursued the continued deployment of Sat>IP, including a new IP-LNB, to ensure that satellite reception will remain relevant in today's multi-screen environment. In fact, the IP-LNB gives satellite television providers and consumers new options for distributing unmatched quality satellite television to multiple TVs, computers, tablets and smart phones over IP at the lowest cost.
Furthermore, SES once again took a leadership role in the industry by broadcasting the first real Ultra HD picture in a commercially realistic bandwidth. At the 2013 SES Industry Days in Luxembourg, an end-to-end live demonstration broadcast a full 3840x2160 pixel Ultra HD picture using HEVC for the first time, while previous demonstrations were either broadcast in H.264 or using 4 HD pictures in parallel.
Illustrating SES's commitment to support and drive innovation in space segment and satellite technology, SES also made a move into the promising area of "all electric satellites", by signing a public-private partnership with the European Space Agency (ESA). The PPP between SES and ESA is part of a programme called ELECTRA, aimed at developing a small to medium sized, fully electric propulsion satellite platform manufactured in Europe.
The ELECTRA project utilises electric propulsion instead of conventional chemical propulsion for transfer into geostationary orbit as well as for orbit station keeping. The satellite platform can thus take advantage of smaller launch vehicles or dual launch capabilities, while carrying payload capabilities equivalent to current mid-sized satellites in terms of power consumption and number of active transponders.
Another exciting project was developed by SES TechCom together with DLR (Deutsches Zentrum für Luft- und Raumfahrt), aiming at monitoring and optimising air traffic control around the globe. The first space-based Automatic Dependent Surveillance – Broadcast (ADS-B) system operates on the Proba V satellite of the European Space Agency and provides (for the first time ever) ADS-B data from space.
In the frame of the project, SES TechCom developed and implemented the ground data processing center, which retrieves, processes, analyses and disseminates all ADS-B data received from the space-based ADS-B receiver.
The promising results of the mission demonstrate the potential of spacebased ADS-B for global air traffic monitoring and control, especially in areas not covered by ground-based radar such as oceans or deserts. Aircraft will remain continuously visible during their journeys around the globe, enabling air traffic optimisation with a significant positive impact on fuel consumption and CO2 emission.
The development of the space-based air traffic control is part of SES's strategic initiative to drive innovation in space and broadcasting technologies.
With an increase in revenues of 12.8% at constant FX, SES delivered solid results in the International region, with several important deals validating SES's growth strategy in the emerging markets.
One of SES's flagship orbital slots for Africa
40.5°West
A prime orbital position for Latin America
Zuku TV – part of the Wananchi Group – completed its migration from SES's NSS-12 satellite to the newer SES-5 positioned at 5 degrees East.
Oi signed a significant long-term capacity agreement to provide direct-to-home (DTH) services in Brazil and became the new anchor customer of the newly launched SES-6 satellite.
Brazilian telecom operator Oi signed a significant long-term capacity agreement to provide direct-to-home (DTH) services in Brazil and became the new anchor customer of the newly launched SES-6 satellite. The new SES capacity will allow Oi to take its pay-TV services to the next level of development. The agreement also represents a quantum leap for SES in this very important and dynamically growing market, demonstrating how satellites substantially support telecommunication companies in the development and delivery of triple- and quadruple-play hybrid services. The early replacement of the NSS-806 satellite and the addition of incremental C-band capacity reflects SES's increased focus on the Latin American market and the development of an important video neighbourhood at the 40.5 degrees West orbital position.
In Asia, SES announced a new multiyear, multi-transponder deal with one of its largest customers in the Philippines, MediaScape Inc, on SES-7 at 108.2 degrees East. The new capacity expansion allowed MediaScape, through Cignal Digital TV, its DTH satellite television service provider, to further expand its services for the provision of DTH satellite TV in the Philippines. Cignal Digital TV currently offers 22 High Definition (HD) channels and 65 Standard Definition (SD) channels to more than half a million subscribers across the Philippine archipelago.
IPMTV, an established satellite TV provider in Thailand, contracted additional capacity on the newly launched SES-8 satellite and renewed its multi-year capacity deal on NSS-6. SES-8 is co-located with NSS-6 at the prime orbital location of 95 degrees East. The deal allows IPMTV to continue to expand its reach of four million TV households in Thailand. The platform currently broadcasts over 150 local channels to its subscribers, with 21 channels in High Definition.
In Indonesia, MNC Sky Vision, Indonesia's premier satellite Pay-TV provider, contracted capacity on the SES-7 satellite to support Indovision's future Chinese-language DTH package. The multi-transponder and multi-year deal provides Indovision with access to the Ku-band capacity aboard SES-7 at the prime orbital location of 108.2 degrees East. Indovision offers
more than a dozen Chinese language channels, allowing Indovision to reach a niche audience segment in Indonesia's fast-growing pay-DTH market, beyond its current base of more than 2 million subscribers.
In Africa, pay-TV broadcaster Zuku TV – part of the Wananchi Group – completed its migration from SES's NSS-12 satellite to the newer SES-5 positioned at 5 degrees East, one of the company's flagship orbital slots, which supports customers across the continent to grow Africa's DTH services. With a substantial and growing customer base in East Africa, principally Kenya, Tanzania and Uganda, Wananchi Group has contracted seven transponders on SES-5; four have migrated to SES-5 whilst three transponders are additional growth capacity.
SES also signed a 15-year contract with Platco Digital – a sister company of the South African independent broadcaster e.tv – to broadcast a new free-to-air service in South Africa, with future plans to expand across Southern Africa. The contract for two transponders, with an option for additional capacity in 2014, allows the direct-to-home transmission of a new TV channel line-up by Platco Digital to audiences in South Africa's urban and remote areas. The contract is an important step for the development of free-to-air DTH reception in Africa's dynamic emerging markets.
StarTimes Communication Network signed a 10-year contract on SES-5 at 5 degrees East to expand its media footprint in Africa and deliver DTH broadcast services across the continent. The new partnership with StarTimes illustrates how the combination of DTH and DTT is a key enabler in Africa's migration to digital TV and also help set pace in the continent's digital migration race.
However, SES's growth was not limited to the International segment during 2013. The company also signed important new contracts and renewals in its other market segments. Significant transponder agreements with Arqiva, Sky Deutschland and Orange Romania for additional digital services respectively a new DTH bouquet for Romania are proof of sustained growth in Europe. In North America, SES scored key renewals with two long-standing customers, Comcast and Globecast.
emergency.lu
Providing satellite services is our business. However, beyond their commercial aspect, satellites are also powerful tools that help to connect people in emergency situations.
Bor, South Sudan – An emergency.lu rapid deployment kit has been online in Bor, South Sudan, since August 2013. Technicians from the World Food Program, under their Emergency Telecommunications Cluster mandate, took care of the transportation and installation of the kit.
The typhoon Haiyan response was the first deployment of emergency.lu to a sudden onset disaster, offering free connectivity to all the humanitarian staff.
South, Central and large parts of North America, Europe, Middle East, Africa, Central Asia
In November 2013, following the devastating Typhoon Haiyan that hit the Philippines – one of the most powerful storms on record to make landfall – emergency.lu terminals and SES satellite capacity were swiftly deployed in the disaster zone to re-establish vital communication links to support much needed humanitarian relief efforts.
emergency.lu is a highly flexible and quickly deployable emergency communication system designed to support first responders during the initial hours of operation in situations of humanitarian or natural disasters. The emergency.lu solution consists of satellite infrastructure and capacity, communication and coordination services, and satellite ground terminals, as well as transportation of equipment to disaster areas all over the world.
emergency.lu was developed and implemented as a public-private partnership by the Ministry of Foreign Affairs of Luxembourg in collaboration with a consortium of Luxembourg companies and organisations: SES TechCom, Hitec and Luxembourg Air Rescue.
The service is powered by SES satellite capacity and can be deployed within 24 hours practically anywhere on the planet, thus dramatically reducing the deployment time of traditional systems. emergency.lu provides email, voice over IP, mapping, file sharing and other types of connectivity that are required by aid organisations early on in a disaster response. It greatly enhances the efficiency of first responders and contributes to saving lives.
In January 2013, emergency.lu was awarded the "Most Innovative Product 2013" prize at the inaugural Asia-Pacific conference of the Aid and International Development Forum (AIDF), which took place in Bangkok.
In total, SES performed six humanitarian aid missions and numerous additional demonstrations and training courses to civil protection and humanitarian aid organisations in Mali, South Sudan, Venezuela, Nepal and the Philippines.
The emergency.lu service supported numerous non-governmental organisations (NGOs) and intragovernmental agencies. In the Philippines, at certain peak moments, more than 500 users from non-governmental organisations (NGOs) relied on the critical connectivity provided by the emergency.lu service.
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2013 overview
01-22
Corporate governance
23-50
Of 35,000 satellite TV channels worldwide broadcast via SES satellites
Of 6,500 HDTV satellite channels worldwide broadcast via SES satellites
2013 was a year of continued growth for the FSS industry. At the same time, it was a year of reinforced consolidation, with the underlying trend being the building of scale. M&A activity has been on the rise, encouraged by the fact that significant organic growth has become more difficult and growth by acquisition the more obvious route. The sector has been transitioning into an environment characterised by increased competition between operators and greater uncertainty on demand usage and associated pricing conditions1 in certain regions.
Altogether 18 commercial geostationary satellites carrying C-band, Ku-band and Ka-band payloads, were successfully launched in 20132 . When adjusted for the capacity that was taken out of service, the available net capacity in C-band and Ku-band increased by 5.4% from 2012 to 2013. During the same period, High Throughput Satellite (HTS) capacity grew by more than 25%. The global average fill rate decreased from 78% in 2012 to approximately 76% in 2013. It is expected to further decrease in the years to come, to about 73%, due to the increase in supply3 from incumbent satellite operators, as well as new entrants into the market, notably government driven national communications satellite programmes.
In 2013, the global revenues of the FSS industry remained on the growth track of the past years and increased by 4-5%4 . Global industry revenues in 2013 reached over EUR 8.6 billion3 .
In 2013 the number of TV channels broadcast worldwide via satellite grew to over 35,000, an increase of about 9% from the previous year of over 32,000. At 6,239 channels, SES accounted for 18% of the global number of channels broadcast via satellite, reflecting a growth of 12.5% in the number of TV channels SES carries4 .
Global pay-TV subscriber numbers grew by 11% in 2013 to bring the total subscribers worldwide to nearly 225 million. The region that showed the strongest growth was Sub-Saharan Africa (+26.1%), bringing the total number of subscribers to approximately 10 million. The second fastest growing region was Latin America, experiencing a growth rate of 22% in 2013, while the Asia Pacific region experienced growth of 14%. Of these three regions, APAC represents the largest market, with 84 million pay-TV subscribers5 . Especially in Latin America, the economic demographics are very positive to support pay-TV expansion. Brazil is of special interest in this region, due to the SES deal with Oi, and because of its size and growing middle class that will drive net subscriber additions. In total, Brazil's pay-TV subscriptions experienced a healthy growth rate of 17% last year, bringing the total number of subscribers to 15 million5 . Forecasts indicate that by 2015 satellite will account for 70% of the total pay-TV base in this market.
2013 overview
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Sources:
continued
High Definition Television (HDTV) continued to show strong growth in 2013, with the number of channels broadcast worldwide growing by nearly 20% to reach approximately 6,5006 . 27% of these channels were broadcast via SES satellites, making it the leading carrier of HD channels. The nearly 1,800 HD channels that SES transmitted came as a result of a 20% plus growth rate in 20136 . The fastest growing regions as far as HD channels are concerned are Southeast Asia, Latin America and Southern Asia, each experiencing growth rates from 2012 to 2013 of 55%, 36% and 34% respectively 7 .
Ultra HD (UHD) television is gaining momentum, as indicated by the significant growth in the number of UHD-compatible TV set shipments during 2013, with over 400,000 units shipped8 . In 2013 there were 3 UHD demo channels worldwide, being broadcast in the Asia Pacific, North American and Western Europe regions. The UHD proposition is only expected to be fully introduced in 2016, when the first 24/7 UHD channels will be launched and the number of channels broadcast globally is estimated to increase to about 159 .
In the Telecom sector, strong growth was evident in data consumption on mobile devices, with an 80% growth in data traffic from Q3 2012 to Q3 2013. Mobile data traffic is expected to continue growing at a CAGR of 45% (2013-2019), resulting in a 10-fold increase by the end of 2019. Mobile data traffic will grow considerably faster than fixed data traffic over the forecast period (fixed data: CAGR +/- 25% over the same period). The main driver for mobile data traffic growth is the rising number of smartphone subscriptions, with the largest and fastest growing mobile data traffic segment being video10.
The VSAT segment of the business is growing steadily. In 2013, the number of VSAT terminals in operation worldwide increased by 6% to top 2 million terminals in service. This reflected a sustained connectivity demand in the emerging markets, with Latin America, Sub Saharan Africa and Southern Asia each accounting for annual growth rates exceeding 10% as of 20129 .
With the successful launch of its first four satellites in 2013, O3b effectively entered the market. The O3b satellite network combines the reach of satellite with the speed of fiber, focusing specifically on cellular backhaul and trunking as its key applications. In March 2013, O3b reported a backlog of approximately USD 700 million; however, the company believes it can achieve a minimum backlog of USD 200 million per year. Overall, O3b will serve to heighten awareness of the satellite industry's capability of developing competitive solutions in specific areas of the telecommunications marketplace11.
The in-flight connectivity market has seen strong growth in the past few years, with the number of commercial aircraft offering in-flight connectivity growing by over 30% to about 3,500 in 2013, representing roughly 14% of the worldwide fleet. The number of business aircraft offering in-flight connectivity grew by 10% to just over 9600, representing roughly 51% of the worldwide fleet12.
Data requirements on maritime vessels have been steadily growing over the last few years. The growth has been driven by applications related to operations, administration and crew welfare. Mobile Satellite Services (MSS) have been faced with increasing competition from emerging Ku-band VSAT services. The maritime VSAT business itself has seen strong growth over the past few years, with the number of terminals growing from just over 10000 the year before to nearly 12000 in 201313.
The Machine-to-Machine (M2M) market is currently growing very fast and is expected to reach around 4 billion units by 2018. This growth is mainly driven by the automotive, government, consumer electronics and utilities verticals. Whereas some of the growth for satellite is threatened by terrestrial solutions, transportation and government are expected to be the dominant markets in revenue terms within the next 10 years, with North America being the leading region in terms of demand14.
Several trends in 2013 led to all FSS operators experiencing a slower, and some a negative, growth in government and military revenues. These include budget reductions around the world, troop withdrawals in Afghanistan, the US government shutdown and increasing utilisation of capacity from proprietary systems. All these elements played a part in the slowdown of demand. Satcom, however, still remains a key component of government and military architectures, due to its strategic importance in supporting worldwide operations. Therefore, the tough time experienced in the FSS market should be short term15.
Sources:
6 Lyngsat, SES analysis
7 Dataxis
8 IHS Study
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The successful maiden launch of the SES-8 satellite into geostationary transfer orbit by SpaceX and the Falcon 9 booster signified the introduction of a new launch services provider into the satellite market. SpaceX, with its reliable technology and moderate cost, promises to lower both the costs and risks associated with the launching of a satellite. Over time, SpaceX should become a viable alternative to established launch vehicle providers and benefit the industry with greater competition and choice in the launch market12.
The successful uptake of UHD is dependent on the development of new technologies to ensure a more efficient transmission of larger quantities of data, as well as on an increased household penetration of UHD compatible TV sets.
It is expected that the roll-out of UHD will be faster than it was for HDTV, with the ecosystem for UHD technology being technically ready by about 2016.
The occasional use of UHD during public events drawing global audiences should further drive the uptake of UHD. Several broadcasters have already been active in showcasing UHD broadcasts. Japan's public broadcaster NHK demonstrated 8K technology during the 2012 Olympics and intends to capture the 2014 FIFA World Cup in UHD16. The 2016 Olympic Games are likely to be the first major sporting event to catalyse UHD service launches in North America and Japan, with European launches happening in time for the 2018 FIFA World Cup15.
Sources: SES, European Satellite Monitor YE13, B2B surveys among cable head-ends in North and Latin America, Pay-TV figures, SES analyses & estimates. Note: SES reach includes subscribers reached via Ciel-2's spot beams.
Consolidated financial statements 57-106 SES S.A. annual accounts 107-120
1,237 Full time employees year end 2013
SES regional offices around the world
SES prides itself on its best-in-class reputation within the industry, attracting and retaining superior talent to deliver on its challenging business objectives and push the boundaries of global communications. As an employer of choice, SES understands what is important to its professionals for them to fulfil maximum potential and feel inspired to embrace the challenges of today and excel in finding solutions to the communications demands of tomorrow.
With performance management playing a key role in the SES human resources strategy, the professional development of employees is a priority. In particular, the continued expansion into new markets brings with it exciting opportunities for individuals to grow and develop their skillsets.
High on the human resources agenda is a comprehensive learning and development strategy, focused on increasing employees' abilities to maximise performance. Training is strategically delivered around five main areas: the customer, leadership, technology, professional development, and compliance. A range of training programmes is offered and these are provided in a variety of formats, from classroom training to e-learning, external courses, conferences and tuition assistance, to best accommodate the needs of the individual.
When conducting business, SES is committed to observing the highest standards of business ethics in all that it does. Equally, these high standards are reflected in sound human resources management practices, encompassing reference and fairness for all employees. Remuneration levels, which are above the market rate, are regularly benchmarked for consistency. All job opportunities are processed according to an open and transparent process, and a strong emphasis is placed on objectivity when assessing employee performance.
Whether it is through the company's Intranet or an internal campaign for innovative ideas, SES promotes knowledge sharing and the effective flow of internal information to ensure our people remain well-informed and up-to-date. Employees are strongly encouraged to get involved and to actively contribute their ideas and creativity to all aspects of the business, whatever their global work location.
Woven in to all that we do at SES are our corporate values – excellence, innovation, leadership, partnership, and integrity. As an industry leader, we are committed to delivering service excellence, and as an employer of choice, we are committed to bringing out the best in our people.
SES regularly implements a range of corporate social responsibility projects and activities in geographic areas where the company has commercial activities, provides communication services or otherwise interacts with local communities.
We consistently engage in corporate social responsibility activities that are focused on educational programmes and on environmental sustainability.
As a leading provider of communications solutions, we have a responsibility to contribute to the development of communications-based societies and increasingly knowledge-based economic systems.
We invest in education where we can make a difference.
In 2013, we continued our multi-year partnership with the University of Luxembourg, supporting the university's efforts to develop a centre of excellence and innovation for advanced information and communications technology in satellite systems, and by financing a chair in satellite, telecommunications and media law.
Furthermore, SES continued financing student scholarships with the International Space University (ISU).
We also continued to support the educational projects of the Society of Satellite Professionals International (SSPI), a US-based non-profit organisation focusing on the skills and career development of satellite industry professionals worldwide.
We are committed to leave as light a footprint as possible on the ecosystem. Our high-tech activities have a light environmental impact. Satellite provides the most carbon-friendly solution for broadcasting TV channels. However, we still remain committed to limiting the environmental impact of our activities even further.
We regularly conduct company-wide carbon footprint measurements in order to monitor and control the greenhouse gas emissions generated by our operations. This has allowed us to significantly reduce our carbon dioxide emissions. In 2012 (the latest available measurements at the time of print) SES had emitted 33.300 tonnes of CO2e, a reduction of more than 15% compared to 2011.
SES also supports a variety of social and cultural initiatives in the communities in which the company operates. In a multiyear plan, SES donates bandwidth to the International Polar Foundation and thus enables the communication between the Foundation's Princess Elisabeth research station in Antarctica and the organisation's headquarters.
SES is a regular supporter of Institut St. Joseph in Betzdorf, Luxembourg, a home for mentally handicapped persons.
In addition to its continuous support of emergency.lu and as a direct help to re-establish communication links to survivors of typhoon Haiyan, SES donated satellite capacity to Nethope, a consortium of 41 non-governmental organisations around the globe. SES also made a donation in support of the victims of the typhoon.
ELEVATE is the SES satellite training, quality assurance, and accreditation programme for installers across the African continent.
An SES ELEVATE certificate provides the opportunity to generate more income, as well as to further develop skills, to learn cutting edge techniques, and to improve the overall quality of satellite installations.
In Africa, only one out of three homes (82 million) currently have a TV set and only about 10% of those homes have access to digital TV. This number is expected to grow significantly in the coming years as younger generations demand more channels, more technology and more digital connectivity. SES is working with broadcasters and manufacturers on the continent to maximise television take-up via satellite and grow local audiences even further, which in turn increases the need for a large network of trained and accredited installers to provide on the ground support.
The ELEVATE training programme was born out of a need to complement satellite and digital television roll-out on the African continent with quality installations. So far the team has travelled to and trained in the Democratic Republic of Congo, Cameroon, Ghana, Nigeria, Senegal, Cote d'Ivoire, Uganda, Kenya and Tanzania and has held close to 4000 training sessions. The growing number of ELEVATE trained installers is serving to benefit local business growth across the digital broadcasting environment. The SES installer training programme includes recruitment, training, communication, monitoring and incentivising installers.
Satellite: Time: Date:
2013 overview
01-22
On behalf of the Board of Directors, I am pleased to confirm that SES once again delivered on its growth strategy, and provided robust financial results in 2013.
SES has continued to successfully differentiate itself, reinforcing its position in developed markets, focusing on investments in regions and segments with high growth potential, and implementing innovative developments in new ground and satellite technology.
In 2013, the company expanded its operations and delivered growth, as foreseen, with a strong focus on video delivering a 12% increase in the number of TV channels carried on the fleet to over 6,200.
Year-on-year comparisons between 2013 and 2012 are affected by the fact that 2012 included EUR 42.6 million in revenue and EBITDA from four months of analogue transmissions in Germany, which ended on 30 April 2012.
New business and renewals during the year delivered revenue and EBITDA growth at about 6% (as adjusted for analogue revenue in 2012 and at constant exchange rates) and increased the contract backlog to an historic high (at constant FX) of EUR 7.5 billion at the end of 2013.
The success of the three satellite launches during 2013 provides a solid foundation for future growth.
Revenue growth was principally driven by the solid performance in the International region, which delivered an increase in revenue of 12.8% at constant FX. Operating costs continued to be tightly managed, delivering an EBITDA of EUR 1,364.7 million. The EBITDA margin was 73.3%, improving on the 2012 ex-analogue margin of 73.1%. The infrastructure margin of 83.3% (2012 ex-analogue: 83.0%) increased, and the services margin also improved, to 17.1% (2012: 14.9%), reflecting the benefits of efficiency, scale and cost management.
The operating profit increased by 7.7% to EUR 851.2 million. This is notably due to depreciation and amortisation charges being 7.7% lower than the prior year, at EUR 513.5 million. Depreciation, at EUR 466.5 million, was lower due mainly to the absence of the charge relating to the AMC-16 impairment taken in 2012.
Net financing charges were 2.3% ahead of the prior year, due mainly to lower capitalised interest.
The group tax charge was EUR 87.5 million (2012: tax income of EUR 42.2 million) representing an effective tax rate of 12.9%.
The group's Net Debt/EBITDA ratio at 31 December stood at 2.79 (2012: 2.96).
These items were the principal variances to the prior year, resulting in 2013 net profit of EUR 566.5 million compared to EUR 648.8 million in 2012.
SES's differentiation from its peers has supported its ability to secure attractive financing in the global capital markets. Significant progress was made during the year in diversifying the company's financing base. An inaugural U.S. dollar bond raised USD 1 billion in March and a EUR 500 million Eurobond was successfully placed in October.
Revenue and EBITDA is expected to show strong growth in 2014 of 6%-7% (at constant exchange rates), based on the present launch schedule and fleet health status. The growth will be supported by the full-year contribution from capacity brought into operation in 2013 and in early 2014, from services growth and from the commercialisation of SES's extensive portfolio of in-orbit assets.
SES provided a new 3-year revenue and EBITDA CAGR guidance for the period 2014-2016. At constant exchange rates and at the same scope, revenue and EBITDA are expected to deliver a strong CAGR in the period. This growth is expected to be driven by the commercialisation of new and existing transponder capacity and the continued development of related services, in particular in Europe and in the emerging markets.
SES's capital expenditure, which was lower in 2013, is expected to continue to reduce, as the satellite replacement cycle approaches its minimum level. Capital expenditure has reduced from EUR 835 million in 2011 and is expected to stabilise at an annual average of about EUR 450 million during 2015-2018. Free cash flow before financing and dividends is therefore significantly increasing from 2013 onwards, reflecting the growth in revenue and EBITDA and the reduction in capital expenditure. SES will continue to seek attractive, profitable organic and non-organic investment opportunities, prioritising investments that enable SES to offer differentiated services to support its growth in mature and emerging markets. The company will also continue to enhance cash returns to its shareholders, while maintaining its investment grade credit rating.
Looking back at 2013, but even more so at the last 19 years of Romain Bausch's tenure as President and CEO of SES, I would like to take this opportunity to thank Romain, in the name of the Members of the Board of Directors of SES, as well as on behalf of its shareholders and employees, for the outstanding work, vision, strategic leadership and dedication that he has consistently delivered to SES for nearly two decades. Romain's nomination in 1995 proved to be a real game-changer for the company and SES is poised to continue to reap the benefits of his dedication and strategic foresight for years to come.
Looking ahead, we welcome Karim Michel Sabbagh as the new President and CEO of SES. Karim brings a wealth of experience in the ICT sector to SES. Together with the experienced satellite executives of the SES Executive Committee, as well as with SES's dedicated staff, Karim will build on the strong foundations laid under Romain's leadership to capture future growth and to develop further business opportunities in order to keep SES at the forefront of the satellite industry.
René Steichen Chairman of the Board of Directors
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| Number of shares | % Voting shareholding |
% Economic participation |
|
|---|---|---|---|
| Class A shares | |||
| Sofina Group | 17,000,000 | 3.36% | 4.20% |
| Luxempart Invest S.à r.l. | 8,638,264 | 1.71% | 2.13% |
| Nouvelle Santander Telecommunications S.A. | 8,000,000 | 1.58% | 1.97% |
| Other shareholders | 5,381,769 | 1.06% | 1.33% |
| BCEE FDRs (free float) | 298,579,967 | 58.96% | 73.70% |
| Total A Shares | 337,600,000 | 66.67%3 | 83.33%3 |
| Class B shares | |||
| BCEE | 55,089,816 | 10.88% | 5.44% |
| SNCI | 55,082,944 | 10.88% | 5.44% |
| Grand-Duchy of Luxembourg State | 58,627,240 | 11.58% | 5.79% |
| Total B shares2 | 168,800,000 | 33.33%3 | 16.67%3 |
| Total shares (actual) | 506,400,000 | ||
| Total shares (economic) | 405,120,000 |
1 Significant shareholdings as of February 28, 2014.
2 A share of Class B carries 40% of the economic rights of a Class A share.
3 All figures have been rounded up to the second decimal, which may result in a rounding difference of the total percentage for Class A and Class B shares.
SES has been listed on the Luxembourg Stock Exchange since 1998 and on Euronext Paris since 2004. The company follows the 'Ten Principles of Corporate Governance' adopted by the Luxembourg Stock Exchange (its home market) as revised in 2013 and the governance rules applied by companies listed in Paris, where most of the trading in SES FDRs takes place. Where those rules conflict, e.g. with regard to the publication of the individual remuneration of the members of its Executive Committee and its Board members, SES follows the rules of its home market by reporting the aggregate amount of the direct and indirect remuneration of the members of the Executive Committee, with the fixed and the variable components of the benefits being separately identified.
SES meets all the recommendations made by the 'Ten Principles' except with regard to Recommendation 3.9, which states that the committees created by the Board should only have advisory powers. The SES Board has delegated some decision-making powers to the Remuneration Committee. For the full details of these powers, see the charter of the Remuneration Committee on the SES website (www.ses.com).
The company continuously increases the flow of information to its shareholders via the corporate governance section of its website and communicates with its shareholders through the dedicated e-mail address: [email protected]. In line with Luxembourg law, the company allows shareholders to receive all corporate documentation, including the documents for shareholder meetings, in electronic format.
In this context, the website contains a regularly updated stream of information, such as the latest version of the company's main governance documents, be it the articles of incorporation, the corporate governance charter (including the charters of the various committees set up by the Board) or the separate sections on the composition and the mission of the Board, the Board's committees and the Executive Committee. This section also contains the SES Code of Conduct and Ethics, the Dealing Code, the financial calendar and any other information that may be of interest to the company's shareholders.
Created on March 16, 2001 under the name of SES GLOBAL, SES is incorporated in Luxembourg. Following the completion of the acquisition of GE Americom on November 9, 2001, SES became the parent company of SES ASTRA, originally created in 1985. A copy of SES's articles of incorporation, in its latest version, is available in the corporate governance section of the company's website.
Under Luxembourg company law, the company's annual and/ or extraordinary general meetings represent the entire body of shareholders of the company. They have the widest powers, and resolutions passed by such meetings are binding upon all shareholders, whether absent, abstaining from voting or voting against the resolutions.
The meetings are presided by the Chairman of the Board or, in case of his absence, by one of the Vice Chairmen of the Board or, in their absence, by any other person appointed by the meeting. Any shareholder who is recorded in the company's shareholder register at least 14 business days before the meeting is authorised to attend and to vote at the meeting. A shareholder may act at any meeting by appointing a proxy (who does not need to be a shareholder).
The company has issued two classes of shares: Class A and Class B shares.
Although they constitute separate classes of shares, Class A and Class B shares have the same rights except that the shares of Class B, held by the State of Luxembourg and by two entities wholly-owned by the State of Luxembourg, entitle their holders to only 40% of the dividend, or in case the company is dissolved, to 40% of the net liquidation proceeds paid to shareholders of Class A. Class B shares are not freely traded. Each share, whether of Class A or Class B, is entitled to one vote. In accordance with the company's articles of incorporation, no shareholder of Class A may hold, directly or indirectly, more than 20%, 33% or 50% of the company's shares unless it has obtained prior approval from the meeting of the shareholders. Such limit is calculated by taking into account the shares of all classes held by a shareholder of Class A.
A shareholder or a potential shareholder who plans to acquire by whatever means, directly or indirectly, more than 20%, 33% or 50% of the shares of the company must inform the Chairman of the Board of such intention. The Chairman will then inform the government of Luxembourg of the planned acquisition, which may only be opposed by the government within three months from receiving such information, should the government determine that such acquisition is against the general public interest.
In case of no opposition from the government, the Board shall convene an extraordinary meeting of shareholders, which may decide at a majority provided for in article 67-1 of the law of August 10, 1915, as amended, regarding commercial companies, to authorise the demanding party to acquire more than 20%, 33% or 50% of the shares.
The annual general meeting is held on the first Thursday in April. Each registered shareholder will receive written notice of the annual general meeting, including the time of the meeting and the agenda, at least 30 days prior to the meeting. Holders of the company's FDRs will be represented at the meeting by Banque et Caisse d'Epargne de l'Etat acting as Fiduciary. Each FDR will represent one Class A share. If a holder of FDRs wishes to attend the annual general meeting of shareholders in person, that shareholder needs to convert at least one FDR into an A share. In order to facilitate the attendance of the meeting by FDR holders, the company will pay the applicable charge for a conversion of up to 10,000 FDRs for a short period prior to the annual general meeting.
Notice of the meeting and of the proposed agenda will also be published in the press and in the 'Memorial C'. The Fiduciary will circulate the draft resolutions to both international clearing systems, Clearstream and Euroclear, allowing FDR holders to give their voting instructions to the Fiduciary in time for the meeting. At the same time, the draft resolutions will be made available on the company's website. Unless the Fiduciary has received specific instructions from the FDR holder, the Fiduciary will vote in favour of the proposals submitted by the Board.
The meeting may deliberate validly only if at least half of the shares of Class A and at least half of the shares of Class B are represented. In the event that the required quorum is not reached, the meeting will be reconvened in accordance with the form prescribed by the articles of incorporation. It may then validly deliberate without consideration of the number of represented shares.
The proceedings are held in French, but an English translation is provided by the company. A French version of the AGM minutes and the results of the shareholders' votes will be published on the SES website within 15 days of the annual general meeting.
With the exception of the procedure described above whenever a shareholder intends to hold more than 20%, 33% or 50%, all the resolutions of the meeting are adopted by a simple majority vote except if otherwise provided for by Luxembourg company law. The annual general meeting held on April 4, 2013 was attended by 99.871% of the company's shareholders. As the 4,875,016 FDRs held by the company did not participate in the vote, the participation in the vote was reduced to 98.951% of the company's shares.
During the 2013 annual general meeting, the shareholders approved the 2012 financial results and the allocation of the 2012 profits, granted discharge to the external auditor and the directors, elected PwC as the company's external auditor in replacement for E&Y and granted an authorisation to SES to buy back its own shares. The shareholders also approved the directors' fees, which remained unchanged in comparison to 2012. Finally, shareholders elected six Directors for a term of three years with a minimum majority of 92.8% of the votes expressed. Four of the Directors saw their mandate renewed, whereas Romain Bausch and Tsega Gebreyes were elected for a first mandate of three years.
All of the Board's other proposals were carried by a majority of at least 99.4% of the votes expressed. In accordance with article 67-1 of the Luxembourg company law, abstentions are not considered when determining whether a resolution has been passed or not. The detailed results of the shareholders' votes are available in the corporate governance section of the company's website.
The Board of Directors is responsible for defining the company's strategic objectives as well as its overall corporate plan. The Board approves, upon proposal from the Executive Committee, the annual consolidated accounts of the company and the appropriation of results, the group's medium-term business plan, the consolidated annual budget of the company and the management report to be submitted to the meeting of shareholders. It also approves major investments and is responsible vis-à-vis shareholders and third parties for the management of the company, which it delegates to the Executive Committee.
The Board of SES is composed of 18 directors, all but one of them non-executive directors. In accordance with the company's articles of association, two thirds of the Board members represent holders of Class A shares and one third of the Board members represent holders of Class B shares. The mandates of the current directors will expire at the annual general meeting of shareholders in April 2014, 2015 and 2016, respectively. Mr René Steichen is the Chairman of the Board of Directors. He was elected by the members of the Board in the meeting which followed the annual general meeting on April 4, 2013. René Steichen is currently assisted by two Vice Chairmen, Messrs François Tesch and Jean-Paul Zens, each one elected on the basis of proposals submitted by directors representing shareholders of Class A and of Class B shares, respectively.
In the event of a vacancy on the Board, the remaining directors may, upon a proposal from the Nomination Committee and on a temporary basis, fill such a vacancy by a majority vote. In this case, the next annual general meeting of shareholders will definitively elect the new director, who will complete the term of the director whose seat became vacant.
In accordance with internal regulations, at least one third of the Board members must be independent directors. A Board member is considered independent if he has no relationship of any kind with the company or management which may impact his judgment. This is defined as:
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Nine of the current Board members are considered independent:
Mrs Bridget Cosgrave, Tsega Gebreyes and Miriam Meckel and Messrs Marc Beuls, Marcus Bicknell, Jacques Espinasse, Conny Kullman, Ramu Potarazu and Marc Speeckaert.
Of the nine directors who are not considered independent, six represent a significant shareholder owning more than 5% of the company's shares, two have been a director for more than 12 years and one director has an employment relationship with the company.
Mr Pierre Margue, Vice President Legal and Corporate Affairs, acts as secretary of the Board of Directors.
The Board of Directors meets when required by the company's business, and at least once per quarter. It can only validly deliberate if a majority of the directors are present or represented. The resolutions of the Board are passed by a simple majority of votes of the voting directors present or represented, not considering abstentions. Any material contract that is proposed to be signed by the company or any of its wholly controlled operating subsidiaries with a shareholder owning, directly or indirectly, at least 5% of the shares of the company is subject to a prior authorisation by the Board. In 2013 there have been no transactions between the company and a shareholder owning directly or indirectly at least 5% of the company's shares.
The Board of Directors held six meetings in 2013, with an average attendance rate of more than 95%. After endorsement by the Audit and Risk Committee, the Board approved the 2012 audited accounts, including the proposed dividend as well as the results for the first half of 2013. During the year, the Board approved the new strategic plan as well as a business plan for the period 2013–2019, which served as the basis for the 2014 budget approved by the Board in December.
During the year 2013, the Board approved the procurement of SES-10 as well as the divestment from Solaris, a Joint-Venture the company had set up with Eutelsat to develop nextgeneration Mobile Satellite Services (MSS).
During 2013, the Board also decided to launch a new share buyback programme, which was implemented on Euronext Paris through the filing of a 'notice d'information' on May 15. The 2013 programme was limited to the following two objectives:
Finally, the Board noted two updates to the company's risk management report. The Board was regularly informed by the Executive Committee on the group's activities and financial situation as well as on the frequency spectrum dispute with Eutelsat. The Board was updated on O3b and noted the sale of the company's shares in Glocom Ltd and in ND SatCom in line with earlier Board decisions. At each meeting, directors receive a report on ongoing matters and the Chairmen of the three committees set up by the Board present a report on the latest developments discussed in these respective committees. In addition, a business report is distributed to the members of the Board on a monthly basis.
The Board further noted an update of the Treasury Roadmap and received a presentation on the main regulatory issues identified in the satellite sector.
In line with past practice, the Board proceeded with a selfevaluation exercise, as a result of which management agreed to some additional modifications which should further streamline the internal corporate governance processes.
Note: Mr. Jacques Espinasse was not able to attend the photoshoot.
The 18 members of the current Board of Directors are:
Born November 27, 1942. Mr Steichen became a director on June 1, 1995. He was elected Chairman on April 15, 1996. Prior to that time, he was a member of the Luxembourg government (1984–1993) and member of the European Commission (1993–1995). He is currently an attorney at law in Luxembourg. He is also a member of the Board of Directors of SES ASTRA and Chairman of the Board of Luxconnect S.A. Mr Steichen studied law and political science in Aix-en-Provence and Paris. He holds a doctorate in law and also earned the final degree in economics and finance from the Institut d'Etudes Politiques of Paris. Mr Steichen is the Chairman of the Board as well as of the company's Nomination and Remuneration Committees.
Mr Steichen is a Luxembourg national. He is not an independent director, because he represents an important shareholder.
Born January 16, 1951. Mr Tesch became a director on April 15, 1999. He is Chief Executive Officer of Foyer S.A. and Luxempart S.A.. He graduated with a degree in economics from the Faculté d'Aix-en-Provence and holds an MBA from INSEAD (Institut Européen d'Administration des Affaires). Mr Tesch is also a Board Member of Atenor Group S.A. and Financière de Tubize S.A., and Vice Chairman of the Board of SES and a member of the Nomination Committee of SES.
Mr Tesch is a Luxembourg national. He is not an independent director, because he has been a director for more than 12 years.
Born January 8, 1953. Mr Zens became a director on May 7, 2002, and was elected Vice Chairman on the same date. Mr Zens is also a member of the Board of Directors of SES ASTRA and Entreprise des Postes et Télécommunications, Luxembourg. He is currently Director of the Media and Communications department of the Ministry of State in Luxembourg. He holds a law degree and a degree in psychology and communications sciences from the University of Strasbourg. Mr Zens is a member of the Nomination Committee of SES.
Mr Zens is a Luxembourg national. He is not an independent director because he represents an important shareholder.
Born October 25, 1959. Mr Allegrezza became a director on February 11, 2010. He is currently the Director General of Statec, the Luxembourg Institute for Statistics and Economic Studies, a post he has held since April 2003. He was Conseiller de Gouvernement 1ère classe at the Ministry of Economics, responsible for internal market policy, and is the Chairman of the Observatory for Competitiveness. He is also the Chairman of the Board of Directors of Entreprise des Postes et Télécommunications and of the Board of LuxTrust i.n.c and a member of the Conseil Economique et Social. Mr Allegrezza, was a parttime lecturer at the IAE/University of Nancy 2, has a Master's in economics and a PhD in applied economics.
Mr Allegrezza is a Luxembourg national. He is not an independent director, because he represents an important shareholder.
Born July 3, 1953. Mr Bausch has been President and Chief Executive Officer of SES since 1995, following a career in the Luxembourg civil service (Ministry of Finance). Before joining SES as its chief executive. Mr Bausch occupied key positions in the banking, media and telecommunications sectors and spent a five-year term as a Director and Vice Chairman of SES. Mr Bausch is also Chairman of the Board of Directors of SES ASTRA and Vice Chairman of the Board of Directors of O3b Networks. Mr Bausch also serves as a Director of Fedil – Business Federation Luxembourg and is a member of the Boards of Directors of Aperam, BIP Investment Partners and Compagnie Financière La Luxembourgeoise. He graduated with a degree in economics (specialisation in business administration) from the University of Nancy. He holds an honorary doctorate from the Sacred Heart University in Luxembourg.
Mr Bausch is a Luxembourg national. He will retire as President and CEO effective April 3, 2014. He is not an independent Director, because of his employment relationship with the company.
Born September 15, 1956. Mr Beuls became a director on April 7, 2011. He is the former President and CEO of Millicom International Cellular S.A., a position he held from 1998 to 2009. Prior to joining Millicom in 1992 as Senior Vice President in charge of finance and treasury, Mr Beuls worked for Generale Bank in Belgium, specialising in project and trade financing in emerging markets. Mr Beuls graduated from the Limburg Business School, currently UHasselt, holding a degree in economics with a major in finance. Mr Beuls is a member of the Audit and Risk Committee of SES.
Mr Beuls is a Belgian national. He is an independent director.
Born February 28, 1948. Mr Bicknell became a director on May 6, 2005. Mr Bicknell is a director of New Media Foundry Ltd, and Langstaff-Ellis Ltd, two non-listed companies in the United Kingdom, and is a member of the Development Board of the Royal Academy of Dramatic Art. From 1986 to 1990 he was Commercial Director of Société Européenne des Satellites. Mr Bicknell holds an MA Honours Degree in physical anthropology from Cambridge University. Mr Bicknell is a member of the Remuneration Committee and the Nomination Committee of SES.
Mr Bicknell is a British national. He is an independent director.
Born May 13, 1955. Mr Colas became a director on February 21, 2013. He was the general secretary of the Council of Ministers of the Luxembourg Government from 2004 to 2013, and he is presently Administrateur Général in the Presidency of the Government, in the Prime Minister's Office. Prior to that, he has held several positions in the Luxembourg civil service, in the Ministry of Finance, the Ministry for the Civil Service and Administrative Reform, the Ministry of Home Affairs and since 2004 in the Presidency of the Government, in the Prime Minister's Office. From 2001-2006, Mr Colas was a member of the Audit Committee of the European Investment Bank. He is also a member of the Board of Oeuvre Nationale de Secours Grand-Duchesse Charlotte. Mr Colas graduated with a master's degree in law from the University of Strasbourg and holds a double Master of Business Administration (Finance and Marketing) from the Richard T. Farmer School of Business from the University of Oxford (Ohio).
Mr Colas is a Luxembourg national. He is not an independent director, because he represents an important shareholder. Mr Colas is a member of the Audit and Risk Committee of SES.
Born July 1, 1961. Ms Cosgrave became a director on April 3, 2008. She is President and Founder of EVERY EUROPEAN DIGITAL, a company to develop technology agnostic broadband infrastructure opportunities, currently focused on Poland. From 2009 until 2011, Ms Cosgrave served as Director General of DIGITALEUROPE. Ms Cosgrave was with Belgacom S.A. from 2001-2007 as a member of the Executive Committee. Her roles there included Executive Vice President of the Enterprise division, Chairman, President & founding CEO of BICS, a joint venture with Swisscom and MTN, and Board Member of Belgacom Mobile (Proximus) and Telindus Group. Ms Cosgrave holds an MBA from London Business School and a BA (Hons) in Economics & History from Queen's University in Canada. Ms Cosgrave is a member of the Audit and Risk Committee of SES.
Ms Cosgrave is a dual Irish and Canadian national. She is an independent director.
Born April 29, 1955. Mr de Liedekerke Beaufort became a director on April 17, 2000. He is currently a director of Santander Telecommunications, a privately held company, as well as a director of other private companies with interests in various fields such as financial, communication and real estate developments. Mr de Liedekerke Beaufort graduated from the Ecole Hôtelière de Lausanne. Mr de Liedekerke Beaufort is a member of the Remuneration Committee of SES.
Mr de Liedekerke Beaufort is a French national. He is not an independent director, because he has been a director for more than 12 years.
Born May 12, 1943. Mr Espinasse became a director on May 6, 2005. In May 2007, after five years of duty, he retired as a member of the Management Board and Chief Financial Officer of Vivendi. Mr Espinasse is the former Chief Operations Officer of TPS. He is a member of the Supervisory Boards of LBPAM, Axa Belgium, Axa Holdings Belgium, Axa Bank Europe and Hammerson Plc., and holds a BBA and an MBA from the University of Michigan. Mr Espinasse is a member of the Audit and Risk Committee and the Remuneration Committee of SES.
Mr Espinasse is a French national. He is an independent director.
Born January 22, 1956. Mr Finck became a director on May 31, 2001. Mr Finck is Chief Executive Officer of Banque et Caisse d'Epargne de l'Etat, a member of the Boards of Directors of Bourse de Luxembourg S.A., Luxair S.A., Cargolux S.A., La Luxembourgeoise S.A., La Luxembourgeoise Vie S.A., Paul Wurth S.A., and La Banque Postale Asset Management. Mr Finck graduated with a degree in economics from the University of Aix/Marseille. Mr Finck is a member of the Audit and Risk Committee of SES.
Mr Finck is a Luxembourg national. He is not an independent director, because he represents an important shareholder.
Born December 14, 1969. Mrs Tsega Gebreyes became a director on April 4, 2013. She is the Founding Director of Satya Capital Limited. She served as Chief Business Development and Strategy Officer of Celtel International BV and Senior Advisor to Zain. She was also Founding Partner of the New Africa Opportunity Fund, LLP (re-named Zeypher Opportunity Fund LLP) and has worked with McKinsey and Citicorp. Mrs Gebreyes is a director of Ison Grown, Hygeia Nigeria Limited and Satya Capital Limited. She has a double major in Economics and International Studies from Rhodes College and holds an MBA from Harvard Business School.
Mrs Gebreyes is an Ethiopian national. She is an independent director.
Born July 5, 1950. Mr Kullman became a director on April 5, 2012. He was a former Director General, CEO and Chairman of Intelsat. Mr Kullman graduated with a Master of Science in Electronic Engineering from the Chalmers University of Technology in Gothenburg in 1974. After working as a Systems Engineer for Saab-Ericsson Space AB in Sweden until 1983, he joined Intelsat in Washington D.C., where he held several positions before becoming the company's Director General and CEO in 1998. Mr Kullman became the CEO of Intelsat, Ltd. in 2001, and in 2005, Chairman of Intelsat, Ltd., and CEO and President of Intelsat (Bermuda), Ltd., positions from which he retired in 2006. Mr Kullman is a member of the Remuneration Committee and of the Nomination Committee of SES.
Mr Kullman is a Swedish national. He is an independent director.
Born July 18, 1967. Pr. Dr. Meckel became a director on April 5, 2012. She is Professor for Corporate Communication and Director of the Institute for Media Management and Communication, University of St. Gallen. Prior to her current position, she was Undersecretary of State for Europe, International Affairs and Media and government spokeswoman in the office of the Premier of North Rhine-Westphalia. She also worked as Professor for Journalism and Communication Studies at the University of Münster, and was Managing Editor and presenter of a television news magazine for RTL Television. She has also been active as a freelance journalist for public and commercial television. Pr. Dr. Meckel is a member of the Boards of Directors of SES ASTRA, of the Ecole Hôtelière de Lausanne and of Commerzbank International S.A. Luxembourg. She holds a PhD in Communication Studies from the University of Münster.
Pr. Dr. Miriam Meckel is a German national. She is an independent director.
Born on August 10, 1961. Mr Potarazu became a director on February 20, 2014. He is the CEO of Binary Fountain. He is the Founder and former CEO of Vubiquity. Prior to founding Vubiquity, Mr Potarazu spent 15 years in various positions at Intelsat (1991–2006). He became Intelsat's Vice President of Operations and CIO in 1996 and its Vice President, Commercial Restructuring in 2000. In 2001 Mr Potarazu became President of Intelsat Global Service Corporation and from 2002 to 2006 he was President and Chief Operating Officer of Intelsat Ltd. Prior to joining Intelsat, Mr Potarazu held several engineering jobs. Mr Potarazu graduated with a BS in Computer Science and in Mathematics from the Oklahoma Christian University. He also holds an MSc in Electrical Engineering from the Johns Hopkins University and was a member of the Stanford Executive Program.
Mr Potarazu is a US National. He is an independent director.
Born April 26, 1950. Mr Rod became a director on November 23, 1995. He is President of Commissariat aux Assurances and Chairman of the Board of Directors of Banque et Caisse d'Epargne de l'Etat, Luxembourg. Mr Rod graduated with a degree in law from the University of Nancy.
Mr Rod is a Luxembourg national. He is not an independent director because he represents an important shareholder.
Born May 23, 1951. Mr Speeckaert became a director on May 6, 2005. He is the Managing Director of Sofina S.A. and a Director of several non-listed corporations, as well as of Rapala (which is listed on the Helsinki Stock Exchange) and of Mersen (which is listed on Euronext Paris). Mr Speeckaert graduated with a degree in applied economics and holds a Master in Business and Administration from the Université Catholique de Louvain (UCL) in Belgium. He also participated in an Advanced Management Program from Wharton, University of Pennsylvania (USA). Mr Speeckaert is the Chairman of the Audit and Risk Committee and a member of the Nomination Committee of SES.
Mr Speeckaert is a Belgian national. He is an independent director.
The Chairman's Office prepares the agenda for the Board meetings.
The Remuneration Committee determines the remuneration of the members of the Executive Committee, and advises on the overall remuneration policies applied throughout the company.
The Audit and Risk Committee assists the Board in carrying out its oversight responsibilities in relation to corporate policies, risk management, internal control, internal and external audit and financial and regulatory reporting practices.
The Nomination Committee identifies and nominates suitable candidates for the Board of Directors, for election by the annual general meeting of shareholders.
The Chairman and the two Vice Chairmen are members of the Chairman's Office. The Chairman's Office prepares the agenda for the Board meetings, allowing the Vice Chairmen to co-ordinate the preparation of the Board meetings with the directors of their respective share classes.
Current members are:
Mr René Steichen
Mr François Tesch
Mr Jean-Paul Zens
The Chairman's Office met six times during 2013 with a members' attendance rate of more than 94%.
In accordance with general corporate governance standards, the company's Board established a Remuneration Committee which determines the remuneration of the members of the Executive Committee, and which advises on the overall remuneration policies applied throughout the company. It reports to the Board at each meeting through its Chairman. The Remuneration Committee is composed of six members, at least half of whom are independent Board members in line with the SES internal regulations. The Remuneration Committee is now composed of the following six non-executive directors:
Mr Marcus Bicknell (independent)
Mr Hadelin de Liedekerke Beaufort
Mr Jacques Espinasse (independent)
Mr Conny Kullman (independent)
Mr Jean-Paul Zens
The Remuneration Committee was chaired in 2013 by the Chairman of the Board.
The Remuneration Committee held five meetings, with an attendance rate of 90%. Matters addressed related to the determination of the 2013 stock option grant and the 2012 bonus for members of the Executive Committee. The Remuneration Committee further determined the number of performance shares allocated to the members of the Executive Committee for their performance in 2012 and it adopted the 2013 business objectives which are used as one element in the determination of their bonuses for 2013. The Remuneration Committee decided that from 2014 onwards, executives will receive fewer restricted shares and more performance shares. After each meeting, the Board is briefed in writing about the work of the Remuneration Committee.
The Remuneration Committee also oversees the implementation of the decision under which the members of the Executive Committee must within five years hold the equivalent of an annual salary's worth of registered shares in the company (with the President and CEO of SES having to hold shares worth two years of his salary).
As part of its overall corporate governance, the Board established an Audit and Risk Committee, which assists the Board in carrying out its oversight responsibilities in relation to corporate policies, risk management, internal control, internal and external audit and financial and regulatory reporting practices. The committee has an oversight function and provides a link between the internal and external auditors and the Board. The Audit and Risk Committee is composed of six members, four of whom are independent Board members.
The current members of the Audit and Risk Committee are:
Mr Marc Speeckaert, Chairman of the Audit and Risk Committee (independent)
Mr Marc Beuls (independent) Mr Marc Colas Ms Bridget Cosgrave (independent) Mr Jacques Espinasse (independent) Mr Jean-Claude Finck
The Audit and Risk Committee held five meetings, with a members' attendance rate of 90%.
The meetings were dedicated in particular to the review of the 2012 financial results before their submission to the Board and their subsequent approval by the shareholders at the statutory annual general meeting, and to the results of the first half of 2013. Members of the Board also had the opportunity to channel any comments they had on the company's quarterly results through the Chairman of the Audit and Risk Committee prior to the publication of these results.
The Audit and Risk Committee reviewed the company's statement on internal control systems prior to its inclusion in the annual report, approved the Internal Audit plan, and received bi-annual updates on the Internal Audit activities and on the follow-up of the major recommendations. It also reviewed the 2012 Ernst & Young Management letter.
The Audit and Risk Committee further continued to encourage management in its efforts to eliminate as many non-operating legal entities as possible. In line with good corporate governance practice, and as result of the RFP launched in 2012 for the appointment of the external auditor, the Audit and Risk Committee proposed to the Board and to the shareholders to appoint PwC as external auditor for 2013.
The Audit and Risk Committee received bi-annual updates on risk management from the SES risk management committee and held several discussions on IT security. The Committee received updates on the newly introduced ERP system and an update on the Treasury Roadmap as well as an annual report from the Chairman of the Compliance Committee. It reviewed the Internal Audit Charter and approved a limited number of non-Audit engagements to be performed by the new external auditor who also briefed the Audit and Risk Committee on the first six months of the transition from EY to PwC. Finally the Audit and Risk Committee reviewed the recommendations submitted by the CSSF resulting from an analysis by the CSSF of the company's 2012 annual accounts.
After each meeting, the Board is briefed in writing about the work of the Audit and Risk Committee.
In line with best practice in corporate governance, the Board established a Nomination Committee whose role is to identify and nominate suitable candidates for the Board of Directors, for election by the annual general meeting of shareholders. Such proposals are based on submissions from shareholders for a number of candidates at least equal to the number of posts to be filled for each class of shareholders. The Nomination Committee also proposes candidates for Executive Committee membership for election by the Board.
The Nomination Committee is composed of six members, at least half of whom are independent Board members in line with the SES internal regulations:
| Mr René Steichen | |
|---|---|
| Mr Marcus Bicknell (independent) | |
| Mr Conny Kullman (independent) | |
| Mr Marc Speeckaert (independent) | |
| Mr François Tesch |
Mr Jean-Paul Zens
The Nomination Committee was chaired in 2013 by the Chairman of the Board. The Nomination Committee met nine times with an attendance rate of 89%. The main topics discussed related to the appointment of a new CEO, the appointment of a new CFO and the Management Succession Plan 2013 as well as to the preparation of the Board renewal.
After each meeting, the Board is briefed in writing about the work of the Nomination Committee.
Front row (from L to R): Ferdinand Kayser (Chief Commercial Officer) and Romain Bausch (President and CEO). Back row (from L to R): Padraig McCarthy (Chief Financial Officer), Martin Halliwell (Chief Technology Officer), Gerson Souto (Chief Development Officer) and Karim Michel Sabbagh (CEO Designate).
The Executive Committee is in charge of the daily management of the group. It functions as a collegial body. The Executive Committee is mandated to prepare and plan the overall policies and strategies of the company for approval by the Board. It may approve intra-group transactions, irrespective of the amount, provided that they are consistent with the consolidated annual budget of the company as well as specific transactions with third parties for an amount up to EUR 10 million per project. It informs the Board at its next meeting on each such transaction, it being understood that the aggregate amount for such projects can at no time be higher than EUR 30 million.
The Executive Committee may approve any external credit facilities or external guarantees, pledges, mortgages and any other encumbrances of the company, or any whollyowned affiliate, for as long as the company will not lose its investment grade rating as a result of such facility or guarantee. It may approve increases of up to 5% in the capital expenditure budget for a satellite procurement already approved by the Board, it being understood that the Internal Rate of Return will need to comply with certain specific thresholds defined by the Board. The Executive Committee informs the Board at its next meeting of each such increase.
The Executive Committee submits to the Board those measures which it deems necessary to be taken in order to meet the purposes of the company. Prior to the beginning of each fiscal year, the Executive Committee submits to the Board a consolidated budget for approval.
The Executive Committee is in charge of implementing all decisions taken by the Board and by the committees specially mandated by the Board. The Executive Committee may, in the interests of the company, sub-delegate part of its powers and duties to its members acting individually or jointly.
The Chairman of the Executive Committee organises the work of the Executive Committee and co-ordinates the activities of its members, who report directly to him. In order to facilitate the implementation by the Board of its overall duty to supervise the affairs of the company, the Chairman of the Executive Committee informs the Chairman of the Board on a regular basis of the company's activities. The latter receives the agenda and the minutes of all meetings of the Executive Committee in due time. During 2013, the Executive Committee met 44 times, with an attendance rate of more than 95%. Mr Pierre Margue, Vice President Legal and Corporate Affairs, the secretary of the Board of Directors, also acted as secretary to the Executive Committee.
The following persons are members of the Executive Committee:
Members of the Executive Committee are nominated by the Board of Directors upon a proposal from the Nomination Committee.
The current members of the Executive Committee are:
Born July 3, 1953, Mr Bausch has been President and Chief Executive Officer of SES since 1995, following a career in the Luxembourg civil service (Ministry of Finance). Before joining SES as its chief executive. Mr Bausch occupied key positions in the banking, media and telecommunications sectors and spent a five-year term as a Director and Vice Chairman of SES. Mr Bausch is also Chairman of the Board of Directors of SES ASTRA and Vice Chairman of the Board of Directors of O3b Networks. Mr Bausch also serves as a Director of Fedil – Business Federation Luxembourg and is a member of the Boards of Directors of Aperam, BIP Investment Partners and Compagnie Financière La Luxembourgeoise. He graduated with a degree in economics (specialisation in business administration) from the University of Nancy. He holds an honorary doctorate from the Sacred Heart University in Luxembourg.
Mr Bausch is a Luxembourg national. He will retire as President and CEO effective April 3, 2014.
Born September 26, 1963. Mr. Sabbagh joined SES on September 1, 2013 as CEO Designate. He is a member of the SES Executive Committee and serves on the Boards of SES ASTRA, O3b and YahLive. He served on the Board of SES from April 7, 2011 until August 31, 2013 and was a member of the Audit and Risk Committee of SES for the same period. He was a Senior Partner and a practice and regional leader for communications, media & technology at Booz & Company. At Board and Chief Executive levels, he has shaped and served the strategic agenda of global players in the communications, media and satellite sectors. He has led end-to-end multinational teams in long-term, large-scale privatisations, international expansion, mergers and acquisitions, growth acceleration and strategy-based transformation programmes.
Mr Sabbagh is a visiting professor in technology management and member of the Academic Council for the School of International Management at Écoles des Ponts et Chaussées ParisTech (Grandes Écoles) in France. He holds a BBA with Distinction from the American University of Beirut, an MBA from the American University of Beirut, a PhD with Honors in strategic management from the American Century University in New Mexico, and a DBA in international business management from the International School of Management.
Mr Sabbagh is a Canadian and Lebanese national. He will succeed to the President and CEO, effective April 4, 2014.
Born on 27 September 1960, and appointed Chief Financial Officer on 4 April 2013, Padraig McCarthy started his career with SES in 1995 and is a skilled satellite finance executive, having held senior finance positions throughout his career in the company. As of 2001, Mr. McCarthy has been the CFO of SES ASTRA and, since the integration of SES ASTRA and SES World Skies into SES, Senior Vice President Financial Operations & Business Support at SES. Mr McCarthy is a Director of SES ASTRA and an alternate Director of YahLive. Prior to joining SES, he occupied various positions with KPMG, Schering Plough and Norton S.A (an affiliate of Saint Gobain). Mr McCarthy holds a bachelors degree in Commerce from the University College Cork and is a fellow of the Irish Institute of Chartered Accountants.
Mr McCarthy is an Irish national.
Born April 20, 1959, and appointed Chief Technology Officer on May 1, 2011. Mr Halliwell was President of SES ENGINEERING from January 1, 2008 to April 2011. Prior to this assignment, Martin Halliwell held the position of SVP and Chief Technology Officer at SES ASTRA, where he was responsible for all engineering and operational activities. In the course of his career at SES ASTRA, Mr Halliwell held a number of positions, including General Manager, Global Multimedia Networks, Technical Director of SES Multimedia and Deputy to the Technical Director of SES ASTRA. Prior to joining SES, Martin Halliwell worked for Cable & Wireless and for Mercury Communications. Mr Halliwell holds a BA in Mathematics and Mechanical Engineering and an MBA specialising in external environment and strategic management from the Open University. Mr Halliwell is a member of the Board of SES ASTRA and of O3b Networks.
Mr Halliwell is a British national.
Born July 4, 1958, and appointed Chief Commercial Officer of SES on May 1, 2011. Mr Kayser was previously President and Chief Executive Officer of SES ASTRA as of January 2002. Mr Kayser came to SES from Premiere World, the digital pay-TV bouquet of Germany's Kirch Group, where he was Managing Director between 1997 and 2001. Prior to joining the Kirch Group, Mr Kayser held a number of executive positions at CLT, Europe's largest commercial broadcaster, including Senior Vice President in charge of German TV and radio activities (1989–1992), Managing Director in charge of the launch of RTL2 (1993) and Executive Vice President and member of the Management Board responsible for all TV activities of CLT (1993–1996). Mr Kayser holds a Master of Economics from the University of Paris 1, Panthéon-Sorbonne, and has concluded specialised university studies in Media Law and Management of Electronic Media. Mr Kayser is a member of the Boards of SES ASTRA and YahLive.
Mr Kayser is a Luxembourg national.
Born June 14, 1964, and appointed Chief Development Officer of SES on May 1, 2011. Mr Souto joined SES in 1998 for a career in the Business Development function and held various executive positions within SES. Since 2009, Mr Souto was a member of the executive management of SES World Skies with responsibility for commercial services; prior to that and since 2007, he held similar responsibilities at SES's New Skies division. Prior to joining SES, Mr Souto worked for Intelsat and at Embratel. Mr Souto holds an MBA from George Washington University in Washington, D.C., an MA in Telecommunication Systems from the Pontifical Catholic University in Brazil, and a bachelor's degree in Telecommunication Engineering from the Federal Fluminense University in Brazil. Mr Souto is a member of the Boards of SES ASTRA and of O3b Networks.
Mr Souto is a Brazilian national.
The annual general meeting of shareholders determines the remuneration of the members of the Board of Directors for attending Board and committee meetings. In 2013, the shareholders decided to maintain the fees paid to the directors at the previous year's level with a majority of more than 99.99%. Directors receive a fixed fee of EUR 40,000 per year, whereas the Vice Chairmen and the Chairman of the Audit and Risk Committee receive an annual fixed fee of EUR 48,000 and the Chairman receives EUR 100,000 per year.
The shareholders also maintained the fees per meeting at EUR 1,600 for each meeting of the Board or a committee of the Board attended. Half of that fee is paid if the director participates via telephone or videoconference in the meeting. All these fees are net of any Luxembourgish withholding taxes. The total net remuneration fees paid for the year 2013 to the members of the Board of Directors (net of the Luxembourgish withholding tax) amounted to EUR 1,126,267, of which EUR 345,600 were paid as variable fees, with the remaining EUR 780,667 representing the fixed part of the Board fees. The gross overall figure for the year 2013 was EUR 1,407,833.
On December 31, 2013, the members of the Board of Directors and their closely associated family members owned a combined total of 832,787 shares and FDRs (representing 0.16% of the company's share capital).
Transactions made by members of the Board of Directors are published on the company's website under Management Disclosures. In accordance with the company's Dealing Code, directors require prior permission before dealing in SES shares or FDRs.
The remuneration of the members of the Executive Committee is determined by the Remuneration Committee. It is composed of a fixed and a variable part. The total gross remuneration paid to the six members of the Executive Committee relative to the year 2013 amounted to EUR 10,669,893.15 of which EUR 3,367,417.92 represented the fixed part and EUR 7,302,474.96 the variable part. The direct remuneration paid to the members of the Executive Committee amounted to EUR 4,926,797.34 whereas the indirect remuneration was EUR 5,743,095.77. The indirect remuneration also contains the benefits derived by the members of the Executive Committee from the company's executive stock option plan and the long-term incentive plan, as adopted by the Board of Directors. During 2013, the members of the Executive Committee were awarded a combined total of 148,184 options to acquire company FDRs at an exercise price of EUR 23.87, the price being based on the average of the closing price on Euronext Paris of the first 15 trading days following the Remuneration Committee meeting at which the options were authorised. A quarter of those options vested on January 1, 2014, the remaining quarters vesting on January 1, 2015, 2016 and 2017, respectively. In 2013, members of the Executive Committee were granted 73,326 restricted shares as part of the company's long-term incentive plan, as well as 24,288 performance shares. These shares will vest on June 1, 2016.
During 2013, Messrs Romain Bausch, Martin Halliwell, Ferdinand Kayser, Padraig McCarthy and Gerson Souto sold some or all of the restricted shares which vested on June 1. SES publishes the details of all transactions made by its Board members and by the members of its Executive Committee on its website: http://www.ses.com/management-disclosures.
Each member of the Executive Committee is entitled to two years of base salary in case his contract is terminated without cause. If they resign they are not entitled to any compensation.
On December 31, 2013, the six members of the Executive Committee then in place owned a combined total of 293,699 shares and FDRs (representing 0.06% of the company's share capital), 299,154 unvested restricted and performance shares and 1,222,174 options. Transactions made by members of the Executive Committee are published on the company's website under Management Disclosures. Members of the Executive Committee are required to comply with the company's dealing code.
In accordance with the Luxembourg law on commercial companies, the company's annual and consolidated accounts are certified by an external auditor appointed by the annual general meeting of shareholders. On April 4, 2013, and based upon a proposal from the Board, the shareholders elected PwC as the company's external auditor for one year and approved its remuneration, with a majority of more than 99.4%. The mandate of PwC will expire at the annual general meeting on April 3, 2014.
This section contains a summary of the main risks that SES may face during the normal course of its business. However:
SES is planning to launch four satellites between 2014 and 2016. The launch of any of these satellites carries a risk of delay for a variety of reasons, including the late availability of the satellite or co-passenger satellite for shipment to the launch site, the late availability of the launch service or lastminute technical problems arising on the satellite, the co-passenger satellite, or the launcher.
A launch delay or failure could have a material negative effect on revenue and also potentially cause the loss of frequency rights at certain orbital positions. Satellite launch and in-orbit insurance policies do not compensate for lost revenues due to the loss of customers or for consequential losses resulting from any launch delay or failure.
SES attempts to mitigate the risk of a launch delay interrupting existing services by leaving large time margins in procurement schedules for replacement satellites.
There is always an inherent risk of launch failure in the form of a reduced satellite lifetime (in case of incorrect orbit injection), reduced functionality of the satellite or the total loss of a mission.
SES attempts to mitigate the risk of launch failure in several ways, including by detailed technical risk management of each satellite and launch vehicle programme, asset insurance for each launch and a staggered fleet deployment scheme (allowing assets to be repurposed in the case of single satellite failure so as to ensure a minimum impact on customers and revenues).
SES is largely dependent on Arianespace, ILS and SpaceX to launch its satellites into space. SES may incur significant delays in launching new satellites in the event of a prolonged unavailability of one of those three systems.
SES is dependent on six major satellite manufacturers for the construction of its satellites.
Dependency on a small number of satellite manufacturers may reduce SES's negotiating power and access to advanced technologies (which may only be available to certain suppliers). It may also result in a higher concentration of risk – SES may incur significant delays in procuring new satellites in the event of prolonged problems at one of these satellite manufacturers. Further, the difficulties caused by any technical problems with the design of a particular model of satellite may be multiplied if several satellites of that design are purchased.
In addition, there are a limited number of second tier suppliers of certain key components for communication satellites. SES may incur significant delays in launching new satellites in the event of prolonged problems at one of these secondary suppliers.
SES attempts to mitigate this risk by a constant monitoring of its supplier base, maintaining multiple procurement sources and developing relationships with new suppliers to the extent possible.
One or more of SES's satellites may suffer in-orbit failures, ranging from a partial impairment of their commercial capabilities to a total loss of the asset. In the event of such a failure, SES may not be able to continue to provide service to its customers from the same orbital slot or at all.
SES attempts to mitigate the risk of in-orbit failure by careful vendor selection and high quality in-orbit operations. SES's fleet is diversified by manufacturer and satellite type, which reduces the likelihood of widespread technical problems. The impacts of such failures on customer service and related revenues are mitigated by an in-orbit backup strategy, where customers on an impaired satellite can be transferred to another satellite in the fleet. However, there is no guarantee that these mitigations will be entirely effective, especially in the event of the failure of several satellites.
For example, several of SES's satellites are operating beyond the end of their design lives and have experienced various technical anomalies. These satellites have already completed the primary missions for which they were designed and have been redeployed for secondary missions. Satellites in secondary missions are used for various reasons, such as developing new orbital locations, safeguarding spectrum rights and providing redundant capacity for satellites in their primary missions. These satellites' technical capabilities do not generally need to be fully utilised in operating their secondary missions, which potentially mitigates the effects of further technical failures.
In addition, eleven of SES's Lockheed Martin A2100 have experienced technical problems with their solar array circuits. The extent of the problem varies depending on the satellite, but it may reduce both the operational life of the satellite and the number of usable transponders, leading to a reduction in the revenue generated by the satellite. All of the satellites with solar array issues are still being used for their primary missions, with the exception of AMC-4 and NSS 7, which are being used for secondary missions.
NSS 12, a satellite built by Space Systems Loral, has also experienced solar array power losses. However, the issue appears to be less severe than the Lockheed Martin A2100 solar array issue and SES does not believe a specific mitigation plan is needed at this point.
Several of SES's satellites (AMC-4, ASTRA 1G, ASTRA 1H, ASTRA 1M, ASTRA 2B, NSS 7 and QuetzSat-1) have experienced various other anomalies.
Technical failures have resulted in a reduction of available capacity on ASTRA 1G and a reduction in the operational life of ASTRA 1H. There is no risk of a recurrence of these issues on these satellites.
AMC-4 and NSS 7 have completed their primary missions and as a result no mitigation is in place.
23-50
ASTRA 1M, which is a key asset at the 19.2°E prime orbital position, has currently lost redundancy on its propulsion subsystem. Further technical problems on the propulsion system could result in the loss of the satellite. However, SES believes that such an event is unlikely and the risk is mitigated by the additional capacity at this orbital slot.
QuetzSat-1 has experienced the loss of redundancy in its data handling equipment and further technical problems with this sub-system could result in the loss of the satellite. However, SES believes that the possibility of such an event happening is unlikely.
In-orbit insurance constitutes an additional financial mitigation against the risk of impairments, subject to the limitations of such insurance.
The expected design life of SES's satellites is typically 15 years. In the event of changes in the expected fuel life of the satellite, in-orbit anomalies or other technical factors, its actual life may be shorter than this. This could lead to the satellite being depreciated faster than anticipated and the lifetime revenue generated by the satellite being reduced, diminishing the overall return on investment for the asset. SES attempts to mitigate the risk of a reduced operational life by careful vendor selection and high quality in-orbit operations.
SES's satellites may be subject to damage or loss from events that might not be covered by insurance policies. SES maintains launch and initial in-orbit insurance, in-orbit insurance and third party liability insurance for its satellites. The insurance policies generally contain exclusions from losses resulting from:
The insurance policies do not provide compensation for business interruption, loss of market share, reputational damage, loss of revenue, incidental and consequential damages and similar losses that might arise from the failure of a satellite launch, incorrect orbital placement or the failure of a satellite to perform according to specifications. In addition, SES's in-orbit insurance only covers losses in excess of the risk retention level selected by SES.
The in-orbit insurance policies may exclude from coverage failures arising from pre-existing defects, such as defects in solar array and battery anomalies of some existing satellites. In addition, SES will not be fully reimbursed if the cost of a replacement satellite exceeds the sum insured. As a consequence, the loss, damage or destruction of any satellites as a result of any of these events could result in material increases in costs or reductions in expected revenues or both.
SES has reviewed its approach to in-orbit insurance of its satellites and, in recognition of the excellent procurement and operating record, has adopted a policy of limited selfinsurance. Premiums are paid to a wholly-owned subsidiary, thus reducing the amount of insurance premiums paid to external insurance companies.
If any event occurs that is covered by the in-orbit insurance, the payment of the sum insured could result in material increases in costs.
SES has third party liability insurance that covers damage suffered by third parties resulting from accidents such as launch failures and satellite collisions. It is subject to an annual combined single limit of €500 million of coverage.
Satellite insurance is a cyclical market dominated by the law of supply and demand. The amount of capacity currently available in the market is adequate to cover SES satellite programmes. However, events outside SES's control – including large losses and shifts of insurance capacity from space to other lines of business – could change this situation. This could result in increases in the amount of insurance premiums paid by SES to cover its risks and affect its ability to obtain the desired level of coverage.
SES's self-insurance programme improves its flexibility to accommodate variations in market conditions.
SES depends on a number of key customers whose loss (or non-renewal) would reduce SES's revenues. SES's five largest commercial customers represented 23.4% of SES's total revenues in 2013. The total revenue generated from contracts with the U.S. government (and customers serving the U.S. government) represented approximately 10% of SES's total revenues in 2013.
If key customers reduce their reliance on SES by developing or increasing relationships with other satellite operators (or moving to other telecommunications solutions) and such key customers cannot be replaced, SES's revenues may be impacted negatively.
SES's main existing satellite capacity agreements for direct to home in Europe typically have contract durations of ten years, with some contracts for longer periods. If SES is unsuccessful in obtaining the renewal of its satellite capacity agreements when they come up for renewal on commercial terms similar to those currently reflected in its agreements, revenues could be adversely affected for some time.
SES's customer base is subject to constant change. Bankruptcy of key customers or customer consolidation resulting from mergers and acquisitions can reduce demand for SES's satellites capacity, thereby affecting SES's revenues.
SES may suffer a financial loss if any of its customers fail to fulfil their contractual payment obligations.
The level of customer credit risk may increase as SES grows revenues in emerging markets, because credit risk tends to be higher in these markets (compared to the mature markets of Europe and North America).
This risk is mitigated principally through a customer credit policy that includes credit checks, credit profiles, deposits or other forms of security, monitoring of payment performance and the application of a provisioning policy.
Further details are provided in Note 19 to the consolidated financial statements.
SES conducts business around the world. It is exposed to issues such as financial, regulatory, geopolitical, tax and trade risks in many jurisdictions. Political and financial stability in some jurisdictions may impact SES's business in that country. In practice, it may be difficult for SES to enforce its legal rights in some jurisdictions.
The inherent instability of doing business in certain jurisdictions may have a negative impact on SES's revenues.
The proxy structure of the SES Government Solutions entity, in line with common practice for businesses serving certain segments of the U.S. government, imposes various restrictions on SES's Board of Directors and executive management in directly supervising the maintenance of an internal control system and imposing an internal audit structure. However, these restrictions are mitigated through having an agreement on a required risk management and internal control framework.
The telecommunications market is fiercely competitive and SES faces competition from satellite, terrestrial and wireless networks.
SES faces competition from international, national and regional satellite operators. Some national operators receive tax and regulatory advantages in their country which are not available to SES. The development of national satellite programmes may hinder SES's ability to compete in those countries on normal economic terms.
In addition, SES competes with operators of terrestrial and wireless networks. Any increase in the technical effectiveness or geographic spread of these terrestrial and wireless networks could result in a reduction in demand for SES's satellites. Some terrestrial and wireless operators may receive state aid and subsidies not available to SES.
Competition in the telecommunications market could result in a demand reduction for SES's satellite capacity and have a significant negative impact on SES's results.
The satellite telecommunications industry is vulnerable to technological change. SES's satellites could become obsolete due to unforeseen advances in telecommunications technology leading to a reduction in demand for its services and a negative impact on revenues.
The use of new technology to improve signal compression rate could lead to a reduction in demand for SES's satellites, which, if not offset by an increase in demand, could lead to a negative impact on the results.
SES's development strategy includes targeting new geographical areas and emerging markets and potentially to develop joint ventures or partnerships with local telecommunications, media and financial businesses in order to improve market access for its services.
SES may be exposed to the inherent instability of doing business in those regions. Such inherent instability could have an adverse impact on SES's revenue.
Please also see 'Risks inherent in international business' above.
In some emerging markets, customers may be less financially secure and run a higher risk of insolvency than in more developed markets. The failure of a customer could have an adverse impact on SES's revenue.
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SES regularly evaluates opportunities to make strategic investments. These opportunities may not yield the expected benefits due to a number of factors such as antitrust reviews, financing costs and regulatory approvals. If an investment is made, it may adversely affect SES's results, due to financing costs or the performance of the investment following acquisition.
SES has a number of strategic investments in businesses that it does not fully control. As a result, SES is dependent in part on the cooperation of other investors and partners in protecting and realising the full potential of certain investments. SES may not be able to prevent strategic partners from taking actions that are contrary to SES's business interests.
SES also invests in new and innovative projects such as O3b Networks, which often feature new technology or uncertain market demand. If the technology is not successful or demand does not materialise as planned, the value of SES's investment may be reduced.
In relation to O3b, there can be no assurance that the business will not require further funding. If SES was to increase its investment in O3b to over 50%, it would have to include O3b's indebtedness in SES's financial statements. It may also have to purchase the shares of the minority investors at a fair market value.
SES has also earmarked certain funds for investment, which includes the replacement of existing satellites (often with increased capacity) and the launching of new satellites. The successful marketing and sale of new capacity is dependent on the underlying demand for satellite capacity in the targeted regional markets. If that demand does not materialise as anticipated, SES's financial forecasts may not be met.
SES cannot always predict the impact of laws and regulations on its operations. The operation of the business is and will continue to be subject to the laws and regulations of the governmental authorities of the countries where SES operates or uses radio spectrum and offers satellite services or capacity, as well as to the frequency co-ordination process of the International Telecommunication Union (ITU). Regulation and legislation is extensive and outside SES's direct control. New or modified rules, regulations, legislation or decisions by a relevant governmental entity or the ITU could materially and adversely affect operations.
The international nature of SES's business means that it is subject to civil or criminal liability under the U.S., UK, EU and other regulations in relation to economic sanctions, export controls and anti-bribery requirements. International risks and violations of international regulations may negatively affect future operations or subject SES to criminal or civil enforcement actions.
Disputes in relation to SES's business arise from time to time and can result in legal or arbitration proceedings. The outcome of these proceedings cannot be predicted. A negative outcome in a substantial litigation or arbitration case could have a material impact on SES's business and financial position.
SES needs access to orbital slots and associated frequencies to permit it to maintain or grow its satellite system.
The ITU establishes radio regulations and is responsible for the allocation of frequency spectrum for particular uses and the allocation of orbital locations and associated frequency spectrum. SES can only access spectrum through ITU filings made by national administrations.
Orbital slots and associated frequencies are a limited resource. The ITU may reallocate spectrum from satellite to terrestrial uses. In addition, national administrations are increasingly charging for access to spectrum by the use of fees and auctions.
Any reallocation of spectrum from satellite to terrestrial uses or charging by national administrations may have a significant adverse effect on SES's current results and future prospects.
SES is required to co-ordinate the operation of its satellites with other satellites operators through the ITU so as to prevent or reduce interference between satellites. SES may also be required to co-ordinate any replacement satellite that has performance characteristics which differ from those of the satellite it replaces.
As a result of such co-ordination, SES may be required to modify the proposed coverage areas of its satellites, satellite design or transmission plans in order to eliminate or minimise interference with other satellites or ground-based facilities. Those modifications may mean that use of a particular orbital position is significantly restricted, possibly to the extent that it may not be economical to place a new satellite in that location. In addition, interference concerns of a country may affect the ability of SES's satellite network to generate revenues, due to the operational restrictions that the country may impose.
Similarly, the performance of SES's satellites in the affected areas could be adversely affected if ITU regulations or other legal constraints fail to prevent competing satellite operators from causing harmful interference by the operation of their satellites.
If SES does not
those orbital locations or frequency bands may become available for other satellite operators to use.
SES has access to a large portfolio of orbital locations that have been filed at the ITU through various administrations. For each filing, the ITU and the national regulators impose various conditions that have to be met in order to secure the spectrum. Operational issues such as satellite launch failure, launch delay or in-orbit failure might compromise the access to the spectrum at specific orbital locations. SES is committed to the highest quality in satellite procurement and launch, which helps to reduce this risk. In addition, SES's large fleet permits the relocation of in-orbit satellites in order to meet the regulatory conditions in many of the cases.
SES may need to obtain and maintain approvals from authorities or other entities to offer or operate satellite capacity. For example, SES must obtain authorisations or landing rights in certain countries for satellites to be able to transmit signals to or receive signals from those countries. The failure to obtain landing rights or the authorisations necessary to operate satellites internationally to provide services could lead to loss of revenues.
Customers are responsible for obtaining regulatory approval for their operations. As a result, there may be governmental regulations of which SES is not aware or which may adversely affect the operations of customers. SES could lose revenues if customers' current regulatory approvals do not remain sufficient in the view of the relevant regulatory authorities, or if additional necessary approvals are not granted on a timely basis, or at all, in all jurisdictions in which customers wish to operate or provide services or if applicable restrictions in those jurisdictions become unduly burdensome.
U.S. companies and companies located in the United States must comply with U.S. export control laws in connection with any information, products or materials that they provide to foreign companies relating to communications satellites, associated equipment and data. SES's U.S. operations may not be able to maintain normal international business activities and SES's non-U.S. operations may not be able to source satellites, satellite-related hardware, technology and services in the United States if:
Such occurrences could impede construction and delay the launch of any future satellites, adversely impacting current and/or future revenues.
In common with other satellite operators, SES is vulnerable to the risk of terrorist acts, sabotage, piracy, attack by anti-satellite devices, jamming, unintentional interference and natural disaster. Such external threats may lead to a temporary or permanent interruption in service and/or the loss of customers. Any such act could have a potentially significant adverse effect on SES's results.
SES's operations may be subject to hacking, malware and other forms of cyber-attack. SES has put in place protections against these forms of cyber-attack and is continually updating its defences. However, the environment for cyberattack is increasingly hostile and there remains a risk to SES.
SES has a number of key employees with highly specialised skills and extensive experience in their fields. If one of these employees were to leave, SES may have difficulty replacing him or her. SES attempts to mitigate the risk of losing key employees through retention programmes, succession planning and development plans.
If SES is unable to retain key employees or attract new highly-qualified employees, it could have a negative impact on SES's business, financial situation and results.
SES's operations may be subject to unforeseen events which are both improbable and have a high impact. Due to the unforeseen nature of the event, it is difficult to manage the impact of such events or predict the nature or extent of the damage. Such unforeseen events may have a significant negative impact on SES's business, financial situation and results.
The global financial system has suffered considerable turbulence and uncertainty in recent years including the Eurozone sovereign debt crisis. This turbulence has contributed to a general economic slowdown in many of the countries where SES operates. This may have a negative effect on SES's performance if potential customers face difficulties funding their business plans, which could in turn delay the onset of new revenue.
SES operates a strong business model but if, for any reason, SES is not successful in implementing its business model, cash flow and capital resources may not be sufficient to repay indebtedness. If SES is unable to meet debt service obligations or comply with covenants, a default under debt agreements would occur. To avoid a possible default or upon a default, SES could be forced to reduce or delay the completion or expansion of the satellite fleet, sell assets, obtain additional equity capital or refinance or restructure its debt.
A change in SES's debt rating could affect the cost and terms of its debt as well as its ability to raise debt. SES's policy is to attain, and retain, a stable BBB rating with Standard & Poor's and Fitch, and a Baa2 rating with Moody's. If SES's credit rating was downgraded, it may affect SES's ability to obtain financing and the terms associated with that financing. SES cannot guarantee that it will be able to maintain its credit ratings.
Many of SES's financing agreements require it to maintain a net debt to EBITDA ratio of not more than 3.5 to 1. Several major rating agencies have indicated that failure to comply with SES's policy of maintaining a ratio of not more than 3.3 to 1 could result in a review of SES's credit rating. Complying with this ratio may limit SES's flexibility and opportunities, including by limiting capital expenditures and investments.
SES's financial results may be materially adversely affected by unforeseen additional tax assessments or other tax liabilities.
SES does business in many different countries and is potentially subject to tax liabilities in multiple tax jurisdictions. It has tax liabilities on its business operations in multiple jurisdictions. SES makes provisions in its accounts for current and deferred tax liabilities and tax assets based on a continuous assessment of tax laws relating to it.
However, SES cannot be certain of a tax authority's application and interpretation of the tax law. SES may be subjected by tax authorities to unforeseen material tax claims, including late payment interest and/or penalties. These unforeseen tax claims may arise through a large number of reasons, including identification of a taxable presence of a non-indigenous group company in a taxing jurisdiction, transfer pricing adjustments, application of indirect taxes on certain business transactions after the event and disallowance of the benefits of a tax treaty. In addition, SES may be subject to tax law changes in a taxing jurisdiction leading to retroactive tax claims.
SES has implemented a tax risks mitigation charter based on (among other things) a framework of tax opinions for the financially material tax positions taken by SES, transfer pricing documentation for the important inter-company transactions of SES, a transfer pricing policy and procedures for accurate tax compliance in all taxing jurisdictions.
SES requires liquidity to maintain its operations and meet its obligations. Any liquidity problems may have a significant impact on SES's operations and lead to the breach of contractual obligations. SES's objective is to efficiently use cash generated so as to maintain short-term debt and bank loans at a low level. In case of liquidity needs, SES can call on uncommitted loans and a committed syndicated loan. In addition, if deemed appropriate based on prevailing market conditions, SES can access additional funds through a European Medium-Term Note or commercial paper programme. SES's debt maturity profile is tailored to allow the company to cover repayment obligations as they fall due.
SES operates a centralised treasury function which manages the liquidity of SES in order to optimise the funding costs. This is supported by a daily cash pooling mechanism.
Further details are provided in Note 19 to the consolidated financial statements.
SES's reported financial performance can be impacted by movements in the U.S. dollar/euro exchange rate as SES has significant operations whose functional currency is the U.S. dollar and liabilities denominated in U.S. dollar.
To mitigate this exposure, SES can enter into forward foreign exchange or similar derivatives contracts to hedge the exposure on financial debt or on the net assets.
Further details are provided in Note 19 to the consolidated financial statements.
SES's exposure to risk of changes in market interest rates relates primarily to SES's floating rate borrowings. SES carefully monitors and adjusts the mix between fixed and floating rate debt from time to time following market conditions. Interest rate derivatives can be used to manage the interest rate risk. The terms of the hedge derivatives are negotiated to match the terms of the hedged item to maximise hedge effectiveness.
Further details are provided in Note 19 to the consolidated financial statements.
SES exposure relates to the potential default of a counterparty holding financial assets (cash and cash equivalents, held for trading financial assets, loans, receivables and derivative instruments), with the maximum exposure being equal to the carrying amount of these instruments.
The counterparty risk from a cash management perspective is reduced by the implementation of several cash pools, accounts and related paying platforms with different counterparties.
To mitigate the counterparty risk, SES only deals with recognised financial institutions with an appropriate credit rating – generally 'A' and above. All counterparties are financial institutions which are regulated and controlled by the national financial supervisory authorities of the applicable countries. The counterparty risk portfolio is analysed on a quarterly basis. Moreover, to reduce this counterparty risk the portfolio is diversified as regards the main counterparties, ensuring a well-balanced relationship for all categories of products (derivatives as well as deposits).
Further details are provided in Note 19 to the consolidated financial statements.
The Board has overall responsibility for ensuring that SES maintains a sound system of internal controls, including financial, operational and compliance controls.
Such a system is an integral part of the corporate governance strategy of the company.
Internal control procedures help to ensure the proper management of risks and provide reasonable assurance that the business objectives of the company can be achieved.
The internal control procedures are defined and implemented by the company to ensure:
Like all control systems, internal controls cannot provide an absolute guarantee that risks of misstatement, losses or human error have been totally mitigated or eliminated.
SES has adopted a robust internal control framework based on a set of guidelines prepared by COSO (Committee of Sponsoring Organisations of the Treadway Commission). This framework provides reasonable assurance that the internal control objectives are being achieved; it is also consistent with the reference framework proposed by the French securities regulator, the 'Autorité des Marchés Financiers' (AMF).
The control environment is an essential element of the company's internal control framework, as it sets the tone for the organisation. This is the foundation of the other components of internal control, providing discipline and structure.
The Board has delegated the design, implementation and maintenance of a rigorous and effective system of internal controls to the Executive Committee of SES, which in turn works closely with the other levels of management in establishing control policies and procedures.
In the context of SES's organisational realignment in 2011, management undertook several initiatives to increase the internal efficiency and effectiveness of its operations. The descriptions of the main SES functions and processes have been reviewed and electronically documented using a Business Process Management software, with the support of the Operational Excellence Team. This has been supplemented by a review of all policies and procedures. The aim is to design and implement a common set of policies and procedures that best support the organisation and can be used company-wide.
The policies and procedures, which are formalised by the management of a department or cross-functional teams, apply to all employees, officers and directors of the company, its subsidiaries and other controlled affiliates as the general framework for their own business process design.
These policies and procedures also take into account specificities of each legal entity and are adapted where necessary to their activity, size, organisation, and legal and regulatory environment.
A 'Code of Conduct and Ethics' has been established to reinforce the corporate governance principles and control environment. This code is applicable to all employees, officers and directors of the company, its subsidiaries and other controlled affiliates. Regular refresher courses are presented to SES employees worldwide to ensure high levels of awareness and compliance by SES staff.
The policies outlined in this code are designed to ensure that all employees, officers and directors act at all times in accordance with the applicable laws, regulations and norms of conduct, and with the highest standards of integrity. The code was submitted to the Audit and Risk Committee and has been approved by the Board. In addition, a Sales Agency and Representative policy has been adopted and implemented to further strengthen this process.
Employees and officers in all entities of the company have been informed of the content of the Code of Conduct and its applicable principles. An SES Compliance Committee, composed of designated Compliance Officers in each main company location, is tasked with raising the staff's awareness of the code and to ensure a consistent roll-out and training programme for the code. The committee meets regularly to discuss important topics or issues.
To ensure better compliance with the Data Compliance laws and regulations, in 2013 SES has appointed a Data Protection Officer.
Another key component of the control environment is the co-ordination of risk management with internal control. Risk management and internal control systems complement each other in controlling the company's activities.
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SES has adopted a risk management policy based on principles proposed by the Committee of Sponsoring Organisations of the Treadway Commission (COSO) and ISO31000. The co-ordination of the implementation of this policy and the development of a risk register is the responsibility of a Risk Management Committee which reports to the Executive Committee of SES.
The Executive Committee in turn reports to the Board, which has the ultimate responsibility for oversight of the company's risks and ensuring that an effective risk management system is in place.
Common definitions and measures of risk management have been established and training has been provided to the various risk owners to ensure that the risk management policy is properly implemented.
A risk management co-ordinator has been appointed in order to ensure the adequate review of the risks facing SES.
Each reported risk is categorised, assessed by the risk owners, and reviewed by the Risk Management Committee. As a result of such review, a risk can be flagged as a 'top risk' which triggers additional analysis for that risk in order to determine the appropriateness and effectiveness of the risk response.
All top risks are periodically reported to the Executive Committee, the Audit and Risk Committee, and the Board.
Regarding the internal controls in the area of accounting and financial reporting, the following should be noted:
The company relies on a comprehensive system of financial reporting. Strategic plans, business plans, budgets and the interim and full-year consolidated accounts of the company are drawn up and brought to the Board for approval. The Board also approves all significant investments. The Board receives monthly financial reports setting out the company's financial performance in comparison to the approved budget and prior year figures.
Any weaknesses in the system of internal controls identified by either internal or external auditors are promptly and fully addressed.
Regarding the internal controls in the area of treasury management, the following should be noted:
Regarding the internal controls in the area of tax management, the following should be noted:
– The tax management department aims to seek upfront tax clearance with relevant local tax authorities with regard to the tax ramifications of main business ventures, corporate reorganisations and financing structures of the company. Where this is not possible, the tax treatment is analysed based on best authoritative interpretations and reported in internal tax technical memos or tax opinions from external tax consultancy firms.
– The transfer pricing team is responsible for continuously improving and fine-tuning the required contemporaneous transfer pricing documentation underpinning all intercompany transactions of the company. SES's transfer pricing reports (including functional and economic analyses including benchmarking studies), are embedded in a framework consisting of a master file and a transfer pricing policy.
Regarding the internal controls in the area of satellite operations, the following should be noted:
Adequate backup capabilities are currently implemented in the following areas:
– The TT&C function is currently provided for each satellite via at least two independent antenna sites. The sites are connected via a ground dual-redundant state of the art network to at least two site diverse SOC's. SOC consolidation in the US is progressing well and will finish by the end of Q3 2014. The SOC move in Betzdorf to a newly finished building is under preparation and will conclude by the end of 2014. Both SOC projects will increase the satellite control efficiency and network security.
Regarding the internal controls in the area of information and communication technology, the following should be noted:
A project to align and harmonise all front- and back-office business processes in SES was completed in 2013. The main components of a new ERP system, Customer Relation Management system and back-office business processes were brought into use on January 1, 2013.
The single integrated and company-wide SAP application platform enhances and enables consistency and transparency of all business data throughout SES, fast consolidation of financial data, and accurate real time reporting on all levels is facilitated by this system. The harmonised processes and SAP application platform also enhance the general and IT internal control systems of SES.
Internal communication ensures the effective circulation of information and supports the implementation of internal control and risk management by providing business and functional objectives, instructions and information to all levels of SES. The corporate intranet portal and collaboration tools are instrumental to sharing and disseminating information throughout the company.
Monitoring is done in two ways: through ongoing evaluations or separate evaluations. Ongoing evaluations are performed by management as routine operations, built into business processes and performed on a real-time basis, reacting to changing conditions.
The SES Internal Audit function performs separate evaluations of the relevance of, and compliance with, company policies and internal control procedures.
The mission of the Internal Audit function is to provide independent and objective assurance regarding the effectiveness and efficiency of business operations, the reliability of financial and operational reporting, and the company's compliance with legal and regulatory requirements. In this context, Internal Audit is also tasked to support management with identifying, preventing and minimising risks, as well as safeguarding the company's assets.
To ensure an appropriate level of independence and communication, the Internal Audit function has a direct reporting line into the Audit and Risk Committee and reports functionally to the President and CEO of SES.
The activities of the Internal Audit function are executed in accordance with an annual audit plan, which is reviewed and approved by the Audit and Risk Committee. This annual plan is derived from an annual risk assessment based on a risk mapping exercise relying on the SES risk register. The annual risk assessment responds to the need to dynamically link the audit plan to risks and exposures that may affect the organisation and its operations. This exercise involves identifying the inherent risks relative to all business processes and then assessing the levels of residual risks after consideration of specific mitigating controls.
Internal Audit monitors the implementation of internal control recommendations and regularly reports on effective compliance to the President and CEO of SES and to the Audit and Risk Committee.
Internal Audit also regularly co-ordinates audit planning and exchanges relevant information with the company's external auditors.
The proxy structure of the SES Government Solutions entity, in line with common practice for businesses serving certain segments of the U.S. government, imposes various restrictions on the Board and executive management in directly supervising the maintenance of an internal control system and imposing an internal audit structure. The SES Internal Audit function did not perform any direct internal control review of this entity during 2013, in line with the imposed restrictions. However, these restrictions are mitigated through having agreement on a required risk management and internal control framework which is subject to evaluation and testing by a third-party internal audit function. An adequate reporting process of activities of the third-party audit function to the Internal Audit function and Audit and Risk Committee has been put in place.
It should be further noted that in any event PwC, as external auditor, has audited the stand-alone financial statements of SES Government Solutions.
SES strives to be the employer of choice in the industry. The company identifies, secures, engages, develops and retains the best talent to further expand its technological reach and business objectives.
SES respects and trusts its people, embraces diversity and lives by its values. SES senior managers have a responsibility as role models to all SES employees, and must therefore act in accordance with the guidelines laid down for SES senior management. SES employees are engaged, committed and proud to be associated with their company.
To leverage the employees' full potential, SES focuses on competency development, alignment of objectives and knowledge sharing. SES ensures that every employee has the necessary resources and support to be successful in his or her career within the context of its performance management system. Human Resources is the catalyst to drive organisational and cultural initiatives leading to sustainable stakeholders' value creation.
As of December 31, 2013, the Group employed 1,237 individuals worldwide (counted in full time equivalents (FTEs)), comprising 448, 364, 365 and 60 FTEs in Luxembourg, the rest of Europe, the United States and the rest of the world, respectively.
SES's employees observe a common set of core values, which provide guidance for their activities. These values inspire a unique organisational culture and reflect SES's aspirations which are geared towards achieving the highest performance at the service of customers, shareholders and society at large. SES's values are primarily focused on providing highest-quality customer service.
Having the passion and commitment to be the best in the industry.
Developing and maintaining co-operative relationships which build upon SES's strengths and skills to achieve common goals and benefits at the service of the customers.
Articulating strategic vision, demonstrating values and creating an environment in which SES can meet the needs of the marketplace.
Consistently applying the principles of honesty, accountability, responsibility, fairness and respect.
Establishing a business culture that stimulates creativity across the organisation, develops employees' skills and improves processes, products and services.
SES is supported by a team of HR professionals based in the company's major locations around the world. HR strategy and objectives are aligned with the business objectives, decisions and guidance of SES's Executive Committee. A major task in 2013 was to support growth in the emerging markets (Africa, Latin America, Asia/Middle East) by assisting in the opening of new offices, establishing an organisation structure in the markets, hiring local staff and transferring employees from mature to emerging markets.
Development of the company's intranet has been ongoing, ensuring employees receive the most up-to-date and relevant information according to location and entity. The intranet continues to be the main vehicle for employee communications. Additionally, the company's vision and business strategy are conveyed successfully to all employees to strengthen awareness and engagement.
The Human Resources Team worked towards bringing all entities within SES under one framework and in 2013 introduced a harmonised approach in coordination with the applicable departments towards Data Protection and Social Media. The SES Bonus Plans were aligned and a global Social Report was delivered. In addition, SES rolled out anti-bribery training to all employees.
SES believes that highly qualified and its motivated employees continue to be the foundation of our success as a company. SES, through the Learning and Development (L&D) function, is committed to enhancing organisational effectiveness by continuously improving employees' abilities to maximise performance. Employees' growth and development opportunities are provided through classroom training, e-learning, external courses, conferences and tuition assistance. As a structure, SES uses the following five training categories:
Three key principles guide SES's learning and development efforts:
SES focuses on identifying and developing high-potential leadership talent by means of succession planning. This includes participation in executive assessments, executive development programmes, coaching and stretch assignments.
In 2013 a dedicated programme was designed for the identification, engagement and development of SES's potential employees.
In order to support the company's organisational realignment, SES launched the 'MOMENTUM' employee development programme in 2011 which is offered to all employees in the organisation. The first module, on organisational change, was delivered to all employees in 2011 and early 2012. The second module, dedicated to SES strategy, included an interactive business simulation and has been rolled out across the organisation during 2013. The third module, scheduled for 2014, will engage employees on how SES interacts with our customers and other strategic stakeholders.
SES regularly offers key employees international assignments through a 'Development Programme' which boosts crossfunctional and cross-continental talent and knowledge exchange. In 2013, three new graduates joined SES's two-year Associate Programme consisting of four six-month crossfunctional assignments.
For some companies in Luxembourg, the legal framework provides for a personnel delegation and a mixed committee.
The personnel delegations consist of between one and six members. All delegates have been elected in 2013 for a new five-year term. Their mandate consists in protecting the interests of the workforce with regard to working conditions, job security and social matters. The personnel delegation is informed on the developments affecting the company and advises on amendments to work rules.
The mixed committee consists of three employer representatives and three employee representatives. The mixed committee has co-decision powers in matters covering performance assessment, health and safety, and in the general criteria applied in the recruitment, promotion and dismissal policies. The mixed committee is consulted on all important decisions regarding investments in plant or equipment, work processes and working conditions. The committee is informed about the general development of the company and employment trends.
As one of SES's legal entities, SES ASTRA benefits from a concession granted by the Luxembourg State, three employee representatives sit on the Board of Directors of SES ASTRA. One of them sits as an observer on the Board of SES.
In other SES locations, the social dialogue is conducted according to the rules laid out in the local legal frameworks, for instance by means of works councils.
In The Hague, The Netherlands, a Dutch works council represents the interests of the employees in line with national laws; the same is true for some divisions in Munich, Germany, where employee representation occurs via the local 'Betriebsrat.'
In 2013 Social Elections took place in Luxembourg and The Hague.
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Consolidated financial statements
57-106
SES S.A. annual accounts
107-120
SES's dedicated Investor Relations function reports to the Chief Financial Officer and works closely with the President and CEO. Its purpose is to develop and co-ordinate the group's external financial communications and interactions with equity and debt investors, investment analysts, credit rating agencies, financial journalists and other external audiences, to monitor stock market developments and to provide feedback and recommendations to the SES Executive Committee.
The Vice President, Investor Relations is responsible for the definition and execution of SES's active Investor Relations programme and participation in investor conferences and similar events. Investor Relations also works closely with the group's General Counsel to ensure that the group's external communications are compliant with all applicable legal and regulatory requirements.
In 2013, SES implemented a range of corporate social responsibility projects and ventures in geographic areas where the SES group has commercial activities, provides communication services or otherwise interacts with local communities.
SES's CSR policy is aimed at supporting educational projects, with a focus on reflecting the group's position as a leading provider of global communications infrastructure and services.
SES believes it has a responsibility to support projects that contribute to the development of a communications-based society and a knowledge-based economy. SES believes that progress in this area should help develop more resilient and flexible economic structures, contribute to enhanced social mobility development, and also contribute to the emergence of more sustainable economic development models.
In 2013 SES reinforced its commitment to support educational institutions especially in Africa, reflecting the company's increasing commercial presence on the African continent.
In 2013, SES continued its student scholarship support programme with the University of Witwatersrand in Johannesburg, South Africa.
SES pursued its scholarship programme with the International Space University (ISU) in Strasbourg, France, supporting students in advanced space applications.
Furthermore, SES continued its engagement initiated in 2010 for a five-year partnership with the University of Luxembourg.
SES committed to support the university's efforts to develop a centre of excellence and innovation for advanced information and communications technology in satellite systems, by cooperating with the university's Interdisciplinary Centre for Security, Reliability and Trust (SnT) and by financing a chair in satellite, telecommunications and media law.
In the Greater Luxembourg region, SES worked closely with SnT to develop a business incubator to encourage industrial development of PhD projects.
SES maintains a seat on the Board of Directors of SnT and also conducts regular steering committee meetings with SnT management and students.
In 2013, SES had the following University partnerships:
SES's engagement with the Princeton University emphasises two projects:
SES's partnership with the Université Catholique de Louvain relates to three projects:
SES's engagement with the Sapienza University in Rome involves the following:
– Mission design for electric propulsion transfer orbit.
The company donates bandwidth to enable the foundation's Princess Elisabeth research station in Antarctica to communicate via satellite. Princess Elisabeth Antarctica's design and construction seamlessly integrates passive building technologies, renewable wind and solar energy, water treatment facilities, continuously monitored power demand and a smart grid for maximising energy efficiency.
In 2013 SES continued its donation towards the Betzdorf based Institut St Joseph, a home for mentally handicapped people.
SES made a donation to the victims of the November typhoon that struck the Philippines.
SES also matched donations made by SES employees to international emergency relief organisations providing help to victims of natural or man-made disasters, especially after the typhoon that struck the Philippines.
SES is a member of the IDATE Foundation, based in Montpellier, France, which provides assistance in strategic decision-making to the telecommunications, internet and media industries. SES is also a member of the International Astronautical Federation, a global organisation that promotes awareness of space activities worldwide.
In 2013 SES remained a sponsor of the 'Musek am Syrdall', local festival and supported the 'Discovery Zone' film festival.
SES provided support to the project 'Business Initiative 123 – GO', a 'business angel' project that aims at stimulating the development of innovative business projects in Luxembourg and the surrounding regions.
SES is committed to respecting the world's natural environment, and to aligning the companies' and the staff's conduct and, to the extent possible, those of their suppliers, to the principles of sustainable development. Compliance is benchmarked against the legal rules and regulations applied in the countries in which SES operates, as well as against industry-wide best practices. SES's objective is to continuously improve its environmental performance and to further reduce the environmental impact of its activities.
The activities of SES are mainly office and technology-based and overall have a light environmental impact. In its operations, the company promotes the most efficient use of energy and natural resources. It has successfully implemented a programme to rely on cogeneration power. SES applies a waste recycling programme, which aims to avoid, reduce and recycle waste material as efficiently as possible; this programme is subject to independent third-party audits and quality control. SES also conducts environmental training on a regular basis and encourages its staff to adopt environmentally correct attitudes in their professional activities. SES regularly conducts a company-wide carbon footprint assessment covering all of its operations.
In 2012, the company's activities related to operating and commercializing SES's satellite fleet, as well as general administration, finance and marketing, generated approximately 33,300 tonnes of CO2e worldwide, a reduction of more than 15% compared to 2011.
Emissions from Scope 2 electricity consumption represented the largest component of SES's total emissions in 2012 (approximately 61%) with Scope 1 emissions (approximately 21%) and Scope 3 business travel (18%) providing the remaining contribution. Teleports generated the largest share of the emissions from Scope 1 and Scope 2 sources.
Details of the carbon footprint are disclosed as part of the Carbon Disclosure Project, in which SES participates (www.cdproject.net).
In the wake of the implementation in previous years of a substantial carbon reduction plan at its headquarters site in Betzdorf, Luxembourg, SES continues to support carbon reduction initiatives on an ongoing basis, and especially in connection with new building constructions and infrastructure upgrades. In Luxembourg, the company also operates a CHP unit, which reduces the emissions load of the general grid. In addition, since January 2010, the Luxembourg campus has been using electricity sourced from hydropower, which can be considered CO2-free; the same applies to operations in Sweden. The use of renewable energy has had a significant additional reduction impact (of an estimated 6,000 tonnes) on the company's carbon emissions in Luxembourg. However, due to the carbon accounting rules, these emissions gains are not reflected in the company's carbon disclosure figures. SES applies best practices in minimising the environmental impact of outsourced activities, such as the manufacturing and launching of spacecraft. The company also ensures that the amount of radiation emitted from earth stations respects or remains below the maximum levels defined by the countries of operation; compliance is checked through yearly internal and third-party audits by accredited organisations that specialise in the field of industrial safety.
The Board of Directors and the executive management of the company reaffirm their responsibility to ensure the maintenance of proper accounting records disclosing the financial position of the group with reasonable accuracy at any time, and ensuring that an appropriate system of internal controls is in place to ensure the group's business operations are carried out efficiently and transparently. In accordance with Article 3 of the law of January 11, 2008 on the harmonisation of transparency requirements in relation to information about issuers whose securities are admitted to trading on a regulated market, we declare that, to the best of our knowledge, the consolidated financial statements for the year ended December 31, 2013, prepared in accordance with the International Financial Reporting Standards as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and profit of the year of SES and its subsidiaries included in the consolidation taken as a whole. In addition, the management report includes a fair review of the development and performance of the business and the position of SES and its subsidiaries included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.
René Steichen Romain Bausch Board of Directors
Chairman of the President and CEO
23-50
Consolidated financial statements
57-106
SES S.A. annual accounts
107-120
| In millions of euro | Q4 2012 |
Q1 2013 |
Q2 2013 |
Q3 2013 |
Q4 2013 |
|---|---|---|---|---|---|
| Average U.S. dollar exchange rate | 1.2970 | 1.3291 | 1.2961 | 1.3197 | 1.3585 |
| Revenue | 468.4 | 440.8 | 469.7 | 467.7 | 484.3 |
| Operating expenses | (133.8) | (119.6) | (128.9) | (120.4) | (128.9) |
| EBITDA | 334.6 | 321.2 | 340.8 | 347.3 | 355.4 |
| Depreciation expenses | (155.0) | (116.1) | (120.1) | (120.2) | (110.1) |
| Amortisation expenses | (14.8) | (7.9) | (9.3) | (8.8) | (21.0) |
| Operating profit | 164.8 | 197.2 | 211.4 | 218.3 | 224.3 |
| In millions of euro | Q4 2012 |
Q1 2013 |
Q2 2013 |
Q3 2013 |
Q4 2013 |
|---|---|---|---|---|---|
| Revenue | 455.5 | 435.9 | 458.3 | 461.4 | 484.3 |
| Operating expenses | (129.1) | (117.6) | (123.8) | (117.4) | (128.9) |
| EBITDA | 326.4 | 318.3 | 334.5 | 344.0 | 355.4 |
| Depreciation expenses | (149.6) | (114.9) | (117.4) | (118.6) | (110.1) |
| Amortisation expenses | (14.7) | (7.9) | (9.4) | (8.8) | (21.0) |
| Operating profit | 162.1 | 195.5 | 207.7 | 216.6 | 224.3 |
"Constant FX" refers to the restatement of comparative figures to neutralise currency variations and thus facilitate comparison.
2012 comparative revenue and operating expenses are also adjusted to reflect the disposal of the Glocom business in November 2013.
| In 36 MHz-equivalent | Q4 2012 |
Q1 2013 |
Q2 2013 |
Q3 2013 |
Q4 2013 |
|---|---|---|---|---|---|
| Europe utilised | 279 | 278 | 283 | 269 | 278 |
| Europe available | 345 | 345 | 345 | 329 | 347 |
| Europe % | 80.9% | 80.6% | 82.0% | 81.8% | 80.1% |
| North America utilised | 289 | 287 | 284 | 282 | 279 |
| North America available | 384 | 384 | 384 | 384 | 384 |
| North America % | 75.3% | 74.7% | 74.0% | 73.4% | 72.7% |
| International utilised | 500 | 516 | 517 | 537 | 543 |
| International available | 707 | 707 | 707 | 756 | 756 |
| International % | 70.7% | 73.0% | 73.1% | 71.0% | 71.8% |
| Group utilised | 1,068 | 1,081 | 1,084 | 1,088 | 1,100 |
| Group available | 1,436 | 1,436 | 1,436 | 1,469 | 1,487 |
| Group % | 74.4% | 75.3% | 75.5% | 74.1% | 74.0% |
| EUR 1 = | 2013 | 2013 | 2012 | 2012 |
|---|---|---|---|---|
| Average | Closing | Average | Closing | |
| United States dollar | 1.3259 | 1.3791 | 1.2910 | 1.3194 |
| In millions of euro | 2013 | 2012 | Change | % |
|---|---|---|---|---|
| Revenue | 1,862.5 | 1,828.0 | +34.5 | +1.9% |
| Revenue with prior at constant FX | 1,862.5 | 1,801.6 | +60.9 | +3.4% |
in EUR millions
Revenue growth on a constant FX basis was strong across both the International and European regions. International growth of 12.8% or EUR 60.1 million was primarily fuelled by new direct-to-home (DTH) capacity from the SES-5 and SES-6 satellites.
European ex-analogue growth of 6.3% or EUR 55.1 million was primarily driven by the continued strong performance of service activities and the recontracting of transponder capacity.
North American revenues reduced by 2.9% or EUR 11.7 million, which mainly reflected the revenue recorded in 2012 for services associated with the SES-3 Ka-band payload and the reduction in AMC-16 capacity.
| As reported In millions of euro |
Q4 2013 | Q4 2012 | Change (%) | 2013 | 2012 | Change (%) |
|---|---|---|---|---|---|---|
| Europe | 253.9 | 235.4 | +7.9% | 936.4 | 923.3 | +1.4% |
| North America | 94.3 | 105.9 | -11.0% | 398.0 | 422.1 | -5.7% |
| International | 136.1 | 127.1 | +7.1% | 528.1 | 482.6 | +9.4% |
| Group | 484.3 | 468.4 | +3.4% | 1,862.5 | 1,828.0 | +1.9% |
| At constant FX In millions of euro |
Q4 2013 | Q4 2012 | Change (%) | 2013 | 2012 | Change (%) |
| Europe | 253.9 | 234.9 | +8.1% | 936.4 | 923.9 | +1.4% |
| North America | 94.3 | 101.1 | -6.7% | 398.0 | 409.7 | -2.9% |
| International | 136.1 | 119.5 | +13.9% | 528.1 | 468.0 | +12.8% |
| Group | 484.3 | 455.5 | +6.3% | 1,862.5 | 1,801.6 | +3.4% |
| In millions of euro | 2013 | 2012 | Change | % |
|---|---|---|---|---|
| Operating expenses | (497.8) | (481.4) | -16.4 | -3.4% |
| Operating expenses with prior at constant FX | (497.8) | (473.7) | -24.1 | -5.1% |
| EBITDA | 1,364.7 | 1,346.6 | +18.1 | +1.3% |
| EBITDA with prior at constant FX | 1,364.7 | 1,327.9 | +36.8 | +2.8% |
in EUR millions
Operating expenses of EUR 497.8 million increased by 5.1% year-on-year at constant FX, as the continuing favourable development of services businesses delivered strong revenue growth, with an accompanying increase in associated cost of goods sold. Excluding this, total operating costs were tightly managed, increasing by only 2.8%.
The Infrastructure margin was 83.3%, an increase of 0.3% points on the ex-analogue margin recorded for 2012 of 83.0%. The Services margin of 17.1% represented a significant strengthening over the prior year margin at constant FX of 14.9%.
The overall margin of 73.3% reflects a rise over the 73.1% recorded in 2012 for ex-analogue activities, despite an increased contribution of Services revenue, from 20.5% in 2012 to 22.7% in 2013.
| In millions of euro | Infrastructure | Services | Elimination/ Unallocated1 |
Total |
|---|---|---|---|---|
| Revenue | 1,591.0 | 432.5 | (161.0) | 1,862.5 |
| EBITDA | 1,325.2 | 73.8 | (34.3) | 1,364.7 |
| 2013 % margin | 83.3% | 17.1% | -- | 73.3% |
| 2012 % margin at constant FX | 83.5% | 14.9% | -- | 73.7% |
| 2012 ex-analogue % margin at constant FX | 83.0% | 14.9% | -- | 73.1% |
1 Revenue elimination refers to cross-charged capacity and other services; EBITDA impact represents unallocated corporate expenses.
| In millions of euro | 2013 | 2012 | Change | % |
|---|---|---|---|---|
| Depreciation expenses | (466.5) | (515.6) | +49.1 | +9.5% |
| Amortisation expenses | (47.0) | (40.5) | -6.5 | -16.0% |
| Depreciation and amortisation | (513.5) | (556.1) | +42.6 | +7.7% |
| Operating profit | 851.2 | 790.5 | +60.7 | +7.7% |
| Operating profit with prior at constant FX | 851.2 | 781.5 | +69.7 | +8.9% |
Aggregated depreciation and amortisation charges were lower year-on-year, mainly reflecting impairment charges totalling EUR 36.6 million taken in connection with the AMC-16 satellite in 2012.
| In millions of euro | 2013 | 2012 | Change | % |
|---|---|---|---|---|
| Net interest expense | (210.4) | (222.5) | +12.1 | +5.4% |
| Capitalised interest | 41.1 | 57.1 | -16.0 | -28.0% |
| Net foreign exchange gains | 4.3 | 4.5 | -0.2 | -4.4% |
| Value adjustment on financial assets | (8.5) | (8.7) | +0.2 | +2.3% |
| Net financing charges | (173.5) | (169.6) | -3.9 | -2.3% |
| Profit before tax | 677.7 | 620.9 | +56.8 | +9.1% |
The increase of EUR 3.9 million in net financing charges in 2013 mainly reflects lower capitalised interest charges than the prior year, related to the capital expenditure cycle. Overall interest charges were lower due to the favourable terms of refinancing activities in 2013, with a 5.4% reduction in net interest expense.
| In millions of euro | 2013 | 2012 | Change | % |
|---|---|---|---|---|
| Income tax income/(expense) | (87.5) | 42.2 | -129.7 | Nm |
| Share of joint ventures and associates' result | (21.7) | (14.0) | -7.7 | -55.0% |
| Non-controlling interests | (2.0) | (0.3) | -1.7 | Nm |
| Profit attributable to SES equity holders | 566.5 | 648.8 | -82.3 | -12.7% |
Net profit decreases year on year reflecting the one-time favourable impact of tax provision releases recorded in 2012 of EUR 107.9 million. Excluding this item, underlying net profit rose 4.7%.
| In millions of euro | 2013 | 2012 | Change | % |
|---|---|---|---|---|
| Net operating cash flow | 1,148.5 | 1,233.4 | -84.9 | -6.9% |
| Investing activities | (422.3) | (697.7) | +275.4 | +39.5% |
| Free cash flow before financing activities | 726.2 | 535.7 | +190.5 | +35.6% |
While operating cash flow declined 6.9% year on year, reflecting both the weaker U.S. dollar and an increased investment in working capital, free cash flow jumped 35.6% as cash outflows for capital expenditure reduced.
| In millions of euro | 2013 | 2012 | Change | % |
|---|---|---|---|---|
| Cash and cash equivalents | (544.2) | (240.0) | -304.2 | -126.8% |
| Loans and borrowings | 4,345.9 | 4,227.7 | +118.2 | +2.8% |
| Net debt | 3,801.7 | 3,987.7 | -186.0 | -4.7% |
| Net debt / EBITDA | 2.79 | 2.96 | -0.17 | -5.7% |
The group's net debt/EBITDA ratio was 2.79 at the end of the year, against 2.96 at the end of 2012.
Satellite:
2013 overview
01-22
Corporate governance
23-50
Financial review by
management
51-56
Consolidated financial statements
57-106
SES S.A. annual accounts
107-120
To the Shareholders of SES S.A.
We have audited the accompanying consolidated financial statements of SES S.A. and its subsidiaries, joint ventures and associates (the "Group") which comprise the consolidated statement of financial position as at 31 December 2013, and the consolidated statements of income, comprehensive income, cash flows and changes in equity for the year then ended, and a summary of significant accounting policies and other explanatory information as set out on pages 59 to 106.
The Board of Directors is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards as adopted by the European Union, and for such internal control as the Board of Directors determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
Responsibility of the "Réviseur d'entreprises agréé" Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing as adopted for Luxembourg by the "Commission de Surveillance du Secteur Financier". Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the judgement of the "Réviseur d'entreprises agréé" including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the "Réviseur d'entreprises agréé" considers internal control relevant to the entity's preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Board of Directors, as well as evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
In our opinion, the consolidated financial statements set out on pages 59 to 106 give a true and fair view of the consolidated financial position of the Group as of 31 December 2013, and of its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the European Union.
The consolidated Directors' report, including the corporate governance statement, which is the responsibility of the Board of Directors, is consistent with the consolidated financial statements and includes the information required by the Law with respect to the Corporate Governance Statement.
Represented by
Gilles Vanderweyen Luxembourg, 20 February 2014
Consolidated income statement For the year ended December 31, 2013
| In millions of euros | 2013 | 2012 | |
|---|---|---|---|
| Revenue | Note 4 | 1,862.5 | 1,828.0 |
| Cost of sales | Note 5 | (179.6) | (173.3) |
| Staff costs | Note 5 | (185.8) | (180.7) |
| Other operating expenses | Note 5 | (132.4) | (127.4) |
| Operating expenses | Note 5 | (497.8) | (481.4) |
| EBITDA1 | 1,364.7 | 1,346.6 | |
| Depreciation expense | Note 12 | (466.5) | (515.6) |
| Amortisation expense | Note 14 | (47.0) | (40.5) |
| Operating profit | Note 4 | 851.2 | 790.5 |
| Finance revenue | Note 7 | 9.6 | 6.5 |
| Finance costs | Note 7 | (183.1) | (176.1) |
| Net financing charges | (173.5) | (169.6) | |
| Profit before tax | 677.7 | 620.9 | |
| Income tax income/(expense) | Note 8 | (87.5) | 42.2 |
| Profit after tax | 590.2 | 663.1 | |
| Share of joint ventures and associates' result, net of tax | Notes 3, 15 | (21.7) | (14.0) |
| Profit for the year | 568.5 | 649.1 | |
| Attributable to: | |||
| Equity holders of the parent | 566.5 | 648.8 | |
| Non-controlling interests | 2.0 | 0.3 | |
| 568.5 | 649.1 | ||
| Earnings per share (in euro)2 |
| Class A shares | Note 10 | 1.41 | 1.62 |
|---|---|---|---|
| Class B shares | Note 10 | 0.56 | 0.65 |
1 Earnings before interest, taxes, depreciation, amortisation and share of joint ventures and associates' result.
2 Earnings per share are calculated by dividing the net profit for the year attributable to ordinary shareholders by the weighted average number of shares outstanding during the year as adjusted to reflect the economic rights of each class of share. Fully diluted earnings per share are insignificantly different from basic earnings per share.
The notes are an integral part of the consolidated financial statements.
Consolidated statement of comprehensive income For the year ended December 31, 2013
| In millions of euros | 2013 | 2012 Restated1 |
|---|---|---|
| Profit for the year | 568.5 | 649.1 |
| Other comprehensive income | ||
| Items that will not be reclassified to profit or loss | ||
| Remeasurements of post employment benefit obligation | 3.8 | 2.5 |
| Income tax effect | (1.3) | (0.9) |
| Remeasurements of post employment benefit obligation, net of tax | 2.5 | 1.6 |
| Total items that will not be reclassified to profit or loss | 2.5 | 1.6 |
| Items that may be reclassified subsequently to profit or loss | ||
| Impact of currency translation | (231.2) | (99.8) |
| Net gain on hedge of net investment | 45.8 | 9.3 |
| Income tax effect | (13.7) | (2.4) |
| Total net gain on hedge of net investment, net of tax | 32.1 | 6.9 |
| Net movements on cash flow hedges Note 9 |
(1.8) | 11.5 |
| Income tax effect | 0.5 | (1.9) |
| Total net movements on cash flow hedges, net of tax | (1.3) | 9.6 |
| Total items that may be reclassified subsequently to profit or loss | (200.4) | (83.3) |
| Total other comprehensive loss for the year, net of tax | (197.9) | (81.7) |
| Total comprehensive income for the year, net of tax | 370.6 | 567.4 |
| Attributable to: | ||
| Equity holders of the parent | 370.1 | 571.1 |
| Non-controlling interests | 0.5 | (3.7) |
| 370.6 | 567.4 |
1 Restated for the adoption of IAS 19 (revised) and for certain balance sheet reclassifications, refer to Note 2.
The notes are an integral part of the consolidated financial statements.
Consolidated statement of financial position
As at December 31, 2013
| In millions of euros | 2013 | Restated1 | |
|---|---|---|---|
| Non-current assets | |||
| Property, plant and equipment Note 12 |
3,747.7 | 4,037.1 | |
| Assets in the course of construction Note 13 |
1,099.8 | 1,050.3 | |
| Total property, plant and equipment | 4,847.5 | 5,087.4 | |
| Intangible assets Note 14 |
2,750.3 | 2,876.0 | |
| Investments in joint ventures and associates Notes 3, 15 |
141.8 | 171.6 | |
| Other financial assets Note 16 |
3.9 | 10.6 | |
| Trade and other receivables Note 17 |
65.5 | 70.1 | |
| Deferred tax assets Note 8 |
95.7 | 89.2 | |
| Total non-current assets | 7,904.7 | 8,304.9 | |
| Current assets | |||
| Inventories | 6.4 | 4.4 | |
| Trade and other receivables Note 17 |
586.6 | 412.7 | |
| Prepayments | 37.4 | 34.9 | |
| Derivatives Note 18 |
9.5 | 4.3 | |
| Cash and cash equivalents Note 20 |
544.2 | 240.0 | |
| Total current assets | 1,184.1 | 696.3 | |
| Total assets | 9,088.8 | 9,001.2 | |
| Equity | |||
| Attributable to equity holders of the parent Note 21 |
2,820.7 | 2,801.7 | |
| Non-controlling interests | 78.2 | 79.4 | |
| Total equity | 2,898.9 | 2,881.1 | |
| Non-current liabilities | |||
| Loans and borrowings Note 23 |
3,542.2 | 3,068.0 | |
| Provisions Note 24 |
129.0 | 169.8 | |
| Deferred income Note 25 |
227.8 | 285.4 | |
| Deferred tax liabilities Note 8 |
645.3 | 669.1 | |
| Other long-term liabilities Note 26 |
59.7 | 42.5 | |
| Total non-current liabilities | 4,604.0 | 4,234.8 | |
| Current liabilities | |||
| Loans and borrowings Note 23 |
803.7 | 1,159.7 | |
| Provisions Note 24 |
12.6 | 16.0 | |
| Deferred income Note 25 |
385.6 | 238.2 | |
| Trade and other payables Note 26 |
341.4 | 410.7 | |
| Derivatives Note 18 |
– | 40.4 | |
| Income tax liabilities Note 8 |
42.6 | 20.3 | |
| Total current liabilities | 1,585.9 | 1,885.3 | |
| Total liabilities | 6,189.9 | 6,120.1 | |
| Total liabilities and equity | 9,088.8 | 9,001.2 |
1 Restated for the adoption of IAS 19 (revised) and for certain balance sheet reclassifications, refer to Note 2.
The notes are an integral part of the consolidated financial statements.
107-120
Corporate governance
23-50
2012
Consolidated statement of cash flows For the year ended December 31, 2013
| In millions of euros | 2013 | 2012 | |
|---|---|---|---|
| Profit before tax | 677.7 | 620.9 | |
| Taxes paid during the year | Note 8 | (30.6) | (37.9) |
| Finance costs, net | Note 7 | 147.7 | 132.4 |
| Depreciation and amortisation | Notes 12, 14 | 513.5 | 556.1 |
| Amortisation of client upfront payments | (42.3) | (41.0) | |
| Other non-cash items in consolidated income statement | 24.2 | 23.5 | |
| Consolidated operating profit before working capital changes | 1,290.2 | 1,254.0 | |
| (Increase)/decrease in inventories | 1.3 | 0.6 | |
| (Increase)/decrease in trade and other debtors | (211.6) | (63.7) | |
| (Increase)/decrease in prepayments and deferred charges | 2.9 | 14.5 | |
| Increase/(decrease) in trade and other creditors | (60.3) | 64.5 | |
| Increase/(decrease) in payments received on account | (21.2) | 11.6 | |
| Increase/(decrease) in upfront payments and deferred income | 147.2 | (48.1) | |
| Changes in operating assets and liabilities | (141.7) | (20.6) | |
| Net operating cash flow | 1,148.5 | 1,233.4 | |
| Cash flow from investing activities | |||
| Net disposal/(purchase) of intangible assets | Note 14 | (5.5) | (1.6) |
| Purchase of tangible assets | Notes 12, 13 | (377.5) | (634.0) |
| Disposal of tangible assets | Note 12 | 0.2 | 3.2 |
| Investment in equity-accounted investments | Note 15 | – | (68.1) |
| Proceeds from disposal of subsidiaries and joint ventures | Note 3 | 15.5 | – |
| Loan granted to associate | Note 15 | (12.3) | – |
| Repayment of loan to associate | Note 15 | 14.2 | 4.1 |
| Settlement of net investment hedge instruments | Note 19 | (57.0) | – |
| Other investing activities | 0.1 | (1.3) | |
| Net cash absorbed by investing activities | (422.3) | (697.7) | |
| Cash flow from financing activities | |||
| Proceeds from borrowings | Note 23 | 1,769.5 | 790.6 |
| Repayment of borrowings | Note 23 | (1,587.1) | (784.6) |
| Dividends paid on ordinary shares, net of dividends received | Note 11 | (390.2) | (351.0) |
| Dividends paid to non-controlling interest | (5.6) | (5.6) | |
| Interest on borrowings | Note 23 | (180.3) | (194.5) |
| Issue of shares | Note 21 | – | 86.7 |
| Acquisition of treasury shares | (22.9) | (86.7) | |
| Proceeds on treasury shares sold | 44.7 | 44.1 | |
| Net cash absorbed by financing activities | (371.9) | (501.0) | |
| Net foreign exchange movements | (50.1) | (12.7) | |
| Net (decrease)/increase in cash | 304.2 | 22.0 | |
| Net cash at beginning of the year (Note 20) | Note 20 | 240.0 | 218.0 |
| Net cash at end of the year (Note 20) | Note 20 | 544.2 | 240.0 |
The notes are an integral part of the consolidated financial statements.
For the year ended December 31, 2013
| In millions of euros | Issued capital |
Share premium |
Treasury shares |
Other reserves |
Retained earnings |
Cash flow hedge reserve |
Foreign currency translation reserve |
Total | Non controlling interests |
Total Equity |
|---|---|---|---|---|---|---|---|---|---|---|
| At January 1, 2013 | ||||||||||
| Restated1 | 633.0 | 595.9 | (75.4) 1,658.1 | 650.1 | (0.1) | (659.9) 2,801.7 | 79.4 | 2,881.1 | ||
| Result for the year | – | – | – | – | 566.5 | – | – | 566.5 | 2.0 | 568.5 |
| Other comprehensive income (loss) |
– | – | – | 2.5 | – | (1.3) | (197.6) | (196.4) | (1.5) | (197.9) |
| Total comprehensive income (loss) for |
||||||||||
| the year | – | – | – | 2.5 | 566.5 | (1.3) | (197.6) | 370.1 | 0.5 | 370.6 |
| Allocation of 2012 result | – | – | – | 258.6 | (258.6) | – | – | – | – | – |
| Dividends paid2 | – | – | – | – | (390.2) | – | – | (390.2) | (5.6) | (395.8) |
| Share-based payment adjustment |
– | – | – | 11.2 | – | – | – | 11.2 | – | 11.2 |
| Exercise of stock options | – | – | 45.8 | (12.5) | – | – | – | 33.3 | – | 33.3 |
| Other movements | – | – | – | (5.4) | – | – | (5.4) | 3.9 | (1.5) | |
| At December 31, 2013 | 633.0 | 595.9 | (29.6) 1,917.9 | 562.4 | (1.4) | (857.5) 2,820.7 | 78.2 | 2,898.9 |
| In millions of euros | Issued capital |
Share premium |
Treasury shares |
Other reserves |
Retained earnings |
Cash flow hedge reserve |
Foreign currency translation reserve |
Total | Non controlling interests |
Total Equity |
|---|---|---|---|---|---|---|---|---|---|---|
| At January 1, 2012 | ||||||||||
| Restated1 | 624.4 | 507.0 | (25.9) 1,384.4 | 619.4 | (9.7) | (571.0) 2,528.6 | 83.1 | 2,611.7 | ||
| Result for the year | – | – | – | – | 648.8 | – | – | 648.8 | 0.3 | 649.1 |
| Other comprehensive | ||||||||||
| income (loss) | – | – | – | 1.6 | – | 9.6 | (88.9) | (77.7) | (4.0) | (81.7) |
| Total comprehensive income (loss) for |
||||||||||
| the year | – | – | – | 1.6 | 648.8 | 9.6 | (88.9) | 571.1 | (3.7) | 567.4 |
| Allocation of 2011 result | – | – | – | 266.7 | (266.7) | – | – | – | – | – |
| Issue of share capital | 8.6 | 88.9 | (11.0) | – | – | – | – | 86.5 | – | 86.5 |
| Dividends paid2 | – | – | – | – | (351.0) | – | – | (351.0) | – | (351.0) |
| Share-based payment | ||||||||||
| adjustment | – | – | – | 12.0 | – | – | – | 12.0 | – | 12.0 |
| Exercise of stock options | – | – | (38.5) | (6.6) | – | – | – | (45.1) | – | (45.1) |
| Employee benefits (past service cost) |
– | – | – | – | (0.4) | – | – | (0.4) | – | (0.4) |
| At December 31, 2012 | ||||||||||
| Restated1 | 633.0 | 595.9 | (75.4) 1,658.1 | 650.1 | (0.1) | (659.9) 2,801.7 | 79.4 | 2,881.1 |
1 Restated for the adoption of IAS 19 (revised), refer to Note 2.
2 Dividends are shown net of dividends received on treasury shares.
The notes are an integral part of the consolidated financial statements.
2013 overview
01-22
Notes to the consolidated financial statements
December 31, 2013
SES S.A., ('SES' or 'the Company') was incorporated on March 16, 2001 as a limited liability Company (Société Anonyme) under Luxembourg law. References to the 'Group' in the following notes are to the Company and its subsidiaries, joint ventures and associates. SES trades under 'SESG' on the Luxembourg Stock Exchange and Euronext, Paris.
The consolidated financial statements of SES for the year ended December 31, 2013 were authorised for issue in accordance with a resolution of the directors on February 20, 2014. Under Luxembourg law the financial statements are approved by the shareholders at the annual general meeting.
The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board, and endorsed by the European Union (IFRS), as at December 31, 2013.
The consolidated financial statements have been prepared on a historical cost basis, except where fair value is required by IFRS as described below. The carrying values of recognised assets and liabilities that are hedged items in fair value hedges, and are otherwise carried at cost, are adjusted to record changes in the fair values attributable to the risks that are being hedged.
Certain comparatives in the consolidated statement of financial position have been reclassified to conform with the current year presentation (see Notes 12, 14, 16 and 24).
The accounting policies adopted are consistent with those of the previous financial year, except for the following new and amended IFRS, effective from January 1, 2013, adopted by the Group:
The amendments to IAS 1 change the grouping of items presented in other comprehensive income (OCI). Items that could be reclassified (or 'recycled') to profit or loss at a future point in time (for example, net gain on hedge of net investment, exchange differences on translation of foreign operations, net movement on cash flow hedges and net loss or gain on available-for-sale financial assets) would be presented separately from items that will never be reclassified (for example, actuarial gains and losses on defined benefit plans and revaluation of land and buildings). The amendment affects presentation only and has no impact on the Group's financial position or performance.
IAS 19 (revised) amends the accounting for employment benefits. The Group has applied the standard retrospectively in accordance with the transition provisions of the standard when impact was considered material. The impact on the Group has been in the following areas:
The standard replaces the interest cost on the defined benefit obligation and the expected return on plan assets with a net interest cost based on the net defined benefit asset or liability and the discount rate, measured at the beginning of the year. There is no change to determining the discount rate; this continues to reflect the yield on high-quality corporate bonds. This amendment did not have any material impact on the financial position or performance of the Group.
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These amendments require an entity to disclose information about rights to set-off and related arrangements (e.g., collateral agreements). The disclosures would provide users with information that is useful in evaluating the effect of netting arrangements on an entity's financial position. The new disclosures are required for all recognised financial instruments that are set off in accordance with IAS 32 Financial Instruments: Presentation. The disclosures also apply to recognised financial instruments that are subject to an enforceable master netting arrangement or similar agreement, irrespective of whether they are set off in accordance with IAS 32.
The adoption of this standard did not have any significant impact on the financial position or performance of the Group.
IFRS 13 establishes a single source of guidance under IFRS for all fair value measurements. IFRS 13 does not change when an entity is required to use fair value, but rather provides guidance on how to measure fair value under IFRS when fair value is required or permitted.
The adoption of this standard did not have any significant impact on the financial position or performance of the Group.
the recoverable amount disclosures for non-financial assets This amendment removed certain disclosures of the recoverable amount of CGUs which had been included in IAS 36 by the issue of IFRS 13. The amendment is not mandatory for the Group until 1 January 2014, however the Group has decided to early adopt the amendment as of 1 January 2013.
The adoption of this standard did not have any significant impact on the financial position or performance of the Group.
The consolidated financial statements comprise the financial statements of the Company and its controlled subsidiaries, after the elimination of all material inter-company transactions. Subsidiaries are consolidated from the date the Company obtains control until such time as control ceases. Acquisitions of subsidiaries are accounted for using the purchase method of accounting. The financial statements of subsidiaries and affiliates are prepared for the same reporting period as the Company, using consistent accounting policies. Adjustments are made to bring into line any dissimilar accounting policies that may exist. For details regarding the subsidiaries included in the consolidated financial statements see Note 29.
Total comprehensive income within a subsidiary is attributed to the non-controlling interest even if that results in a deficit balance.
A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction. If the Group loses control over a subsidiary, it:
The Group has interests in joint ventures which are jointly controlled entities which are accounted for using the equity method. A joint venture is a contractual arrangement whereby two or more parties undertake an economic activity that is subject to joint control, and a jointly controlled entity is a joint venture that involves the establishment of a separate entity in which each venturer has an interest.
Under the equity method, the investment in a jointly controlled entity is carried in the statement of financial position at cost, plus post-acquisition changes in the Group's share of net assets of the jointly controlled entity, less distributions received and less any impairment in value of the investment. The Group income statement reflects the Group's share of the results after tax of the jointly controlled entity.
Financial statements of jointly controlled entities are prepared for the same reporting year as the Group. Where necessary, adjustments are made to those financial statements to bring the accounting policies used into line with those of the Group.
Unrealised gains on transactions between the Group and its jointly controlled entities are eliminated to the extent of the Group's interest in the jointly controlled entities. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.
The Group assesses investments in jointly controlled entities for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. If any such indication of impairment exists, the carrying amount of the investment is compared with its recoverable amount, being the higher of its fair value less costs to sell and value in use. Where the carrying amount exceeds the recoverable amount, the investment is written down to its recoverable amount.
The Group ceases to use the equity method of accounting on the date from which it no longer has joint control, or significant influence over the joint venture or associate respectively, or when the interest becomes held for sale.
Notes to the consolidated financial statements continued December 31, 2013
The Group has investments in associates which are accounted for under the equity method. An associate is an entity in which the Group has significant influence and which is neither a subsidiary nor a joint venture.
Under the equity method, the investment in the associate is carried in the statement of financial position at cost plus post-acquisition changes in the Group's share of net assets of the associate. Goodwill relating to an associate is included in the carrying amount of the investment and is not amortised.
The Group determines at each reporting date whether there is any objective evidence that the investment in the associate is impaired. If this is the case, the Group calculates the amount of impairment as the difference between the recoverable amount of the associate and its carrying value and recognises the amount adjacent to "Share of joint ventures and associates' result" in the income statement.
The Group's share of post-acquisition profit or loss is recognised in the income statement, and its share of post-acquisition movements in other comprehensive income is recognised in other comprehensive income with a corresponding adjustment to the carrying amount of the investment. When the Group's share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the Group does not recognise further losses, unless it has incurred legal or constructive obligations or made payments on behalf of the associate. In general the financial statements of associates are prepared for the same reporting year as the parent Company, using consistent accounting policies. Adjustments are made to bring in line any dissimilar accounting policies that may exist. Where differences arise in the reporting dates the Group adjusts the financial information of the associate for significant transactions in the intervening period.
In the process of applying the Group's accounting policies, management has made the following judgements, apart from those involving estimations, which have the most significant effect on the amounts recognised in the financial statements:
(i) Treatment of orbital slot licence rights
The Group's operating companies have obtained rights to operate satellites at certain orbital locations and using certain frequency bands. These licences are obtained through application to the relevant national and international regulatory authorities, and are generally made available for a defined period. On the expiry of such agreements, the operating Company will generally be in a position to re-apply for the usage of these positions and frequency rights. Where the Group has obtained such rights through the acquisition of subsidiaries and associates, the rights have been identified as an asset acquired and recorded at the fair value attributed to the asset at the time of the acquisition as a result of purchase accounting procedure. Such assets are deemed to have an indefinite life where the Group has a high probability that it will be able to successfully re-apply for these rights as and when they expire. Hence these assets are not amortised, but rather are subject to regular impairment reviews to confirm that the carrying value in the Group's financial statements is still appropriate. More details are given in Note 14
The Group operates in numerous tax jurisdictions and management is required to assess tax issues and exposures across its entire operations and to accrue for potential liabilities based on its interpretation of country-specific tax law and best estimates. In conducting this review management assesses the materiality of the issue and the likelihood, based on experience and specialist advice, as to whether it will result in a liability for the Group. If this is deemed to be the case then a provision is made for the potential taxation charge arising. A corresponding provision of EUR 98.0 million (2012: EUR 113.9 million) is recorded in the Statement of Financial Position as at December 31, 2013 under non-current 'Provisions', for EUR 85.4 million (2012: EUR 97.9 million), and current 'Provisions' for EUR 12.6 million (2012: EUR 16.0 million).
One significant area of management judgement is in the area of transfer pricing. Whilst the Group employs dedicated members of staff to establish and maintain appropriate transfer pricing structures and documentation, judgement still needs to be applied and hence potential tax exposures can be identified. The Group, as part of its overall assessment of liabilities for taxation, reviews in detail the transfer pricing structures in place and makes provisions where this seems appropriate on a case by case basis.
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SES S.A. annual accounts
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The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below. The Group based its assumptions and estimates on parameters available when the consolidated financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising beyond the control of the Group. Such changes are reflected in the assumptions when they occur.
(i) Impairment testing for goodwill and other indefinite life intangible assets
The Group determines whether goodwill is impaired at least on an annual basis. This requires an estimation of the value in use of the cash-generating units to which the goodwill is allocated. Establishing the value in use requires the Group to make an estimate of the expected future pre-tax cash flows from the cash-generating unit and also to choose a suitable pre-tax discount rate and terminal growth rate in order to calculate the present value of those cash flows. More details are given in Note 14.
(ii) Impairment testing for space segment assets As described above the Group assesses at each reporting date whether there is any indicator that an asset may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the Group makes an estimate of the recoverable amount. This requires an estimation of the value in use of the assets to ensure that this exceeds the carrying amount included in the consolidated financial statements. As far as this affects the Group's satellite assets, this estimation of the value in use requires estimations not only concerning the commercial revenues to be generated by each satellite, but also the impact of past in-orbit anomalies and their potential impact on the satellite's ability to provide its expected commercial service.
For one satellite, AMC-16, three solar array circuit failures in 2012 resulted in aggregate impairment charges of EUR 36.7 million being taken in 2012. These solar array failures impact the satellites ability to generate power to operate its transponders and hence its commercialisable capacity. This impairment charge resulted in the carrying value of the satellite being reduced to EUR 39.8 million from EUR 87.9 million at the end of 2012, and this has been further reduced to a book value of EUR 32.8 million at the 2013 year end by regular depreciation charges taken during the year. In arriving at the 2012 impairment charge, management assumed reduced capacity based on its experience of this satellite, and other satellites of the same type. Changes in capacity assumptions used and/or additional circuit failures in the future could further impact the value in use of the satellite.
(iii) Going concern and valuation of O3b Networks Limited ("O3b Networks")
The Group assesses at each reporting date whether there is any indicator that the carrying value of its interest in associates may be impaired. This requires an estimation of the value in use of the assets to ensure that this exceeds the carrying amount included in the consolidated financial statements. In this regard an assessment is made of the business assumptions and planning of the associates concerned.
For one associate, O3b Networks, there is a higher degree of uncertainty concerning the carrying value of the investment for the reasons set out in more detail in Note 15.
Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred, measured at acquisition date fair value and the amount of any non-controlling interest in the acquiree. For each business combination, the acquirer measures the non-controlling interest in the acquiree either at fair value or at the proportionate share of the acquiree's identifiable net assets. Acquisition costs incurred are expensed and included in administrative expenses.
When the Group acquires a business, it assesses the financial assets acquired and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date. This includes the separation of embedded derivatives in host contracts by the acquiree. Assets acquired and liabilities assumed are recognised at fair value.
If the business combination is achieved in stages, the acquisition date fair value of the acquirer's previously held equity interest in the acquiree is remeasured to fair value at the acquisition date through profit or loss. Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration which is deemed to be an asset or a liability will be recognised in accordance with IAS 39 either in profit or loss or as a change to other comprehensive income. If the contingent consideration is classified as equity, it should not be remeasured until it is finally settled within equity.
Property, plant and equipment is initially recorded at acquisition or manufacturing cost, which for satellites includes the launcher cost and launch insurance, and is depreciated over the expected useful economic life. Other than in respect of supplier credits for delayed delivery of satellites, which are set off against the base cost of the satellite concerned, the financial impact of changes resulting from revisions to management's estimate of the cost of the property, plant and equipment is taken to income statement of the period concerned.
Notes to the consolidated financial statements continued December 31, 2013
Costs for the repair and maintenance of these assets are recorded as an expense.
Property, plant and equipment is depreciated using the straight-line method, generally based on the following useful lives:
| Buildings | 25 years |
|---|---|
| Space segment assets | 10 to 16 years |
| Ground segment assets | 3 to 15 years |
| Other fixtures, fittings, tools and equipment | 3 to 15 years |
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any loss or gain arising on derecognition of the asset is included in the profit and loss account in the year the asset is derecognised.
The residual values, useful lives and methods of depreciation of property, plant and equipment are reviewed at each financial year end and adjusted prospectively, if appropriate.
This caption includes satellites which are under construction. Incremental costs directly attributable to the purchase of satellites, including launch costs and other related expenses such as ground equipment and borrowing costs, are capitalised in the statement of financial position.
The cost of satellite construction may include an element of deferred consideration to satellite manufacturers referred to as satellite performance incentives. SES is contractually obligated to make these payments over the lives of the satellites, provided the satellites continue to operate in accordance with contractual specifications. Historically, the satellite manufacturers have earned substantially all of these payments. Therefore, SES accounts for these payments as deferred financing, capitalising the present value of the payments as part of the cost of the satellites and recording a corresponding liability to the satellite manufacturers. Interest expense is recognized on the deferred financing and the liability is accreted upward based on the passage of time and reduced as the payments are made.
Once the asset is subsequently put into service and operates in the manner intended by management, the expenditure is transferred to assets in use and depreciation commences.
Borrowing costs that are directly attributable to the construction or production of a qualifying asset are capitalised as part of the cost of that asset. All other borrowing costs are recognised as an expense in the period in which they are incurred.
Goodwill is initially measured at cost, being the excess of the aggregate of the consideration transferred and the amount recognised for non-controlling interest over the net identifiable assets acquired and liabilities assumed. If this consideration is lower than the fair value of the net assets of the subsidiary acquired, the difference is recognised as income in the income statement.
After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill, from the acquisition date, is allocated to each of the Group's cash-generating units that are expected to benefit from the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units.
The carrying value of acquisition goodwill is reviewed for impairment annually, or more frequently if required to establish whether the value is still recoverable. The recoverable amount is defined as the higher of fair value less costs to sell and value in use. Impairment charges are taken as charges to the income statement. Impairment losses relating to goodwill cannot be reversed in future periods. The Group estimates value in use on the basis of the estimated discounted cash flows to be generated by a cash-generating unit which are based upon business plans approved by management. Beyond a seven-year period, cash flows may be estimated on the basis of stable rates of growth or decline.
Where goodwill forms part of a cash-generating unit and part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured based on the relative values of the operation disposed of and the portion of the cashgenerating unit retained.
Intangible assets, consisting principally of rights of usage of orbital frequencies and acquired transponder service agreements. SES is authorized by governments to operate satellites at certain orbital locations. Various governments acquire rights to these orbital locations through filings made with the International Telecommunication Union (the "ITU"), a sub-organization of the United Nations. The Company will continue to have rights to operate at its orbital locations so long as it maintains its authorisations to do so. Those rights are reviewed at acquisition to establish whether they represent assets with a definite or indefinite life. Those assessed as being definite life assets are amortised on a straight-line basis over their estimated useful life not exceeding 21 years. Indefinite life intangible assets are held at cost in the statement of financial position and are subject to impairment testing in line with the treatment outlined for goodwill above. The useful life of an intangible asset with an indefinite life is reviewed annually to determine whether indefinite life assessment continues to be supportable. If not, the change in the useful life assessment from indefinite to finite is made on a prospective basis.
Costs associated with maintaining computer software programmes are recognised as an expense as incurred. Development costs that are directly attributable to the design and testing of identifiable and unique software products controlled by the Group are recognised as intangible assets when the following criteria are met:
Directly attributable costs that are capitalised as part of the software product include the software development employee costs and an appropriate portion of relevant overheads.
Other development expenditures that do not meet these criteria are recognised as an expense as incurred. Development costs previously recognised as an expense are not recognised as an asset in a subsequent period.
Computer software development costs recognised as assets are amortised over their estimated useful lives, which does not exceed seven years.
The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the Group makes an estimate of the recoverable amount.
The Group's long-lived assets and definite-life intangible assets, including its in-service satellite fleet, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Impairments can arise from complete or partial failure of a satellite as well as other changes in expected discounted future cash flows. Such impairment tests are based on a recoverable value determined using estimated future cash flows and an appropriate discount rate. The estimated cash flows are based on the most recent business plans. If impairment is indicated, the asset value will be written down to its recoverable amount.
Financial assets in the scope of IAS 39 are classified as one of:
When financial assets are recognised initially, they are measured at fair value, plus, in the case of investments not at fair value through profit or loss, directly attributable transaction costs. The Group determines the classification of its financial assets after initial recognition and, where allowed and appropriate, re-evaluates this designation at each financial year end.
All regular purchases and sales of financial assets are recognised on the trade date, that is to say the date that the Group is committed to the purchase or sale of the asset.
The following categories of financial asset as defined in IAS 39 are relevant in the Group's financial statements.
Financial assets classified as held for trading are included in the category 'financial assets at fair value through profit or loss'. Financial assets are classified as held for trading if they are acquired for the purpose of selling in the near term. Derivatives are also classified as held for trading unless they are designated and effective hedging instruments. Gains or losses on investments held for trading are recognised in income.
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are carried at amortised cost using the effective interest method. Gains and losses are recognised in income when the loans and receivables are derecognised or impaired, as well as through the amortisation process.
The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset or Group of financial assets is impaired. A financial asset or a Group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a 'loss event') and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or Group of financial assets that can be reliably estimated.
Evidence of impairment may include indications that the debtors or a Group of debtors is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganisation, and where observable data indicate that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults.
Notes to the consolidated financial statements continued December 31, 2013
For 'loans and receivables', the amount of the loss is measured as the difference between the asset's carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset's original effective interest rate. The carrying amount of the asset is reduced and the amount of the loss is recognised in the consolidated income statement. If a loan or held-to-maturity investment has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract. As a practical expedient, the Group may measure impairment on the basis of an instrument's fair value using an observable market price.
If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised (such as an improvement in the debtor's credit rating), the reversal of the previously recognised impairment loss is recognised in the consolidated income statement.
Inventories primarily consist of equipment held for re-sale, work-in-progress, related accessories and network equipment spares and are stated at the lower of cost or market value, with cost determined on an average-cost method and market value based on the estimated net realisable value.
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. Provision is made when there is objective evidence that the Group will not be able to collect the debts. The Group evaluates the credit risk of its customers on an ongoing basis, classifying them into three categories: prime, market and sub-prime.
Treasury shares are mostly used by the Group for the sharebased payments plan. Acquired own equity instruments (treasury shares) are deducted from equity. No gain or loss is recognised in profit or loss on the purchase, sale, issue or cancellation of the Group's own equity instruments.
Cash and cash equivalents comprise cash at banks and on hand, deposits and short-term, highly liquid investments readily convertible to known amounts of cash and subject to insignificant risk of changes in value. Cash on hand and in banks and short-term deposits which are held to maturity are carried at fair value. For the purposes of the consolidated statement of cash flow, 'Net Cash' consists of cash and cash equivalents, net of outstanding bank overdrafts.
SES generates its revenues through the commercialisation of its extensive satellite assets and ground network; and through a range of ancillary services.
In the infrastructure operations, revenues are generated primarily from customer agreements for the provision of satellite transponder services. All amounts received from customers under contracts for satellite capacity are recognised on a straight-line basis at the fair value of the consideration received or receivable over the duration of the respective contracts - including any free-of-charge periods which may be included in the contract.
Customer payments received in advance of the provision of service are recorded as deferred income in the statement of financial position, and for significant advance payments, interest is accrued on the amount received at the effective interest rate at the time of receipt. In the case of backloaded payment plans, the unbilled portion of recognised revenues are disclosed within 'Trade and other receivables', allocated between current and non-current as appropriate.
Other operational income includes fees generated for end-oflife missions on inclined orbit satellites and uplinking charges. Where satellite transponder services are provided in exchange for dissimilar goods and services, the revenue is measured at the fair value of the goods or services received where these can be reliably measured, otherwise at the fair value of the goods or services given up, adjusted by the amount of any cash or cash equivalents received.
The Group also has a number of long-term construction contracts. For these contracts, revenue is recognised by reference to the stage of completion of the contract where the outcome can be estimated reliably.
The Company declares dividends after the financial statements for the year have been approved. Accordingly dividends are recorded in the subsequent year's financial statements.
Provisions are recognised when the Group has a present obligation as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.
Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently carried at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the borrowings using the effective interest method.
Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw-down occurs.
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23-50
Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from, or paid to, the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted, or substantively enacted, at the reporting date.
Deferred tax is provided using the liability method on temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.
Deferred tax liabilities are recognised for all taxable temporary differences, except:
Deferred tax assets are recognised for all deductible temporary differences, carry-forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry-forward of unused tax credits and unused tax losses can be utilised except:
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are reassessed at each reporting date and are recognised to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.
Deferred tax items are classified according to the classification of the underlying temporary difference either, as an asset or a liability, or in other comprehensive income or directly in equity.
Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.
The consolidated financial statements are presented in euro (EUR), which is the Company's functional and presentation currency. Each entity in the Group determines its own functional currency and items included in the financial statements of each entity are measured using the functional currency.
Transactions in foreign currencies are initially recorded in the functional currency ruling at the date of transaction. The cost of non-monetary assets is translated at the rate applicable at the date of the transaction. All other assets and liabilities are translated at closing rates of exchange. During the year, expenses and income expressed in foreign currencies are recorded at exchange rates which approximate to the rate prevailing on the date they occur or accrue. All exchange differences resulting from the application of these principles are included in the consolidated income statement.
The Group considers that monetary long-term receivables or loans for which settlement is neither planned nor likely to occur in the foreseeable future is, in substance, a part of the entity's net investment in that foreign operation, The related foreign exchange differences are included in the foreign currency translation reserve within equity. On disposal of a foreign operation, the deferred cumulative amount recognised in equity relating to that particular foreign operation is reclassified to the income statement.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate.
The assets and liabilities of consolidated foreign operations are translated into euro at the year-end exchange rates, while the income and expense items of these foreign operations are translated at the average exchange rate of the year. The related foreign exchange differences are included in the foreign currency translation reserve within equity. On disposal of a foreign operation, the deferred cumulative amount recognised in equity relating to that particular foreign operation is reclassified to the income statement as part of the gain or loss on disposal.
Notes to the consolidated financial statements continued December 31, 2013
The US dollar exchange rates used by the Group during the year were as follows:
| 1 euro = | Average rate | Closing rate | Average rate | Closing rate |
|---|---|---|---|---|
| for 2013 | for 2013 | for 2012 | for 2012 | |
| USD | 1.3259 | 1.3791 | 1.2910 | 1.3194 |
The Company's capital structure consists of Class A and Class B shares, entitled to the payment of annual dividends as approved by the shareholders at their annual meetings. Holders of Class B shares participate in earnings and are entitled to 40% of the dividends payable per Class A share. Basic and diluted earnings per share are calculated by dividing the net profit attributable to ordinary shareholders by the weighted average number of common shares outstanding during the period as adjusted to reflect the economic rights of each class of shares. Diluted earnings per share are also adjusted for the effects of dilutive shares and options.
The Group recognises all derivatives as assets and liabilities at fair value in the statement of financial position. Changes in the fair value of derivatives are recorded in the income statement or in accordance with the principles below where hedge accounting is applied. The Group usually uses derivative financial instruments such as foreign currency contracts and interest rate swaps to hedge its risks associated with interest rate and foreign currency fluctuation. On the date a hedging derivative instrument is entered into, the Group designates the derivative as one of the following:
Hedges which meet the criteria for hedge accounting are accounted for as follows:
In relation to fair value hedges (for example interest rate swaps on fixed-rate debt), any gain or loss from remeasuring the hedging instrument at fair value is recognised immediately in the income statement as finance revenue or cost. Any gain or loss on the hedged item attributable to the hedged risk is adjusted against the carrying amount of the hedged item and recognised in the income statement as finance revenue or cost.
In relation to cash flow hedges (forward foreign currency contracts and interest rate swaps on floating-rate debt) – to hedge firm commitments or forecasted transactions, the portion of the gain or loss on the hedging instrument that is determined to be an effective hedge is recognised directly in equity as other comprehensive income and the ineffective portion is recognised in the income statement as finance revenue or cost. When the hedged commitment results in the recognition of an asset or a liability, then, at the time the asset or liability is recognised, the associated gains or losses that had previously been recognised in equity are included in the initial measurement of the acquisition cost or carrying amount of the asset or liability.
Changes in the fair value of a derivative or non-derivative instrument that is designated as a hedge of a net investment are recorded in the foreign currency translation reserve within equity to the extent that it is deemed to be an effective hedge. The ineffective portion is recognised in the income statement as finance revenue or cost.
Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated or exercised, the hedge no longer qualifies for hedge accounting, or the Group revokes the designation. At that point in time, any cumulative gain or loss on the hedging instrument recognised in equity is kept in equity until the forecasted transaction occurs. If a hedged transaction is no longer expected to occur, the net cumulative gain or loss recognised in equity is transferred to net profit or loss for the period.
The Group formally documents all relationships between hedging instruments and hedged items, as well as its riskmanagement objective and strategy for undertaking various hedge transactions. This process includes allocating all derivatives that are designated as fair value hedges, cash flow hedges or net investment hedges to specific assets and liabilities on the statement of financial position or to specific firm commitments or forecasted transactions. The Group also formally assesses both at the inception of the hedge and on an ongoing basis, whether each derivative is highly effective in offsetting changes in fair values or cash flows of the hedged item. If it is determined that a derivative is not highly effective as a hedge, or if a derivative ceases to be a highly effective hedge, the Group will discontinue hedge accounting prospectively. The ineffective portion of hedge is recognised in profit or loss.
23-50
A financial asset is derecognised where:
Where the Group has transferred its rights to receive cash flows from an asset and has neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control of the asset, the asset continues to be recognised to the extent of the Group's continuing involvement in it. Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of the consideration that the Group could be required to repay.
Where continuing involvement takes the form of a written and/or purchased option (including cash-settled options or similar provision) on the transferred asset, the extent of the Group's continuing involvement is the amount of the transferred asset that the Group may repurchase, except that in the case of a written put option (including a cash-settled option or similar provision) on an asset measured at fair value, the extent of the Group's continuing involvement is limited to the lower of the fair value of the transferred asset and the option exercise price.
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. Where an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amount is recognised in profit or loss.
The Company and certain subsidiaries operate defined benefit pension plans and/or defined contribution plans.
A defined contribution plan is a pension plan under which the Group pays fixed contributions into a separate entity. The Group has no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods. A defined benefit plan is a pension plan that is not a defined contribution plan.
Typically defined benefit plans define an amount of pension benefit that an employee will receive on retirement, usually dependent on one or more factors such as age, years of service and compensation.
The liability recognised in the balance sheet in respect of defined benefit pension plans is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets. The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating to the terms of the related pension obligation. Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to equity in other comprehensive income in the period in which they arise.
Past-service costs are recognised immediately in income statement.
For defined contribution plans, the Group pays contributions to publicly or privately administered pension insurance plans on a mandatory, contractual or voluntary basis. The Group has no further payment obligations once the contributions have been paid. The contributions are recognised as employee benefit expense when they are due. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the future payments is available.
Employees (including senior executives) of the Group receive remuneration in the form of share-based payment transactions, whereby employees render services as consideration for equity instruments ('equity-settled transactions'). The cost of equity-settled transactions is measured by reference to the fair value at the date on which they are granted. The fair value is determined by an external valuer using a binomial model, further details are given in Note 22. In valuing equity-settled transactions, no account is taken of any non-market performance conditions, other than conditions linked to the price of the Company's shares, if applicable.
The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which the performance and/or service conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award (the vesting date). The cumulative expense recognised for equity-settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the Group's best estimate of the number of equity instruments that will ultimately vest. The income statement charge or credit for a period represents the movement in cumulative expense recognised as at the beginning and end of that period. No expense is recognised for awards that do not ultimately vest.
The dilutive effect of outstanding options is reflected as additional share dilution in the computation of earnings per share (see Note 10).
Notes to the consolidated financial statements continued
December 31, 2013
The determination of whether an arrangement is, or contains a lease is based on the substance of the arrangement at inception date of whether the fulfilment of the arrangement is dependent on the use of a specific asset or assets or the arrangement conveys a right to use the asset. For arrangements entered into prior to January 1, 2005, the date of inception is deemed to be January 1, 2005 in accordance with the transitional requirements of IFRIC 4.
Finance leases, which transfer to the Group substantially all risks and benefits incidental to ownership of the leased item, are capitalised at the inception of the lease at the fair market value of the leased item or, if lower, at the present value of the minimum lease payments. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly to expense. Capitalised leased assets are depreciated over the shorter of the estimated useful life of the asset or the lease term.
Leases where the lessor retains substantially all the risks and benefits of ownership of the asset are classified as operating leases. Operating lease payments are recognised as an expense in the income statement on a straight-line basis over the lease term.
A number of new standards and amendments to standards and interpretations are effective for annual periods beginning after 1 January 2013, and have not been applied in preparing these consolidated financial statements. The Group is still to assess the effect of the following changes on its consolidated financial statements:
IFRS 9 addresses the classification, measurement and recognition of financial assets and financial liabilities. IFRS 9 was issued in two phases in November 2009 and October 2010. It replaces the parts of IAS 39 that relate to the classification and measurement of financial instruments. IFRS 9 requires financial assets to be classified into two measurement categories: those measured as at fair value and those measured at amortised cost. The determination is made at initial recognition. The classification depends on the entity's business model for managing its financial instruments and the contractual cash flow characteristics of the instrument. For financial liabilities, the standard retains most of the IAS 39 requirements. The main change is that, in cases where the fair value option is taken for financial liabilities, the part of a fair value change due to an entity's own credit risk is recorded in other comprehensive income rather than the income statement, unless this creates an accounting mismatch. In addition, final standard on hedging (excluding macro hedging) has been issued in November 2013 which aligns hedge accounting more closely with risk management, and so should result in more 'decision-useful' information to users of financial statements. A final standard is not expected before 2014. The Group is yet to assess IFRS 9's full impact. The Group will also consider the impact of the remaining phases of IFRS 9 when completed by the Board. Application date has not been determined. IFRS 9 has not yet been adopted by the European Union.
IFRS 10 builds on existing principles by identifying the concept of control as the determining factor in whether an entity should be included within the consolidated financial statements of the parent Company. The standard provides additional guidance to assist in the determination of control where this is difficult to assess. This standard becomes effective for annual periods beginning on or after January 1, 2014.
The adoption of this standard is not expected to have an impact on the financial position or performance of the Group.
IFRS 11 focuses on the rights and obligations of the parties to the arrangement rather than its legal form. There are two types of joint arrangements: joint operations and joint ventures. Joint operations arise where the investors have rights to the assets and obligations for the liabilities of an arrangement. A joint operator accounts for its share of the assets, liabilities, revenue and expenses. Joint ventures arise where the investors have rights to the net assets of the arrangement; joint ventures are accounted for under the equity method. Proportional consolidation of joint arrangements is no longer permitted. This standard becomes effective for annual periods beginning on or after January 1, 2014.
The adoption of this standard is not expected to have an impact on the financial position or performance of the Group.
IFRS 12 includes the disclosure requirements for all forms of interests in other entities, including joint arrangements, associates, structured entities and other off balance sheet vehicles. This standard becomes effective for annual periods beginning on or after January 1, 2014.
The adoption of this standard is not expected to have an impact on the financial position or performance of the Group.
This amendment clarifies the application of IAS19, 'Employee Benefits' (2011) – referred to as IAS19 Employee Benefits (revised), to plans that require employees or third parties to contribute towards the cost of benefits. The amendment clarifies that the benefit of employee contributions linked to the length of services is recognised in profit or loss over the employee's working life. Contributions that are not linked to service are reflected in the measurement of the benefit obligation. The amendment does not affect the accounting for voluntary contributions. The Group does not expect this amendment to have a material impact and intends to adopt it for accounting periods beginning after July 1, 2014. This amendment has not yet been adopted by the European Union.
IFRIC 21 sets out the accounting for an obligation to pay a levy that is not income tax. The interpretation addresses what the obligating event is that gives rise to pay a levy and when should a liability be recognised. This standard becomes effective for annual periods beginning on or after January 1, 2014. The Group is not currently subjected to significant levies so the impact on the Group is not material. This amendment has not yet been adopted by the European Union.
As part of its annual improvement project, the IASB slightly amended various standards. The improvements 2012 and 2013 focus on areas of inconsistencies in IFRSs or where clarification of wording was required. The effective date of these amendments is July 1, 2014. The Group does not expect any significant impact of these amendments on its consolidated financial statements. These amendments have not yet been adopted by the European Union.
There are no other IFRSs or IFRIC interpretations that are not yet effective that would be expected to have a material impact on the Group.
With effect from January 1, 2012 SES adopted the equity method for the presentation of the results of joint ventures (refer to Note 2).
In 2007, SES ASTRA and Eutelsat entered into a joint venture, Solaris Mobile Limited ('Solaris') based in Dublin, to develop the use of S-band frequencies for next-generation entertainment services via satellite. On April 6, 2009, the S-band payload was launched on board Eutelsat's W2A satellite. On May 14, 2009, the European Commission granted one of two 15 MHz blocks of S-band capacity for a European coverage to Solaris, subject to certain conditions, with the second block assigned to Inmarsat. On the same day Eutelsat and SES announced an anomaly in the functioning of the payload. On June 22, 2009, Solaris filed a constructive total loss insurance claim for the full insured value of the payload which was fully impaired on June 30, 2009. The insurance proceeds were collected in full towards the end of 2009.
On December 13, 2013, the Group disposed of its 50% interest in Solaris Mobile Limited and recorded a gain on sale of EUR 12.4 million disclosed under "Share of joint ventures and associates' result" in the consolidated income statement. The share of assets, liabilities, income and expenses of the joint venture as at the date of disposal and at December 31, 2012 and for the periods then ended, which are included in the consolidated financial statements, are as follows:
| In millions of euros | 2013 | 2012 |
|---|---|---|
| Non-current assets | 2.0 | 2.0 |
| Current assets | 1.5 | 3.2 |
| Non-current liabilities | – | – |
| Current liabilities | 0.3 | 0.3 |
| Revenue | – | – |
| Other income | – | 0.1 |
| Operating expenses | (1.6) | (2.0) |
| Depreciation and amortisation | (0.1) | (0.2) |
| Finance income, net | – | 0.1 |
| Net loss | (1.7) | (2.0) |
SES believes that it does business in one operating segment, namely the provision of satellite-based data transmission capacity, and ancillary services, to customers around the world.
The Executive Committee, which is the most senior chief operating decision-making committee in the Group's corporate governance structure, reviews the Group's financial reporting and generates those proposals for the allocation of Company resources which are submitted to the Board of Directors. The main sources of financial information used by the Executive Committee in assessing the Group's performance and allocating resources are:
The increasing level of integration, particularly of the Group's Infrastructure operations, has also impacted the composition of the defined cash generating units for impairment testing purposes from January 1, 2013 (Note 14).
When analysing the performance of the operating segment the comparative prior year figures are reconsolidated using, for all currencies, the exchange rates applying for each month in the current period. These restated prior year figures are noted as being presented at 'constant FX'.
Notes to the consolidated financial statements continued
December 31, 2013
The segment's financial results for 2012 and 2013 are set out below - the comparative 2012 figures have also been adjusted to reflect the disposal of the Group's 75% interest in Glocom (Communications and Images) Limited in November 2013.
| In millions of euros | 2013 | Constant FX 2012 |
Change Favourable +/ Adverse |
|---|---|---|---|
| Revenue | 1,862.5 | 1,801.6 | +3.4% |
| Operating expenses | (497.8) | (473.7) | -5.1% |
| EBITDA | 1,364.7 | 1,327.9 | +2.8% |
| EBITDA margin | 73.3% | 73.6% | -0.3 % pts |
| Depreciation | (466.5) | (505.9) | +7.8% |
| Amortisation | (47.0) | (40.5) | -16.0% |
| Operating profit | 851.2 | 781.5 | +8.9% |
| In millions of euros | 2012 | Constant FX 2011 |
Change Favourable +/ Adverse - |
|---|---|---|---|
| Revenue | 1,828.0 | 1,801.6 | +1.5% |
| Operating expenses | (481.4) | (475.6) | -1.2% |
| EBITDA | 1,346.6 | 1,326.0 | +1.6% |
| EBITDA margin (%) | 73.7% | 73.6% | +0.1% pts |
| Depreciation | (515.6) | (453.3) | -13.7% |
| Amortisation | (40.5) | (34.9) | -16.0% |
| Operating profit | 790.5 | 837.8 | -5.6% |
At constant FX, the revenue allocated to the relevant downlink region developed as follows:
| In millions of euros | 2013 | 2012 | Change Favourable +/ Adverse - |
|---|---|---|---|
| Europe | 936.4 | 923.9 | +1.4% |
| North America | 398.0 | 409.7 | -2.9% |
| International | 528.1 | 468.0 | +12.8% |
| Total | 1,862.5 | 1,801.6 | +3.4% |
The Group's revenues from external customers analysed between components of the business is as follows: 'Infrastructure' refers to the sale of satellite transponder capacity and directly attributable services, whereas 'Services' refers to the provision of products such as engineering services, retail broadband two-way internet access, and playout and transmission services. Sales between the two, mainly sales of infrastructure capacity to the 'Services' businesses, are eliminated on consolidation.
| 2013 In millions of euros |
Infrastructure | Services | Elim./unalloc. | Total |
|---|---|---|---|---|
| Revenue | 1,591.0 | 432.5 | (161.0) | 1,862.5 |
| 2012 In millions of euros |
Infrastructure | Services | Elim./unalloc. | Total |
| Revenue | 1,586.4 | 386.9 | (145.3) | 1,828.0 |
The Group's revenues from external customers analysed by country using the customer's billing address is as follows:
| In millions of euros | 2013 | 2012 |
|---|---|---|
| Luxembourg (SES country of domicile) | 38.0 | 35.2 |
| United States of America | 513.3 | 515.7 |
| Germany | 336.6 | 350.7 |
| United Kingdom | 297.3 | 304.5 |
| France | 98.3 | 99.2 |
| Others | 579.0 | 522.7 |
| Total | 1,862.5 | 1,828.0 |
No single customer accounted for 10% or more of total revenue in 2013 or 2012.
51-56
107-120
The Group's non-current assets are located as set out in the following table. Note that satellites are allocated to the country where the legal owner of the asset is incorporated. Similarly orbital slot rights and goodwill balances are allocated to the attributable subsidiary. In millions of euros 2013 2012
| Luxembourg (SES country of domicile) | 2,274.7 | 2,127.7 |
|---|---|---|
| United States of America | 2,547.4 | 2,785.7 |
| The Netherlands | 1,226.8 | 1,187.4 |
| Isle of Man | 961.1 | 1,205.7 |
| Sweden | 282.2 | 312.5 |
| Others | 311.6 | 344.4 |
| Total | 7,603.8 | 7,963.4 |
The operating expense categories disclosed include the following types of expenditure:
1) Cost of sales (excluding staff costs and depreciation) represents cost categories which generally vary directly with revenue development. Such costs include the rental of third-party satellite capacity, customer support costs, such as uplinking and monitoring, and other cost of sales which include the cost of equipment rental or purchased for integration and resale, largely as part of SES Services offerings.
In millions of euros 2013 2012 Rental of third-party satellite capacity (59.8) (71.1) Customer support costs (18.1) (12.4) Other cost of sales (101.7) (89.8) Total cost of sales (179.6) (173.3)
2) Staff costs in the amount of EUR 185.8 million (2012: EUR 180.7 million) include gross salaries and employer's social security payments, payments into pension schemes for employees, and charges arising under share-based payment schemes.
3) Other operating expenses in the amount of EUR 132.4 million (2012: EUR 127.4 million) are by their nature less variable to revenue development. Such costs include facility costs, in-orbit insurance costs, marketing expenses, general and administrative expenditure, consulting charges, travel-related expenditure and movements on provisions for debtors.
For the year ended December 31, the Group has recorded charges – both billed and accrued – from its independent auditor and affiliated companies thereof, as set out below:
| In millions of euros | 2013 | 2012 |
|---|---|---|
| Fees for statutory audit of annual and consolidated accounts | 1.5 | 1.6 |
| Fees charged for other assurance services | 0.2 | 0.2 |
| Fees charged for tax services | 0.6 | 0.6 |
| Fees charged for other non-audit services | 0.2 | – |
| Total audit and non-audit fees | 2.5 | 2.4 |
| In millions of euros | 2013 | 2012 |
|---|---|---|
| Finance revenue | ||
| Interest income | 5.3 | 2.0 |
| Net foreign exchange gains | 4.3 | 4.5 |
| Total | 9.6 | 6.5 |
| Finance costs | ||
|---|---|---|
| Interest expense on loans and borrowings (net of amounts capitalised) | (174.6) | (167.4) |
| Value adjustments on financial assets | (8.5) | (8.7) |
| Total | (183.1) | (176.1) |
Notes to the consolidated financial statements continued
December 31, 2013
Taxes on income comprise the taxes paid or owed on income in the individual countries, as well as deferred taxes. Current and deferred taxes can be analysed as follows:
| In millions of euros | 2013 | 2012 |
|---|---|---|
| Consolidated income statement | ||
| Current income tax | ||
| Current income tax charge | (95.2) | (1.6) |
| Adjustments in respect of prior periods | 18.9 | 6.1 |
| Foreign withholding taxes | (8.3) | – |
| Total current income tax | (84.6) | 4.5 |
| Deferred income tax | ||
| Relating to origination and reversal of temporary differences | (8.4) | 25.9 |
| Relating to tax losses brought forward | 6.8 | – |
| Changes in tax rate | 5.9 | 22.7 |
| Adjustment of prior years | (7.2) | (10.9) |
| Total deferred income tax | (2.9) | 37.7 |
| Income tax income/(expense) per consolidated income statement | (87.5) | 42.2 |
| Consolidated statement of changes in equity | ||
| Income tax related to items (charged) or credited directly in equity | ||
| Cash flow hedge | 0.5 | (1.9) |
| Net Investment hedge | (13.7) | (2.4) |
| Retirement benefit obligation | (1.3) | (0.9) |
| Income taxes reported in equity | (14.5) | (5.2) |
(2012: 29.55%) which corresponds to the Luxembourg domestic tax rate for the year ended December 31, 2013 is as follows:
| In millions of euros | 2013 | 2012 |
|---|---|---|
| Profit before tax from continuing operations | 677.7 | 620.9 |
| Multiplied by theoretical tax rate of 29.97% (29.55% for 2012) | 203.1 | 183.5 |
| Investment tax credits | (35.7) | (46.6) |
| Tax exempt income | (11.3) | (8.1) |
| Non deductible expenditures | 3.9 | 10.0 |
| Taxes related to prior years | 12.4 | (4.8) |
| Effect of changes in tax rate | (4.6) | (22.7) |
| Revaluation of prior-year deferred taxes | (6.8) | 1.1 |
| Effect of different local tax rates | (65.1) | (78.1) |
| Group tax provision related to current year | 8.4 | 10.0 |
| Reversal of Group tax provision related to prior years | (22.0) | (85.7) |
| Foreign withholding taxes (not creditable) | 8.3 | – |
| Foreign exchange impact and other | (3.1) | (0.8) |
| Income tax reported in the consolidated income statement | 87.5 | (42.2) |
During the year, several intercompany transfers have occurred (transfers of full assets and liabilities) which have triggered the recognition of goodwill in the statutory accounts of the related entities. These transfers have no carrying amount in the consolidated financial statements and did give rise to temporary differences for which no deferred tax assets have been recognised, as of December 31, 2013, as there is no sufficient evidence that future taxable profits will be available to utilise the deferred tax assets.
The accounts related to deferred taxes included in the consolidated financial statements can be analysed as follows:
| In millions of euros | Deferred tax assets 2013 |
Deferred tax assets 2012 |
Deferred tax liabilities 2013 |
Deferred tax liabilities 2012 |
Deferred tax in income 2013 |
Deferred tax in income 2012 |
|---|---|---|---|---|---|---|
| Losses carried forward | 11.8 | 68.5 | – | – | (56.7) | (64.9) |
| Tax credits | 103.1 | 83.5 | – | – | 19.6 | 50.9 |
| Intangible assets | – | – | 233.6 | 254.8 | 21.2 | (100.3) |
| Tangible assets | – | 0.5 | 403.2 | 458.0 | 54.3 | 141.8 |
| Retirement benefit obligation | 14.7 | 12.9 | – | – | 1.8 | 0.3 |
| Value adjustments on financial asset | – | – | 18.7 | 18.6 | (0.1) | 8.0 |
| Receivables | 3.6 | – | – | 0.4 | 4.0 | 15.3 |
| Payables | – | – | – | – | – | 0.9 |
| Tax-free reserves | – | – | 3.7 | – | (3.7) | – |
| Other provisions and accruals | 0.4 | 1.6 | 11.6 | 17.3 | 4.5 | (6.3) |
| Foreign exchange impact1 | (47.8) | (8.0) | ||||
| Total deferred tax as per consolidated income statement |
133.6 | 167.0 | 670.8 | 749.1 | (2.9) | 37.7 |
| Measurement of financial instruments, cash | ||||||
| flow hedges and net investment hedges | 1.0 | 11.8 | 12.1 | 9.6 | (13.2) | (4.3) |
| Retirement benefit obligations | – | – | 1.3 | – | (1.3) | (0.9) |
| Subtotal | 134.6 | 178.8 | 684.2 | 758.7 | (17.4) | 32.5 |
| Offset of deferred taxes | (38.9) | (89.6) | (38.9) | (89.6) | – | – |
| Total | 95.7 | 89.2 | 645.3 | 669.1 | (17.4) | 32.5 |
1 A foreign exchange impact arises due to the translation of Group's operations with a different functional currency than Euro.
Deferred tax assets have been offset against deferred tax liabilities where they relate to the same taxation authority and the entity concerned has a legally enforceable right to set off current tax assets against current tax liabilities.
In addition to the tax losses for which the Group recognised deferred tax assets, the Group has tax losses of EUR 1.6 million (2012: EUR 191.3 million) that are available indefinitely for offset against future taxable profits of the companies in which the losses arose. Deferred tax assets have not been recognised in respect of these losses as they may not be used to offset taxable profits elsewhere in the Group and they have arisen in subsidiaries that are not expected to generate taxable profits against which these losses could be offset in the foreseeable future.
No deferred income tax liabilities has been recognised for the withholding tax and other taxes that would be payable on the unremitted earnings of certain subsidiaries. Such amounts are permanently reinvested or not subject to taxation.
51-56
Notes to the consolidated financial statements continued
December 31, 2013
| In millions of euros | 2013 | 2012 |
|---|---|---|
| Cash flow hedges | ||
| Gains (losses) arising during the year: | ||
| On currency forward contracts | (1.8) | 6.6 |
| On interest rate swaps | – | 5.2 |
| Reclassification adjustments for (gains)/losses included in the fixed assets | – | (0.3) |
| Total | (1.8) | 11.5 |
Basic earnings per share is calculated by dividing the net profit for the year attributable to ordinary shareholders of each class of shares by the weighted average number of shares outstanding during the year as adjusted to reflect the economic rights of each class of share. Earnings per share calculated on a fully diluted basis is insignificantly different from the basic earnings per share.
For the year 2013, earnings per share of EUR 1.41 per A share (2012: EUR 1.62), and EUR 0.56 per B share (2012: EUR 0.65) have been calculated on the following basis:
| In millions of euros | 2013 | 2012 |
|---|---|---|
| Profit attributable to equity holders of the parent | 566.5 | 648.8 |
Weighted average number of shares, net of own shares held, for the purpose of calculating earnings per share:
| 2013 | 2012 | |
|---|---|---|
| Class A shares (in million) | 335.1 | 334.1 |
| Class B shares (in million) | 168.8 | 167.8 |
| Total | 503.9 | 501.9 |
The weighted average number of shares is based on the capital structure of the Company as described in Note 21.
| Dividends declared and paid during the year: | ||
|---|---|---|
| In millions of euros | 2013 | 2012 |
| Class A dividend (2012: EUR 0.97, 2011: EUR 0.88) | 327.5 | 293.0 |
| Class B dividend (2012: EUR 0.39, 2011: EUR 0.35) | 65.5 | 58.6 |
| Total | 393.0 | 351.6 |
Dividends proposed for approval at the annual general meeting to be held on April 3, 2014, which are not recognised as a liability as at December 31, 2013:
| In millions of euros | 2013 | 2012 |
|---|---|---|
| Class A dividend for 2013: EUR 1.07 | 361.2 | 326.8 |
| Class B dividend for 2013: EUR 0.43 | 72.3 | 65.4 |
| Total | 433.5 | 392.2 |
Dividends are paid net of any withholding tax.
| Other fixtures and fittings, |
|||||
|---|---|---|---|---|---|
| Land and | Space | Ground | tools and | ||
| In millions of euros Movements in 2012 on cost |
buildings | segment | segment | equipment1 | Total |
| As at January 1 | 173.0 | 7,554.6 | 355.2 | 133.9 | 8,216.7 |
| Additions | 4.2 | 90.2 | 6.7 | 19.5 | 120.6 |
| Disposals | – | – | (8.5) | (3.6) | (12.1) |
| Retirements | – | – | (8.3) | (7.9) | (16.2) |
| Transfers from assets in course of construction (Note 13) | 9.6 | 738.7 | 24.1 | 6.9 | 779.3 |
| Transfer to another heading | – | – | 5.1 | – | 5.1 |
| Impact of change in accounting policies – Solaris | – | (2.7) | (0.1) | – | (2.8) |
| Impact of currency translation | (0.6) | (81.5) | (2.3) | (1.2) | (85.6) |
| As at December 31 | 186.2 | 8,299.3 | 371.9 | 147.6 | 9,005.0 |
| Movements in 2012 on depreciation | |||||
| As at January 1 | (102.8) | (4,059.3) | (270.8) | (86.5) | (4,519.4) |
| Depreciation | (6.3) | (425.6) | (24.2) | (22.8) | (478.9) |
| Depreciation on disposals | – | – | 7.5 | 3.6 | 11.1 |
| Depreciation on retirements | – | – | 8.3 | 7.9 | 16.2 |
| Impairment on AMC-16 | – | (36.7) | – | – | (36.7) |
| Transfer from assets in course of construction (Note 13) | – | (0.5) | (1.2) | (2.9) | (4.6) |
| Impact of change in accounting policies – Solaris | – | 2.7 | 0.1 | – | 2.8 |
| Impact of currency translation | 0.4 | 38.5 | 1.8 | 0.9 | 41.6 |
| As at December 31 | (108.7) | (4,480.9) | (278.5) | (99.8) | (4,967.9) |
| Net book value as at December 31, 2012 | 77.5 | 3,818.4 | 93.4 | 47.8 | 4,037.1 |
| In millions of euros | Land and buildings |
Space segment |
Ground segment |
Other fixtures and fittings, tools and equipment |
Total |
| Movements in 2013 on cost | |||||
| As at January 1 | 186.2 | 8,299.3 | 371.9 | 147.6 | 9,005.0 |
| Additions | 1.1 | 9.7 | 12.5 | 7.8 | 31.1 |
| Disposals | (0.1) | (0.7) | (5.0) | (4.5) | (10.3) |
| Retirements | (0.4) | (0.5) | (0.1) | (0.3) | (1.3) |
| Transfers from assets in course of construction (Note 13) | – | 266.0 | 46.0 | – | 312.0 |
| Transfer to another heading | – | – | – | (30.7) | (30.7) |
| Impact of currency translation | (1.8) | (245.7) | (13.1) | (2.4) | (263.0) |
| As at December 31 | 185.0 | 8,328.1 | 412.2 | 117.5 | 9,042.8 |
| Movements in 2013 on depreciation | |||||
| As at January 1 | (108.7) | (4,480.9) | (278.5) | (99.8) | (4,967.9) |
| Depreciation | (6.8) | (422.0) | (31.7) | (6.0) | (466.5) |
| Depreciation on disposals | 0.1 | 0.7 | 5.0 | 1.9 | 7.7 |
| Depreciation on retirements | 0.2 | 0.5 | – | 0.3 | 1.0 |
| Transfer to another heading | – | – | – | 9.1 | 9.1 |
| Impact of currency translation | 1.0 | 111.7 | 6.7 | 2.1 | 121.5 |
| As at December 31 | (114.2) | (4,790.0) | (298.5) | (92.4) | (5,295.1) |
| Net book value as at December 31, 2013 | 70.8 | 3,538.1 | 113.7 | 25.1 | 3,747.7 |
Note 12 – Property, plant and equipment
1 In 2012 consolidated financial statements, 'software costs' were disclosed under 'Property, plant and equipment' for a net amount of EUR 11.6 million. Those have been reclassified to 'Intangible' assets in 2013. As a consequence, comparative figures have been restated accordingly.
Notes to the consolidated financial statements continued
December 31, 2013
| In millions of euros | Land and Buildings |
Space segment |
Ground segment |
Total | |
|---|---|---|---|---|---|
| Cost and net book value as at January 1, 2012 | 13.9 | 1,243.4 | 43.1 | 1,300.4 | |
| Movements in 2012 | |||||
| Additions | 6.2 | 487.2 | 43.7 | 537.1 | |
| Transfers to assets in use (Note 12) | (11.0) | (738.2) | (25.5) | (774.7) | |
| Disposals | – | (1.7) | – | (1.7) | |
| Impact of change in accounting policies – Solaris | – | (0.1) | – | (0.1) | |
| Impact of currency translation | – | (10.0) | (0.7) | (10.7) | |
| Cost and net book value as at December 31, 2012 | 9.1 | 980.6 | 60.6 | 1,050.3 | |
| In millions of euros | Land and Buildings |
Space segment |
Ground segment |
Fixtures, tools & Equipment |
Total |
| Cost and net book value as at January 1, 2013 | 9.1 | 980.6 | 60.6 | – | 1,050.3 |
| Movements in 2013 | |||||
| Additions | 8.6 | 317.8 | 19.2 | 29.4 | 375.0 |
| Transfers to assets in use (Note 12) | – | (266.0) | (46.0) | – | (312.0) |
| Transfer to another heading | – | (2.2) | – | – | (2.2) |
| Disposals | – | – | (0.2) | (0.2) | (0.4) |
| Impact of currency translation | – | (9.5) | (1.1) | (0.3) | (10.9) |
| Cost and net book value as at December 31, 2013 | 17.7 | 1,020.7 | 32.5 | 28.9 | 1,099.8 |
Borrowing costs of EUR 41.1 million (2012: EUR 57.1 million) arising on financing specifically relating to satellite construction were capitalised during the year and are included in 'Space segment' additions in the above table.
A weighted average capitalisation rate of 4.37% (2012: 4.88%) was used, representing the borrowing Group's average weighted cost of borrowing. Excluding the impact of the loan origination costs the average weighted interest rate was 4.13% (2012: 4.49%).
| In millions of euros | Orbital slot licence rights |
Goodwill | Definite life intangibles1 |
Total |
|---|---|---|---|---|
| Book value as at January 1, 2012 | 772.3 | 1,835.5 | 317.2 | 2,925.0 |
| Movements in 2012 on cost | ||||
| As at January 1 | 772.3 | 1,835.5 | 737.0 | 3,344.8 |
| Additions | – | – | 37.3 | 37.3 |
| Transfers to another heading | (2.0) | – | (2.4) | (4.4) |
| Impact of change in accounting policies – Solaris | (1.0) | – | (1.3) | (2.3) |
| Impact of currency translation | (10.3) | (33.4) | (1.0) | (44.7) |
| As at December 31 | 759.0 | 1,802.1 | 769.6 | 3,330.7 |
| Movements in 2012 on amortisation | ||||
| As at January 1 | – | – | (419.8) | (419.8) |
| Amortisation | – | – | (40.5) | (40.5) |
| Transfers to another heading | – | – | 4.5 | 4.5 |
| Impact of change in accounting policies – Solaris | – | – | 0.3 | 0.3 |
| Impact of currency translation | – | – | 0.8 | 0.8 |
| As at December 31 | – | – | (454.7) | (454.7) |
| Book value as at December 31, 2012 | 759.0 | 1,802.1 | 314.9 | 2,876.0 |
| Movements in 2013 on cost | ||||
| As at January 1 | 759.0 | 1,802.1 | 769.6 | 3,330.7 |
| Additions | 5.3 | – | 0.6 | 5.9 |
| Impairment Glocom2 | – | (3.0) | (2.9) | (5.9) |
| Transfers to another heading | – | – | 30.7 | 30.7 |
| Impact of currency translation | (30.7) | (81.3) | (5.0) | (117.0) |
| As at December 31 | 733.6 | 1,717.8 | 793.0 | 3,244.4 |
| Movements in 2013 on amortisation | ||||
| As at January 1 | – | – | (454.7) | (454.7) |
| Amortisation | – | – | (34.2) | (34.2) |
| Impairment Glocom2 | – | – | 2.2 | 2.2 |
| Transfers to another heading | – | – | (9.1) | (9.1) |
| Impact of currency translation | – | – | 1.7 | 1.7 |
| As at December 31 | – | – | (494.1) | (494.1) |
Book value as at December 31, 2013 733.6 1,717.8 298.9 2,750.3
1 In 2012 consolidated financial statements, 'software costs' were disclosed under 'Property, plant and equipment' for a net amount of EUR 11.6 million. Those have been reclassified to 'Intangible assets' in 2013. As a consequence, comparative figures have been restated accordingly.
2 Impairment has been recorded under "Amortisation expense" in the income statement.
The indefinite life intangible assets as at December 31, 2013 have a net book value made up as set out per cash-generating unit in the table below.
| In millions of euros | 2013 | 2012 | ||
|---|---|---|---|---|
| Orbital slot licence rights |
Goodwill | Orbital slot licence rights |
Goodwill | |
| One SES* | 730.8 | 1,682.7 | 759.0 | 1,757.8 |
| SES Platform Services | – | 35.9 | – | 33.9 |
| Others | 2.9 | 4.5 | – | 10.4 |
| Total | 733.7 | 1,723.1 | 759.0 | 1,802.1 |
"One SES" is defined below.
23-50
2013 overview
107-120
Notes to the consolidated financial statements continued December 31, 2013
Interests in orbital slot licence rights were acquired in the course of the acquisitions of SES World Skies entities and SES ASTRA AB, as well as through the targeted acquisition of such rights from third parties. The Group believes that it has a high probability of being able to achieve the extension of these rights at no significant cost as the current agreements expire.
Hence these assets are not amortised, but rather are held on the statement of financial position at acquisition cost. Impairment procedures are performed at least once a year to assess whether the carrying value is still appropriate.
Impairment procedures are performed at least once a year to assess whether the carrying value is still appropriate. The recoverable amount of the goodwill is determined based on a value-in-use calculation (Note 2) using the most recent business plan information approved by senior management which covers a period of up to seven years. This relatively long period for the business plan is derived from the long-term contractual base for the satellite business.
Pre-tax discount rates in 2013 are between 6.20% and 7.60% (2012: 6.70% and 7.50% – comparatives adjusted to a comparable pre-tax basis) and were selected to reflect market interest rates and commercial spreads; the capital structure of businesses in the Group's business sector; and the specific risk profile of the businesses concerned. Terminal growth rates used in the valuations are set at 1% to 2%, which reflect the most recent long-term planning assumptions approved by the Board and can be supported by reference to the trading performance of the companies concerned over a longer period.
Until 2011, the primary segments were 'ASTRA', 'WORLD SKIES' and 'SES S.A. and other participations' and these formed the basis of the Group's segmental reporting (Note 4). Accordingly, SES World Skies, SES ASTRA AB and ASTRA Platform Services were treated as separate CGUs for goodwill impairment testing purposes.
In the second quarter of 2011, SES announced the implementation of an internal restructuring. Whilst this internal restructuring impacted the segmental reporting of the Group already in 2012, it impacted the composition of the CGUs only from January 1, 2013 due to the following reasons:
– Beginning 2013, reflecting the above developments, the business plan as well as the Group's consolidation system was adjusted to reflect the new Group structure. Therefore whilst for December 31, 2012, the CGUs for the impairment testing of goodwill and intangible assets remained the same as in previous periods, to ensure that the goodwill could be tested for impairment in a way consistent with available financial information and avoiding the need for the development of systems specifically to deal with goodwill, from 2013 the OneSES basis for identifying CGUs has been applied.
SES WORLD SKIES and SES ASTRA AB are part of the 'OneSES' cash generating unit. For the reasons mentioned above, the 'OneSES' represents the lowest level at which management is capturing information about the goodwill and other indefinite live assets for internal management reporting purposes as of January 1, 2013. All entities under OneSES benefit from the synergies ascribed to each business combination.
SES Platform Services is not one of the 'OneSES' companies and generates cash inflows that are largely Independent of the cash inflows from the 'OneSES' companies. Therefore for goodwill impairment testing purposes this entity is treated separately.
The allocation of goodwill and indefinite life intangible assets to the CGUs for the year ended 2012 has been restated to be consistent with the current year presentation.
The calculations of value in use are most sensitive to:
Business plans are drawn up annually and generally provides an assessment of the expected developments for a seven-year period beyond the end of the year when the plan is drawn up. These business plans reflect both the most up-to-date assumptions concerning the CGU's markets and also developments and trends in the business of the CGU. For the provision of satellite capacity business these will particularly take account of the following factors:
Discount rates reflect management's estimate of the risks specific to each unit. Management uses a pre-tax weighted average cost of capital as the discount rate for each entity. This reflects the market interest rates on ten-year bonds in the market concerned, the capital structure of businesses in the Group's business sector, and other factors, as necessary, applying specifically to the CGU concerned.
The Group's primary definite life intangible asset is the agreement concluded by SES ASTRA with the Luxembourg government in relation to the usage of the Luxembourg frequencies in the orbital positions of the geostationary arc from 45˚ West to 50˚ East for the period of January 1, 2001 to December 31, 2021. Given the finite nature of this agreement, these usage rights – valued at EUR 550.0 million on acquisition – are being amortised on a straight-line basis over the 21-year term of the agreement.
On November 16, 2009, SES made an initial investment of USD 75 million (EUR 49.9 million) to acquire 25% of O3b, a company establishing a new Medium Earth Orbit satellite-based backbone for telecommunications operators and internet service providers in emerging markets. In addition to its cash investment, SES agreed to provide in-kind services, including technical and commercial services, to O3b in the pre-service commercialisation period in return for additional shares.
On November 29, 2010, SES announced its participation in a further financing round. This round raised a total of USD 1.2 billion from a Group of investors and banks, securing the financing required to take O3b through to its assumed service launch in the first half of 2013. SES' participation on this round comprised the subscription for additional shares to be fully paid based on estimates by 2013. In addition SES committed to provide two tranches of loans in a total amount of USD 66 million to O3b in the precommercialisation period, if required, at fixed rates. In return for making these commitments, which were valued at EUR 30.9 million when granted, SES received additional shares in O3b. In 2013, out of the USD 66 million commitments, USD 16 million has been paid out to O3b, which is recorded under "Other financial assets" in the statement of financial position.
On October 31, 2011, O3b announced that it had raised an additional USD 139 million to accelerate the procurement of four additional satellites. SES participated in this financing for an amount of USD 34.7 million (EUR 24.5 million) in the form of O3b equity. For this investment, SES received additional shares to be fully paid by 2013.
On October 2, 2012, SES participated to an additional funding for an amount of USD 10 million (EUR 7.8 million) in exchange for additional fully paid shares in the Company.
In June 2013, O3b launched the initial four satellites of its fleet. Following in-orbit tests on the first four satellites, O3b delayed the launch of the second four satellites to make modifications to its subsequent satellites. For this reason the start of commercial operations has been delayed. Satellites 5 to 8 are expected to be launched in Q2 2014. Funding discussions are underway to secure the commercial launch of O3b including the launch of satellites 9-12 and other long term development activities. Depending on the outcome of these discussions, the carrying value of our investment in O3b might be materially impaired.
At the time of the issuing of the consolidated financial statements SES believes that the financial negotiations will be completed in a timely way to secure the continued operations of O3b and paving the way for the commencement of commercial operations in 2014. The assumptions used in the valuation procedures applied to the impairment testing include additional satellites not all of which have been contractually committed at the reporting date. The valuation procedures applied are based on discounted cashflow modelling techniques applying a discount rate of 11.0% and perpetual growth rate of 2.0%. As a result of the impairment testing, no impairment has been taken by SES on the carrying value of its interest in O3b.
The net carrying value of SES's interest in O3b at the reporting date is EUR 114.8 million.
At December 31, 2013, SES has an equity interest of 46.85% in O3b, compared to 46.88% at the end of 2012.
Notes to the consolidated financial statements continued December 31, 2013
The carrying value of the equity component of the O3b investment has decreased from EUR 154.5 million in 2012 to EUR 132.8 million in 2013, representing an aggregate equity Investment of EUR 177.9 million, less accumulated recognised losses of EUR 45.1 million. The equity investment includes a fair value of EUR 30.9 million placed on the contingent funding described above.
The share of O3b's assets, liabilities, income and expenses as at December 31, 2013 and 2012 and for the years then ended, which are included in the consolidated financial statements, are as follows:
| In millions of euros | 2013 | 2012 |
|---|---|---|
| Non-current assets | 367.7 | 315.5 |
| Current assets | 34.8 | 34.4 |
| Non-current liabilities | 238.2 | 179.2 |
| Current liabilities | 19.9 | 5.7 |
| Revenue | 0.2 | – |
| Operating expenses | (15.1) | (9.2) |
| Depreciation and amortisation | (9.6) | (0.2) |
| Finance expense, net | (1.1) | (0.6) |
| Income tax | (0.2) | (0.1) |
| Net loss | (25.8) | (10.1) |
As at 31 December 2013 and 2012, O3b has no significant contingent liabilities.
As at 31 December 2013, the Group's share in O3b's capital commitments, which mainly relate to satellites procurement costs, amounts to EUR 41.0 million (2012: EUR 80.0 million).
As at 31 December 2013 and 2012, the Group's share in O3b's operating lease commitments is as follows:
| In millions of euros | 2013 | 2012 |
|---|---|---|
| Operating lease commitments | ||
| within one year | 1.8 | 0.8 |
| years 2-5 | 5.6 | 2.4 |
| Thereafter | 0.5 | 0.1 |
| Total capital commitments | 7.9 | 3.3 |
On May 31, 2013, the Group disposed of its remaining 24.9% interest in ND SatCom and set off the amount receivable from ND SatCom against the final selling price (see Note 16).
The investment in the Group's interest in its 24.9% shareholding in ND SatCom was initially recorded at EUR 3.4 million. The share of losses taken for the ten-month period from March to December 2011 resulted in the Group's interest being reduced to zero as at December 31, 2011.
The 24.9% share of assets, liabilities, income and expenses of ND SatCom as of and for the year ended December 31, 2012 and the share of income and expenses for the period from January 1, 2013 to May 31, 2013 are as follows:
| In millions of euros | 2013 | 2012 |
|---|---|---|
| Non-current assets | 7.4 | 7.3 |
| Current assets | 11.8 | 14.6 |
| Non-current liabilities | 8.5 | 8.3 |
| Current liabilities | 16.0 | 18.0 |
| Revenue | 3.6 | 14.3 |
| Operating expenses | (4.4) | (17.2) |
| Depreciation and amortisation | (0.3) | (0.8) |
| Finance expense, net | (0.1) | (0.6) |
| Share of associate | 0.1 | 0.3 |
| Net loss | (1.1) | (4.0) |
| Net loss attributed to associate | (3.1) | (1.9) |
On December 31, 2013, like on December 31, 2012, the Group held no other significant investments in associates.
| In millions of euros | 2013 | 2012 |
|---|---|---|
| Receivable from ND SatCom | – | 10.3 |
| Amounts receivable from associates (see Note 15) | 2.7 | – |
| Sundry financial assets | 1.2 | 0.3 |
| Total other financial assets | 3.9 | 10.6 |
The amount receivable from ND SatCom at December 31, 2012 was the non-current portion of a financing loan in the amount of EUR 27.0 million arising in the framework of the sale of the Group's controlling interest in ND SatCom in February 2011. In 2013, the Group disposed the remaining 24.9% interest in ND SatCom, set off this receivable against the final selling price and recorded a final impairment charge of EUR 7.5 million recorded under "Finance costs" in the consolidated income statement.
In 2012 consolidated financial statements, sundry financial assets included a loan to our associate Quetzsat S. de R. L. de C.V. (a Mexican company) for an amount of EUR 13.2 million. This loan was eventually contributed to the equity of the company before 2012 and has therefore been reclassified to "Investments in joint ventures and associates". The comparatives have been restated accordingly.
| In millions of euros | 2013 | 2012 |
|---|---|---|
| Net trade debtors | 355.9 | 185.7 |
| Unbilled accrued revenue | 158.0 | 115.9 |
| Other receivables | 72.7 | 111.1 |
| Total trade and other receivables | 586.6 | 412.7 |
Unbilled accrued revenue represents revenue for use of satellite capacity under long-term contracts but not billed. Billing will occur based on the terms of the contracts. There is current and non-current portion for unbilled accrued revenue. The non-current portion is in the amount of EUR 65.5 million (2012: EUR 70.1 million).
An amount of EUR 9.2 million was expensed in 2013 reflecting an increase in debtor provisions (2012: EUR 0.9 million). This amount is recorded in 'Other operating charges'. As at December 31, 2013, trade receivables with a nominal amount of EUR 19.9 million (2012: EUR 19.0 million) were impaired and fully provided for. Movements in the provision for the impairment of receivables were as follows:
| As at December 31 | 17.7 | 19.0 |
|---|---|---|
| Impact of currency translation | (0.4) | (0.1) |
| Utilised | (10.1) | (0.6) |
| Increase in debtor provisions for the year | 9.2 | 0.9 |
| As at January 1 | 19.0 | 18.8 |
| In millions of euros | 2013 | 2012 |
The Group uses the following hierarchy levels for determining the fair value of financial instruments by valuation technique:
The fair value of investments that are actively traded in organised financial markets is determined by reference to quoted market bid prices at the close of business on the reporting date. For investments where there is no active market, fair value is determined using valuation techniques. Such techniques include using recent arm's-length market transactions; reference to the current market value of another instrument, which is substantially the same; discounted cash flow analysis and option pricing models.
The fair value of forward exchange contracts is calculated by reference to current forward exchange rates for contracts with similar maturity profiles. The fair value of interest rate swap contracts is determined by reference to market values for similar instruments.
The following table presents the Group's financial assets and liabilities that are measured at fair value at December 31, 2013 and December 31, 2012.
Notes to the consolidated financial statements continued
December 31, 2013
| Assets (in millions of euros) | Level 1 | Level 2 | Level 3 | Total |
|---|---|---|---|---|
| Derivatives used for hedging | ||||
| – Cross-currency swaps | – | 9.5 | – | 9.5 |
| Total assets | – | 9.5 | – | 9.5 |
| As at December 31, 2012 | ||||
| Assets (in millions of euros) | Level 1 | Level 2 | Level 3 | Total |
| Financial assets at fair value through profit and loss | ||||
| Trading derivatives | ||||
| – Foreign exchange contracts | – | 4.3 | – | 4.3 |
| Total assets | – | 4.3 | – | 4.3 |
| Liabilities | Level 1 | Level 2 | Level 3 | Total |
| Derivatives used for hedging | ||||
| – Foreign exchange contracts | – | 0.2 | – | 0.2 |
| – Cross-currency swaps | – | 40.2 | – | 40.2 |
| Total liabilities | – | 40.4 | – | 40.4 |
A change in the Group's credit default rate by +/- 5% would not or only marginally impact profit and loss and as such is not material.
Set out below is an analysis of financial derivatives valuation by category of hedging/trading activities and derivatives.
| December 31, 2013 | December 31, 2012 | |||
|---|---|---|---|---|
| In millions of euros | Fair value asset |
Fair value liability |
Fair value asset |
Fair value liability |
| Derivatives held for trading: | – | – | 4.3 | – |
| Currency forwards, futures and swaps | – | – | 4.3 | – |
| Cash flow hedges: | – | – | – | 0.2 |
| Currency forwards, futures and swaps | – | – | – | 0.2 |
| Net investment hedges: | 9.5 | – | – | 40.2 |
| Cross currency swaps | 9.5 | – | – | 40.2 |
| Total valuation of financial derivatives | 9.5 | – | 4.3 | 40.4 |
| Of which: Non-current | – | – | – | – |
| Of which: Current | 9.5 | – | 4.3 | 40.4 |
The fair value of the loans and borrowings has been calculated by discounting the expected future cash flows at prevailing interest rates except for the listed Eurobonds for which the quoted market price has been used. The fair value of foreign currency contracts is calculated by reference to current forward exchange rates for contracts with similar maturity profiles. The fair value of the interest rate swap contracts is determined by reference to market values for similar instruments.
All loans and borrowings are measured at amortised cost.
Set out below is a comparison by category of carrying amounts and fair values of all of the Group's financial instruments that are carried in the financial statements.
| Carried at fair | ||||
|---|---|---|---|---|
| In millions of euros | Carried at amortised cost Carrying |
Fair | value Carrying |
Total Balance |
| amount | value | amount | Sheet | |
| As at December 31, 2013 | ||||
| Financial assets | ||||
| Non-current financial assets: | ||||
| Trade and other receivables | 65.5 | 65.5 | – | 65.5 |
| Loans and receivables | 3.9 | 3.9 | – | 3.9 |
| Total non-current financial assets | 69.4 | 69.4 | – | 69.4 |
| Current financial assets: | ||||
| Trade and other receivables | 586.6 | 586.6 | – | 586.6 |
| Derivatives | – | – | 9.5 | 9.5 |
| Cash and cash equivalents | 544.2 | 544.2 | – | 544.2 |
| Total current financial assets | 1,130.8 | 1,130.8 | 9.5 | 1,141.3 |
| Financial liabilities | ||||
| Loans and borrowings: | ||||
| At floating rates: | ||||
| Syndicated loan 20151 | – | – | – | – |
| COFACE | 429.7 | 429.7 | – | 429.7 |
| At fixed rates: | ||||
| Eurobond 2014 (EUR 650 million) | 649.5 | 663.3 | – | 649.5 |
| Eurobond 2018 (EUR 500 million) | 493.7 | 490.9 | – | 493.7 |
| Eurobond 2020 (EUR 650 million) | 645.5 | 724.8 | – | 645.5 |
| Eurobond 2021 (EUR 650 million) | 644.9 | 730.9 | – | 644.9 |
| US Bond 2023 (USD 750 million) | 537.6 | 502.4 | – | 537.6 |
| US Bond 2043 (USD 250 million) | 179.3 | 167.3 | – | 179.3 |
| US Private Placement Series B (USD 513 million) | 148.8 | 153.3 | – | 148.8 |
| US Private Placement Series C (USD 87 million) | 63.1 | 67.6 | – | 63.1 |
| US Ex-Im | 81.9 | 82.7 | – | 81.9 |
| German Bond 2032 (EUR 50 million), non-listed | 49.8 | 48.5 | – | 49.8 |
| Euro Private Placement 2016 (EUR 150 million) issued under EMTN | 149.5 | 161.2 | – | 149.5 |
| Euro Private Placement 2027 (EUR 140 million) issued under EMTN | 139.3 | 142.0 | – | 139.3 |
| European Investment Bank (EUR 200 million) | 133.3 | 137.0 | – | 133.3 |
| Total loans and borrowings: | 4,345.9 | 4,501.6 | – | 4,345.9 |
| Of which: Non-current | 3,542.2 | 3,668.9 | – | 3,542.2 |
| Of which: Current | 803.7 | 832.7 | – | 803.7 |
| Other long term liabilities | 59.7 | 59.7 | – | 59.7 |
| Trade and other payables | 341.4 | 341.4 | – | 341.4 |
1 As at December 31, 2013 no amount has been draw down under this facility. As a consequence, the remaining balance of loan origination cost of the Syndicated loan 2015 has been disclosed under prepaid expenses for an amount of EUR 7.0 million.
23-50
Notes to the consolidated financial statements continued
December 31, 2013
| In millions of euros | Carried at amortised cost | Carried at fair value |
Total | ||
|---|---|---|---|---|---|
| Carrying | Fair | Carrying | Balance | ||
| As at December 31, 2012 | amount | value | amount | Sheet | |
| Financial assets | |||||
| Non-current financial assets: | |||||
| Trade and other receivables | 70.1 | 70.1 | – | 70.1 | |
| Loans and receivables | 10.6 | 10.6 | – | 10.6 | |
| Total non-current financial assets | 80.7 | 80.7 | – | 80.7 | |
| Current financial assets: | |||||
| Trade and other receivables | 412.7 | 412.7 | – | 412.7 | |
| Derivatives | – | – | 4.3 | 4.3 | |
| Cash and cash equivalents | 240.0 | 240.0 | – | 240.0 | |
| Total current financial assets | 652.7 | 652.7 | 4.3 | 657.0 | |
| Financial liabilities | |||||
| Interest-bearing loans and borrowings: | |||||
| At floating rates: | |||||
| Syndicated loan 20151 | – | – | – | – | |
| Commercial papers | 466.9 | 466.9 | – | 466.9 | |
| COFACE | 374.4 | 374.4 | – | 374.4 | |
| At fixed rates: | |||||
| Eurobond 2014 (EUR 650 million) | 647.8 | 687.0 | – | 647.8 | |
| Eurobond 2020 (EUR 650 million) | 644.8 | 755.9 | – | 644.8 | |
| Eurobond 2021 (EUR 650 million) | 644.1 | 763.2 | – | 644.1 | |
| US Private Placement Series A (USD 400 million) | 43.3 | 45.4 | – | 43.3 | |
| US Private Placement Series B (USD 513 million) | 231.5 | 258.3 | – | 231.5 | |
| US Private Placement Series C (USD 87 million) | 65.9 | 76.7 | – | 65.9 | |
| US Private Placement Series D (GBP 28 million) | 5.0 | 5.1 | – | 5.0 | |
| US Ex-Im | 99.0 | 108.4 | – | 99.0 | |
| German Bond 2032 (EUR 50 million), non-listed | 49.8 | 79.7 | – | 49.8 | |
| Euro Private Placement 2016 (EUR 150 million) issued under EMTN | 149.2 | 169.4 | – | 149.2 | |
| Euro Private Placement 2027 (EUR 140 million) issued under EMTN | 139.3 | 150.8 | – | 139.3 | |
| Eurobond 2013 (EUR 500 million) | 500.0 | 515.0 | – | 500.0 | |
| European Investment Bank (EUR 200 million) | 166.7 | 179.6 | – | 166.7 | |
| Total interest-bearing loans and borrowings: | 4,227.7 | 4,635.8 | – | 4,227.7 | |
| Of which: Non-current | 3,068.0 | 3,447.6 | – | 3,068.0 | |
| Of which: Current | 1,159.7 | 1,188.2 | – | 1,159.7 | |
| Forward currency contracts | – | – | 0.2 | 0.2 | |
| Cross currency swaps | – | – | 40.2 | 40.2 | |
| Total Derivatives | – | – | 40.4 | 40.4 | |
| Of which: Non-current | – | – | – | – | |
| Of which: Current | – | – | 40.4 | 40.4 | |
| Other long term liabilities | 42.5 | 42.5 | – | 42.5 | |
| Trade and other payables | 410.7 | 410.7 | – | 410.7 | |
1 As at December 31, 2012 no amount had been draw down under this facility. As a consequence, the remaining balance of loan origination cost of the Syndicated loan 2015 was disclosed under prepaid expenses for an amount of EUR 11.5 million.
107-120
The Group's financial instruments, other than derivatives, comprise a syndicated loan, Eurobonds, US dollar Bonds (144A), EUR Private Placement, German Bonds, European Investment Bank loan, borrowings under a Private Placement issue, eurodenominated commercial papers, drawings under Coface and Export-Import Bank of the United States ('US Ex-Im') for specified satellites under construction, cash and short-term deposits. The main purpose of these financial instruments is to raise cash to finance the Group's day-to-day operations as well as for other general business purposes. The Group has various other financial assets and liabilities such as trade receivables and trade payables, which arise directly from its operations.
The Group also enters into derivative transactions, principally forward currency contracts, in order to manage exchange rate exposure on the Group's assets, liabilities and finance operations.
The main risks arising from the Group's financial instruments are liquidity risks, foreign currency risks, interest rate risks and credit risks. The general policies are periodically reviewed and approved by the board.
The Group's accounting policies in relation to derivatives and other financial instruments are set out in Note 2.
The Group's objective is to efficiently use cash generated so as to maintain short-term debt and bank loans at a low level. In case of liquidity needs, the Group can call on uncommitted loans and a committed syndicated loan. In addition, if deemed appropriate based on prevailing market conditions, the Group can access additional funds through the European Medium-Term Note or commercial paper programmes. The Group's debt maturity profile is tailored to allow the Company and its subsidiaries to cover repayment obligations as they fall due.
The Group operates a centralised treasury function which manages, among others, the liquidity of the Group in order to optimise the funding costs. This is supported by a daily cash pooling mechanism.
Liquidity is monitored on a daily basis through a review of cash balances, the drawn and issued amounts and the availability of additional funding under credit lines, the commercial paper programmes, EMTN Programme, and COFACE (EUR 4,029.9 million as at December 31, 2013, EUR 3,631.8 million as at December 31, 2012, more details in Note 23).
The table below summarises the projected contractual undiscounted cash flows (nominal amount plus interest charges) based on the maturity profile of the Group's interest-bearing loans and borrowings as at December 31, 2013. The interest assumption for all floating debts is based on the interest rate of the last drawing.
| In millions of euros | Within 1 year |
Between 1 and 5 years |
A´er 5 years |
Total |
|---|---|---|---|---|
| As at December 31, 2013: | ||||
| Loans and borrowings | 804.6 | 1,154.6 | 2,422.9 | 4,382.1 |
| Future interest commitments | 157.6 | 470.6 | 496.2 | 1,124.4 |
| Trade and other payables | 341.4 | – | – | 341.4 |
| Other long term liabilities | – | 59.7 | – | 59.7 |
| Total maturity profile | 1,303.6 | 1,684.9 | 2,919.1 | 5,907.6 |
| As at December 31, 2012: | ||||
| Loans and borrowings | 1,159.7 | 1,384.4 | 1,713.0 | 4,257.1 |
| Future interest commitments | 166.4 | 393.1 | 311.8 | 871.3 |
| Trade and other payables | 410.7 | – | – | 410.7 |
| Derivatives | 40.4 | – | – | 40.4 |
| Other long term liabilities | – | 42.5 | – | 42.5 |
| Total maturity profile | 1,777.2 | 1,820.0 | 2,024.8 | 5,622.0 |
The Group's consolidated statement of financial position can be impacted by movements in the US dollar/euro exchange rate as the Group has significant operations whose functional currency is the US dollar. To mitigate this exposure the Group may enter into forward foreign exchange contracts or similar derivatives to hedge the exposure. Currently SES holds cross currency amounting to EUR 400 million and maturing in 2014. This synthetic debt leads to an obligation for SES to deliver at the maturity of the swaps USD 557.8 million (2012: USD 735.0 million) and a right for SES to receive at maturity of the swaps EUR 414.6 million (2012: EUR 517.7 million) including interest.
The Group also has a corresponding exposure in the Income Statement. Approximately 46.1% (2012: 46.4%) of the Group's sales and 40.3% (2012: 42.4%) of the Group's operating expenses are denominated in US dollars. The Group does not enter into any hedging derivatives to cover these currency exposures.
The Group uses predominately forward currency contracts to eliminate or reduce the currency exposure arising from individual capex projects, such as satellite procurements, tailoring the maturities to each milestone payment. The foreign currency risk might be in EUR or USD. The forward contracts are in the same currency as the hedged item and can cover up to 100% of the total value of the contract. It is the Group's policy not to enter into forward contracts until a firm commitment is in place, and to match the terms of the hedge derivatives to those of the hedged item to maximise effectiveness.
Notes to the consolidated financial statements continued December 31, 2013
At December 31, 2013 the Group had no forward exchange contract outstanding designated as cash flow hedges.
In 2012 the cash flow hedges were assessed to be highly effective and a net unrealised loss of EUR 0.1 million net of deferred tax EUR 0.1 million relating to the hedging instruments is included in equity. During the year 2012, EUR (0.3) million was removed from equity and included in the initial carrying value of the acquired satellites. As at December 31, 2012, the fair value of the contracts amounted to a liability of EUR 0.2 million.
The USD portfolio was not hedged in 2013 as all US dollar procurements are currently located in entities which have the U.S. dollar as their functional currency.
Set out below are the periods when the cash flows in EUR for the capital expenditure programme are expected to occur.
| In millions of euros | Within 1 year |
Between 1 and 5 years |
A´er 5 years |
Total |
|---|---|---|---|---|
| As at December 31, 2013: | ||||
| Cash outflows for procurement | – | – | – | – |
| Amount covered by cash flow hedges | – | – | – | – |
| As at December 31, 2012: | ||||
| Cash outflows for procurement | 54.5 | – | – | 54.5 |
| Amount covered by cash flow hedges | 52.7 | – | – | 52.7 |
At December 31, 2013 and 2012, certain borrowings denominated in US dollars were designated as hedges of the net investments in SES Americom, SES Holdings (Netherlands) B.V. and SES Satellite Leasing to hedge the Group's exposure to foreign exchange risk on these investments. Similarly at December 31, 2013 and 2012, cross-currency swaps and additional Group borrowings were designated as hedges of the above net investments.
As at December 31, 2013, the net investment hedges were assessed to be highly effective and a realised loss of EUR 11.8 million net of tax of EUR 5.0 million and a unrealised gain of EUR 6.4 million net of tax of EUR 3.1 million (2012: unrealised loss of EUR 28.2 million and EUR 12.0 million respectively) relating to the cross-currency swaps is included in equity.
The following table demonstrates the hedged portion of USD statement of financial position exposure:
| December 31, 2013 |
December 31, 2012 |
|
|---|---|---|
| USD statement of financial position exposure: | ||
| SES Americom | 2,927.4 | 3,101.9 |
| SES Holdings (NL) B.V. | 1,655.7 | 1,206.2 |
| SES Satellite Leasing | 1,137.0 | 1,336.9 |
| SES Re International (Bermuda) | 90.1 | 110.7 |
| Total | 5,810.2 | 5,755.7 |
| Hedged with: | ||
| Foreign exchange forward contracts | – | – |
| Cross currency swaps excluding interest | 537.6 | 713.2 |
| Private Placement | 292.2 | 451.9 |
| US Bonds | 1,000.0 | – |
| Other external borrowings | 116.4 | 134.3 |
| Total | 1,946.2 | 1,299.4 |
| Hedged proportion | 33% | 23% |
| December 31, 2013 | Amount in USD million |
Amount in euro at closing rate of 1.3791 EUR million |
Amount in euro at rate of 1.6500 EUR million |
Amount in euro at rate of 1.1000 EUR million |
|---|---|---|---|---|
| USD statement of financial position exposure: | ||||
| SES Americom | 2,927.4 | 2,122.7 | 1,774.2 | 2,661.3 |
| SES Holdings (NL) B.V. | 1,655.7 | 1,200.6 | 1,003.5 | 1,505.2 |
| SES Satellite Leasing | 1,137.0 | 824.5 | 689.1 | 1,033.6 |
| SES Re International (Bermuda) | 90.1 | 65.3 | 54.6 | 81.9 |
| Total | 5,810.2 | 4,213.1 | 3,521.4 | 5,282.0 |
| Hedged with: | ||||
| Cross currency swaps | 537.6 | 389.8 | 325.8 | 488.7 |
| Private Placement | 292.2 | 211.9 | 177.1 | 265.6 |
| US Bonds | 1,000.0 | 725.1 | 606.1 | 909.1 |
| Other external borrowings | 116.4 | 84.4 | 70.5 | 105.8 |
| Total | 1,946.2 | 1,411.2 | 1,179.5 | 1,769.2 |
The following table demonstrates the sensitivity to a +/- 20% change in the US dollar exchange rate on the nominal amount of the Group's US dollar net investment, with all other variables held constant. All value changes are eligible to be recorded
in other comprehensive account with no impact on profit and loss.
| Hedged proportion | 33% | |
|---|---|---|
| Absolute difference without hedging | (691.7) | 1,069.0 |
| Absolute difference with hedging | (460.0) | 710.9 |
| December 31, 2012 | Amount in USD million |
Amount in euro at closing rate of 1.3194 EUR million |
Amount in euro at rate of 1.60 EUR million |
Amount in euro at rate of 1.04 EUR million |
|---|---|---|---|---|
| USD statement of financial position exposure: | ||||
| SES Americom | 3,101.9 | 2,351.0 | 1,938.7 | 2,982.6 |
| SES Holdings (NL) B.V. | 1,206.2 | 914.2 | 753.9 | 1,159.8 |
| SES Satellite Leasing | 1,336.9 | 1,013.3 | 835.6 | 1,285.5 |
| SES Re International (Bermuda) | 110.7 | 83.9 | 69.2 | 106.4 |
| Total | 5,755.7 | 4,362.4 | 3,597.4 | 5,534.3 |
| Hedged with: | ||||
| Cross currency swaps | 713.2 | 540.5 | 445.8 | 685.8 |
| Private Placement | 451.9 | 342.5 | 282.4 | 434.5 |
| Other external borrowings | 134.3 | 101.8 | 83.9 | 129.1 |
| Total | 1,299.4 | 984.8 | 812.1 | 1,249.4 |
| Hedged proportion | 23% | |||
| Absolute difference without hedging | (765.0) | 1,171.9 | ||
| Absolute difference with hedging | (592.3) | 907.3 |
The Group's exposure to market interest rate risk relates primarily to the Group's debt portion at floating rates. In order to mitigate this risk, the Group is generally seeking to contract as much as possible of its debt outstanding at fixed interest rates, and is carefully monitoring the evolution of market conditions, adjusting the mix between fixed and floating rate debt if necessary. The Group had neither on December 31, 2012 nor on December 31, 2013 interest rate hedges outstanding.
The table below summarises the split of the nominal amount of the Group's debt between fixed and floating rate.
| In millions of euros | At fixed rates |
At floating rates |
Total |
|---|---|---|---|
| Borrowings at December 31, 2013 | 3,944.7 | 437.4 | 4,382.1 |
| Borrowings at December 31, 2012 | 3,405.9 | 851.1 | 4,257.0 |
During the year 2013 the Group repaid the fixed EUR 500 million Eurobond, another amortisation tranche of EUR 33.3 million of the European Investment Bank funding, two amortisation tranches of the US Ex-Im facility of USD 17.9 million and three tranches of the US Private Placement – USD 159.7 million and GBP 4.0 million (2012: USD 159.7 million and GBP 4.0 million), which all represented fixed rate obligations. Furthermore, during the year 2013 the Group repaid floating rate obligations of EUR 40.0 million French Commercial Paper issuances, EUR 427.0 million European Commercial Paper issuances as well as
Notes to the consolidated financial statements continued December 31, 2013
various Coface amortisation payments in the total amount of EUR 14.0 million. The Group concluded in March 2013 a fixed 144A bond offering of USD 1.0 billion of notes and in October 2013 SES issued a fixed EUR 500 million Eurobond.
The following table demonstrates the sensitivity of the Group's pre-tax income to reasonably possible changes in interest rates affecting the interest charged on the floating rate borrowings. All other variables are held constant.
The Group believes that a reasonably possible development in euro-zone interest rates would be an increase of 50 basis points or a decrease of 25 basis points (2012: increase 75 basis points and no possible decrease).
| Euro interest rates In millions of euros |
Floating rate borrowings |
Increase in rates Pre-tax impact |
Decrease in rates Pre-tax impact |
|---|---|---|---|
| Borrowings at December 31, 2013 | 437.4 | (2.2) | 1.1 |
| Borrowings at December 31, 2012 | 851.1 | (6.4) | – |
It is the Group's policy that all customers who wish to trade on credit terms are subject to credit verification procedures. Those procedures include the assessment of the creditworthiness of the customer by using sources of quality information such as Dun & Bradstreet reports, audited annual reports, press articles or rating agencies. Should the customer be a governmental entity, the official debt rating of the respective country will be the key driver in determining the appropriate credit risk category. Following to this credit analysis, the customer is classified into a credit risk category which can be as follows: "prime" (typically publicly rated and traded customers), "market" (usually higher growth companies with higher leverage) or "sub-prime" (customers for which viability is dependent on continued growth with higher leverage). The credit profile is updated at least once a year for all customers with an ongoing contractual relationship with annual revenues over MEUR/MUSD 1 or the equivalent in any other currency.
Receivables which are more than 90 days overdue are provided for at 100% of the receivable amount. Receivable amounts more than 90 days overdue with a credit worthy government or branch thereof are generally not provided for unless conditions warrant. In addition, receivable balances are monitored on an ongoing basis with the result that the Group's exposure to bad debts is historically insignificant. The carrying value of unprovided gross debtors at December 31, 2013 is EUR 373.5 million (2012: EUR 185.7 million). The Group's largest customers are substantial media companies and government agencies and the credit risk associated with these contracts is assessed as low.
| Aging of trade debtors (in millions of euros) |
Neither past due nor impaired |
Less than 1 month |
Between 1 and 3 months |
More than 3 months |
Total |
|---|---|---|---|---|---|
| 2013 | |||||
| Gross trade debtors | 206.1 | 136.2 | 10.1 | 21.2 | 373.6 |
| Provision | – | (8.8) | – | (8.9) | (17.7) |
| Net trade debtors | 206.1 | 127.4 | 10.1 | 12.3 | 355.9 |
| 2012 | |||||
| Gross trade debtors | 136.0 | 19.7 | 20.6 | 25.0 | 201.3 |
| Provision | – | (1.8) | (0.1) | (13.7) | (15.6) |
| Net trade debtors | 136.0 | 17.9 | 20.5 | 11.3 | 185.7 |
With respect to the credit risk relating to financial assets (cash and cash equivalents, held for trading financial assets, loans receivable and derivative instruments), this exposure relates to the potential default of the counterparty, with the maximum exposure being equal to the carrying amount of these instruments. The counterparty risk from a cash management perspective is reduced by the implementation of several cash pools, accounts and related paying platforms with different counterparties.
To mitigate the counterparty risk, the Group only deals with recognised financial institutions with an appropriate credit rating – generally 'A' and above – and in adherence of a maximum trade limit for each counterparty which has been approved for each type of transactions. All counterparties are financial institutions which are regulated and controlled by the federal financial supervisory authorities of the associated countries. The counterparty risk portfolio is analyzed on a quarterly basis. Moreover to reduce this counterparty risk the portfolio is diversified as regards the main counterparties ensuring a well-balanced relation for all categories of products (derivatives as well as deposits).
The Group's policy is to attain, and retain, a stable BBB rating with Standard & Poor's and Fitch, and a Baa2 rating with Moody's. This investment grade rating serves to maintain investors, creditors, rating agency and market confidence. Within this framework, the Group manages its capital structure and liquidity in order to reflect changes in economic conditions to keep its cost of debt low, maintain the confidence of debt investors at a high level and to create added value for the shareholder.
| In millions of euros | 2013 | 2012 |
|---|---|---|
| Cash at bank and in hand | 429.8 | 158.0 |
| Short-term deposits | 114.4 | 82.0 |
| Total cash and cash equivalents | 544.2 | 240.0 |
Cash at banks earns interest at floating rates based on daily bank deposit rates. Short-term deposits are made for varying periods of between one day and three months depending on the immediate cash requirements of the Group, and earn interest at the respective short-term deposit rates. As at December 31, 2013, an amount of EUR 16.0 million (2012: nil) is invested in Money Market Funds which qualify as cash and cash equivalents.
SES has a subscribed capital of EUR 633 million (2012: EUR 633 million), represented by 337,600,000 class A shares and 168,800,000 class B shares with no par value. The movement between the opening and closing number of shares issued per class of share can be summarised as follows:
| Class A shares | Class B shares | Total shares | |
|---|---|---|---|
| As at January 1, 2013 | 337,600,000 | 168,800,000 | 506,400,000 |
| Shares Issued during the year | – | – | – |
| As at December 31, 2013 | 337,600,000 | 168,800,000 | 506,400,000 |
On April 5, 2012, the general meeting of shareholders authorised the Board of Directors to issue, within the authorised share capital, 4,614,870 new class A shares and 2,307,435 new class B shares. The new class A shares were entirely paid up in cash for an amount of EUR 81.4 million allocated as EUR 5.8 million to share capital and EUR 75.6 million to share premium. The new class B shares were partly paid up in cash of EUR 5.3 million allocated as EUR 0.9 million to share capital and EUR 4.4 million to share premium. The remainder was paid up by a contribution in kind consisting of 621,788 FDRs. The value of the contribution in kind amounted to EUR 10.9 million allocated as EUR 1.9 million to share capital and EUR 9.0 million to share premium.
Within the framework of SES's share buy-back programme, on June 4, 2012, SES entered into a forward agreement with a financial institution for the repurchase of the above 4,614,870 class A-shares converted into FDRs. The forward agreement is entered into by SES to allow delivery of FDRs upon the exercise of the outstanding stock options issued by SES.
The maturities of the forward agreement were June 25, 2012, July 25, 2012 and December 12, 2012 for the purchase of 600,000 FDRs, 2,000,000 FDRs and 2,014,870 FDRs respectively.
FDRs with respect to Class A shares are listed on the Luxembourg Stock Exchange and on Euronext Paris. They can be traded freely and are convertible into Class A shares at any time at the option of the holder under the conditions applicable in the Company's articles of association and in accordance with the terms of the FDRs.
All Class B shares are currently held by the State of Luxembourg, or by Luxembourg public institutions. Dividends paid for one share of Class B equal 40% of the dividend for one share of Class A.
A shareholder, or a potential shareholder, who seeks to acquire, directly or indirectly, more than 20%, 33% or 50% of the shares of the Company must inform the chairman of the board of the Company of such intention. The chairman of the board shall forthwith inform the government of the Grand Duchy of Luxembourg of the envisaged acquisition which may be opposed by the government within three months from such information should the government determine that such acquisition would be against the general public interest. In case of no opposition from the government, the board shall convene an extraordinary meeting of shareholders which may decide at a majority provided for in article 67-1 of the law of August 10, 1915, as amended, regarding commercial companies, to authorise the Demanding Party to acquire more than 20%, 33% or 50% of the shares. If the Demanding Party is a shareholder of the Company, it may attend the general meeting and will be included in the count for the quorum but may not take part in the vote.
SES has historically, in agreement with the shareholders, purchased Fiduciary Deposit Receipts in respect of 'A' shares for use in connection with executives' and employees' option schemes as well as for cancellation. At the year-end, the Company held FDRs in connection with the above schemes as set out below. These FDRs are disclosed as treasury shares in the balance sheet and are carried at weighted average cost to the Group as a deduction of equity.
| 2013 | 2012 | |
|---|---|---|
| FDRs held as at December 31 | 1,678,009 | 4,080,000 |
| Carrying value of FDRs held (in millions of euros) | 29.6 | 75.4 |
Notes to the consolidated financial statements continued
December 31, 2013
In accordance with Luxembourg legal requirements, a minimum of 5% of the yearly net profit (statutory) is transferred to a legal reserve from which a distribution is restricted. This requirement is satisfied when the reserve reaches 10% of the issued share capital. As at December 31, 2013 a legal reserve of EUR 63.2 million (2012: EUR 62.4 million) is included within other reserves. Other reserves include a further undistributable amount of EUR 347.5 million (2012: EUR 365.3 million) linked to local tax legislation in Luxembourg (Net worth tax), which may be released and distributable after a period of 5 years of retention.
The Group has four share-based payment plans, the details of which are as follows. In the case of schemes 2, 3 and 4 the relevant strike price is defined as the average of the market price of the underlying shares over a period of 15 trading days before the date of the grant.
The IPO plan is an equity-settled scheme which was open to members of staff working for SES ASTRA S.A. at the time of its IPO on the Luxembourg Stock Exchange in 1998. Employees were granted options to acquire shares at a fixed price of EUR 12.64. In 2005, the exercise period of this plan was extended to June 30, 2013. All such options were vested as at December 31, 2005.
| 2013 | 2012 | |
|---|---|---|
| Outstanding options at the end of the year | – | 288,240 |
| Weighted average exercise price in euro | – | 12.64 |
The STAR Plan, initiated in 2000, is an equity-settled scheme available to non-executive staff of controlled Group subsidiaries, where share options are granted. In January 2011, the STAR Plan was amended and, for all options granted 2011 onwards, a third of the share options vest and can be exercised each year. After being fully vested, the share options have a four-year exercise period.
| 2013 | 2012 | |
|---|---|---|
| Outstanding options at the end of the year | 2,393,356 | 2,353,319 |
| Weighted average exercise price in euro | 19.29 | 17.43 |
Out of 2,393,356 outstanding options as of December 31, 2013 (2012: 2,353,319), 1,111,316 options are exercisable (2012: 999,579). Options exercised in 2013 resulted in 518,218 treasury shares (2012: 962,246) being issued at a weighted average price of 16.57 each (2012:14.39).
On average, the related weighted average share price at the time of exercise was 22.45 (2012:19.57) per share.
Movements in the number of share options outstanding and their related weighted average exercise prices are as follows:
| 2013 | 2012 | |||
|---|---|---|---|---|
| Average exercise price per share option in euro |
Number of options |
Average exercise price per share option in euro |
Number of options |
|
| At 1 January | 17.43 | 2,353,319 | 16.05 | 2,679,061 |
| Granted | 23.87 | 630,356 | 18.38 | 769,404 |
| Forfeited | 19.33 | (45,635) | 17.80 | (82,731) |
| Exercised | 16.57 | (518,218) | 14.39 | (962,246) |
| Expired | 17.18 | (15,033) | 15.82 | (45,781) |
| Cancelled | 15.15 | (11,433) | 18.07 | (4,388) |
| At December 31 | 19.29 | 2,393,356 | 17.43 | 2,353,319 |
Share options outstanding at the end of the year have the following expiry date and exercise prices:
| Grant | Expiry date – 1 June |
Exercise price per share options in euro |
Share options | |
|---|---|---|---|---|
| 2013 | 2012 | |||
| 2013 | 2020 | 23.87 | 621,304 | – |
| 2012 | 2019 | 18.38 | 646,687 | 739,239 |
| 2011 | 2018 | 17.84 | 479,267 | 601,360 |
| 2010 | 2015 | 18.23 | 451,970 | 600,537 |
| 2009 | 2014 | 13.68 | 194,128 | 284,557 |
| 2008 | 2013 | 14.62 | – | 127,626 |
| 2,393,356 | 2,353,319 |
The EICP, initiated in 2002, is available to Group executives. Under the plan, options are granted with an effective date of January 1. One-quarter of the entitlement vests on each anniversary date of the original grant. Once vested, the options can be exercised until the tenth anniversary of the original grant.
| 2013 | 2012 | |
|---|---|---|
| Outstanding options at the end of the year | 4,359,026 | 4,960,235 |
| Weighted average exercise price in euro | 17.92 | 16.40 |
Out of 4,359,026 outstanding options as of December 31, 2013 (2012: 4,960,235), 2,090,141 options are exercisable (2012: 2,276,554). Options exercised in 2013 resulted in 1,223,392 Treasury shares (2012:1,627,718) being issued at a weighted average price of 15.40 each (2012:14.66).
On average, the related weighted average share price at the time of exercise was 22.45 (2012:19.57) per share.
Movements in the number of share options outstanding and their related weighted average exercise prices are as follows:
| 2013 | 2012 | |||
|---|---|---|---|---|
| Average exercise price per share option in euro |
Number of options |
Average exercise price per share option in euro |
Number of options |
|
| At 1 January | 16.38 | 4,960,235 | 15.48 | 5,518,673 |
| Granted | 23.87 | 779,242 | 18.38 | 1,214,438 |
| Forfeited | 18.40 | (152,485) | 17.61 | (88,242) |
| Exercised | 15.40 (1,223,392) | 14.66 | (1,627,718) | |
| Expired | 17.39 | (4,574) | 17.00 | (46,697) |
| Cancelled | – | – | 18.23 | (10,219) |
| At December 31 | 17.92 | 4,359,026 | 16.40 | 4,960,235 |
Share options outstanding at the end of the year have the following expiry date and exercise prices:
| Grant | Expiry date – 1 Jan |
Exercise price per share options in euro |
Share options | |
|---|---|---|---|---|
| 2013 | 2012 | |||
| 2013 | 2023 | 23.87 | 773,187 | – |
| 2012 | 2022 | 18.38 | 971,736 | 1,189,030 |
| 2011 | 2021 | 17.84 | 818,458 | 1,093,551 |
| 2010 | 2020 | 18.23 | 516,068 | 734,958 |
| 2009 | 2019 | 13.68 | 349,214 | 574,548 |
| 2008 | 2018 | 14.62 | 354,129 | 494,037 |
| 2007 | 2017 | 15.17 | 240,775 | 366,093 |
| 2006 | 2016 | 12.93 | 236,432 | 254,984 |
| 2005 | 2015 | 10.64 | 91,027 | 227,534 |
| 2004 | 2014 | 6.76 | 8,000 | 25,500 |
| 4,359,026 | 4,960,235 |
Notes to the consolidated financial statements continued
December 31, 2013
The LTI programme, initiated in 2005, is also a programme for executives and senior executives of the Group. Under the scheme, until end of 2008, restricted shares were allocated to executives on July 1 and these vest on the third anniversary of the grant. Senior executives also had the possibility to be allocated performance shares whose granting was dependent on the achievement of defined performance criteria which are a) individual objectives and b) the economic value added ("EVA") target established by the Board from time to time. Where these criteria were met, the shares vested on the third anniversary of the original grant. Since January 1, 2009, both executives and senior executives are granted restricted and performance shares. Since 2011 the LTI vest on June 1.
| 2013 | 2012 | |
|---|---|---|
| Restricted and performance shares outstanding at the end of the year | 999,684 | 1,113,320 |
| Weighted average fair value in euro | 16.77 | 15.18 |
During 2013, 193,962 restricted shares and 132,524 performance shares have been granted. On the same period, 54,271 restricted shares and 34,286 performance shares have forfeited.
The fair value of equity-settled share options (restricted and performance shares) granted is estimated as at the date of grant using a binomial model, taking into account the terms and conditions upon which the options ( restricted and performance shares) were granted. The following table lists the average value of inputs to the model used for the years ended December 31, 2013, and December 31, 2012.
| 2013 | EICP | STARs | LTI |
|---|---|---|---|
| Dividend yield (%) | 6.08% | 6.08% | 5.35% |
| Expected volatility (%) | 35.22% | 35.22% | 25.92% |
| Risk-free interest rate (%) | 0.55% | 0.55% | 0.20% |
| Expected life of options (years) | 9.67 | 7 | 3 |
| Share price at inception (EUR) | 23.28 | 23.28 | 23.28 |
| 2012 | EICP | STARs | LTI |
| Dividend yield (%) | 6.95% | 6.95% | 6.09% |
| Expected volatility (%) | 36.78% | 36.78% | 41.37% |
| Risk-free interest rate (%) | 1.16% | 1.16% | 0.54% |
| Expected life of options (years) | 9.67 | 7 | 3 |
| Share price at inception (EUR) | 18.71 | 18.71 | 18.71 |
The expected life of options is based on historical data and is not necessarily indicative of exercise patterns that may occur. The expected volatility reflects the assumption that the historical volatility is indicative of future trends, which may or may not necessarily be the actual outcome. The total charge for the period for share-based compensation payments amounted to EUR 11.2 million (2012: EUR 12.0 million).
As at December 31, 2013 and 2012, the Group's interest-bearing loans and borrowings were:
| Carried at amortised cost | ||||
|---|---|---|---|---|
| In millions of euros | Eµective interest rate | Maturity | Amounts outstanding 2013 |
Amounts outstanding 2012 |
| Non-current | ||||
| U.S. Private Placement | ||||
| Series B (USD 513 million) | 5.83% | September 2015 | 74.4 | 153.7 |
| Series C (USD 87 million) | 5.93% | September 2015 | 63.1 | 65.9 |
| Euro Private Placement 2016 | ||||
| (EUR 150 million issued under EMTN) | 5.05% | August 2016 | 149.5 | 149.2 |
| European Investment Bank (EUR 200 million) | 3.618% | May 2017 | 100.0 | 133.4 |
| Eurobond 2018 (EUR 500 million) | 1.875% | October 2018 | 493.7 | – |
| Eurobond 2020 (EUR 650 million) | 4.625% | March 2020 | 645.5 | 644.8 |
| Eurobond 2014 (EUR 650 million) | 4.875% | July 2014 | – | 647.8 |
| US Ex-Im | 3.11% | June 2020 | 69.3 | 85.4 |
| Eurobond 2021 (EUR 650 million) | 4.75% | March 2021 | 644.9 | 644.1 |
| COFACE | EURIBOR + 1.7% | 2022 | 395.8 | 354.6 |
| US Bond (USD 750 million) | 3.60% | April 2023 | 537.6 | – |
| Euro Private Placement 2027 | ||||
| (EUR 140 million issued under EMTN) | 4.00% | May 2027 | 139.3 | 139.3 |
| German bond (EUR 50 million), non-listed | 4.00% | November 2032 | 49.8 | 49.8 |
| US Bond (USD 250 million) | 5.30% | April 2043 | 179.3 | – |
| Total non-current | 3,542.2 | 3,068.0 | ||
| Current | ||||
| U.S. Private Placement | ||||
| Series A (USD 400 million) | 5.29% | September 2013 | – | 43.3 |
| Series B (USD 513 million) | 5.83% | September 2014 | 74.4 | 77.8 |
| Series D (GBP 28 million) | 5.63% | September 2013 | – | 5.0 |
| European Investment Bank (EUR 200 million) | 3.618% | May 2014 | 33.3 | 33.3 |
| Eurobond 2013 (EUR 500 million) | 4.375% | October 2013 | – | 500.0 |
| Commercial paper | 0.23% | 2013 | – | 466.9 |
| Eurobond 2014 (EUR 650 million) | 4.875% | July 2014 | 649.5 | – |
| COFACE | EURIBOR + 1.7% | 2014 | 33.9 | 19.8 |
| US Ex-Im | 3.11% | 2014 | 12.6 | 13.6 |
| Total current | 803.7 | 1,159.7 |
On September 30, 2003, the Group issued in the US Private Placement market four series of unsecured notes amounting to USD 1,000.0 million and GBP 28.0 million. These notes comprised:
On these four series, the Group pays interest semi-annually. SES is committed under the US Private Placement to maintaining covenants requiring certain financial ratios to be upheld within agreed limits in order to provide sufficient security to the lenders. Of these, the covenant which management monitors the most actively is the requirement to maintain the Net Debt/EBITDA ratio at a level of 3.5 or below.
On December 6, 2005, SES put in place a EUR 2,000.0 million EMTN enabling SES, or SES Global Americas Holdings GP, to issue as and when required notes up to a maximum aggregate amount of EUR 2,000.0 million. In May 2007, this programme was increased to an aggregate amount of EUR 4,000.0 million. On October 4, 2013 this programme has been extended for one further year. As of December 31, 2013, SES has issued EUR 2,740.0 million (2012: EUR 2,740.0 million) under the EMTN Programme with maturities ranging from 2014 to 2027.
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2013 overview
01-22
Notes to the consolidated financial statements continued December 31, 2013
On October 20, 2006, SES issued a EUR 500.0 million bond under the Company's European Medium-Term Note Programme. The bond had a fixed coupon yield of 4.375% and matured on October 21, 2013.
On July 9, 2009 (pricing June 30, 2009), SES issued a EUR 650.0 million bond under the Company's European Medium-Term Note Programme. The bond has a 5-year maturity and bears interest at a fixed rate of 4.875%.
On July 13, 2009, SES issued a EUR 150.0 million Private Placement under the Company's European Medium-Term Note Programme with Deutsche Bank. The Private Placement has a 7-year maturity, beginning August 5, 2009, and bears interest at a fixed rate of 5.05%.
On October 16, 2013, SES issued a EUR 500.0 million bond under the Company's European Medium-Term Note Programme. The bond has a 5-year maturity and bears interest at a fixed rate of 1.875%.
On March 9, 2010 (pricing March 1, 2010), SES issued a EUR 650.0 million bond under the Company's European Medium-Term Note Programme. The bond has a 10-year maturity and bears interest at a fixed rate of 4.625%.
On March 11, 2011 (pricing March 2, 2011), SES issued a EUR 650.0 million bond under the Company's European Medium-Term Note Programme. The bond has a 10-year maturity and bears interest at a fixed rate of 4.75%.
Between May and July 2012, SES issued three individual tranches of a total EUR 140.0 million Private Placement under the Company's European Medium-Term Note Programme with ING Bank N.V. The Private Placement has a 15-year maturity, beginning May 31, 2012, and bears interest at a fixed rate of 4.00%.
On April 21, 2009, SES signed a financing agreement with the European Investment Bank concerning the investment by the Group in certain satellite investment projects. This facility, bearing interest at a fixed rate of 3.618%, is repayable in six annual installments between May 2012 and May 2017.
On October 29, 2012, the Group signed an agreement to issue EUR 50 million in the German bond ('Schuldschein') market. The German bond bears a fixed interest rate of 4.0% and matures on November 12, 2032.
On April 4, 2013, SES completed a 144A offering in the US market issuing USD 750 million 10-year bond with a coupon of 3.60% and a final maturity date on April 4, 2023.
On April 4, 2013, SES completed a 144A offering in the US market issuing USD 250 million 30-year bond with a coupon of 5.30% and a final maturity date on April 4, 2043.
In April 2009, SES signed a syndicated loan facility maturing in 2012 with a consortium of 24 banks. On September 2010, the syndicated loan has been amended and restated. The amended facility, maturing April 2015, is for EUR 1,200.0 million and can be drawn in EUR and USD. The interest rate is based on EURIBOR or US LIBOR, depending on the drawing currency, plus a margin based on the rating of the Company. The current rating of the Company is BBB/Baa2 (Standard & Poor's and Moody's) leading to a margin of 0.95%.
On December 16, 2009, SES signed a financing agreement with COFACE (Compagnie Française d 'Assurance pour le Commerce Extérieur) in respect of the investment in four geostationary satellites (ASTRA 2E, ASTRA 2F, ASTRA 2G, ASTRA 5B). The facility is divided into five loans. The drawings under the facility are based on invoices from the supplier of the satellites. The first drawing was done on April 23, 2010. Each loan will be repaid in 17 equal semi-annual installments starting six months after the earlier of the in-orbit date of the satellite being financed by such loan and April 1, 2014 and the estimated final maturity of the facility will be by the end of 2022. The facility bears interest at a floating rate of six month EURIBOR plus a margin of 1.7%.
In April 2011, SES signed a financing agreement with Ex-Im Bank (Export-Import Bank of the United States) over USD 158 million for the investment in one geostationary satellite (QuetzSat). At the in-orbit acceptance date of the satellite, the facility was fully drawn with USD 152.2 million which will be repaid in 17 equal semi-annual installments starting on June 22, 2012. The loan has a final maturity date of June 22, 2020 and bears interest at a fixed rate of 3.11%.
On October 25, 2005, SES put in place a EUR 500.0 million 'Programme de Titres de Créances Négociables' in the French market where the Company issued 'Billets de Trésorerie' (commercial paper) in accordance with articles L.213-1 to L213-4 of the French Monetary and Financial Code and decree n°92.137 of February 13, 1992 and all subsequent regulations. The maximum outstanding amount of 'Billet de Trésorerie' issuable under the programme is EUR 500.0 million or its counter value at the date of issue in any other authorised currency. On May 31, 2013, this programme was extended for one further year. As of December 31, 2013 borrowings of EUR nil million (2012: EUR 40.0 million) were outstanding under this programme. The average rate of the outstanding commercial paper amounts to nil% (2012: 0.13%) for the drawdown period.
In July 2012, SES signed the documentation for the inception of a joint EUR 1 billion guaranteed European commercial paper programme of SES S.A. and SES Global Americas Holdings GP. The issuance under the programme represents senior unsecured obligations of the issuer and any issuance under the programme is guaranteed by the non-issuing entity. The programme is rated by Moody's Investors Services and is compliant with the standards set out in the STEP Market Convention. As of December 31, 2013 borrowings of EUR nil million (2012: EUR 427.0 million) were outstanding of which EUR nil million (2012: EUR 267.0 million) issued in the name of SES Global Americas Holding GP and EUR nil million (2012: EUR 160.0 million) in the name of SES S.A. The average rate of the outstanding commercial papers was nil% (2012: 0.24%) for the drawdown period.
| In millions of euros | Non-current | Current |
|---|---|---|
| As at January 1, 2013 | 169.8 | 16.0 |
| Increase in provisions | 16.4 | – |
| Decrease in provisions | (42.0) | (16.0) |
| Transfer from non-current portion | (12.6) | 12.6 |
| Impact of currency translation | (2.6) | – |
| As at December 31, 2013 | 129.0 | 12.6 |
| In millions of euros | Non-current | Current |
| As at January 1, 2012 | 78.9 | – |
| Increase in provisions | 2.0 | – |
| Reclassified from "Income tax liabilities" | 97.9 | 16.0 |
| Decrease in provisions | (8.3) | – |
| Impact of currency translation | (0.7) | – |
| As at December 31, 2012 | 169.8 | 16.0 |
Provisions relate primarily to Group tax provisions, O3b contingent funding (see Note 15), provision for post-retirement benefit schemes and other items arising in the normal course of business.
The Group operates in numerous tax jurisdictions and management is required to assess tax issues and exposures across its entire operations and to accrue for potential liabilities based on its interpretation of country-specific tax law and best estimates. In conducting this review management assesses the materiality of the issue and the likelihood, based on experience and specialist advice, as to whether it will result in a liability for the Group. If this is deemed to be the case then a provision is made for the potential taxation charge arising. A corresponding provision of EUR 98.0 million (2012: EUR 113.9 million) is recorded in the Statement of Financial Position as at December 31, 2013 under non-current 'Provisions', for EUR 85.4 million (2012: EUR 97.9 million), and current 'Provisions' for EUR 12.6 million (2012: EUR 16.0 million). The Group tax provision at December 31, 2012 has been reclassified from "Income tax liabilities" to "Provisions" to conform with current year presentation.
In US operations, certain employees benefit from a post-retirement health benefits programme which is externally insured. As at December 31, 2013, accrued premiums of EUR 16.6 million (2012: EUR 11.6 million) are included in this position. Contributions made in 2013 to Group pension schemes totalled EUR 1.6 million (2012: EUR 7.0 million), which are recorded in the income statement under 'staff costs'.
| In millions of euros | Non-current | Current |
|---|---|---|
| As at January 1, 2013 | 285.4 | 238.2 |
| Movement on deferred income | (48.1) | 144.6 |
| Impact of currency translation | (9.5) | 2.9 |
| As at December 31, 2013 | 227.8 | 385.6 |
| In millions of euros | Non-current | Current |
| As at January 1, 2012 | 199.5 | 258.5 |
| Movement on deferred income | 93.7 | (20.9) |
| Impact of currency translation | (7.8) | 0.6 |
| As at December 31, 2012 | 285.4 | 238.2 |
23-50
107-120
Notes to the consolidated financial statements continued
December 31, 2013
| In millions of euros | 2013 | 2012 |
|---|---|---|
| Trade creditors | 72.4 | 86.1 |
| Payments received in advance | 40.2 | 17.2 |
| Interest on loans | 89.1 | 81.7 |
| Personnel-related liabilities | 27.1 | 22.4 |
| Tax liabilities other than for income tax | 22.4 | 25.5 |
| Other liabilities | 90.2 | 177.8 |
| Total | 341.4 | 410.7 |
In the framework of receivables securitisation transactions completed in June 2010, in June 2012 and June 2013, the Group received a net cash amount of EUR 50.6 million, EUR 59.5 million and EUR 40.2 million respectively from a financial institution as advance settlement of future receivables arising between 2011 and 2015 under contracts with a specific customer. A corresponding liability of EUR 82.7 million (2012: EUR 80.9 million), representing SES's obligation towards the financial institution to continue to provide services to the customer in accordance with the terms of the customer contract, is recorded in the Statement of Financial Position as at December 31, 2013 under 'Other long-term liabilities', for EUR 41.6 million (2012: EUR 42.5 million), and 'Trade and other payables' for EUR 41.1 million (2012: EUR 38.4 million).
The Group had outstanding commitments in respect of contracted capital expenditure totalling EUR 25.2 million at December 31, 2013 (2012: EUR 244.4 million). These commitments largely reflect the purchase and launch of future satellites for the expansion and replacement of the Group satellite system, together with the necessary expansion of the associated ground station and control facilities. In the case of termination by the Group of these contracts, contractual penalty provisions apply.
Future minimum rentals payable under non-cancellable operating leases are as follows as at December 31:
| In millions of euros | 2013 | 2012 |
|---|---|---|
| Within one year | 8.4 | 11.0 |
| After one year but not more than five years | 10.1 | 26.0 |
| More than five years | 4.4 | 28.1 |
| Total | 22.9 | 65.1 |
Total operating lease expense was EUR 11.0 million in 2013 (2012: EUR 11.2 million).
The Group has entered into transponder service agreements for the purchase of satellite capacity from third parties under contracts with a maximum life of eight years. The commitment arising under these agreements as at December 31 is as follows:
| In millions of euros | 2013 | 2012 |
|---|---|---|
| Within one year | 8.4 | 29.3 |
| After one year but not more than five years | 4.1 | 4.3 |
| After more than five years | 1.9 | 2.0 |
| Total | 14.5 | 35.6 |
Total operating lease expense for transponder service agreements was EUR 29.3 million in 2013 (2012: EUR 42.3 million).
Under the O3b Networks Limited 2010 financing round, SES entered in 2010 into commitments to provide, if needed in the pre-commercialisation phase, additional shareholder loans to O3b Networks totalling USD 50 million (2012: USD 66 million). See Note 15.
There were no significant litigation claims against the Group as of December 31, 2013.
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On December 31, 2013 the Group had outstanding bank guarantees for an amount of EUR 19.7 million (2012: EUR 2.6 million) with respect to performance and warranty guarantees for services of satellite operations.
At the year-end, there were no restricted cash balances (2012: nil).
The state of Luxembourg holds a direct 11.58% voting interest in the Company and two indirect interests, both of 10.88%, through two state owned banks, Banque et Caisse d'Epargne de l'Etat and Société Nationale de Crédit et d'Investissement. These shares constitute the Company's Class B shares, which are described in more detail in Note 21.
The total payments to directors for attendance at board and committee meetings in 2013 amounted to EUR 1.4 million (2012: EUR 1.4 million). These payments are computed on a fixed and variable basis, the variable part being based upon attendance at board and committee meetings.
There were no other significant transactions with related parties.
The key management of the Group, defined as the Group's Executive Committee, received compensation as follows:
| In millions of euros | 2013 | 2012 |
|---|---|---|
| Remuneration including bonuses | 5.0 | 4.4 |
| Pension benefits | 0.6 | 0.6 |
| Share-based payments | 5.0 | 2.0 |
| Other benefits | 0.1 | 0.0 |
| Total | 10.7 | 7.0 |
Total share-based payment instruments allocated to key management as at December 31, 2013 were 1,521,328 (2012: 1,687,249).
The consolidated financial statements include the financial statements of the material subsidiaries, joint ventures and associates listed below:
| Effective interest (%) |
Eµective interest (%) |
Method of consolidation |
|
|---|---|---|---|
| 2013 | 2012 | 2013 | |
| Held directly by SES: | |||
| SES ASTRA S.A., Luxembourg | 100.00 | 100.00 | Full |
| SES GLOBAL-Americas Inc., U.S.A. | 100.00 | 100.00 | Full |
| SES GLOBAL Americas Holdings General Partnership, U.S.A. | 100.00 | 100.00 | Full |
| SES GLOBAL Africa S.A., Luxembourg | 100.00 | 100.00 | Full |
| SES Participations S.A., Luxembourg | 100.00 | 100.00 | Full |
| SES Finance S.à r.l., Switzerland | 100.00 | 100.00 | Full |
| SES Holdings (Netherlands) B.V., Netherlands | 100.00 | 100.00 | Full |
| SES ASTRA Services Europe S.A., Luxembourg | 100.00 | 100.00 | Full |
| SES Latin America S.A., Luxembourg | 100.00 | 100.00 | Full |
| SES Belgium S.p.r.l, Belgium | 100.00 | 100.00 | Full |
| SES Insurance International S.A., Luxembourg | 100.00 | 100.00 | Full |
| SES Insurance International Re S.A., Luxembourg | 100.00 | 100.00 | Full |
| SES Lux Finance S.à r.l., Luxembourg¹ | 100.00 | 100.00 | Full |
| SES NL Finance S.à r.l., Luxembourg¹ | 100.00 | 100.00 | Full |
| Held through SES Participations S.A., Luxembourg: | |||
| Ciel Satellite Holdings Inc., Canada | 100.00 | 100.00 | Full |
| Ciel Satellite Limited Partnership, Canada | 70.00 | 70.00 | Full |
| Northern Americas Satellite Ventures, Inc., Canada | 100.00 | 100.00 | Full |
| Held through SES ASTRA Services Europe S.A., Luxembourg: | |||
| Glocom (Communications and Images) Limited (Isle of Man)² | 75.00 | 75.00 | Full |
| SES ASTRA TechCom S.A., Luxembourg | 100.00 | 100.00 | Full |
| SES ASTRA TechCom Belgium S.A., Belgium | 100.00 | 100.00 | Full |
| Astralis S.A., Luxembourg³ | 51.00 | 51.00 | Full |
| SES Broadband Services S.A., Luxembourg | 100.00 | 100.00 | Full |
| SES Digital Distribution Services AG, Switzerland | 100.00 | 100.00 | Full |
Notes to the consolidated financial statements continued December 31, 2013
| Effective interest (%) |
Eµective interest (%) |
Method of consolidation |
|
|---|---|---|---|
| 2013 | 2012 | 2013 | |
| SES Digital Distribution Services S.à r.l., Luxembourg | 100.00 | 100.00 | Full |
| Redu Operations Services S.A., Belgium | 48.00 | 48.00 | Equity |
| Redu Space Services S.A., Belgium | 52.00 | 52.00 | Full |
| HD Plus GmbH, Germany | 100.00 | 100.00 | Full |
| SES ASTRA Real Estate (Betzdorf) S.A., Luxembourg | 100.00 | 100.00 | Full |
| SES Capital Belgium S.A., Belgium | 100.00 | 100.00 | Full |
| ND SatCom GmbH, Germany² | 24.90 | 24.90 | Equity |
| SES Platform Services GmbH, Germany | 100.00 | 100.00 | Full |
| SES Digital Distribution Services GmbH, Germany | 100.00 | 100.00 | Full |
| Virtual Planet Group GmbH, Germany | 90.00 | 90.00 | Full |
| Held through SES ASTRA S.A.: | |||
| ASTRA Deutschland GmbH, Germany | 100.00 | 100.00 | Full |
| ASTRA (U.K.) Ltd, United Kingdom | 100.00 | 100.00 | Full |
| ASTRA Iberica S.A., Spain | 100.00 | 100.00 | Full |
| ASTRA France S.A., France | 100.00 | 100.00 | Full |
| ASTRA (GB) Limited, United Kingdom | 100.00 | 100.00 | Full |
| ASTRA Benelux B.V., The Netherlands | 100.00 | 100.00 | Full |
| SES ASTRA CEE Sp. z o.o, Poland | 100.00 | 100.00 | Full |
| SES ASTRA Italia S.r.l. | 100.00 | 100.00 | Full |
| SES ENGINEERING (Luxembourg) S.à r.l., Luxembourg | 100.00 | 100.00 | Full |
| New Skies Investments S.à r.l, Luxembourg | 100.00 | 100.00 | Full |
| SES ASTRA AB, Sweden | 100.00 | 100.00 | Full |
| Sirius Satellite Services SIA, Latvia | 100.00 | 100.00 | Full |
| SES SIRIUS Ukraine, Ukraine | 100.00 | 100.00 | Full |
| SES ASTRA 1KR S.à r.l., Luxembourg | 100.00 | 100.00 | Full |
| SES ASTRA 1L S.à r.l., Luxembourg | 100.00 | 100.00 | Full |
| SES ASTRA 1M S.à r.l., Luxembourg | 100.00 | 100.00 | Full |
| SES ASTRA 3B S.à r.l., Luxembourg | 100.00 | 100.00 | Full |
| SES ASTRA 5B S.à r.l., Luxembourg | 100.00 | 100.00 | Full |
| SES ASTRA 1N S.à r.l., Luxembourg | 100.00 | 100.00 | Full |
| Solaris Mobile Limited, Ireland² | – | 50.00 | Equity |
| SES ASTRA 2E S.à r.l., Luxembourg | 100.00 | 100.00 | Full |
| SES ASTRA 2F S.à r.l., Luxembourg | 100.00 | 100.00 | Full |
| SES ASTRA 2G S.à r.l., Luxembourg | 100.00 | 100.00 | Full |
| SES ASTRA (Romania) S.à r.l. | 100.00 | 100.00 | Full |
| Held through SES Finance S.à r.l.: | |||
| SES Re International (Bermuda) Ltd, Bermuda | 100.00 | 100.00 | Full |
| SES Satellite Leasing Ltd, Isle of Man | 100.00 | 100.00 | Full |
| Al Maisan Satellite Communications (YahSat) LLC, UAE | 35.00 | 35.00 | Full |
| SES Satellites (Bermuda) Ltd, Bermuda | 100.00 | 100.00 | Full |
| Held through SES GLOBAL Africa S.A.: | |||
| SES ASTRA Africa (Proprietary) Ltd, South Africa | 100.00 | 100.00 | Full |
| ODM (Proprietary) Ltd, South Africa | 15.08 | 15.08 | Equity |
| SES Satellites Ghana Ltd | 100.00 | 100.00 | Full |
| Held through SES GLOBAL-Americas Inc.: | |||
| SES AMERICOM, Inc., U.S.A. | 100.00 | 100.00 | Full |
| SES AMERICOM PAC, Inc., U.S.A. | 100.00 | 100.00 | Full |
| SES AMERICOM International Holdings, Inc., U.S.A. | 100.00 | 100.00 | Full |
| SES AMERICOM (Brazil) Holdings, LLC, U.S.A. | 100.00 | 100.00 | Full |
| SES AMERICOM do Brasil Servicos de Telecomunicacoes, Ltda, Brazil | 100.00 | 100.00 | Full |
| Effective interest (%) 2013 |
Eµective interest (%) 2012 |
Method of consolidation 2013 |
|
|---|---|---|---|
| AMERICOM Government Services, Inc., U.S.A. | 100.00 | 100.00 | Full |
| Sistemas Satelitales de Mexico S. de R.L. de C.V., Mexico | 73.99 | 73.99 | Equity |
| Socios Aguila S.de R.L de C.V., Mexico | 49.00 | 49.00 | Equity |
| Columbia Communications Corporation, U.S.A. | 100.00 | 100.00 | Full |
| SES Satellites International, Inc., U.S.A. | 100.00 | 100.00 | Full |
| SES Satellites (Gibraltar) Ltd, Gibraltar | 100.00 | 100.00 | Full |
| SES AMERICOM Colorado, Inc., U.S.A. | 100.00 | 100.00 | Full |
| AMC-1 Holdings LLC, U.S.A. | 100.00 | 100.00 | Full |
| AMC-2 Holdings LLC, U.S.A. | 100.00 | 100.00 | Full |
| AMC-3 Holdings LLC, U.S.A. | 100.00 | 100.00 | Full |
| AMC-5 Holdings LLC, U.S.A. | 100.00 | 100.00 | Full |
| AMC-6 Holdings LLC, U.S.A. | 100.00 | 100.00 | Full |
| AMC-8 Holdings LLC, U.S.A. | 100.00 | 100.00 | Full |
| AMC-9 Holdings LLC, U.S.A. | 100.00 | 100.00 | Full |
| AMC-10 Holdings LLC, U.S.A. | 100.00 | 100.00 | Full |
| AMC-11 Holdings LLC, U.S.A. | 100.00 | 100.00 | Full |
| SES AMERICOM (Asia 1A) LLC, U.S.A. | 100.00 | 100.00 | Full |
| AMERICOM Asia Pacific LLC, U.S.A. | 100.00 | 100.00 | Full |
| AMC-12 Holdings LLC, U.S.A. | 100.00 | 100.00 | Full |
| SES AMERICOM California, Inc., U.S.A. | 100.00 | 100.00 | Full |
| AMC-4 Holdings LLC, U.S.A. | 100.00 | 100.00 | Full |
| AMC-7 Holdings LLC, U.S.A. | 100.00 | 100.00 | Full |
| AMC-15 Holdings LLC, U.S.A. | 100.00 | 100.00 | Full |
| AMC-16 Holdings LLC, U.S.A. | 100.00 | 100.00 | Full |
| SES-1 Holdings, LLC, U.S.A. | 100.00 | 100.00 | Full |
| QuetzSat Directo, S. de R.L. de C.V., Mexico | 49.00 | 49.00 | Equity |
| SES ENGINEERING (U.S.) Inc., U.S.A. | 100.00 | 100.00 | Full |
| AOS Inc., U.S.A. | 100.00 | 100.00 | Full |
| SES-2 Holdings LLC, U.S.A. | 100.00 | 100.00 | Full |
| SES-3 Holdings LLC, U.S.A. | 100.00 | 100.00 | Full |
| Held through SES Latin America S.A.: | |||
| QuetzSat S. de R.L. de C.V., Mexico | 73.99 | 73.99 | Equity |
| Satellites Globales S. de R.L. de C.V., Mexico | 49.00 | 49.00 | Equity |
| SES Satelites Directo Ltda, Brazil | 100.00 | 100.00 | Full |
| SES DTH do Brasil Ltda, Brazil | 100.00 | 100.00 | Full |
| SES GLOBAL South America Holding S.L., Spain | 100.00 | 100.00 | Full |
| Held through SES Holdings (Netherlands) B.V.: | |||
| New Skies Satellites, Inc., U.S.A. | 100.00 | 100.00 | Full |
| New Skies Satellites Mar B.V., The Netherlands | 100.00 | 100.00 | Full |
| New Skies Satellites Ltda, Brazil | 100.00 | 100.00 | Full |
| New Skies Networks, Inc., U.S.A. | 100.00 | 100.00 | Full |
| New Skies Networks (U.K.) Ltd, U.K. | 100.00 | 100.00 | Full |
| SES ENGINEERING (Netherlands) B.V., The Netherlands | 100.00 | 100.00 | Full |
| New Skies Asset Holdings, Inc., U.S.A. | 100.00 | 100.00 | Full |
| SES NEW SKIES Marketing B.V., The Netherlands | 100.00 | 100.00 | Full |
| New Skies Satellites India B.V., The Netherlands | 100.00 | 100.00 | Full |
| New Skies Satellites Argentina B.V., The Netherlands | 100.00 | 100.00 | Full |
| New Skies Networks Australia B.V., The Netherlands | 100.00 | 100.00 | Full |
| New Skies Satellites Australia Pty Ltd, Australia | 100.00 | 100.00 | Full |
| New Skies Satellites Licensee B.V., The Netherlands | 100.00 | 100.00 | Full |
| NSS Latin America Holdings S.A., Luxembourg 4 |
100.00 | 100.00 | Full |
| SES Asia S.A., Luxembourg | 100.00 | 100.00 | Full |
Notes to the consolidated financial statements continued December 31, 2013
| Effective interest (%) 2013 |
Eµective interest (%) 2012 |
Method of consolidation 2013 |
|
|---|---|---|---|
| SES Finance Services AG, Switzerland | 100.00 | 100.00 | Full |
| O3b Networks Ltd, Jersey Island5 | 46.85 | 46.88 | Equity |
| SES World Skies Singapore Pty Ltd, Singapore | 100.00 | 100.00 | Full |
1 Entity created in 2013.
2 Entity disposed in 2013.
3 Entity merged into SES ASTRA Service Europe in 2013. 4 Entity merged into SES Participations in 2013.
5 See Note 15.
On January 30, 2014, the Company and Eutelsat Communications announced that the two companies have concluded a series of agreements including a comprehensive settlement of legal proceedings concerning the right to operate at the 28.5 degrees East orbital position and containing long-term commercial as well as frequency coordination elements.
The first agreement ends the arbitral procedure between Eutelsat and the Company that was initiated in October 2012 under the rules of the International Chamber of Commerce (ICC) in Paris. The dispute concerned a right of use of 500 MHz spectrum at the 28.5 degrees East orbital position. Eutelsat ceased to operate this spectrum on 3 October 2013 and the Company has operated this spectrum since that date. The dispute over this right of use has now been resolved, with the Company continuing to operate its satellites at this location, and Eutelsat independently commercialising part of the capacity of the previously disputed frequencies.
According to the second agreement between both companies, Eutelsat has therefore contracted long-term satellite capacity on the Group satellite fleet at the 28.5 degrees East orbital position. Eutelsat will commercialise over Europe on the SES fleet 125 MHz (eight transponders) of the formerly disputed 500 MHz. Eutelsat will also commercialise on the Group fleet the 250 MHz (12 transponders) which was not the subject of the legal proceedings. The 20 transponders will be operated on three new satellites which SES is deploying at the 28.2/28.5 degrees East neighborhood – ASTRA 2F, ASTRA 2E and ASTRA 2G – of which the first two have been launched and are operational, while the third is planned for a launch later this year.
The third agreement between the two companies addresses technical frequency coordination under the rules of the International Telecommunication Union (ITU). It will allow both parties an optimised use of their respective spectrum at a number of orbital positions over Europe, the Middle East and Africa. It confirms and clarifies in technical terms the geographic coverage and transmission power levels for frequencies at these positions.
In January 2014, the company successfully renewed its EUR 1.2 billion Revolving Credit Facility on favorable terms. Twenty banks participated in the syndicate for the 5-year multi-currency revolving credit facility with two one-year extension options. The margin at the current rating of BBB / Baa2 is 45 bps p.a. (replacing the former syndicated and committed credit line with a margin of 95 bps p.a.).
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2013 overview
01-22
To the Shareholders of SES S.A.
We have audited the accompanying annual accounts of SES S.A., which comprise the balance sheet as at 31 December 2013, the profit and loss account for the year then ended and a summary of significant accounting policies and other explanatory information.
The Board of Directors is responsible for the preparation and fair presentation of these annual accounts in accordance with Luxembourg legal and regulatory requirements relating to the preparation of the annual accounts, and for such internal control as the Board of Directors determines is necessary to enable the preparation of annual accounts that are free from material misstatement, whether due to fraud or error.
Our responsibility is to express an opinion on these annual accounts based on our audit. We conducted our audit in accordance with International Standards on Auditing as adopted for Luxembourg by the "Commission de Surveillance du Secteur Financier". Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the annual accounts are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the annual accounts. The procedures selected depend on the judgement of the "Réviseur d'entreprises agréé", including the assessment of the risks of material misstatement of the annual accounts, whether due to fraud or error. In making those risk assessments, the "Réviseur d'entreprises agréé" considers internal control relevant to the entity's preparation and fair presentation of the annual accounts in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Board of Directors, as well as evaluating the overall presentation of the annual accounts.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
In our opinion, the annual accounts give a true and fair view of the financial position of SES S.A. as of 31 December 2013, and of the results of its operations for the year then ended in accordance with Luxembourg legal and regulatory requirements relating to the preparation of the annual accounts.
The management report, which is the responsibility of the Board of Directors is consistent with the annual accounts.
Represented by
Gilles Vanderweyen Luxembourg, 20 February 2014
As at December 31, 2013
| In millions of euros | 2013 | 2012 | |
|---|---|---|---|
| Assets | |||
| Fixed Assets | |||
| Financial assets | |||
| Shares in affiliated undertakings | Note 3 | 7,404.3 | 8,344.4 |
| Loans to affiliated undertakings Loans to undertakings with which the company is linked by virtue of |
Note 3 | 1,269.6 | 752.0 |
| participating interests | Note 3 | 0.5 | 27.0 |
| 8,674.4 | 9,123.4 | ||
| Current Assets | |||
| Amounts owed by affiliated undertakings | |||
| becoming due and payable after less than one year | Note 4 | 2,319.3 | 2,284.9 |
| Amounts owed by undertakings with which the company | |||
| is linked by virtue of participating interests | |||
| becoming due and payable after less than one year | Note 3 | – | 17.5 |
| Other debtors | |||
| becoming due and payable after less than one year | 200.5 | 167.5 | |
| Investments | |||
| Own shares or own corporate units | Note 3 | 22.9 | 68.7 |
| Cash at bank and in hand | 343.9 | 73.1 | |
| 2,886.6 | 2,611.7 | ||
| Prepayments | 47.6 | 40.0 | |
| Total assets | 11,608.6 | 11,775.1 |
The accompanying notes form an integral part of the annual accounts.
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SES S.A. annual accounts
107-120
2013 overview
01-22
Balance sheet continued As at December 31, 2013
| 2013 EUR million |
2012 EUR million |
||
|---|---|---|---|
| Liabilities | |||
| Capital and reserves | |||
| Subscribed capital | Note 5 | 633.0 | 633.0 |
| Share premium and similar premiums | 835.4 | 835.4 | |
| Reserves | |||
| Legal reserve | Note 6 | 63.3 | 62.4 |
| Other reserves | Note 7 | 338.0 | 333.3 |
| Result for the financial year | 388.9 | 395.8 | |
| 2,258.6 | 2,259.9 | ||
| Non subordinated debts | |||
| Debenture loans – Non convertible loans | Note 8 | ||
| becoming due and payable after less than one year | 811.1 | 1,111.6 | |
| becoming due and payable after more than one year | 3,002.6 | 2,544.1 | |
| Amounts owed to credit institutions | Note 8 | ||
| becoming due and payable after less than one year | 80.2 | 66.7 | |
| becoming due and payable after more than one year | 574.9 | 585.8 | |
| Trade creditors | |||
| becoming due and payable after less than one year | 1.2 | 0.5 | |
| Amounts owed to affiliated undertakings | Note 8 | ||
| becoming due and payable after less than one year | 1,871.6 | 4,864.0 | |
| becoming due and payable after more than one year | 2,956.7 | 322.1 | |
| Tax and social security | |||
| Tax | Note 9 | – | 0.2 |
| Social security | 0.3 | 0.3 | |
| Other creditors | |||
| becoming due and payable after less than one year | 51.4 | 19.9 | |
| 9,350.0 | 9,515.2 | ||
| Total Liabilities | 11,608.6 | 11,775.1 |
The accompanying notes form an integral part of the annual accounts.
Profit and loss account
For the year ended December 31, 2013
| 2013 EUR million |
2012 EUR million |
||
|---|---|---|---|
| Charges | |||
| Other external charges | 27.2 | 12.3 | |
| Staff costs | Note 10 | ||
| Wages and salaries | 15.2 | 14.0 | |
| Social security costs | 1.6 | 0.5 | |
| Value adjustments | |||
| on formation expenses and on tangible and intangible fixed assets | – | 0.1 | |
| Other operating charges | 2.7 | 3.4 | |
| Value adjustments and fair value adjustments on financial fixed assets | 12.5 | 2.4 | |
| Interest payable and similar charges | |||
| concerning affiliated undertakings | 72.2 | 87.7 | |
| other interest payable and similar charges | Note 12 | 214.1 | 206.3 |
| Tax on profit or loss | Note 9 | (79.5) | (63.3) |
| Profit for the financial year | 388.9 | 395.8 | |
| Total Charges | 654.9 | 659.2 | |
| Income | |||
| Other operating income | Note 13 | 17.7 | 5.1 |
| Income from financial fixed assets | |||
| derived from affiliated undertakings | Note 14 | 578.6 | 567.1 |
| other income from participating interests | – | 13.1 | |
| Other interests and other financial income | |||
| derived from affiliated undertakings | 33.1 | 36.4 | |
| other interest receivable and similar income | Note 15 | 25.5 | 37.5 |
| Total Income | 654.9 | 659.2 |
As at December 31, 2013
| Subscribed capital EUR million |
Share premium EUR million |
Legal reserve EUR million |
Other reserves EUR million |
Result for the year EUR million |
Total EUR million |
|---|---|---|---|---|---|
| 633.0 | 835.4 | 62.4 | 333.3 | 395.8 | 2,259.9 |
| – | – | 0.9 | 394.9 | (395.8) | – |
| – | – | – | (390.2) | – | (390.2) |
| – | – | – | – | – | – |
| – | – | – | – | 388.9 | 388.9 |
| 633.0 | 835.4 | 63.3 | 338.0 | 388.9 | 2,258.6 |
The accompanying notes form an integral part of the annual accounts.
2013 overview
01-22
Corporate governance
23-50
Financial review by
Notes to the annual accounts As at December 31, 2013
SES S.A. (hereafter the "Company") was incorporated on 16 March 2001 as a limited liability company (Société Anonyme) under the law of the Grand Duchy of Luxembourg for an unlimited period of time.
The registered office of the Company is established in Betzdorf, Luxembourg.
The purpose of the Company is to take generally any interest whatsoever in electronic media and to be active, more particularly, in the communications area via satellites and to invest, directly or indirectly, in other companies that are actively involved in the satellite communication industry.
The accounting period of the Company is from January 1 to December 31.
The Company has a 99.94% interest in a partnership, SES Global Americas Holdings GP, whose accounts are integrated in those of the Company to the level of its share in the partnership.
As from 1 January 2013, the Company has established a branch in Switzerland in order to centralize the cash pooling.
The Company also prepares consolidated financial statements for the Group ("SES"), which are published according to the provisions of the Luxembourg law.
The Company has been listed on the Luxembourg Stock Exchange since 1998 and on Euronext Paris since 2004. Fiduciary Depositary Receipts each in respect of one A share of SES S.A. are listed on the Stock Exchange of Luxembourg and on Euronext Paris under the symbol SESG.
The annual accounts are prepared in accordance with the Luxembourg legal and regulatory requirements relating to the preparation and presentation of the annual accounts.
Accounting policies and valuation rules are, besides the ones laid down by Law of 19 December 2002, determined and applied by the Board of Directors.
The preparation of annual accounts requires the use of certain critical accounting estimates. It also requires the Board of Directors to exercise its judgement in the process of applying the accounting policies. Changes in assumptions may have a significant impact on the annual accounts in the period in which the assumptions changed. Management believes that the underlying assumptions are appropriate and that the annual accounts therefore present the financial position and results fairly.
The Company makes estimates and assumptions that affect the reported amounts of assets and liabilities in the next financial year. Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.
The figures for the year ended 31 December 2012 have been reclassified to ensure comparability with the figures for the year ended 31 December 2013. Management does not believe that these reclassifications adversely affect the information provided.
A balance of EUR 81.7 million has been reclassified from other creditors to amount owed to affiliated undertakings.
A balance of EUR 78.4 million has been reclassified from other debtors to amount owed to affiliated undertakings.
The main valuation rules applied by the Company are the following:
Financial assets held by the Company are valued at purchase price. Loans are valued at their nominal value.
In the case of permanent depreciation in value of the financial assets according to the opinion of the Board of Directors, value adjustments are made so that they are valued at the lower figure to be attributed to them at the balance sheet date. In some instances, interdependency of cash flows between the legal entities of SES has been considered to assess the carrying value of the financial assets. These value adjustments are not continued if the reasons for which the value adjustments were made have ceased to apply.
Loan origination costs are capitalised and included in prepayments. These costs are amortised over the remaining estimated loan periods based on the Company's financing strategy.
Dividends are declared after the accounts for the year have been approved. Accordingly dividends payable are recorded in the subsequent year's accounts. Dividends receivable from affiliated undertakings are recorded as income in the year in which they are approved by the subsidiary.
Returns on convertible profit participating loans ("PPL") issued by the Company are calculated based on the cumulative profits of the PPL recipient over the life of the loan. The Company's entitlement to the return is therefore only certain at the date of maturity of the loan. The return is therefore recorded as income on final maturity of the PPL.
Debtors are valued at their nominal value. They are subject to value adjustments where their recovery is compromised. These value adjustments are not continued if the reasons for which the value adjustments were made have ceased to apply.
The Company maintains its accounting records in Euro ("EUR") and the annual accounts are expressed in this currency.
Transactions expressed in currencies other than Euro are translated into Euro at the exchange rates ruling at the time of the transaction.
With the exception of fixed assets, all assets and liabilities denominated in foreign currencies are converted at the rate of exchange ruling at the balance sheet date. Related realised and unrealised gains and losses are recognised in the profit and loss account.
Fixed assets expressed in currencies other than Euro are translated into Euro at the exchange rate effective at the time of the transaction. At the balance sheet date, these assets remain translated at historical exchange rates. Long term financial liabilities, which are hedged by financial derivatives, were translated at historical rate until December 31, 2012. As from January 1, 2013, the accounting policy has been amended and as a result long term liabilities and related hedging derivatives are translated at closing rate.
All financial derivatives were maintained off balance sheet until December 31, 2012. As from January 1, 2013, derivatives hedging balance sheet positions in foreign currencies are revaluated at year-end by using the forward rate prevailing at balance sheet date. Unrealized gains resulting from the conversion of derivatives held for trading are not recognized. Unrealized losses resulting from the conversion of these contracts are recognized and recorded in other creditors.
Debts are recorded at their reimbursement value. Where the amount repayable on account is greater than the amount received, the difference is shown as an asset and is written off over the period of the debt based on a linear method.
| a) Shares in affiliated undertakings | ||
|---|---|---|
| 2013 | 2012 | |
| EUR million | EUR million | |
| Cost at beginning of year | 8,349.1 | 8,334.1 |
| Additions | 76.5 | 15.0 |
| Decrease | (1,016.6) | – |
| Cost at end of year | 7,409.0 | 8,349.1 |
| Value adjustments at beginning of year | (4.7) | (4.7) |
| Value adjustment of the year | – | – |
| Value adjustments at end of year | (4.7) | (4.7) |
| Net book value at end of year | 7,404.3 | 8,344.4 |
As at 31 December 2013, the Company holds the following investments:
| Participation | Net Book Value EUR million |
|
|---|---|---|
| SES Astra S.A., Betzdorf, Luxembourg | 100% | 1,046.8 |
| SES Global – Americas, Inc., Princeton, United States | 99.94% | 3,854.8 |
| Astra Broadband Services S.A., Betzdorf, Luxembourg | 0.01% | – |
| SES Astra A.B., Stockholm, Sweden | 32.34% | 50.1 |
| SES Participations S.A., Betzdorf, Luxembourg | 100% | 206.8 |
| SES Global Africa S.A., Betzdorf, Luxembourg | 100% | 406.6 |
| SES Finance S.à r.l., Switzerland | 100% | 1,502.2 |
| SES Holdings (Netherlands) B.V., Netherlands | 100% | 96.7 |
| SES Astra Services Europe S.A., Betzdorf, Luxembourg | 100% | 148.8 |
| SES Astra TechCom Belgium S.A.,Belgium | 1% | – |
| SES Latin America S.A., Betzdorf, Luxembourg | 100% | – |
| SES Belgium Sprl, Belgium | 99% | – |
| SES Insurance International (Luxembourg) S.A., Luxembourg | 100% | 15.2 |
| SES Insurance International Re (Luxembourg) S.A., Luxembourg | 100% | 76.3 |
| SES NL Finance S.à.r.l. | 100% | – |
| 7,404.3 |
Notes to the annual accounts continued
As at December 31, 2013
As at December 31, 2012, the Company holds the following investments:
| Participation | Net Book Value EUR million |
|
|---|---|---|
| SES Astra S.A., Betzdorf, Luxembourg | 100% | 1,046.8 |
| SES Global – Americas, Inc., Princeton, United States | 99.94% | 3,854.8 |
| Astra Broadband Services S.A., Betzdorf, Luxembourg | 0.01% | – |
| SES Astra A.B., Stockholm, Sweden | 32.34% | 50.1 |
| SES Participations S.A., Betzdorf, Luxembourg | 100% | 206.8 |
| SES Global Africa S.A., Betzdorf, Luxembourg | 100% | 406.6 |
| SES Finance S.à r.l., Switzerland | 100% | 1,502.2 |
| SES Holdings (Netherlands) B.V., Netherlands | 100% | 1,113.3 |
| SES Astra Services Europe S.A., Betzdorf, Luxembourg | 100% | 148.8 |
| SES Astra TechCom Belgium S.A.,Belgium | 1% | – |
| SES Latin America S.A., Betzdorf, Luxembourg | 100% | – |
| SES Belgium Sprl, Belgium | 99% | – |
| SES Insurance International (Luxembourg) S.A., Luxembourg | 100% | 11.2 |
| SES Insurance International Re (Luxembourg) S.A., Luxembourg | 100% | 3.8 |
| 8,344.4 |
In May 2013, SES resolved to increase the share capital in SES Insurance International (Luxembourg) S.A. and SES Insurance International Re (Luxembourg) S.A., for respective amounts of USD 5.3 million (EUR 4 million) and USD 95 million (EUR 72.5 million), without issuing new shares.
In February 2013, SES declared a reduction from the share premium reserve of SES Holdings (Netherlands) B.V. for an amount of USD 813.2 million (EUR 616.4 million).
In December 2013, SES had undergone a restructuring which resulted in the decrease in the share premium account of SES Holdings (Netherlands) B.V. for an amount of USD 552 million (EUR 400.2 million).
Art. 65 paragraph (1) 2o of the Law of 19 December 2002 on the register of commerce and companies and the accounting and annual accounts of undertakings (the "law") requires the disclosure of the amount of capital and reserves and profit and loss for the last financial year of each affiliated undertaking. In conformity with Art. 67 (3) of the law these details have been omitted as the Company prepares consolidated accounts and these consolidated accounts and the related consolidated management report and auditors' report thereon have been lodged with the Luxembourg Trade Registry.
Loans to affiliated undertakings of EUR 1,269.6 million mainly consist of:
The amount receivable from ND SatCom at 31 December 2012 was the non-current portion of a financing loan in the amount of EUR 27.0 million arising in the framework of the sale of the Group's controlling interest in ND SatCom in February 2011.
In 2013, the Group disposed the remaining 24.9% interest in ND SatCom, set off this loan receivable against the final selling price of EUR 14 million and recorded a final impairment charge of EUR 12.5 million recorded under "Value adjustments and fair value adjustments on financial fixed assets" in the annual accounts.
Own Fiduciary Deposit Receipts:
All Fiduciary Deposit Receipts ("FDRs") in respect of Class A shares owned by the Company are for use in connection with the Senior Executives, Executives and Employees option schemes operated by the group. These shares are valued at the weighted average cost.
As at 31 December 2013, the Company owned 1,678,009 FDRs (2012: 4,089,040).
107-120
Amounts owed by affiliated undertakings of EUR 2,319.3 million (2012: EUR 2,284.9 million) consist of in-house bank accounts.
As at 31 December 2013 current accounts represent short-term advances bearing interest at market rates.
As at 31 December 2013 the issued and fully paid share capital amounted to EUR 633.0 million, represented by 506,400,000 shares with no par value (337,600,000 Class A ordinary shares and 168,800,000 Class B ordinary shares).
The company has issued two classes of shares: Class A and Class B shares (sometimes referred to as "A-shares" and "B-shares", respectively).
Although they constitute separate classes of shares, Class A and Class B shares have the same rights except that the shares of Class B, held by the State of Luxembourg and by two entities wholly-owned by the State of Luxembourg, entitle their holders to only 40% of the dividend, or in case the company is dissolved, to 40% of the net liquidation proceeds paid to shareholders of Class A. Class B shares are not freely traded. Each share, whether of Class A or Class B, is entitled to one vote.
In accordance with Luxembourg legal requirements, a minimum of 5% of the yearly net profit is transferred to a legal reserve from which distribution is restricted. This requirement is satisfied when the reserve reaches 10% of the issued share capital. This reserve may not be distributed.
In accordance with paragraph 8a of the 16 October 1934 Law as amended, the Company is entitled to reduce the net worth tax due for the year by an amount which cannot exceed the corporate income tax due for the year. In order to avail of the above the Company must set up a restricted reserve equal to five times the amount of the net worth tax credited. This reserve has to be maintained for a period of five years following the year in which it was created. In case of distribution of the restricted reserve, the tax credit falls due during the year in which it was distributed.
As at 31 December 2013, the restricted portion of "other reserves" in the books of SES S.A. is as follows:
| Reduction in net worth tax EUR million |
Restricted reserve EUR million |
|
|---|---|---|
| 2008 | 18.2 | 90.8 |
| 2009 | 12.7 | 63.4 |
| 2010 | 14.1 | 70.7 |
| 2011 | 12.4 | 61.8 |
On 30 September 2003, SES, through SES GLOBAL-Americas Holdings GP, issued in the US Private Placement market four series of unsecured notes amounting to USD 1,000.0 million and GBP 28.0 million. These notes comprised:
On these four series, SES pays interest semi-annually. SES is committed under the US Private Placement to maintaining covenants requiring certain financial ratios to be upheld within agreed limits in order to provide sufficient security to the lenders. These financial ratios are based on the consolidated financial statements of SES S.A..
On 6 December 2005, SES put in place a EUR 2,000.0 million EMTN enabling SES, or SES GLOBAL-Americas Holdings GP, to issue as and when required notes up to a maximum aggregate amount of EUR 2,000.0 million. In May 2007, this programme was increased to an aggregate amount of EUR 4,000.0 million. On 4 October 2013 this programme has been extended for one further year. As of 31 December 2013, SES has issued EUR 2,740.0 million (2012: EUR 2,740.0 million) under the EMTN Programme with maturities ranging from 2014 to 2027.
On 20 October 2006, SES issued a EUR 500.0 million bond under the company's European Medium-Term Note Programme. The bond had a fixed coupon yield of 4.375% and has been repaid on 21 October 2013.
Notes to the annual accounts continued As at December 31, 2013
On 9 July 2009 (pricing 30 June 2009), SES issued a EUR 650.0 million bond under the company's European Medium-Term Note Programme. The bond has a 5-year maturity and bears interest at a fixed rate of 4.875%.
On 13 July 2009, SES issued a EUR 150.0 million Private Placement under the Company's European Medium-Term Note Programme with Deutsche Bank. The Private Placement has a 7-year maturity, beginning 5 August 2009, and bears interest at a fixed rate of 5.05%.
On 16 October 2013, SES issued a EUR 500.0 million bond under the Company's European Medium-Term Note Programme. The bond has a 5-year maturity and bears interest at a fixed rate of 1.875%.
On 9 March 2010 (pricing 1 March 2010), SES issued a EUR 650.0 million bond under the company's European Medium-Term Note Programme. The bond has a 10-year maturity and bears interest at a fixed rate of 4.625%.
On 11 March 2011 (pricing 2 March 2011), SES issued a EUR 650.0 million bond under the company's European Medium-Term Note Programme. The bond has a 10-year maturity and bears interest at a fixed rate of 4.75%.
Between May and July 2012, SES issued three individual tranches of a total EUR 140.0 million Private Placement under the company's European Medium-Term Note Programme with ING Bank N.V.. The Private Placement has a 15-year maturity, beginning 31 May 2012, and bears interest at a fixed rate of 4.00%.
On 4 April 2013, SES completed a 144A offering in the US market issuing USD 750 million 10-year bond with a coupon of 3.60% and a final maturity date on 4 April 2023.
On 4 April 2013, SES completed a 144A offering in the US market issuing USD 250 million 30-year bond with a coupon of 5.30% and a final maturity date on 4 April 2043.
On 29 October 2012, SES signed an agreement to issue EUR 50 million in the German bond ("Schuldschein") market. The German bond bears a fixed interest rate of 4.0% and matures on 12 November 2032.
On 25 October 2005, SES put in place a EUR 500.0 million "Programme de Titres de Créances Négociables" in the French market where the Company issued "Billets de Trésorerie" (commercial papers) in accordance with Articles L.213-1 to L.213-4 of the French Monetary and Financial Code and decree n°92.137 of 13 February 1992 and all subsequent regulations. The maximum outstanding amount of "Billets de Trésorerie" issuable under the programme is EUR 500.0 million or its counter value at the date of issue in any other authorised currency. On 31 May 2013, this programme was extended for one further year. As at 31 December 2013 borrowings of EUR nil million (2012: EUR 40.0 million) were outstanding under this programme. The average rate of the outstanding commercial paper amounts to nil% (2012: 0.13%) for the drawdown period.
In July 2012, SES signed the documentation for the inception of a joint EUR 1 billion guaranteed European commercial paper programme of SES S.A. and SES Global Americas Holdings GP. The issuance under the programme represents senior unsecured obligations of the issuer and any issuance under the programme is guaranteed by the non-issuing entity. The programme is rated by Moody's Investors Services and is compliant with the standards set out in the STEP Market Convention. As of 31 December 2013 borrowings of EUR nil million (2012: EUR 427.0 million) were outstanding of which EUR nil million (2012: EUR 267.0 million) issued in the name of SES Global Americas Holding GP and EUR nil million (2012: EUR 160.0 million) in the name of SES S.A.. The average rate of the outstanding commercial papers was nil% (2012: 0.24%) for the drawdown period.
The maturity profile of notes, bonds and commercial papers is as follows as at 31 December 2013 and 2012:
| 2013 EUR million |
2012 EUR million |
|
|---|---|---|
| Within one year | 811.1 | 1,111.6 |
| Between one to two years | 137.5 | 814.9 |
| Between two to five years | 650.0 | 239.2 |
| After five years | 2,215.1 | 1,490.0 |
| Total after one year | 3,002.6 | 2,544.1 |
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23-50
As at December 31, 2013 and 2012, the amount owed to credit institutions was as follows:
| 2013 EUR million |
2012 EUR million |
|
|---|---|---|
| Becoming due and payable after more than one year | 574.9 | 585.8 |
| European Investment Bank | 100.0 | 133.3 |
| COFACE facility | 403.5 | 364.3 |
| US Ex-Im | 71.4 | 88.2 |
| Becoming due and payable after less than one year | 80.2 | 66.7 |
| European Investment Bank | 33.3 | 33.3 |
| COFACE facility | 33.9 | 19.8 |
| US Ex-Im | 13.0 | 13.6 |
On 21 April 2009, SES signed a financing agreement with the European Investment Bank concerning the investment by the Group in certain satellite investment projects. This facility, bearing interest at a fixed rate of 3.618% and is repayable in six annual instalments between May 2012 and May 2017.
In April 2009, SES signed a syndicated loan facility maturing in 2012 with a consortium of 24 banks. On September 2010, the syndicated loan has been amended and restated. The amended facility, maturing April 2015, is for EUR 1,200.0 million and can be drawn in EUR and USD. The interest rate is based on EURIBOR or US LIBOR, depending on the drawing currency, plus a margin based on the rating of the Company. The current rating of the Company is BBB/Baa2 (Standard & Poor's and Moody's) leading to a margin of 0.95%.
On 16 December 2009, SES signed a financing agreement with COFACE (Compagnie Française d'Assurance pour le Commerce Extérieur) in respect of the investment in four geostationary satellites (ASTRA 2E, ASTRA 2F, ASTRA 2G, ASTRA 5B). The facility is divided into five loans. The drawings under the facility are based on invoices from the supplier of the satellites. The first drawing was done on 23 April 2010. Each loan will be repaid in 17 equal semi-annual instalments starting six months after the earlier of the in-orbit date of the satellite being financed by such loan and April 1, 2014 and the estimated final maturity of the facility will be by the end of 2022. The facility bears interest at a floating rate of six month EURIBOR plus a margin of 1.7%.
In April 2011, SES signed a financing agreement with Ex-Im Bank (Export-Import Bank of the United States) over USD 158 million for the investment in one geostationary satellite (QuetzSat). At the in-orbit acceptance date of the satellite, the facility was fully drawn with USD 152.2 million which will be repaid in 17 equal semi-annual installments starting on 22 June 2012. The loan has a final maturity date of 22 June 2020 and bears interest at a fixed rate of 3.11%.
As at 31 December 2012, the Company had no drawn down under uncommitted loan facilities (2012: nil).
The maturity profile of the amounts drawn is as follows as at 31 December 2013 and 2012:
| 2013 EUR million |
2012 EUR million |
|
|---|---|---|
| Between one and two years | 100.1 | 86.6 |
| Between two and five years | 267.0 | 276.3 |
| After five years | 207.8 | 222.9 |
| Total | 574.9 | 585.8 |
Amounts owed to affiliated undertakings of EUR 3,276.7 million (2012: EUR 5,026.0 million) include the following:
| 2013 EUR million |
2012 EUR million |
|
|---|---|---|
| Long-term loans (maturity after 5 years) | 1,261.1 | 322.1 |
| Short-term loans | 0.0 | 1,293.2 |
| Notes | 1,695.6 | 2,016.9 |
| Current accounts | 1,871.6 | 1,553.9 |
| 4,828.3 | 5,186.1 |
There are no short term loans outstanding as 31 December 2013 as the maturity of these loans has been extended and these loans are now classified as "notes".
Notes to the annual accounts continued
As at December 31, 2013
As at December 31, 2012 long-term loans include seven loans bearing interest at a rate of 4.12% with a maturity of April 2021, two loans bearing interest at a rate of one month USD LIBOR plus a margin of 0.50% with a maturity of November 2020 and eight loans bearing interest at a rate of 2.98% with a maturity of May 2022.
As at December 31, 2013 and 2012 the notes are interest free and are repayable upon demand.
As at December 31, 2013 current accounts represent short-term debts bearing interest at market rates.
The Company is subject to the tax regulations in Luxembourg, in Switzerland for the Swiss branch and in US for the partnership.
The balance sheet position takes into consideration the tax payable or receivable of the Luxembourg subsidiaries and the related tax charges/income is recharged to the below subsidiaries:
Those are part of the Luxembourg fiscal unity, in accordance with Art 164 bis LIR.
As at 31 December 2013, the number of full time equivalent employees was 55 (2012: 55) and the average number of employees in the workforce for 2013 was 58 (2012: 58). Staff costs can be analysed as follows:
| 2013 EUR million |
2012 EUR million |
|
|---|---|---|
| Wages and salaries | 15.2 | 14.0 |
| Social security costs | 1.6 | 0.5 |
| Total | 16.8 | 14.5 |
Art. 65 paragraph (1) 16º of the Law of 19 December 2002 on the register of commerce and companies and the accounting and annual accounts of undertakings (the "law") requires the disclosure of the independent auditor fees. In conformity with the law these details have been omitted as the Company prepares consolidated accounts in which this information is disclosed and these consolidated accounts and the related consolidated management report and auditors' report thereon have been lodged with the Luxembourg Trade Registry.
Other interest payable and similar charges include the following:
| 2013 EUR million |
2012 EUR million |
|
|---|---|---|
| Interest charges | 185.4 | 189.5 |
| Foreign exchange losses, net | 12.1 | – |
| Interests on swaps | 0.8 | – |
| Loan origination costs | 15.8 | 16.8 |
| 214.1 | 206.3 |
Other operating income mainly consist of group recharge revenues amounting to EUR 17.7 million (2012: EUR 5.1 million) arising from advisory support services rendered to various affiliates.
Income from financial fixed assets derived from affiliated undertakings consists of the following:
| EUR million | 2013 | 2012 EUR million |
|---|---|---|
| Dividends received from affiliated undertakings | 578.6 | 567.1 |
| 578.6 | 567.1 |
Other interest receivable and similar income include the following:
| 2013 EUR million |
2012 EUR million |
|
|---|---|---|
| Other financial income | 0.4 | 0.2 |
| Foreign exchange gain, net | 22.1 | 37.3 |
| 25.5 | 37.5 |
At the Annual General Meeting held on April 5, 2013, payments to directors for attendance at Board and Committee meetings were approved. These payments are computed on a fixed and variable basis; the variable payments being based upon attendance at Board and Committee meetings. Total payments arising in 2013 were EUR 1.4 million (2012: EUR 1.4 million).
On December 31, 2013, the Company entered into the following derivatives:
| Currency sold | Currency bought | Maturity | Unrealised gain/(loss) |
|---|---|---|---|
| USD 537.6 million | EUR 400.0 million | July 2014 | EUR 9.5 million |
| Currency sold | Currency bought | Maturity | Unrealised gain/(loss) |
|---|---|---|---|
| EUR 39.8 million | SEK 360.0 million | 16 January 2014 | EUR 0.8 million |
| Currency sold | Currency bought | Maturity | Unrealised gain/(loss) |
|---|---|---|---|
| EUR 159.4 million | USD 189.6 million | September 2015 | EUR (21.7) million |
| EUR 86.9 million | USD 102.6 million | September 2014 | EUR (12.6) million |
On 31 December 2013 the Group had outstanding bank guarantees for an amount of EUR 19.7 million (2012: EUR 2.6 million) with respect to performance and warranty guarantees for services of satellite operations.
In 2013, SES has given several corporate guarantees to satellite providers for the provision of communications spacecraft and related equipment contracted by fully-owned subsidiaries of the Group for EUR 49.3 million (2012: EUR 244.4 million).
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| Annual general meeting of shareholders: | April 03, 2014 |
|---|---|
| Dividend payment: | April 24, 2014 |
| First quarter trading update: | May 09, 2014 |
| Announcement of first-half results: | July 25, 2014 |
| Third quarter trading update: | October 31, 2014 |
Fiduciary Depositary Receipts each in respect of one A share of SES S.A. are listed on the Stock Exchange of Luxembourg and on NYSE Euronext Paris under the symbol SESG.
Banque et Caisse d'Epargne de l'Etat 16, rue Ste Zithe L-2954 Luxembourg Tel: +352 40 151
SES S.A. Investor Relations L-6815 Château de Betzdorf Luxembourg Tel: +352 710 725 490 Fax: +352 710 725 9836 [email protected]
All brand and product names may be registered trade marks and are hereby acknowledged.
It is our policy to produce the document constituting our annual report with a minimum impact on the environment. To this end the paper used is 100% chlorine free woodpulp from sustainable forests, using thinnings and waste from the timber industry and is totally recyclable and biodegradable. Our printers are fully accredited to the ISO 14001 environmental management system. They utilise vegetable based inks and operate a direct computer to plate repro system, eliminating the need for film with its chemicals such as developer and acid fixers. This report is printed on Heaven 42, an environmentally responsible 100% recycled paper made from 100% post–consumer waste and bleached chlorine free (PCF).
Designed and produced by Carnegie Orr +44 (0)20 7610 6140 www.carnegieorr.com
Château de Betzdorf L-6815 Luxembourg Registre de commerce RCS Luxembourg B 81.267
SES Government Solutions 2010 Corporate Ridge, Suite 550 McLean, VA 22102 USA Tel: +1 703 610 1000 Fax: +1 703 610 1030 www.ses-gs.com [email protected]
SES Platform Services Betastrasse 1–10 D-85774 Unterföhring Germany Tel: +49 89 1896 2100 Fax: +49 89 1896 3659 www.ses.com/ platform-services
SES Broadband Services Château de Betzdorf L-6815 Luxembourg Tel: +352 710 725 545 Fax: +352 710 725 621 www.ses.com/ broadband-services
SES TechCom Services 9 rue Pierre Werner L-6832 Betzdorf, Luxembourg Tel: +352 710 725 259 Fax: +352 710 725 575 www.ses.com/techcom
HD+ GmbH Betastrasse 1–10 D-85774 Unterföhring Germany Tel: +49 900 1 904 599 Fax: +49 89 1896 3602 www.hd-plus.de
For more information about SES, visit www.ses.com or email [email protected]
Printed in March 2014
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