Al Yah Satellite Communications Company (Yahsat), the UAE’s flagship satellite solutions provider, has seen first-half (H1) net income soar 50.7% to AED167 million ($45 million) year-on-year, driving a strong net margin of 22.1%.
Underpinned by double-digit growth in Managed Solutions and Mobility Solutions, Yahsat posted record H1 revenue of AED755 million, up 8.1% year-on-year.
Adjusted EBITDA was AED448 million, up 5.3% year-on-year, delivering a robust margin of 59.3%.
Contracted future revenue is more than AED7.7 billion, equivalent to 5.2 times FY2021 annual revenue.
The company’s strong financial position and high visibility on future cash flows underpin its ability to invest in growth and sustain an attractive dividend policy.
It is on track to grow FY2022 dividend by at least 2% to 16.12 fils [$4.39 cents] per share or AED393 million, split into two equal installments payable around October 2022 and May 2023.
The lower end of FY2022 revenue guidance increased to AED1.54 billion from AED1.52 billion; all other guidance remain unchanged.
Bright second quarter
Yahsat’s growth momentum continued in Q22022 with revenue of AED392 million, an increase of 6.9% year-on-year. This resulted in H122 revenue growth of 8.1% year-on-year to AED755 million. Both Managed Solutions and Mobility Solutions performed exceptionally well with H122 revenues increasing by 35.1% and 24.1% respectively.
Q222 Adjusted EBITDA of AED235 million increased by 3.9% year-on-year, generating a healthy margin of 59.8%, while net income (profit attributable to the shareholders) of AED93 million increased by 77.9% year-on-year. On a year-to-date basis, the group recorded H122 Adjusted EBITDA growth of 5.3% and an increase in net income of 50.7%, resulting in a solid net income margin of 22.1%.
As of June 30, 2022, the group’s contracted future revenue remained strong at more than AED7.7 billion [$2.1 billion], equivalent to around 5.2 times FY2021 annual revenue representing an increase of 4.1% since the start of the financial year, underpinned by the 5-year AED909 million [$247 million] managed services mandate awarded by the UAE Government in February 2022.
Highest first half revenue
Musabbeh Al Kaabi, Chairman of Yahsat, commented: “Against a backdrop of challenging global economic headwinds, we are delighted to record our highest ever first-half revenue whilst significantly growing Adjusted EBITDA and net income. This reflects the strength of our business underpinned by strong contracted future revenue and positive momentum across operating segments. In light of our strong year-to-date performance, the Board of Directors’ confidence in future cash flow generation, ability to grow the business and financial strength of the company, we are reiterating our commitment to deliver attractive shareholder returns.”
Ali Al Hashemi, Group Chief Executive Officer of Yahsat, commented: “Yahsat has delivered exceptional results, recording its highest-ever first half revenue and demonstrating our performance-driven culture to deploy innovative capabilities and grow the business. Our contracted future revenue exceeds AED7.7 billion, equivalent to 5.2 times FY2021 annual revenue. Looking ahead, we remain on track to bring into commercial service our Next Generation Satellite, Thuraya 4-NGS, in the second half of 2024 whilst two new satellites, Al Yah 4 and Al Yah 5, are under consideration for launch in 2026. We remain very confident in both our short-term and long-term outlook, and have accordingly increased the lower end of our revenue guidance for FY2022, whilst reiterating our commitment to pay a progressive dividend.
“We remain committed to pursuing and launching new growth opportunities across the business and we are confident that Yahsat’s robust balance sheet, business resilience and track record in delivering exceptional results will enable us to capture significant value to drive long-term growth.”
Attractive dividend outlook
Yahsat reiterates its commitment to grow its dividend by at least 2% per year, reflecting the Board of Directors’ confidence in the cash flow generation and overall financial strength of the business. For financial year 2022, the total expected dividend is a minimum of 16.12 fils per share [US Cents 4.39], split into two equal instalments payable around October 2022 and May 2023 respectively. This represents a total dividend payment of AED393 million. The company’s dividend policy is well supported by its high cash conversion (93.1% in H122), robust balance sheet (0.9x Net Debt/EBITDA as at June 30, 2022) and a strong discretionary free cash flow (expected to be approximately two times FY2022 dividend payment).
Increasing minimum revenue guidance
In view of the strong H122 performance and considering that approximately 90% of the remaining projected revenue for FY2022 is already secured (based on the low end of its revenue guidance), Yahsat has decided to narrow the range of its FY2022 guidance provided on 1 March 2022.
The company now raises its projected 2022 revenues to at least AED1.54 billion with the upper end of the range unchanged at AED1.62 billion. All other guidance remain unchanged.
Senior management appointment
On July 1, 2022 (a post-period event), Yahsat announced the appointment of Sulaiman Al Ali as Chief Commercial Officer (CCO). Al Ali has assumed the role having been with Yahsat for eight years, previously serving as a Director of Yahsat Government Solutions and later as CEO of Thuraya, where he has been instrumental in driving operational excellence and delivering new and innovative solutions for customers, establishing a platform for strong future growth. In his new role, Al Ali will lead both YahClick, Yahsat’s Data Solutions arm, and Thuraya, with a mandate to drive synergies and growth across these commercial businesses, creating value for customers and partners. He takes over from Farhad Khan, who spent six years in the role and was a key player in the expansion of the YahClick business in new and existing markets.
Infrastructure accounted for approximately 55% of group revenue in Q222, mainly comprising a 15-year long-term Capacity Services Agreement with the UAE Government. Overall revenue remained broadly stable at AED218 million. The Infrastructure business offers strong visibility on future cash flows with contracted future revenue of approximately AED6.5 billion as of June 30, 2022, which includes a 15-year T4-NGS Capacity Service Agreement worth AED2.6 billion that will support revenue growth from 2024 onwards. Yahsat remains well-positioned to further grow its Infrastructure business with two potential new satellites under consideration (Al Yah 4 and Al Yah 5), targeted for launch in 2026.
Managed Solutions, which contributed approximately 22% of Group revenue, continued its strong performance with Q222 revenues increasing by 41.4%, resulting in H122 revenue of AED144 million, an increase of 35.1% year-on-year. This was underpinned by the February 2022 award of a 5-year mandate worth AED909 million focused on providing enhanced managed services to the UAE Government for its satellite communication capabilities, effective from January 2022. During the H122 period, AED86 million of this award was recognised. In Q222, the business continued to build its contracted future revenues with the award of other contracts including a mandate to design and deliver advanced satellite communications for UAE Government platforms worth AED28 million. Management expects the strong momentum in the Managed Solutions business to continue in the second half of 2022.
Mobility Solutions, accounting for approximately 17% of Group revenue, had another excellent quarter with Q222 revenues up 7.8% year-on-year. H122 revenues exceeded the prior year by 24.1% with strong growth in both service and equipment revenue. Service revenue increased by 6.5% with double digit increases across several parts of the business including Voice, Data and Intercarrier. Meanwhile, equipment revenue, which increased by 95%, continued to benefit from the three-year AED316 million distribution agreement secured in 2021.
YahClick, which accounted for approximately 5% of Group revenue, saw year-on-year revenue slightly down by 4.4% in H122, mainly due to the wind-down in July 2021 of a multi-year, opportunistic capacity deal that contributed AED8 million of revenue in H121. The business continued to build strong foundations for future growth with the subscriber base in the Consumer Broadband business growing by 11% year-to-date and by 24% compared to the same period last year, underpinned by expansion across the Africa region. In addition, it concluded an agreement to connect schools across Zimbabwe, rolled out several cellular backhaul projects and signed a number of new managed network service orders.
Balance Sheet & Cashflow
The group’s balance sheet remained robust. At June 30, 2022, net debt stood at AED812 million with a leverage ratio (Net Debt to Adjusted EBITDA) of 0.9x. Together with Discretionary Free Cash Flow for the period of AED224 million and a cash conversion ratio of 93.1%, the group is well positioned to meet its growth and capital expenditure commitments and to sustain its attractive dividend policy.-- TradeArabia News Service