Earnings Release • Mar 12, 2018
Earnings Release
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| 4Q16 | 4Q17 | 4Q17 / 4Q16 | 2016 | 2017 | 2017 / 2016 |
|---|---|---|---|---|---|
| 390.9 | 399.3 | 2.2% | 1,515.0 | 1,561.8 | 3.1% |
| 371.6 | 381.4 | 2.7% | 1,442.5 | 1,487.2 | 3.1% |
| 125.0 | 129.1 | 3.3% | 556.7 | 580.6 | 4.3% |
| 32.0% | 32.3% | 0.4 pp | 36.7% | 37.2% | 0.4 pp |
| 9.5 | 10.5 | 11.2% | 95.9 | 101.3 | 5.6% |
| 12.0 | 18.6 | 55.3% | 90.4 | 124.1 | 37.3% |
| 24.9 | 12.1 | (51.6%) | 164.1 | 200.1 | 21.9% |
| 5.9 | (2.6) | n.a. | 54.1 | 133.4 | 146.6% |
| 3,763.9 | 4,084.2 | 8.5% | 3,763.9 | 4,084.2 | 8.5% |
| 9.076.8 | 9,411.7 | 3.7% | 9,076.8 | 9,411.7 | 3.7% |
| 4,455.7 | 4,672.9 | 4.9% | 4,455.7 | 4,672.9 | 4.9% |
| 1,600.6 | 1.616.6 | 1.0% | 1.600.6 | 1.616.6 | 1.0% |
| 1,724.7 | 1,758.2 | 1.9% | 1,724.7 | 1,758.2 | 1.9% |
| 1,264.6 | 1,333.1 | 5.4% | 1.264.6 | 1,333.1 | 5.4% |
| 3,387.2 | 3,650.6 | 7.8% | 3,387.2 | 3,650.6 | 7.8% |
| 680.2 | 721.4 | 6.1% | 680.2 | 721.4 | 6.1% |
| 45.8% | 47.4% | 1.6 pp | 45.8% | 47.4% | 1.6 pp |
| 43.5 | 43.8 | 0.7% | 43.3 | 44.3 | 2.4% |
We continued to grow in all our core services in 2017, posting total RGU growth of 46 thousand to a total of 9.412 million services, +3.7% than in 4Q16.
Pay TV provides the platform for upselling additional fixed and mobile services and in a highly competitive and invested market, we differentiate our value proposition as the ultimate entertainment provider in Portugal, leveraging our strength in telecoms, cinema exhibition and audiovisual distribution. The success of our convergent offers is still the key driver of growth, with almost half of our customers subscribing to fixed and mobile convergent bundles by the end of 2017. Our convergent customer base increased in 4Q17 by a further 2.9 thousand households with 47.4% of our fixed access customer base now taking their telecom services in bundled fixed and mobile offers. According to the most recently available data published by ANACOM for 3Q17, we also lead the market in bundled services with a share of close to 40%.
Our Pay TV subscriber base grew by 1% yoy to 1.617 million subscribers, with an additional 0.8 thousand net adds in 4Q17. On top of the slowdown in commercial activity of the past quarters, market wide remedies imposed in June by the regulator around price increase communication procedures led to additional pressure on net adds in the last months of the year. Of total Pay TV net adds, fixed access subscribers grew by 4.4 thousand in 4Q17, whereas the number of households receiving services over DTH fell by 3.5 thousand, due primarily to fixed NGN rollout becoming available in more new geographies. Our own footprint grew by 8.5% in 2017 to 4.084 million households, all of which capable of delivering next generation speeds. Broadband and Fixed Voice RGUs grew a further 5.4% and 1.9% yoy respectively with penetration of the base now standing at 78.1% and 87.4%.
Also driven by the wave of convergent take-up, we have achieved very strong growth in mobile RGUs with our total share of subscribers growing to 25% according to the latest market share data, significantly narrowing the gap to the second player. Although less representative in numbers, on a stand-alone mobile basis the youth segment has been a strategic bet for us given the relevance of this category as trend setters in the fast developing and technologically sophisticated entertainment landscape of today and as the decision makers of tomorrow. We have achieved unprecedented growth in this arena through highly targeted and relevant offers tailored for the youth segment through our "WTF" brand. At the end of 4Q17 we had 4.673 million mobile subscribers, up 4.9% yoy, with net adds of 29.2 thousand in the quarter, the majority of which, 20 thousand, subscribing to post-paid tariffs.
Growth in residential RGUs and the price increase implemented at the end of 2016 were supportive of yoy ARPU growth to 43.8 euros per fixed access household in 4Q17, albeit the pace of growth has decelerated with the already high level of service penetration in the market.
Entertainment is at the heart of our value proposition and helps take us closer to the day to day lives of customers. Conscious of the rapidly changing trends in how and where people watch TV and alternative media, we aim to deliver the best content and viewing experience with a highly differentiated positioning, leveraging our unique combination of telco, audiovisuals and cinema assets. We have repeatedly been
at the forefront of innovation and in 2017 our "UMA" multi-platform TV interface was once again voted the best in Portugal by consumers. Our choices on the content front are led by our key brand territories, namely football, music, movies and series and children's content. An example of our innovative formats targeting the movie territory was the launch of the Star Wars pop-up channel, before the premiere of "The Last Jedi", the most recent film in the saga, which was broadcast exclusively for NOS customers during a six week period. In addition to 24 hours broadcasting of earlier Star Wars movies, documentaries, interviews, edited scenes and backstage images, we also offered a number of exclusive benefits for NOS cinema card holders at our IMAX, 4DX and 3D theatres plus a 40% discount for Star Wars movies rented over the NOS videoclub, therefore leveraging our broader cinema and audiovisuals asset base. The initiative was a huge success further reinforcing our leading position in entertainment.
Also exclusive to NOS, in October we announced the launch of YouTube inside UMA, again setting the pace of what is most innovative and ground breaking in TV experience. We were the first operator in Portugal to offer the YouTube native app in HTML 5 for TV. Our customers are now able to watch their favourite YouTube videos on their TV screens, benefitting from all their favourite features in Ultra HD 4K quality. Exclusive to NOS, the YouTube TV app can also sync smartphones with the TV, to be used as a remote control and to manage navigation in the app and customers can log on to their YouTube account on TV, accessing each user profile's favourite content and playlists.
On the B2B front we continue to reinforce our position in the corporate market with some of the largest accounts in Portugal having migrated all or part of their telecom, data and IT spend to us. We have been particularly successful in the demanding financial services sector with many of the leading banking groups using NOS as their main telecom provider. During the latter half of the year we increased both the number of major accounts in our portfolio and extended the term of existing contracts, evidence of the satisfaction and trust of our clients in the quality and reliability of the services we provide. Our strategy for the large corporate market is built on three pillars: protection of existing revenues and accounts whilst expanding the base and penetration of IT and data services; investment in technological assets, to enable best in class delivery of telco and IT solution services; and innovation to tap alternative sources of growth. To capture the IT opportunity, we position ourselves as a partner for transformation for the companies we address, providing reliable and responsive telecom solutions and complementing them with value added services, which go beyond the realm of traditional telecommunications.
Conscious of the need to invest more in the technological assets required to support, in particular, the large corporate market, we launched a number of investment projects during 2017 to upgrade existing platforms and solutions, one of the most important being the deployment of 2 new data centres, one in the North of Portugal in Riba D'Ave and the other near Lisbon. We increased available capacity by approximately 1 thousand square metres (500 racks) to almost 4 thousand square metres in total and invested in next generation cloud management platforms to facilitate provisioning and self-service solutions.
In the SME segment we have focused our activity on stabilizing revenues and implementing a transformation of the business model to address the needs of each sub segment more efficiently and with best in class service levels. Core to the transformation process is a simplification of the range of products and services we provide whilst following a more segmented commercial approach. We are building the basic tools for the future with a strong focus on market relevant innovation and development, to help businesses optimize their communication and IT functions and a review of our customer experience and internal processes has identified clear opportunities for virtualization, driving better service levels and efficiency.
To meet the challenges of continued growth in traffic and guarantee service quality, a number of major network development projects are currently underway across both the mobile and fixed infrastructure.
The investment we are doing in our mobile network is designed primarily to increase capacity, network flexibility and efficiency, and to deliver the best possible quality of service. We are rearranging our network to a single RAN architecture replacing almost all existing radio equipment with the most modern technology to support a smooth 5G oriented evolution. The project entails the complete swap of our 2G, 3G and 4G radio equipment in the South of Portugal and an upgrade of our 3G and 4G equipment in the North of the country, whilst at the same time increasing capacity in both 2G and 4G. The project also involves extension of coverage with investment in additional close to 250 sites. By the end of 2018, we will have a fully 4.5G ready network in place, already able to deliver IoT and prepared for the evolution to mobile 1Gbps.
Our strategy for fixed is based on a two pronged approach of upgrading our HFC network to Docsis 3.1, to be completed by the end of 1Q18, and extension of our FttH footprint through both greenfield rollout and a dark fibre network swap with Vodafone as agreed in September 2017. Further splitting of our HFC cells to take fibre deeper into the network will be supportive of increased traffic and capacity demands on the mobile network. With these investments, by the end of 2018, we will have extended our NGN Gigabit coverage to 4.4 million households and by 2022, we will have extended FttH to 70% of our footprint, supporting ever increasing consumer demands for bandwidth and to preempt the need to relieve capacity from the mobile network in future.
In parallel, we are in the process of evolving our core network to all IP as a means of extending IP capillarity, which is particularly relevant for the enterprise market, to reduce latency and increase capacity by replacing a lot of microwaves with optic fiber, and to optimize network flexibility, management and costs. This transformation is becoming even more relevant with the progressive expansion of cloud based architectures, network virtualization and digitalization of key functions.
As had been the case of 3Q17, 4Q17 was not a strong quarter for the Cinema and Audiovisuals division. NOS' Cinema ticket sales posted a yoy decrease of 5.1% to 2.199 million tickets in 4Q17, reflecting the negative performance of the market as a whole which declined by 5.4%[1], due to fewer blockbuster box office hits during the second half of the year. Average revenue per ticket improved by 2.5% yoy to 4.9 euros in 4Q17. Although the latter half of the year was weaker for the cinema business, full year 2017 achieved the best results ever in terms of number of tickets sold and box-office revenues, up by 3.9% and 4.7% respectively.
| Table 2. | ||||||||
|---|---|---|---|---|---|---|---|---|
| Operating Indicators ('000) | 4Q16 | 3Q17 | 4Q17 | 4Q17 / 4Q16 | 4017 / 3017 | 2016 | 2017 | 2017 / 2016 |
| $Cinema^{(1)}$ | ||||||||
| Revenue per Ticket (Euros) | 4.8 | 4.7 | 4.9 | 2.5% | 4.6% | 4.7 | 4.8 | 0.8% |
| Tickets Sold | 2.317.6 | 2.509.1 | 2.198.9 | $(5.1\%)$ | $(12.4\%)$ | 9.096.9 | 9,450.67 | 3.9% |
| Screens (units) | 215 | 215 | 219 | 1.9% | 1.9% | 215 | 219 | 1.9% |
| All Departments Committees |
The most successful films exhibited in 4Q17 were "Star Wars: The Last Jedi", "Coco", "Justice League", "Thor: Ragnarok" and "Murder on the Orient Express".
NOS' gross box-office revenues decreased by 2.8% in 4Q17, which compares with a 3.2% yoy decline for the market as a whole. NOS continues to maintain its leading market position, with a market share of 62.7% in terms of gross revenues in 4Q17. Cinema Exhibition revenues declined by 1.1% yoy in 4Q17 to 15.3 million euros.
This quarter we opened 10 new screens in 2 new locations (Loulé and Évora) and we upgraded our Cascais cinema with one IMAX screen. Due to a significant refurbishment of Oeiras Parque shopping centre we had to close our total 7 screens in Oeiras for 9 months, with plans to reopen 6 upgraded screens during 3Q18.
Revenues in the Audiovisuals division decreased by 7.9% yoy to 17.5 million euros in 4Q17 driven primarily by the weaker yoy performance in Cinema Distribution and Homevideo and despite a slight improvement in the rights management area. Of the top 10 cinema box-office hits in 4Q17, NOS distributed the top 4, "Star Wars: The Last Jedi", "Coco", "Justice League" and "Thor: Ragnarok", therefore maintaining its leadership position, despite a lower than usual market share of Cinema Distribution in the quarter.
[1] Source: ICA – Portuguese Institute For Cinema and Audiovisuals
The Consolidated Accounts have been subject to full audit for the Full Year 2017.
| Table 3. | ||||||||
|---|---|---|---|---|---|---|---|---|
| Profit and Loss Statement | 4Q16 | 3Q17 | 4Q17 | 4Q17 / 4Q16 | 4Q17 / 3Q17 | 2016 | 2017 | 2017 / 2016 |
| (Millions of Euros) | ||||||||
| Operating Revenues | 390.9 | 393.1 | 399.3 | 2.2% | 1.6% | 1,515.0 | 1,561.8 | 3.1% |
| Telco | 371.6 | 374.0 | 381.4 | 2.7% | 2.0% | 1,442.5 | 1,487.2 | 3.1% |
| Consumer Revenues | 226.8 | 236.1 | 231.7 | 2.2% | $(1.8\%)$ | 894.8 | 932.4 | 4.2% |
| Business and Wholesale Revenues | 104.9 | 108.4 | 115.4 | 10.0% | 6.5% | 415.0 | 437.2 | 5.3% |
| Equipment Sales | 16.3 | 15.3 | 14.4 | (11.8%) | $(6.0\%)$ | 53.7 | 51.0 | $(5.0\%)$ |
| Others and Eliminations | 23.6 | 14.2 | 20.0 | $(15.5\%)$ | 40.1% | 79.0 | 66.6 | (15.6%) |
| Audiovisuals | 19.0 | 17.3 | 17.5 | $(7.9\%)$ | 1.1% | 71.6 | 71.8 | 0.3% |
| Cinema (1) | 15.5 | 16.4 | 15.3 | $(1.1\%)$ | $(6.5\%)$ | 60.2 | 63.3 | 5.1% |
| Others and Eliminations | (15.3) | (14.6) | (15.0) | $(1.8\%)$ | 2.4% | (59.3) | (60.5) | 2.1% |
| Operating Costs Excluding D&A | (265.9) | (241.9) | (270.2) | 1.6% | 11.7% | (958.2) | (981.1) | 2.4% |
| W&S | (24.4) | (23.2) | (23.1) | (5.2%) | (0.4% ) | (93.1) | (89.2) | (4.2%) |
| Direct Costs | (122.9) | (118.9) | (133.7) | 8.8% | 12.5% | (457.8) | (492.7) | 7.6% |
| Commercial Costs (2) | (31.2) | (25.8) | (30.2) | (3.2%) | 16.9% | (104.6) | (96.6) | $(7.6\%)$ |
| Other Operating Costs | (87.5) | (74.0) | (83.2) | (4.9%) | 12.5% | (302.7) | (302.6) | $(0.0\%)$ |
| EBITDA | 125.0 | 151.2 | 129.1 | 3.3% | $(14.6\%)$ | 556.7 | 580.6 | 4.3% |
| EBITDA Margin | 32.0% | 38.5% | 32.3% | 0.4 pp | (6.1 pp ) | 36.7% | 37.2% | 0.4 pp |
| Telco | 111.8 | 138.4 | 117.7 | 5.2% | $(15.0\%)$ | 506.7 | 531.6 | 4.9% |
| EBITDA Margin | 30.1% | 37.0% | 30.8% | 0.7 pp | (6.2pp) | 35.1% | 35.7% | 0.6 pp |
| Cinema Exhibition and Audiovisuals | 13.1 | 12.8 | 11.4 | $(13.1\%)$ | $(11.0\%)$ | 50.1 | 49.0 | $(2.1\%)$ |
| EBITDA Margin | 42.9% | 42.8% | 38.5% | (4.4 pp ) | (4.4 pp ) | 42.6% | 40.7% | (1.9 pp ) |
| Depreciation and Amortization | (99.1) | (103.7) | (111.8) | 12.9% | 7.8% | (391.6) | (422.2) | 7.8% |
| (Other Expenses) / Income | (10.9) | (3.8) | (4.0) | $(63.8\%)$ | 2.6% | (22.4) | (15.7) | $(30.1\%)$ |
| Operating Profit (EBIT) (3) | 15.0 | 43.7 | 13.3 | $(11.2\%)$ | (69.5%) | 142.8 | 142.8 | $(0.0\%)$ |
| Share of results of associates and joint ventures | 2.3 | 6.0 | 7.9 | 246.1% | 32.2% | (5.9) | 22.9 | n.a. |
| (Financial Expenses) / Income | (5.8) | (6.5) | (5.7) | (2.2%) | $(11.9\%)$ | (24.6) | (24.0) | (2.5%) |
| Income Before Income Taxes | 11.5 | 43.2 | 15.6 | 35.6% | $(64.0\%)$ | 112.2 | 141.7 | 26.3% |
| Income Taxes | 0.3 | (9.7) | 2.9 | n.a. | (129.7%) | (22.2) | (17.5) | (21.4%) |
| Net Income Before Associates & Non-Controlling Interests | 9.5 | 27.5 | 10.5 | 11.2% | $(61.8\%)$ | 95.9 | 101.3 | 5.6% |
| Income From Continued Operations | 11.8 | 33.5 | 18.5 | 57.0% | $(44.9\%)$ | 90.0 | 124.2 | 38.0% |
| o.w. Attributable to Non-Controlling Interests | 0.2 | 0.1 | 0.2 | (32.6%) | 42.7% | 0.4 | (0.1) | n.a. |
| Net Income | 12.0 | 33.6 | 18.6 | 55.3% | $(44.6\%)$ | 90.4 | 124.1 | 37.3% |
Consolidated Revenues grew by 2.2% yoy to 399.3 million euros reflecting a deceleration yoy due to the anticipated slowdown in RGU growth, regulatory intervention on price communication procedures as discussed last quarter and a weaker quarter for the cinema and audiovisuals business. Also, we are now facing a tougher yoy comparison since the price increase was implemented in December 2016.
| Fable 4. | |||||
|---|---|---|---|---|---|
| Operating Revenues (YoY Change) |
1Q17 | 2Q17 | 3Q17 | 4Q17 | 2017 |
| Operating Revenues | 2.9% | 4.2% | 3.2% | 2.2% | 3.1% |
| Telco | 2.9% | 3.1% | 3.8% | 2.7% | 3.1% |
| Consumer Revenues | 3.6% | 5.4% | 5.7% | 2.2% | 4.2% |
| Business and Wholesale Revenues | 1.3% | 5.9% | 4.0% | 10.0% | 5.3% |
| Equipment Sales | $(14.6\%)$ | 0.6% | 7.3% | $(11.8\%)$ | $(5.0\%)$ |
| Others and Eliminations | 17.7% | (34.3%) | (23.2%) | (15.5%) | $(15.6\%)$ |
| Audiovisuals | 10.6% | 13.1% | $(11.4\%)$ | $(7.9\%)$ | 0.3% |
| Cinema | $(2.1\%)$ | 38.6% | (5.3%) | $(1.1\%)$ | 5.1% |
| Others and Eliminations | 7.6% | 15.4% | $(10.2\%)$ | $(1.8\%)$ | 2.1% |
Of the 2.2% growth in revenues from the Consumer segment, Residential revenues grew by 1.6% representing a slowdown in RGU growth mostly due to continued migration of satellite customers onto new NGN coverage geographies with all operators in the market still expanding footprint and to the market wide regulatory intervention on price communication procedures in June. As discussed in last quarter's announcement the latter had already led to an increase in churn mostly during 3Q17 and 4Q17, however the impact on customer revenues was felt primarily in 4Q17. Like for like comparison was also affected by the fact that we implemented a price increase in 4Q16 which was not the case in 4Q17. In the standalone mobile segment, revenues grew by 5.8% reflecting continued growth in subscribers and gains in market share, particularly in the youth segment with our WTF tariff plans and a supportive price environment for mobile services.
The strong growth in Business and Wholesale revenues in 4Q17 was explained almost entirely by the Wholesale segment performance with a number of relevant short term deals won in the low margin mass calling service segment and wholesale traffic segment. Business customer revenues were relatively flat yoy with a combination of positive yoy growth in Corporate Revenues offset by a decline in Mass Business revenues, the latter also being impacted by the regulatory intervention on price communication discussed above.
Equipment sales posted an 11.8% decline yoy to 14.4 million euros, led by slower commercial activity over the same period last year, with fewer handset based campaigns. "Others and Eliminations" which includes mostly revenues received from advertising revenue share on TV channels, and a number of other telecom related revenues, with the most relevant coming from judicial collections, fell by 15.5% yoy to 20 million euros.
Audiovisuals and Cinema revenues both posted a yoy decline in 4Q17 of 7.9% to 17.5 million euros and of 1.1% to 15.3 million euros respectively. Both businesses are highly dependent on the overall success of the box-office movies and there was a clear decline in ticket sales during 4Q17, as seen in the operating review above. The more material decline in Audiovisual revenues, as previously mentioned, is explained by a lower market share of films distributed in the quarter and by poor performance in Home DVD sales in 4Q17 which faced a particularly tough comparison with 4Q16 in view of the strong performance in that quarter.
| l able 5. | |||||
|---|---|---|---|---|---|
| Operating Costs (YoY Change) |
1017 | 2017 | 3Q17 | 4017 | 2017 |
| Operating Costs Excluding D&A | 2.1% | 3.3% | 2.6% | 1.6% | 2.4% |
| W&S | $(6.9\%)$ | $(5.5\%)$ | 0.9% | (5.2%) | $(4.2\%)$ |
| Direct Costs | 4.6% | 14.4% | 2.7% | 8.8% | 7.6% |
| Commercial Costs | $(22.2\%)$ | 10.5% | (11.3%) | $(3.2\%)$ | $(7.6\%)$ |
| Other Operating Costs | 9.8% | (12.6%) | 8.9% | $(4.9\%)$ | $(0.0\%)$ |
Growth of 1.6% in Consolidated OPEX to 270.2 million euros was 0.5pp below that of Operating Revenues leading to expansion in EBITDA margin to 32.3% in 4Q17. Telco EBITDA grew by 5.2% yoy to 117.7 million euros.
Direct costs are the biggest contributor to total OPEX, having increased 8.8% yoy to 133.7 million euros. The main driver of this increase were interconnection costs related with wholesale traffic and mass calling services which together grew by 11.9 million euros, an increase consistent with the strong growth in revenues from these businesses, as explained in the revenues section above. Excluding the impact of these interconnection costs, direct costs would have declined by around 1.2% yoy. Programming costs posted a small decline yoy mainly due to lower royalties with the cinema operation's slower activity in 4Q17. There was no material increase in premium sports yoy costs in 4Q17 as the most relevant impacts for 2017 had already passed through the accounts in previous quarters. Progressive savings are being achieved with third party network rentals as we continue to migrate more traffic onto our own infrastructure.
The 3.2% decline in commercial costs was led by lower COGS reflective of the lower equipment sales in the quarter and by a decline in sales commissions. These were partially offset by a pick-up in advertising costs due to a reinforced marketing presence in 4Q17.
Wages and Salaries posted a yoy decline of 5.2% in 4Q17 to 23.1 million euros.
Depreciation and Amortization increased by 12.9% yoy to 111.8 million euros. The major mobile investment project initiated in 2017 to modernize the network has led to significant impairments of existing equipment which in 4Q17 amounted to 20.6 million euros. This increase in D&A more than offset the gains in EBITDA, leading to a decline in Operating Profit (EBIT) of 11.2% yoy to 13.3 million euros in 4Q17.
Net Income posted a 55.3% increase in 4Q17 to 18.6 million euros with the decline in EBIT being mitigated by a 5.7 million euro increase in share of results of associates and joint ventures. As in previous quarters, this was mainly due to the improved performance at ZAP. During 4Q17, Angola was considered to be a hyperinflationary economy, leading to a restatement at the associates level in accordance to IAS 29, which had a positive impact on the 4Q17 contribution of ZAP of close to 3 million euros.
Lower net financial charges of 5.7 million euros reflect lower interest costs due to the decline in average cost of debt from 2.1% in 4Q16 to 1.9% in 4Q17. The negative tax provision in 4Q17 of 2.9 million euros is explained mainly by a lower municipal tax surcharge and the impact from tax incentives.
| CAPEX | ||
|---|---|---|
| Table 6. | ||||||||
|---|---|---|---|---|---|---|---|---|
| CAPEX (Millions of Euros) | 4Q16 | 3Q17 | 4Q17 | 4017 / 4016 | 4017 / 3017 | 2016 | 2017 | 2017 / 2016 |
| Telco | 91.6 | 84.2 | 107.6 | 17.5% | 27.8% | 356.3 | 347.1 | $(2.6\%)$ |
| o.w. Technical CAPEX | 41.3 | 47.1 | 68.6 | 66.0% | 45.5% | 171.6 | 194.1 | 13.1% |
| % of Telco Revenues | 11.1% | 12.6% | 18.0% | 6.9 pp | 5.4 pp | 11.9% | 13.1% | 1.2 pp |
| Baseline Telco | 28.3 | 27.8 | 32.5 | 14.6% | 16.9% | 114.3 | 123.0 | 7.6% |
| Network Expansion / Substitution and Integration Projects and Others |
13.0 | 19.4 | 36.1 | 178.2% | 86.5% | 57.3 | 71.1 | 24.1% |
| o.w. Customer Related CAPEX | 50.3 | 37.0 | 39.0 | (22.4%) | 5.3% | 184.7 | 153.0 | (17.2%) |
| % of Telco Revenues | 13.5% | 9.9% | 10.2% | (3.3pp) | 0.3 pp | 12.8% | 10.3% | (0.2 pp ) |
| Audiovisuals and Cinema Exhibition | 8.4 | 6.6 | 9.4 | 11.8% | 43.3% | 36.4 | 33.5 | $(7.9\%)$ |
| Total Group CAPEX | 100.0 | 90.8 | 117.0 | 17.0% | 28.9% | 392.7 | 380.6 | $(3.1\%)$ |
| % of Total Group Revenues | 25.6% | 23.1% | 29.3% | 3.7 pp | 6.2 pp | 25.9% | 24.4% | (0.1 pp ) |
Total Telecom CAPEX increased by 17.5% yoy in 4Q17 to 107.6 million euros as expected. With the new fully running execution of the mobile single RAN project, as well as the DOCSIS 3.1 project, our strategic decision to implement major network modernization projects during 2017 and 2018 is driving levels of technical CAPEX over total telecom revenues of close to 13%, with CAPEX during 2017 being more concentrated in 2H17.
Consistent with the lower volume of commercial activity and gross adds, customer related CAPEX fell by 22.4% yoy to 39 million euros representing 10.2% of telco revenues. Cumulative customer related CAPEX for the year fell by 31.7 million euros more than offsetting the 22.5 million euros increase in technical CAPEX and resulting in a 2.6% decline of total telecom CAPEX to 347.1 million euros.
Total Group CAPEX grew by 17% yoy to 117 million euros in 4Q17, 29.3% of Consolidated Revenues in 4Q17, an increase explained by the performance of telecom related CAPEX.
| Table 7. | ||||||||
|---|---|---|---|---|---|---|---|---|
| Cash Flow (Millions of Euros) | 4Q16 | 3Q17 | 4Q17 | 4Q17 / 4Q16 | 4017 / 3017 | 2016 | 2017 | 2017 / 2016 |
| EBITDA | 125.0 | 151.2 | 129.1 | 3.3% | $(14.6\%)$ | 556.7 | 580.6 | 4.3% |
| Total CAPEX | (100.0) | (90.8) | (117.0) | 17.0% | 28.9% | (392.7) | (380.6) | $(3.1\%)$ |
| EBITDA - Total CAPEX | 24.9 | 60.5 | 12.1 | (51.6%) | $(80.0\%)$ | 164.1 | 200.1 | 21.9% |
| % of Revenues | 6.4% | 15.4% | 3.0% | (3.4 pp ) | (12.4pp) | 10.8% | 12.8% | 2.0 pp |
| Non-Cash Items Included in EBITDA - CAPEX and Change in Working Capital |
(2.4) | (4.5) | 0.2 | n.a. | n.a. | (42.1) | (25.1) | (40.3%) |
| Operating Cash Flow | 22.5 | 56.0 | 12.3 | $(45.6\%)$ | $(78.1\%)$ | 122.0 | 174.9 | 43.4% |
| Long Term Contracts | (4.1) | (4.6) | (3.6) | (11.3%) | (20.7%) | (17.1) | (14.9) | (12.8%) |
| Cash Restructuring Payments | (4.1) | (2.5) | (2.0) | $(50.0\%)$ | $(18.0\%)$ | (15.8) | (15.8) | (0.4% |
| Interest Paid | (3.4) | (6.3) | (3.1) | $(9.8\%)$ | $(51.4\%)$ | (18.9) | (21.0) | 11.0% |
| Income Taxes Paid | (6.3) | (9.4) | (7.6) | 22.0% | (18.7%) | (21.1) | (17.3) | $(17.9\%)$ |
| Disposals | 1.3 | 0.6 | 1.0 | n.a. | n.a. | 5.0 | 27.0 | n.a. |
| Other Cash Movements | (0.2) | (0.0) | 0.5 | n.a. | n.a. | 0.0 | 0.5 | n.a. |
| Total Free Cash-Flow Before Dividends, Financial Investments and Own Shares Acquisition |
5.9 | 33.9 | (2.6) | n.a. | n.a. | 54.1 | 133.4 | 146.6% |
| Acquisition of Own Shares | 0.0 | 0.0 | 0.0 | n.a. | n.a. | (20.7) | 0.0 | $(100.0\%)$ |
| Dividends | 0.0 | 0.0 | 0.0 | n.a. | n.a. | (82.1) | (102.6) | 25.0% |
| Free Cash Flow | 5.9 | 33.9 | (2.6) | n.a. | n.a. | (48.7) | 30.8 | n.a. |
| Debt Variation Through Financial Leasing, Accruals & Deferrals & Others |
(4.0) | 0.5 | (3.1) | $(22.0\%)$ | n.a. | (15.2) | (4.0) | $(73.9\%)$ |
| Change in Net Financial Debt | (1.9) | (34.4) | 5.7 | n.a. | n.a. | 63.9 | (26.8) | n.a. |
FCF in 4Q17 was negative by 2.6 million euros, explained almost entirely by the increase in CAPEX discussed above which more than offset the improvement in EBITDA and non cash items included in EBITDA-CAPEX and change in working capital.
As a result, Operating Cash Flow amounted to 12.3 million euros in 4Q17. The remaining cash flow items worth highlighting are the yoy saving in long term contract payments of 11.3% due to improved contract terms and of 50% in cash restructuring payments in the quarter to 2 million euros.
FCF in FY17 increased significantly to 133.4 million euros compared with 54.1 million euros the year before, reflecting the impact of the receival of 24.2 million euros from the financial settlement of the sale of the Optimus FttH network to Vodafone in 1Q17 and our strong FCF generation momentum, supporting our ability to deliver attractive and sustainable growth in shareholder remuneration.
| Table 8. | ||||
|---|---|---|---|---|
| Balance Sheet (Millions of Euros) | 2016 | 3Q17 | 2017 | 2017 / 2016 |
| Non-current Assets | 2,453.0 | 2,418.5 | 2,422.2 | $(1.3\%)$ |
| Current Assets | 529.6 | 526.5 | 544.9 | 2.9% |
| Total Assets | 2,982.6 | 2,945.0 | 2,967.1 | (0.5)% |
| Total Shareholders' Equity | 1,053.1 | 1.060.2 | 1,086.4 | 3.2% |
| Non-current Liabilities | 1,168.7 | 1,137.2 | 1,127.7 | $(3.5)\%$ |
| Current Liabilities | 760.8 | 747.7 | 753.0 | (1.0)% |
| Total Liabilities | 1,929.5 | 1,884.9 | 1,880.7 | $(2.5)\%$ |
| Total Liabilities and Shareholders' Equity | 2,982.6 | 2,945.0 | 2,967.1 | (0.5)% |
At the end of FY17, Net Financial Debt stood at 1,085.5 million euros.
Total financial debt was 1,088.5 million euros, which was offset with a cash and short-term investment position on the balance sheet of 3.0 million euros. At the end of FY17, NOS also had 245 million euros of unissued commercial paper programmes. The all-in average cost of NOS' Net Financial Debt stood at 1.9% for 4Q17, down from 2.1% in 4Q16 and in line with 1.9% in 3Q17. For FY17, the all-in average cost of NOS' Net Financial Debt amounted to 2.0%.
During 2017 NOS executed four financing deals to refinance existing lines:
Net Financial Gearing was 50.0% at the end of FY17 and Net Financial Debt / EBITDA (last 4 quarters) now stands at 1.9x. The average maturity of NOS' Net Financial Debt at the end of FY17 was 3 years.
Taking into account the loans issued at a fixed rate, the interest rate hedging operations in place, and the negative interest rate environment, as at 31 December 2017, the proportion of NOS' issued debt paying interest at a fixed rate is approximately 79%.
| Table 9. | ||||
|---|---|---|---|---|
| Net Financial Debt (Millions of Euros) | 2016 | 3Q17 | 2017 | 2017 / 2016 |
| Short Term | 213.9 | 193.3 | 197.3 | (7.8%) |
| Bank and Other Loans | 196.4 | 177.5 | 183.6 | (6.5%) |
| Financial Leases | 17.5 | 15.8 | 13.7 | (21.6%) |
| Medium and Long Term | 900.7 | 888.5 | 891.2 | $(1.1\%)$ |
| Bank and Other Loans | 871.8 | 869.9 | 870.3 | $(0.2\%)$ |
| Financial Leases | 28.9 | 18.7 | 20.8 | $(28.0\%)$ |
| Total Debt | 1,114.6 | 1,081.8 | 1,088.5 | (2.3%) |
| Cash and Short Term Investments | 2.3 | 2.0 | 3.0 | 28.7% |
| Net Financial Debt | 1,112.3 | 1,079.8 | 1,085.5 | $(2.4\%)$ |
| Net Financial Gearing (1) | 51.4% | 50.5% | 50.0% | (1.4 pp ) |
| Net Financial Debt / EBITDA $\mathcal{L}(\mathbf{X},\mathbf{Y})=\mathcal{L}(\mathbf{X},\mathbf{Y})=\mathcal{L}(\mathbf{X},\mathbf{Y})=\mathcal{L}(\mathbf{X},\mathbf{Y})=\mathcal{L}(\mathbf{X},\mathbf{Y})=\mathcal{L}(\mathbf{X},\mathbf{Y})$ 1.10, 1.17, 7.101, 1.11, 1.7, 1.1 |
2.0x | 1.9x | 1.9x | n.a. |
Considering the strong financial structure with Net Financial Debt / EBITDA of 1.9x, the high level of FCF generated in 2017 of 133.4 million euros and the confidence in the ability to continue generating these strong levels of cash flow, the Board of NOS has approved the proposal of a 30 euro cent ordinary dividend per share, representing an increase of 50% from the dividend paid in the previous year. This proposal is subject to final approval at the General Shareholders' Meeting.
As from 1Q18, NOS' accounts will be reported applying the new IFRS 15 framework with regards mainly to the disclosure of revenues and costs related to contracts. Restated values for the corresponding comparative periods for FY17 will also be provided.
The main changes are as follows:
• Handset sales in Telecom bundles: revenues are no longer recognized according to the amount paid by the customer but according to the value received by the customer. As such, part of the contract revenue will be allocated to equipment sales implying higher revenues from equipment sales at the beginning, and lower monthly bill revenues over the period of the contract. The same principle applies to equipment leased to customers under commodate (free of charge), which will be considered part of the bundle, as an equipment sale and no longer as an operational lease, which implies an increase in OPEX, compensated by a decrease in D&A.
• Commissions and other contract acquisition costs: capitalization of acquisition costs is no longer limited to contracts with loyalty periods. As such, other costs and commissions previously expensed, will now also be capitalized.
The table below summarizes the main differences that result to 2017 accounts with the application of IFRS15:
| Before IFRS 15 | Impact | Restated | |
|---|---|---|---|
| Revenues | 1,561.8 | (3.1) | 1,558.6 |
| OPEX | 981.1 | 21 | 983.2 |
| EBITDA | 580.6 | (5.2) | 575.4 |
| Net Income | 124.1 | (2.0) | 122.1 |
| CAPEX | 380.6 | (3.4) | 377.2 |
| 1001 Operating Indicators ('000) |
1Q16 | 2Q16 | 3Q16 | 4Q16 | 1Q17 | 2Q17 | 3Q17 | 4Q17 |
|---|---|---|---|---|---|---|---|---|
| Telco $^{(1)}$ | ||||||||
| Aggregate Indicators | ||||||||
| Homes Passed | 3,632.8 | 3,701.0 | 3,741.4 | 3,763.9 | 3,772.3 | 3,787.2 | 4,065.9 | 4,084.2 |
| Total RGUs | 8,595.1 | 8,746.4 | 8,941.5 | 9,076.8 | 9,155.2 | 9,254.3 | 9,365.7 | 9,411.7 |
| Mobile | 4,173.0 | 4,270.3 | 4,395.6 | 4,455.7 | 4,487.1 | 4,549.1 | 4,643.7 | 4,672.9 |
| Pre-Paid | 2,055.3 | 2,048.3 | 2,089.3 | 2,071.3 | 2,034.2 | 2,027.3 | 2,070.5 | 2,079.7 |
| Post-Paid | 2,117.8 | 2,222.0 | 2,306.3 | 2,384.4 | 2,452.8 | 2,521.8 | 2,573.2 | 2,593.2 |
| Pay TV | 1,561.5 | 1,574.4 | 1,586.1 | 1,600.6 | 1,608.4 | 1,613.3 | 1,615.7 | 1,616.6 |
| Fixed Access (2) | 1,229.7 | 1,240.0 | 1,250.8 | 1,265.6 | 1,276.2 | 1,282.4 | 1,287.8 | 1,292.2 |
| DTH | 331.8 | 334.4 | 335.4 | 335.0 | 332.3 | 331.0 | 327.9 | 324.4 |
| Fixed Voice | 1,647.9 | 1,665.0 | 1,692.1 | 1,724.7 | 1,738.0 | 1,751.1 | 1,752.9 | 1,758.2 |
| Broadband | 1,182.5 | 1,206.4 | 1,236.8 | 1,264.6 | 1,289.5 | 1,308.0 | 1,320.6 | 1,333.1 |
| Others and Data | 30.2 | 30.4 | 30.8 | 31.2 | 32.2 | 32.7 | 32.8 | 30.9 |
| 3,4&5P Subscribers (Fixed Access) | 995.8 | 1,018.2 | 1,040.3 | 1,061.8 | 1,083.3 | 1,096.3 | 1,108.4 | 1,112.1 |
| % 3,4&5P (Fixed Access) | 81.0% | 82.1% | 83.2% | 83.9% | 84.9% | 85.5% | 86.1% | 86.1% |
| Convergent RGUs | 2,988.0 | 3,155.6 | 3,272.9 | 3,387.2 | 3,509.0 | 3,585.9 | 3,631.5 | 3,650.6 |
| Convergent Customers | 614.8 | 644.0 | 661.2 | 680.2 | 697.8 | 710.8 | 718.5 | 721.4 |
| Fixed Convergent Customers as % of Fixed Access Customers | 42.8% | 44.4% | 45.1% | 45.8% | 46.5% | 47.1% | 47.3% | 47.4% |
| % Convergent Customers | 39.4% | 40.9% | 41.7% | 42.5% | 43.4% | 44.1% | 44.5% | 44.6% |
| Net Adds | ||||||||
| Homes Passed | 32.7 | 68.2 | 40.4 | 22.5 | 8.3 | 14.9 | 278.7 | 18.2 |
| Total RGUs | 130.3 | 151.3 | 195.0 | 135.3 | 78.4 | 99.1 | 111.4 | 46.0 |
| Mobile | 50.0 | 97.3 | 125.3 | 60.0 | 31.4 | 62.0 | 94.6 | 29.2 |
| Pre-Paid | (20.3) | (6.9) | 41.0 | (18.0) | (37.0) | (7.0) | 43.2 | 9.2 |
| Post-Paid | 70.2 | 104.2 | 84.4 | 78.1 | 68.4 | 69.0 | 51.4 | 20.0 |
| Pay TV | 17.7 | 12.9 | 11.8 | 14.5 | 7.8 | 4.9 | 2.4 | 0.8 |
| Fixed Access | 14.3 | 10.3 | 10.7 | 14.8 | 10.6 | 6.2 | 5.5 | 4.4 |
| DTH | 3.4 | 2.5 | 1.0 | (0.4) | (2.7) | (1.3) | (3.1) | (3.5) |
| Fixed Voice | 24.6 | 17.0 | 27.1 | 32.6 | 13.3 | 13.1 | 1.8 | 5.3 |
| Broadband | 37.7 | 23.9 | 30.4 | 27.8 | 24.9 | 18.5 | 12.6 | 12.5 |
| Others and Data | 0.3 | 0.2 | 0.4 | 0.4 | 1.0 | 0.6 | 0.0 | (1.9) |
| 3,4&5P Subscribers (Fixed Access) | 27.3 | 22.5 | 22.1 | 21.5 | 21.4 | 13.1 | 12.1 | 3.6 |
| Convergent RGUs | 134.3 | 167.5 | 117.3 | 114.3 | 121.8 | 76.9 | 45.6 | 19.1 |
| Convergent Customers | 23.9 | 29.2 | 17.2 | 19.0 | 17.6 | 13.0 | 7.7 | 2.9 |
| Operating Indicators ('000) | 1Q16 | 2Q16 | 3Q16 | 4Q16 | 1Q17 | 2Q17 | 3Q17 | 4Q17 |
|---|---|---|---|---|---|---|---|---|
| Telco (1) | ||||||||
| Indicators per Segment | ||||||||
| Consumer | ||||||||
| Total RGUs | 7,285.8 | 7,400.6 | 7,560.0 | 7,658.9 | 7,724.7 | 7,801.2 | 7,906.0 | 7,953.1 |
| Pay TV | 1,448.8 | 1,458.1 | 1,466.3 | 1,478.3 | 1,483.6 | 1,487.1 | 1,489.6 | 1,491.3 |
| Fixed Access | 1,144.9 | 1,152.1 | 1,160.0 | 1,172.0 | 1,180.1 | 1,185.0 | 1,189.5 | 1,193.6 |
| DTH | 303.9 | 306.0 | 306.2 | 306.3 | 303.5 | 302.1 | 300.2 | 297.7 |
| Broadband | 1,072.5 | 1,093.3 | 1,119.3 | 1,143.5 | 1,167.1 | 1,182.9 | 1,194.6 | 1,206.3 |
| Fixed Voice | 1,354.6 | 1,365.6 | 1,381.4 | 1,393.3 | 1,402.0 | 1,408.6 | 1,410.5 | 1,413.8 |
| Mobile | 3,409.9 | 3,483.7 | 3,593.0 | 3,643.8 | 3,671.8 | 3,722.6 | 3,811.3 | 3,841.6 |
| ARPU / Unique Subscriber With Fixed Access (Euros) | 43.7 | 43.1 | 42.8 | 43.5 | 44.5 | 44.4 | 44.6 | 43.8 |
| Net Adds | ||||||||
| Total RGUs | 105.3 | 114.8 | 159.3 | 98.9 | 65.8 | 76.5 | 104.9 | 47.0 |
| Pay TV | 13.3 | 9.2 | 8.2 | 12.0 | 5.3 | 3.5 | 2.5 | 1.7 |
| Fixed Access | 10.6 | 7.2 | 8.0 | 11.9 | 8.1 | 4.9 | 4.5 | 4.2 |
| DTH | 2.7 | 2.1 | 0.2 | 0.1 | (2.8) | (1.4) | (2.0) | (2.5) |
| Broadband | 33.3 | 20.8 | 26.0 | 24.2 | 23.6 | 15.7 | 11.7 | 11.7 |
| Fixed Voice | 17.7 | 11.0 | 15.8 | 11.9 | 8.8 | 6.6 | 1.9 | 3.3 |
| Mobile | 41.0 | 73.8 | 109.3 | 50.8 | 28.1 | 50.7 | 88.7 | 30.4 |
| Business | ||||||||
| Total RGUs | 1,309.3 | 1,345.8 | 1,381.5 | 1,417.9 | 1,430.5 | 1,453.1 | 1,459.7 | 1,458.6 |
| Pay TV | 112.7 | 116.3 | 119.9 | 122.3 | 124.8 | 126.2 | 126.1 | 125.2 |
| Broadband | 140.2 | 143.5 | 148.3 | 152.3 | 154.6 | 157.9 | 158.7 | 157.6 |
| Fixed Voice | 293.3 | 299.4 | 310.7 | 331.4 | 335.9 | 342.5 | 342.4 | 344.5 |
| Mobile | 763.1 | 786.6 | 802.7 | 811.9 | 815.2 | 826.5 | 832.5 | 831.3 |
| ARPU per RGU (Euros) | 16.8 | 16.4 | 16.0 | 15.8 | 15.7 | 15.7 | 15.5 | 15.2 |
| Net Adds | ||||||||
| Total RGUs | 25.0 | 36.5 | 35.7 | 36.4 | 12.6 | 22.6 | 6.6 | (1.1) |
| Pay TV | 4.4 | 3.6 | 3.6 | 2.4 | 2.5 | 1.4 | (0.1) | (0.9) |
| Broadband | 4.7 | 3.3 | 4.8 | 4.0 | 2.3 | 3.3 | 0.9 | (1.1) |
| Fixed Voice | 6.9 | 6.1 | 11.3 | 20.7 | 4.5 | 6.6 | (0.1) | 2.1 |
| Mobile | 9.0 | 23.5 | 16.1 | 9.2 | 3.3 | 11.3 | 6.0 | (1.2) |
| Cinema (1) | ||||||||
| Revenue per Ticket (Euros) | 4.8 | 4.7 | 4.7 | 4.8 | 4.8 | 4.7 | 4.7 | 4.9 |
| Tickets Sold | 2,400.3 | 1,715.6 | 2,663.4 | 2,317.6 | 2,296.4 | 2,446.3 | 2,509.1 | 2,198.9 |
| Screens (units) | 215 | 215 | 215 | 215 | 215 | 215 | 215 | 219 |
| Profit and Loss Statement (Millions of Euros) |
1Q16 | 2Q16 | 3Q16 | 4Q16 | 2016 | 1Q17 | 2Q17 | 3Q17 | 4Q17 | 2017 |
|---|---|---|---|---|---|---|---|---|---|---|
| Operating Revenues | 370.3 | 372.8 | 381.0 | 390.9 | 1,515.0 | 381.0 | 388.4 | 393.1 | 399.3 | 1,561.8 |
| Telco | 352.5 | 357.9 | 360.4 | 371.6 | 1,442.5 | 362.9 | 368.8 | 374.0 | 381.4 | 1,487.2 |
| Consumer Revenues | 223.7 | 220.9 | 223.4 | 226.8 | 894.8 | 231.8 | 232.8 | 236.1 | 231.7 | 932.4 |
| Business and Wholesale Revenues | 100.3 | 105.6 | 104.2 | 104.9 | 415.0 | 101.6 | 111.8 | 108.4 | 115.4 | 437.2 |
| Equipment Sales | 12.7 | 10.5 | 14.3 | 16.3 | 53.7 | 10.8 | 10.5 | 15.3 | 14.4 | 51.0 |
| Others and Eliminations | 15.9 | 20.9 | 18.6 | 23.6 | 79.0 | 18.7 | 13.8 | 14.2 | 20.0 | 66.6 |
| Audiovisuals | 16.1 | 16.9 | 19.6 | 19.0 | 71.6 | 17.8 | 19.1 | 17.3 | 17.5 | 71.8 |
| Cinema (1) | 15.7 | 11.7 | 17.3 | 15.5 | 60.2 | 15.3 | 16.2 | 16.4 | 15.3 | 63.3 |
| Others and Eliminations | (14.0) | (13.7) | (16.3) | (15.3) | (59.3) | (15.1) | (15.8) | (14.6) | (15.0) | (60.5) |
| Operating Costs Excluding D&A | (232.4) | (224.2) | (235.7) | (265.9) | (958.2) | (237.4) | (231.6) | (241.9) | (270.2) | (981.1) |
| W&S | (23.8) | (21.9) | (23.0) | (24.4) | (93.1) | (22.2) | (20.7) | (23.2) | (23.1) | (89.2) |
| Direct Costs | (108.8) | (110.4) | (115.7) | (122.9) | (457.8) | (113.8) | (126.3) | (118.9) | (133.7) | (492.7) |
| Commercial Costs (2) | (25.6) | (18.7) | (29.1) | (31.2) | (104.6) | (20.0) | (20.7) | (25.8) | (30.2) | (96.6) |
| Other Operating Costs | (74.1) | (73.2) | (68.0) | (87.5) | (302.7) | (81.4) | (64.0) | (74.0) | (83.2) | (302.6) |
| EBITDA | 137.9 | 148.7 | 145.2 | 125.0 | 556.7 | 143.6 | 156.7 | 151.2 | 129.1 | 580.6 |
| EBITDA Margin | 37.2% | 39.9% | 38.1% | 32.0% | 36.7% | 37.7% | 40.4% | 38.5% | 32.3% | 37.2% |
| Telco | 125.8 | 137.6 | 131.4 | 111.8 | 506.7 | 131.2 | 144.4 | 138.4 | 117.7 | 531.6 |
| EBITDA Margin | 35.7% | 38.4% | 36.5% | 30.1% | 35.1% | 36.2% | 39.1% | 37.0% | 30.8% | 35.7% |
| Cinema Exhibition and Audiovisuals | 12.1 | 11.1 | 13.8 | 13.1 | 50.1 | 12.4 | 12.4 | 12.8 | 11.4 | 49.0 |
| EBITDA Margin | 41.5% | 42.8% | 43.2% | 42.9% | 42.6% | 41.5% | 39.9% | 42.8% | 38.5% | 40.7% |
| Depreciation and Amortization | (95.3) | (98.5) | (98.7) | (99.1) | (391.6) | (103.3) | (103.4) | (103.7) | (111.8) | (422.2) |
| (Other Expenses) / Income | (2.4) | (3.6) | (5.5) | (10.9) | (22.4) | (3.4) | (4.5) | (3.8) | (4.0) | (15.7) |
| Operating Profit (EBIT) (3) | 40.2 | 46.5 | 41.1 | 15.0 | 142.8 | 37.0 | 48.8 | 43.7 | 13.3 | 142.8 |
| Share of results of associates and joint ventures | (6.4) | (3.3) | 1.4 | 2.3 | (5.9) | 5.3 | 3.6 | 6.0 | 7.9 | 22.9 |
| (Financial Expenses) / Income | (5.4) | (6.9) | (6.5) | (5.8) | (24.6) | (6.6) | (5.2) | (6.5) | (5.7) | (24.0) |
| Income Before Income Taxes | 28.4 | 36.4 | 35.9 | 11.5 | 112.2 | 35.7 | 47.2 | 43.2 | 15.6 | 141.7 |
| Income Taxes | (4.0) | (9.9) | (8.6) | 0.3 | (22.2) | (4.3) | (6.4) | (9.7) | 2.9 | (17.5) |
| Net Income Before Associates & Non-Controlling Interests | 30.8 | 29.7 | 25.9 | 9.5 | 95.9 | 26.1 | 37.2 | 27.5 | 10.5 | 101.3 |
| Income From Continued Operations | 24.5 | 26.5 | 27.3 | 11.8 | 90.0 | 31.4 | 40.8 | 33.5 | 18.5 | 124.2 |
| o.w. Attributable to Non-Controlling Interests | (0.0) | 0.0 | 0.2 | 0.2 | 0.4 | 0.0 | (0.4) | 0.1 | 0.2 | (0.1) |
| Net Income | 24.4 | 26.5 | 27.5 | 12.0 | 90.4 | 31.4 | 40.4 | 33.6 | 18.6 | 124.1 |
| $1$ avit $1$ J. | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| CAPEX (Millions of Euros) | 1Q16 | 2Q16 | 3Q16 | 4Q16 | 2016 | 1Q17 | 2Q17 | 3Q17 | 4Q17 | 2017 |
| Telco | 84.9 | 92.7 | 87.0 | 91.6 | 356.3 | 77.7 | 77.6 | 84.2 | 107.6 | 347.1 |
| o.w. Technical CAPEX | 42.0 | 45.8 | 42.5 | 41.3 | 171.6 | 36.0 | 42.4 | 47.1 | 68.6 | 194.1 |
| % of Telco Revenues | 11.9% | 12.8% | 11.8% | 11.1% | 11.9% | 9.9% | 11.5% | 12.6% | 18.0% | 13.1% |
| Baseline Telco | 27.6 | 34.9 | 23.5 | 28.3 | 114.3 | 26.8 | 35.9 | 27.8 | 32.5 | 123.0 |
| Network Expansion / Substitution and Integration Projects and Others |
14.4 | 11.0 | 18.9 | 13.0 | 57.3 | 9.1 | 6.5 | 19.4 | 36.1 | 71.1 |
| o.w. Customer Related CAPEX | 42.9 | 46.9 | 44.6 | 50.3 | 184.7 | 41.7 | 35.2 | 37.0 | 39.0 | 153.0 |
| % of Telco Revenues | 12.2% | 13.1% | 12.4% | 13.5% | 12.8% | 11.5% | 9.5% | 9.9% | 10.2% | 10.3% |
| Audiovisuals and Cinema Exhibition | 10.2 | 8.2 | 9.5 | 8.4 | 36.4 | 9.4 | 8.1 | 6.6 | 9.4 | 33.5 |
| Total Group CAPEX | 95.1 | 101.0 | 96.6 | 100.0 | 392.7 | 87.1 | 85.7 | 90.8 | 117.0 | 380.6 |
| % of Total Group Revenues | 25.7% | 27.1% | 25.3% | 25.6% | 25.9% | 22.9% | 22.1% | 23.1% | 29.3% | 24.4% |
| Table 14. | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Cash Flow (Millions of Euros) | 1Q16 | 2Q16 | 3Q16 | 4Q16 | 2016 | 1Q17 | 2Q17 | 3Q17 | 4Q17 | 2017 |
| EBITDA | 137.9 | 148.7 | 145.2 | 125.0 | 556.7 | 143.6 | 156.7 | 151.2 | 129.1 | 580.6 |
| Total CAPEX | (95.1) | (101.0) | (96.6) | (100.0) | (392.7) | (87.1) | (85.7) | (90.8) | (117.0) | (380.6) |
| EBITDA - Total CAPEX | 42.8 | 47.7 | 48.7 | 24.9 | 164.1 | 56.5 | 71.1 | 60.5 | 12.1 | 200.1 |
| % of Revenues | 11.6% | 12.8% | 12.8% | 6.4% | 10.8% | 14.8% | 18.3% | 15.4% | 3.0% | 12.8% |
| Non-Cash Items Included in EBITDA - CAPEX and Change in Working Capital |
(19.8) | (18.9) | (0.9) | (2.4) | (42.1) | (7.7) | (13.2) | (4.5) | 0.2 | (25.1) |
| Operating Cash Flow | 22.9 | 28.8 | 47.7 | 22.5 | 122.0 | 48.8 | 57.9 | 56.0 | 12.3 | 174.9 |
| Long Term Contracts | (3.8) | (4.4) | (4.7) | (4.1) | (17.1) | (2.9) | (3.8) | (4.6) | (3.6) | (14.9) |
| Cash Restructuring Payments | (3.4) | (2.3) | (6.0) | (4.1) | (15.8) | (5.3) | (5.9) | (2.5) | (2.0) | (15.8) |
| Interest Paid | (5.5) | (4.2) | (5.9) | (3.4) | (18.9) | (6.7) | (4.9) | (6.3) | (3.1) | (21.0) |
| Income Taxes Paid | (0.9) | (4.5) | (9.5) | (6.3) | (21.1) | (0.3) | (0.0) | (9.4) | (7.6) | (17.3) |
| Disposals | 0.4 | 0.4 | 2.9 | 1.3 | 5.0 | 24.6 | 0.7 | 0.6 | 1.0 | 27.0 |
| Other Cash Movements | 0.0 | 0.4 | (0.2) | (0.2) | 0.0 | (0.0) | 0.0 | (0.0) | 0.5 | 0.5 |
| Total Free Cash-Flow Before Dividends, Financial Investments and Own Shares Acquisition |
9.7 | 14.1 | 24.3 | 5.9 | 54.1 | 58.2 | 43.9 | 33.9 | (2.6) | 133.4 |
| Acquisition of Own Shares | (7.3) | (13.3) | 0.0 | 0.0 | (20.7) | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 |
| Dividends | 0.0 | (82.1) | 0.0 | 0.0 | (82.1) | 0.0 | (102.6) | 0.0 | 0.0 | (102.6) |
| Free Cash Flow | 2.4 | (81.3) | 24.3 | 5.9 | (48.7) | 58.2 | (58.7) | 33.9 | (2.6) | 30.8 |
| Debt Variation Through Financial Leasing, Accruals & Deferrals & Others |
(1.7) | (7.2) | (2.4) | (4.0) | (15.2) | 0.8 | (2.2) | 0.5 | (3.1) | (4.0) |
| Change in Net Financial Debt | (0.7) | 88.5 | (21.9) | (1.9) | 63.9 | (59.0) | 60.9 | (34.4) | 5.7 | (26.8) |
| Table 15. | ||||||||
|---|---|---|---|---|---|---|---|---|
| Net Financial Debt (Millions of Euros) | 1Q16 | 2Q16 | 3Q16 | 4Q16 | 1Q17 | 2Q17 | 3Q17 | 4Q17 |
| Short Term | 144.4 | 71.9 | 116.3 | 213.9 | 156.3 | 153.6 | 193.3 | 197.3 |
| Bank and Other Loans | 123.9 | 52.8 | 98.5 | 196.4 | 139.0 | 138.7 | 177.5 | 183.6 |
| Financial Leases | 20.5 | 19.1 | 17.8 | 17.5 | 17.3 | 15.0 | 15.8 | 13.7 |
| Medium and Long Term | 905.1 | 1,065.6 | 999.4 | 900.7 | 898.9 | 962.6 | 888.5 | 891.2 |
| Bank and Other Loans | 873.1 | 1,033.2 | 968.7 | 871.8 | 872.2 | 939.4 | 869.9 | 870.3 |
| Financial Leases | 32.1 | 32.4 | 30.7 | 28.9 | 26.6 | 23.2 | 18.7 | 20.8 |
| Total Debt | 1,049.5 | 1,137.5 | 1,115.8 | 1.114.6 | 1,055.1 | 1.116.3 | 1,081.8 | 1,088.5 |
| Cash and Short Term Investments | 1.8 | 1.3 | 1.5 | 2.3 | 1.8 | 2.0 | 2.0 | 3.0 |
| Net Financial Debt | 1,047.7 | 1,136.2 | 1,114.2 | 1,112.3 | 1,053.3 | 1,114.2 | 1,079.8 | 1,085.5 |
| Net Financial Gearing (1) | 49.2% | 52.9% | 51.7% | 51.4% | 49.2% | 52.1% | 50.5% | 50.0% |
| Net Financial Debt / EBITDA | 1.9x | 2.1x | 2.0x | 2.0x | 1.9x | 2.0x | 1.9x | 1.9x |
| Financial Indicators YoY Change | 1Q16 | 2Q16 | 3Q16 | 4Q16 | 2016 | 1Q17 | 2Q17 | 3Q17 | 4Q17 | 2017 |
|---|---|---|---|---|---|---|---|---|---|---|
| Operating Revenues | 7.6% | 4.8% | 3.5% | 3.8% | 4.9% | 2.9% | 4.2% | 3.2% | 2.2% | 3.1% |
| Telco | 7.6% | 5.8% | 3.7% | 3.6% | 5.1% | 2.9% | 3.1% | 3.8% | 2.7% | 3.1% |
| Consumer Revenues | 6.8% | 4.0% | 3.9% | 4.4% | 4.8% | 3.6% | 5.4% | 5.7% | 2.2% | 4.2% |
| Business and Wholesale Revenues | 8.8% | 3.0% | 0.3% | 0.7% | 3.0% | 1.3% | 5.9% | 4.0% | 10.0% | 5.3% |
| Equipment Sales | 52.0% | 6.7% | 8.3% | (2.5%) | 11.8% | $(14.6\%)$ | 0.6% | 7.3% | (11.8%) | $(5.0\%)$ |
| Others and Eliminations | $(10.9\%)$ | 55.0% | 20.3% | 14.6% | 17.3% | 17.7% | (34.3%) | (23.2%) | (15.5%) | $(15.6\%)$ |
| Audiovisuals | (3.2%) | (6.3%) | 7.7% | 3.2% | 0.5% | 10.6% | 13.1% | $(11.4\%)$ | $(7.9\%)$ | 0.3% |
| Cinema | 13.8% | $(9.2\%)$ | 2.3% | 4.1% | 2.9% | $(2.1\%)$ | 38.6% | $(5.3\%)$ | $(1.1\%)$ | 5.1% |
| Others and Eliminations | 0.0% | 2.1% | 10.9% | (2.3%) | 2.7% | 7.6% | 15.4% | $(10.2\%)$ | $(1.8\%)$ | 2.1% |
| Operating Costs Excluding D&A | 7.5% | 3.1% | 5.0% | 5.0% | 5.2% | 2.1% | 3.3% | 2.6% | 1.6% | 2.4% |
| W&S | 10.3% | 7.9% | $(1.8\%)$ | 2.5% | 4.5% | (6.9% | $(5.5\%)$ | 0.9% | (5.2%) | (4.2%) |
| Direct Costs | 7.5% | $(0.3\%)$ | 7.4% | 5.0% | 4.8% | 4.6% | 14.4% | 2.7% | 8.8% | 7.6% |
| Commercial Costs | 20.8% | (2.3%) | 3.1% | 5.5% | 6.6% | (22.2%) | 10.5% | (11.3%) | (3.2%) | $(7.6\%)$ |
| Other Operating Costs | 2.8% | 8.8% | 4.5% | 5.6% | 5.4% | 9.8% | (12.6%) | 8.9% | $(4.9\%)$ | $(0.0\%)$ |
| EBITDA | 7.8% | 7.3% | 1.2% | 1.4% | 4.4% | 4.2% | 5.4% | 4.1% | 3.3% | 4.3% |
| EBITDA Margin | 0.1 pp | 1.0 pp | (0.9 pp ) | (0.8 pp ) | (0.2pp) | 0.5 pp | 0.5 pp | 0.3 pp | 0.4 pp | 0.4 pp |
| Telco | 7.6% | 6.6% | 1.3% | 1.8% | 4.4% | 4.3% | 4.9% | 5.3% | 5.2% | 4.9% |
| EBITDA Margin | 0.0 pp | 0.3 pp | (0.9 pp ) | (0.5pp) | (0.3 pp ) | 0.5 pp | 0.7 pp | 0.5 pp | 0.7 PP | 0.6 pp |
| Cinema Exhibition and Audiovisuals | 9.2% | 17.0% | 0.9% | (1.7%) | 5.3% | 2.8% | 11.8% | $(7.1\%)$ | (13.1%) | $(2.1\%)$ |
| EBITDA Margin | 1.0 pp | 7.7 pp | (2.0 PP ) | (1.5pp) | 1.1 pp | 0.0 pp | (2.9 pp ) | (0.4 pp ) | (4.4 pp ) | (1.9 pp ) |
| Operating Profit (EBIT) | 17.6% | 9.7% | (16.7%) | (28.2%) | (2.7%) | $(7.9\%)$ | 4.8% | 6.4% | (11.2%) | $(0.0\%)$ |
| CAPEX | 0.8% | (1.4% ) | (1.4% ) | $(12.0\%)$ | (3.8%) | (8.4%) | $(15.1\%)$ | $(6.0\%)$ | 17.0% | $(3.1\%)$ |
| EBITDA - CAPEX | 27.3% | 32.0% | 6.9% | 160.6% | 31.4% | 32.0% | 49.0% | 24.3% | (51.6%) | 21.9% |
| Operating Cash Flow | 163.7% | n.a. | (20.2% | (12.1%) | 24.4% | 112.9% | 101.2% | 17.3% | (45.6%) | 43.4% |
| Free Cash Flow Before Dividends | n.a. | n.a. | (54.2%) | $(55.5\%)$ | 30.5% | n.a. | 210.9% | 39.5% | (143.1%) | 146.6% |
| Free Cash Flow | n.a. | $(8.6\%)$ | $(50.4\%)$ | (39.2%) | 25.5% | n.a. | (27.8%) | 39.5% | (143.1%) | n.a. |
This presentation contains forward looking information, including statements which constitute forward looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. These statements are based on the current beliefs and assumptions of our management and on information available to management only as of the date such statements were made. Forward-looking statements include: (a) information concerning strategy, possible or assumed future results of our operations, earnings, industry conditions, demand and pricing for our products and other aspects of our business, possible or future payment of dividends and share buyback program; and (b) statements that are preceded by, followed by or include the words "believes", "expects", "anticipates", "intends", "is confident", "plans", "estimates", "may", "might", "could", "would", and the negatives of such terms or similar expressions. These statements are not guarantees of future performance and are subject to factors, risks and uncertainties that could cause the assumptions and beliefs upon which the forwarding looking statements were based to substantially differ from the expectation predicted herein. These factors, risks and uncertainties include, but are not limited to, changes in demand for the company's services, technological changes, the effects of competition, telecommunications sector conditions, changes in regulation and economic conditions. Further, certain forward looking statements are based upon assumptions as to future events that may not prove to be accurate. Therefore, actual outcomes and results may differ materially from the plans, strategy, objectives, expectations, estimates and intentions expressed or implied in such forward-looking statements. Forward-looking statements speak only as of the date they are made, and we do not undertake any obligation to update them in light of new information or future developments or to provide reasons why actual results may differ. You are cautioned not to place undue reliance on any forward-looking statements. NOS is exempt from filing periodic reports with the United States Securities and Exchange Commission ("SEC") pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934, as amended. Under this exemption, NOS is required to post on its website English language translations of certain information that it has made or is required to make public in Portugal, has filed or is required to file with the regulated market Eurolist by Euronext Lisbon or has distributed or is required to distribute to its security holders. This document is not an offer to sell or a solicitation of an offer to buy any securities.
Chief Financial Officer: José Pedro Pereira da Costa Phone: (+351) 21 799 88 19
Analysts/Investors: Maria João Carrapato Phone: (+351) 21 782 47 25 / E-mail: [email protected]
Press: Isabel Borgas / Irene Luis
Phone: (+351) 21 782 48 07 / E-mail: [email protected]
Conference call and audio webcast scheduled for 14.00 (GMT) on 12 March 2018
Audio webcast available here
Conference ID: 3213822 Portugal Freephone Dial-in: +351 800 812 274 Portugal Local Dial-in: +351 213 180 030 UK Freephone Dial-in: +44 (0) 800 358 63 77 UK Local Dial-in: +44 (0) 330 336 91 05 US Freephone Dial-in: +1 800 289 04 38 US Local Dial-in: +1 929 477 03 53
A replay of the conference call is available as of 18.00 (GMT) on March 12 and may be accessed using the same dial-in details.
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