Telefonica S.A. — Earnings Release 2019

May 10, 2019

National Storage Mechanism | Additional information

You don't have Javascript enabled. For full functionality this page requires javascript to be enabled.

RNS Number : 6543Y

Telefonica SA

10 May 2019

FINANCIAL HIGHLIGHTS

·        Improving trends in revenue growth, net income and earnings per share.

®     Solid growth in value accesses: LTE (+18% y-o-y; +4.1m quarterly net additions), mobile contract (+6%; +1.1m), smartphones (+3%), FTTx/Cable (+18%; +0.4m), Pay TV (+3%).

®     Organic revenue growth acceleration (+3.8% y-o-y; +0.8 p.p. vs. Q4 18), with improved service revenues (+2.6% y-o-y, +1.3 p.p. vs. Q4 18). Revenues in the quarter totalled €11,979m (-1.7% reported y-o-y).

®     OIBDA (€4,264m in January-March) up 10.3% y-o-y in the quarter (+1.0% in organic terms) impacted by special factors amounting to +€534m:

®     i) adoption of reporting standard IFRS 16 (+€414m), ii) capital gains from the assignment of future rights linked to a portfolio of claims in Spain (+€103m), iii) net capital gains on sale of companies (+€86m, mainly Antares), iv) restructuring costs (-€47m) and v) hyperinflation adjustment in Argentina (-€22m).

®     Net income reached €926m in the quarter, +10.6% y-o-y (€0.16 per share; +33.8%).

·        Increasing relevance with our customers; higher satisfaction and better quality.

®     51.8m premises passed with proprietary FTTx/cable network (+13% y-o-y); LTE coverage of 78% (+5 p.p.).

®     E2E Digital Transformation Programme: 66% of processes digitalised and real-time managed (+4 p.p. y-o-y).

·        Significant cash flow generation improvement, accelerating debt reduction.

®     Free cash flow (€1,408m in January-March 2019) multiplied by 2.6x vs. January-March 2018.

®     Net debt (€40,381m at March; -5.7% y-o-y) decreased for the 8th consecutive the quarter (-€693m) to €38.7bn once including post-closing events of c.a. €1.7bn.

·        The Company reiterates its guidance and dividend announced for 2019.

·        T. España; differentiated value offering allowed for accelerating y-o-y service revenue growth (+0.8% organic; +0.3 p.p. vs. Q4 18) and a sequential improvement in OIBDA (+3.0 p.p.), with an efficient cost management.

·        T. Brasil; growth in value customers (mobile contract and FTTx), confirmation of the improved y-o-y revenue growth trend (+1.7%; +1.2 p.p. sequentially) and OIBDA margin expansion for the 9th straight quarter (+0.5 p.p.).

·        T. Deutschland; strong net quarterly additions in mobile contract (+306k, x1.9 y-o-y), sustained growth in revenues (+0.7% in organic terms) and sequential OIBDA improvement (+3.8 p.p.).

·        T. UK; positive performance in the quarter of revenues (+5.3% y-o-y in organic terms), OIBDA (+3.4%) and OpCF (+5.8%) and a market leading contract churn.

·        T. Hispam Sur; elevated growth rates in revenues and OIBDA (+15.2% and +7.0% y-o-y in organic terms respectively), highlighting improved trends in Chile and Peru.

·        T. Hispam Norte; back to revenue growth (+1.2% y-o-y; +3.6 p.p. sequentially), despite competitive intensity across the region, highlighting Colombia's positive performance (commercial and financial).

Comments of José María Álvarez-Pallete, Chairman and Chief Executive Officer:

"We have started the year by extending our leadership in fibre and 4G deployment, testing new 5G capabilities and making progress in the UNICA virtualisation programme, allowing us to continue gaining customer relevance through better experience and higher average lifetime.

The first quarter results showed a significant improvement in revenue growth trends and double-digit growth in net income and earnings per share. Strong cash generation, which was three times higher than the figure reported in the first quarter of the previous year, allowed for an acceleration in debt reduction, for the 8th consecutive quarter, further strengthening our balance sheet.

As a result, we reiterate the dividend and guidance announced for 2019".

TELEFÓNICA
SELECTED FINANCIAL DATA
Unaudited figures (Euros in millions)
		January - March		% Chg
		2019		Reported	Organic
Revenues		11,979		(1.7)	3.8
Telefónica España		3,108		0.3	0.3
Telefónica Deutschland		1,779		0.7	0.7
Telefónica UK		1,691		6.6	5.3
Telefónica Brasil		2,563		(5.2)	1.7
Telefónica Hispam Sur (1)		1,612		(12.1)	15.2
Telefónica Hispam Norte (2)(3)		971		(0.0)	1.2
Other companies & eliminations		256		11.4	9.2
Telxius		219		21.5	18.7
OIBDA		4,264		10.3	1.0
Telefónica España		1,350		10.3	(1.4)
Telefónica Deutschland		522		29.5	(0.2)
Telefónica UK		504		17.3	3.4
Telefónica Brasil		1,050		6.9	3.1
Telefónica Hispam Sur (1)		441		(14.6)	7.0
Telefónica Hispam Norte (2)(3)		263		1.9	(14.9)
Other companies & eliminations		134		n.m.	32.0
Telxius		129		50.1	18.2
OIBDA margin		35.6%		3.9 p.p.	(0.9 p.p.)
Telefónica España		43.4%		3.9 p.p.	(0.7 p.p.)
Telefónica Deutschland		29.4%		6.5 p.p.	(0.2 p.p.)
Telefónica UK		29.8%		2.7 p.p.	(0.5 p.p.)
Telefónica Brasil		40.9%		4.6 p.p.	0.5 p.p.
Telefónica Hispam Sur (1)		27.4%		(0.8 p.p.)	(2.0 p.p.)
Telefónica Hispam Norte (2)(3)		27.1%		0.5 p.p.	(4.3 p.p.)
Other companies & eliminations		52.3%		30.3 p.p.	4.4 p.p.
Telxius		58.8%		11.2 p.p.	(0.2 p.p.)
Operating Income (OI)		1,650		0.7	(0.1)
Net income attributable to equity holders of the Parent		926		10.6
Basic and diluted earnings per share (euros)		0.16		33.8
CapEx		1,554		4.3	11.2
Telefónica España		377		9.0	9.2
Telefónica Deutschland		252		28.3	28.3
Telefónica UK		185		1.4	0.2
Telefónica Brasil		396		2.1	9.6
Telefónica Hispam Sur (1)		243		(3.4)	33.8
Telefónica Hispam Norte (2)		78		46.8	16.6
Other companies & eliminations		22		(69.3)	(69.2)
Telxius		9		(83.6)	(83.6)
Spectrum		18		161.5	141.7
Telefónica España		-		-	-
Telefónica Deutschland		-		-	-
Telefónica UK		-		-	-
Telefónica Brasil		-		-	-
Telefónica Hispam Sur (1)		-		-	-
Telefónica Hispam Norte (2)		18		n.m.	n.m.
OpCF (OIBDA-CapEx)		2,710		14.2	(5.3)
Telefónica España		973		10.8	(5.6)
Telefónica Deutschland		270		30.7	(25.6)
Telefónica UK		319		29.0	5.8
Telefónica Brasil		654		10.0	(1.2)
Telefónica Hispam Sur (1)		199		(25.2)	(17.1)
Telefónica Hispam Norte (2)		185		(9.7)	(22.8)
Other companies & eliminations		112		c.s.	c.s.
Telxius		120		n.m.	n.m.
- Reconciliation included in the excel spreadsheets.
Notes:
- January-March 2019 results reported under accounting standards IFRS 16, effective since January 2019. January-March 2018 results reported under prior accounting IAS 17.
- OIBDA and OI are presented before brand fees and management fees.
(1) Telefónica Hispam Sur includes Argentina, Chile, Peru and Uruguay (2) Telefónica Hispam Norte includes Colombia, Mexico, Venezuela, Central America and Ecuador.
- Group consolidated results deconsolidate Telefónica Guatemala's results since 1 January 2019 and Antares' results since 1 February 2019.
Organic criteria 2019: Assumes average constant foreign exchange rates of 2018, except for Venezuela (2018 and 2019 results converted at the closing synthetic exchange rate for each period) and excludes the hyperinflation adjustment in Argentina. Considers constant perimeter of consolidation. Excludes the effects of the accounting change to IFRS 16, write-offs, capital gains/losses from the sale of companies, restructuring costs and material non-recurring impacts. CapEx excludes spectrum investments.

DISCLAIMER

This document may contain forward-looking statements and information (hereinafter, the "Statements") relating to the Telefónica Group (hereinafter, the "Company" or "Telefónica") or otherwise. These Statements may include financial forecasts and estimates based on assumptions or statements regarding plans, objectives and expectations that make reference to different matters, such as the customer base and its evolution, growth of the different business lines and of the global business, market share, possible acquisitions, divestitures or other transactions, Company's results and other aspects related to the activity and situation of the Company.

The Statements can be identified, in certain cases, through the use of words such as "forecast", "expectation", "anticipation", "aspiration", "purpose", "belief" or similar expressions or variations of such expressions. These Statements reflect the current views of Telefónica with respect to future events, do not represent, by their own nature, any guarantee of future fulfilment, and are subject to risks and uncertainties that could cause the final developments and results to materially differ from those expressed or implied by such Statements. These risks and uncertainties include those identified in the documents containing more comprehensive information filed by Telefónica before the different supervisory authorities of the securities markets in which its shares are listed and, in particular, the Spanish National Securities Market Commission.

Except as required by applicable law, Telefónica does not assume any obligation to publicly update the Statements to adapt them to events or circumstances taking place after the date hereof, including changes in the Company's business, in its business development strategy or any other unexpected circumstance.

This document may contain summarized, non-audited or non-GAAP financial information. The information contained herein should therefore be considered as a whole and in conjunction with all the public information regarding the Company available, including, if any, other documents released by the Company that may contain more detailed information. Information related to Alternative Performance Measures (APM) used in the present document are included in the Appendix "Alternative performance measures", page 45 of the 2019 first quarter Interim Management Statement submitted to the Spanish National Securities Market Commission (CNMV). Moreover, recipients of this document are invited to read our consolidated financial statements and consolidated management report for the year 2018 submitted to the CNMV, in Note 2, page 17, of the pdf filed.

Neither this document nor any of its contents constitute an offer to purchase, sale or exchange any security, a solicitation of any offer to purchase, sale or exchange any security, or a recommendation or advice regarding any security.

For further information please refer to the information on 2019 first quarter financial results filed by the Company and also available on the Company's website: www.telefonica.com

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

END

QRFCKKDDOBKKFPD