Telefonica SA TEF - Quarterly resuls January-June 2017 (2570M)

TIDMTDE

RNS Number : 2570M

Telefonica SA

27 July 2017

FINANCIAL HIGHLIGHTS

   --        Growth acceleration across the board in main financials and KPIs. 

(R) Customer base quality improvement: LTE (1.6x y-o-y), smartphones (+19%), FTTx & cable (+19%) and mobile contract (+5%).

(R) Revenues totaled EUR12,960m in the quarter (+1.9% y-o-y reported) and increased 3.1% organic (+1.6 p.p. vs. the first quarter), accelerating service revenue growth (+2.9%; +1.2 p.p.) and handset sales (+5.2%; +6.8 p.p.).

   (R)    Double-digit growth in mobile data revenues continued (+17.8% y-o-y in organic terms). 

(R) OIBDA (EUR4,158m; +6.1% y-o-y) growth accelerated to 7.2% y-o-y organic vs. 1.3% in the first quarter. The OIBDA margin stood at 32.1% (+1.2 p.p. y-o-y in organic terms).

(R) Underlying OIBDA in the quarter excluded EUR25m restructuring costs (EUR4,183m; +5.5% y-o-y).

(R) Operating Cash Flow excluding spectrum (EUR2,273m) improved its organic growth by 8.6 p.p. vs. the first quarter to reach 17.5% year-on-year.

(R) Net income totaled EUR821m (+18.4% y-o-y) and earnings per share EUR0.15 (+16.3%). In underlying terms, net income totaled EUR1,092m (+23.6%) and earnings per share EUR0.20 (+21.9%).

   --        Ongoing Company transformation. 
   (R)     CapEx (EUR3,507m in January-June): mainly devoted to UBB network expansion, simplification, digitalisation and cognitive intelligence. As of June, 41.2m premises passed with FTTx & cable and LTE coverage of 68%. 
   --        Progress in de-leveraging. 
   (R)     Free cash flow in first the half year reached EUR1,620m (2x y-o-y). 
   (R)     Net debt stood at EUR48,487m at the end of June and decreased EUR3,706m vs. June 2016. 

-- T. España improved service revenues (-0.8% y-o-y in organic terms in the quarter; +0.8 p.p. vs. the first quarter) and OIBDA (-1.5%; +0.9 p.p.); operating cash flow grew a solid 7.8%.

-- T. Brasil accelerated revenue growth in the quarter (+1.8% y-o-y in organic terms) and maintained solid performance in OIBDA (+7.0%) and operating cash flow (+11.6%), levered on margin expansion.

-- T. Deutschland posted in April-June solid commercial momentum, OIBDA growth acceleration (+3.8% y-o-y in organic terms) and margin expansion (+1.9 p.p.).

-- T. UK; revenues and OIBDA accelerated their pace of growth in April-June (+2.6% and +3.9% y-o-y in organic terms respectively) and the operating cash flow returned to growth (+5.3%).

-- T. Hispanoamérica in the quarter reported strong growth acceleration in revenues (+15.5% y-o-y in organic terms) and OIBDA (+20.9%) and a significant operating cash flow evolution (+71.8%).

   --        The Company upgrades guidance and reiterates the dividend announced for 2017. 

(R) Revenue guidance upgraded to growth >1.5% (vs. stable previously), despite the negative impact from regulation (approximately 1.2 p.p.).

(R) OIBDA margin guidance (y-o-y expansion up to 1 p.p.) and CapEx/Sales excluding spectrum (around 16%) reiterated.

Comments from José María Álvarez-Pallete, Executive Chairman:

"During the second quarter of the year we have accelerated organic growth through the execution of our structural quality-based strategy, which was reflected in the strong competitive positioning in our main markets. Moreover, we continued to make progress in our transformation towards becoming a platform Company, with CapEx devoted to UBB networks, underpinning E2E digitalization and cognitive intelligence, with a differential value proposition for customers. All this, with a stronger balance sheet, after doubling Free Cash Flow in the last twelve months and reducing net debt by 5 billion euros, when considering the sale of the stake in Telxius.

The strength and better business trends in the first half of the year, as well as being well-positioned to continue capturing sustainable growth in the coming quarters, allow us to upgrade our guidance for 2017".

 
 TELEFÓNICA 
 SELECTED FINANCIAL DATA 
  Unaudited figures (Euros in 
  millions) 
                                       January-June            % Chg            April-June          % Chg 
 
                                               2017     Reported      Organic         2017   Reported    Organic 
 
 
 Revenues                                    26,091          3.4          2.3       12,960        1.9        3.1 
 Telefónica España                  6,226        (2.3)        (2.3)        3,160      (2.0)      (1.9) 
 Telefónica Deutschland                  3,542        (4.1)        (4.1)        1,771      (3.4)      (3.4) 
 Telefónica UK                           3,208        (7.4)          2.3        1,607      (6.2)        2.6 
 Telefónica Brasil                       6,193         21.8          1.7        3,028       14.1        1.8 
 Telefónica Hispanoamerica               6,419          6.7         12.3        3,134        5.9       15.5 
 Other companies & eliminations                 504       (16.9)        (8.5)          259     (23.5)     (12.9) 
   Telxius                                      370         27.1          8.3          182       18.7       11.4 
------------------------------------ 
 
 OIBDA                                        8,179          5.5          4.3        4,158        6.1        7.2 
 Telefónica España                  2,425        (5.0)        (1.9)        1,282      (1.6)      (1.5) 
 Telefónica Deutschland                    861          2.1          2.7          461        2.2        3.8 
 Telefónica UK                             849        (7.4)          2.2          433      (5.0)        3.9 
 Telefónica Brasil                       2,138         30.1          7.2        1,034       23.3        7.0 
 Telefónica Hispanoamerica               1,796          5.7         13.5          892        6.9       20.9 
 Other companies & eliminations                 110         10.2        (7.7)           56       55.4      108.5 
   Telxius                                      179         78.0         11.1           87       17.8        7.9 
------------------------------------ 
 
 OIBDA margin                                 31.3%     0.6 p.p.     0.6 p.p.        32.1%   1.3 p.p.   1.2 p.p. 
 Telefónica España                  38.9%   (1.1 p.p.)     0.1 p.p.        40.6%   0.2 p.p.   0.2 p.p. 
 Telefónica Deutschland                  24.3%     1.5 p.p.     1.6 p.p.        26.1%   1.4 p.p.   1.9 p.p. 
 Telefónica UK                           26.5%   (0.0 p.p.)   (0.0 p.p.)        27.0%   0.3 p.p.   0.3 p.p. 
 Telefónica Brasil                       34.5%     2.2 p.p.     1.8 p.p.        34.1%   2.5 p.p.   1.7 p.p. 
 Telefónica Hispanoamerica               28.0%   (0.3 p.p.)     0.3 p.p.        28.5%   0.3 p.p.   1.3 p.p. 
 
 
 Operating Income (OI)                        3,370          9.3         12.2        1,800       14.9       19.0 
 
 
 Net income attributable to equity 
  holders of the Parent                       1,600         28.9                       821       18.4 
 Basic and diluted earnings per 
  share (euros)                                0.29         30.3                      0.15       16.3 
 
 
 CapEx                                        3,507        (4.0)        (5.7)        1,886      (3.7)      (3.3) 
 Telefónica España                    704       (21.2)       (20.6)          371     (19.8)     (18.6) 
 Telefónica Deutschland                    435          0.5          1.3          226        6.3        6.9 
 Telefónica UK                             434          4.4         15.4          209      (6.5)        2.4 
 Telefónica Brasil                         915         15.5        (3.6)          518       16.6        2.7 
 Telefónica Hispanoamerica                 923        (9.4)        (6.2)          493     (11.5)      (3.9) 
 Other companies & eliminations                  96        (5.7)        (2.6)           68       17.4       22.4 
   Telxius                                       56         29.2         24.8           44       85.7       86.0 
------------------------------------ 
 
 Spectrum                                         4       (57.9)       (56.3)            1     (93.8)     (95.8) 
 Telefónica España                      -            -            -            -          -          - 
 Telefónica Deutschland                      1       (79.8)       (79.8)            0     (78.7)     (78.7) 
 Telefónica UK                               -            -            -            -          -          - 
 Telefónica Brasil                           -            -            -            -          -          - 
 Telefónica Hispanoamerica                   4         n.m.         n.m.            0       n.m.       n.m. 
 
 
 OpCF (OIBDA-CapEx)                           4,672         13.9         13.0        2,272       16.0       17.5 
 Telefónica España                  1,720          3.7          8.0          910        8.5        7.8 
 Telefónica Deutschland                    426          3.8          4.0          235      (1.4)        1.2 
 Telefónica UK                             415       (17.3)        (8.7)          224      (3.6)        5.3 
 Telefónica Brasil                       1,223         43.7         17.0          515       30.9       11.6 
 Telefónica Hispanoamerica                 873         28.2         43.2          399       44.0       71.8 
 Other companies & eliminations                  14         c.s.       (30.5)         (12)     (45.1)     (71.5) 
   Telxius                                      123        115.5          5.7           43     (14.0)     (23.9) 
------------------------------------  -------------  -----------  -----------  -----------  ---------  --------- 
 
 - Reconciliation included in the 
  excel spreadsheets. 
 Notes: 
 - 2016 and 2017 reported figures include hyperinflationary adjustments in Venezuela in both 
  years. 

 - OIBDA and OI are presented before brand fees and management fees. 
 - Telxius financials are fully reported in Other Companies & Eliminations in T. Group since 
  1 January, 2017, reflecting the final integration into Telxius of the mobile communications 
  towers transferred from T. España, T. Deutschland, T. Brasil and T. Hispanoamérica 
  segments and the international submarine fiber optic cable (which was already being reported 
  within Other Companies and Eliminations). As a consequence, 2017 reported figures for these 
  segments follow the same criteria. In addition, 2016 segment results have been revised to 
  reflect the different dates of asset integration into Telxius, affecting T. España (since 
  1 January, 2016), T. Deutschland (since 1 May, 2016), T. Brasil (since 1 April, 2016) and 
  T. Hispanoamérica (T. Perú since 1 April 2016 and T. Chile since 1 May 2016). Organic 
  y-o-y changes on segments reflect all the charges related to the towers transferred to Telxius 
  since 1 January 2016. The results of the segments do not include intra-group capital gains 
  resulting from the transfer of towers to Telxius in 2016. 
 - Organic criteria: Assumes constant exchange rates as of 2016 (average FX in 2016), excludes 
  the impact from hyperinflation in Venezuela in both years and considers constant perimeter 
  of consolidation. In OIBDA and OI terms, excludes write-downs, capital gains/losses from the 
  sale of companies, tower sales, material non-recurring impacts and restructuring costs. CapEx 
  also excludes investment in spectrum. 
 

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DISCLAIMER

This document may contain forward-looking statements regarding intentions, expectations or forecasts related to the Telefónica Group (hereinafter, the "Company" or "Telefónica"). 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, the market share, possible acquisitions, divestitures or other transactions, Company results and other aspects related to the activity and situation of the Company.

The forward-looking statements can be identified, in certain cases, through the use of words such as "expectation", "anticipation", "purpose", "belief" or similar expressions, or the corresponding negative forms, or through the own predictive nature of all issues referring to strategies, plans or intentions. These forward-looking statements or forecasts 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 differ substantially from the ones put forward through these intentions, expectations or forecasts. 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 laws, Telefónica does not assume any obligation to publicly update these statements to adapt them to events or circumstances taking place after this document, 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.

In October 2015, the European Securities Markets Authority (ESMA) published guidelines on Alternative Performance Measures (APM), applicable to the regulated information published from July 3, 2016. Information and disclosure related to APM used in the present document are included in the Appendix. Moreover, recipients of this document are invited to read our condensed consolidated interim financial statements and consolidated interim management report for the six-month period ended Jun 30, 2017 submitted to the Spanish National Securities Market Commission.

Finally, it is hereby stated that neither this document or any of its contents constitutes an offer to purchase, sale or exchange any securities, a solicitation of any offer to purchase, sale or exchange of securities, or a recommendation or advice regarding any security.

Investor Relations

Distrito Telefónica - Ronda de la Comunicación, s/n

28050 Madrid (Spain)

Telephone: [phone]

Pablo Eguirón ([e-mail])

Isabel Beltrán ([e-mail])

Gonzalo Borja ([e-mail])

[e-mail]

www.telefonica.com/accionistaseinversores

This information is provided by RNS

The company news service from the London Stock Exchange

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July 27, 2017 02:40 ET (06:40 GMT)