Terra Networks SA American Dep (NASDAQ:TRRA)
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Terra Meets its Target and Obtains Positive EBITDA in 2004
The company has reported net profit of 164 million euros
MADRID, Feb. 24 /PRNewswire-FirstCall/ -- Terra Networks, S.A., (MC: TRR;
Nasdaq: TRRA), the world's leading Spanish and Portuguese Internet group today
released its financial results for 2004 and comparisons with 2003.
Revenues
The Company obtained revenues of 540 million euros in current euros in 2004, 1%
lower than in 2003. Revenues were impacted by changes in the group's
consolidation perimeter, specifically the sale of its shares in Lycos, Inc. in
October 2004. Stripping out this effect, and the negative impact of the
exchange rates of some currencies against the euro (Terra consolidates its
accounts in euros), revenues would have risen 8% on 2003.
The access business accounted for 44% of revenues; advertising and e-commerce
accounted for 22%; value-added communication, portal and content services for
23%; and corporate and SME services and other revenues for 11%.
Operating expenses
Efficient management continuously improved processes and structures, and
steadily brought down operating costs throughout 2004. Operating expenses
totalled 263 million euros, an 18%, or 57 million euro improvement on 2003.
The group implemented far-reaching headcount restructuring programs in 2004,
primarily in Spain, the US and Mexico. At the end of 2004 Terra had 1,606
employees vs. 2,255 at the end of 2003.
Positive EBITDA performance in 2004
Improvements on the gross profit line and the firm grip on other operating
costs resulted in a sharp rise in operating income or EBITDA (Earning before
Interest, Taxes, Depreciation and Amortization), which was positive for all
four quarters of the year. EBITDA stood at 21 million euros, with an EBITDA
margin over revenues of 4%.
The company reported net income of 164 million euros in 2004, compare to a loss
of 173 million euros in 2003. The Company has recognized a tax credit of 306
million euros, mainly due to the sale of its shares in Lycos, Inc.
The net cash position at December 2004 was 529 million euros. The cash balance
fell by 1,065 million euros compared to 2003 due mainly to the distribution of
1,136 million euros in dividends (2 euros per share) made at the end of July.
Terra maintains a positive trend in the access and portal business which in
2004 has reached 6.3 million paid access and portal services customers, a rise
of 25%.
The Group had a total of 1.8 million paid access subscribers at December 31
2004, an advance of 9% vs. 2003. We would highlight the 66% increase in
broadband subscribers, mainly ADSL, with 1.1 million at the end of the year, of
which 68% were in Brazil, 18% in Spain and 12% in Chile.
We would also highlight the rise in paid communication and portal services
customers (4.5 million at December 2004). This figure is 33% up on 2003.
Throughout 2004 Terra pursued a strategy of forging agreements with leading
companies with the aim of including the best content and services in its
portals network. Along these lines, Terra and Google signed an agreement
designed to improve the quality of Terra's browser on all portals in Spain and
Latin America, offering Google's browser services on Terra portals thereby
allowing users to access the technology of the most powerful search engine on
the market today.
Terra has boosted the joint development of multimedia products and services
with Real Madrid C.F. and FC Barcelona pursuant to the respective agreements
made with the football clubs. The Real Madrid Exclusive Zone and the FC
Barcelona Premium Zone are exclusive premium products offering a full range of
multimedia services for internet and mobile, enabling domestic and
international fans to keep up to date with the latest developments at both
clubs.
Terra has also launched other communications and content products and services.
These include: Terra Musica Premium -- the first platform for downloading
digital music from the Internet in Spain. This new service has a database of
500,000 songs and video clips in WMA format, and enables Terra ADSL clients to
listen to songs from the database, enjoy predetermined channels or compile
customised music lists according to their preferences for 6 euros (just music)
or 9.95 euros (music and video clips) a month. Users can also download songs
for 0.99 euros and even complete albums from 6.65 euros.
The Company has also launched other products such as Antivirus Terra, designed
to detect and block computer viruses; Kit Terra Mail Plus, a package offering
email services with enhanced functions (larger capacity, increased security and
easier access); and Fotolog services, a virtual photo album which allows users
to share their photos online.
Keeping commitment to customers
Telefonica recently announced that it had offered to enter into negotiations
with Terra with a view to their merger. The proposal made to Terra includes an
exchange ratio of 2 Telefonica S.A. shares with a nominal value of 1 euro, for
9 Terra Networks, S.A. shares with a nominal value of 2 euros.
On 23rd February 2004 Terra Networks S.A.'s Board of Directors approved
Telefonica's merger proposal which is now subjected to the corresponding
approval by shareholders at the Ordinary General Shareholders' Meeting of both
companies.
On the same meeting Terra's Board of Directors also approved the proposal to
pay a dividend in the amount of 0.60 Euros per share, with a charge against the
"Reserve for Shares Issuance Premium" account. The effectiveness of the
distribution is subject to the corresponding approval by the shareholders at
the Ordinary General Shareholders' Meeting of Terra. Payment is expected to be
made during the days following the meeting and, in any event, before the merger
of Telefonica and Terra is recorded with the Commercial Registry.
Kim Faura, executive chairman of Terra Networks, S.A., said that "Terra plays a
decisive role in driving the broadband market by providing value added content
and services, as reflected by the satisfactory set of earnings the company has
just reported."
Mr. Faura added that "we have met our target of reporting positive EBITDA in
2004, we have increased our portfolio of paid customers and consolidated the
first Latin American internet standard." He stated that "Terra has, and will
continue to have, a clear commitment to its customers and suppliers in all its
markets. A commitment to providing quality, value-added services and content
products."
Telephone numbers:
Public Relations Investor Relations
Pablo Fuentes Miguel von Bernard
+34-91-452-4248 +34-91-452-3922
CONSOLIDATED STATEMENT OF OPERATIONS
(in thousand of Euros - Spanish GAAP)
Audited
Twelve months
Dec-31
2004 2003
(1)
Revenues:
Access 236,501 221,034
Advertising and e-commerce 119,661 143,021
Communication, portal and
content services 122,304 119,023
Corporate & SMEs Services and
Other 62,012 63,550
Total revenues 540,478 546,627
Goods purchased (256,307) (265,836)
Gross profit 284,171 280,791
Personnel expenses (95,785) (119,653)
Professional services (21,912) (23,191)
Depreciation and amortization (79,513) (78,742)
Marketing and Commissions (62,611) (79,104)
Maintenance, supplies and leases (27,284) (41,306)
Other expenses (55,713) (57,021)
Total other operating
expenses (342,818) (399,017)
Operating loss (58,647) (118,226)
Financial income (expense) 18,277 57,743
Amortization of goodwill (64,848) (82,297)
Equity share in affiliate losses,
net (14,559) (34,734)
Extraordinary income (expense) and
other (25,773) 4,534
Income (loss) before taxes (145,550) (172,980)
Corporate income tax 306,456 (266)
Minority interest 3,066 536
Net Loss (Spanish GAAP) 163,972 (172,710)
Shares excluding Stock Options
Plan ('000) 561,062 560,997
(1) Revenue by business line and some operating expenses show slight
variations from previously reported figures due to reclassifications
OPERATING DATA
(in thousands)
Dec-31
2004 2003 %
Total Paid Subscribers (1) 6,280 5,033 25%
Access:
Narrowband 748 1,028 -27%
Broadband 1,068 644 66%
Total 1,816 1,672 9%
VAS (CSP/Portal): 4,464 3,361 33%
Broadband Access Subscribers:
Spain 189 166 14%
Latam 879 478 84%
Total 1,068 644 66%
(1) Based on number of services delivered. Some subscribers may be
contracting access and Value Added Services at the same time
NOTES TO CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands - Spanish GAAP)
Unaudited
EBITDA
Dec-31
2004 2003 %
Operating loss (58,647) (118,226) 50%
Depreciation and amortization 79,513 78,742 -1%
Leases (1) 0 10,133 100%
EBITDA (2) 20,866 (29,353) 171%
EBITDA Margin 4% -5% 9 b.p.
(1) In all prior periods reported and for EBITDA guidance calculation
purposes, expenses related to equipment leases recorded in Lycos are
deemed to be depreciation costs
(2) See EBITDA description in the Other Information section
DATASOURCE: Terra Networks, S.A.
CONTACT: Pablo Fuentes, +34-91-452-4248, ,
or Miguel von Bernard, +34-91-452-3922,
both of Terra Networks, S.A.