TELUS Corp Net Income dropped on 11.5% in 2016 while Revenue increased on 2.4%
09.02.2017 • About TELUS Corp (
$T) • By InTwits
TELUS Corp reported 2016 financial results today. Overall the company's long term financial model is characterised by the following facts:
- EBITDA Margin is declining: 33.0% in 2016 vs. 34.1% in 2015 vs. 35.3% in 2012
- TELUS Corp has high CAPEX intensity: 5 year average CAPEX/Revenue was 19.4%. At the same time it's a lot of higher than industry average of 6.8%.
- CAPEX is quite volatile: 3,797 in 2016, 4,468 in 2015, 11,398 in 2014, 7,211 in 2013, 6,104 in 2012
- The company has business model with low profitability: ROIC is at 9.6%
- It operates with high leverage: Net Debt/EBITDA is 3.0x while industry average is 0.9x
Below you can find a comprehensive analysis of the key data driving the company's performance and stock price.
TELUS Corp ($T) key annual financial indicators
| mln. CAD | 2012 | 2013 | 2014 | 2015 | 2016 | 2016/2015 |
|---|
P&L
|
|---|
| Revenue | 10,921 | 11,404 | 12,002 | 12,502 | 12,799 | 2.4% |
| Gross Profit | 6,101 | 6,442 | 6,703 | 6,970 | 7,168 | 2.8% |
| EBITDA | 3,859 | 4,018 | 4,216 | 4,262 | 4,229 | -0.8% |
| Net Income | 1,204 | 1,294 | 1,425 | 1,382 | 1,223 | -11.5% |
Balance Sheet
|
|---|
| Cash | 107 | 336 | 60 | 223 | 432 | 93.7% |
| Short Term Debt | 947 | 400 | 355 | 956 | 1,427 | 49.3% |
| Long Term Debt | 5,711 | 7,493 | 9,055 | 11,182 | 11,604 | 3.8% |
Cash flow
|
|---|
| Capex | 1,950 | 2,035 | 2,373 | 2,522 | 2,752 | 9.1% |
Ratios
|
|---|
| Revenue growth | 5.0% | 4.4% | 5.2% | 4.2% | 2.4% | |
| EBITDA growth | 2.1% | 4.1% | 4.9% | 1.1% | -0.8% | |
| Gross Margin | 55.9% | 56.5% | 55.8% | 55.8% | 56.0% | 0.3% |
| EBITDA Margin | 35.3% | 35.2% | 35.1% | 34.1% | 33.0% | -1.0% |
| Net Income Margin | 11.0% | 11.3% | 11.9% | 11.1% | 9.6% | -1.5% |
| CAPEX, % of revenue | 17.9% | 17.8% | 19.8% | 20.2% | 21.5% | 1.3% |
| ROIC | 12.4% | 13.0% | 13.0% | 11.5% | 9.6% | -1.9% |
| ROE | 15.8% | 16.5% | 18.4% | 18.3% | 15.7% | -2.6% |
| Net Debt/EBITDA | 1.7x | 1.9x | 2.2x | 2.8x | 3.0x | 0.2x |
TELUS Corp ($T) key quoterly financial indicators
| mln. CAD | 16Q1 | 16Q2 | 16Q3 | 16Q4 | YoY change |
|---|
P&L
|
|---|
| Revenue | 3,108 | 3,148 | 3,238 | 3,305 | 2.6% | 1.5% | 2.6% | 2.7% |
| EBITDA | 1,140 | 1,189 | 1,131 | 769 | 0.4% | 10.0% | 5.9% | -21.4% |
| Net Income | 378 | 416 | 348 | 81 | -8.9% | 22.0% | -4.7% | -69.0% |
Balance Sheet
|
|---|
| Cash | 478 | 428 | 410 | 432 | -69.7% | 455.8% | 190.8% | 93.7% |
| Short Term Debt | 2,289 | 1,791 | 950 | 1,427 | 207.7% | 46.2% | -41.1% | 49.3% |
| Long Term Debt | 10,487 | 10,834 | 11,604 | 11,604 | -2.9% | 2.2% | 13.8% | 3.8% |
Ratios
|
|---|
| Gross Margin | 58.2% | 57.7% | 56.0% | 52.4% | 0.6% | 1.9% | 0.1% | -1.6% |
| EBITDA Margin | 36.7% | 37.8% | 34.9% | 23.3% | -0.8% | 2.9% | 1.1% | -7.1% |
| Net Income Margin | 12.2% | 13.2% | 10.7% | 2.5% | -1.5% | 2.2% | -0.8% | -5.7% |
Revenue and profitability
The company's Revenue increased on 2.4%. Revenue growth showed acceleration in 16Q4 - it increased 2.7% YoY. Revenue growth was financed by EBITDA margin decline. EBITDA Margin decreased slightly on 1.0 pp from 34.1% to 33.0% in 2016.
Gross Margin showed almost no change in 2016.
Net Income marign decreased slightly on 1.5 pp from 11.1% to 9.6% in 2016.
Capital expenditures (CAPEX) and working capital investments
The company's CAPEX/Revenue was 21.5% in 2016. The company showed CAPEX/Revenue growth of 3.7 pp from 17.8% in 2013 to 21.5% in 2016. It's average level of CAPEX/Revenue for the last three years was 20.5%.TELUS Corp invested a large share of EBITDA (65.1%) to CAPEX.
Return on investment
The company operates at good ROE (15.69%) while ROIC is low (9.64%). ROIC decreased slightly on 1.9 pp from 11.5% to 9.6% in 2016. ROE decreased on 2.6 pp from 18.3% to 15.7% in 2016.
Leverage (Debt)
Debt level is 3.0x Net Debt / EBITDA and 3.1x Debt / EBITDA. Net Debt / EBITDA surged on 0.2x from 2.8x to 3.0x in 2016. Debt increased on 7.4% while cash jumped on 93.7%.
Management team
TELUS Corp's CEO Darren Entwistle is a founder and has spent 18 years at the company. TELUS Corp's CFO Doug French has spent 2 years at the company.
Appendix 1: Peers in Communications
Below you can find TELUS Corp benchmarking vs. other companies in Communications industry. It's shown for the period of 5 years for the key financial metrics. Each table has median value for all the companies in the industry together with individual financial data of the top-5 companies in the industry by particular financial metric.
Top companies by Revenue growth, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| AcuityAds Holding Inc ($AT) | | | | 51.6% | 91.4% |
| Shopify Inc ($SH) | | 111.9% | 109.0% | 95.4% | 89.7% |
| Gaming Nation Inc ($FAN) | | | | | 46.6% |
| Tucows Inc ($TC) | | 13.3% | 13.6% | 17.1% | 9.8% |
| Points International Ltd ($PTS) | | 45.1% | 26.0% | 16.2% | 8.6% |
| |
|---|
| Median (25 companies) | 13.1% | 2.6% | 1.1% | 3.3% | 2.1% |
|---|
| TELUS Corp ($T) | | 4.4% | 5.2% | 4.2% | 2.4% |
Top companies by Gross margin, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Wanted Technologies Corp ($WAN) | 90.5% | 93.2% | 94.3% | 95.6% | |
| NeuLion Inc ($NLN) | 53.6% | 63.8% | 70.2% | 81.1% | 81.6% |
| TeraGo Inc ($TGO) | 62.9% | 61.8% | 59.8% | 77.2% | 77.2% |
| ICTV Brands Inc ($ITV) | 67.4% | 71.9% | 69.6% | 68.1% | |
| Platinum Communications Corp ($PCS) | 67.4% | 67.1% | 60.2% | 60.5% | |
| |
|---|
| Median (22 companies) | 43.5% | 41.2% | 43.6% | 43.5% | 40.1% |
|---|
| TELUS Corp ($T) | 55.9% | 56.5% | 55.8% | 55.8% | 56.0% |
Top companies by EBITDA margin, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| BCE Inc ($BCE) | 38.8% | 37.7% | 38.4% | 37.7% | 39.8% |
| Rogers Communications Inc ($RCI.A) | 37.3% | 38.4% | 37.9% | 36.9% | 32.5% |
| Quebecor Inc ($QBR.B) | 27.5% | 36.3% | 35.5% | 34.2% | 35.5% |
| ZoomerMedia Ltd ($ZUM) | 32.6% | 33.8% | 29.3% | 29.1% | 27.1% |
| Newfoundland Capital Corp Ltd ($NCC.B) | 25.9% | 25.1% | 27.4% | 28.2% | |
| |
|---|
| Median (29 companies) | 14.4% | 7.7% | 8.8% | 9.4% | 7.3% |
|---|
| TELUS Corp ($T) | 35.3% | 35.2% | 35.1% | 34.1% | 33.0% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Rogers Communications Inc ($RCI.A) | 17.2% | 17.6% | 18.4% | 18.2% | 17.2% |
| Quebecor Inc ($QBR.B) | 16.7% | 15.4% | 17.9% | 17.5% | 17.6% |
| BCE Inc ($BCE) | 17.6% | 17.5% | 17.7% | 16.9% | 17.4% |
| TeraGo Inc ($TGO) | 20.9% | 21.5% | 23.1% | 14.8% | 13.0% |
| UrtheCast Corp ($UR) | | | 26.5% | 14.1% | |
| |
|---|
| Median (28 companies) | 2.6% | 2.8% | 2.2% | 2.2% | 2.9% |
|---|
| TELUS Corp ($T) | 17.9% | 17.8% | 19.8% | 20.2% | 21.5% |
Top companies by ROIC, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Tucows Inc ($TC) | 17.7% | 22.5% | 35.4% | 51.4% | 58.4% |
| BCE Inc ($BCE) | 14.1% | 12.6% | 12.6% | 12.3% | 12.6% |
| Quebecor Inc ($QBR.B) | 7.9% | 9.6% | 8.4% | 8.4% | 10.1% |
| MDC Partners Inc ($MDZ.A) | -3.1% | -6.3% | 14.2% | 13.7% | 10.1% |
| Rogers Communications Inc ($RCI.A) | 17.8% | 16.1% | 12.3% | 10.7% | 8.4% |
| |
|---|
| Median (28 companies) | 8.0% | 7.7% | 7.1% | 2.0% | -0.1% |
|---|
| TELUS Corp ($T) | 12.4% | 13.0% | 13.0% | 11.5% | 9.6% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Intertain Group Ltd/The ($IT) | | | | 9.4x | |
| MDC Partners Inc ($MDZ.A) | 12.4x | 112.6x | 4.6x | 5.5x | 9.6x |
| Quebecor Inc ($QBR.B) | 3.7x | 3.9x | 4.2x | 4.8x | 4.3x |
| Rogers Communications Inc ($RCI.A) | 2.3x | 2.4x | 3.2x | 3.6x | 3.8x |
| Newfoundland Capital Corp Ltd ($NCC.B) | 1.4x | 1.3x | 3.3x | 3.2x | |
| |
|---|
| Median (20 companies) | 1.4x | 1.2x | 1.5x | 1.5x | 1.7x |
|---|
| TELUS Corp ($T) | 1.7x | 1.9x | 2.2x | 2.8x | 3.0x |
