Telefonica Sa reports 79.5% Net Income decline while 26.4% Revenue growth
26 Feb 2016 • About Telefonica Sa (
$TDE) • By InTwits
Telefonica Sa reported 2015 financial results today. Overall the company's long term financial model is characterised by the following facts:
- EBITDA Margin is declining: 24.1% in 2015 vs. 31.7% in 2014 vs. 32.2% in 2011
- Telefonica Sa has high CAPEX intensity: 5 year average CAPEX/Revenue was 16.9%. At the same time it's a lot of higher than industry average of 12.4%.
- CAPEX is quite volatile: 2,086 in FY2015, 2,963 in FY2014, 2,204 in FY2013, 3,724 in FY2012, 7,461 in FY2011
- The company has potentially unprofitable business model: ROIC is at 4.4%
- It operates with high leverage: Net Debt/EBITDA is 4.2x while industry average is 1.4x
Below you can find a comprehensive analysis of the key data driving the company's performance and stock price.
Telefonica Sa ($TDE) key annual financial indicators
| mln. € | 2011 | 2012 | 2013 | 2014 | 2015 | 2015/2014 |
|---|
P&L
|
|---|
| Revenue | 62,837 | 62,356 | 57,061 | 43,458 | 54,916 | 26.4% |
| EBITDA | 20,210 | 21,231 | 19,077 | 13,781 | 13,229 | -4.0% |
| Net Income | 5,403 | 3,928 | 4,593 | 3,001 | 616 | -79.5% |
Balance Sheet
|
|---|
| Cash | 4,135 | 9,847 | 9,977 | 6,529 | 2,615 | -59.9% |
| Short Term Debt | 10,339 | 10,054 | 9,387 | 8,693 | 12,625 | 45.2% |
| Long Term Debt | 53,523 | 53,410 | 48,366 | 47,457 | 45,134 | -4.9% |
Cash flow
|
|---|
| Capex | 9,085 | 9,481 | 9,674 | 8,305 | 10,256 | 23.5% |
Ratios
|
|---|
| Revenue growth | 3.5% | -0.8% | -8.5% | -23.8% | 26.4% | |
| EBITDA growth | -21.6% | 5.1% | -10.1% | -27.8% | -4.0% | |
| EBITDA Margin | 32.2% | 34.0% | 33.4% | 31.7% | 24.1% | -7.6% |
| Net Income Margin | 8.6% | 6.3% | 8.0% | 6.9% | 1.1% | -5.8% |
| CAPEX, % of revenue | 14.5% | 15.2% | 17.0% | 19.1% | 18.7% | -0.4% |
| ROIC | 11.1% | 12.1% | 11.1% | 7.7% | 4.4% | -3.3% |
| ROE | 23.4% | 18.7% | 22.1% | 14.2% | 2.0% | -12.2% |
| Net Debt/EBITDA | 3.0x | 2.5x | 2.5x | 3.6x | 4.2x | 0.6x |
Revenue and profitability
Telefonica Sa's Revenue jumped on 26.4% in 2015. Revenue growth was financed by EBITDA margin decline. EBITDA Margin decreased on 7.6 pp from 31.7% to 24.1% in 2015.
Net Income marign decreased on 5.8 pp from 6.9% to 1.1% in 2015.
Capital expenditures (CAPEX) and working capital investments
Telefonica Sa's CAPEX/Revenue was 18.7% in 2015. CAPEX/Revenue increased on 3.5 pp from 15.2% in 2012 to 18.7% in 2015. For the last three years the average CAPEX/Revenue was 18.2%.To maintain this fast growth Telefonica Sa invested a large share of EBITDA (77.5%) to CAPEX.
Return on investment
The company operates at low ROIC (4.43%) and ROE (1.99%). ROIC decreased on 3.3 pp from 7.7% to 4.4% in 2015. ROE dropped on 12.2 pp from 14.2% to 2.0% in 2015.
Leverage (Debt)
Debt level is 4.2x Net Debt / EBITDA and 4.4x Debt / EBITDA. Net Debt / EBITDA surged on 0.6x from 3.6x to 4.2x in 2015. Debt increased on 2.9% in 2015 while cash dropped on 59.9% in 2015.
Valuation
Telefonica Sa's trades at EV/EBITDA 4.2x and P/E 0.8x while industy averages are 10.5x and 26.1x. The company's EV/(EBITDA-CAPEX) is 18.7x with the industry average at 4.7x.
Appendix 1: Peers in Fixed Line Telecommunications
Below you can find Telefonica Sa benchmarking vs. other companies in Fixed Line Telecommunications 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 | FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Syqic ($SYQ) | 190.6% | 37.6% | 20.5% | 126.5% | |
| Alternative Networks ($AN.) | | -2.1% | -0.4% | 17.5% | 9.2% |
| Telecom Egypt ($TEEG) | -3.4% | 1.6% | 11.0% | 9.2% | |
| Verizon Communications Inc ($VZC) | | 4.5% | 4.1% | 5.4% | 3.6% |
| Rostelekom ($RKMD) | 7.4% | -0.2% | -1.6% | 2.8% | |
| |
|---|
| Median (13 companies) | 12.1% | -2.1% | -1.6% | -0.8% | -0.4% |
|---|
| Telefonica Sa ($TDE) | | -0.8% | -8.5% | -23.8% | 26.4% |
Top companies by Gross margin, %
| Top 5 | FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Kt Corp ($KTCD) | 81.6% | 75.5% | 76.0% | 77.9% | 77.9% |
| Verizon Communications Inc ($VZC) | 58.6% | 60.1% | 62.8% | 60.7% | 60.1% |
| Telecom Egypt ($TEEG) | 45.0% | 41.4% | 41.9% | 44.2% | |
| Syqic ($SYQ) | 59.6% | 57.3% | 59.9% | 43.6% | |
| Alternative Networks ($AN.) | 38.1% | 39.0% | 39.2% | 41.2% | 41.3% |
| |
|---|
| Median (6 companies) | 51.8% | 49.4% | 50.9% | 43.9% | 50.7% |
|---|
Top companies by EBITDA margin, %
| Top 5 | FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| O2 Czech Republic As ($O2CZ) | 41.6% | 39.1% | 38.6% | 41.0% | 29.9% |
| Koninklijke Kpn Nv ($0O8F) | 39.5% | 35.9% | 34.1% | 39.1% | 33.2% |
| Ooredoo Qsc ($ORDS) | 45.9% | 46.0% | 42.4% | 37.6% | |
| Hellenic Telecom.Organization S.A. ($OTES) | 33.0% | 32.0% | 28.8% | 35.4% | 31.3% |
| Orange Polska Sa ($OPLD) | 39.2% | 34.3% | 30.1% | 33.2% | 29.1% |
| |
|---|
| Median (13 companies) | 33.0% | 32.0% | 32.0% | 31.9% | 29.9% |
|---|
| Telefonica Sa ($TDE) | 32.2% | 34.0% | 33.4% | 31.7% | 24.1% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Ooredoo Qsc ($ORDS) | 20.7% | 21.9% | 27.5% | 25.3% | |
| Rostelekom ($RKMD) | 28.0% | 31.7% | 23.6% | 19.3% | |
| Orange Polska Sa ($OPLD) | 17.5% | 16.6% | 16.9% | 17.6% | 16.9% |
| Hellenic Telecom.Organization S.A. ($OTES) | 14.2% | 11.7% | 14.8% | 15.4% | 16.9% |
| Verizon Communications Inc ($VZC) | 14.7% | 14.0% | 13.8% | 13.5% | 13.5% |
| |
|---|
| Median (13 companies) | 13.2% | 13.5% | 13.7% | 12.9% | 13.5% |
|---|
| Telefonica Sa ($TDE) | 14.5% | 15.2% | 17.0% | 19.1% | 18.7% |
Top companies by ROIC, %
| Top 5 | FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| BT Group ($BT.A) | 23.3% | 23.6% | 27.0% | 34.7% | 37.5% |
| Syqic ($SYQ) | 64.3% | 38.9% | 3.2% | 33.9% | |
| Alternative Networks ($AN.) | 36.7% | 35.2% | 33.7% | 28.5% | 20.2% |
| Adept Telecom ($ADT) | 11.9% | 11.6% | 15.5% | 13.2% | 14.3% |
| Hellenic Telecom.Organization S.A. ($OTES) | 4.8% | 8.2% | 5.4% | 10.4% | 7.1% |
| |
|---|
| Median (13 companies) | 11.9% | 9.6% | 8.5% | 8.7% | 14.3% |
|---|
| Telefonica Sa ($TDE) | 11.1% | 12.1% | 11.1% | 7.7% | 4.4% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Kt Corp ($KTCD) | 2.0x | 2.1x | 2.1x | 3.1x | 1.3x |
| Koninklijke Kpn Nv ($0O8F) | 2.4x | 3.8x | 3.4x | 3.0x | 3.6x |
| Verizon Communications Inc ($VZC) | 1.4x | 1.7x | 0.8x | 2.8x | 2.1x |
| Ooredoo Qsc ($ORDS) | 1.7x | 1.6x | 1.7x | 2.0x | |
| Rostelekom ($RKMD) | 1.3x | 1.7x | 1.8x | 1.8x | |
| |
|---|
| Median (13 companies) | 1.4x | 1.6x | 1.1x | 1.4x | 1.2x |
|---|
| Telefonica Sa ($TDE) | 3.0x | 2.5x | 2.5x | 3.6x | 4.2x |
