Because the Spanish Telefonica sees red
2023 financial statements archived at a loss for the Spanish Telefonica group. Here are the reasons for the red. Facts, numbers and insights
Balance sheet in the red for the Spanish telco Telefonica.
Despite good operating results (including revenues improved by 1.6% to 40.652 billion), the Spanish telecommunications group closed 2023 with a net loss of 892 million. It weighs on the red of 2.15 billion in the fourth quarter of the year due to provisions for staff exits in Spain (over 3400 redundancies) and the devaluation of its joint venture Virgin Media-O2 in the United Kingdom . The net loss compares with a loss of 742 million euros expected by analysts, according to the consensus provided by the company, Reuters reports.
However, the telecom company reiterated its key profit and revenue growth targets for 2024 and maintained its annual dividend at 0.30 euros per share.
All the details.
REVENUES GOOD
Telefonica's revenue reached 40.65 billion euros in 2023, 1.6% more than in 2022. Nearly 27% of these revenues were generated in Spain, compared to 21% in Brazil, 18 % of Germany, 13% of the United Kingdom and 18% of the rest of Latin America.
LOSS RESULT IN 2023 FOR TELEPHONE
The telecommunications group, which had forecast a net profit of almost two billion euros in 2022, lost a total of 892 million euros. This result is explained by “the provision” made “for the restructuring plan of Telefonica Spain” and by a “goodwill write-down” of its “British subsidiary Virgin Media O2”, according to the Spanish incumbent operator. Without these extraordinary items, Telefonica would have recorded a net profit of 2.37 billion euros, "17.1% more than in 2022", explains the group, which claims to have achieved "all financial objectives" last year .
The ordinary net result, excluding provisions and extraordinary items, is positive for 2.369 billion with an increase of 17.1%.
THE LAYOFFS STARTED LAST MONTH
In December Telefónica decided to cut 5,100 jobs in Spain, around 24% of its workforce in the country, over the next three years. The cuts reflect the need to adapt to "the challenging process of transformation and adaptation required by the new digital era", the company said.
Last month the company signed a deal with Spanish unions to lay off up to 3,400 employees in the country, a plan that would cost the company around 1.3 billion euros. The job cuts are expected to save €285 million every year from 2025.
TELEPHONE DEBT RISES
Coming back to the results, net financial debt rose to €27.3 billion in the quarter, thanks to the acquisition of a larger stake in Telefonica Deutschland, shareholder remuneration and the issuance and buyback of hybrid bonds.
COUPON CONFIRMED
As for the remuneration of shareholders, for the 2023 financial year the dividend will be 0.30 euros per share (0.15 paid in December and 0.15 expected in June): the coupon is confirmed in the same amount for the 2024 financial year with detachment of the advance in December and the balance in June 2025. Furthermore, the cancellation of 1.4% of the capital held in treasury shares is envisaged.
2023 GUIDANCE CENTERED
The group underlines that it has achieved all the financial targets for 2023 and expects for 2024, the first full financial year of the new industrial plan, an increase in revenues of 1%, an improvement in ebitda between 1% and 2% and an operating cash flow increasing by 1-2%.
THE SCENARIO OUTLINED BY BLOOMBERG
Finally, Telefonica's results "come in a context of profound changes in the Spanish competitive landscape" observes Bloomberg recalling that "this week the European Commission approved the merger of the Spanish activities of Masmovil Ibercom SA and Orange SA, in an agreement that will create the largest Spanish mobile operator, overtaking Telefonica”.
Telefonica's shareholding structure is also in the midst of a transformation since Saudi Telecom Co., controlled by the Saudi sovereign wealth fund, announced plans to take a 2.1 billion euro stake in September. Then in December the Madrid government said it would buy up to 10% of the shares through its SEPI investment vehicle, in a bid to safeguard the strategically important asset. If completed, the takeover could turn the government into the largest shareholder of the former monopoly, more than two decades after it sold the last of its Telefonica shares, Bloomberg recalls.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/perche-la-spagnola-telefonica-vede-rosso/ on Thu, 22 Feb 2024 11:43:30 +0000.