Telefónica Doubles Q1’21 Profit Despite A 9% Revenue Drop; Will Pay €0.2/Share In June

Telefonica pantallaTelefonica's share price is taking a severe hit at the moment

Link Securities |Telefónica presented today, before market opening, its results for the first quarter of the year (Q1’2021), of which we highlight the following aspects: revenues fell by 9% to 10.34 billion euros, as did EBITDA, which dropped 9.1% to 3.417 billion. However, this did not prevent the company from doubling net profit, which rose 116% to 886 million euros (FacSet analysts’ consensus expected 500 million in profit). This represents a margin of 8.6% vs 3.6% in the first quarter of last year.

The fall in revenues (-9%) is affected by COVID-19 and exchange rate impacts (-2.5 p.p. and -6.6 p.p., respectively), but is in line (+0.5%) with the analysts’ consensus estimate. Net profit was 886 million euros, but net income amounted to 1.076 billion, excluding 53 million of restructuring expenses and 137 million of other impacts. Free cash flow was affected by 694 million euros of spectrum payments in the UK, Chile, Spain and Germany. Without these payments, it would have grown by more than 200% year-on-year to 727 million euros, thanks to lower working capital consumption and lower interest and tax payments.

These spectrum payments drove CapEx up 35.1% year-on-year in Q1’2021. CapEx ex-spectrum was 9.9% lower year-on-year.


However, Telefonica said it is on track to meet its 2021 targets, with the first quarter results in line with its expectations. The 2021 financial targets are:

o Revenues and OIBDA; “stabilisation” (organic year-on-year).

o Return to normalised level of CapEx/sales ratio of up to 15%.

In addition, the telecoms giant confirmed shareholder remuneration for 2020 and 2021:


o The second tranche of the 2020 dividend (0.20 euros gross per share) will be paid in June 2021, in the form of a voluntary flexible dividend.

o 2021 dividend of 0.30 euros gross per share payable in December 2021 (0.15 euros gross per share) and June 2022 (0.15 euros gross per share), through a voluntary flexible dividend. For the purposes of this second tranche, the adoption of the corresponding corporate resolutions will be proposed at the General Meeting of Shareholders.

o Reduction of share capital through the cancellation of treasury stock (82,896,466 shares).

About the Author

Juan José Fernandez-Figares
Head of Research at Link Securities, Juan José Fernández-Figares has been analysing financial markets and companies from a wide range of sectors for over two decades. He also advises clients on their investments. For the last ten years Fernandez-Figares has been developing models based on algorithms, oriented towards stock picking for portfolio and fund management.