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Telefónica earns 53.5% less than June after a second quarter hit by the virus

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Telefónica has earned 53.5% less in the first half of the year, up to 831 million euros, while the quarterly profit fell by 50.7%, to 425 million euros. The company has highlighted that Covid-19 has an impact on the financial and operational evolution of the quarter (revenue and OIBDA), partially mitigated by the CapEx efficiency and savings measures carried out. Telefónica is leaving around 5% on the stock market this Thursday.

The operator's income they decreased 10% year-on-year in the semester, to 21,706 million, while in the quarter they fell 14.8%, to 10,340 million. This is mainly due to the negative effects of the Covid-19 pandemic on commercial activity in the countries where it is present (estimated impact: -729 million), unfavorable movements in exchange rates (impact: -791 million ) and changes in the scope (impact: -64 million).

He OIBDA falls 18.7% in the semester (7,075 million) and falls 25.3% in the quarter, up to 3,315 million euros. This is so due to the effects of the pandemic (estimated impact in the quarter: -338 million), the depreciation of currencies (-297 million) and a deterioration in goodwill assigned to Telefónica Argentina (-109 million), as well as capital gains from the sale of assets recorded in the second quarter of 2019 (-285 million) and changes in scope (-28 million).

To mitigate the negative effects of the Covid-19 pandemic, Telefónica has launched a series of measures, translating into a decrease in operating expenses of 4.9% year-on-year organic. The OIBDA margin stands at 32.1%, -4.5 percentage points year-on-year. The group's OIBDA-CapEx improves by 3.1 percentage points sequentially, up to -0.7% year-on-year in organic terms (+ 1.9% year-on-year in the four key markets).

"During the second quarter of the year, marked by the Covid-19 crisis, Telefónica's behavior has been resistant, limiting the impact on revenue with sound operational management of cost and investment control. These actions have allowed us to record, both in the second quarter and in the semester, an increase in operating cash flow and margin in the four key markets and reduce debt by 7.5% year-on-year. In addition, there has been a notable improvement in commercial activity throughout June, with 100% of the stores open in Europe"said José María Álvarez-Pallete, Chairman of Telefónica.

Telefónica has confirmed its goal for the year OIBDA-CapEx organic year-on-year growth from slightly negative to stable. Furthermore, it has also underlined that maintains the 2020 dividend of 0.4 euros per share. The targets set for 2022 are reiterated, reflecting confidence in sustained demand and long-term growth trends in connectivity and digital services.

Regarding the net financial debt as of June 2020, totals 37,201 million, and it decreases 1,022 million compared to March, positively impacted by the generation of free cash of 988 million, net financial investments of 13 million and other net factors for a total of 251 million. Net financial debt is negatively affected by shareholder remuneration of 21 million (including the payment of coupons for capital instruments) and labor commitments of 209 million.

He free cash flow in the second quarter amounted to 988 million, compared to 233 million in the first quarter of the year, mainly due to lower interest payments of 435 million, lower consumption of working capital of 358 million, lower payments of principal of leases of 222 million, partially offset by 167 million of higher dividends paid to minority interests and reduction of OIBDA-CapEx.

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