Globe Newswire 14-Feb-2019 6:45 AM
Fourth quarter consolidated revenue and EBITDA growth of 6.3 and 4.3 per cent, respectively
Strong customer growth, including 164,000 new postpaid wireless, Internet and TV customer additions, reflecting our consistent broadband network leadership and customer service excellence; strongest fourth quarter result in four years
Postpaid wireless net additions of 112,000, combined with industry-leading wireless postpaid churn of 0.91 per cent
Strong Internet and TV customer growth of 52,000; best fourth quarter result in five years
Targeting 2019 consolidated revenue and EBITDA growth of up to 5 and 6 per cent respectively
VANCOUVER, British Columbia, Feb. 14, 2019 (GLOBE NEWSWIRE) -- TELUS Corporation today released its unaudited results for the fourth quarter of 2018. For the quarter, consolidated operating revenue of $3.8 billion increased by 6.3 per cent over the same period a year ago. This growth was driven by higher wireless network revenue and wireline data services revenue growth, as well as higher wireless equipment revenue. Earnings before interest, income taxes, depreciation and amortization (EBITDA) increased by 1.1 per cent to $1.2 billion due to higher revenue growth and higher wireless equipment margins. This growth was partly offset by increased costs to support our growing customer base and incremental employee benefits expense due to recent business acquisitions. Adjusted EBITDA was up 4.3 per cent when excluding restructuring and other costs from both periods, as well as the MTS net recovery and non-recurring losses and equity losses related to real estate joint ventures in the fourth quarter of 2017.
"TELUS delivered strong fourth quarter operational and financial results, concluding another year of robust customer growth, while achieving our annual revenue and EBITDA growth targets for the eighth consecutive year", said Darren Entwistle, President and CEO. "This continued performance is bolstered by the unwavering dedication of our TELUS team to execute on our longstanding strategy, despite a highly competitive environment. Moreover, our team's unparalleled commitment to providing exceptional customer experiences contributed materially to TELUS achieving our fifth consecutive year of industry-leading wireless churn below one per cent."
Mr. Entwistle added, "A key differentiator for our organisation is our leadership in network excellence. In January, Ookla once again recognized TELUS as having the fastest mobile network in Canada for the second half of 2018. TELUS continues to be ranked amongst the best on a global basis, as further evidenced by Ookla's global speed index in December, which named Canada as having the third fastest network in the world. Impressively, Canada distinctly outperformed many developed countries, including the United States as well as historical leaders in Asia, such as South Korea and Singapore. These acknowledgements build on the consistent network accolades TELUS has earned from J.D. Power, PCMag, OpenSignal, as well as Ookla, over the past two years, and reinforce the superiority of our networks and the value of our capital investments in broadband technologies."
Mr. Entwistle further commented, "Through the success of our broadband technology investments, in combination with our culture of putting our customers first, we have demonstrated our ability to consistently drive profitable growth. Our proven strategy, gives us confidence in our 2019 targets announced today, including revenue growth up to 5 per cent and EBITDA growth up to 6 per cent. Without question, it is the unparalleled execution by our talented team that enables our shareholder-friendly initiatives, notably our multi-year dividend growth programme, which is now in its ninth year. In 2018, we returned more than $1.2 billion to shareholders, building on the more than $16 billion TELUS has returned to shareholders since 2004, representing over $27 per share. Consistent with the 7 per cent dividend growth achieved in 2018 and 2017, and following six consecutive prior years of circa 10 per cent annual dividend growth, we continue to target an additional seven to 10 per cent increase in 2019."
Doug French, TELUS' Executive Vice-president and Chief Financial Officer, said, "TELUS' fourth quarter results build on the consistent financial and operational results we delivered throughout 2018, and our operating momentum places our team in a position of strength as we enter 2019. As planned, our net debt to EBITDA ratio progressively moved towards the upper-end of our guideline and finished the year at 2.54-times, on the back of EBITDA growth of nearly five per cent. This solid growth reflects our strong asset mix focused on wireless and data, and the consistent execution of our long-term focused growth strategy, combined with an unrelenting focus on cost efficiency."
Mr. French added, "For 2018, we delivered healthy free cash flow growth of 24 per cent, reflecting solid EBITDA growth and lower capital expenditures as planned. In 2019, we expect to generate robust free cash flow driven by continued profitable customer growth and lower capital expenditures before spectrum of $2.85 billion, despite an increase to cash taxes due to a one-time catch-up payment. Importantly, cash taxes are expected to decline to a lower level in 2020. Overall, our strong balance sheet positions us well as we look to continue investing in our world-leading advanced broadband network, further extending our leadership position and supporting our planned participation in the upcoming 600 MHz spectrum auction."
In wireless, external revenue increased by 5.4 per cent, reflecting network and equipment revenue growth of 1.8 per cent and 19 per cent respectively. Network revenue growth was driven by continued customer growth and a larger proportion of customers selecting plans with larger data buckets or periodically topping up their data buckets. This was partly offset by declining chargeable data usage and the competitive environment putting pressure on base rate plan prices including larger data buckets.
In wireline, external revenue increased by 7.5 per cent driven by data services revenue growth of 13 per cent, reflecting increased Internet and enhanced data service revenues from higher revenue per customer and continued high-speed Internet subscriber growth, higher customer care and business services (CCBS) revenues due primarily to increased business volumes from business acquisitions and organic growth, increased TELUS Health revenues driven partially by business acquisitions, revenues from our home and business security service offerings and increased TELUS TV revenues from subscriber growth.
In the quarter, we added 164,000 new wireless postpaid, high-speed Internet and TELUS TV customers, up 8,000 or 5.1 per cent over the same quarter a year ago. The higher net additions included 112,000 wireless postpaid net additions, 28,000 high-speed Internet subscribers and 24,000 TELUS TV customers. Our total wireless subscriber base of 9.2 million is up 3.6 per cent from a year ago, reflecting a 4.2 per cent increase in our postpaid subscriber base to 8.3 million, while our prepaid base of 924,000 remained relatively stable. Our high-speed Internet connections of 1.9 million are up 6.6 per cent over the last twelve months, while our TELUS TV subscriber base stands at 1.1 million.
For the quarter, net income of $368 million increased by 4.0 per cent over the same period a year ago as EBITDA growth was partly offset by higher depreciation and amortization due to growth in our asset base, resulting in part from business acquisitions as well as increased financing costs. Basic earnings per share (EPS) of $0.60 rose by 1.7 per cent over the same period last year. Adjusted net income of $409 million increased by 3.3 per cent over the same period a year ago, while adjusted basic EPS of $0.69 rose by 4.5 per cent.
Free cash flow for the quarter of $122 million decreased by 55.5 per cent over the same period a year ago as EBITDA growth was offset by higher wireless acquisition and retention costs, as well as increased share-based compensation and higher cash taxes, both of which were higher due to timing. The higher acquisition and retention costs reflect more attractive handset promotion offers during the competitive holiday selling season while in the same period a year ago subscriber loading was driven by an attractive Bring Your Own Device promotion. For the year, free cash flow of $1.2 billion increased by 24 per cent on higher EBITDA and lower capital expenditures as planned.
|CONSOLIDATED FINANCIAL HIGHLIGHTS|
except per share amounts
|Three months ended
|Operating expenses before depreciation and amortization||2,529||2,318||9.1|
|Adjusted net income(4)||409||396||3.3|
|Net income attributable to common shares||357||353||1.1|
|Adjusted basic EPS(4)||0.69||0.66||4.5|
|Capital expenditures (excluding spectrum licences)||711||739||(3.8||)|
|Free cash flow(5)||122||274||(55.5||)|
|Total subscriber connections(6) (thousands)||13,434||13,050||2.9|
|(1)||Our results for 2017 have been adjusted to reflect the retrospective application of IFRS 15 and IFRS 9, which were adopted January 1, 2018.|
|(2)||EBITDA is a non-GAAP measure and does not have any standardized meaning prescribed by IFRS-IASB. We issue guidance on and report EBITDA because it is a key measure used to evaluate performance. For further definition and explanation of this measure, see ‘Non-GAAP and other financial measures' in this news release.|
|(3)||Adjusted EBITDA for the fourth quarters of 2018 and 2017 excludes restructuring and other costs of $75 million and $54 million respectively, as well as the following items in the fourth quarter of 2017: the MTS net recovery of $21 million as well as non-recurring losses and equity losses of $2 million related to real estate joint ventures.|
|(4)||Adjusted net income and adjusted basic EPS are non-GAAP measures and do not have any standardized meaning prescribed by IFRS-IASB. These terms are defined in this news release as excluding from net income attributable to common shares and basic EPS (after income taxes), restructuring and other costs, income tax-related adjustments, the MTS net recovery and non-recurring losses and equity losses related to real estate joint ventures. For further analysis of adjusted net income and adjusted basic EPS, see ‘Non-GAAP and other financial measures' in this news release.|
|(5)||Free cash flow is a non-GAAP measure and does not have any standardized meaning prescribed by IFRS-IASB. For further definition and explanation of this measure, see ‘Non-GAAP and other financial measures' in this news release.|
|(6)||The sum of active wireless subscribers, residential network access lines (NALs), high-speed Internet access subscribers and TELUS TV subscribers, measured at the end of the respective periods based on information in billing and other systems. Effective April 1, 2018, and on a prospective basis, we have adjusted cumulative subscriber connections to remove approximately 68,000 TELUS TV subscribers as we have ceased marketing our Satellite TV product. Fourth quarter 2018 opening postpaid and total subscribers, as well as associated fourth quarter 2018 operating statistics (ARPU, ABPU, and churn) have been adjusted to exclude an estimated 23,000 subscribers impacted by the CRTC's final pro-rating ruling in June 2018, which was effective October 1, 2018.|
Fourth Quarter 2018 Operating Highlights
TELUS sets 2019 consolidated financial targets
TELUS' consolidated financial targets for 2019 reflect continued growth in data services across wireless and wireline, supported by our strategic investments in advanced broadband technologies and our leading network, a team member culture of delivering customer service excellence, and ongoing focus on operational effectiveness. TELUS' 2019 financial targets are supportive of the Company's multi-year dividend growth program first announced in May 2011, under which TELUS has since delivered 16 dividend increases.
In 2019, TELUS plans to continue generating positive subscriber growth in its key growth segments, including wireless, high-speed Internet and TELUS TV. Increasing customer demand for reliable access and fast data services is expected to support continued customer growth. TELUS International and TELUS Health are also expected to contribute to TELUS' growth profile.
Our 2019 targets reflect the January 1, 2019 implementation of IFRS 16, Leases (IFRS 16), which is non-cash impacting. Financial results for 2018 will not be restated for the new accounting standard, however, when reflecting the adoption of IFRS 16, 2018 adjusted EBITDA would have increased by approximately $230 million, with a similar impact anticipated for 2019. As adoption of new accounting standards are non-cash impacting, our free cash flow definition will be adjusted to remove the non-cash increase to EBITDA as a result of the implementation of IFRS 16, similar to our adjustment for IFRS 15 which also had no impact to cash flow, and ensure a consistent and reliable focus on free cash flow generation to support our dividend growth program.
as reported (1)
applying IFRS 16 to both periods(1)
|Revenues(2)||3 to 5 per cent||3 to 5 per cent|
|Adjusted EBITDA(1)(3)||8 to 10 per cent||4 to 6 per cent|
|Basic earnings per share||2 to 10 per cent||2 to 10 per cent|
|Capital expenditures(4)||Approximately $2.85 billion||Approximately $2.85 billion|
|1)||2019 targets reflect the non-cash impacting January 1, 2019 implementation of IFRS 16, Leases. While financial results for 2018 will not be restated for the new non-cash accounting standard, our 2018 adjusted EBITDA of $5.250 billion would have been higher by approximately $230 million to $5.480 billion when applying the non-cash application of IFRS 16. When applying the non-cash IFRS 16 impact to 2018, our 2019 adjusted EBITDA target represents growth of 4 to 6 per cent as referenced in the table above. See Note 2, accounting policy developments, in our annual Financial Statements for more information.|
|2)||The 2019 revenue growth target of 3 to 5 per cent is calculated over an Operating revenues of $14.197 billion for 2018, which excludes non-recurring equity income related to real estate joint ventures of $171 million arising from the sale of TELUS Garden from our reported 2018 Operating revenues of $14.386 billion. On a reported basis, our 2019 revenue target represents growth of 2 to 4 per cent.|
|3)||Adjusted EBITDA for all periods excludes the following: restructuring and other costs, and net gains and equity income or net losses and equity losses related to real estate joint venture developments. In 2019, total restructuring and others costs are expected to be approximately $100 million, as compared to $317 million in 2018, which also included our donation commitment of $118 million to the TELUS Friendly Future Foundation.|
|4)||Capital expenditure targets and results exclude expenditures for spectrum licences.|
The preceding disclosure respecting TELUS' 2019 financial targets is forward-looking information and is fully qualified by the ‘Caution regarding forward-looking statements' in the 2018 annual Management's discussion and analysis filed on the date hereof on SEDAR, especially Section 10 entitled ‘Risks and Risk Management' thereof which is hereby incorporated by reference, and is based on management's expectations and assumptions as set out in Section 9.3 entitled ‘TELUS assumptions for 2019' in the 2018 annual Management's discussion and analysis.
The TELUS Board of Directors has declared a quarterly dividend of $0.545 per share on the issued and outstanding Common Shares of the Company payable on April 1, 2019 to holders of record at the close of business on March 11, 2019.
TELUS makes significant contributions and investments in the communities where team members live, work and serve and to the Canadian economy on behalf of customers, shareholders and team members. These include:
Access to Quarterly results information
Interested investors, the media and others may review this quarterly earnings news release, management's review of operations, quarterly results slides, audio and transcript of the investor webcast call, supplementary financial information at telus.com/investors.
TELUS' fourth quarter 2018 and 2019 targets conference call is scheduled for Thursday, February 14, 2019 at 11:30am ET (8:30am PT) and will feature a presentation followed by a question and answer period with investment analysts. Interested parties can access the webcast at telus.com/investors. An audio recording will be available on February 14 until March 15, 2019 at 1-855-201-2300. Please use reference number 1241661# and access code 77377#. An archive of the webcast will also be available at telus.com/investors and a transcript will be posted on the website within a few business days.
Caution regarding forward-looking statements
This news release contains forward-looking statements about expected events and the financial and operating performance of TELUS Corporation. The terms TELUS, we, us and our refer to TELUS Corporation and, where the context of the narrative permits or requires, its subsidiaries.
Forward-looking statements include any statements that do not refer to historical facts. They include, but are not limited to, statements relating to our objectives and our strategies to achieve those objectives, our outlook, updates, capital expenditure targets, and our multi-year dividend growth program. Forward-looking statements are typically identified by the words assumption, goal, guidance, objective, outlook, strategy, target and other similar expressions, or future or conditional verbs such as aim, anticipate, believe, could, expect, intend, may, plan, predict, seek, should, strive and will.
By their nature, forward-looking statements are subject to inherent risks and uncertainties and are based on assumptions, including assumptions about future economic conditions and courses of action. These assumptions may ultimately prove to have been inaccurate and, as a result, our actual results or events may differ materially from our expectations expressed in or implied by the forward-looking statements.
Our general outlook and assumptions for 2019 are presented in Section 9 General trends, outlook and assumptions, and regulatory developments and proceedings in the 2018 annual Management's discussion and analysis (MD&A). Our key assumptions for 2019 include the following:
Risks and uncertainties that could cause actual performance or events to differ materially from the forward-looking statements made herein and in other TELUS filings include, but are not limited to, the following:
These risks are described in additional detail in Section 9 General trends, outlook and assumptions, and regulatory developments and proceedings and Section 10 Risks and risk management in our 2018 annual MD&A. Those descriptions are incorporated by reference in this cautionary statement but are not intended to be a complete list of the risks that could affect TELUS.
Many of these factors are beyond our control or our current expectations or knowledge. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also have a material adverse effect on our financial position, financial performance, cash flows, business or reputation. Except as otherwise indicated in this document, the forward-looking statements made herein do not reflect the potential impact of any non-recurring or special items or any mergers, acquisitions, dispositions or other business combinations or transactions that may be announced or that may occur after the date of this document.
Readers are cautioned not to place undue reliance on forward-looking statements. Forward-looking statements in this document describe our expectations and are based on our assumptions as at the date of this document and are subject to change after this date. Except as required by law, we disclaim any intention or obligation to update or revise any forward-looking statements. The forward-looking statements in this news release are presented for the purpose of assisting our investors and others in understanding certain key elements of our expected 2019 financial results as well as our objectives, strategic priorities and business outlook. Such information may not be appropriate for other purposes.
This cautionary statement qualifies all of the forward-looking statements in this document.
Non-GAAP and other financial measures
We have issued guidance on and report certain non-GAAP measures that are used to evaluate the performance of TELUS, as well as to determine compliance with debt covenants and to manage our capital structure. As non-GAAP measures generally do not have a standardized meaning, they may not be comparable to similar measures presented by other issuers. Securities regulations require such measures to be clearly defined, qualified and reconciled with their nearest GAAP measure.
Adjusted Net income and adjusted basic earnings per share: These measures are used to evaluate performance at a consolidated level and exclude items that may obscure the underlying trends in business performance. These measures should not be considered alternatives to Net income and basic earnings per share in measuring TELUS' performance. Items that may, in management's view, obscure the underlying trends in business performance include significant gains or losses associated with real estate redevelopment partnerships, gains on the exchange of wireless spectrum licences, restructuring and other costs, long-term debt prepayment premiums (when applicable), income tax-related adjustments and asset retirements related to restructuring activities.
|Reconciliation of adjusted Net income|
|Three months ended
|C$ and in millions||2018||2017||Change|
|Net income attributable to Common Shares||357||353||4|
|Add back (deduct):|
|Restructuring and other costs, after income taxes||55||40||15|
|(Favourable) unfavourable income tax-related adjustments||(3||)||24||(27||)|
|Non-recurring losses and equity losses related to real estate joint ventures, after income taxes||—||1||(1||)|
|MTS net recovery, after income taxes||—||(22||)||22|
|Adjusted Net income||409||396||13|
|Reconciliation of adjusted basic EPS|
|Three months ended
|C$, per share amounts||2018||2017||Change|
|Add back (deduct):|
|Restructuring and other costs, after income taxes, per share||0.09||0.07||0.02|
|Unfavourable income tax-related adjustments, per share||—||0.04||(0.04||)|
|MTS net recovery, after income taxes||—||(0.04||)||0.04|
|Adjusted basic EPS||0.69||0.66||0.03|
EBITDA (earnings before interest, income taxes, depreciation and amortization): We have issued guidance on and report EBITDA because it is a key measure used to evaluate performance at a consolidated level. EBITDA is commonly reported and widely used by investors and lending institutions as an indicator of a company's operating performance and ability to incur and service debt, and as a valuation metric. EBITDA should not be considered an alternative to Net income in measuring TELUS' performance, nor should it be used as an exclusive measure of cash flow. EBITDA as calculated by TELUS is equivalent to Operating revenues less the total of Goods and services purchased expense and Employee benefits expense.
We also calculate Adjusted EBITDA to exclude items of an unusual nature that do not reflect our ongoing operations and should not, in our opinion, be considered in a valuation metric, or should not be included in an assessment of our ability to service or incur debt.
|Reconciliation of Adjusted EBITDA|
|C$ and in millions||Three months ended
|Amortization of intangible assets||158||150|
|Add back restructuring and other costs included in EBITDA||75||54|
|Add back non-recurring losses and equity losses related to real estate joint ventures||—||2|
|Deduct MTS net recovery||—||(21||)|
Free cash flow: We report this measure as a supplementary indicator of our operating performance. It should not be considered an alternative to the measures in the Consolidated statements of cash flows. Free cash flow excludes certain working capital changes (such as trade receivables and trade payables), proceeds from divested assets and other sources and uses of cash, as found in the Consolidated statements of cash flows. It provides an indication of how much cash generated by operations is available after capital expenditures (excluding purchases of spectrum licences) that may be used to, among other things, pay dividends, repay debt, purchase shares or make other investments. Free cash flow may be supplemented from time to time by proceeds from divested assets or financing activities.
|Calculation of free cash flow|
|C$ and in millions||Three months ended December 31|
|Deduct non-cash gains from the sale of property, plant and equipment||(30||)||(4||)|
|Restructuring and other costs, net of disbursements||33||43|
|Add back non-recurring losses and equity losses related to real estate joint ventures||—||2|
|Effects of contract asset, acquisition and fulfilment (IFRS 15)||(169||)||(100||)|
|Share-based compensation, net||(81||)||(44||)|
|Net employee defined benefit plans expense||22||21|
|Employer contributions to employee defined benefit plans||(9||)||(15||)|
|Capital expenditures (excluding spectrum licences)||(711||)||(739||)|
|Free cash flow before income taxes||162||266|
|(Income taxes paid, net of refunds received) income tax refunds received, net of income taxes paid)||(40||)||8|
|Free cash flow||122||274|
Our method of calculating Free cash flow has been revised to reflect the discretionary nature of the donation to the TELUS Friendly Future Foundation that fundamentally transformed our operating model in respect of philanthropic giving.
TELUS (TSX:T, NYSE:TU) is one of Canada's largest telecommunications companies, with $14.4 billion of annual revenue and 13.4 million subscriber connections, including 9.2 million wireless subscribers, 1.9 million high-speed Internet subscribers, 1.2 million residential network access lines and 1.1 million TELUS TV customers. TELUS provides a wide range of communications products and services, including wireless, data, Internet protocol (IP), voice, television, entertainment, video and home and business security. TELUS is also Canada's largest healthcare IT provider, and TELUS International delivers business process solutions around the globe.
In support of our philosophy to give where we live, TELUS, our team members and retirees have contributed over $650 million to charitable and not-for-profit organizations and volunteered more than 1.21 million days of service to local communities since 2000. Created in 2005 by President and CEO Darren Entwistle, TELUS' 13 Canadian community boards and five International boards have led the Company's support of grassroots charities and have contributed $72 million in support of 7,000 local charitable projects, enriching the lives of more than 2 million children and youth, annually. TELUS was honoured to be named the most outstanding philanthropic corporation globally for 2010 by the Association of Fundraising Professionals, becoming the first Canadian company to receive this prestigious international recognition.
For more information about TELUS, please visit telus.com.