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2005 second quarter review & conference call August 5, 2005 Robert McFarlane EVP & Chief Financial Officer. Mobility segment. financial results. Q2-04. Q2-05. Change. ($M). Revenue. 677. 802. . 19%. EBITDA 1. 286. 367. . 28%. Capex. 78. 115. . 46%.
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2005 second quarter review & conference call August 5, 2005 Robert McFarlane EVP & Chief Financial Officer
Mobility segment financial results • Q2-04 • Q2-05 • Change ($M) • Revenue • 677 • 802 • • 19% • EBITDA1 • 286 • 367 • • 28% • Capex • 78 • 115 • • 46% • Cash Flow (EBITDA less capex) • 208 • 252 • • 21% 1 Earnings before interest, taxes, depreciation and amortization
Mobility segment profitable growth • Q2-04 • Q2-05 • Change • Net additions • 114K • 131K • • 15% • ARPU • $59 • $61 • • 3.4% • Blended churn • 1.32% • 1.37% • • 5 bps • COA per gross add • $381 • $342 • • 10%
Mobility segment subscriber results net additions total wireless subscribers prepaid 4.1 M 131K postpaid 114K 0.7 M prepaid 18% postpaid 82% 3.4 M Q2-04 Q2-05
Mobility segment wireless net additions 211 (000s) 190 131 114 Q2-04 Q2-05 YTD Q2-04 YTD Q2-05
Communications segment revenue profile • Q2-04 • Q2-05 • Change ($M) • Voice – Local • 544 • 543 • • 0.2% • Voice – Long Distance • 229 • 229 • - • Data • 346 • 380 • • 9.9% • Other • 71 • 65 • • 7.9% • Total Revenue $1,189 $1,217 • 2.3%
Communications segment financial results • Q2-04 • Q2-05 • Change • Revenue • $1.19B • $1.22B • 2.3% • EBITDA1 • $499M • $499M • - • Capex • $268M • $294M • 9.8% • Cash Flow (EBITDA less capex) • $231M • $205M • • 11% 1 Earnings before interest, taxes, depreciation and amortization
Communications segment non-ILEC revenue & EBITDA revenue EBITDA ($M) 156 131 3.5 (14) Q2-04 Q2-05 Q2-05 Q2-04
Communications segment high-speed Internet subscriber growth high-speed Internet net additions total Internet subscribers 990K 261K 19K 17K dial-up 26% high-speed 74% 729K Q2-04 Q2-05
Communications segment network access line results % of network access lines lost, YoY Q2-04 Q3-04 Q4-04 Q1-05 Q2-05 -1.5% -1.1% -1.2% -1.3% -1.4% -1.8%
TELUS consolidated financial results • Q2-05 • Change • Q2-04 • Revenue • $1.87B • $2.02B • • 8.2% • EBITDA • $785M • $865M • • 10% • EPS1 • $0.48 • $0.53 • • 10% • • $346M • 18% • Capex • $409M 1 Including favourable impacts for tax settlements on EPS of $0.13 in Q2-04 & nil in Q2-05
TELUS consolidated capital intensity Mobility Communications Consolidated 22% 20% 18% 17% 11% 10% YTD Q2-04 YTD Q2-05 YTD Q2-04 YTD Q2-05 YTD Q2-04 YTD Q2-05
convertible debentures & shares outstanding • $132M or 88% of $150M convertible debentures converted into 3.3M non-voting shares prior to redemption • Remaining debentures redeemed for $17.9M • Difference between redemption value & book value treated as expense, a pre-tax charge of approx $0.9M • Options & warrant exercises resulted in 2.2M share issue • repurchased 6.5M shares under normal course issuer bid (NCIB)
TELUS consolidated EPS continuity • Q2-04 • Q2-05 • Change • $0.53 • EPS reported • $0.48 • • 10% • Provision for BCTel bond redemption litigation, & convertible deb. redemption expense • - • $0.03 • Income tax settlement • $(0.13) • - • • $0.56 • 60% • EPS normalized • $0.35
TELUS consolidated free cash flow • Q2-04 • Q2-05 • ($M) • EBITDA • $785 • $865 • Capex • (346) • (409) • Net Cash Interest • (286) • (275) • Cash Restructuring Payments (in excess of expense) • (9) • (1) • Non-Cash Share Based Compensation • 6 • 7 • Net Cash Tax Recovery • 81 • 20 • Free Cash Flow • $230 • $208 • Share Issuance (non-public) • 17 • 56 • Cash Dividends • (48) • (144) • Working Capital/Other • (86) • 61 • Cash avail. for debt reduction & share redemp. • $112 • $181 • Purchase of shares for cancellation (NCIB) • - • (272) • Redemption of Preferred Shares • (36) • - • Funds for redemption of debt • 8 • (15) • Net change in cash • $84 • $(106)
2005 consolidated guidance • previous 2005 guidance1 • updated 2005 guidance2 • Revenue • $7.950 to 8.050B • EBITDA3 • $3.250 to 3.325B • EPS4 • $1.85 to 2.05 • no change • Capex • approx. $1.4B • Free Cash Flow • $1.25 to 1.35B 1 Provided on May 4, 2005 2 Updated August 5, 2005 3 Including ~$100M in restructuring & workforce reduction costs 4 Including favourable impacts for tax settlements of $0.15 in Q1-05
questions? 2005 second quarter review investor relations 1-800-667-4871 TELUS.com ir@telus.com
AppendicesSummaries: Chronology of collective bargaining events Chronology of legal decisions Definitions
Labour Relations – summary of events • Apr 13 - Company tabled Offer to the TWU • Apr 18 – Company declared negotiations to be at an impasse and delivered first notice of lockout to TWU • Apr 21 - terms and conditions of the Offer communicated to bargaining unit team members • Apr 25 – Company began implementing numerous soft lockout measures • May to July – TELUS continued escalating lockout measures; TWU responded with overtime ban and work-to-rule campaign • Jun 14 – TELUS provided addendum to offer, which provided additional benefits • Jun 22 – TWU tabled its counter proposal
Labour Relations - summary of events (cont’d) • Jun 24 – TELUS rejected counter proposal • July – TWU began rotating strike activity (“study sessions”) to which Company normally imposed short lockouts to participants • Jul 12 – TELUS informed TWU, it would commence implementation of its comprehensive offer on July 22 - TWU further escalated rotating strike activity • Jul 21 – TWU initiated full scale strike and Company implemented contingency plan • Jul 22 – Phase I of Company’s Offer implemented
Labour relations - 2005 legal ruling summary • Feb 2 - CIRB ruled in TELUS favour and overturned its year old ruling ordering TELUS into binding arbitration. • Apr 22 - TWU allegations challenging TELUS’ ability to implement lockout measures dismissed by Federal Court of Appeal (FCA) • Apr 24 - TWU application at CIRB seeking to prevent TELUS from implementing its lockout measures on Apr 25 dismissed • July 21 – CIRB dismissed TWU allegations regarding improper lockout and company communications • July 23 – BC Court grants sweeping injunction against TWU impeding access to Company and customer locations • July 25 – TWU loses appeal to FCA to overturn Feb. CIRB ruling that returned both sides into collective bargaining process • July 27 – AB Court grants TELUS injunction on posting website images and TWU impeding access to Company and customer locations • July 29 – BC Court grants TELUS injunction on posting website images, TWU intimidation, and blocking entrances by pickets
appendix definitions • EBITDA: Earnings, after restructuring and workforce reduction costs, before interest, taxes, depreciation and amortization • Capital intensity: capex divided by total revenue • Cash flow: EBITDA less capex • Free Cash Flow: EBITDA, adding Restructuring and workforce reduction costs, cash interest received and excess of share compensation expense over share compensation payments, subtracting cash interest paid, cash taxes, capital expenditures, and cash restructuring payments