Terra Meets its Target and Obtains Positive EBITDA in 2004
24 Februar 2005 - 7:39PM
PR Newswire (US)
Terra Meets its Target and Obtains Positive EBITDA in 2004 The
company has reported net profit of 164 million euros MADRID, Feb.
24 /PRNewswire-FirstCall/ -- Terra Networks, S.A., (MC: TRR;
Nasdaq: TRRA), the world's leading Spanish and Portuguese Internet
group today released its financial results for 2004 and comparisons
with 2003. Revenues The Company obtained revenues of 540 million
euros in current euros in 2004, 1% lower than in 2003. Revenues
were impacted by changes in the group's consolidation perimeter,
specifically the sale of its shares in Lycos, Inc. in October 2004.
Stripping out this effect, and the negative impact of the exchange
rates of some currencies against the euro (Terra consolidates its
accounts in euros), revenues would have risen 8% on 2003. The
access business accounted for 44% of revenues; advertising and
e-commerce accounted for 22%; value-added communication, portal and
content services for 23%; and corporate and SME services and other
revenues for 11%. Operating expenses Efficient management
continuously improved processes and structures, and steadily
brought down operating costs throughout 2004. Operating expenses
totalled 263 million euros, an 18%, or 57 million euro improvement
on 2003. The group implemented far-reaching headcount restructuring
programs in 2004, primarily in Spain, the US and Mexico. At the end
of 2004 Terra had 1,606 employees vs. 2,255 at the end of 2003.
Positive EBITDA performance in 2004 Improvements on the gross
profit line and the firm grip on other operating costs resulted in
a sharp rise in operating income or EBITDA (Earning before
Interest, Taxes, Depreciation and Amortization), which was positive
for all four quarters of the year. EBITDA stood at 21 million
euros, with an EBITDA margin over revenues of 4%. The company
reported net income of 164 million euros in 2004, compare to a loss
of 173 million euros in 2003. The Company has recognized a tax
credit of 306 million euros, mainly due to the sale of its shares
in Lycos, Inc. The net cash position at December 2004 was 529
million euros. The cash balance fell by 1,065 million euros
compared to 2003 due mainly to the distribution of 1,136 million
euros in dividends (2 euros per share) made at the end of July.
Terra maintains a positive trend in the access and portal business
which in 2004 has reached 6.3 million paid access and portal
services customers, a rise of 25%. The Group had a total of 1.8
million paid access subscribers at December 31 2004, an advance of
9% vs. 2003. We would highlight the 66% increase in broadband
subscribers, mainly ADSL, with 1.1 million at the end of the year,
of which 68% were in Brazil, 18% in Spain and 12% in Chile. We
would also highlight the rise in paid communication and portal
services customers (4.5 million at December 2004). This figure is
33% up on 2003. Throughout 2004 Terra pursued a strategy of forging
agreements with leading companies with the aim of including the
best content and services in its portals network. Along these
lines, Terra and Google signed an agreement designed to improve the
quality of Terra's browser on all portals in Spain and Latin
America, offering Google's browser services on Terra portals
thereby allowing users to access the technology of the most
powerful search engine on the market today. Terra has boosted the
joint development of multimedia products and services with Real
Madrid C.F. and FC Barcelona pursuant to the respective agreements
made with the football clubs. The Real Madrid Exclusive Zone and
the FC Barcelona Premium Zone are exclusive premium products
offering a full range of multimedia services for internet and
mobile, enabling domestic and international fans to keep up to date
with the latest developments at both clubs. Terra has also launched
other communications and content products and services. These
include: Terra Musica Premium -- the first platform for downloading
digital music from the Internet in Spain. This new service has a
database of 500,000 songs and video clips in WMA format, and
enables Terra ADSL clients to listen to songs from the database,
enjoy predetermined channels or compile customised music lists
according to their preferences for 6 euros (just music) or 9.95
euros (music and video clips) a month. Users can also download
songs for 0.99 euros and even complete albums from 6.65 euros. The
Company has also launched other products such as Antivirus Terra,
designed to detect and block computer viruses; Kit Terra Mail Plus,
a package offering email services with enhanced functions (larger
capacity, increased security and easier access); and Fotolog
services, a virtual photo album which allows users to share their
photos online. Keeping commitment to customers Telefonica recently
announced that it had offered to enter into negotiations with Terra
with a view to their merger. The proposal made to Terra includes an
exchange ratio of 2 Telefonica S.A. shares with a nominal value of
1 euro, for 9 Terra Networks, S.A. shares with a nominal value of 2
euros. On 23rd February 2004 Terra Networks S.A.'s Board of
Directors approved Telefonica's merger proposal which is now
subjected to the corresponding approval by shareholders at the
Ordinary General Shareholders' Meeting of both companies. On the
same meeting Terra's Board of Directors also approved the proposal
to pay a dividend in the amount of 0.60 Euros per share, with a
charge against the "Reserve for Shares Issuance Premium" account.
The effectiveness of the distribution is subject to the
corresponding approval by the shareholders at the Ordinary General
Shareholders' Meeting of Terra. Payment is expected to be made
during the days following the meeting and, in any event, before the
merger of Telefonica and Terra is recorded with the Commercial
Registry. Kim Faura, executive chairman of Terra Networks, S.A.,
said that "Terra plays a decisive role in driving the broadband
market by providing value added content and services, as reflected
by the satisfactory set of earnings the company has just reported."
Mr. Faura added that "we have met our target of reporting positive
EBITDA in 2004, we have increased our portfolio of paid customers
and consolidated the first Latin American internet standard." He
stated that "Terra has, and will continue to have, a clear
commitment to its customers and suppliers in all its markets. A
commitment to providing quality, value-added services and content
products." Telephone numbers: Public Relations Investor Relations
Pablo Fuentes Miguel von Bernard +34-91-452-4248 +34-91-452-3922
CONSOLIDATED STATEMENT OF OPERATIONS (in thousand of Euros -
Spanish GAAP) Audited Twelve months Dec-31 2004 2003 (1) Revenues:
Access 236,501 221,034 Advertising and e-commerce 119,661 143,021
Communication, portal and content services 122,304 119,023
Corporate & SMEs Services and Other 62,012 63,550 Total
revenues 540,478 546,627 Goods purchased (256,307) (265,836) Gross
profit 284,171 280,791 Personnel expenses (95,785) (119,653)
Professional services (21,912) (23,191) Depreciation and
amortization (79,513) (78,742) Marketing and Commissions (62,611)
(79,104) Maintenance, supplies and leases (27,284) (41,306) Other
expenses (55,713) (57,021) Total other operating expenses (342,818)
(399,017) Operating loss (58,647) (118,226) Financial income
(expense) 18,277 57,743 Amortization of goodwill (64,848) (82,297)
Equity share in affiliate losses, net (14,559) (34,734)
Extraordinary income (expense) and other (25,773) 4,534 Income
(loss) before taxes (145,550) (172,980) Corporate income tax
306,456 (266) Minority interest 3,066 536 Net Loss (Spanish GAAP)
163,972 (172,710) Shares excluding Stock Options Plan ('000)
561,062 560,997 (1) Revenue by business line and some operating
expenses show slight variations from previously reported figures
due to reclassifications OPERATING DATA (in thousands) Dec-31 2004
2003 % Total Paid Subscribers (1) 6,280 5,033 25% Access:
Narrowband 748 1,028 -27% Broadband 1,068 644 66% Total 1,816 1,672
9% VAS (CSP/Portal): 4,464 3,361 33% Broadband Access Subscribers:
Spain 189 166 14% Latam 879 478 84% Total 1,068 644 66% (1) Based
on number of services delivered. Some subscribers may be
contracting access and Value Added Services at the same time NOTES
TO CONSOLIDATED STATEMENT OF OPERATIONS (in thousands - Spanish
GAAP) Unaudited EBITDA Dec-31 2004 2003 % Operating loss (58,647)
(118,226) 50% Depreciation and amortization 79,513 78,742 -1%
Leases (1) 0 10,133 100% EBITDA (2) 20,866 (29,353) 171% EBITDA
Margin 4% -5% 9 b.p. (1) In all prior periods reported and for
EBITDA guidance calculation purposes, expenses related to equipment
leases recorded in Lycos are deemed to be depreciation costs (2)
See EBITDA description in the Other Information section DATASOURCE:
Terra Networks, S.A. CONTACT: Pablo Fuentes, +34-91-452-4248, , or
Miguel von Bernard, +34-91-452-3922, both of Terra Networks, S.A.
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