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Alternative
performance
measures

Alternative performance measures

In addition to financial performance measures prepared in accordance with IFRS, Telia Company presents non-IFRS financial performance measures, for example EBITDA, Adjusted EBITDA, Adjusted operating income, continuing operations, CAPEX, CAPEX excluding license and spectrum fees, Cash CAPEX, Free cash flow, Operational free cash flow, Net debt, Net debt/Adjusted EBITDA ratio and Adjusted EBITDA margin. (Adjustment items were previously named non-recurring items). These alternative measures are considered to be important performance indicators for investors and other users of the Annual report. The alternative performance measures should be considered as a complement to, but not a substitute for, the information prepared in accordance with IFRS. Telia Company’s definitions of these non-IFRS measures are described in this Note and in the Definitions. These terms may be defined differently by other companies and are therefore not always comparable to similar measures used by other companies.

EBITDA and Adjusted EBITDA
Telia Company considers EBITDA as a relevant measure for investors to be able to understand profit generation before investments in fixed assets. To assist the understanding of Telia Company’s underlying financial performance we believe it is also useful to analyze Adjusted EBITDA. Adjustment items within EBITDA are specified in Board of Director’s Report, section “Adjustment items.”

Continuing operations

SEK in millions

Jan–Dec 2017

Jan–Dec 2016

Operating income

13,690

21,090

Income from associated companies and joint ventures

-778

-2,810

Total depreciation/amortization/write-down

12,893

11,534

EBITDA

25,806

29,813

Adjustment items within EBITDA

-368

-3,977

Adjusted EBITDA

25,438

25,836

Discontinued operations

SEK in millions

Jan–Dec 2017

Jan–Dec 2016

Operating income

8,418

-7,048

Income from associated companies and joint ventures

-8

-7

Total depreciation/amortization/write-down

-52

Gain/loss on disposals

-193

1,035

EBITDA

8,217

-6,071

Adjustment items within EBITDA

-3,971

11,952

Adjusted EBITDA

4,246

5,880

 

Adjusted operating income, continuing operations

Telia Company considers Adjusted operating income, continuing operations as a relevant measure to be able to understand the underlying financial performance of Telia Company. Adjustment items within operating income, continuing operations are specificed in Board of Director’s Report, section “Adjustment items.”

SEK in millions

Jan–Dec 2017

Jan–Dec 2016

Operating income

13,690

21,090

Adjustment items within operating income

1,378

-3,967

Adjusted operating income, continuing operations

15,069

17,123

CAPEX, CAPEX excluding license and spectrum fees and Cash CAPEX

Telia Company considers CAPEX, CAPEX excluding license and spectrum fees and Cash CAPEX as relevant measures to understand the group’s investments in intangible and tangible non-current assets (excluding goodwill, assets acquired in business combinations and asset retirement obligations).

SEK in millions

Jan–Dec 2017

Jan–Dec 2016

Continuing operations

   

Intangible assets

4,147

2,787

Property, plant and equipment

11,525

12,838

CAPEX

15,672

15,625

Net of not paid investments and additional payments from previous periods

-1,162

-267

Cash CAPEX

14,509

15,358

     

CAPEX

15,672

15,625

License and spectrum fees

-457

-609

CAPEX excluding license and spectrum fees

15,215

15,016

     

Discontinued operations

   

Intangible assets

178

3,657

Property, plant and equipment

1,609

2,156

CAPEX

1,787

5,813

Net of not paid investments and additional payments from previous periods

109

-2,469

Cash CAPEX

1,896

3,345

Free cash flow

Telia Company considers free cash flow as a relevant measure to be able to understand the group’s cash flow from operating activities after CAPEX.

SEK in millions

Jan–Dec 2017

Jan–Dec 2016

Cash flow from operating activities

23,569

25,970

Cash CAPEX (paid Intangible and tangible assets)

-16,405

-18,703

Free cash flow, continuing and discontinued operations

7,164

7,267

Operational free cash flow

Telia Company considers Operational free cash flow as a relevant measure to be able to understand the cash flows that Telia Company is in control of. From the reported free cash flow from continuing operations dividends from associated companies are deducted as these are dependent on the approval of boards and the annual general meetings of the associated companies. License and spectrum payments are excluded as they generally refer to a longer period than just one year.

SEK in millions

Jan–Dec 2017

Jan–Dec 2016

Cash flow from operating activities from continuing operations

26,313

22,510

Deduct: Cash CAPEX from continuing operations

-14,509

-15,358

Free cash flow continuing operations

11,804

7,152

Add back: Cash CAPEX for licenses from continuing operations

561

376

Deduct: Dividends from associated companies from continuing operations

-2,851

-2,122

Add back: Taxes paid on dividends from associated companies from continuing operations

173

91

Operational free cash flow

9,687

5,497

Net debt

Telia Company considers Net debt to be an important measure to be able to understand the group’s indebtedness. Net debt presented below is based on the total Telia Company group for both continuing and discontinued operations.

SEK in millions

Dec 31, 2017

Dec 31, 2016

Long-term borrowings

88,108

83,516

Less 50 percent of hybrid capital1

-7,670

Short-term borrowings

5,102

12,919

Less derivatives recognized as financial assets and
hedging long-term and short-term borrowings and related credit support annex (CSA)

-3,032

-5,455

Less long-term bonds available for sale

-12,084

-10,185

Less short-term investments

-15,616

-7,132

Less cash and cash equivalents

-20,984

-22,907

Net debt, continuing and discontinued operations

33,823

50,756

1) 50 percent of hybrid capital is treated as equity, consistent with market practice for the type of instrument, and reduces net debt.

Net debt/Adjusted EBITDA ratio (multiple)

Telia Company considers net debt in relation to adjusted EBITDA as a relevant measure to be able to understand the group’s financial position.

SEK in millions, except for multiple

Jan–Dec 2017

Jan–Dec 2016

Net debt

33,823

50,756

Adjusted EBITDA continuing operations

25,438

25,836

Adjusted EBITDA discontinued operations

4,246

5,880

Deduct disposed operations

-109

-1,600

Adjusted EBITDA rolling 12 months excluding disposed operations

29,575

30,116

Net debt/adjusted EBITDA ratio (multiple)

1.14

1.69


Adjusted EBITDA margin

Telia Company considers Adjusted EBITDA in relation to net sales as a relevant measure to be able to understand the group’s profit generation and to be used as a comparative benchmark.

SEK in millions

Jan–Dec 2017

Jan–Dec 2016

Net sales

79,867

84,178

Adjusted EBITDA

25,438

25,836

Adjusted EBITDA margin (%), continuing operations

31.9

30.7