REG - BT Group PLC - Half-year Report
RNS Number : 9489FBT Group PLC01 November 2018BT Group plc
Results for the half year to 30 September 2018
1 November 2018
BT Group plc (BT.L) today announced its results for the second quarter and half year to 30 September 2018.
Key strategic developments:
· Philip Jansen announced as new Chief Executive from 1 February 2019 - see separate press release on 25 October
· Nine quarters of successive improvement in customer experience metrics; Group NPS1 up 3.6 points and Right First Time2 up 2.7%
· Majority of major and a number of smaller communications provider customers signed up to Openreach's volume related discounts
· 5G capability demonstrated by EE from a live site in Canary Wharf
· Initiatives to transform our operating model on track; restructuring programme removed c.2,000 roles in the first half
Operational:
· Nearly 2m total ultrafast premises passed; Openreach currently building FTTP to c.13,000 premises per week
· Consumer fixed ARPU up 1% to £38.3, with increased mix of SIM only reducing postpaid mobile ARPU by 0.5% to £22.0
· Mobile churn remains low at 1.2%; fixed churn increased to 1.6% reflecting the impact of recent price increases
Financial:
· Reported revenue of £11,588m down 2% and adjusted3 revenue of £11,624m down 1%4 as growth in our consumer business was offset by regulated price reductions in Openreach and declines in our enterprise businesses
· Reported profit before tax of £1,340m and adjusted3 EBITDA of £3,675m, up 2%4, mainly driven by higher volume and mix of high-end smartphones in our consumer business and restructuring related cost savings
· Net cash inflow from operating activities of £754m down £1,831m mainly due to £2bn contribution to BTPS. Normalised free cash flow3 of £974m down 22% due to increased cash capital expenditure and timing of working capital movements
· Reported capital expenditure up £140m at £1,833m due primarily to the increase in BDUK grant funding deferral following take up of Openreach's volume related discounts
· Interim dividend of 4.62 pence per share; 30% of last year's full-year dividend of 15.4 pence per share
· Overall outlook maintained. Based on current trading, we expect EBITDA to be in the upper half of our £7.3-£7.4bn range
Gavin Patterson, Chief Executive, commenting on the results, said
"We continued to generate positive momentum in the second quarter resulting in encouraging results for the half year. We are successfully delivering against the core pillars of our strategy with improved customer experience metrics, accelerating ultrafast deployment and positive progress towards transforming our operating model.
"In Consumer, we continue to see strong sales of our converged product, BT Plus, and have seen good mobile sales following new handset launches. Last month EE demonstrated 5G capability from a live site in Canary Wharf. We have maintained momentum in our enterprise businesses despite legacy product declines.
"On 1 October we completed the transfer of 31,000 employees into Openreach, a key part of fulfilling our DCR commitments. Openreach has signed up the majority of its major and a number of its smaller communications providers to its new volume related discounts which should increase average broadband speeds across the UK. We are making positive progress on the key enablers to ensure that we can secure a fair return on our FTTP investment, and are ready to expand the FTTP programme up to and beyond 10 million premises if the conditions are right.
"Our strategy is delivering, with benefits evident from the steps we've been taking to simplify and strengthen the business and improve efficiency. Despite increasingly competitive fixed, mobile and networking markets and continued declines in legacy products there is no change in our overall outlook for the full year. Based on current trading, we expect EBITDA to be in the upper half of our £7.3 - £7.4 billion range."
Half year to 30 September 2018
2018
(IFRS 15)
2017
(IFRS 15 pro forma)
2017
(IAS 18)
Change
£m
£m
£m
%
Reported measures
Revenue
11,588
11,786
(2)
Profit before tax
1,340
1,084
24
Profit after tax
1,052
809
30
Basic earnings per share
10.6p
8.2p
29
Net cash inflow from operating activities
754
2,585
(71)
Interim dividend
4.62p
4.85p
(5)
Capital Expenditure
1,833
1,693
8
Adjusted measures
Adjusted3 Revenue
11,624
11,770
11,800
(1)4
Change in underlying3 revenue
(0.9)4
Adjusted3 EBITDA
3,675
3,605
3,596
24
Adjusted3 basic earnings per share
13.3p
12.8p
12.7p
44
Normalised free cash flow3
974
1,245
1,245
(22)
Net debt3
11,895
9,520
9,520
£2,375m
1 Group NPS measures Net Promoter Score in our retail business and Net Satisfaction in our wholesale business
2 Measured against Group-wide 'Right First Time' (RFT) index3 See Glossary on page 2
4 Measured against IFRS 15 pro forma comparative period in the prior year
Customer facing unit results for the half year to 30 September 2018
Adjusted1 revenue
Adjusted1 EBITDA
Normalised free cash flow1
Half year to
2018
2017
Change
2018
2017
Change
2018
2017
Change
30 September
(IFRS 15
(IFRS 15
(IFRS 15
pro forma)
pro forma)
pro forma)
£m
£m
%
£m
£m
%
£m
£m
%
Consumer
5,272
5,127
3
1,221
1,131
8
677
663
2
Business and Public Sector
2,195
2,275
(4)
708
696
2
514
479
7
Wholesale and Ventures
929
1,007
(8)
325
364
(11)
160
212
(25)
Global Services
2,332
2,511
(7)
208
154
35
(44)
(133)
67
Openreach
2,472
2,509
(1)
1,177
1,250
(6)
259
501
(48)
Other
2
6
n/m
36
10
n/m
(592)
(477)
(24)
Intra-group items
(1,578)
(1,665)
5
-
-
-
-
-
-
Total
11,624
11,770
(1)
3,675
3,605
2
974
1,245
(22)
1 See Glossary below
n/m = not meaningful
Glossary of alternative performance measures
Adjusted
Before specific items
EBITDA
Earnings before interest, tax, depreciation and amortisation
Adjusted EBITDA
EBITDA before specific items, share of post tax profits/losses of associates and joint ventures and net non-interest related finance expense
Free cash flow
Net cash inflow from operating activities after capital expenditure
Capital expenditure
Additions to property, plant and equipment and software in the period less proceeds from disposals
Normalised free cash flow
Free cash flow after net interest paid, before pension deficit payments (including the cash tax benefit of pension deficit payments) and specific items
Net debt
Loans and other borrowings (both current and non-current), less current asset investments and cash and cash equivalents. Currency denominated balances within net debt are translated to Sterling at swapped rates where hedged. Fair value adjustments and accrued interest applied to reflect the effective interest method are removed.
Specific items
Items that in management's judgement need to be disclosed separately by virtue of their size, nature or incidence. Further information is provided in note 6 on page 25
Underlying
Excludes specific items, foreign exchange movements and the effect of acquisitions and disposals. Further information is provided in note 1 on page 32
We assess the performance of the group using a variety of alternative performance measures. The rationale for using adjusted measures is explained in note 1 on page 32. Results on an adjusted basis are presented before specific items. Reconciliations from the most directly comparable IFRS measures are in Additional Information on pages 32 to 34.
Enquiries
Press office:
Tom Engel
Tel: 020 7356 5369
Investor relations:
Mark Lidiard
Tel: 020 7356 4909
We will hold the second quarter and half year 2018/19 results call for analysts and investors in London at 9am today and a simultaneous webcast will be available at www.bt.com/results
We are scheduled to announce our third quarter results for 2018/19 on 31 January 2019.
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