REG - BT Group PLC - Final Results
18/05/2023 07:00
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RNS Number : 8109Z BT Group PLC 18 May 2023
Results for the full year to 31 March 2023
BT Group plc
18 May 2023
Philip Jansen, Chief Executive, commenting on the results, said
"We have delivered our outlook for FY23: this year we've grown both pro forma
revenue and EBITDA for the first time in six years while navigating an
extraordinary macro-economic backdrop. Over the last four years we have stuck
firmly to our strategy and it's working.
"Openreach is competing strongly and it's clear that customers love full
fibre. The Openreach Board has reaffirmed its target to reach 25 million
premises with FTTP by the end of 2026 and plans to further accelerate take-up
on the network. In Consumer we're delivering for customers with strong growth
in FTTP and 5G, and we're also seeing green shoots in B2B with a return to
revenue growth in the final quarter in Global and the creation of our newly
integrated Business unit.
"By continuing to build and connect like fury, digitise the way we work and
simplify our structure, by the end of the 2020s BT Group will rely on a much
smaller workforce and a significantly reduced cost base. New BT Group will be
a leaner business with a brighter future."
Continued strong delivery against strategy
• We delivered revenue and adjusted(1) EBITDA in line with our outlook
for FY23, despite significant headwinds; normalised free cash flow was
delivered at the lower end of our guidance range due to increased cash capital
expenditure, primarily in Openreach
• FTTP build of 702k premises passed in the quarter at an average build
rate of 54k per week, with 41% of our 25m build completed; FTTP footprint of
10.3m, up 43%, with a further 6m where initial build is underway
• Customer demand in Openreach for FTTP extremely strong with FY23
orders up 70% year on year; take up rate grew to 30.4% with record net adds of
395k in the quarter; base now c.3.1m
• Record quarter of Consumer FTTP connections up 50% year-on-year with
the base now over 1.7m
• We have 8.6m 5G connections, up 62% on last year; our 5G network now
covers 68% of the population
• Cost transformation on track with gross annualised cost savings of
£2.1bn since April 2020 against our £3bn target, with a cost to achieve of
£1.1bn against a target of £1.6bn
• Created Business through the merger of Enterprise and Global to
enhance value for all B2B customers, strengthen our competitive position and
deliver material synergies
• The UK Government announced a three-year 100% tax expensing benefit on
qualifying UK capex, effective from 1 April 2023; this will allow Openreach to
deliver increased connections and offset inflation whilst reconfirming our 25m
FTTP target by the end of 2026
• New metrics announced to track our transformation into a
next-generation connectivity provider (see page 4), focussed on our networks,
our customers and becoming a more efficient organisation
• Total labour resource(2) to reduce from 130k to 75-90k by FY28-FY30
Pro forma full year revenue and adjusted(1) EBITDA growth:
• Revenue £20.7bn, down 1% with the growth in Openreach more than
offset by decline in the other units
• Adjusted(1) EBITDA £7.9bn, up 5% due to growth in Openreach and
Consumer offset by a decline in Enterprise
• Revenue up 1% and adjusted(1) EBITDA up 3% on a Sports Joint Venture
('JV') pro forma(1) basis
• Reported profit before tax £1.7bn, down 12% due to increased
depreciation from network build and specific items, partially offset by
adjusted(1) EBITDA growth
• Reported capital expenditure ('capex') £5.1bn, down 4%; capex
excluding Spectrum up 5% due to higher fixed network investment primarily in
Openreach for building, and connecting more customers to, FTTP; cash capex was
c.£0.2bn higher at £5.3bn (up 10%) as we reduced our capital creditors;
significantly lower capex in Q4 given unwind of Openreach work in progress
('WIP')
• Net cash inflow from operating activities £6.7bn; normalised free
cash flow(1) £1.3bn, down 5% due to increased cash capex and adverse working
capital movements offset by EBITDA growth and a tax refund; increase in Q4 due
to timing of working capital, lower cash capex, and increased EBITDA
• Net debt £18.9bn, up £850m primarily due to pension scheme
contribution of £1bn
• Gross IAS 19 deficit of £3.1bn, up from £1.1bn at 31 March 2022
mainly due to the impact of higher real gilt yields partly offset by deficit
contributions
• Final dividend of 5.39 pence per share (pps) bringing the full year
dividend to 7.70pps, flat year on year
• FY24 Outlook: revenue and EBITDA growth on a pro forma basis; capital
expenditure excluding spectrum of £5.0bn-£5.1bn; normalised free cash flow
of £1.0bn-£1.2bn
(1) See Glossary on page 3
(2) Total labour resource includes both employees directly employed by BT and
non-employees supplied by a third party
Full year to 31 March 2023 2022 Change
Reported measures £m £m %
Revenue 20,681 20,850 (1)
Profit before tax 1,729 1,963 (12)
Profit after tax 1,905 1,274 50
Basic earnings per share 19.4p 12.9p 50
Net cash inflow from operating activities 6,724 5,910 14
Full year dividend 7.7p 7.7p -
Capital expenditure 5,056 5,286 (4)
Adjusted measures
Adjusted(1) Revenue 20,669 20,845 (1)
Adjusted(1) EBITDA 7,928 7,577 5
Pro forma Revenue 20,431 20,306 1
Pro forma EBITDA 7,999 7,782 3
Adjusted(1) basic earnings per share 22.0p 20.3p 8
Normalised free cash flow(1) 1,328 1,392 (5)
Capital expenditure excluding spectrum 5,056 4,807 5
Net debt(1,2) 18,859 18,009 £850m
Customer-facing unit updates
Adjusted(1) revenue Adjusted(1) EBITDA Normalised free cash flow(1)
Full year to 31 March 2023 2022 Change 2023 2022 Change 2023 2022 Change
£m £m % £m £m % £m £m %
Consumer 9,737 9,858 (1) 2,623 2,262 16 1,147 917 25
Enterprise 4,962 5,157 (4) 1,394 1,636 (15) 522 791 (34)
Global 3,328 3,362 (1) 458 456 - 63 131 (52)
Openreach 5,675 5,441 4 3,449 3,179 8 211 448 (53)
Other 27 27 - 4 44 (91) (615) (895) 31
Intra-group items (3,060) (3,000) (2) - - - - -
Total 20,669 20,845 (1) 7,928 7,577 5 1,328 1,392 (5)
Fourth quarter to 31 March 2023 2022 Change 2023 2022 Change 2023 2022 Change
£m £m % £m £m % £m £m %
Consumer 2,306 2,416 (5) 659 557 18
Enterprise 1,270 1,290 (2) 384 384 -
Global 854 837 2 147 135 9
Openreach 1,420 1,373 3 879 811 8
Other 3 7 (57) (21) (18) (17)
Intra-group items (764) (755) (1) - - -
Total 5,089 5,168 (2) 2,048 1,869 10 1,222 513 138
( )
Performance against FY23 outlook
FY23 performance FY23 outlook
Change in adjusted(1) pro forma(1) revenue Up 1% Growth on a Sports JV pro forma(1) basis
Adjusted(1) EBITDA £7.9bn At least £7.9bn
Capital expenditure(1) £5.1bn c.£5.0bn
Normalised free cash flow(1) £1.3bn Lower end of the £1.3bn-£1.5bn range
(1) See Glossary on page 3
Glossary
Adjusted Before specific items. Adjusted results are consistent with the way that
financial performance is measured by management and assist in providing an
additional analysis of the reporting trading results of the group.
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 net capital expenditure.
Capital expenditure Additions to property, plant and equipment and intangible assets in the
period.
Normalised free cash flow Free cash flow (net cash inflow from operating activities after net capital
expenditure) after net interest paid and payment of lease liabilities, before
pension deficit payments (including their cash tax benefit), payments relating
to spectrum, and specific items. It excludes cash flows that are determined at
a corporate level independently of ongoing trading operations such as
dividends paid, share buybacks, acquisitions and disposals, repayment and
raising of debt, cash flows relating to loans with joint ventures, and cash
flows relating to the Building Digital UK demand deposit account which have
already been accounted for within normalised free cash flow. For non-tax
related items the adjustments are made on a pre-tax basis.
Net debt Loans and other borrowings and lease liabilities (both current and
non-current), less current asset investments and cash and cash equivalents,
including items which have been classified as held for sale on the balance
sheet. Currency denominated balances within net debt are translated into
sterling at swapped rates where hedged. Fair value adjustments and accrued
interest applied to reflect the effective interest method are removed. Amounts
due to joint ventures held within loans and borrowings are also excluded.
Service revenue Earned from services delivered using our fixed and mobile network
connectivity, including but not limited to, broadband, calls, line rental, TV,
residential BT Sport subscriptions, mobile data connectivity, incoming &
outgoing mobile calls and roaming by customers of overseas networks.
Sports JV pro forma On 1 September 2022 BT Group and Warner Bros. Discovery announced completion
of their transaction to form a 50:50 joint venture (JV) combining the assets
of BT Sport and Eurosport UK. Financial information stated as pro forma is
unaudited and is presented to estimate the impact on the group as if trading
in relation to BT Sport had been equity accounted for in previous periods,
akin to the JV being in place historically. Please refer to Additional
Information on page 46 for a bridge between financial information on a
reported basis and a Sports JV pro forma basis.
Specific items Items that in management's judgement need to be disclosed separately by virtue
of their size, nature or incidence. In the current period these relate to
changes to our assessment of our provision for historic regulatory matters,
restructuring charges, divestment-related items and net interest expense on
pensions.
We assess the performance of the group using a variety of alternative
performance measures. Reconciliations from the most directly comparable IFRS
measures are in Additional Information on pages 46 to 48.
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