REG - BT Group PLC - Half-year Report
03/11/2022 07:00
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RNS Number : 1435F BT Group PLC 03 November 2022
Results for the half year to 30 September 2022
BT Group plc
03 November 2022
Philip Jansen, Chief Executive, commenting on the results, said
"BT Group remains on the front foot in these turbulent times. Our strategy is
working, we're executing against our plan and we're confident that we'll
deliver our long-term ambition while underpinning economic growth in the UK.
"Our financial performance is on track; we grew revenue and EBITDA in the
first six months of the year and we remain laser focused on modernising and
simplifying BT Group. Given the current high inflationary environment,
including significantly increased energy prices, we need to take additional
action on our costs to maintain the cash flow needed to support our network
investments. As a result, we are increasing our cost savings target from
£2.5bn to £3.0bn by the end of FY25.
"High-quality connectivity has never been more important for our customers and
our products provide great value for money.
"We continue to drive ahead with our strategy designed to deliver consistent
and predictable revenue and EBITDA growth, expand cash flow and underpin our
progressive dividend policy over the longer-term."
Key strategic developments:
• We are firmly on track in delivering our strategy despite short-term
macroeconomic pressures; we are investing to sustain network leadership,
improving customer experience and reducing our costs to strengthen our
competitive position
• FTTP build passed 8.8m premises, including 2.8m in rural areas, with
initial build underway on a further 6m premises; weekly build rate averaging
62k premises in Q2
• FTTP connections ahead of plan; Q2 net adds of 331k with total take
up of 27%
• Openreach broadband base down 89k in Q2 (Q2 FY22: net adds of 29k)
due to reduced broadband market growth and c.40k impact from industrial
action, with competitor churn in line with our expectations; average monthly
rental ARPU grew by c.£1 year on year due to continued increase in
fibre-enabled broadband
• Openreach reviewing wholesale pricing to accelerate migration to
FTTP
• EE's 5G network continues to grow with 5G deployed in nearly all UK
major towns and cities
• Completed Sports JV to create one of the most extensive portfolios
of premium sports in the UK
• Delivered gross annualised cost savings of £1.7bn since April 2020
with total cost to achieve of £0.9bn; FY25 target increased from £2.5bn to
£3.0bn in response to cost inflation, with total cost to achieve of £1.6bn
Revenue and EBITDA growth and interim dividend at 2.31pps confirmed
• Revenue £10.4bn, up 1% due to growth in Consumer and Openreach
partially offset by legacy declines in large corporate customers in
Enterprise, lower equipment sales in Global and the impact of the BT Sport
disposal
• Adjusted(1) EBITDA £3.9bn, up 3% due to revenue growth, continued
strong cost control and some one-off items, partially offset by increased
energy costs and cost inflation
• Reported profit before tax £0.8bn, down 18% due to increased
depreciation from network build and higher specific costs offsetting
adjusted(1) EBITDA growth
• Reported capital expenditure £2.6bn, up 2% due to increased
Openreach investments in fixed network infrastructure offsetting a decline in
spectrum; capital expenditure excluding spectrum payments up 26%
• Net cash inflow from operating activities £2.9bn; normalised free
cash flow(1) £0.1bn, down £0.3bn primarily reflecting higher cash capex
partially offset by increased EBITDA and working capital movements including
stronger collections and movement in sports rights
• Gross IAS 19 deficit of £1.7bn, up from £1.1bn at 31 March 2022
mainly due to the impact of higher real gilt yields partly offset by deficit
contributions; BT Pension Scheme roll-forward funding deficit was £4.4bn at
end of June 2022, and not adversely impacted by gilt market volatility in late
September
• FY23 capex outlook revised from c.£4.8bn to c.£5.0bn due to higher
fibre connections and inflation, enabled by a £0.2bn tax refund in October;
capex in subsequent years will be c.£4.8bn over remainder of the peak fibre
build
• Normalised free cash flow(1) expected to outturn towards the lower
end of the £1.3bn-£1.5bn range
• Interim dividend of 2.31 pence per share in line with our policy
(1) See Glossary on page 3
Half year to 30 September 2022 2021 Change
Reported measures £m £m %
Revenue 10,366 10,305 1
Profit before tax 831 1,009 (18)
Profit after tax 893 431 107
Basic earnings per share 9.1p 4.4p 107
Net cash inflow from operating activities 2,911 2,394 22
Half year dividend 2.31p 2.31p -
Capital expenditure 2,613 2,563 2
Adjusted measures
Adjusted(1) Revenue 10,368 10,308 1
Adjusted(1) EBITDA 3,873 3,748 3
Adjusted(1) basic earnings per share 10.0p 10.2p (2)
Normalised free cash flow(1) 64 360 (82)
Capital expenditure excluding spectrum 2,613 2,067 26
Net debt(1,2) 19,042 18,241 £801m
Customer-facing unit updates
Adjusted(1) revenue Adjusted(1) EBITDA Normalised free cash flow(1)
Half year to 30 September 2022 2021 Change 2022 2021 Change 2022 2021 Change
£m £m % £m £m % £m £m %
Consumer 4,992 4,857 3 1,295 1,077 20 460 525 (12)
Enterprise 2,439 2,572 (5) 660 852 (23) 112 327 (66)
Global 1,617 1,654 (2) 197 207 (5) (128) (63) (103)
Openreach 2,836 2,707 5 1,711 1,561 10 53 8 n/m
Other 14 14 - 10 51 (80) (433) (437) 1
Intra-group items (1,530) (1,496) (2) - - - - -
Total 10,368 10,308 1 3,873 3,748 3 64 360 (82)
Second quarter to 30 September 2022 2021 Change 2022 2021 Change 2022 2021 Change
£m £m % £m £m % £m £m %
Consumer 2,490 2,475 1 670 554 21
Enterprise 1,239 1,285 (4) 345 423 (18)
Global 843 869 (3) 101 105 (4)
Openreach 1,419 1,360 4 860 788 9
Other 7 6 17 (6) 12 (150)
Intra-group items (763) (757) (1) - - -
Total 5,235 5,238 - 1,970 1,882 5 269 403 (33)
(1) See Glossary on page 3
(2) Net debt was £18,009m at 31 March 2022
n/m = not meaningful
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, share buybacks, acquisitions and disposals, and repayment and
raising of debt, 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 or from joint ventures held within current asset investments or loans
and borrowings are also excluded.
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 32 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 the
BT Sport disposal, 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 30 to 32.
Enquiries
Press office: Tom Engel Tel: 07947 711 959
Richard Farnsworth Tel: 07734 776 317
Investor relations: Mark Lidiard Tel: 0800 389 4909
We will hold a conference call for analysts and investors in London at 10am
today and a simultaneous webcast will be available at www.bt.com/results
(file:///C%3A/Users/803076431/AppData/Local/Microsoft/Windows/INetCache/Content.Outlook/9NO227HI/www.bt.com/results)
.
We are scheduled to announce the third quarter results for FY23 on 2 February
2023.
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