REG - BT Group PLC - Half-year Report
02/11/2023 07:16
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RNS Number : 1140S BT Group PLC 02 November 2023
Results for the half year to 30 September 2023
BT Group plc
2 November 2023
Philip Jansen, Chief Executive, commenting on the results, said
"These results show that BT Group is delivering and on target: we're rapidly
building and connecting customers to our next generation networks, we're
simplifying our products and services, and we're now seeing predictable and
consistent revenue and EBITDA growth.
"We've strengthened our competitive position with the launch of both New EE
and our renewed strategy in Business, and Openreach has now built full fibre
broadband to more than a third of the UK's homes and businesses with a growing
connection rate. Our transformation programme has now delivered £2.5bn in
annualised savings, well on track to meet our £3bn savings target by FY25.
"Our delivery in the first half means we are confirming our financial outlook
for FY24 with normalised free cash flow now expected towards the top end of
the guidance range, and we are declaring an interim dividend of 2.31 pence per
share. BT Group has a bright future and I'm pleased to be handing the baton to
Allison Kirkby early in the new year. She knows the sector, she knows the
company and she's the right person to lead BT Group from this position of
operational strength."
Continued strong execution of our strategy
• FTTP build rate accelerated to 66k per week delivering a record of
860k premises passed in the quarter, FTTP footprint is now expanded to 12m
premises with a further 6m where initial build is underway
• Strong customer demand in Openreach for FTTP with net adds of 364k in
Q2, bringing take-up rate to 33%
• Openreach broadband ARPU grew by 10% year-on-year due to price rises
and increased volumes of FTTP; Openreach broadband line losses of 255k in H1,
a 1% decline in the broadband base; whilst we continue to target a decline of
around 400k in FY24, softer market conditions increase the risk that losses
will be above this level
• Consumer broadband ARPU for the year to date increased 4% year-on-year
and Consumer postpaid mobile ARPU for the year to date increased 9%
year-on-year; churn for the year to date remains stable for both broadband and
postpaid mobile at 1.1% and 1.0% respectively
• In October 'New EE' was launched with a modern digital platform and
a set of converged products and services
• Retail FTTP base grew year-on-year by 48% to 2.2m of which Consumer
2.1m and Business 0.1m; 5G base 9.9m, up 42% year-on-year
• Cost transformation on track with gross annualised cost savings of
£2.5bn since April 2020 against our £3bn target, with a cost to achieve of
£1.3bn against a target of £1.6bn
• Continued focus on creating standout customer experiences with BT
Group NPS of 22.7, up 1.8pts year-on-year
Adjusted(1) Revenue and EBITDA growth:
• Reported revenue £10.4bn, in line with the prior year; adjusted(1)
revenue £10.4bn, up 3% on a pro forma(2) basis due to increased fibre-enabled
product sales, inflation-linked pricing and improved lower margin trading in
Business partially offset by legacy product declines
• Adjusted(1) EBITDA £4.1bn, up 6%; and up 4% on a pro forma(2) basis
with revenue flow through and strong cost control more than offsetting cost
inflation and one-off items in the prior year; Business EBITDA decline due to
increased input costs and legacy high-margin managed contract declines
• Reported profit before tax £1.1bn, up 29% largely due to factors
driving adjusted(1) EBITDA growth
• Reported capital expenditure ('capex') £2.3bn, down 11% with lower
fixed network spend driven by lower FTTP build unit costs; cash capex of
£2.5bn also down 11%
• Net cash inflow from operating activities £2.3bn; normalised free
cash flow(1) £0.5bn, up £0.4bn primarily due to £0.2bn increase in adjusted
EBITDA(1) and £0.3bn decrease in cash capital expenditure partly offset by
£(0.1)bn net working capital outflow; net working capital movements includes
£359m from the sale of cash flows of contract assets relating to mobile
handsets as well as £(220)m from lower utilisation of a supply chain
financing programme
• Net debt £19.7bn, (31 March 2023: £18.9bn), increasing mainly due to
pension scheme contributions with net free cash flow for the first half of
FY24 substantially offsetting the payment for the final dividend of FY23
• Gross IAS 19 deficit of £3.9bn, up from £3.1bn at 31 March 2023
mainly due to the increase in real interest rates and narrowing of credit
spreads over H1, partly offset by deficit contributions
• Interim dividend for FY24 of 2.31 pence per share (pps) in line with
our policy of paying 30% of prior year's full year dividend
• FY24 Outlook: Adjusted(1) revenue and EBITDA growth on a pro forma
basis; capital expenditure excluding spectrum of around £5.0bn; normalised
free cash flow towards the top end of £1.0bn-£1.2bn range.
(1) See Glossary on page 3.
(2) See 'Prior period comparatives' section on page 2 for background on pro
forma comparatives.
Half year to 30 September 2023 2022 Change
Reported measures £m £m %
Revenue 10,407 10,366 -
Profit before tax 1,076 831 29
Profit after tax 844 893 (5)
Basic earnings per share 8.6p 9.1p (5)
Net cash inflow from operating activities 2,324 2,911 (20)
Interim dividend 2.31p 2.31p -
Capital expenditure 2,321 2,613 (11)
Adjusted measures
Adjusted(1) Revenue 10,414 10,368 -
Adjusted(1) EBITDA 4,094 3,873 6
Pro forma(2) Revenue 10,414 10,130 3
Pro forma(2) EBITDA 4,094 3,944 4
Adjusted(1) basic earnings per share 10.3p 10.0p 3
Normalised free cash flow(1) 456 64 613
Net debt(1,3) 19,689 19,042 £647m
Customer-facing unit updates
Adjusted(1) revenue Adjusted(1) EBITDA Normalised free cash flow(1)
Half year to 30 September 2023 2022 Change 2023 2022 Change 2023 2022 Change
Pro forma(2) Pro forma(2) Pro forma(2) re-presented(2)
re-presented(2) re-presented(2)
£m £m % £m £m % £m £m %
Consumer 4,903 4,754 3 1,347 1,296 4 798 499 60
Business 4,100 4,041 1 806 903 (11) (65) 12 (642)
Openreach 3,053 2,836 8 1,936 1,735 12 152 59 158
Other 8 14 (43) 5 10 (50) (429) (506) 15
Intra-group items (1,650) (1,515) (9) - - - - -
Total 10,414 10,130 3 4,094 3,944 4 456 64 613
Second quarter to 30 September 2023 2022 Change 2023 2022 Change 2023 2022 Change
Pro forma(2) Pro forma(2) Pro forma(2)
re-presented(2) re-presented(2) re-presented(2)
£m £m % £m £m % £m £m %
Consumer 2,480 2,406 3 674 664 2
Business 2,073 2,074 - 420 469 (10)
Openreach 1,527 1,419 8 971 872 11
Other 3 7 (57) (4) (6) 33
Intra-group items (833) (755) (10) - - -
Total 5,250 5,151 2 2,061 1,999 3 687 269 155
(1 ) See Glossary on page 3.
(2) See 'Prior period comparatives' section below for more information on pro
forma and re-presented measures.
(3) Net debt was £18,859m at 31 March 2023.
Prior period comparatives
Throughout this release, comparative financial information for the half year
to 30 September 2022 ('FY23') has been re-presented to reflect the merger of
our Global and Enterprise business units to form Business; and the change in
the methodology used to allocate shared Network, Digital and support function
costs across our units, which improves the relevance of our financial
reporting by better allocating internal costs to the drivers behind those
costs. These adjustments are made pursuant to IFRS accounting requirements,
for more information see note 1 to the condensed consolidated financial
statements on page 15 .
In addition, the group and operating review sections of this release present
comparative financial information for the Consumer customer-facing unit and BT
Group overall on an unaudited 'pro forma' basis. This reflects adjustments
that estimate the impact as if trading in relation to BT Sport has been equity
accounted in FY23, akin to the Sports JV being in place historically. Analysis
on a pro forma basis enables comparison of results on a like-for-like basis.
The Additional Information on page 29 presents a bridge between financial
information for the half year to 30 September 2022 as published on 3 November
2022, and the comparatives presented in this release. For further information
see bt.com/about
(file:///C%3A/Users/700738890/AppData/Local/Microsoft/Windows/INetCache/Content.Outlook/TCYA8AH4/bt.com/about)
for separate publications covering the formation of Business and cost
allocation changes, (published 27 June 2023), and the pro forma adjustments
(published 18 October 2022).
Glossary
Adjusted Adjusted measures (including adjusted revenue, adjusted operating costs,
adjusted operating profit, and adjusted basic earnings per share) are 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.
Adjusted EBITDA Earnings before interest, tax, depreciation and amortisation, before specific
items, share of post tax profits/losses of associates and joint ventures and
net 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, payment of lease liabilities, net cash
flows from the sale of cash flows related to contract assets, monies received
as prepayment for the sale of redundant copper, dividends received from
non-current assets investments, associates and joint ventures, and net
purchase or disposal of non-current asset investments, 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. Amounts due to joint ventures, loans and borrowings recognised in
relation to monies received from the sale of cash flows of contract assets and
as prepayment for the forward sale of redundant copper are excluded. 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.
Service revenue Earned from services delivered using our fixed and mobile network
connectivity, including but not limited to, broadband, calls, line rental, TV,
residential sport subscriptions, mobile data connectivity, incoming &
outgoing mobile calls and roaming by customers of overseas networks.
Re-presented FY23 comparatives throughout this release have been re-presented to reflect:
(i) the merger of our Global and Enterprise business units to form Business;
and
(ii) the change in our methodology used to allocate shared Network, Digital
and support function costs across our units.
Refer to the 'Prior period comparatives' section on page 2 and note 1 to the
condensed consolidated financial statements on page 15 for more details, and
to Additional Information on page 29 for a bridge between previously published
FY23 financial information and re-presented numbers.
Pro forma Unaudited pro forma results estimate the impact on the group as if trading in
relation to BT Sport has been equity accounted in FY23, akin to the Sports JV
being in place historically.
Refer to the 'Prior period comparatives' section on page 2 for more
information and to Additional Information on page 29 for a bridge between
previously published financial information (re-presented as noted above) and
pro forma numbers.
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 29 to 31.
Click on, or paste the following link into your web browser, to view the
associated PDF document.
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(http://www.rns-pdf.londonstockexchange.com/rns/1140S_1-2023-11-1.pdf)
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