TIDMBT.A
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 GBP2.5bn in annualised savings, well
on track to meet our GBP3bn 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 GBP2.5bn since April 2020 against our GBP3bn target,
with a cost to achieve of GBP1.3bn against a target of GBP1.6bn
-- 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 GBP10.4bn, in line with the prior year;
adjusted(1) revenue GBP10.4bn, 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 GBP4.1bn, 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 GBP1.1bn, up 29% largely due to
factors driving adjusted(1) EBITDA growth
-- Reported capital expenditure ('capex') GBP2.3bn, down 11%
with lower fixed network spend driven by lower FTTP build unit
costs; cash capex of GBP2.5bn also down 11%
-- Net cash inflow from operating activities GBP2.3bn;
normalised free cash flow(1) GBP0.5bn, up GBP0.4bn primarily due to
GBP0.2bn increase in adjusted EBITDA(1) and GBP0.3bn decrease in
cash capital expenditure partly offset by GBP(0.1)bn net working
capital outflow; net working capital movements includes GBP359m
from the sale of cash flows of contract assets relating to mobile
handsets as well as GBP(220)m from lower utilisation of a supply
chain financing programme
-- Net debt GBP19.7bn, (31 March 2023: GBP18.9bn), 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 GBP3.9bn, up from GBP3.1bn 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
GBP5.0bn; normalised free cash flow towards the top end of
GBP1.0bn-GBP1.2bn 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 GBPm GBPm %
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 GBP647m
------------------------------- ---------------------- ----------------------- -------------------------
Customer-facing unit updates
Adjusted(1) revenue Adjusted(1) EBITDA Normalised free
cash flow(1)
--------------------------------- -------------------------------
2022 2022 2022
Half year Pro forma(2) Pro forma(2) Pro forma(2)
to 30 September 2023 re-presented(2) Change 2023 re-presented(2) Change 2023 re-presented(2) Change
-----------------
GBPm GBPm % GBPm GBPm% GBPm GBPm %
----------------- ------- ---------------- ------ ----- ---------------- ----- ----- ---------------- ------
Consumer 4,903 4,754 3 1,347 1,2964 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 3,9444 456 64 613
----------------- ------- ---------------- ------ ----- ---------------- ----- ----- ---------------- ------
2022 2022 2022
Second quarter Pro forma(2) Pro forma(2) Pro forma(2)
to 30 September 2023 re-presented(2) Change 2023 re-presented(2) Change 2023 re-presented(2) Change
-----------------
GBPm GBPm % GBPm GBPm% GBPm GBPm %
----------------- ----- ---------------- ------ ----- ---------------- ----- ---- ---------------- ------
Consumer 2,480 2,406 3 674 6642
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 1,9993 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 GBP18,859m 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 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 (net cash inflow from operating activities
free cash flow 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.
http://www.rns-pdf.londonstockexchange.com/rns/1140S_1-2023-11-1.pdf
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