BT Group PLC Half-year Report (5440D)

TIDMBT.A

RNS Number : 5440D

BT Group PLC

29 October 2020

Results for the half year to 30 September 2020

BT Group plc

29 October 2020

This announcement contains inside information

BT Group plc (BT.L) today announced its results for the half year to 30 September 2020.

Key strategic developments:

   --   All of Openreach's major CP(1) customers now selling FTTP with strong increase in sales in Q2 

-- Consumer aligns pricing policies across all products and services to CPI plus 3.9% per annum to provide consistent, predictable pricing for new and regrading customers and to support network investment

Operational:

   --   Strong operating performance despite the ongoing impact of Covid-19 

-- FTTP rollout reached record levels in Q2 with run-rate of 40k premises per week; 3.5m premises passed to date

-- Openreach to stop selling copper products to c.1.8m FTTP-enabled premises by September 2021 latest

   --   5G-ready customer base now over 1m and 5G now live in 112 towns and cities 

-- Strong increase in Consumer FTTP customer base up 60% year on year; fixed and mobile convergence at 21.4%

   --   Enterprise agrees landmark partnership with Belfast Harbour to deploy 5G Private Network 
   --   Modernisation programme delivers GBP352m gross annualised savings at a cost of GBP163m 

Financial:

-- Revenue relatively resilient at GBP10,590m, down 8%, primarily due to the impact of Covid-19 including reduced BT Sport revenue and a reduction in business activity in our enterprise units, and declines in legacy products

-- Adjusted(2) EBITDA GBP3,721m, down 5%, driven by the fall in revenue, partly offset by sports rights rebates, savings from our modernisation programme and other cost initiatives including Covid-19 mitigating actions

   --   Reported profit before tax GBP1,062m, down 20%, driven primarily by reduced EBITDA 

-- Net cash inflow from operating activities GBP2,713m; normalised free cash flow(2) GBP422m, down 30%, primarily due to reduced EBITDA and offsetting movements in working capital and timing of tax payments

   --   Capital expenditure GBP1,969m, up 5%, primarily driven by fixed and mobile network investment 

-- Lower end of the adjusted(2) EBITDA outlook range for 2020/21 raised to GBP7.3bn; revised range GBP7.3bn - GBP7.5bn

-- Adjusted(2) EBITDA outlook of at least GBP7.9bn in 2022/23, underpins planned reinstated dividend from 2021/22 and value-creating investment plans

 
Philip Jansen, Chief Executive, commenting on the results, said 
 "BT delivered financial results in-line with expectations for the 
 first half of the year, thanks to strong operational performance 
 during exceptional circumstances. Customer demand during the pandemic 
 has shown how critical our networks have become, and our significant 
 network investments have helped us double the number of Openreach's 
 FTTP orders compared to this time last year and have seen our leading 
 5G network expand to 112 towns and cities across the UK. 
 "We continue to invest to make BT more competitive and I'm pleased 
 to see the quality of our products and services improving. At the 
 same time we are firmly on track with the delivery of our modernisation 
 programme and have delivered GBP352m in cost savings in the first 
 half of the year. 
 "This performance has given us confidence to raise the lower end 
 of our EBITDA outlook range for this year and publish an EBITDA 
 expectation of at least GBP7.9bn for 2022/23, with sustainable 
 growth from this level forward. This growth will be driven by the 
 continued recovery from Covid-19, enhanced by sales of our converged 
 and growth products, and by significant savings from our modernisation 
 and cost saving programme. In combination these factors will more 
 than offset legacy product declines. 
 "The growth in EBITDA underpins the planned reinstatement of our 
 dividend next year whilst ensuring that we can continue to drive 
 value-creating investments in our networks and products." 
 
 
Half year to 30 September          2020    2019       Change 
                                 ======  ====== 
                                   GBPm    GBPm            % 
===============================  ======  ======  =========== 
Reported measures 
Revenue                          10,590  11,467        (8) 
Profit before tax                 1,062   1,333       (20) 
Profit after tax                    856   1,068       (20) 
Basic earnings per share           8.6p   10.8p       (20) 
Net cash inflow from operating 
 activities                       2,713   2,243         21 
Interim dividend                     0p   4.62p 
Capital expenditure               1,969   1,882          5 
===============================  ======  ======  ========= 
 
Adjusted measures 
Adjusted(2) Revenue              10,607  11,413        (7) 
Adjusted(2) EBITDA                3,721   3,923        (5) 
Normalised free cash flow(2)        422     604       (30) 
Net debt(2)                      17,627  18,347    (GBP720m) 
===============================  ======  ======  =========== 
 

Customer-facing unit results for the half year to 30 September 2020

 
                    Adjusted(1) revenue           Adjusted(1) EBITDA           Normalised free cash 
                                                                                      flow(1) 
Half year          2020    2019(2)  Change      2020   2019(2)  Change       2020    2019(2)    Change 
 to 
30 September       GBPm       GBPm       %      GBPm      GBPm       %       GBPm       GBPm         % 
============  =========  =========  ======  ========  ========  ======  =========  =========  ======== 
Consumer          4,873      5,194     (6)     1,075     1,180     (9)        315        534    (41) 
Enterprise        2,710      2,987     (9)       833       955    (13)        474        622    (24) 
Global            1,916      2,196    (13)       289       304     (5)         57         40      43 
Openreach         2,585      2,536       2     1,453     1,417       3         20        197    (90) 
Other                12         14    (14)        71        67       6      (444)      (789)      44 
Intra-group 
 items          (1,489)    (1,514)       2         -         -       -          -          -       - 
============  =========  =========  ======  ========  ========  ======  =========  =========  ====== 
Total            10,607     11,413     (7)     3,721     3,923     (5)        422        604    (30) 
============  =========  =========  ======  ========  ========  ======  =========  =========  ====== 
 
 
Second quarter 
 to 
 30 September 
===============  =====  =====  ====  =====  =====  ====  ===  ===  ==== 
Consumer         2,511  2,644   (5)    574    592   (3) 
Enterprise       1,358  1,504  (10)    427    490  (13) 
Global             926  1,111  (17)    148    164  (10) 
Openreach        1,299  1,268     2    724    700     3 
Other                8      6    33     35     19    84 
Intra-group 
 items           (745)  (753)     1      -      -     - 
===============  =====  =====  ====  =====  =====  ====  ===  ===  ==== 
Total            5,357  5,780   (7)  1,908  1,965   (3)  471  281  68 
===============  =====  =====  ====  =====  =====  ====  ===  === 
 
 

(1) See Glossary below

(2) On 1 April 2020, Supply Chain and Pelipod, which serve several parts of BT, were transferred from Enterprise to the central procurement team and as a result are now reported in Group 'Other' financial results. The prior year comparative for the Enterprise and Other CFU results has been restated to reflect this. Refer to the announcement on 29 June 2020 for further information

Glossary of alternative performance measure

 
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 after net interest paid and payment 
 free cash flow       of lease liabilities, before pension deficit payments 
                      (including the cash tax benefit of pension deficit 
                      payments) and specific items. 
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. 
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 predominantly to 
                      retrospective regulatory charges, restructuring charges 
                      linked with our modernisation programme and other cost 
                      initiatives, and divestment related items. Further 
                      information is provided in note 6 on page 22. 
===================  ============================================================== 
 

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: [phone] 
 
Investor relations: 
Mark Lidiard         Tel: [phone] 
 

We will hold a conference 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 the third quarter results for 2020/21 on 4 February 2021.

Click on, or paste the following link into your web browser, to view the associated PDF document.

http://www.rns-pdf.londonstockexchange.com/rns/5440D_1-2020-10-28.pdf

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October 29, 2020 03:00 ET (07:00 GMT)