BT Group PLC Trading update for first quarter to 30 June 2018 (9434V)

TIDMBT.A

RNS Number : 9434V

BT Group PLC

27 July 2018

BT Group plc

Trading update for the first quarter to 30 June 2018

27 July 2018

BT Group plc (BT.L) today announced its trading update for the first quarter to 30 June 2018.

Key developments for the quarter

Strategic:

   --     Successfully launched new converged products including BT Plus and 4G Assure 
   --     EE to launch the UK's first live 5G trial network in East London in October 

-- Future Telecoms Infrastructure Review conclusion and Ofcom's approach to future regulation provide positive progress towards enabling fair returns for infrastructure investment

-- Openreach announced new wholesale pricing discounts to accelerate superfast and ultrafast uptake

-- Continued improvement in customer experience metrics; Group NPS(1) up 1.9 points and Right First Time(2) up 3.1%

-- Initiatives to transform our operating model on track; new Enterprise senior leadership team announced

Operational:

-- Over 1.7m total ultrafast premises passed; currently building FTTP to c.10,000 premises per week

-- Monthly fixed ARPU up 1% to GBP37.9, with increased mix of SIM only reducing postpaid mobile ARPU by 1% to GBP21.7; churn remains low at 1.2%

-- Mobile customers up 4% in Business and Public Sector. External broadband lines down 6% in Wholesale and Ventures and 3% in Business and Public Sector

Financial:

-- Reported revenue of GBP5,715m. Underlying(3) revenue down 2%(4) as regulated price reductions in Openreach and declines in our enterprise businesses offset growth in our consumer business

-- Adjusted(3) EBITDA up 1%(4) to GBP1,800m mainly driven by stronger handset margins in our consumer business and restructuring related cost savings

   --     Reported profit before tax of GBP704m. Adjusted(3) profit before tax up 3%(4) at GBP816m 

-- Normalised free cash flow(3) of GBP507m down 9% mainly driven by increased cash capital expenditure partly offset by timing of working capital movements

   --     Reported capital expenditure broadly flat at GBP839m 
 
 Gavin Patterson, Chief Executive, commenting on the trading update, 
  said 
  "We've made a good start to the year. We are making positive progress 
  against our strategy. Our customer experience metrics continue 
  to improve and we have seen the successful launch of new converged 
  products including BT Plus, our first Consumer converged offering 
  and 4G Assure, for business customers. Initiatives to transform 
  our operating model have seen a gross reduction in c.900 roles 
  across the Group and improved cost performance. 
  "EE continues to maintain its network leadership and will switch 
  on the UK's first live 5G network trial in October. Openreach 
  continues its FTTP network deployment and is currently building 
  to c.10,000 premises per week. New Openreach wholesale pricing 
  will incentivise communications providers to encourage more of 
  their customers onto better services and ultimately move the vast 
  majority of Britain's homes and businesses onto superfast and 
  ultrafast platforms. We welcome the initial outcome of DCMS' Future 
  Telecoms Infrastructure Review and Ofcom's approach to future 
  regulation and look forward to further engagement with all our 
  key stakeholders to ensure greater clarity, certainty and support 
  as we look to realise our broader investment ambitions. 
  "Our outlook for the year remains unchanged." 
                                                                                                 =========== 
                                              2018                             2017        2017 
  First quarter to 30 June               (IFRS 15)    (IFRS 15 pro forma unaudited)    (IAS 18)    Change(4) 
===============================  ====  ===========  ===============================  ==========  =========== 
                                              GBPm                             GBPm        GBPm            % 
===============================  ====  ===========  ===============================  ==========  =========== 
 Reported measures 
 Revenue                                     5,715                                        5,837          n/m 
 Profit before tax                             704                                          418          n/m 
 Profit after tax                              549                                          285          n/m 
 
 Adjusted measures 
 Adjusted revenue                            5,716                            5,835       5,849          (2) 
 Change in underlying(3) revenue                                                                         (2) 
 Adjusted(3) EBITDA                          1,800                            1,785       1,785            1 
 Adjusted(3) profit before tax                 816                              791         791            3 
 Capital expenditure                           839                              835         835            - 
 Normalised free cash flow(3)                  507                              556         556     GBP(49)m 
 Net debt(3)                                11,227                            8,810       8,810    GBP2,417m 
=====================================  ===========  ===============================  ==========  =========== 
 

(1) Group NPS measures Net Promoter Score in our retail business and Net Satisfaction in our wholesale business

(2) Measured against Group-wide 'Right First Time' (RFT) index

(3) See Glossary on page 2

(4) Measured against unaudited IFRS 15 pro forma comparative period in the prior year

n/m = IFRS 15 to IAS 18 comparison not meaningful

Customer facing unit results for the first quarter to 30 June 2018

 
                                    Adjusted(1) revenue          Adjusted(1) EBITDA 
                              ===========================  ========================== 
 First quarter to 30 June        2018    2017(2)   Change     2018   2017(2)   Change 
                                 GBPm       GBPm        %     GBPm      GBPm        % 
============================  =======  =========  =======  =======  ========  ======= 
 Consumer                       2,591      2,540        2      610       556       10 
 Business and Public Sector     1,085      1,132      (4)      350       342        2 
 Wholesale and Ventures           459        497      (8)      154       174     (11) 
 Global Services                1,147      1,246      (8)       95        73       30 
 Openreach                      1,217      1,248      (2)      567       621      (9) 
 Other                              1          2      n/m       24        19       26 
 Intra-group eliminations       (784)      (830)        6        -         -        - 
============================  =======  =========  =======  =======  ========  ======= 
 Total                          5,716      5,835      (2)    1,800     1,785        1 
============================  =======  =========  =======  =======  ========  ======= 
 

(1) See Glossary

(2) Unaudited IFRS 15 pro forma used for comparative period in the prior year

n/m = not meaningful

SUMMARY AND OUTLOOK

There is no change to our financial outlook for 2018/19 from that published on 25 June which reflected the adoption of the IFRS 15 accounting standard.

 
                                          2018/19 
 Change in underlying(1) revenue        Down c.2% 
  (IFRS 15 basis) 
 Adjusted(1) EBITDA (IFRS 15 basis)      GBP7.3bn 
                                       - GBP7.4bn 
 Normalised free cash flow(1)            GBP2.3bn 
                                       - GBP2.5bn 
 Capital expenditure(2)                c.GBP3.7bn 
===================================  ============ 
 

(1) See Glossary

(2) Excluding BDUK clawback

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 second quarter and half year results for 2018/19 on 1 November 2018.

Glossary of alternative performance measures

 
 Adjusted          Before specific items 
 Net debt          Loans and other borrowings (both current and non-current), 
                    less current asset investments and cash and cash 
                    equivalents. Currency denominated balances within 
                    net debt are translated to Sterling at swapped rates 
                    where hedged 
 Normalised free   Free cash flow before specific items and the cash 
  cash flow         tax benefit of pension deficit payments 
 Specific items    Items that in management's judgement need to be disclosed 
                    separately by virtue of their size, nature or incidence. 
                    Further information is provided in note 1 on page 
                    9 
 Underlying        Excludes specific items, foreign exchange movements 
                    and the effect of acquisitions and disposals. Further 
                    information is provided in note 2 on page 9 
================  =========================================================== 
 

Our commentary focuses on the trading results on an adjusted basis. Unless otherwise stated, revenue, earnings before interest, tax, depreciation and amortisation (EBITDA), profit before tax, and normalised free cash flow are measured before specific items. Further information is provided in note 1 on page 9.

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July 27, 2018 02:00 ET (06:00 GMT)