Member Info for fleccy

That's a hard one to answer Pete, I suppose much will depend on regulation going forward and how much IOT and AI pushes processing closer to the edge. It isn't just the pipe connecting to the end user, new applications like augmented reality, driverless cars and many other new applications will require low latency connectivity between servers and end users, which will require the servers to be as close to the end user as possible.

As time goes on, security, latency and bandwidth will become ever more important and BT have been experimenting with various technologies to be ready.

On the access network they've been experimenting with Hollow Core Fibre, which allows light to travel faster than in glass and offers greater bandwidth potential.

https://newsroom.bt.com/bt-kicks-off-trials-of-revolutionary-new-optical-fibre/

https://www.cambridgemc.com/hollow-core-fibre-the-route-to-a-faster-future

https://www.analysysmason.com/research/content/articles/hollow-core-fibre-rdfi0/

And they're also working on securing network data at the Quantum level.

https://newsroom.bt.com/shaping-the-uks-quantum-enabled-economy/

Couldn't have put it better myself Phat. I've argued for years that BT is a cost cutting play with the potential to grow bottom line Net Income, rather than a revenue growth type investment. I wouldn't describe myself as an expert on Lease Liabilities, or anything financial, but it makes sense that Lease Liabilities reduce year on year as they pay each year's lease rental charge. The reduction in the lease liability figure, will likely be calculated based on BT's knowledge of how many buildings they're closing and when, set against the predicted increases in rental charges in the meantime. I expect the lease liabilities will eventually level off dependent on what BT decides to do at the end of the current leasing arrangement, with Telereal Trillium, around 2031. I believe BT still own the Freehold for the properties and will get a cut of any redevelopment profits from the sale of any redundant land/buildings.

https://www.ispreview.co.uk/index.php/2020/12/openreach-consult-on-closure-plans-for-4600-uk-exchanges.html

https://www.building.co.uk/corporate-real-estate-telereal-closes-deal-to-manage-bt-properties/1014242.article

Apart from one person, I don't know anyone who uses Crypto apps on their phone, why would they need to in this country? You can already buy stuff using digital banking apps on your phone, or with your debit card and both are free to use, I doubt anyone trading using crypto wont have transaction/conversion charges. Anyone using debit cards tied to their bank account will also pay around the same for their groceries week in week out, whereas someone using a crypto based service would have to deal with volatility as well as any charges.

I do know one person who uses a crypto payment service to purchase streaming apps in foreign markets, so they buy something like Netflix in Turkey, via the crypto app, and stream it as they would normally; Apparently some of the streaming providers have got a bit wise to this and tried to block the loophole, but VPN's can usually get around that problem; So there you have it the only real use for Crypto apps, in countries like the UK, is to get around the rules and circumvent the system.

Bitcoin will only be successful ,as a means of exchange, if it's as stable and cheaper than conventional banking to use, and neither of those things are on the cards.

Pas most of the money in the world is held by older affluent individuals. I would suggest that many younger people have jumped on the Crypto bandwagon as they see it as some sort of short cut to paying off debts, or becoming rich, it's more akin to a bet than an investment.

The biggest current problem for Crypto is that AI hype is sucking all the air out of other bubbles, and much of the speculative Crypto cash will jump ship and board the AI super tanker instead. The miners are having to sell their newly won Bitcoin to cover their operating costs, post halving, since Difficulty has held up with stiff competition to find the winning hashes. I suspect many miners will have invested heavily in anticipation that other miners would throw in the towel, but that doesn't appear to have happened this time from what I've read.

Personally I don't see any value in Bitcoin, I view it as equivalent to a gambling chip used in a game where participants bet on the direction of the price. I've had a brilliant idea for a betting alternative to Bitcoin, they could put a storm glass weather barometer at a specific location and monitor with camera's streaming to the internet; The price of the token would depend on the level within the glass and profit/loss would be dependent on the direction and when you sell. They could make it even more interesting by putting the glass on a ship so the location changes over time; It'd be no less useful than Bitcoin.

https://www.youtube.com/watch?v=i4aczba45gs

With a company like BT it isn't as simple as just looking at working capital Velo, are you getting your negative £1 Billion working capital figure by subtracting Current Liabilities from Current assets? I don't believe looking at one section of the balance sheet paints an accurate picture in itself, with the most important figure's being Free cash flow and Net Debt incorporating everything. I wouldn't be worried if BT added more Financial Debt in the short term, since their free cash flow should improve dramatically between now and 2030.

Clearly BT has increased Financial Net Debt, due to pension deficit payments and the massive £5 Billion a year CAPEX into FTTP and 5G, which should tail off in the coming years since they've stated they're now past peak Capex, plus they're targeting "a further £3bn of gross annualised cost savings to be reached by the end of FY29". If BT wasn't a profitable company I'd probably agree with you on Working Capital, but BT and Telecom companies in general are cash generating machines once CAPEX cycles complete.

"When BT has clearly stated that they've passed peak cash flow"

Correction to that line, I meant peak CAPEX not cash flow.

I'm with you Phat I don't see any issues with BT's finances, but I'd rather read why people hold a different opinion instead of directly disagreeing with them.

Aus they wont need to cut CAPEX though, I just included that as an example of something they could do. BT stated that they have £2.8 Billion in cash and equivalents, with the current portion of loans and other borrowings totaling £1.4bn. Should BT lose the class action it's highly unlikely that the payout will come to a further £1.4 Billion, as that would mean Patourel's lawyers will have won on all counts, including payouts for split purchase customers who OFCOM deemed as engaged and not part of their initial request.

Velo I saw your 11:53 post and responded to it at 16:00, where do you get your greater than £1 Billion Working capital figure from and why do you believe cash flow isn't safe? When BT has clearly stated that they've passed peak cash flow and projecting improved future cash flow's.

Aus, the cash in the Bank and revolving credit facility aren't the only considerations, there's also earnings and CAPEX. If BT did start to suffer short term liquidity issues, they could first draw on the revolving credit facility and if that wasn't enough they could reduce CAPEX temporarily. The only thing in the short term, I can think of that might hit liquidity, is if they lose the Class action and have to pay out the full amount; I have no idea what will happen in relation to the class action, but there are levers BT can pull should the decision go against them, BT seem to think it wont.

To add to my last post, here are two charts of BT's Bond debt I made last year. I can't remember updating them, so they may be slightly out of date now. If the charts are missing something, I don't think they'll be out by much.

https://docs.google.com/spreadsheets/d/e/2PACX-1vTga-e_OMKY-RszcRtUutcyaP_KjD12HX7w2CCEuL0CvSTuRB6D_nhUO2pY8qYjSmnSXE2e9t2xe5sq/pubchart?oid=50340481&format=interactive

https://docs.google.com/spreadsheets/d/e/2PACX-1vTga-e_OMKY-RszcRtUutcyaP_KjD12HX7w2CCEuL0CvSTuRB6D_nhUO2pY8qYjSmnSXE2e9t2xe5sq/pubchart?oid=483405488&format=interactive

I'm not an accountant so I'll happily be corrected if I've misunderstood something, or printed wrong figures.

DEBT

From the 1st April 2019 BT moved onto IFRS16, which effectively meant there was a requirement to calculate forward looking Lease Liabilities and report the calculated figure as an addition to Net Debt; Vodafone doesn't list specific Lease Liabilities in their Cash Flow statement, but incorporate it into their Group EBITDAal (after leasing) figure instead. If you look at the following chart, it shows the increase in the Net Debt figure as a result of the change to IFRS16:

https://docs.google.com/spreadsheets/d/e/2PACX-1vTga-e_OMKY-RszcRtUutcyaP_KjD12HX7w2CCEuL0CvSTuRB6D_nhUO2pY8qYjSmnSXE2e9t2xe5sq/pubchart?oid=958721961&format=interactive

BT have been spending a lot on CAPEX and resolving the Pension Deficit, so they have been increasing Financial Debt, as demonstrated in the chart, to cover additional costs. You'll notice that Lease Liabilities are reducing year on year, I think that's due to BT's plan for reducing their buildings from over 5000, to around 1000 post 2030; The Lease Liability figure will eventually level out to reflect the new building footprint once the Exchange closure program completes. Basically the Net Financial Debt is around £5 Billion less than the reported Net Debt figure, with Lease payments (rent) around £750 Million in FY24.

WORKING CAPITAL

Velo you'll have to clarify your "Working Capital has disappeared down the plug-hole (for past couple of years now) and been replaced by red minus figure in the millions but last year passed into minus one £billion!" statement, because I don't see where you get your minus £1 Billion from?

This is what BT say about Working Capital

"We include the sale of cash flows of contract assets related to mobile handsets where the performance obligations have been substantially delivered to the customer. This is a financing cash flow in the cash flow statement as certain performance obligations in the contract need to be fulfilled before the right to consideration is unconditional. The underlying rationale for entering into these transactions is however for the purpose of working capital management as handset costs are incurred up front but recovered throughout the customer contract term. We therefore view the related cash flows as equivalent to working capital cash flows internally"

If I'm understanding Working capital correctly, it's an upfront cost that's recovered over time, in the case of Vodafone their working capital increases their Net Debt figure in H1 figures and subtracts from the Net Debt in the H2/FY figures. I don't pay much attention to Working capital because it doesn't seem that important; I could be missing something, so Velo I'd be grateful if you could explain in detail BT's Working Capital outflows/inflows and how it's relevant to their accounts?

Velo can you clarify the following:

"Discovered some disturbing liquidity/Cash Flow issues, that are so dire that I'm going to directly contact the Finance Director tomorrow"

"where she announces a 5 year plan to attend to the matter of improving cashf low - so she knows it's a serious problem!"

"However, on paper the figures are dire. The comments so far from the management and the bare figures reported, do not synchronise with an "it's okay" outlook"

There was some scaremongering in that post, so you really need to explain your thinking.

In reality, Kirkby only reiterated what Jansen said the previous year, this is a paste from a previous thread where I pointed as much out:

"Financial outlook's 2023/24 17 May 2024 15:51

In 2023 BT said:

"Beyond FY24, we continue to expect consistent and predictable adjusted revenue and adjusted EBITDA growth driven by CPI-linked pricing and by cost transformation. We remain confident in expanding normalised free cash flow by at least £1.5bn, when compared with FY22, by the end of the decade. This comes from lower capex and lower opex as we move past peak capex and towards an all-fibre, all-IP network"

FY25 outlook:

"Adjusted revenue growth of 0-1% and EBITDA of around £8.2bn; capital expenditure excluding spectrum less than £4.8bn; normalised free cash flow of around £1.5bn

Mid-term guidance: Consistent and predictable adjusted2 revenue growth and EBITDA growth ahead of revenue, enhanced by cost transformation from FY26 to FY30; capital expenditure excluding spectrum less than £4.8bn until FY26, reducing by c. £1bn post peak FTTP build; normalised free cash flow of c. £2.0bn in FY27 and c. £3.0bn by the end of the decade"

The FY22 Free Cash Flow came in at £1.392 Billion, if you add £1.5 Billion to that you get £2.892 Billion, so roughly rounded up to £3 Billion which ties in with what Kirkby said in her end of decade outlook.

Basically Kirkby said the same yesterday as Jansen said in 2023, the only difference being that Kirkby added the two figures up for the analysts and gave the resultant rounded figure. I can only conclude that the analysts either can't add up, can't read and interpret, or they had a vested interest in ignoring Jansen in 2023.

https://www.bt.com/bt-plc/assets/documents/investors/financial-reporting-and-news/quarterly-results/fy23/q4/q4-fy23-release.pdf

https://www.bt.com/bt-plc/assets/documents/investors/financial-reporting-and-news/quarterly-results/fy24/h2/h2-fy24-release.pdf"

I have no idea why the market understood the increase to £3 Billion cash flow by 2030 in the FY24 statement, but didn't latch on to it in the FY23 results, maybe the analysts ONLY UNDERSTAND THINGS WHEN THEY'RE EXPRESSED IN SIMPLE TERMS.

Velo, what about the details of your analysis?

Parker, in the case of SaaS the server would have to be very close to the miner and very fast, since any delay would be crippling due to the gargantuan BTC Network hash rate. As far as I can remember, I've seen no update stating that QBT have proven their software outside of the lab, which I'd argue isn't surprising. The Bitcoin Network runs 24 hours a day, 7 days a week, and literally anyone anywhere can participate in mining; This goes back to what I said in my last post, to prove QBT's software works they need scale, otherwise the hash rate of the rest of the mining network will reduce the probability of QBT finding a winning hash to a miniscule (insignificant) fraction. Think of it like this, imagine you have 100 ASIC's and you double the efficiency to the equivalent of 200 ASIC's, the improvement wont be apparent if measured against a million other ASIC's processing hashes in the rest of the Network, they likely need significant scale to prove their software works outside of the lab.

I just plucked out the cash flow figures for FY24 and included then in my chart.

https://docs.google.com/spreadsheets/d/e/2PACX-1vTga-e_OMKY-RszcRtUutcyaP_KjD12HX7w2CCEuL0CvSTuRB6D_nhUO2pY8qYjSmnSXE2e9t2xe5sq/pubchart?oid=1033495067&format=interactive

I've only glanced through the results spreadsheet, but nothing dire jumps out at me, so Velo will have to clarify what he's concerned about.

I don't chart working capital, as it's not really that relevant in my opinion. This year it showed as -£341 Million and although it dropped lower than last years -£115, I'm not sure it's that important in the scheme of things.

When it comes to liquidity, this is what BT says:

" Net debt and liquidity

• Net financial debt (which excludes lease liabilities) at 31 March 2024 was £14.5bn (31 March 2023: £13.5bn), increasing mainly due to our scheduled pension scheme contributions of £0.8bn.

• Net debt1 (which includes lease liabilities) at 31 March 2024 was £19.5bn (31 March 2023 £18.9bn). The difference to the movement in net financial debt reflects lease movements.

• BT Group holds cash and current investment balances of £2.8bn; the current portion of loans and other borrowings is £1.4bn.

• Our £2.1bn revolving credit facility, which matures in March 2027, remains undrawn at 31 March 2024.

• We remain committed to our credit rating target of BBB+ and minimum rating of BBB.

◦ During FY24 all of the major agencies confirmed their ratings at BBB or equivalent with stable outlook."

Zesty I believe QBT are trying to achieve the impossible, so I'm not expecting much in the way of progress to be honest.

Even if QBT's Method B works they'd likely need a massive number of ASIC's to prove it, and even then there'd be a good probability that other miners could find the winning hashes first. Because of the phenomenal hash rate of the Bitcoin network, QBT would have to process and distribute their data to their client's mining rigs at a fast enough speed to beat the rest of the BTC network, any delays would reduce the probability of QBT's software finding a winning hash first, even if their software works; Especially so in the case of SaaS. My guess is that QBT would need one of the big miners to allocate a large number of their rigs/ASIC's toward proving QBT's software works, otherwise it could take years, or decades, to prove it.

If I had a product that significantly increased the speed of Bitcoin mining, but needing huge amounts of hash power to prove it, I'd approach one of the top three miners and enter into a contractual partnership agreement with them; If it works winner winner chicken dinner for the miner and QBT.

Https://www.youtube.com/watch?v=q3qfXpoScxw&t=1s

Sorry, I mean the next 11 days 🥸 Results imminent 🚂

It looks as though the trade went through at the open price of 139.25p, which was also the day low. It could be that the parties involved pre negotiated the trade based on the opening price, so I'm not sure anything can be speculated from the trade price. It may even be that the trade went through at the open and wasn't reported until after the close.

Possibly to cover the Hybrid Bonds with Next Call dates in 2024/25.

https://docs.google.com/spreadsheets/d/e/2PACX-1vRA1ndHTf_Bz7O_moDxmcbWnEtcusZucUu6lEJvm3O4mGooeH4ErFjRqot3RQHBaVXCgoUED1k2CUVK/pubchart?oid=17624073&format=interactive

I assume the 2 Billion Euro Hybrid Bond for 2023 has already been covered and there's a further 1.8 Billion Euro's with Next call dates in the next 13 months. If they cover Hybrid Bonds from shares in Treasury it prevents dilution.

Velo I notice you agreed that the debt is huge, can you explain why? Because I take a different view.