BT Regulatory News (BT.A)

Philip Jansen, Chief Executive, commenting on the results, said

"BT had a positive year delivering results in line with expectations and completing our £1.6bn phase 1 transformation programme, one year ahead of schedule.

"Covid-19 has changed everybody's world and I am immensely proud of how BT has responded to the challenges the Covid-19 crisis has presented. Our strong and resilient networks, both fixed and mobile, have proved critical to the continuing functioning of the UK economy, providing unrivalled connectivity and services for the nation.

"Of course, Covid-19 is affecting our business, but the full impact will only become clearer as the economic consequences unfold over the next 12 months. Due to Covid-19, BT is not providing guidance for 2020/21, at this time.

"BT has the best network infrastructure in the UK. We have the leading 4G network and are rapidly expanding our leadership position in 5G, that today covers over 80 towns and cities. We have the largest and most extensive fixed network and are leading the UK on the next generation Fibre-to-the-Premises (FTTP) network where we now pass 2.6 million premises. Today we are announcing a rapid acceleration of our FTTP build with a target of 20 million premises passed by the mid- to late-2020s, including a significant build in rural areas. After passing 1.3 million premises last year, we are aiming at over 2 million in 2020/21, and envisage a maximum build rate of 3 million premises per year. Our FTTP investment should deliver pre-tax nominal returns of between 10% to 12% and is based on a regulatory framework consistent with Ofcom's preferred policy direction and continued support for infrastructure investment and competition.

"The continued delivery of market leading customer experiences remains core to our success, with a focus on driving the take-up of converged product offerings such as Halo, our premium converged offering for homes and businesses. In the short period since launch, Halo now represents over 30% of our BT consumer broadband base.

"BT is delivering, but is also changing. BT needs to be leaner, simpler and more agile. Today we are announcing a radical modernisation and simplification programme that will use technology to create a better BT for the future. This 5-year initiative will re-engineer old and out of date processes, rationalise products, reduce re-work and switch off many legacy services. This next stage in the modernisation of BT will deliver gross annualised savings of £2 billion over the next 5 years.

"In order to deal with the potential consequences of Covid-19, allow us to invest in FTTP and 5G, and to fund the major 5-year modernisation programme, we have also taken the difficult decision to suspend the dividend until 2022 and re-base thereafter.

"These decisions, particularly on the dividend, network investment and transformation are key to underpinning BT's investment case; driving network strength, competitive strength and financial strength, providing more clarity to the market, and driving long-term value for shareholders. I am confident that these decisions position us really positively for the future."

Jan du Plessis, Chairman, commenting on the dividend, said

"Recognising the importance of dividends to our shareholders, the Board's decision in relation to the dividend has been exceptionally difficult. BT plays a key role in sustaining critical national infrastructure - as magnified by the Covid-19 crisis - and many stakeholders trust and rely on the connectivity we provide. BT also stands ready to make the biggest communications infrastructure investment in the UK in a generation - that includes building our full fibre network to 20m premises by the mid- to late-2020s. To maintain such trust, whilst creating capacity for value-enhancing investment and navigating the unprecedented uncertainties caused by Covid-19 without compromising our credit rating, the Board concluded that the prudent and proper decision was to suspend the 2019/20 final dividend and all dividends for 2020/21, and re-base future dividends to a more sustainable level. The Board believes that this decision is in the best long-term interests of shareholders.

"We expect to resume dividend payments in 2021/22, rebased to 7.7p per share. The Board expects to continue with a progressive dividend policy from this re-based level for future years."

Full year to 31 March

2020

2019

2019

Change1

(IFRS 16)

(IAS 17)

(IFRS 16 pro forma2)

£m

£m

£m

%

Reported measures

Revenue

22,905 

23,428 

(2)

Profit before tax

2,353 

2,666 

n/m

Profit after tax

1,734 

2,159 

n/m

Basic earnings per share

17.5p

21.8p

(20)

Net cash inflow from operating activities

6,271 

4,256 

47 

Full year dividend

- 

15.4p

n/m

Capital expenditure

3,960 

3,963 

- 

Adjusted measures

Adjusted2 Revenue

22,824 

23,459 

23,459 

(3)

Adjusted2 EBITDA

7,907 

7,392 

8,126 

(3)

Adjusted2 basic earnings per share

23.5p

26.3p

(11)

Normalised free cash flow2

2,011 

2,440 

2,440 

(18)

Net debt2

17,969 

11,035 

n/m

Adjusted2 revenue

Adjusted2 EBITDA

Normalised free cash flow2

Full year to

2020

20193

Change

2020

20193

Change

2020

20193

Change

31 March

(IFRS 16)

(IFRS 16

pro forma1)

(IFRS 16)

(IFRS 16

pro forma1)

(IFRS 16)

(IFRS 16

pro forma1)

£m

£m

%

£m

£m

%

£m

£m

%

Consumer

10,388 

10,591 

(2)

2,426 

2,558 

(5)

1,065 

1,166 

(9)

Enterprise

6,093 

6,396 

(5)

1,965 

2,032 

(3)

1,397 

1,356 

3 

Global

4,361 

4,735 

(8)

634 

604 

5 

255 

235 

9 

Openreach

5,112 

5,075 

1 

2,858 

2,934 

(3)

670 

1,006 

(33)

Other

1 

3 

n/m

24 

(2)

n/m

(1,376)

(1,323)

(4)

Intra-group items

(3,131)

(3,341)

6 

- 

- 

- 

- 

- 

- 

Total

22,824 

23,459 

(3)

7,907 

8,126 

(3)

2,011 

2,440 

(18)

Fourth quarter to

31 March

Consumer

2,493 

2,610 

(4)

626 

675 

(7)

Enterprise

1,543 

1,592 

(3)

507 

516 

(2)

Global

1,081 

1,201 

(10)

175 

176 

(1)

Openreach

1,295 

1,271 

2 

719 

725 

(1)

Other

1 

(1)

n/m

(20)

(66)

n/m

Intra-group items

(781)

(820)

5 

- 

- 

- 

Total

5,632 

5,853 

(4)

2,007 

2,026 

(1)

1,011 

703 

44 

2019/20 outlook

2019/20 performance

Change in adjusted2 revenue

Down c.2%

Down 2.7%

Adjusted2 EBITDA

£7.9bn - £8.0bn

£7.9bn

Capital expenditure4

£3.7bn - £3.9bn

£3.9bn

Normalised free cash flow2

£1.9bn - £2.1bn

£2.0bn

Adjusted

Before specific items

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

Free cash flow after net interest paid and payment 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.

IFRS 16 pro forma

On 1 April 2019, BT adopted IFRS 16 Leases, which replaced IAS 17 Leases. To aid comparability, pro forma financial information for 2018/19 has been presented to reflect how the results would have looked like if the accounting standard had been adopted last year. See page 12 for more details.

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 6 on page 26.