Last checked at 3 Nov 2022 07:00
Results for the half year to 30 September 2022
BT Group plc
03 November 2022
Philip Jansen, Chief Executive, commenting on the results, said "BT Group remains on the front foot in these turbulent times. Our strategy is working, we're executing against our plan and we're confident that we'll deliver our long-term ambition while underpinning economic growth in the UK. "Our financial performance is on track; we grew revenue and EBITDA in the first six months of the year and we remain laser focused on modernising and simplifying BT Group. Given the current high inflationary environment, including significantly increased energy prices, we need to take additional action on our costs to maintain the cash flow needed to support our network investments. As a result, we are increasing our cost savings target from £2.5bn to £3.0bn by the end of FY25. "High-quality connectivity has never been more important for our customers and our products provide great value for money. "We continue to drive ahead with our strategy designed to deliver consistent and predictable revenue and EBITDA growth, expand cash flow and underpin our progressive dividend policy over the longer-term." |
Key strategic developments:
• We are firmly on track in delivering our strategy despite short-term macroeconomic pressures; we are investing to sustain network leadership, improving customer experience and reducing our costs to strengthen our competitive position
• FTTP build passed 8.8m premises, including 2.8m in rural areas, with initial build underway on a further 6m premises; weekly build rate averaging 62k premises in Q2
• FTTP connections ahead of plan; Q2 net adds of 331k with total take up of 27%
• Openreach broadband base down 89k in Q2 (Q2 FY22: net adds of 29k) due to reduced broadband market growth and c.40k impact from industrial action, with competitor churn in line with our expectations; average monthly rental ARPU grew by c.£1 year on year due to continued increase in fibre-enabled broadband
• Openreach reviewing wholesale pricing to accelerate migration to FTTP
• EE's 5G network continues to grow with 5G deployed in nearly all UK major towns and cities
• Completed Sports JV to create one of the most extensive portfolios of premium sports in the UK
• Delivered gross annualised cost savings of £1.7bn since April 2020 with total cost to achieve of £0.9bn; FY25 target increased from £2.5bn to £3.0bn in response to cost inflation, with total cost to achieve of £1.6bn
Revenue and EBITDA growth and interim dividend at 2.31pps confirmed
• Revenue £10.4bn, up 1% due to growth in Consumer and Openreach partially offset by legacy declines in large corporate customers in Enterprise, lower equipment sales in Global and the impact of the BT Sport disposal
• Adjusted1 EBITDA £3.9bn, up 3% due to revenue growth, continued strong cost control and some one-off items, partially offset by increased energy costs and cost inflation
• Reported profit before tax £0.8bn, down 18% due to increased depreciation from network build and higher specific costs offsetting adjusted1 EBITDA growth
• Reported capital expenditure £2.6bn, up 2% due to increased Openreach investments in fixed network infrastructure offsetting a decline in spectrum; capital expenditure excluding spectrum payments up 26%
• Net cash inflow from operating activities £2.9bn; normalised free cash flow1 £0.1bn, down £0.3bn primarily reflecting higher cash capex partially offset by increased EBITDA and working capital movements including stronger collections and movement in sports rights
• Gross IAS 19 deficit of £1.7bn, up from £1.1bn at 31 March 2022 mainly due to the impact of higher real gilt yields partly offset by deficit contributions; BT Pension Scheme roll-forward funding deficit was £4.4bn at end of June 2022, and not adversely impacted by gilt market volatility in late September
• FY23 capex outlook revised from c.£4.8bn to c.£5.0bn due to higher fibre connections and inflation, enabled by a £0.2bn tax refund in October; capex in subsequent years will be c.£4.8bn over remainder of the peak fibre build
• Normalised free cash flow1 expected to outturn towards the lower end of the £1.3bn-£1.5bn range
• Interim dividend of 2.31 pence per share in line with our policy
1 See Glossary on page 3
Half year to 30 September | 2022 | 2021 | Change |
Reported measures | £m | £m | % |
Revenue | 10,366 | 10,305 | 1 |
Profit before tax | 831 | 1,009 | (18) |
Profit after tax | 893 | 431 | 107 |
Basic earnings per share | 9.1p | 4.4p | 107 |
Net cash inflow from operating activities | 2,911 | 2,394 | 22 |
Half year dividend | 2.31p | 2.31p | - |
Capital expenditure | 2,613 | 2,563 | 2 |
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Adjusted measures |
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Adjusted1 Revenue | 10,368 | 10,308 | 1 |
Adjusted1 EBITDA | 3,873 | 3,748 | 3 |
Adjusted1 basic earnings per share | 10.0p | 10.2p | (2) |
Normalised free cash flow1 | 64 | 360 | (82) |
Capital expenditure excluding spectrum | 2,613 | 2,067 | 26 |
Net debt1,2 | 19,042 | 18,241 | £801m |
| Adjusted1 revenue | Adjusted1 EBITDA | Normalised free cash flow1 | ||||||
Half year to 30 September | 2022 | 2021 | Change | 2022 | 2021 | Change | 2022 | 2021 | Change |
£m | £m | % | £m | £m | % | £m | £m | % | |
Consumer | 4,992 | 4,857 | 3 | 1,295 | 1,077 | 20 | 460 | 525 | (12) |
Enterprise | 2,439 | 2,572 | (5) | 660 | 852 | (23) | 112 | 327 | (66) |
Global | 1,617 | 1,654 | (2) | 197 | 207 | (5) | (128) | (63) | (103) |
Openreach | 2,836 | 2,707 | 5 | 1,711 | 1,561 | 10 | 53 | 8 | n/m |
Other | 14 | 14 | - | 10 | 51 | (80) | (433) | (437) | 1 |
Intra-group items | (1,530) | (1,496) | (2) | - | - | - | - | - |
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Total | 10,368 | 10,308 | 1 | 3,873 | 3,748 | 3 | 64 | 360 | (82) |
Second quarter to 30 September | 2022 | 2021 | Change | 2022 | 2021 | Change | 2022 | 2021 | Change |
£m | £m | % | £m | £m | % | £m | £m | % | |
Consumer | 2,490 | 2,475 | 1 | 670 | 554 | 21 |
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Enterprise | 1,239 | 1,285 | (4) | 345 | 423 | (18) |
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Global | 843 | 869 | (3) | 101 | 105 | (4) |
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Openreach | 1,419 | 1,360 | 4 | 860 | 788 | 9 |
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Other | 7 | 6 | 17 | (6) | 12 | (150) |
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Intra-group items | (763) | (757) | (1) | - | - | - |
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Total | 5,235 | 5,238 | - | 1,970 | 1,882 | 5 | 269 | 403 | (33) |
1 See Glossary on page 3
2 Net debt was £18,009m at 31 March 2022
n/m = not meaningful
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 | Free cash flow (net cash inflow from operating activities after net capital expenditure) after net interest paid and payment of lease liabilities, 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, share buybacks, acquisitions and disposals, and repayment and raising of debt, 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. 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. Amounts due to or from joint ventures held within current asset investments or loans and borrowings are also excluded. |
Sports JV pro forma | On 1 September 2022 BT Group and Warner Bros. Discovery announced completion of their transaction to form a 50:50 joint venture (JV) combining the assets of BT Sport and Eurosport UK. Financial information stated as pro forma is unaudited and is presented to estimate the impact on the group as if trading in relation to BT Sport had been equity accounted for in previous periods, akin to the JV being in place historically. Please refer to Additional Information on page 32 for a bridge between financial information on a reported basis and a Sports JV pro forma basis. |
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 the BT Sport disposal, 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 30 to 32.
Enquiries
Press office: | Tom Engel Richard Farnsworth | Tel: 07947 711 959 Tel: 07734 776 317 |
Investor relations: | Mark Lidiard | Tel: 0800 389 4909 |
We will hold a conference call for analysts and investors in London at 10am today and a simultaneous webcast will be available at www.bt.com/results.
We are scheduled to announce the third quarter results for FY23 on 2 February 2023.
Click on, or paste the following link into your web browser, to view the associated PDF document.
http://www.rns-pdf.londonstockexchange.com/rns/1435F_1-2022-11-2.pdf