TIDMBT.A
RNS Number : 3877E
BT Group PLC
03 July 2019
3 July 2019
BT PROVIDES HISTORICAL PRO FORMA DISCLOSURES AND UPDATED OUTLOOK
FOR 2019/20 UNDER IFRS 16
-- Outlook for 2019/20 updated solely to reflect the adoption of
IFRS 16, the new leases accounting standard. BT expects IFRS 16 to
have a positive impact on 2019/20 EBITDA of c.GBP0.7bn, with no
impact on revenue or cash flow.
-- Post IFRS 16 historical pro forma financial key performance indicators for 2018/19 published.
-- Pro forma information also reflects: adjustments to refine
the allocation of shared costs across BT's operating units; the
transfer of the Emergency Services Network contract from Consumer
to Enterprise; and new key performance indicators for its Global
operating unit. BT has provided two sets of pro forma KPIs showing
the impacts of these changes both pre and post IFRS 16.
Both sets of historical pro forma KPIs are unaudited and provide
an indicative history of the company's performance.
IFRS 16 leases accounting standard
BT will report its financial statements under IFRS 16 from the
first quarter of 2019/20, on a modified retrospective basis.
Accordingly it will not restate prior year comparatives for the
effect of IFRS 16 but has provided an indicative impact of IFRS 16
in pro forma KPIs for 2018/19.
Under IFRS 16, pro forma 2018/19 EBITDA increases because the
operating lease expense is replaced by interest expense and
depreciation.
Net debt increases as the standard requires lessees to recognise
a lease liability (and corresponding right of use asset) for all
leases meeting the lease definition of the standard, unless certain
exemptions are made.
The standard has required BT to make material accounting
judgements, in particular on the likelihood of lease renewals, in
order to determine its 2019/20 opening balance sheet. Details of
BT's existing operating lease commitments at 31 March 2019 are set
out in note 30 of its Annual Report 2019.
Credit rating agencies already typically include operating lease
liabilities in their leverage calculations, so BT does not expect
the adoption of IFRS16 to impact its credit rating.
IFRS 16 pro forma financials for 2018/19
2018/19 Pre IFRS 16 (previous) Post IFRS 16 Change
(new)
Adjusted revenue(1) GBP23.5bn GBP23.5bn none
----------------------- ----------------- ------------------
Adjusted EBITDA(1) GBP7.4bn GBP8.1bn up GBP0.7bn
----------------------- ----------------- ------------------
Capital expenditure GBP3.8bn GBP3.8bn none
(excluding BDUK clawback)
----------------------- ----------------- ------------------
Normalised free cash GBP2.4bn GBP2.4bn none
flow(2)
----------------------- ----------------- ------------------
Closing net debt GBP11.0bn GBP16.6bn-17.6bn Up GBP5.6bn-6.6bn
----------------------- ----------------- ------------------
(1) before specific items
(2) before specific items, pension deficit payments and the cash
tax benefit of pension deficit payments
Financial outlook for 2019/20 post IFRS 16
BT has updated its outlook solely to reflect the impact of IFRS
16.
2019/20 outlook Pre IFRS 16 Post IFRS 16 Change
(previous) (new)
Adjusted revenue(1) down c.2% down c.2% none
--------------- --------------- ------------
Adjusted EBITDA(1) GBP7.2bn-7.3bn GBP7.9bn-8.0bn up GBP0.7bn
--------------- --------------- ------------
Capital expenditure GBP3.7bn-3.9bn GBP3.7bn-3.9bn none
(excluding BDUK clawback)
--------------- --------------- ------------
Normalised free cash GBP1.9bn-2.1bn GBP1.9bn-2.1bn none
flow(2)
--------------- --------------- ------------
Dividend per share flat flat none
--------------- --------------- ------------
Adjustments to methodologies used to recharge shared fixed
costs
BT has adjusted its methodologies used to recharge shared fixed
costs, reported within EBITDA, to refine the allocation of shared
costs across its operating units following the recent creation and
development of the Consumer and Enterprise units as well as the
formation of Openreach Limited as part of the implementation of the
Digital Communications Review Commitments. The changes align BT's
segmental reporting more closely with its Regulated Financial
Statements.
These changes impact operating unit financials only and have no
impact on the reported Group financials.
Transfer of Emergency Services Network (ESN) from Consumer to
Enterprise
ESN is a resilient national mobile network, which will give
300,000 critical emergency workers access to 4G voice and data for
the first time.
BT has transferred responsibility for the ESN contract from the
Consumer operating unit to Enterprise, reflecting the fact that the
major customers on the ESN network are serviced by its Public
Sector teams in Enterprise.
This change impacts operating unit financials only and has no
impact on the reported Group financials.
New Global operating unit KPIs
Global (previously Global Services) has updated its KPIs to
reflect its simplified commercial structure and to aid a better
understanding of the underlying drivers of business performance. It
now manages customer accounts on a global rather than on a
geographical basis and has reorganised its sales teams to align
with three industry verticals: Banking and Financial Services;
Resources, Manufacturing and Logistics; and Technology, Life
Sciences and Business Services. Global's new KPIs also include
revenue segmented by the stage of the product lifecycle: growth;
mature; or legacy.
This change impacts the presentation of Global's financials only
and has no impact on the reported Group financials.
Accompanying documents
To make it easier to understand these changes BT has also
published four documents:
1. Pre IFRS 16 pro forma KPIs (pro forma KPIs 'A'): BT's
previously published KPIs for 2017/18 and 2018/19 updated to show
the impact of adjustments to refine the allocation of shared costs
across its operating units, the transfer of the ESN contract from
Consumer to Enterprise and new Global key performance
indicators.
2. Post IFRS 16 pro forma KPIs (pro forma KPIs 'B'): BT's
previously published KPIs updated to show the impact of the changes
made in the pre IFRS 16 pro forma KPIs (pro forma KPIs 'A') with an
indicative impact of IFRS 16 in 2018/19 only.
3. Pro forma KPIs - supporting information: a bridging document
between previously reported KPIs, pre IFRS 16 pro forma KPIs (pro
forma KPIs 'A') and post IFRS 16 pro forma KPIs (pro forma KPIs
'B').
4. IFRS 16 applied to BT: a presentation explaining how BT has adopted IFRS 16.
These documents are provided on BT's website:
https://www.btplc.com/Sharesandperformance/Financialreportingandnews/Quarterlyresults/index.htm
For further information:
Enquiries about this news release should be made to the BT Group
Investor Relations team on + 44 (0)20 7356 4909. All news releases
can be accessed on BT's website. You can also subscribe to receive
all BT announcements here and you can follow BT on Twitter
here.
Ends
About BT
BT's purpose is to use the power of communications to make a
better world. It is one of the world's leading providers of
communications services and solutions, serving customers in 180
countries. Its principal activities include the provision of
networked IT services globally; local, national and international
telecommunications services to its customers for use at home, at
work and on the move; broadband, TV and internet products and
services; and converged fixed-mobile products and services. BT
consists of four customer-facing units: Consumer, Enterprise,
Global and Openreach.
For the year ended 31 March 2019, BT Group's reported revenue
was GBP23,428m with reported profit before taxation of
GBP2,666m.
British Telecommunications plc (BT) is a wholly-owned subsidiary
of BT Group plc and encompasses virtually all businesses and assets
of the BT Group. BT Group plc is listed on stock exchanges in
London and New York.
For more information, visit www.btplc.com
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END
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