TIDMBT.A

RNS Number : 1435F

BT Group PLC

03 November 2022

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 GBP2.5bn to GBP3.0bn 
 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.GBP1 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 GBP1.7bn since April 2020 with total cost to achieve of GBP0.9bn; FY25 target increased from GBP2.5bn to GBP3.0bn in response to cost inflation, with total cost to achieve of GBP1.6bn

Revenue and EBITDA growth and interim dividend at 2.31pps confirmed

-- Revenue GBP10.4bn, 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

-- Adjusted(1) EBITDA GBP3.9bn, 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 GBP0.8bn, down 18% due to increased depreciation from network build and higher specific costs offsetting adjusted(1) EBITDA growth

-- Reported capital expenditure GBP2.6bn, 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 GBP2.9bn; normalised free cash flow(1) GBP0.1bn, down GBP0.3bn 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 GBP1.7bn, up from GBP1.1bn 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 GBP4.4bn at end of June 2022, and not adversely impacted by gilt market volatility in late September

-- FY23 capex outlook revised from c.GBP4.8bn to c.GBP5.0bn due to higher fibre connections and inflation, enabled by a GBP0.2bn tax refund in October; capex in subsequent years will be c.GBP4.8bn over remainder of the peak fibre build

-- Normalised free cash flow(1) expected to outturn towards the lower end of the GBP1.3bn-GBP1.5bn 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                                   GBPm                    GBPm                          % 
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 
-------------------------------  -----------------------  ----------------------  ------------------------- 
 
Adjusted measures 
Adjusted(1) Revenue                               10,368                  10,308                          1 
Adjusted(1) EBITDA                                 3,873                   3,748                          3 
Adjusted(1) basic earnings per 
 share                                             10.0p                   10.2p                        (2) 
Normalised free cash flow(1)                          64                     360                       (82) 
Capital expenditure excluding 
 spectrum                                          2,613                   2,067                         26 
Net debt(1,2)                                     19,042                  18,241                    GBP801m 
-------------------------------  -----------------------  ----------------------  ------------------------- 
 

Customer-facing unit updates

 
                      Adjusted(1) revenue                  Adjusted(1) EBITDA                     Normalised free 
                                                                                                    cash flow(1) 
              -----------------------------------  ----------------------------------- 
Half year 
 to 30 
 September          2022        2021       Change        2022        2021       Change        2022         2021       Change 
------------ 
                    GBPm        GBPm            %        GBPm        GBPm%                    GBPm         GBPm            % 
------------  ----------  ----------  -----------  ----------  ----------   ----------  ----------  -----------  ----------- 
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)           -           -            -           -            - 
------------  ----------  ----------  -----------  ----------  ----------  -----------  ----------  -----------  ----------- 
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 
------------ 
                     GBPm         GBPm            %         GBPm        GBPm%                   GBPm       GBPm           % 
------------  -----------  -----------  -----------  -----------  ----------   ----------  ---------  ---------  ---------- 
Consumer            2,490        2,475            1          670         554           21 
Enterprise          1,239        1,285          (4)          345         423         (18) 
Global                843          869          (3)          101         105          (4) 
Openreach           1,419        1,360            4          860         788            9 
Other                   7            6           17          (6)          12        (150) 
Intra-group 
 items              (763)        (757)          (1)            -           -            - 
------------  -----------  -----------  -----------  -----------  ----------  -----------  ---------  ---------  ---------- 
Total               5,235        5,238            -        1,970       1,882            5        269        403        (33) 
------------  -----------  -----------  -----------  -----------  ----------  -----------  ---------  ---------  ---------- 
 

(1) See Glossary on page 3

(2) Net debt was GBP18,009m at 31 March 2022

n/m = not meaningful

Glossary

 
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 (net cash inflow from operating activities 
 free cash flow       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        On 1 September 2022 BT Group and Warner Bros. Discovery 
 forma                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            Tel: 07947 711 959 
                      Richard Farnsworth   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

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