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Half-year Report

RNS Number : 2835R

BT Group PLC

04 November 2021

Financial results

Results for the half year to 30 September 2021

BT Group plc

4 November 2021

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

"These results demonstrate an acceleration of pace in the transformation of BT. We are creating a better BT for our customers, the country and our shareholders. We're going further and faster on the UK's next generation connectivity; we're modernising BT and bringing down costs; and we're reinstating the dividend today, as planned.

"After a record six months, Openreach has now rolled out full fibre broadband to almost 6m premises and continues to lower its build cost. Its three largest customers are signed up to the new pricing offer as we see rapid adoption of what will be the UK's first nationwide full fibre network spanning 25m premises by 2026. Meanwhile, our 5G network now covers over 40% of the UK's population and we have over 5.2m 5G ready customers. Together, our networks provide our customers with an unrivalled level of connectivity.

"While we are serving our customers better than ever, BT is also changing rapidly internally. We have hit our £1bn cost savings target 18 months early, which allows us to bring forward our FY25 target for £2bn of savings to FY24. This is all part of creating a leaner BT with simplified processes and improved customer experiences.

"BT is on track and with results in-line with our expectations, we are today confirming our financial outlook for FY22 and FY23. Looking further out, as we pass the peak of our fibre build and move towards an all-fibre, all-IP network, we expect a reduction in capex of at least £1bn and lower operating costs of £500m. From these two factors alone, by the end of the decade we expect an expansion of at least £1.5bn in normalised free cash flow compared to FY22, and that's before any benefits from increased revenue and further transformation efficiencies. Our progressive dividend policy will be underpinned by these increased cash flows as we move to sustainable growth going forward."

BT Group plc (BT.L) today announced its results for the half year to 30 September 2021.

Key strategic developments - accelerating the pace of transformation:

• Adam Crozier joined the Board on 1 November, and will become Chairman with effect from 1 December

• Ten communication providers including Sky and TalkTalk signed up to Equinox, Openreach's national long-term FTTP pricing offer

• Launched Eagle-i, our flagship security platform that will predict and prevent cyber-attacks for enterprises

• Delivered £1bn of gross annualised savings 18 months early at a cost of £571m

• Brought forward FY25 target of £2bn gross annualised savings to FY24 with further savings in FY25, within the expected cost of £1.3bn; Group peak capex from FY23 now expected to be £4.8bn, down from £5bn previously

• FTTP joint venture: with FTTP build costs coming down and take-up ahead of expectations, decided to retain 100% of the project for shareholders and to remain fully focused on driving build and take-up

• Brought forward net zero targets to 2030 for operational emissions and 2040 for supply chain and customer emissions

Strong operational performance:

• Record Openreach FTTP build in Q2 and footprint now at almost 6m; expected average build costs lowered to £250-£350 per premises passed¹

• Openreach delivered strongest ever H1 for repairs on time at 87.1%, with highest proportion of customers back in service within SLA

• Consumer and Enterprise have now connected over 1m homes and businesses to FTTP

• Growth in fixed and broadband ARPC from Q1 into Q2 due to our convergence strategy and CPI+ price rise

• 5G ready customer base over 5.2m

• Consumer churn remaining near record lows resulting from strong customer focus

Interim dividend of 2.31p per share declared; FY22 and FY23 financial outlook confirmed:

• Revenue £10,305m, down 3%; driven by revenue decline in Enterprise and Global, flat in Consumer, partially offset by growth in Openreach; adjusted² revenue down 3%

• Adjusted² EBITDA £3,748m, up 1%, with revenue decline more than offset by lower costs from our transformation programmes and tight cost management, and lower indirect commissions

• Reported profit before tax £1,009m, down 5%, primarily due to higher finance expenses partly offset by increased EBITDA

• Net cash inflow from operating activities £2,394m; normalised free cash flow² £360m, down 15%, primarily due to higher cash capital expenditure and adverse working capital movements, offset by lower tax payments

¹ Excludes new builds and net of subsidies.

² See Glossary on page 3.

• Capital expenditure £2,563m, up 30%, primarily due to investment in spectrum

• Expect by the end of the decade at least £1.5bn expansion in normalised free cash flow compared to FY22, solely from lower capex and operating costs as we move towards an all-fibre, all-IP network, before any benefits of increased revenue and further transformation efficiencies, net of tax

• Now expect around £5bn of carried forward tax losses from FY23 as a greater proportion of capex qualify for Government's cash tax super-deduction

• Interim dividend of 2.31p per share declared

Half year to 30 September	2021	2020	Change
	£m	£m	%
Reported measures
Revenue	10,305	10,590	(3)
Profit before tax	1,009	1,062	(5)
Profit after tax	431	856	(50)
Basic earnings per share	4.4p	8.6p	(49)
Net cash inflow from operating activities	2,394	2,713	(12)
Half year dividend	2.31p	0p	N/A
Capital expenditure¹	2,563	1,969	30

Adjusted measures
Adjusted² Revenue	10,308	10,607	(3)
Adjusted² EBITDA	3,748	3,721	1
Adjusted² basic earnings per share	10.2p	9.6p	6
Normalised free cash flow²	360	422	(15)
Capital expenditure excluding spectrum	2,067	1,969	5
Net debt²	18,241	17,627	£614m

Customer-facing unit results for the half year to 30 September 2021

	Adjusted² revenue			Adjusted² EBITDA			Normalised free cash flow²
Half year to 30 September	2021	2020	Change	2021	2020	Change	2021	2020	Change
Half year to 30 September	£m	£m	%	£m	£m	%	£m	£m	%
Consumer	4,857	4,873	-	1,077	1,075	-	525	315	67
Enterprise	2,572	2,710	(5)	852	833	2	327	474	(31)
Global	1,654	1,916	(14)	207	289	(28)	(63)	57	(211)
Openreach	2,707	2,585	5	1,561	1,453	7	8	20	(60)
Other	14	12	17	51	71	(28)	(437)	(444)	2
Intra-group items	(1,496)	(1,489)	-	-	-	-	-	-	-
Total	10,308	10,607	(3)	3,748	3,721	1	360	422	(15)

Second quarter to 30 September
Consumer	2,475	2,511	(1)	554	574	(3)
Enterprise	1,285	1,358	(5)	423	427	(1)
Global	869	926	(6)	105	148	(29)
Openreach	1,360	1,299	5	788	724	9
Other	6	8	(25)	12	35	(66)
Intra-group items	(757)	(745)	(2)	-	-	-
Total	5,238	5,357	(2)	1,882	1,908	(1)	403	471	(14)

¹ Includes investment in spectrum of £496m.

² See Glossary on page 3.

Glossary of alternative performance measure

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 reported 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.
Group NPS	Group NPS tracks changes in our customers' perceptions of BT. This is a combined measure of 'promoters' minus 'detractors' across our business units. Group NPS measures Net Promoter Score in our retail business and Net Satisfaction in our wholesale business.
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 cash tax benefit), payments relating to spectrum, and specific items. For non-tax related items the adjustments are made on a pre-tax basis. 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.
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.
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 retrospective regulatory matters, restructuring charges, divestment-related items, Covid-19 related items, net interest expense on pensions and tax charge on specific items.

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 27 to 28.

Enquiries

Press office:
Tom Engel	Tel: 07947 711 959
Richard Farnsworth	Tel: 07734 776 317

Investor relations:
Mark Lidiard	Tel: 020 7356 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 FY22 on 3 February 2022.

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Half-year Report - BT Group PLC | RNS | Ticker