TIDMBT.A
RNS Number : 6623O
BT Group PLC
02 February 2023
Trading update for the nine months to 31 December 2022
BT Group plc - 02 February 2023
Philip Jansen, Chief Executive, commenting on the results, said
"We've grown revenue and EBITDA on a pro forma, like-for-like basis,
despite a challenging economic backdrop, and we're transforming
BT Group for the benefit of our customers. We continue to accelerate
our investments in the UK's leading next generation networks; we're
combining our Enterprise and Global operations to create BT Business,
a single, strengthened B2B unit; and we're going further on cutting
costs to deliver GBP3 billion in annualised savings by the end
of FY25.
"On full fibre, we're building - and now connecting - like fury:
9.6 million premises reached to date, with 29% already connected,
and our 5G mobile network now reaches 60% of the UK population.
"In December we awarded a cost-of-living pay rise to 85% of our
UK colleagues, reaching an agreement with our union partners that
we will all lean into our ongoing transformation plans. Despite
extraordinary energy costs and other inflationary headwinds, we
are reaffirming our outlook for the year."
Key strategic developments:
-- Announced the merger of Enterprise and Global to create BT
Business, to enhance value for all B2B customers, strengthen our
competitive position and deliver material synergies as part of our
GBP3bn cost-saving target
-- Announced CPI-linked price increases to offset cost inflation
and pay for increased data usage and investment in our next
generation networks
-- Additional action taken on operating costs to mitigate
unforeseen energy, pay and equipment costs
-- Record FTTP build of 810k premises passed in the quarter at
an average build rate of 62k per week; 38% of our 25m FTTP build
completed
-- Customer demand for FTTP extremely strong with orders up 51%
year on year; take up(3) rate grew to 29% with net adds of 324k in
the quarter; broadband rental ARPU up 7.6% year on year
-- Openreach announced improved discounts for FTTP connection
and rental charges, from April 2023, to support accelerated take
up(3) of FTTP; announced the launch of 1.2Gbps and 1.8Gbps
products
-- Record quarterly growth in FTTP base in Consumer, up 155k to
1.6m; 5G ready base now 8.5m; churn remains stable in a competitive
market; RootMetrics named EE the UK's best mobile network for a
19th time running
-- Operational metrics recovering as industrial action ended with cost of living pay rise
Reaffirmed all outlook metrics despite inflationary
headwinds:
-- Revenue GBP15.6bn, down 1% as price increases and improved
trading in Openreach and Consumer were offset by lower strategic
equipment sales in Global, migration of a MVNO customer, removal of
BT Sport revenue, and legacy product declines; on a Sports Joint
Venture ('JV') pro forma(1) basis adjusted revenue was up
GBP65m
-- Adjusted(1) EBITDA GBP5.9bn, up 3% due to tight cost control
and the removal of BT Sport costs, offset by revenue declines and
inflationary cost pressures; on a Sports JV pro forma(1) basis
adjusted EBITDA was up 2%
-- Reported profit before tax GBP1.3bn, down 15% due to
increased depreciation offsetting EBITDA growth
-- Reported capital expenditure (capex) GBP3.9bn, up 3% due to
increased Openreach investment in fixed network infrastructure
offsetting prior-year investment in spectrum; capex excluding
spectrum payments up 19%; cash capex was GBP4.1bn, up 19%;
significantly lower capex in Q4 given unwind of Openreach work in
progress
-- Normalised free cash flow(1) GBP0.1bn, down GBP0.8bn due to
increased cash capex and adverse working capital phasing primarily
driven by collections timings, partially offset by a tax refund and
EBITDA growth
-- Net debt was GBP19.2bn, GBP1.2bn higher than at 31 March 2022
with normalised free cash flow more than offset by pension scheme
contributions and payment of the final dividend
-- Financial outlook reaffirmed; normalised free cash flow
heavily weighted to Q4, reflecting more front-ended capex and
back-ended EBITDA and receivable collections than usual
(1) See Glossary on page 3
(2) Net debt was GBP18,009m at
31 March 2022
(3) FTTP take up defined as customers
that have been provisioned on the
FTTP network
Nine months to 31 December 2022 2021 Change
---------------------- ----------------------
Reported measures GBPm GBPm %
Revenue 15,593 15,676 (1)
Profit before tax 1,307 1,537 (15)
Profit after tax 1,320 886 49
Capital expenditure 3,880 3,752 3
------------------------------ ---------------------- ---------------------- ---------
Adjusted measures
Adjusted(1) Revenue 15,580 15,677 (1)
Adjusted(1) EBITDA 5,880 5,708 3
Pro forma(1) Revenue 15,342 15,277 -
Pro forma(1) EBITDA 5,951 5,863 2
Capital expenditure excluding
spectrum 3,880 3,273 19
Normalised free cash flow(1) 106 878 (88)%
Net debt(1,2) 19,226 17,741 GBP1,485m
------------------------------ ---------------------- ---------------------- ---------
(1) See Glossary on page 3
(2) Net debt was GBP18,009m at
31 March 2022
(3) FTTP take up defined as customers
that have been provisioned on the
FTTP network
Overview of the nine months to 31 December 2022
Customer-facing unit updates
Adjusted(1) revenue Adjusted(1) EBITDA
------------------------
Nine months to 31
December 2022 2021 Change 2022 2021 Change
------------------
GBPm GBPm % GBPm GBPm%
------------------ ------- ------- ------ ------ ------ -----
Consumer 7,431 7,442 - % 1,964 1,705 15%
Enterprise 3,692 3,867 (5)% 1,010 1,252 (19)%
Global 2,474 2,525 (2)% 311 321 (3)%
Openreach 4,255 4,068 5% 2,570 2,368 9%
Other 24 20 20% 25 62 (60)%
Intra-group items (2,296) (2,245) (2)% - - -%
------------------ ------- ------- ------ ------ ------ ------
Total 15,580 15,677 (1)% 5,880 5,708 3%
------------------ ------- ------- ------ ------ ------ ------
Third quarter to
31 December 2022 2021 Change 2022 2021 Change
------------------
GBPm GBPm % GBPm GBPm%
------------------ ----- ----- ------ ----- ----- -----
Consumer 2,439 2,585 (6)% 669 628 7%
Enterprise 1,253 1,295 (3)% 350 400 (13)%
Global 857 871 (2)% 114 114 -%
Openreach 1,419 1,361 4% 859 807 6%
Other 10 6 67% 15 11 36%
Intra-group items (766) (749) (2)% - - -%
------------------ ----- ----- ------ ----- ----- ------
Total 5,212 5,369 (3) 2,007 1,960 2%
------------------ ----- ----- ------ ----- ----- ------
Consumer: Strong performance in tough market conditions, first
full quarter after completion of BT Sport JV
-- Revenue was flat due to the BT Sport disposal offsetting
service revenue(1) growth; on a Sports JV pro forma(1) basis
revenue was up 2%, with a 4% growth in service revenue(1) driven by
the 2022 annual contractual price rise which was aided by a higher
FTTP base, along with higher roaming, offset by lower mobile
equipment sales due to reduced market activity
-- EBITDA was up 15% due to the BT Sport disposal and increased
mobile and fixed service revenue(1) and tight cost management
including lower indirect mobile commissions; on a Sports JV pro
forma(1) basis EBITDA was up 9%
-- Strong demand for next generation products with highest ever
quarterly growth in FTTP base, with an increase of 155k; FTTP base
now 1.6m, 5G ready base now 8.5m
-- Churn continues to remain stable in a competitive market
-- Strong support for vulnerable customers with EE launching its
first mobile social tariff in November alongside BT Home
Essentials; 3m customers including customers on social and
discounted tariffs excluded from April 2023 price increases
Enterprise: Revenue and EBITDA quarterly progression in FY23
continues
-- Revenue decline due to the migration of a MVNO customer and
legacy product declines, partially offset by growth in SME and
SoHo
-- EBITDA decline due to lower revenue and revenue mix,
partially offset by tight cost control and our cost transformation
programmes
-- The overall revenue and EBITDA trend continued to improve
into Q3, reflecting continued growth in both the SME and SoHo
segments and the timing of contract revenue recognition in
Wholesale and ESN
-- Continued growth in both mobile and VoIP in the year to date,
adding 65k connections to our mobile base and 93k connections to
our VoIP base
-- Retail order intake was GBP2.8bn on a 12-month rolling basis,
up 4% reflecting growth in new business partially offset by
contract re-signs; Wholesale order intake was GBP0.7bn, down
28%
-- Official opening of new cyber Security Operations Centre in
Belfast following contract win with the Department of Finance,
Northern Ireland
-- Contract wins with HMRC to replace its existing in house IT
services provider with a managed networks solution and the Ministry
of Defence to upgrade its legacy Broadband and ADSL estate
Global: Financial performance continues to stabilise as improved
growth portfolio and strong cost transformation offset lower
equipment sales and inflationary pressures
-- Revenue decline mainly due to lower strategic equipment sales
and the impact of prior year divestments, partly offset by a GBP95m
positive foreign exchange movement; revenue excluding divestments,
one-offs and foreign exchange was down 5%
-- EBITDA decline reflected lower revenue and inflationary
pressures, partly offset by lower operating costs from ongoing
modernisation, cost control and one-offs; EBITDA excluding
divestments, one-offs and foreign exchange was down 5%
-- On a rolling 12-month basis order intake was GBP2.9bn, down
10%; the proportion of our growth product portfolio represents 53%
of total orders won in the year
-- During the quarter we launched new digital tools to help
customers monitor and optimise energy and carbon use across
multi-cloud networks
Openreach: Revenue and EBITDA growth; FTTP connections continue
to grow
-- Revenue growth due to price increases and increased sales of
fibre-enabled products and Ethernet, partially offset by decline in
physical lines and decrease in chargeable repairs due to lower
repair volumes
-- EBITDA growth from revenue flow through and lower operating
costs driven by improved repair and efficiency programmes partially
offset by higher FTTP provisioning activity, and pay inflation
-- Broadband base down 10k in Q3 (Q3 FY22: 45k growth) with YoY
position impacted by reduced broadband market growth; competitor
churn continues to be in line with our expectations and average
monthly rental ARPU grew by c.GBP1 YoY (7.6%) due to increased
volumes of FTTP
-- Record FTTP build of 810k premises passed in the quarter at
an average build rate of 62k per week; we have completed 38% of our
25m build
-- Customer demand for FTTP extremely strong with orders up 51%
year on year; take up rate grew to 29% with net adds of 324k in the
quarter; base now c.2.7m (29% of premises passed)
-- Almost 50% of the Openreach broadband base where we built
network 24 months ago are now on FTTP
-- Announced improved discounts for FTTP connection and rental
charges, from April 2023, to support accelerated take up(2) of
FTTP; announced the launch of 1.2Gbps and 1.8Gbps products
-- FTTP footprint of 9.6m with a further 6m where initial build
is underway; now passed 3m premises in rural locations
(1) See Glossary on page 3. Commentary on revenue and EBITDA is
based on adjusted measures.
(2) FTTP take up defined as customers that have been provisioned
on the FTTP network.
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 paid, share buybacks, acquisitions
and disposals, repayment and raising of debt, cash
flows relating to loans with joint ventures, 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.
Service revenue Earned from services delivered using our fixed and
mobile network connectivity, including but not limited
to, broadband, calls, line rental, TV, residential
BT Sport subscriptions, mobile data connectivity,
incoming & outgoing mobile calls and roaming by customers
of overseas networks.
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 the press release on 3 November 2022
for a bridge between financial information on a reported
basis and a Sports JV pro forma basis at the half
year to 30 September 2022.
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 changes to our
assessment of our provision for historic regulatory
matters, restructuring charges, divestment-related
items and net interest expense on pensions.
------------------- --------------------------------------------------------------
Our commentary focuses on the trading results on an adjusted
basis, which is a non-GAAP measure, being before specific items.
The directors believe that presentation of the group's results in
this way is relevant to an understanding of the group's financial
performance as specific items are those that in management's
judgement need to be disclosed by virtue of their size, nature or
incidence. This is consistent with the way that financial
performance is measured by management and reported to the Board and
the Executive Committee and assists in providing a meaningful
analysis of the trading results of the group. In determining
whether an event or transaction is specific, management considers
quantitative as well as qualitative factors such as the frequency
or predictability of occurrence. Reported revenue, reported
operating costs, reported operating profit and reported profit
before tax are the equivalent unadjusted or statutory measures.
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 full year results for FY23 on
18 May.
Forward-looking statements - caution advised
Certain information included in this announcement is forward
looking and involves risks, assumptions and uncertainties that
could cause actual results to differ materially from those
expressed or implied by forward looking statements. Forward looking
statements cover all matters which are not historical facts and
include, without limitation, projections relating to results of
operations and financial conditions and the Company's plans and
objectives for future operations. Forward looking statements can be
identified by the use of forward looking terminology, including
terms such as 'believes', 'estimates', 'anticipates', 'expects',
'forecasts', 'intends', 'plans', 'projects', 'goal', 'target',
'aim', 'may', 'will', 'would', 'could' or 'should' or, in each
case, their negative or other variations or comparable terminology.
Forward looking statements in this announcement are not guarantees
of future performance. All forward looking statements in this
announcement are based upon information known to the Company on the
date of this announcement. Accordingly, no assurance can be given
that any particular expectation will be
met and readers are cautioned not to place undue reliance on
forward looking statements, which speak only at their respective
dates. Additionally, forward looking statements regarding past
trends or activities should not be taken as a representation that
such trends or activities will continue in the future. Other than
in accordance with its legal or regulatory obligations (including
under the UK Listing Rules and the Disclosure Guidance and
Transparency Rules of the Financial Conduct Authority), the Company
undertakes no obligation to publicly update or revise any forward
looking statement, whether as a result of new information, future
events or otherwise. Nothing in this announcement shall exclude any
liability under applicable laws that cannot be excluded in
accordance with such laws.
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