BT Group financial results in-line with expectations for the first half of the year

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BT Group plc (LON:BT.A) has announced its results for the half year to 30 September 2020.

Key strategic developments:

• All of Openreach’s major CP¹ customers now selling FTTP with strong increase in sales in Q2

• Consumer aligns pricing policies across all products and services to CPI plus 3.9% per annum to provide consistent, predictable pricing for new and regrading customers and to support network investment

Operational:

• Strong operating performance despite the ongoing impact of Covid-19

• FTTP rollout reached record levels in Q2 with run-rate of 40k premises per week; 3.5m premises passed to date

• Openreach to stop selling copper products to c.1.8m FTTP-enabled premises by September 2021 latest

• 5G-ready customer base now over 1m and 5G now live in 112 towns and cities

• Strong increase in Consumer FTTP customer base up 60% year on year; fixed and mobile convergence at 21.4%

• Enterprise agrees landmark partnership with Belfast Harbour to deploy 5G Private Network

• Modernisation programme delivers £352m gross annualised savings at a cost of £163m

Financial:

• Revenue relatively resilient at £10,590m, down 8%, primarily due to the impact of Covid-19 including reduced BT Sport revenue and a reduction in business activity in our enterprise units, and declines in legacy products

• Adjusted² EBITDA £3,721m, down 5%, driven by the fall in revenue, partly offset by sports rights rebates, savings from our modernisation programme and other cost initiatives including Covid-19 mitigating actions

• Reported profit before tax £1,062m, down 20%, driven primarily by reduced EBITDA

• Net cash inflow from operating activities £2,713m; normalised free cash flow² £422m, down 30%, primarily due to reduced EBITDA and offsetting movements in working capital and timing of tax payments

• Capital expenditure £1,969m, up 5%, primarily driven by fixed and mobile network investment

• Lower end of the adjusted² EBITDA outlook range for 2020/21 raised to £7.3bn; revised range £7.3bn – £7.5bn

• Adjusted² EBITDA outlook of at least £7.9bn in 2022/23, underpins planned reinstated dividend from 2021/22 and value-creating investment plans

Philip Jansen, Chief Executive, commenting on the results, said
“BT delivered financial results in-line with expectations for the first half of the year, thanks to strong operational performance during exceptional circumstances. Customer demand during the pandemic has shown how critical our networks have become, and our significant network investments have helped us double the number of Openreach’s FTTP orders compared to this time last year and have seen our leading 5G network expand to 112 towns and cities across the UK.
“We continue to invest to make BT more competitive and I’m pleased to see the quality of our products and services improving. At the same time we are firmly on track with the delivery of our modernisation programme and have delivered £352m in cost savings in the first half of the year.
“This performance has given us confidence to raise the lower end of our EBITDA outlook range for this year and publish an EBITDA expectation of at least £7.9bn for 2022/23, with sustainable growth from this level forward. This growth will be driven by the continued recovery from Covid-19, enhanced by sales of our converged and growth products, and by significant savings from our modernisation and cost saving programme. In combination these factors will more than offset legacy product declines.
“The growth in EBITDA underpins the planned reinstatement of our dividend next year whilst ensuring that we can continue to drive value-creating investments in our networks and products.”