BT Group remain on track to meet outlook for full year

BT Group (LON:BT.A) has announced its results for the half year to 30 September 2019.

Key strategic developments:

·     Launched a host of new products for consumer and business segments, including the new Halo converged product plans and BT Mobile 5G

·     Introduced a range of new service initiatives including bringing the BT brand to the high street in over 600 EE/BT dual-branded stores, and to answer 100% of customer calls in the UK & Ireland from January 2020

·     Continued to make progress on the BT modernisation agenda, including delivering over £1.1bn transformation benefits, announcing the first locations in our Better Workplace Programme, and disposal of BT Fleet Solutions

·     Outlined our Skills for Tomorrow programme to provide digital skills training for 10m UK children, families and businesses

Operational:

·     5G network live in over 20 cities and large towns; 5G smartphone plans now available on both EE and BT brands

·     Openreach announced the launch of new FTTP 1Gbps and 550Mbps products. FTTP rollout at c.23k premises passed per week; 4.2m ultrafast (FTTP and Gfast) premises passed to date; currently announced plans to build FTTP in 103 locations

·     Consumer fixed ARPC £38.5, broadly flat year on year; postpaid mobile ARPC £20.8, down 5.5% year on year due to impact of regulation and continued trend towards SIM-only; RGUs per address up to 2.38

·     Postpaid mobile churn remains low at 1.2% in Q2 despite impact of auto switching; fixed churn at 1.3% in Q2 down from 1.6% in prior year

Financial:                                                                                            

·     Reported revenue £11,467m, down 1%¹ mainly reflecting the impact of regulation, declines in legacy products, and strategically reducing low margin business

·     Reported profit before tax £1,333m, broadly flat year on year; adjusted² EBITDA £3,923m, down 3%¹ due to lower revenues, increased spectrum fees, content costs and investment to improve competitive positioning partly offset by cost savings from transformation programmes

·     Net cash inflow from operating activities of £2,173m; normalised free cash flow² of £604m, down 38% due to increased capital expenditure, higher interest and tax payments, partially offset by one-off cash flows

·     Capital expenditure £1,882m. Up £225m excluding BDUK grant funding deferral, driven by increased network investment

·     Net debt² increased primarily due to implementation of IFRS 16, £6.1bn, and net business cash outflows, £1.2bn

·     Interim dividend of 4.62p per share; 30% of last year’s full-year dividend of 15.4p per share

·     Overall financial outlook maintained

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

“BT delivered results in line with our expectations for the second quarter and first half of the year, and we remain on track to meet our outlook for the full year.

“We’ve invested to strengthen our competitive position. We’ve accelerated our 5G and FTTP rollouts, introduced an enhanced range of product and service initiatives for both consumer and business segments, and announced price and technology commitments to deliver fair, predictable and competitive pricing for customers.

“Openreach is significantly accelerating its pace of FTTP build and is now passing a home or business every 26 seconds. Openreach announced a further 29 locations in its build plan to reach 4m premises by March 2021, and we continue to make positive progress with Government and Ofcom on the enablers to stimulate further investment in full fibre.

“We continue to make progress on the BT modernisation agenda, delivering over £1.1bn in annualised cost savings, and announcing locations in our Better Workplace Programme.”