TIDMBT.A
RNS Number : 9964T
BT Group PLC
28 July 2022
Trading update for the three months to 30 June 2022
BT Group plc
28 July 2022
Philip Jansen, Chief Executive, commenting on the results, said
"BT Group has made a good start to the year; we're accelerating our network
investments and performing well operationally. Despite ongoing challenges
in our enterprise businesses, we returned to revenue and EBITDA growth
in the quarter.
"We continued to grow the number of BT and EE customers connected to
our next generation networks. We're building our full fibre broadband
network faster than ever and we're seeing record customer connections
- both ahead of our own expectations. Openreach's full fibre network
now reaches over 8 million homes and businesses across the UK and we
anticipate increasing our annual build from 2.6 million premises last
year to around 3.5 million this year. EE's 5G network covers more than
55% of the country's population. We're achieving continued high customer
satisfaction scores thanks to our much improved customer service and
the value for money that our products and services represent.
"The modernisation of BT Group remains on track. We are delivering and
notwithstanding the current economic uncertainty we remain confident
in our outlook for this financial year."
Key strategic developments:
-- Fibre build and connection continues at pace, beyond our
expectations, with record quarterly FTTP build of 763k and net adds
of 302k
-- Finalised our FTTP co-provisioning agreement with Sky
-- EE was voted best network by RootMetrics for the ninth year
running and came top in every category measured; our 5G ready base
is now at 7.7m
-- Price rises to support investment in the network and offset
cost inflation; we have continued to raise awareness of our Home
Essentials social tariff with prices frozen this year
-- Consumer churn and complaints remain low with high levels of service
-- BT Sport remains home of UEFA club competitions, including
the UEFA Champions League, until 2027
-- The CMA(1) approved the BT Group plc agreement with Warner
Bros. Discovery, Inc. to form a 50:50 sports broadcasting joint
venture
-- Contingency plans in place to minimise disruption and keep
customers connected during CWU(2) strike action
Revenue and EBITDA growth, no change to full year outlook:
-- Revenue GBP5.1bn, up 1% due to improved pricing and trading
in Consumer and Openreach, offset by the migration of a wholesale
MVNO customer which concluded in FY22 and by continued legacy
product declines and challenging market conditions impacting large
corporate customers in Enterprise and Global.
-- Adjusted(3) EBITDA GBP1.9bn, up 2% primarily due to flow
through from revenue and continued strong cost control
-- Reported profit before tax GBP0.5bn, down 10% due to
increased depreciation offsetting EBITDA growth
-- Reported capital expenditure down 17% to GBP1.3bn, due to
prior year investment in spectrum; capital expenditure excluding
spectrum payments up 24% to GBP1.3bn, primarily due to increased
investments on FTTP build and provision, and cost inflation
-- Normalised free cash flow(3) GBP(0.2)bn, down GBP162m
primarily reflecting increased cash capital expenditure
-- Net financial debt (which excludes lease liabilities) was
GBP13.2bn and net debt(3) was GBP18.9bn at 30 June 2022, both
GBP0.9bn higher than at 31 March 2022 driven by pensions
contributions and lower cash flows
-- No change to FY23 outlook: Revenue growth, at least GBP7.9bn
EBITDA, around GBP4.8bn capital expenditure and between
GBP1.3bn-GBP1.5bn normalised free cash flow
Three months to 30 June 2022 2021 Change
----------------------------- --------------------------------
Reported measures GBPm GBPm %
Revenue 5,130 5,071 1
Profit before tax 482 536 (10)
Profit after tax 422 2 n/m
Capital expenditure 1,251 1,507 (17)
------------------------------ ----------------------------- -------------------------------- -------
Adjusted measures
Adjusted(3) Revenue 5,133 5,070 1
Adjusted(3) EBITDA 1,903 1,866 2
Capital expenditure excluding
spectrum 1,251 1,011 24
Normalised free cash flow(3) (205) (43) (377)
Net debt(3,4) 18,891 18,566 GBP325m
------------------------------ ----------------------------- -------------------------------- -------
n/m = not meaningful
(1) Competition and Markets Authority
(2) Communications Workers Union
(3) See Glossary on page 3
(4) Net debt was GBP18,009m at 31 March 2022
Overview of the three months to 30 June 2022
Customer-facing unit updates
Adjusted(1) revenue Adjusted(1) EBITDA
-----------------------
First quarter to
30 June 2022 2021 Change 2022 2021 Change
GBPm GBPm % GBPm GBPm%
------------------ ------ ------ ------- ------ ------ -----
Consumer 2,502 2,382 5 625 523 20
Enterprise 1,200 1,287 (7) 315 429 (27)
Global 774 785 (1) 96 102 (6)
Openreach 1,417 1,347 5 851 773 10
Other 7 8 (13) 16 39 (59)
Intra-group items (767) (739) (4) - --
------------------ ------ ------ ------- ------ ------ -----
Total 5,133 5,070 1 1,903 1,8662
------------------ ------ ------ ------- ------ ------ -----
Consumer: Strong financial performance and FTTP growth; churn
remains near record lows
-- Revenue growth with improved fixed and mobile service
revenues, now returning close to levels in the quarter before the
start of the pandemic; this was helped by the annual contractual
price rise in April and
strong Sport revenues including the Fury-Whyte event
-- EBITDA increased with revenue growth, tight cost management
and lower indirect mobile commissions
-- Churn remains near record lows with continued low complaints
to Ofcom and high levels of service
-- Highest ever quarterly growth in FTTP base with increase of 118k, 5G ready base now at 7.7m
-- The CMA approved the BT Group plc agreement with Warner Bros.
Discovery, Inc. to form a 50:50 sports broadcasting joint
venture
Enterprise: Challenging market conditions continue in large
corporates offsetting growth in other segments
-- Revenue decrease primarily due to challenging market
conditions in large corporates, ongoing legacy product declines and
the migration of a wholesale MVNO customer which concluded in
FY22
-- EBITDA decrease as a result of reduction in revenue, with the
mix of revenue driving a further downside; Q1 FY22 also saw an
asset disposal along with strong performance in ESN
-- SoHo and SME segments saw revenue and EBITDA growth
-- Retail order intake was GBP2.6bn on a 12-month rolling basis,
down 8% with growth in new business offset by decline in contract
re-signs; wholesale order intake was GBP1.0bn, up 8%
-- Concluded an agreement to extend the existing MVNO agreement
with Telecom Plus (UW), and Sellafield Ltd has awarded a major new
contract to BT for managed network services
Global: Challenging market conditions and impact of prior year
divestments partly offset by strong cost transformation
-- Revenue decline due to impact of prior year divestments and
challenging market conditions partly offset by GBP18m foreign
exchange movement; revenue excluding divestments, one-offs and
foreign exchange was down 1%
-- EBITDA decline reflected lower revenues, the impact of
divestments and inflationary pressures offset by lower operating
costs from ongoing modernisation, cost control and one-offs; EBITDA
excluding divestments,
one-offs and foreign exchange was down 8%
-- Order intake was GBP3.7bn on a 12-month rolling basis, up 6%
with our growth product portfolio
representing over half of total orders won in the quarter
-- Announced a strategic alliance with MTN to enhance
communications services in Africa, in which cloud-based security
and consultancy, managed connectivity and voice services will be
delivered seamlessly as part of MTN's Enterprise portfolio. We also
launched Connect Cloud Edge in partnership with Equinix, a
next-generation cloud connectivity solution designed to accelerate
our customers' digital transformation
Openreach: Revenue and EBITDA growth; FTTP build
accelerating
-- Revenue growth driven by price increases and increased sales
in fibre-enabled products and Ethernet, partially offset by decline
in physical lines and decrease in chargeable repairs due to lower
repair volumes;
in FY22 price increases started in Q2
-- EBITDA growth from revenue flow through and lower operating
costs driven by lower repair and efficiency programmes, partially
offset by higher FTTP provisioning activity and pay inflation
-- Record FTTP build of 763k premises passed in the quarter at
an average build rate of 59k per week, around a third of the way
through our 25m build; we now have a footprint of over 8m including
2.5m in rural locations
-- Record growth in FTTP take up with base of c.2.1m, weekly net
adds of 23k and a take up rate of 26%
-- Achieved all 30 of the Ofcom Quality of Service measures for
Q1, with higher standards set for FY23;
delivered improved year on year performance for on time copper and FTTP provision of 94%
-- Finalised our FTTP co-provisioning agreement with Sky in a long-term deal
(1) See Glossary on page 3. Commentary on revenue and EBITDA is
based on adjusted measures.
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 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 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 half year results for FY23 on 3
November 2022.
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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