BT Group Plc - Final Results
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BT Grou Plc
BT Group plc (BT.L) today announced its results for the full year to 31 March 2020.
- 2019/20 results overall in line with expectations
- New FTTP target to reach 20m premises by mid- to late-2020s, on the assumption we obtain the required critical enablers
- Phase 1 of our transformation programme complete; next phase of modernisation to deliver annualised gross benefits of £1bn by March 2023 and £2bn by March 2025, with £1.3bn one-off cost to achieve in total across the five years
- Keeping the nation connected during the Covid-19 crisis
- Final dividend suspended for 2019/20 and all dividends for 2020/21 to create capacity for value-enhancing investments and managing confidently through the Covid-19 crisis; expect to resume dividends in 2021/22 at an annual rate of 7.7 pence per share
Philip Jansen, Chief Executive, commenting on the results, said
"BT had a positive year delivering results in line with expectations and completing our £1.6bn phase 1 transformation programme, one year ahead of schedule.
"Covid-19 has changed everybody's world and I am immensely proud of how BT has responded to the challenges the Covid-19 crisis has presented. Our strong and resilient networks, both fixed and mobile, have proved critical to the continuing functioning of the UK economy, providing unrivalled connectivity and services for the nation.
"Of course, Covid-19 is affecting our business, but the full impact will only become clearer as the economic consequences unfold over the next 12 months. Due to Covid-19, BT is not providing guidance for 2020/21, at this time.
"BT has the best network infrastructure in the UK. We have the leading 4G network and are rapidly expanding our leadership position in 5G, that today covers over 80 towns and cities. We have the largest and most extensive fixed network and are leading the UK on the next generation Fibre-to-the-Premises (FTTP) network where we now pass 2.6 million premises. Today we are announcing a rapid acceleration of our FTTP build with a target of 20 million premises passed by the mid- to late-2020s, including a significant build in rural areas. After passing 1.3 million premises last year, we are aiming at over 2 million in 2020/21, and envisage a maximum build rate of 3 million premises per year. Our FTTP investment should deliver pre-tax nominal returns of between 10% to 12% and is based on a regulatory framework consistent with Ofcom's preferred policy direction and continued support for infrastructure investment and competition.
"The continued delivery of market leading customer experiences remains core to our success, with a focus on driving the take-up of converged product offerings such as Halo, our premium converged offering for homes and businesses. In the short period since launch, Halo now represents over 30% of our BT consumer broadband base.
"BT is delivering, but is also changing. BT needs to be leaner, simpler and more agile. Today we are announcing a radical modernisation and simplification programme that will use technology to create a better BT for the future. This 5-year initiative will re-engineer old and out of date processes, rationalise products, reduce re-work and switch off many legacy services. This next stage in the modernisation of BT will deliver gross annualised savings of £2 billion over the next 5 years.
"In order to deal with the potential consequences of Covid-19, allow us to invest in FTTP and 5G, and to fund the major 5-year modernisation programme, we have also taken the difficult decision to suspend the dividend until 2022 and re-base thereafter.
"These decisions, particularly on the dividend, network investment and transformation are key to underpinning BT's investment case; driving network strength, competitive strength and financial strength, providing more clarity to the market, and driving long-term value for shareholders. I am confident that these decisions position us really positively for the future."
Jan du Plessis, Chairman, commenting on the dividend, said
"Recognising the importance of dividends to our shareholders, the Board's decision in relation to the dividend has been exceptionally difficult. BT plays a key role in sustaining critical national infrastructure - as magnified by the Covid-19 crisis - and many stakeholders trust and rely on the connectivity we provide. BT also stands ready to make the biggest communications infrastructure investment in the UK in a generation - that includes building our full fibre network to 20m premises by the mid- to late-2020s. To maintain such trust, whilst creating capacity for value-enhancing investment and navigating the unprecedented uncertainties caused by Covid-19 without compromising our credit rating, the Board concluded that the prudent and proper decision was to suspend the 2019/20 final dividend and all dividends for 2020/21, and re-base future dividends to a more sustainable level. The Board believes that this decision is in the best long-term interests of shareholders.
"We expect to resume dividend payments in 2021/22, rebased to 7.7p per share. The Board expects to continue with a progressive dividend policy from this re-based level for future years."
Keeping the nation connected during the Covid-19 crisis:
- Our priority is protecting our people, in particular our frontline keyworkers who have continued to work to keep the nation connected
- Our networks are performing well, and comfortably within capacity, despite the change in demand patterns
- We have supported the national response to the crisis, including providing connectivity to the NHS Nightingale hospitals and are working closely with Government on a wide range of initiatives
- FTTP rollout at c.32k premises passed per week; FTTP premises passed to date doubled in the year to 2.6m
- Divested Tikit and progressing disposals of selected domestic operations in Latin America and France
- 5G now live in 80 cities and large towns; investing significantly to more than double current footprint by March 2021 subject to the right conditions
- EE named best overall operator in RootMetrics' biannual awards
- Consumer fixed ARPC £38.1, down 2% year on year; postpaid mobile ARPC £20.4, down 2% year on year due to impact of regulation and continued trend towards SIM-only; RGUs per address 2.38
- Postpaid mobile churn improved to 1.1% quarter on quarter; fixed churn improved to 1.3% year on year due to improvements to customer experience and shift to fairer, predictable and competitive pricing strategy
- Reported revenue £22,905m down 2%1 mainly reflecting the impact of regulation, declines in legacy products, strategic reductions in low margin business and divestments
- Reported profit before tax £2,353m down year on year; includes charges of £95m as a result of Covid-19 mainly reflecting increased debtor provisions
- Adjusted2 EBITDA £7,907m, down 3%1, due to lower revenue and investment in customer experience, partly offset by cost savings from transformation programmes
- Net cash inflow from operating activities £6,271m, up 47%, due to lower pension contributions and one-off cash flows; normalised free cash flow2 £2,011m, down 18%, primarily due to increased cash capital expenditure
- Capital expenditure £3,960m, up £193m excluding BDUK funding deferral, driven by network and customer investment
- Net debt2 increased primarily due to implementation of IFRS 16, and net business cash outflows
- Given the uncertainty created by Covid-19 we will not be providing a financial outlook statement for 2020/21