BT on track to reinstate dividend after 'resilient' first half

BT said its first half revenue was “relatively resilient” on Thursday, falling 8% to £10.59bn, which it put down to the impact of Covid-19 including reduced BT Sport revenue and a reduction in business activity in its enterprise units, as well as declines in its legacy products.

Adjusted EBITDA was off 5% for the six months ended 30 September at £3.72bn, which was driven by the fall in revenue, partially offset by sports rights rebates, savings from its modernisation programme, and other cost initiatives including Covid-19 mitigating actions.

Reported profit before tax for the period was 20% weaker at £1.06bn, which the board said was driven by the reduction in EBITDA.

Net cash inflow from operating activities totalled £2.71bn for the period, with normalised free cash flow sliding 30% to £422m, which BT said was also due to the reduced EBITDA, as well as offsetting movements in working capital and the timing of tax payments.

Capital expenditure rose 5% to £1.97bn, primarily driven by fixed and mobile network investment.

BT’s board raised the lower end of its adjusted EBITDA outlook range for the financial year to £7.3bn, making for a revised range of between £7.3bn and £7.5bn.

Its adjusted EBITDA outlook for the 2023 financial year was at least £7.9bn, which it said underpinned its plans to reinstate the dividend from the 2022 financial year, and reflected its “value-creating” investment plans.

On the operational front, BT reported a “strong” performance in the period despite the ongoing impact of the Covid-19 pandemic, with Openreach’s fibre-to-the-premises rollout reaching record levels in the second quarter, with a run-rate of 40,000 premises per week and 3.5 million premises passed to date.

It said Openreach would stop selling copper products to around 1.8m full fibre-enabled premises by September 2021 at the latest.

The company’s 5G-ready customer base was now over one million, with 5G live in 112 towns and cities.

BT said it saw a “strong increase” in consumer fibre-to-the-premises customer base, up 60% year-on-year, with fixed line and mobile convergence now standing at 21.4%.

Its enterprise division agreed a “landmark” partnership with Belfast Harbour during the period, to deploy a 5G private network.

The company’s modernisation programme also delivered £352m in gross annualised savings during the first half, at a cost of £163m.

Looking at its key strategic developments, BT said all of Openreach's major communications provider customers were now selling fibre-to-the-premises, leading to the “strong increase” in sales in the second quarter.

Its consumer unit also aligned its pricing policies across all products and services to consumer prices index plus 3.9% per annum, which the board said would provide “consistent, predictable pricing” for new and regrading customers, and would also support its network investment.

“BT delivered financial results in-line with expectations for the first half of the year, thanks to strong operational performance during exceptional circumstances,” said chief executive officer Philip Jansen.

“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 fibre-to-the-premises 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.”

Jansen said that at the same time, the company was “firmly on track” with the delivery of its modernisation programme, and delivered £352m in cost savings in the first half.

“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 2023, 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, Jansen said those factors would “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.”