BT upbeat on full-year prospects after first half growth

(Sharecast News) - BT Group said on Thursday that it was now expecting a full-year turnout at the top end of its guidance range after recording growth in revenue and earnings in the first half. The FTSE 100 telecoms giant said adjusted revenue for the six months ended 30 September reached £10.4bn, marking a 3% increase on a pro forma basis compared to the prior year.

That was attributed to higher sales of fibre-enabled products, inflation-linked pricing, and improved trading in the lower-margin business segment, partially offset by declines in legacy products.

The company's adjusted EBITDA also saw robust growth, rising 6% to £4.1bn, while on a pro forma basis, the increase was 4%, thanks to revenue flow-through and effective cost control measures mitigating the impact of cost inflation and one-off items from the previous year.

BT said its business segment's EBITDA, however, declined due to increased input costs and the decline of high-margin managed contracts from its legacy portfolio.

It reported a profit before tax of £1.1bn for the half, reflecting a substantial 29% increase.

Capital expenditure totalled £2.3bn, making for an 11% decrease, primarily due to lower fixed network spending resulting from lower unit costs for its fibre-to-the-premises (FTTP) build.

Cash capex also saw an 11% reduction to £2.5bn.

The firm reported a net cash inflow from operating activities of £2.3bn, with normalised free cash flow reaching £0.5bn, up £0.4bn year-on-year.

That increase was put down to a £0.2bn rise in adjusted EBITDA and a £0.3bn decrease in cash capital expenditure, partly offset by a net working capital outflow of £0.1bn.

BT Group said its net debt stood at £19.7bn at period end, widening from £18.9bn on 31 March, primarily due to pension scheme contributions.

The net free cash flow generated in the first half substantially offset the payment for the final dividend of the 2023 financial year.

It reported a gross IAS 19 pension scheme deficit of £3.9bn, up from £3.1bn on 31 March, due to increased real interest rates and narrowing credit spreads over the first half.

BT Group declared an interim dividend of 2.31p per share, in line with its policy of paying 30% of the prior year's full-year dividend.

Looking ahead to the rest of the financial year, the company said it anticipated adjusted revenue and EBITDA growth on a pro forma basis, with capital expenditure excluding spectrum expected to be around £5bn.

Normalised free cash flow was projected towards the upper end of the £1bn to £1.2bn range.

"These results show that BT Group is delivering and on target - we're rapidly building and connecting customers to our next generation networks, we're simplifying our products and services, and we're now seeing predictable and consistent revenue and EBITDA growth," said chief executive officer Philip Jansen.

"We've strengthened our competitive position with the launch of both New EE and our renewed strategy in business, and Openreach has now built full-fibre broadband to more than a third of the UK's homes and businesses with a growing connection rate.

"Our transformation programme has now delivered £2.5bn in annualised savings, well on track to meet our £3bn savings target by 2025."

Jansen said BT's delivery in the first half meant it was confirming its financial outlook for the 2024 financial year, with normalised free cash flow now expected towards the top end of the guidance range, as it declared an interim dividend of 2.31p per share.

"BT Group has a bright future, and I'm pleased to be handing the baton to Allison Kirkby early in the new year.

"She knows the sector, she knows the company and she's the right person to lead BT Group from this position of operational strength."

Reporting by Josh White for Sharecast.com.