BT Group plc

Good morning and welcome everyone to BT Group's results presentation for the half-year ended 30th September 2024. Presenting today is Alison Kirkby, BT Group's Chief Executive and Simon Louth, BT Group's CFO. Following the presentation, we will be having a Q&A session. I would like to make everyone aware that this event is being recorded for replay purposes. Before we start, I'd like to draw your attention to the usual forward-looking statements in our press release and our latest annual report for examples of the factors that could cause actual results to differ from any forward-looking statements we may make. Both the press release and the annual report can be found on our website. With that, I'll now hand over to Alison.

Good morning, everyone, and welcome again to our half-year results presentation, and thank you for joining us. Back in May, I reconfirmed our five strategic priorities, and I'm pleased that we're making solid progress against all of them. We're accelerating the key foundations that will drive value creation over the mid and long term, specifically doubling down on the UK, fibre build and take up, lower costs, and happier customers. But let me begin with some highlights. Openreach delivered record-building connections in the half and increased its market-leading take-up, outpacing even our own expectations. With lower build costs, we can now go even further and build beyond the original 4 million target that was set for this year, keeping our foot to the floor on one of the country's largest ever infrastructure investments. In consumer, we saw excellent growth in both our 5G and our fibre customer bases as we accelerated the migration of our customers to next generation platforms. And our mobile subscriber base grew for the first time in two years and our converged customer base is starting to grow again too. Customer satisfaction also improved across all three consumer brands for the first time in nearly three years. In business, we accelerated the carve-out of our global segment and started the transition to a simpler, more focused UK business. And while radically modernising, we also improved customer satisfaction. Across the group, structural transformation and improved cost discipline delivered a further £400 million run rate savings. And bringing all of this together, we delivered growth in both EBITDA and normalised free cash flow despite the revenue weakness. which is keeping us firmly on track to meet our EBITDA and our cash flow targets for the year. Finally, we will increase the interim dividend by 4% to 2.4 pence per share in line with our progressive dividend policy. But let me now hand over to Simon to run you through the numbers before I take you back to a more detailed update on each of our units, our transformation agenda and the outlook for the rest of this year.

Well, thank you, Alison, and good morning to everyone. Looking first at our group results on slide seven. So adjusted revenue for the half was 10.1 billion pounds. That's down 3% as challenging conditions in business, particularly outside the UK, and an expected H1 decline for consumer more than offset growth in open reach. Adjusted operating costs before depreciation were down 3%. We have made 433 million pounds of gross annualized savings this half, with £187 million cost to achieve. That's absolutely in line with our target. Before moving on from costs, I wanted to quantify the impact of last week's budget on BT Group. We expect that the additional 1.2% on employers' national insurance contributions, the £4,100 reduction in the NI threshold and the known increase in the national living wage will together cost BT around £100 million per annum from April 2025, of which about 70% will be OPEX. We will intensify our productivity and our cost transformation programs to offset this. Turning now to adjusted EBITDA for H1, this was up 1% to £4.1 billion. Cost transformation and operational efficiency have more than offset the lower revenues. Reported capex came in at just under 2.3 billion for the half. That's down 2% compared with the prior year. This was mainly due to lower non-network infrastructure spend and the decline in IT costs following last year's platform deployment to support the new EE launch. It's worth noting that FTTP CapEx is down 2% in the half, benefiting from lower unit costs as the build has accelerated. Lastly, we're still expecting FY25 cash CapEx to be around £200 million higher than the reported CapEx due to the net impact of grant funding and capital creditors. Normalised free cash flow of £715 million in H1 was up 57% on the prior year. This reflects the benefit of a lower working capital outflow, which was primarily from lower handset stock levels and a net inflow of mid tens of millions of pounds from supply chain finance and handset monetization. We continue to expect a more neutral outturn for working capital for the full year. Separately, we also received a cash tax refund of around £100 million in the second quarter. And as Alison just announced, we're proposing an interim dividend of 2.4 pence per share at an increase of 3.9%. And that's in line with our policy of paying an interim dividend of 30% of last year's total dividend. Moving now to our individual unit results, that's on slide 8. Openreach grew revenue 2% in H1, driven by price increases and strong momentum in FTTP and Ethernet, partly offset by declines in broadband and voice lines. We expect continued momentum on FTTP and Ethernet beyond FY25, broadly offsetting the impact of line losses and the closure of WLR-related revenue streams as we approach the PSDN switch-off. Openreach EBITDA grew by 6% in the half, driven by stronger revenue, improved cost transformation, including around 5,000 fewer FTEs over the past 12 months, and partially offset by pay inflation. Consumer revenue was down 1% for the half, impacted by the expected challenging pricing comparator with the prior year, combined with a lower broadband base. Consumer EBITDA declined by 1% in the half year due to the revenue flow through and higher input costs, partially offset by continued strong cost control and higher equipment margin. In our business division, H1 revenue was down 6%, principally driven by non-UK trading in our global and our portfolio channels. UK revenues saw a small decline, around half of which was due to the change in recognition of £38 million of wholesale managed broadband revenue in Q3 last year, and that impacted the H1 comparative figures. Business EBITDA declined by 7% for the half, reflecting the revenue declines offset by cost control. We expect H2 year-on-year revenue and EBITDA trends to improve versus H1, in part due to a favourable comparator as we lap the impact of last year's £38 million wholesale broadband recognition change and £41 million of billing accuracy adjustment. We also expect the usual B2B pickup in H2, albeit in a tougher CPS trading environment. And on that note, I'll hand back to Alison.