BT Group plc

Good morning and welcome everyone to BT Group's results presentation for the full year ended 31st of March 2025. Presenting today are Alison Kirkby, Chief Executive, and Simon Louth, CFO. Following the presentation, there will be a question and answer 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 forward-looking statements caution in the presentation and press release, 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 presentation can be found on our website. With that, I'll now hand over to Alison.

Thank you, Nick, our new chatbot. Good morning, everyone, and welcome to our full year results presentations. And thank you so much for joining us today on this sunny morning. By way of an agenda, I'll be starting by looking back at our progress in the past year, and then I'll hand over to Simon to talk about the financials. Then we'll set out more detail on our strategy, our plans and our outlook for the year ahead. And of course, Simon and I will be taking your questions at the end. We're also joined, I'm delighted to say in the audience, by two longstanding colleagues, Clive and Howard, and three new ones, Claire, John and Tom. So please do feel free to say hello at the end of the meeting. We won't invite them for Q&A, otherwise you'll be here all day. But let me start first with our full year highlights on slide four. It's been a busy year for all of us at BT. We've continued to deliver on our strategy by building and connecting customers to next generation networks at pace, by improving customer experience, and by modernizing and simplifying. We broke records on full fiber build and connections and on mobile network performance. Our NPS jumped in all of our customer-facing divisions and we delivered transformation benefits ahead of plan. And we continue to simplify, shutting down non-core activities and selling businesses in Ireland and since year-end Italy, all with the ultimate aim to sharpen both our focus and our capital allocation. This focus and accelerated transformation helped us more than offset revenue pressure to deliver EBITDA growth and a better than expected £1.6 billion of normalised free cash flow, even as we invested at close to peak levels. In fact, the highest investment into the UK of any FTSE 100 company. Reflecting this performance and our confidence in cash flow expansion, we're now increasing our dividend. Our total dividend will increase to 8.16 pence per share in line with our progressive dividend policy. And we're continuing to target normalised free cash flow of £2 billion in fiscal year 27, which is now just one year away, and rising to £3 billion by the end of the decade. Considering the clear benefits of full fibre for our customers in defending our market position and ultimately growing our enterprise value, I'm also very pleased to announce that we're going to push on even faster this year and pass up to 5 million homes, so that by the time we're here next year, will have reached 23 million homes and businesses and connected close to 9 million of them. More of that later in the presentation. But first, let's reflect on how we've performed in each of our customer-facing units. In OpenReach, we delivered a record year in build, in provisions, in revenue, in EBITDA, and in customer satisfaction. Our full-fibre footprint today stands at more than 18 million premises, reaching over half the country. And thanks to greater build efficiency, we built a record $4.3 million for the same budgeted cost as for the $4 million that we'd originally planned for when we came into the year. Customer demand has remained very strong, with 6.5 million homes and businesses connected by the end of March, and in fact, 6.8 million already at the end of just last week. This means our market-leading take-up actually increased during the year from 34% to 36%, and hit 37% in the last few weeks, even while we've been passing so many new premises. Broadband ARPU has grown 6%, driven by CPI and better than planned upsell to higher speeds, with a 3% overall broadband revenue growth despite the higher line losses. And with ARPU up 5% in our billion-pound Ethernet business, revenues grew a further 8%. In addition, our transition to fibre drove faults down by around 10% in the year, And in copper and Ethernet, we continue to meet all Ofcom quality of service standards, and we also have an excellent Trustpilot rating across both copper and fibre. All of this drove growth in NPS and in EBITDA well ahead of revenue growth. Finally, we've already won seven Type-C project gigabit contracts, covering 300,000 hard-to-reach premises with a value of over £700 million. we've also taken over two substantial contracts where other suppliers have struggled, both of which will allow us to gain further momentum in the coming years. The area where we haven't been happy, of course, is in line losses. We always expected some share loss, but within a growing market. Instead, the fixed broadband market shrank slightly in the last year, creating a headwind of a few hundred thousand lines compared to the previous trend. And based on our data, we think there is some post-Covid and cost of living reset going on in the market as a whole. At the same time, in areas where we don't have full fibre or our CPs are not investing to maintain their market position, our losses are higher. However, the positive also remains, as in areas where we do have full fibre, we lose much less. So our best defence, therefore, remains to continue building and connecting faster and more efficiently than anyone else. And as I said, we're now going to accelerate further this year to address the growing demand and bring forward higher connections and higher ARPUs. Let's now move to consumer. We delivered a solid performance in what was a year of transition after heightened inflation on our back book over the last three years. In line with what I said last May, the second half did see a return to service revenue growth and we expect a similar seasonal pattern in this coming year. After several years of both a declining customer base and market share, it was clear coming into last year that we needed to stabilise at some point. So despite the competitive market, I'm very pleased to say that our broadband base grew in the final quarter for the first time since December 21. That was due to us better leveraging all three of our brands, but particularly EE and BTE. Our mobile base was also stable in the year, and on ARPUs we achieved a slight increase in broadband, and we were stable for mobile despite ongoing shifts to SIM only. Churn had a small increase in broadband, but a fall to 1% for mobile, helped in part by our new EE1 proposition, which is successfully growing household penetration, loyalty, you saw in our churn, and our converged base. and our converged base now is actually growing up two percentage points to 25%. We're continuing to proactively upgrade our customers to the best available network in the geographic area, with our full fiber base up over 30% to 3.2 million. 5G connections also grew up 10%, and our mobile network won best network for the 11th year in a row with RootMetrics, for the 10th year in a row with Umlaut Connect. and we also recorded the best 5G availability with speed test. All of these improved network and convergence experiences clearly boosted NPS, which increased across all three of our brands, and I'm delighted to see all our brands score well this morning in Ofcom's customer service comparison, with EE the best performing MNO overall, and Plusnet, EE, and BT in the top four for broadband. Finally, I'm very proud that EE took the lead and issued age guidance for smartphone usage last August, and at the other end of the generational spectrum, I'm proud of the enhanced support that we are giving to vulnerable customers ahead of the switch to digital landlines. Both are evidence of our commitment to our purpose to connect for good. Moving to slide seven, business is continuing to focus its turnaround efforts by simplifying and transforming to next generation products and solutions, but is clearly impacted by ongoing drags from legacy products. In the UK, revenue fell 1%, but this is more than accounted for by the fall in traditional voice, which, as we know, will slow with PSTN switch-off in January 2027. Within SMB, the trajectory of service revenue was very similar to consumer, with a recovery in the second half, but weighed down by lower equipment sales. In corporate and public sector, we were very pleased to broaden the emergency services network contract for a further seven years. And at the end of the year, we saw excellent wins, including with DEFRA, which will contribute to further improved performance in the future. Like in consumer, we're also seeing substantial growth in our fibre and 5G bases. And to note, almost three quarters of our voice customers are now on voice over IP. That being said, UK connectivity revenues did fall 3%, but grew if you exclude traditional voice, and UK managed services also grew 2%. This underlying growth and our improving NPS speak to the relatively seamless way in which we are managing these migrations and to the strength of the relationships we have with our customers, large and small, throughout the country. Moving to international, revenue fell 9%, driven by weaker trading and FX. Essentially, the challenge for business as a whole remains the speed at which we move off of legacy services, digitalize our customer journeys, and our effectiveness at offsetting rising costs with pricing in what has been a tricky environment for our customers. That's what we've seen this past year, and that's what we've factored in to the same for the outlook for the coming year. But having carved out the international segment, we now have focused leadership teams in both parts of the business to help us address the opportunities that we now see ahead. So let me now hand over to Simon to take you through the numbers in a little bit more detail.

Thanks, Alison. So, good morning to you all. I'm going to start with the individual unit results on slide 9. Consumer revenue was down 1% for the year. That was mainly due to lower handset sales volumes. Adjusted service revenue declined 0.4% for the year due to lower average customer bases through the year, only partly offset by the higher broadband ARPU. But despite this... We returned to service revenue growth in H2, and the broadband base grew in Q4. Consumer EBITDA declined by 1%, driven by the flow-through of service revenue and some higher input costs, partly offset by strong cost controls and some one-offs of mid-tens of millions of pounds. Business revenue was down 4%. That was driven primarily by international trading alongside a £56 million adverse impact from FX. UK revenue was 1% lower. Declines in legacy voice products ahead of the PSTN switch-off in 2027 were only partly offset by the easier comparator from last year's revenue adjustment. Business EBITDA declined by 6% for the year, reflecting the flow-through of revenue from high-margin legacy products, partly offset by tight cost management and the ongoing modernization activity. Q4 EBITDA benefit of the prior year revenue adjustment was largely offset by the quarterly phasing of our corporate and network costs. Openreach grew revenue 1% in the year, driven by CPI-linked price increases, the increased FTTP mix in broadband, and Ethernet volume growth. This was partially offset by declines in the base of broadband and voice-only lines. Q4 revenue growth was negatively impacted by the phasing of commercial and some storm-related rebates. Oprah, which adjusted EBITDA, grew by 5%. This was driven by the revenue flow through and the continued cost transformation, including the benefit of lower fault rates, lower total labor resource, and lower energy costs, all partly offset by the pay inflation. Our other EBITDA outturned at zero for the year. So moving to look at our group results now on slide 10. Adjusted revenue for the year was £20.4 billion. That's down 2%. It was at the bottom end of our revised guidance range. Revenue declines in consumer and business were only partially offset by that growth in open reach. Adjusted UK service revenue fell 1% in the year, but it grew in the second half. Adjusted operating costs before depreciation, they were down 3% due to the cost transformation and the tight expenditure controls. Adjusted EBITDA for the year was £8.2 billion, that is up 1%, and it's in line with our guidance. Strong delivery from our cost transformation programs more than offset the revenue pressure. CAPEX came in at £4.9 billion for the year, that's broadly flat. This was achieved while Openreach built full fibre to 4.3 million premises, exceeding the revised build target set at H1 and delivering record provisioning volumes. We largely absorbed the increased full fibre volumes through a combination of lower unit costs in Openreach and significantly improved IT development efficiencies in our digital unit. Cash capex was slightly higher than reported capex due to around about £100 million, a grant funding gain share partially offset by the timing of capital creditor payments. Normalised free cash flow increased 25% year-on-year to £1.6 billion, £100 million ahead of our guidance. Now compared to FY24, EBITDA growth, a reduced working capital outflow and a £95 million tax receipt more than offset higher interest costs. We delivered our cash flow performance while also achieving the new Fair Payment Code silver standard. The IAS 19 pension deficit fell by £0.7 billion, mainly due to scheduled contributions, partly offset by lower-than-assumed asset returns. The funding and IAS 19 deficits at the end of April were largely unchanged, despite the last month's market volatility following the U.S. tariff announcement. And as Alison just announced, we're proposing a final dividend of 5.76 pence per share, making the FY25 full-year dividend 2% higher at 8.16 pence per share. And now, Alison, back to you.