BT Group plc

Good morning and welcome everyone to BT Group's results presentation for the half year ended 30th of September 2025. Presenting today is Alison Kirkby, BT Group's Chief Executive and Simon Louse, BT Group's CFO. Following the presentation, we'll 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.

Hi, good morning everyone and welcome and thank you for joining us for our half year results. In terms of the presentation this morning, I'm going to start by setting out the progress we've made against our strategic priorities so far this year. Simon will update on the financials and then we very much look forward to taking your questions after a quick recap from myself. So in summary, it's been another period of solid delivery despite the competitive markets we operate in, with very clear progress in the UK, while we've also worked hard to manage headwinds from our accelerated migration away from legacy voice products and in our international markets. Let me begin with some highlights. Our leadership in fibre, 5G and secure networking has strengthened further since the start of the year. Openreach achieved another set of records on full fibre build and again on take up with even better efficiency. Consumer gained customers in all its key segments, broadband, mobile and TV, and grew its number of converged households. Business is showing a stabilising financial performance for the first time in many years. And we continue to press ahead with our £3 billion transformation programme, offsetting some of the cost headwinds we are facing, including the higher labour-related costs incurred since the beginning of this tax year. In addition, we have agreed or completed four targeted disposals outside of the UK and having carved it out with dedicated leadership, we're accelerating the reshaping of our international business. As a result, we're today reconfirming all of our guidance metrics for the year and beyond, including our target of £2 billion in normalised free cash flow for next year and £3 billion in fiscal year 30. And our interim dividend is rising 2%. As you will recall, and as I set out in May, our ambition is to become the UK's most trusted connector of people, business, and society, guided by our purpose to connect for good. Our strategy focuses on three things, building the best, most trusted digital networks, connecting customers so that they thrive as we grow in a digital world, and accelerating our modernization to restore leadership in everything we do. By the end of the decade, this strategy will have delivered for all of us, including meeting our financial commitments of service revenue growth, EBITDA growth ahead of revenue, and a doubling of this year's normalised free cash flow. So how are we doing so far this year? Well, I'm pleased that we continue to deliver on the key levers that will realise our short, medium and long-term ambitions, specifically a focus on the UK, building the UK's only nationwide digital backbone, a growing customer base as a result of a much improved customer and product experience, all enabled by a radically simpler and better BT. On build, our nationwide reach expanded further. The open reach team hit a new record of 2.2 million homes passed. On mobile, we won best network with RootMetrics for the 12th year in a row, and we lifted our 5G plus coverage by 23 percentage points to reach 66% of the UK's population. And today we're announcing a new landmark agreement with Starlink so we can offer the best broadband connectivity in the hardest places to reach in our country. On Connect, we connected a record 1.1 million open reach customers to full fibre. And we've again lifted our market leading take up rate, which is now at 38%. Our consumer customer base grew again with customer growth in broadband for a third quarter in a row and further growth in both mobile and TV. Our decision to adopt a multi-brand strategy is clearly paying off, allowing us to reach more market segments without diluting our premium position. Customer satisfaction also rose again with growth in converged homes too, building customer loyalty and over time lifetime value. And our sales orders in business grew with clear demand coming from British businesses for more secure and more resilient networking solutions. And finally, on Accelerate, our cost transformation is allowing us to offset margin pressures as they arise and still grow our EBITDA. And there is much more to come. We've achieved £1.2 billion in annualised cost savings in the first 18 months of our five-year programme, with particularly solid progress in our networks and digital units during this first half of this year. We have exited businesses outside the UK that do not fit with International's mission to serve only multinational companies. And in International, now that it is carved out, we have clearer and more accelerated plans to simplify our product portfolio and reshape our office footprint. Finally, we are continuing to carefully migrate customers off the PSTN ahead of closure in January 27, investing to support the elderly and the vulnerable in particular, and we're leading in safety with the launch of our Safer Sims product for children as we build the best, most trusted networks for families. On the next slide, it's worth stepping back to look at the longer-term achievement of our Openreach and our networks teams. We are the only operator building fibre at scale with nationwide reach, and we are well on track to achieve our target build of 25 million premises passed by December 26, so just over a year from now, with an ambition to reach 30 million by fiscal year 30, assuming a stable and pro-investment environment. And we remain on course, therefore, to earn good returns for our shareholders and to create one of Europe's most attractive fibre infrastructure assets, whether in a competitive market or one regulated under Ofcom's fair bet. Why is that? Well, returns in network businesses depend on building at the right price and quality with the best take up and a reasonable cost of capital. We compare very well on all four of those metrics and we continue to build within the cost ranges we aimed for at the beginning, despite the inflation we saw during the period, with excellent quality and resilience. On mobile, we have a growing 5G connected base with now 89% population coverage, 66% 5G+, which is our name for 5G standalone coverage. And we're well on track to reach 99% 5G plus coverage by fiscal year 30, almost four years ahead of the other networks. We are clearly super proud of the network credentials we've built over the last 12 years and before that. But I can assure you we are not resting on our laurels and are always working on ways to improve customer experience, including now the deployment of the millimeter wave spectrum we purchased in mid-October for high density locations and in reapplying what we learned from uniquely running the emergency services network into building the most trusted and resilient network experience for everyone. Moving on to each of our customer-facing units, and in turn, let's start with Openreach. As I've said, we continue to build full fibre at pace and now pass over 20 million premises, of which we had already connected 7.9 million at the end of last week. Broadband line losses were 242,000 in the quarter, similar to Q4 last year, and in line with what we expected. Within that, we estimate that the broadband market remains either flat to slightly down, as new home building is still running around 100,000 a year below what the government's target was. Meanwhile, competitor losses for Openreach are little changed, half on half, but with a tilt towards wholesale operators rather than retail, where we're seeing some declines. Quarter to quarter, there's always going to be some natural variability based on competitor build and promotions and the orders that we have coming into the quarter. But the guidance we gave in May of last year's second half run rate continuing for the full year remains unchanged. But I do want to point out, and it's worth saying, that October has progressed well. After quarter end, we launched new offers to stimulate fibre migration, which our CPs have welcomed, and we made good progress to be ready to launch XGS PON next year. In our operations, our repair volumes decreased 13% year-on-year due to the shift to full fibre and we reduced our headcount by 11% year-on-year as we upgrade our network and transform our operations and as we ensure we've got the right resourcing for when the fibre build steps down during next year. Thanks to the strong demand for our fibre and the impressive build and connect progress made by our Openreach team, we're maintaining steady revenues with ARPU growth of 4%, offsetting line losses and good growth still in Ethernet revenues of 5%. And we're delivering continued EBITDA growth. Moving to consumer, our strategy is clear. Having invested in and built the UK's only nationwide networks, we intend to get back to sustainable service revenue growth. This starts with having a growing customer base by leveraging convergence, our breadth of household relationships, and all three brands to ensure we compete carefully on value, not just price. So it's good to report that our consumer business is continuing to win customers in the first half of this year, despite the competitive pressures. Convergence, multi-SIM household tariffs and leveraging all three of our iconic retail brands has helped us grow the broadband base for a third consecutive quarter, our mobile base for a second consecutive quarter and our TV base for the fifth quarter in a row. We're achieving excellent levels of fibre take-up with almost half of our broadband base now on full fibre. Broadband continues to grow in our mobile base, and so our converged customers have grown to almost 26% of all broadband and mobile customers, which is up almost three points in the last year. And we're seeing a steep increase in customers moving on to EE1, our main convergence offer. All of this, plus our renewed focus on customer experience has helped improve customer satisfaction, which was flatter up in all three brands in the last six months, resulting in stable churn rates at relatively low levels across mobile and broadband. While the customer base grew, service revenue was basically stable, excluding a 1% drag from legacy voice. Admittedly, there has been some ARPU pressure, but this is mainly a result of coming off the high price rises of the last few years into a more competitive market. As inflation stabilises and we move towards pounds and pence, this sawtooth effect should dissipate. And the equipment sales market has been slower too, as consumers now keep their handsets for 48 months, hence why total revenue was also down in the period. But we're now seeing excellent performance by EE on recent new device launches. At EBITDA, we were able to offset almost all the lower revenue and the higher input costs from open reach with disciplined cost control. Additional headwinds from the rise in national insurance and national living wage, combined with the ongoing transition to digital voice, accounted for over two-thirds of our EBITDA decline. But with the progress made in the first half and the run rate we're now seeing, we remain confident that consumer will, as it did last year, return to year-on-year service revenue and EBITDA growth in the second half as a result of the levers I just mentioned, customer experience, convergence and our multi-brand strategy. Moving to business now on slide 10. As you well know, since the start of the fiscal year, we've focused business now on the UK, improving our ability to develop and deliver the best products and services for UK-based companies across the private and public sectors. The levers to growth and transformation remain the same, simplifying our product portfolio, migrating customers off legacy systems and products, and radically improving customer journeys and satisfaction on the back of digitalization of our processes and our journeys, and through secure and resilient by design products. Our delivery in corporate and public sector improved with sales orders up 16% year on year, including new business in the industrial sector. In broadband, we increased our fibre connections by over 40% and our 5G connections by over 30%. NPS also improved. Our modernisation agenda continued, with another 10 products retired in the half year, taking us below 200 products, down by a third in just two years, and units on legacy networks fell by almost 40%, a nearly half a million reduction. Clearly, it's still early days for John and the team in business, but I am pleased that in the half, the financial performance was more stable, especially considering the drag from legacy voice is still sizable. We have a robust pipeline in corporate and public sector and have launched new offers for smaller businesses, reinforcing our most trusted status, including last week's cyber defense exclusive with CrowdStrike and our announcement just yesterday to place business experts in all of our high street stores. I'm confident that BT Business is at the start of its long-awaited turnaround. Moving on to transformation, on slide 11, we're making solid progress against our transformation agenda. This includes £247 million of run rate savings delivered in the past six months, taking us to £1.2 billion achieved in the first 18 months of our five-year programme. We continue to drive most of the cost savings from four key programs, shutting down legacy networks, simplifying our products, scaling the use of fewer shared platforms, and deepening our data and AI capabilities. With respect to what happened in H1, while we migrated over 1 million customers away from legacy networks, we reduced our energy consumption by 54 gigawatt hours, or 5% year on year. We cut the number of applications we use by nearly 20%. And as a result of all of these initiatives, our total labour resource dropped by 5,000 in the half across all divisions. Now, with the arrival of our new Chief Digital Officer, Peter Leuker, on the 1st of September, I know that we will build further on this progress. No pressure, Peter. But part of this will be to ensure we take full advantage of the capabilities of AI, where we see significant potential, particularly in better and more efficient customer care, higher, more personalised marketing velocity and greater efficiency across all areas of our corporate functions, including the investor relations function. Now, turning to the transformation of international. We have successfully agreed or completed our targeted disposals. This is the end of a long process that began back in 2019, but which had paused in recent years. From 1st of July, international has been carved out, giving it much greater strategic focus and clarity to become the global leader in secure multi-cloud connectivity, anchored by next generation platforms, Global Fabric and Global Voice. There is naturally a transition period between moving from the existing MPLS-based services to the new global fabric network. But having carved the unit out, we're now accelerating our plans to reshape it, including a reduction in the number of office locations and in radically simplifying the product and service set. This will help deliver EBITDA growth from next year and ensure that in the mid-term, international is no longer a drag on group cash flow, allowing for clearer optionality for future partnerships, which we still believe are possible. With that, let me now hand you over to Simon, who will talk you through the financials in some greater detail. Over to you, Simon.

Alison, thank you very much indeed. So I will take you through our group level results before then explaining the performance of our customer facing units in more detail. First half UK service revenues were £7.7 billion. That's down 1%. This was driven principally by a reduction in legacy voice revenues of about £100 million. Price pressure in retail fixed and mobile was largely offset by growth in our retail connectivity bases and open reach revenues. First half total adjusted revenue fell by 3% to £9.8 billion. In addition to the lower UK service revenue, this was driven by lower sales of UK equipment, particularly mobile handsets, and by lower international revenues. We reduced our operating costs by 3% due to the strong progress of our cost transformation programmes, supported by tight expenditure controls. And as a result, adjusted EBITDA in the period was flat at £4.1 billion. Adjusted EBITDA in our UK businesses, excluding the international unit, that increased by 0.5%. Reported capex increased by 8% or £171 million to £2.4 billion. That was driven by a higher FTTP build and provision in open reach as we ramp up our build to 5 million premises this year and then drive take-up of our fast-expanding FTTP footprint. Openreach has continued to drive efficiencies in its unit costs of build and provision through engineering innovation and dynamic management of the supply chain. Our build and provision costs have consistently been within the ranges we've set, despite the significant inflation over recent years. Cash capex was slightly higher than reported capex due to the timing of capital creditor payments and about £60 million worth of grant funding gainshare. Normalised free cash flow was in line with our plan at £408 million. This was 300 million pounds lower than last year, due in largely equal measure to higher cash capex, the prior year tax refund, and reduced working capital funding due to lower handset volumes. we remain confident of our outlook for £1.5 billion normalised cash flow in the full year. As Alison just announced, our interim dividend is up 2% year-on-year to 2.45 pence per share, in line with our policy of paying 30% of the prior year's full-year dividend. The IAS 19 pension deficit fell to 3.8 billion pounds from 4.1 billion pounds at the FY25 year end. Scheduled contributions of just under 800 million pounds were offset by a decrease in credit spreads. The IAS 19 deficit does not drive our cash contributions. These are determined by the actual aerial valuation, which will be determined at the tri-annual review next year. Moving now to performance of the customer-facing units. Open reach revenue was flat year-on-year at £3.1 billion. Inflation-linked price rises and the increasing FTTP mix in broadband were offset by the lower broadband customer base. Openreach EBITDA again grew ahead of revenue, up 4% to £2.1 billion. We continue to reduce our operating costs through a combination of labour efficiencies and lower repair and energy volumes as we transition to FTTP, offset by inflation in pay and non-commodity energy costs. Consumer service revenue was down 1%, and that's the same as last year, to 3.9 billion pounds. ARPU declines, reflecting the higher prior year comparator and competitive markets, combined with reduced legacy voice revenues as we migrate off the PSDN, were only partially offset by the stabilizing broadband base, growing mobile base, and increased FTTP mix within broadband. That's now up to 45% of the base. We will continue to compete, to defend, and where we see value, grow our customer base, and we will protect and grow our margins through cost transformation. Consumer total revenue declined by 3% to £4.7 billion due to the service revenue and reduced sales volumes in the mobile handset market as customers retain their devices for longer and with many of our own customers already on three-year FlexPay contracts. Consumer EBITDA fell by 4% to 1.3 billion pounds. Our transformation programs and our tight cost controls successfully mitigated most of the gross margin pressure from reduced revenues and the higher open reach input costs. However, as Alison said, we were impacted by the significant increases in national insurance and the national living wage and by some additional costs incurred in the accelerated migrations to digital voice. These headwinds will be progressively offset with cost reduction, and in the case of the digital voice migration, will end with the closure of the PSDN as we move into FY28. Business service revenue was £2.4 billion, that's down 1%, driven principally by lower voice revenues as we migrate off legacy voice to voice over IP. Service revenues in connectivity, secure networking and managed services were broadly flat, with some growth in SMB and wholesale offsetting a decline in CPS. Business total revenue fell by 2% to £2.6 billion, with lower equipment sales adding to the service revenue decline. Business EBITDA was down 1% to £647 million, with the impact of lower revenues partially offset by cost transformation and the benefits of cost phasing, which reverse in the second half of this year. International revenues were £1.1 billion. Revenue declines in businesses whose sale has either been agreed or completed accounted for about four percentage points of the 9% fall, and adverse foreign exchange accounted for a further one percentage point. The remainder was driven by legacy product declines on the renewal of several managed services contracts. International EBITDA declined 27% to 66 million pounds due to the lower revenues, cost inflation, and the increased investment in global fabric, all offset partially by transformation programs and tight cost control. As Alison has said, we're accelerating our restructuring and our cost transformation programs in international to ensure that the business moves rapidly to generate positive cashflow. We expect to complete all of the announced divestments within international before the end of this financial year. We don't anticipate these divestments will have a major impact on EBITDA and normalised cash flow in either FY26 or FY27. While the divestments will have some impact on total revenues in FY27 and beyond, which we will share when all disposals are complete, there will clearly be no impact on our UK service revenue. And with that, I'll hand back to Alison to conclude.