5G and fibre shine, but revs and profits fall in BT half-year results

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5G and fibre shine, but revs and profits fall in BT half-year results

Even though it claims to have made solid progress on strategic priorities with a record FTTP build rate with strong demand at its Openreach division, the ***’s leading telco BT has posted disappointing half-year (H1) results, with marked falls in profits and revenues compared with the previous year.

For the half year to 30 September 2024, BT posted adjusted revenue of £10.1bn, down 3% on a yearly basis, mainly due to “challenging conditions” in its business division, principally driven by non-*** trading in its global and portfolio channels.

Elsewhere, lower consumer prices index (CPI) benefit and continued competitive markets in the consumer line were broadly offset by growth in the Openreach broadband business. This was due to the benefit of price increases, Ethernet base growth and improving fibre-to-the-premises (FTTP) volume and mix.

The company’s adjusted EBITDA was £4.1bn, inching up 1%, with revenue flow through more than offset by cost transformation, yet reported profit before tax was £1.0bn, tumbling 10% primarily due to lower revenue, higher specific costs and higher net finance expenses, partly offset by reduction in reported operating costs.

In line with the trend announced in My 2024 to the satisfaction of the ***’s investor community, capital expenditure (capex) for the half year was £2.3bn, down 2% with peak reported capex passed in FY24, primarily driven by lower networks spend despite higher FTTP build due to reduced unit costs and efficiencies. Net cash inflow from operating activities was £3bn with normalised free cash flow of £0.7bn.

While the company saw its business division struggle, its fibre provision side continued to go from strength to strength. In the six-month *******, there was a record FTTP build rate of 2.1 million, with FTTP footprint passing 16 million premises in October – around half of the ***.

There was strong customer demand for Openreach FTTP in Q2, with record net adds of 446,000 and a total of 5.5 million total premises connected with an increased take up rate of 35%. Growth in FTTP as a proportion of BT’s broadband base contributed to a reduction in 12-month repair volumes of 300,000 to three million, supporting growth in margin and EBITDA.

BT’s Retail FTTP base grew by 35% year on year (YoY) to three million, of which consumer accounted for 2.8 million and business 200,000. Openreach’s broadband line losses in H1 were 377,000, representing a 2% decline in the broadband base. BT noted that it continued to see moderately higher competitor losses with a weaker overall broadband and new homes market.

To this extent, the company has now increased its FY25 build target to 4.2 million within its existing capex envelope driven by build cost efficiencies and the firm is on track to reach 25 million premises by December 2026.

In addition to the fibre advances, in the half year BT saw the base of its EE 5G mobile division rise 25% compared with the year before to total 12.5 million customers.

BT has now offered mid-term guidance “confirming our EBITDA, capex and cash flow, albeit on lower projected revenue”. It predicted sustained adjusted revenue growth and EBITDA growth ahead of revenue, enhanced by cost transformation from FY26 to FY30. It expects to see capex excluding spectrum amount to less than £4.8bn until FY26, reducing by around £1bn post peak FTTP build.

As she assessed the half-year results, BT chief executive Allison Kirkby emphasised the strength of the fibre roll-out and how the firm has accelerated its corporate modernisation.

“We’ve ramped up our full-fibre build and connections, seen further improvements in customer satisfaction, and our cost transformation contributed to growth in EBITDA and normalised free cash flow despite revenue declines driven by our non-*** operations and a competitive retail environment,” she said.

“Our nationwide full-fibre roll-out has set new records, now reaching more than 16 million premises, and we have further extended our industry-leading take-up rate to 35%. Our cost to build continues to reduce, enabling us to increase this year’s build target to 4.2 million with no additional capex spend.

“We also expanded our 5G network to cover 80% of the *** population, more than any other operator. These investments in the ***’s next-generation networks are enabling much better experiences, reflected in our improved net promoter scores.”

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