BT claims positives amid challenging fiscal year

BT reports tough 2019/20, leading to major restructuring plan to go forward to meet major fibre-to-the-premises targets

Despite posting year-on-year decreases in revenue, profits and EBITDA, leading UK telco BT is claiming to have a had “positive” 2019/20 year, with results that it said were in line with expectations

Yet even as it was lauding, it had completed the third phase of a £1.6bn transformation programme a year ahead of schedule, the telco warned that it was embarking on radical “modernisation and simplification” programme that would remove legacy products and services to deliver gross annualised savings of £2bn over the next five years.

For the fiscal year ended 31 March 2020, BT reported revenue of almost £23bn, down 2% annually mainly due said the company to reflecting the impact of regulation, declines in legacy products, strategic reductions in low margin business and divestments.

Adjusted was EBITDA £7.9bn, down 3% compared with the previous fiscal year due to lower revenue and investment in customer experience, partly offset by cost savings from transformation programmes and reported profit before tax was £2.35bn, marginally down year-on-year and including charges of £95m as a result of Covid-19. Net cash inflow from operating activities totalled £6.3bn, up 47% due to lower pension contributions and one-off cash flows.

Yet the company wanted to stress that despite having to deal with the effects of Covid-19, the year saw a number of highlights such as network roll-out

On the assumption that it could obtain the required critical enablers, BT said that it had ended the year on target to roll out fibre to the premises (FTTP) to 20m premises by the mid- to late-2020s, including what the company says will be a significant build in rural areas. These areas have been traditionally underserved by fibre in the UK and the UK government has spent 2020 accelerating full fibre roll-out. At present, the BT FTTP network passes 2.6 million premises.

After passing 1.3 million premises last year, BT was aiming at over two million in 2020/21, and envisages a maximum build rate of three million premises per year. BT predicts that its FTTP investment should deliver pre-tax nominal returns of between 10% to 12%, and adds that it is based on a regulatory framework consistent with the preferred policy and direction of UK regulator Ofcom, and continued support for infrastructure investment and competition.

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Commenting on the year in a world that he said has been changed for everyone by Covid-19, BT chief executive Philip Jansen said that he was “immensely proud” in the company and how it has responded to the challenges the Covid-19 crisis has presented. “Our strong and resilient networks, both fixed and mobile, have proved critical to the continuing functioning of the UK economy, providing unrivalled connectivity and services for the nation,” he said.

“The continued delivery of market leading customer experiences remains core to our success, with a focus on driving the take-up of converged product offerings such as Halo, our premium converged offering for homes and businesses. In the short period since launch, Halo now represents over 30% of our BT consumer broadband base.”

That said, Jansen accepted that going forward, BT needed to be leaner, simpler and more agile and so was entering into the modernisation plan. This will re-engineer old and out of date processes, rationalise products, reduce rework and switch off many legacy services. In order to allow the company to invest in FTTP and 5G, and to fund the modernisation programme, BT said it was suspending final dividends for 2019/20 and all dividends for 2020/21.

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