TIDMRF99
RNS Number : 1271T
British Telecommunications PLC
10 November 2023
British Telecommunications plc
Results for the half year to 30 September 2023
10 November 2023
About BT
British Telecommunications plc ('BT' or 'group)' is a
wholly-owned subsidiary of BT Group Investments Ltd, which
encompasses virtually all businesses and assets of the BT Group.
The ultimate parent company is BT Group plc, which is listed on the
London Stock Exchange.
BT the UK's leading provider of fixed and mobile
telecommunications and related secure digital products, solutions
and services. We also provide managed telecommunications, security
and network and IT infrastructure services to customers across 180
countries.
BT consists of three customer-facing units: Consumer serves
individuals and families in the UK; Business covers companies and
public services in the UK and internationally; Openreach is an
independently governed, wholly owned subsidiary wholesaling fixed
access infrastructure services to its customers - over 650
communications providers across the UK.
The directors at 30 September 2023 were Simon Lowth, Neil
Harris, Roger Eyre, Edward Heaton and Daniel Rider, all of whom
served as directors throughout the period.
Half year to 30 September 2023 2022 Change
---------------------- ----------------------
Reported measures GBPm GBPm %
Revenue 10,407 10,366 -
Profit before tax 1,413 968 46
Profit after tax 1,181 1,030 15
Capital expenditure 2,321 2,613 (11)
-------------------------- ---------------------- ---------------------- ------------------------
Adjusted measures
Adjusted(1) Revenue 10,414 10,368 -
Adjusted(1) EBITDA 4,095 3,874 6
Pro forma(2) Revenue 10,414 10,130 3
Pro forma(2) EBITDA 4,095 3,945 4
-------------------------- ---------------------- ---------------------- ------------------------
Customer-facing unit updates
Adjusted(1) revenue Adjusted(1) EBITDA
---------------------------------------- ----------------------------------------------
2022 2022
Half year to 30 Pro forma(2) Pro forma(2)
September 2023 re-presented(2) Change 2023 re-presented(2) Change
------------------
GBPm GBPm % GBPm GBPm%
------------------ ----------- ---------------- --------- ----------- ---------------- --------------
Consumer 4,903 4,754 3 1,347 1,296 4
Business 4,100 4,041 1 806 903 (11)
Openreach 3,053 2,836 8 1,936 1,735 12
Other 8 14 (43) 6 11 (45)
Intra-group items (1,650) (1,515) (9) - - -
------------------ ----------- ---------------- --------- ----------- ---------------- ---------------
Total 10,414 10,130 3 4,095 3,945 4
------------------ ----------- ---------------- --------- ----------- ---------------- ---------------
(1) See Glossary on page 3 .
(2) See 'Prior period comparatives' section on page 3 for
background on pro forma comparatives.
Prior period comparatives
Throughout this release, comparative financial information for
the half year to 30 September 2022 ('FY23') has been re-presented
to reflect the merger of our Global and Enterprise business units
to form Business; and the change in the methodology used to
allocate shared Network, Digital and support function costs across
our units, which improves the relevance of our financial reporting
by better allocating internal costs to the drivers behind those
costs. These adjustments are made pursuant to IFRS accounting
requirements, for more information see note 1 to the condensed
consolidated financial statements on page 13 .
In addition, the group and operating review sections of this
release present comparative financial information for the Consumer
customer-facing unit and BT overall on an unaudited 'pro forma'
basis. This reflects adjustments that estimate the impact as if
trading in relation to BT Sport has been equity accounted in FY23,
akin to the Sports JV being in place historically. Analysis on a
pro forma basis enables comparison of results on a like-for-like
basis.
The Additional Information on page 27 presents a bridge between
financial information for the half year to 30 September 2022 as
published on 16 November 2022, and the comparatives presented in
this release. For further information see bt.com/about for separate
publications covering the formation of Business and cost allocation
changes, (published 27 June 2023), and the pro forma adjustments
(published 18 October 2022).
Glossary
Adjusted Adjusted measures (including adjusted revenue, adjusted
operating costs, adjusted operating profit, and adjusted
basic earnings per share) are before specific items.
Adjusted results are consistent with the way that
financial performance is measured by management and
assist in providing an additional analysis of the
reporting trading results of the group.
Adjusted EBITDA Earnings before interest, tax, depreciation and amortisation,
before specific items, share of post tax profits/losses
of associates and joint ventures and net finance expense.
Capital expenditure Additions to property, plant and equipment and intangible
assets in the period.
Service revenue Earned from services delivered using our fixed and
mobile network connectivity, including but not limited
to, broadband, calls, line rental, TV, residential
sport subscriptions, mobile data connectivity, incoming
& outgoing mobile calls and roaming by customers of
overseas networks.
Re-presented FY23 comparatives throughout this release have been
re-presented to reflect:
(i) the merger of our Global and Enterprise business
units to form Business; and
(ii) the change in our methodology used to allocate
shared Network, Digital and support function costs
across our units.
Refer to the 'Prior period comparatives' section on
page 3 and note 1 to the condensed consolidated financial
statements on page 13 for more details, and to Additional
Information on page 27 for a bridge between previously
published FY23 financial information and re-presented
numbers.
Pro forma Unaudited pro forma results estimate the impact on
the group as if trading in relation to BT Sport has
been equity accounted in FY23, akin to the Sports
JV being in place historically.
Refer to the 'Prior period comparatives' section on
page 3 for more information and to Additional Information
on page 27 for a bridge between previously published
financial information (re-presented as noted above)
and pro forma numbers.
Specific items Items that in management's judgement need to be disclosed
separately by virtue of their size, nature or incidence.
In the current period these relate to changes to our
assessment of our provision for historic regulatory
matters, restructuring charges, divestment-related
items and net interest expense on pensions.
------------------- -------------------------------------------------------------
We assess the performance of the group using a variety of
alternative performance measures. Reconciliations from the most
directly comparable IFRS measures are in Additional Information on
page 27 .
Group results for the half year to 30 September 2023
Income statement
-- Reported revenue was GBP10,407m, in line with the prior year
with the removal of BT Sport revenue and legacy product declines
offset by fibre-enabled product sales and price increases in
Openreach, increased service revenue in Consumer driven by
contractual price rises and improved lower margin trading in
Business.
on a Sports JV pro forma(1) basis reported revenue was up
3%.
-- Reported operating costs were GBP8,828m, down 3% primarily
due to tight cost control and the removal of BT Sport rights and
production costs partly offset by cost inflation and one-off items
in the prior year.
-- Adjusted(1) EBITDA of GBP4,095m, up 6%, primarily driven by the reduction in operating costs.
on a Sports JV pro forma(1) basis adjusted(1) EBITDA was up
4%.
-- Reported profit before tax of GBP1,413m, up 46%, largely due
to factors driving adjusted(1) EBITDA growth and increased finance
income on intra-group loan receivables, which reflects market
conditions.
Specific items (Note 5 to the condensed consolidated financial
statements)
-- Specific items resulted in a net charge after tax of GBP167m
(H1 FY23: GBP87m). The main components were restructuring charges
of GBP170m (H1 FY23: GBP122m) and interest expense on retirement
benefit obligation of GBP60m (H1 FY23: GBP9m); partly offset by tax
credit on specific items of GBP55m (H1 FY23: credit of
GBP220m).
-- Specific items recognised in H1 FY23 include GBP188m net
charges associated with the disposal of BT Sport and GBP191m of the
tax credit.
Tax
-- The effective tax rate on reported profit was 16.4% (H1 FY23:
negative 6.4%). It was lower than the 25% corporation tax rate
primarily due to the benefit derived from the UK patent box
incentive and the inclusion of group relief for nil payment.
-- The rate is higher than the prior year as the prior year tax
credit was driven by the impact of the super deduction and the fact
that the gain on disposal of BT Sport was exempt from UK tax.
-- The effective tax rate on adjusted(1) profit was 17.6% (H1
FY23: 12.4%) also due to the benefit derived from the UK patent box
incentive.
-- We expect a large proportion of our fibre rollout capital
expenditure to be eligible for the Government's full expensing
capital allowance regime, which provides for 100% tax relief in the
year of spend for qualifying expenditure. This is expected to drive
a taxable loss in the year, adding to the GBP8bn of tax losses
carried forward from FY23.
-- The charge for the period comprises deferred tax in the UK and current tax overseas.
Capital expenditure
-- Reported capital expenditure was GBP2,321m [1] , down 11%,
with lower fixed network spend driven by lower FTTP build unit
costs.
-- Cash capital expenditure was also down 11% at GBP2,455m.
Cash flow
-- Net cash inflow from operating activities was GBP2,324m, down
20% with increased operating profit offset by working capital
movements.
Balance sheet
-- The group holds cash and current investment balances of
GBP3.8bn; the current portion of loans and other borrowings is
GBP2.1bn.
-- Our GBP2.1bn revolving credit facility, which matures in
March 2027, remains undrawn at 30 September 2023.
Pensions (Note 6 to the condensed consolidated financial
statements)
-- The IAS 19 deficit has increased from GBP3.1bn at 31 March
2023 to GBP3.9bn at 30 September 2023.
-- The BT Pension Scheme (BTPS) hedges inflation and interest
rate risk with reference to the funding deficit, mechanically
leading to the BTPS being over hedged on an IAS 19 measure. In
addition, the IAS 19 liabilities are set by reference to the yield
on corporate bonds. The increase in real yields and the narrowing
of credit spreads over H1 have therefore contributed to an increase
in the deficit, partly offset by deficit contributions of GBP0.7bn.
By contrast, these factors would not contribute to an increase in
the funding deficit.
Sports JV performance
-- Our sports joint venture with Warner Bros. Discovery ('Sports
JV') completed its first year of trading, delivering a compelling
sports offering to audiences in the UK and Ireland. Underlying
trading operations in the six months to 30 September 2023 were
profitable but we recognised a share of losses after tax of GBP19m
after adjustments made to align with the group's accounting
policies.
-- Further details on the Sports JV is provided in note 10.
Operating review
Measures discussed in the operating review are on an adjusted
basis and unless otherwise stated commentary is on half year
results.
Consumer: Continued adjusted (2) EBITDA growth and strong operational performance
Half year to 30 September
2023 2022 re-presented(1) Change
GBPm GBPm GBPm %
---------------------------- -------------- -------------------- ---------------- ----------------
Revenue(2) 4,903 4,992 (89) (2)
Operating costs(2) 3,556 3,767 (211) (6)
---------------------------- -------------- -------------------- ---------------- ----------------
EBITDA(2) 1,347 1,225 122 10
Depreciation & amortisation 840 804 36 4
---------------------------- -------------- -------------------- ---------------- ----------------
Operating profit(2) 507 421 86 20
Capital expenditure 538 596 (58) (10)
Pro forma(3) adjusted
revenue 4,903 4,754 149 3
Pro forma(3) adjusted
EBITDA 1,347 1,296 51 4
---------------------------- -------------- -------------------- ---------------- ----------------
Pro forma(3) capital
expenditure 538 595 (57) (10)
---------------------------- -------------- -------------------- ---------------- ----------------
-- Adjusted(2) revenue growth of 3% on a pro forma(3) basis was
driven by service revenue(4) growth from the 2023 annual
contractual price rise, increased roaming and increased FTTP
connections. This was partially offset by a decline in mobile
equipment revenue due to a continued slowdown in device demand.
Adjusted(2) revenue was down 2% due to the BT Sport disposal
-- Adjusted(2) EBITDA growth of 4% on a pro forma(3) basis with
the growth in service revenue(4) offset by higher input costs and
prior year one-off items. Adjusted(2) EBITDA was up 10% due to
adjusted(1) revenue growth and rights and production cost savings
from the BT Sport disposal
-- Strong H1 ARPU growth; postpaid mobile GBP19.9, up 9% YoY, broadband GBP41.6, up 4% YoY
-- Churn remains low despite competitive markets; Broadband
1.1%, Postpaid mobile 1.0% with EE Ofcom complaints lower than
industry average for mobile, broadband and landline
-- Continued growth in FTTP base with an increase of 335k in H1;
up 40% year on year; FTTP base now at 2.1m, 5G Connected base now
at 9m
-- Depreciation and amortisation was up, driven by higher mobile
network, digital and customer equipment investment
-- Capital expenditure was down due to lower digital spend
-- 'New EE' launched in October, a modern digital platform for
growth with a new portfolio of converged products and services
(1) Prior period comparatives have been re-presented for the
changes detailed in the 'Re-presented' heading of the Glossary on
page 3 . See also note 1 to the condensed consolidated financial
statements on page 13 for more details, and Additional Information
on page 27 for a bridge to previously published results.
(2) Financials and commentary are based on adjusted measures;
see Glossary on page 3 .
(3) See Sports JV pro forma definition in the Glossary on page 3
, and Additional Information on page 27 for a bridge to previously
published results.
(4) See Glossary on page 3 .
Business: Ongoing margin pressure reflecting higher input costs
and legacy declines, partly offset by cost transformation
Half year to 30 September
2023 2022 re-presented(1) Change
GBPm GBPm GBPm %
-------------------- -------------- -------------------- ---------------- ----------------
Revenue(2) 4,100 4,041 59 1
Operating costs(2) 3,294 3,138 156 5
-------------------- -------------- -------------------- ---------------- ----------------
EBITDA(2) 806 903 (97) (11)
Depreciation &
amortisation 490 536 (46) (9)
-------------------- -------------- -------------------- ---------------- ----------------
Operating profit(2) 316 367 (51) (14)
-------------------- -------------- -------------------- ---------------- ----------------
Capital expenditure 361 448 (87) (19)
-------------------- -------------- -------------------- ---------------- ----------------
-- Adjusted(2) revenue growth was driven by low margin sales and
continued trading momentum further enhanced by inflation-linked
price rises in Small and Medium Business (SMB). This was partially
offset by declines and exits in high margin legacy managed
contracts
-- Adjusted(2) EBITDA decline was driven by higher input costs,
the flow through of legacy declines and one-offs in the prior year.
This was partially offset by the ongoing benefit of cost
transformation and SMB trading flow through
-- Depreciation and amortisation decline was driven primarily by
the timing of asset recognition in the prior year
-- Capital expenditure was down due to higher customer project spend in the prior year
-- FTTP base increased 53% to 124k at the end of H1, up from 81k
at H1 last year. 5G base increased 32% to 931k at the end of H1, up
from 706k at H1 last year
-- Retail order intake was GBP6.2bn on a 12-month rolling basis,
down 4%, with 11% growth in contract re-signs offset by 11% fall in
new business
-- Business has secured a major new five-year networks contract
with the Army - paving the way for the rollout of smart bases
across the UK
-- In October, Business signed a new strategic security
partnership with Google Cloud, targeting a range of joint revenue
and innovation opportunities. The move builds on existing
collaboration between the companies and sees BT become an official
reseller of Google Chronicle
-- Business also announced in October the launch of Global
Fabric, a new international multi-cloud network based on a
network-as-a-service model enabling customers to improve
performance, cost, security and sustainability
(1) Prior period comparatives have been re-presented for the
changes detailed in the 'Re-presented' heading of the Glossary on
page 3 . See also note 1 to the condensed consolidated financial
statements on page 13 for more details, and Additional Information
on page 27 for a bridge to previously published results.
(2) Financials and commentary are based on adjusted measures;
see Glossary on page 3 .
Openreach: Adjusted(2) revenue and adjusted(2) EBITDA growth; Record quarter for FTTP build
Half year to 30 September
2023 2022 re-presented(1) Change
GBPm GBPm GBPm %
-------------------- -------------- -------------------- --------------- ----------------
Revenue(2) 3,053 2,836 217 8
Operating costs(2) 1,117 1,101 16 1
-------------------- -------------- -------------------- --------------- ----------------
EBITDA(2) 1,936 1,735 201 12
Depreciation &
amortisation 992 940 52 6
-------------------- -------------- -------------------- --------------- ----------------
Operating profit(2) 944 795 149 19
-------------------- -------------- -------------------- --------------- ----------------
Capital expenditure 1,390 1,504 (114) (8)
-------------------- -------------- -------------------- --------------- ----------------
-- Adjusted(2) revenue growth was driven by CPI linked price
increases, growth in FTTP broadband base and growth in the Ethernet
base. This was partially offset by declines in the legacy copper
broadband and Wholesale Line Rental (WLR) voice only base
-- Adjusted(2) EBITDA growth was driven by revenue flow through,
improved cost transformation including lower staff numbers,
partially offset by pay inflation, higher energy costs and higher
FTTP provision volumes.
-- Depreciation and amortisation was up, driven by increased network build
-- Capital expenditure reduction was driven by lower FTTP capex
with lower FTTP build unit costs partly offset by higher FTTP
provision volume
-- Record FTTP build of 860k premises passed in the quarter at
an average build rate of 66k per week
-- Current FTTP footprint of 12m with 3.5m premises passed in rural locations
-- Strong FTTP demand with YTD orders up 23% YoY; take up rate
grew to 33% with continued strong net adds of 364k; total FTTP
connections currently stand at c.4m
-- Openreach broadband ARPU grew by 10% year-on-year due to
price rises and increased volumes of FTTP
-- Openreach broadband base down 255k in H1 largely in our
copper base, due to a weaker broadband market, including slower new
home build, dual line ceases and competitor losses that were
broadly flat vs H2 FY23; whilst we continue to target the Openreach
broadband base to decline by around 400k in FY24, a weaker than
expected broadband market means there is a risk that we will exceed
this level. Our broadband base decline has occurred where we do not
have FTTP. We have grown the broadband base within our FTTP
footprint over the past 12 months.
-- Achieved 30/30 Ofcom Copper Quality of Service measures and
5/5 Ethernet Ofcom quality of service measures for H1
-- Openreach delivered solid performance for on time FTTP provision of 90% in H1
-- End customer satisfaction remains high with 93% of customers
survey responses scoring us between 8 to 10 at the end of H1
(1) Prior period comparatives have been re-presented for the
changes detailed in the 'Re-presented' heading of the Glossary on
page 3 . See also note 1 to the condensed consolidated financial
statements on page 13 for more details, and Additional Information
on page 27 for a bridge to previously published results.
(2) Financials and commentary are based on adjusted measures;
see Glossary on page 3 .
Condensed consolidated financial statements
Group income statement
Half year ended 30 September Note Before Specific Total
2023 specific items (Reported)
items (note 5)
(Adjusted)
---- -------------------- --------------------
GBPm GBPm GBPm
------------------------------------- ---- -------------------- -------------------- -------------------
Revenue 2,3 10,414 (7) 10,407
Operating costs 4 (8,673) (155) (8,828)
Of which net impairment losses
on trade receivables and contract
assets(1) (72) - (72)
------------------------------------- ---- -------------------- -------------------- -------------------
Operating profit (loss) 1,741 (162) 1,579
Finance expense (526) (60) (586)
Finance income 427 - 427
------------------------------------- ---- -------------------- -------------------- -------------------
Net finance expense (99) (60) (159)
Share of post tax profit (loss)
of associates and joint ventures (7) - (7)
------------------------------------- ---- -------------------- -------------------- -------------------
Profit (loss) before tax 1,635 (222) 1,413
Taxation (287) 55 (232)
------------------------------------- ---- -------------------- -------------------- -------------------
Profit (loss) for the period 1,348 (167) 1,181
------------------------------------- ---- -------------------- -------------------- -------------------
Half year ended 30 September Note Before Specific Total
2022 specific items (Reported)
items (note 5)
(Adjusted)
---- ------------------- --------------------
GBPm GBPm GBPm
------------------------------------- ---- ------------------- -------------------- -------------------
Revenue 2,3 10,368 (2) 10,366
Operating costs 4 (8,826) (309) (9,135)
Of which net impairment losses
on trade receivables and contract
assets(1) (68) - (68)
------------------------------------- ---- ------------------- -------------------- -------------------
Operating profit (loss) 1,542 (311) 1,231
Finance expense (422) 4 (418)
Finance income 153 - 153
------------------------------------- ---- ------------------- -------------------- -------------------
Net finance expense (269) 4 (265)
Share of post tax profit (loss)
of associates and joint ventures 2 - 2
------------------------------------- ---- ------------------- -------------------- -------------------
Profit (loss) before tax 1,275 (307) 968
Taxation (158) 220 62
------------------------------------- ---- ------------------- -------------------- -------------------
Profit (loss) for the period 1,117 (87) 1,030
------------------------------------- ---- ------------------- -------------------- -------------------
(1) Impairment losses have been presented separately in
accordance with IAS 1.
Group statement of comprehensive income
Half year ended
30 September
2023 2022
GBPm GBPm
--------------------------------------------------------- ------------------ ------------------
Profit for the period 1,181 1,030
--------------------------------------------------------- ------------------ ------------------
Other comprehensive income (loss)
Items that will not be reclassified to the income
statement
Remeasurements of the net pension obligation (1,501) (1,137)
Tax on pension remeasurements 375 283
Items that have been or may be reclassified subsequently
to the income statement
Exchange differences on translation of foreign
operations 2 249
Fair value movements on assets at fair value through
other comprehensive income 1 (4)
Movements in relation to cash flow hedges:
* net fair value gains (losses)(1) (99) 2,377
* recognised in income and expense(2) 32 (1,179)
Share of other comprehensive income in associates (4) -
and joint ventures
Tax on components of other comprehensive income
that have been or may be reclassified 15 (303)
--------------------------------------------------------- ------------------ ------------------
Other comprehensive income (loss) for the period,
net of tax (1,179) 286
--------------------------------------------------------- ------------------ ------------------
Total comprehensive income (loss) for the period 2 1,316
--------------------------------------------------------- ------------------ ------------------
(1) The fair value of cash flow hedges in the six months to 30
September 2022 was heavily influenced by the weakening of GBP and
movement in GBP interest rates. Movements in the six months to 30
September 2023 have been modest.
(2) Movements in relation to cash flow hedge recognised in
income and expense in the six months to 30 September 2022 were
heavily influenced by the weakening of GBP. Movements in the six
months to 30 September 2023 have been modest.
Group balance sheet
Note 30 September 31 March 2023
2023
---- ---------------------------
GBPm GBPm
-------------------------------------- ---- --------------------------- ---------------------------
Non-current assets
Intangible assets 13,578 13,695
Property, plant and equipment 22,075 21,667
Right-of-use assets 3,703 3,981
Derivative financial instruments 1,282 1,397
Investments(1) 10,992 10,945
Joint ventures and associates 10 335 359
Trade and other receivables 566 503
Preference shares in joint venture 10 535 542
Contract assets 330 369
Retirement benefit surplus 73 52
Deferred tax assets 1,083 709
-------------------------------------- ---- --------------------------- ---------------------------
54,552 54,219
-------------------------------------- ---- --------------------------- ---------------------------
Current assets
Inventories 404 349
Trade and other receivables 3,594 3,087
Preference shares in joint ventures - 13
Contract assets 1,480 1,565
Assets classified as held for sale 2 21
Current tax receivable 421 427
Derivative financial instruments 113 82
Investments 3,485 3,548
Cash and cash equivalents 352 384
-------------------------------------- ---- --------------------------- ---------------------------
9,851 9,476
-------------------------------------- ---- --------------------------- ---------------------------
Current liabilities
Loans and other borrowings 2,075 1,772
Derivative financial instruments 50 86
Trade and other payables 6,117 6,508
Contract liabilities 882 859
Lease liabilities 807 800
Liabilities held for sale 2 4
Current tax liabilities 97 78
Provisions 226 229
-------------------------------------- ---- --------------------------- ---------------------------
10,256 10,336
-------------------------------------- ---- --------------------------- ---------------------------
Total assets less current liabilities 54,147 53,359
-------------------------------------- ---- --------------------------- ---------------------------
Non-current liabilities
Loans and other borrowings 17,811 16,749
Derivative financial instruments 285 297
Contract liabilities 183 193
Lease liabilities 4,251 4,559
Retirement benefit obligations 4,017 3,139
Other payables 759 894
Deferred tax liabilities 1,776 1,620
Provisions 337 369
-------------------------------------- ---- --------------------------- ---------------------------
29,419 27,820
-------------------------------------- ---- --------------------------- ---------------------------
Equity
Share capital 2,172 2,172
Share premium 8,000 8,000
Other reserves 1,636 1,664
Retained earnings 12,920 13,703
-------------------------------------- ---- --------------------------- ---------------------------
Total equity 24,728 25,539
-------------------------------------- ---- --------------------------- ---------------------------
54,147 53,359
-------------------------------------- ---- --------------------------- ---------------------------
(1) GBP10,962m (31 March 2023: GBP10,916m) of the non-current
investments relates to amounts owed by the parent company. Refer to
note 11.
Group statement of changes in equity
Share Share Other Retained Total
Capital Premium Reserves earnings Equity
----------- ----------- ------------ ------------
GBPm GBPm GBPm GBPm
At 1 April 2023 2,172 8,000 1,664 13,703 25,539
--------------------------- ----------- ----------- ------------ ------------ ------------
Profit for the period - - - 1,181 1,181
Other comprehensive
income (loss) before
tax - - (96) (1,505) (1,601)
Tax on other comprehensive
(loss) income - - 15 375 390
Transferred to the
income statement - - 32 - 32
--------------------------- ----------- ----------- ------------ ------------ ------------
Total comprehensive
income (loss) for
the period - - (49) 51 2
Dividends to shareholders - - - (850) (850)
Share-based payments - - - 36 36
Net buyback of own - - - - -
shares
Transfer to realised
profit - - 20 (20) -
Other movements - - 1 - 1
--------------------------- ----------- ----------- ------------ ------------ ------------
At 30 September
2023 2,172 8,000 1,636 12,920 24,728
--------------------------- ----------- ----------- ------------ ------------ ------------
At 31 March 2022 2,172 8,000 1,326 14,353 25,851
Change in accounting
policy - - - (12) (12)
At 1 April 2022 2,172 8,000 1,326 14,341 25,839
--------------------------- ----------- ----------- ----------- ------------ ------------
Profit for the period - - - 1,030 1,030
Other comprehensive
income (loss) before
tax - - 2,622 (1,137) 1,485
Tax on other comprehensive
(loss) income - - (303) 283 (20)
Transferred to the
income statement - - (1,179) - (1,179)
--------------------------- ----------- ----------- ----------- ------------ ------------
Total comprehensive
income (loss) for
the period - - 1,140 176 1,316
Dividends to shareholders - - - (850) (850)
Share-based payments - - - 41 41
Net buyback of own - - - - -
shares
At 30 September
2022 2,172 8,000 2,466 13,708 26,346
--------------------------- ----------- ----------- ----------- ------------ ------------
Group cash flow statement
Half year ended
30 September
2023 2022
GBPm GBPm
------------------------------------------------------ ----------------- -----------------
Cash flow from operating activities
Profit before taxation 1,413 968
Share of post tax (profit) loss of associates and
joint ventures 7 (2)
Net finance expense 159 265
------------------------------------------------------ ----------------- -----------------
Operating profit 1,579 1,231
Other non-cash charges 49 37
(Profit) loss on disposal of businesses (38) 188
Loss on disposal of property, plant and equipment 3 -
and intangible assets
Depreciation and amortisation 2,356 2,332
(Increase) decrease in inventories (54) (54)
Decrease in programme rights - 7
(Increase) decrease in trade and other receivables (690) (393)
Decrease (increase) in contract assets 124 37
(Decrease) increase in trade and other payables (263) 124
Increase (decrease) in contract liabilities 18 19
(Decrease) increase in other liabilities(1) (699) (546)
(Decrease) increase in provisions (35) (35)
------------------------------------------------------ ----------------- -----------------
Cash generated from operations 2,350 2,947
Income taxes paid (26) (33)
------------------------------------------------------ ----------------- -----------------
Net cash inflow from operating activities 2,324 2,914
------------------------------------------------------ ----------------- -----------------
Cash flow from investing activities
Interest received 66 11
Dividends received from joint ventures, associates
and investments 13 1
Proceeds on disposal of businesses 74 29
Net outflow on non-current amounts owed by ultimate
parent company (550) (664)
Proceeds on disposal of current financial assets(2) 5,525 5,897
Purchases of current financial assets(2) (5,461) (5,994)
Purchases of property, plant and equipment and
intangible assets (2,455) (2,756)
Decrease (increase) in amounts owed by joint ventures 38 -
Settlement of off-market minimum guarantee liability (111) -
with Sports JV
------------------------------------------------------ ----------------- -----------------
Net cash outflow from investing activities (2,861) (3,476)
------------------------------------------------------ ----------------- -----------------
Cash flow from financing activities
Interest paid (463) (391)
Repayment of borrowings(3) (485) -
Proceeds from bank loans and bonds 1,899 848
Payment of lease liabilities (360) (370)
Cash flows from derivatives related to net debt (101) 155
(Increase) decrease in amounts owed by joint ventures (1) -
Net cash outflow from financing activities 489 242
------------------------------------------------------ ----------------- -----------------
Net decrease in cash and cash equivalents (48) (320)
------------------------------------------------------ ----------------- -----------------
Opening cash and cash equivalents(4) 373 687
Net decrease in cash and cash equivalents (48) (320)
Effect of exchange rate changes (3) 19
------------------------------------------------------ ----------------- -----------------
Closing cash and cash equivalents(5) 322 386
------------------------------------------------------ ----------------- -----------------
(1) Includes pension deficit payments of GBP702m for the half
year to 30 September 2023 (FY23: GBP594m).
(2) Primarily consists of investment in and redemption of
amounts held in liquidity funds.
(3) Repayment of borrowings includes the impact of hedging.
(4) Net of bank overdrafts of GBP11m (FY23: GBP85m).
(5) Net of bank overdrafts of GBP30m (FY23: GBP20m).
Notes to the condensed consolidated financial statements
1. Basis of preparation and accounting policies
Basis of preparation
These condensed consolidated financial statements (the
"financial statements") comprise the financial results of British
Telecommunications plc for the half years to 30 September 2023 and
2022 together with the balance sheet at 31 March 2023. The
financial statements for the half year to 30 September 2023 have
been reviewed by the auditors and their review opinion is on page
26 .The financial statements have been prepared in accordance with
the Disclosure Guidance and Transparency Rules sourcebook (DTR) of
the Financial Conduct Authority and with UK-adopted IAS 34 'Interim
Financial Reporting'. The financial statements should be read in
conjunction with the Annual Report 2023 which was prepared in
accordance with UK-adopted International Financial Reporting
Standards (IFRS).
The directors are satisfied that the group has adequate
resources to continue in operation for a period of at least sixteen
months from the date of approval of this report, notwithstanding
the net current liabilities position of GBP405m at 30 September
2023 (GBP860m net current liabilities at 31 March 2023).
Consequently, the directors consider it appropriate to adopt the
going concern basis of accounting in preparing the condensed
consolidated financial statements for the half year to 30 September
2023. When reaching this conclusion, the directors took into
account:
-- The group's overall financial position (including trading
during the year and ability to repay term debt as it matures
without recourse to refinancing); and
-- Exposure to principal risks (including severe but plausible downsides).
At 30 September 2023, the group had cash and cash equivalents of
GBP322m (net of bank overdrafts) and current asset investments of
GBP3,485m. The group also had access to committed borrowing
facilities of GBP2.1bn. These facilities were undrawn at period-end
and are not subject to renewal until March 2027.
The information for the year ended 31 March 2023 does not
constitute the group's statutory accounts as defined in section 434
of the Companies Act 2006. A copy of the statutory accounts for
that year has been delivered to the Registrar of Companies. The
auditor has reported on those accounts; their report (i) was
unqualified, (ii) did not include a reference to any matters to
which the auditor drew attention by way of emphasis without
qualifying their report and (iii) did not contain a statement under
section 498 (2) or (3) of the Companies Act 2006 in respect of the
accounts for the year to 31 March 2023.
A reference to a year expressed as FY24 is to the financial year
ended 31 March 2024.
Accounting policies
Other than as stated below, the financial statements have been
prepared in accordance with the accounting policies as set out in
the financial statements for the year to 31 March 2023 and have
been prepared under the historical cost convention as modified by
the revaluation of financial assets and liabilities (including
derivative financial instruments) at fair value.
Tax
Income taxes are accrued using the tax rate that is expected to
be applicable for the full financial year.
Allocation of central costs
From 1 April 2023 we have revised the methodology used to
allocate shared Network, Digital and support function costs across
our units to more closely align the recharges received by each unit
to their actual consumption. This represents an accounting policy
change affecting the segmental results reporting in note 2
'operating results - by customer facing unit'.
In line with the requirements of IAS 8 Accounting Policies,
Changes in Accounting Estimates and Errors we have re-presented
FY23 comparatives to enable comparability across periods.
At the same time and in line with the requirements of IFRS 8
Operating Segments, we have re-presented FY23 comparatives to
reflect the merger of the Enterprise and Global CFUs into a single
unit, Business, which began reporting as a single unit from 1 April
2023.
These changes affect segmental results only and have no impact
on the overall reported group financial results.
The Additional Information section on page 27 presents a bridge
between FY23 comparatives presented in the Results for the half
year to 30 September 2023 (published on 16 November 2022) and those
presented in note 2, reflecting the change in central cost
allocation methodology and the creation of the Business unit.
Further information can also be found in the 'Prior period
comparatives' section of the release on page 3 .
New and amended accounting standards effective during the
year
The following new and amended standards are effective during the
year:
IFRS 17 Insurance Contracts
BT adopted IFRS 17 with retrospective application on 1 April
2023. The standard establishes principles for the recognition,
measurement, presentation and disclosure of insurance contracts.
The measurement method for insurance contracts required by IFRS 17
is a probability weighted discounted cash flow model, including a
best estimate and an adjustment for non-financial risk calculated
for groups of similar contracts.
IFRS 17 primarily impacts insurance entities, however as it
applies to individual contracts it is possible that non-insurers
could issue contracts that are in scope of the standard such as
product breakdown contracts or warranties.
We have assessed the impact of the standard on the group, and
concluded that its impact is not material. Contracts in scope of
the standard entered into by the group are restricted to intragroup
insurance arrangements, and the group does not issue external
insurance contracts.
Amendments to IAS 12 Income Taxes- International Tax Reform -
Pillar Two Model Rules
The IASB amended the scope of IAS 12 to introduce a temporary
exception from accounting for deferred taxes arising from the
implementation of OECD's Pillar Two Model Rules. This was endorsed
in the UK in July 2023 and applies to accounting periods beginning
on or after 1 January 2023. We have therefore not recognised, or
disclosed information about, deferred tax assets and liabilities
related to the Pillar Two Model Rules in the interim reporting
period.
Other
The following changes have not had a significant impact on our
condensed consolidated financial statements:
-- Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2)
-- Definition of Accounting Estimate (Amendments to IAS 8)
-- Deferred Tax related to Assets and Liabilities arising from a
Single Transaction (Amendments to IAS 12)
New and amended accounting standards that have been issued but
are not yet effective
There are no new or amended standards and interpretations
applicable in future periods that are expected to have a
significant impact on the group.
IFRS Interpretations Committee agenda decisions
The IFRS Interpretations Committee (IFRIC) periodically issues
agenda decisions which explain and clarify how to apply the
principles and requirements of IFRS standards. Agenda decisions are
authoritative and may require the group to revise accounting
policies or practice to align with the interpretations set out in
the decision.
We regularly review IFRIC updates and assess the impact of
agenda decisions. No agenda decisions finalised in the half year to
30 September 2023 have been assessed as having a significant impact
on the group.
2. Operating results - by customer-facing unit
Consumer Business Openreach Other Total
-------------- -------------- ------------- ---------------
Half year to 30 September GBPm GBPm GBPm GBPm GBPm
2023
--------------------------------- -------------- -------------- ------------- --------------- -------------
Segment revenue 4,903 4,100 3,053 8 12,064
Internal revenue (24) (36) (1,590) - (1,650)
--------------------------------- -------------- -------------- ------------- --------------- -------------
Adjusted(1) external revenue 4,879 4,064 1,463 8 10,414
--------------------------------- -------------- -------------- ------------- --------------- -------------
Adjusted EBITDA(2) 1,347 806 1,936 6 4,095
Depreciation and amortisation(1) (840) (490) (992) (32) (2,354)
--------------------------------- -------------- -------------- ------------- --------------- -------------
Adjusted(1) operating
profit (loss) 507 316 944 (26) 1,741
--------------------------------- -------------- -------------- ------------- --------------- -------------
Specific operating profit
(loss) (note 5) (162)
-------------
Operating profit 1,579
--------------------------------- -------------- -------------- ------------- --------------- -------------
Half year to 30 September
2022
(re-presented(3) )
--------------------------------- -------------- -------------- ------------- --------------- -------------
Segment revenue 4,992 4,041 2,836 14 11,883
Internal revenue (30) (42) (1,443) - (1,515)
--------------------------------- -------------- -------------- ------------- --------------- -------------
Adjusted(1) external revenue 4,962 3,999 1,393 14 10,368
--------------------------------- -------------- -------------- ------------- --------------- -------------
Adjusted EBITDA(2) 1,225 903 1,735 11 3,874
Depreciation and amortisation(1) (804) (536) (940) (52) (2,332)
--------------------------------- -------------- -------------- ------------- --------------- -------------
Adjusted(1) operating
profit (loss) 421 367 795 (41) 1,542
--------------------------------- -------------- -------------- ------------- --------------- -------------
Specific operating profit
(loss) (note 5) (311)
-------------
Operating profit 1,231
--------------------------------- -------------- -------------- ------------- --------------- -------------
(1) Before specific items, see Glossary on page 3 .
(2) Adjusted EBITDA is defined in the Glossary on page 3 . For
the reconciliation of adjusted EBITDA, see Additional Information
on page 27 .
(3) Comparatives for the half year to 30 September 2022 have
been re-presented for the impact of the creation of our Business
customer-facing unit and a change in the methodology used to
allocate shared central costs. For more information see note 1 on
page 13 . and for a bridge to prior period published financial
information see Additional Information on page 28 .
3. Operating results - disaggregation of external revenue
Half year to 30 September Consumer Business Openreach Other Total
2023
------------- ------------ ------------- --------------
GBPm GBPm GBPm GBPm GBPm
--------------------------- ------------- ------------ ------------- -------------- ---------------
ICT and managed networks - 1,798 - - 1,798
Fixed access subscriptions 2,197 1,107 1,426 - 4,730
Mobile subscriptions 1,833 592 - - 2,425
Equipment and other
services 849 567 37 8 1,461
--------------------------- ------------- ------------ ------------- -------------- ---------------
Total adjusted(1)
revenue 4,879 4,064 1,463 8 10,414
--------------------------- ------------- ------------ ------------- -------------- ---------------
Specific items (note
5) (7)
--------------------------- ---------------
Total revenue 10,407
--------------------------- ---------------
Half year to 30 September
2022
(re-presented(2) )
--------------------------- ------------- ------------ ------------- -------------- ---------------
ICT and managed networks - 1,665 - - 1,665
Fixed access subscriptions 2,096 978 1,361 - 4,435
Mobile subscriptions 1,702 562 - - 2,264
Equipment and other
services 1,164 794 32 14 2,004
--------------------------- ------------- ------------ ------------- -------------- ---------------
Total adjusted(1)
revenue 4,962 3,999 1,393 14 10,368
--------------------------- ------------- ------------ ------------- -------------- ---------------
Specific items (note
5) (2)
--------------------------- ---------------
Total revenue 10,366
--------------------------- ---------------
(1) See Glossary on page 3 .
(2) Comparatives for the half year to 30 September 2022 have
been re-presented for the impact of the creation of our Business
customer-facing unit, formed through the merger of our Enterprise
and Global units. For more information see Glossary on page 3 .
Total adjusted revenue reported by Business for the half year to 30
September 2022 of GBP3,999m comprises revenue previously reported
by Enterprise (GBP2,382m) and by Global (GBP1,617m). This total
comprises ICT and managed networks revenue of GBP1,665m previously
reported by Enterprise (GBP839m) and by Global(GBP826m); fixed
access subscription revenue of GBP978m previously reported by
Enterprise (GBP839m) and by Global (GBP139m); mobile subscription
revenue of GBP562m previously reported by Enterprise (GBP522m) and
by Global (GBP40m); and equipment and other services revenue of
GBP794m previously reported by Enterprise (GBP182m) and by Global
(GBP612m).
4. Operating costs
Half year to 30
September
2023 2022
GBPm GBPm
---------------------------------------------------- ----------------- -----------------
Operating costs by nature
Wages and salaries 1,935 1,920
Social security costs 210 213
Other pension costs 296 303
Share-based payment expense 37 41
---------------------------------------------------- ----------------- -----------------
Total staff costs 2,478 2,477
Own work capitalised (645) (641)
---------------------------------------------------- ----------------- -----------------
Net staff costs 1,833 1,836
Net indirect labour costs 210 188
---------------------------------------------------- ----------------- -----------------
Net labour costs 2,043 2,024
Product costs 1,658 1,510
Sales commissions 321 313
Payments to telecommunications operators 640 605
Property and energy costs 666 630
Network operating and IT costs 460 480
TV programme rights charges - 354
Provision and installation 267 330
Marketing and sales 180 190
Net impairment losses on trade receivables and
contract assets 72 68
Other operating costs 129 102
Other operating income (117) (112)
Depreciation and amortisation, including impairment
charges 2,354 2,332
---------------------------------------------------- ----------------- -----------------
Total operating costs before specific items 8,673 8,826
---------------------------------------------------- ----------------- -----------------
Specific items (note 5) 155 309
---------------------------------------------------- ----------------- -----------------
Total operating costs 8,828 9,135
---------------------------------------------------- ----------------- -----------------
Depreciation and amortisation, which includes impairment
charges, is analysed as follows:
Half year to 30
September
2023 2022
GBPm GBPm
---------------------------------------------------- ------------------ -----------------
Depreciation and amortisation before impairment
charges
Property, plant and equipment 1,438 1,417
Right-of-use assets 330 338
Intangible assets 581 577
Impairment charges
Property, plant and equipment 5 -
Total depreciation and amortisation before specific
items 2,354 2,332
---------------------------------------------------- ------------------ -----------------
Impairment charges classified as specific items
Right-of-use assets 2 -
---------------------------------------------------- ------------------ -----------------
Total operating costs 2,356 2,332
---------------------------------------------------- ------------------ -----------------
5. Specific items
Our income statement and segmental analysis separately identify
trading results on an adjusted basis, being before specific items.
The directors believe that presentation of the group's results in
this way is relevant to an understanding of the group's financial
performance as specific items are those that in management's
judgement need to be disclosed by virtue of their size, nature or
incidence.
This presentation is consistent with the way that financial
performance is measured by management and reported to the Board and
the Executive Committee and assists in providing an additional
analysis of our reporting trading results. Specific items may not
be comparable to similarly titled measures used by other
companies.
In determining whether an event or transaction is specific,
management considers quantitative as well as qualitative factors.
Examples of charges or credits meeting the above definition and
which have been presented as specific items in the current and/or
prior years include significant business restructuring programmes
such as the current group-wide cost transformation and
modernisation programme, acquisitions and disposals of businesses
and investments, charges or credits relating to retrospective
regulatory matters, property rationalisation programmes,
significant out of period contract settlements, net interest on our
pension obligation, and the impact of remeasuring deferred tax
balances. In the event that items meet the criteria, which are
applied consistently from year to year, they are treated as
specific items. Any releases to provisions originally booked as a
specific item are also classified as specific. Conversely, when a
reversal occurs in relation to a prior year item not classified as
specific, the reversal is not classified as specific in the current
year.
Current and future movements relating to the sports joint
venture (Sports JV) with Warner Bros. Discovery (WBD), such as fair
value gains or losses on the A and C preference shares or
impairment charges on the equity-accounted investment, will be
classified as specific as they are deemed to be related to the
divestment of BT Sport operations and linked to the overall fair
value of the transaction. Refer to note 10 for further detail.
Half year to 30
September
2023 2022
GBPm GBPm
-------------------------------------------------- ------------------ ------------------
Specific revenue
Retrospective regulatory matters 7 2
-------------------------------------------------- ------------------ ------------------
Specific revenue 7 2
-------------------------------------------------- ------------------ ------------------
Specific operating costs
Restructuring charges 170 122
BT Sport disposal - 188
Sports JV - subsequent movements 17 -
Other divestment-related items (34) (1)
-------------------------------------------------- ------------------ ------------------
Specific operating costs before depreciation
and amortisation 153 309
Restructuring impairment charges 2 -
-------------------------------------------------- ------------------ ------------------
Specific operating costs 155 309
-------------------------------------------------- ------------------ ------------------
Specific operating loss 162 311
Finance costs associated with BT Sport disposal - (13)
Interest expense on retirement benefit obligation 60 9
-------------------------------------------------- ------------------ ------------------
Net specific items charge before tax 222 307
Tax charge (credit) on specific items (55) (220)
-------------------------------------------------- ------------------ ------------------
Net specific items charge after tax 167 87
-------------------------------------------------- ------------------ ------------------
Retrospective regulatory matters
We recognised net charge of GBP7m in revenue in relation to
historical regulatory matters (H1 FY23: GBP2m). These items
represent movements in provisions relating to various matters.
Restructuring charges
We have incurred charges of GBP170m (H1 FY23: GBP122m) relating
to projects associated with our group-wide cost transformation and
modernisation programme. Costs primarily relate to leaver costs,
consultancy costs, and staff costs associated with colleagues
working exclusively on programme activity. The net cash cost of
restructuring activity in the half year was GBP130m (H1 FY23:
GBP154m).
The programme was first announced in May 2020 and runs until the
end of FY25. In response to cost inflation, during FY23 we revised
the gross annualised savings target to GBP3.0bn (previously
GBP2.5bn), with a cost to achieve of GBP1.6bn (previously
GBP1.3bn). Since embarking on the programme we have achieved gross
annualised savings of GBP2.5bn and incurred costs of GBP1.3bn.
During H1 FY24, we also recognised a GBP2m impairment charge as
specific (H1 FY23: GBPnil), in relation to a property
rationalisation programme associated with our group-wide cost
transformation and modernisation programme.
BT Sport disposal
In Q2 FY23, we recognised a net profit on disposal of the BT
Sport operations of GBP3m in specific items, made up of GBP188m
charges recognised within operating costs net of GBP191m tax
credit. This was subsequently adjusted to GBP28m for FY23, driven
by a GBP33m increase in the charges recognised within operating
costs, offset by an GBP8m decrease in the related tax credit. The
difference is not quantitatively material and does not impact
qualitative disclosures of our KPIs, and therefore we have not
re-presented the comparative period presented above. Further
details on the BT Sport disposal can be found in note 23 of the
Annual Report 2023.
Sports JV - subsequent movements
Subsequent to the disposal of BT Sport, we have recorded charges
of GBP17m (H1 FY23: GBPnil) in specific items which primarily
relate to net fair value movements on the A and C preference shares
in the Sports JV, see note 10 for more details.
Other divestment-related items
We recognised a net GBP34m credit (H1 FY23: GBP1m credit)
relating to divestment projects. The net credit in the half year
primarily relates to the gains on disposal recognised on completion
of the divestments of Pelipod Limited and certain city fibre
networks and associated infrastructure assets in Germany, both of
which completed during the half year.
Interest expense on retirement benefit obligation
During the year we incurred GBP60m (H1 FY23: GBP9m) of interest
costs in relation to our defined benefit pension obligations.
Tax on specific items
A tax credit of GBP55m (H1 FY23: GBP220m) was recognised in
relation to specific items. GBP191m of the amount recognised in H1
FY23 relates to the BT Sport disposal.
6. Pensions
30 September 31 March 2023
2023
--------------------------
GBPbn GBPbn
-------------------------------------- -------------------------- --------------------------
IAS 19 liabilities - BTPS (38.1) (41.6)
Assets - BTPS 34.3 38.7
Other schemes (0.1) (0.2)
-------------------------------------- -------------------------- --------------------------
Total IAS 19 deficit, gross of tax(1) (3.9) (3.1)
-------------------------------------- -------------------------- --------------------------
Total IAS 19 deficit, net of tax (3.1) (2.5)
-------------------------------------- -------------------------- --------------------------
Discount rate (nominal) 5.65 % 4.85 %
Future inflation - average increase
in RPI (p.a.) 3.45 % 3.35 %
Future inflation - average increase
in CPI (p.a.) 2.95 % 2.85 %
1 Of which GBP(4.0)bn relates to schemes in deficit (31 March
2023: GBP(3.2)bn) and GBP0.1bn relates to schemes in surplus (31
March 2023: GBP0.1bn).
The IAS 19 deficit has increased from GBP3.1bn at 31 March 2023
to GBP3.9bn at 30 September 2023.
The BT Pension Scheme (BTPS) hedges inflation and interest rate
risk with reference to the funding deficit, mechanically leading to
the BTPS being over hedged on an IAS 19 measure. In addition, the
IAS 19 liabilities are set by reference to the yield on corporate
bonds. The increase in real yields and the narrowing of credit
spreads over H1 have therefore contributed to an increase in the
deficit, partly offset by deficit contributions of GBP0.7bn. By
contrast, these factors would not contribute to an increase in the
funding deficit.
7. Financial instruments and risk management
Fair value of financial assets and liabilities measured at
amortised cost
At 30 September 2023, the fair value of listed bonds was
GBP17,672m (31 March 2023: GBP16,979m) and the carrying value was
GBP18,976m (31 March 2023: GBP17,796m).
The fair value of the following financial assets and liabilities
approximate to their carrying amount:
-- Cash and cash equivalents
-- Lease liabilities
-- Trade and other receivables
-- Trade and other payables
-- Provisions
-- Investments held at amortised cost
-- Other short-term borrowings
-- Contract assets
-- Contract liabilities
The group's activities expose it to a variety of financial
risks: market risk (including interest rate risk and foreign
exchange risk); credit risk; and liquidity risk. There have been no
changes to the risk management policies which cover these risks
since 31 March 2023.
Current trade and other payables balance of GBP6,117m
includes:
-- GBP230m (31 March 2023: GBP348m) of trade payables in a
supply chain financing programme used with a limited number of
suppliers to extend short payment terms to a more typical payment
term.
-- GBP164m (31 March 2023: GBP169m) of trade payables in a
separate supply chain financing programme that allows suppliers the
opportunity to receive funding earlier than the invoice due date.
Financial institutions are used to support this programme but we
continue to recognise the underlying payables as we continue to
cash settle the supplier invoices in accordance with their
terms.
Fair value estimation
Fair values of financial instruments are analysed by three
levels of valuation methodology which are:
1. Level 1 - uses quoted prices in active markets for identical assets or liabilities.
2. Level 2 - uses inputs for the asset or liability other than
quoted prices, that are observable either directly or
indirectly.
3. Level 3 - uses inputs for the asset or liability that are not
based on observable market data, such as internal models or other
valuation methods.
Level 2 balances are the fair values of the group's outstanding
derivative financial assets and liabilities which were estimated
using discounted cash flow models and market rates of interest and
foreign exchange at the balance sheet date.
Level 3 balances comprise the following financial instruments
classified as fair value through profit and loss and fair value
through other comprehensive income:
-- A and C preference shares in the Sports JV, see note 10 for more details.
-- Investments in a number of private companies. In the absence
of specific market data, these investments are held at cost,
adjusted as necessary for impairments, which approximates to fair
value.
-- Derivative energy contracts, estimated using discounted cash
flow models and the latest forward energy curves at the balance
sheet date.
Level 1 Level 2 Level 3 Total held
at fair
value
----------------- ---------------- -----------------
30 September 2023 GBPm GBPm GBPm GBPm
--------------------------------------- ----------------- ---------------- ----------------- -----------------
Preference shares in joint venture
Fair value through profit and
loss - - 535 535
Investments
Fair value through other comprehensive
income - - 24 24
Fair value through profit and
loss 6 - - 6
Derivative assets
Designated in a hedge - 1,282 15 1,297
Fair value through profit and
loss - 98 - 98
--------------------------------------- ----------------- ---------------- ----------------- -----------------
Total assets 6 1,380 574 1,960
--------------------------------------- ----------------- ---------------- ----------------- -----------------
Derivative liabilities
Designated in a hedge - 228 31 259
Fair value through profit and
loss - 73 3 76
--------------------------------------- ----------------- ---------------- ----------------- -----------------
Total liabilities - 301 34 335
--------------------------------------- ----------------- ---------------- ----------------- -----------------
Level 1 Level 2 Level 3 Total held
at fair
value
--------------------------------------- ----------------- ---------------- ----------------- -----------------
31 March 2023 GBPm GBPm GBPm GBPm
--------------------------------------- ----------------- ---------------- ----------------- -----------------
Preference shares in joint venture
Fair value through profit and
loss - - 555 555
Investments
Fair value through other comprehensive
income - - 23 23
Fair value through profit and
loss 6 - - 6
Derivative assets
Designated in a hedge - 1,350 58 1,408
Fair value through profit and
loss - 71 - 71
--------------------------------------- ----------------- ---------------- ----------------- -----------------
Total assets 6 1,421 636 2,063
--------------------------------------- ----------------- ---------------- ----------------- -----------------
Derivative liabilities
Designated in a hedge - 316 1 317
Fair value through profit and
loss - 64 2 66
--------------------------------------- ----------------- ---------------- ----------------- -----------------
Total liabilities - 380 3 383
--------------------------------------- ----------------- ---------------- ----------------- -----------------
Net losses of GBP24m and GBP69m have been recognised in the
income statement and other comprehensive income respectively in
respect of fair value movements on level 3 instruments during the
half year ended 30 September 2023. Of the GBP24m loss recognised in
the income statement GBP3m loss is in respect of recycling from
cash flow hedge reserve. There were no changes to the valuation
methods or transfers between levels 1, 2 and 3 during the half
year.
8. Financial commitments
Financial commitments as at 30 September 2023 include capital
commitments of GBP1,309m (31 March 2023: GBP1,480m).
9. Contingent liabilities and legal proceedings
In the ordinary course of business, we are periodically notified
of actual or threatened litigation, and regulatory and compliance
matters and investigations. We have disclosed below a number of
such matters including any matters where we believe a material
adverse impact on the operations or financial condition of the
group is possible and the likelihood of a material outflow of
resources is more than remote.
Where the outflow of resources is considered probable, and a
reasonable estimate can be made of the amount of that obligation, a
provision is recognised for these amounts. Where an outflow is not
probable but is possible, or a reasonable estimate of the
obligation cannot be made, a contingent liability exists.
In respect of each of the claims below, the nature and
progression of such proceedings and investigations can make it
difficult to predict the impact they will have on the group. There
are many reasons why we cannot make these assessments with
certainty, including, among others, that they are in early stages,
no damages or remedies have been specified, and/or the often slow
pace of litigation.
Class action claim
In January 2021, Justin Le Patourel, represented by law firm
Mishcon de Reya applied to the Competition Appeal Tribunal to bring
a proposed class action claim for damages they estimated at GBP608m
(inclusive of compound interest) or GBP589m (inclusive of simple
interest) alleging anti-competitive behaviour through excessive
pricing by BT to customers with certain residential landline
services. Ofcom considered this topic more than five years ago. At
that time, Ofcom's final statement made no finding of excessive
pricing or breach of competition law more generally. The claim
seeks to hold against us the fact that we implemented a voluntary
commitment to reduce prices for customers that have a BT landline
only and not to increase those prices beyond inflation (CPI). In
September 2021 the Competition Appeal Tribunal certified the claim
to proceed to a substantive trial on an opt-out basis (class
members are automatically included in the claim unless they choose
to opt-out). In July 2023 Justin Le Patourel amended his claim
seeking increased damages estimated at GBP1,338m (inclusive of
compound interest) or GBP1,309m (inclusive of simple interest). The
parties are preparing for trial, with exchanges of expert reports
currently underway. In September 2023 within its expert evidence
claimed estimate of damages was revised to GBP1,322m (inclusive of
compound interest) or GBP1,292m (inclusive of simple interest). A
hearing window has been set for January - April 2024. BT intends to
defend itself vigorously. At the reporting date we are not aware of
any evidence to indicate that a present obligation exists such that
any amount should be provided for.
Italian business
Milan Public Prosecutor prosecutions: In February 2019 the Milan
Public Prosecutor served BT Italia S.P.A. (BT Italia) with a notice
(which named BT Italia, as well as various individuals) to record
the Prosecutor's view that there is a basis for proceeding with its
case against BT Italia for certain potential offences, namely the
charge of having adopted, from 2011 to 2016, an inadequate
management and control organisation model for the purposes of
Articles 5 and 25 of Legislative Decree 231/2001. BT Italia
disputes this and maintains in a defence brief filed in April 2019
that: (a) BT Italia did not gain any interest or benefit from the
conduct in question; and (b) in any event, it had a sufficient
organisational, management and audit model that was
circumvented/overridden by individuals acting in their own
self-interest. However, following a series of committal hearings in
Autumn 2020, on 10 November 2020, the Italian court agreed (as is
the normal process unless there are limitation or other fundamental
issues with the claim) that BT Italia, and all but one of the
individuals, should be committed to a full trial. The trial
commenced on 26 January 2021 and is ongoing. On 23 April 2021, the
Italian court allowed some parties to be joined to the criminal
proceedings as civil parties ('parte civile') - a procedural
feature of the Italian criminal law system. These claims are
directed at certain individual defendants (which include former BT/
BT Italia employees). Those parties successfully joined BT Italia
as a respondent to their civil claims ('responsabile civile') on
the basis that it is vicariously responsible for the individuals'
wrongdoing. If successful, the quantum of those claims is not
anticipated to be material.
Accounting misstatement claims: a law firm acting on behalf of a
group of investors has made claims under s.90A of the Financial
Services & Markets Act 2000, alleging that untrue or misleading
statements were made in relation to the historical irregular
accounting practices in BT's Italian business (which have been the
subject of previous disclosures). No value is stated and the matter
is in the early stages. As mentioned in our earlier reports, the
accounting issues in Italy have previously been the subject of
class actions in the US that were dismissed by the US courts.
Phones 4U
Since 2015 the administrators of Phones 4U Limited have made
allegations that EE and other mobile network operators colluded to
procure Phones 4U's insolvency. Legal proceedings for an
unquantified amount were issued in December 2018 by the
administrators. The trial on the question of liability/breach ran
from May to July 2022. The court has not yet delivered its judgment
but it is expected shortly. A second trial on causation and quantum
would be required in the event of a finding for the claimant. We
continue to dispute these allegations vigorously.
UK Competition and Markets Authority (CMA) investigation
On 12 July 2022 the CMA opened a competition law investigation
into BT and other companies involved in the purchase of freelance
services for the production and broadcasting of sports content in
the UK. The investigation is focused on BT Sport. In February 2023,
the CMA extended its investigation to include suspected breaches of
competition law in relation to the employment of staff supporting
the production and broadcasting of sports content in the UK. The
CMA has said no assumption should be made at this stage that
competition law has been infringed. BT is cooperating with the
investigation.
10. Joint ventures and associates
30 September 31 March 2023
2023
----------------------------
GBPm GBPm
Interest in joint ventures 331 354
Interest in associates 4 5
--------------------------- ---------------------------- ----------------------------
Closing balance 335 359
--------------------------- ---------------------------- ----------------------------
The sports joint venture (Sports JV) with Warner Bros. Discovery
(WBD), see below, is the only material equity-accounted investment
held by the group.
Sports JV
In FY23 we formed the Sports JV with WBD combining BT Sport and
WBD's Eurosport UK business. The group holds both ordinary equity
shares and preference shares in the Sports JV entity.
Ordinary equity shares
Our retained ordinary equity interest in the Sports JV is held
under the equity method of accounting, consistent with our
accounting policy on associates and joint ventures.
GBPm
------------------------
Carrying amount at 1 April 2023 352
Share of total comprehensive loss for the period (23)
Dividends received during the period -
------------------------------------------------- ------------------------
Carrying amount at 30 September 2023 329
------------------------------------------------- ------------------------
The Sports JV had a loss after tax for the 6 months to 30
September 2023 of GBP38m, after adjustments made to align with the
group's accounting policies; underlying trading, before these
adjustments, was profitable. In addition, the Sports JV had other
comprehensive losses of GBP8m relating to fair value movements on
its foreign exchange hedging arrangement with the group (see note
13) that have been designated as cash flow hedges. Our share of the
Sports JV's results in FY23 included amortisation from provisional
fair value adjustments, which have been finalised with an
immaterial true-up recorded in the six months to 30 September
2023.
As required by IAS 36, we have assessed the investment for
impairment. There is no impairment at 31 March 2023 as the fair
value less costs to sell is higher than the carrying amount of the
investment. See below for sensitivities we have applied in
determining the fair value less costs to sell.
Preference shares
In addition to the group's ordinary equity shareholding, BT held
the following investments in preference shares in the Sports JV
that have not been included within the equity-accounted interest
above.
30 September 31 March 2023
2023
--------------------------
GBPm GBPm
Investment in A preference shares 407 429
Investment in C preference shares 128 126
---------------------------------- -------------------------- --------------------------
Closing balance 535 555
---------------------------------- -------------------------- --------------------------
-- A preference shares - we expect these shares to be redeemed
by the Sports JV over the 4-year earn-out period for the
distribution of cash to BT under our earn-out entitlement. The fair
value of the shares is driven by the underlying cash profit
generation of the Sports JV and therefore has been classified as a
fair value through profit of loss (FVTPL) financial asset under
IFRS 9. A GBP22m fair value loss has been recognised through
specific items (see note 5) driven by a change in the forecasted
cash flows and an increase in the discount rate applied.
-- C preference shares - these shares are expected to be sold to
WBD at the end of BT's earn-out entitlement in consideration for
any sports rights funded by BT at that point and have been
recognised as a financial asset held at FVTPL under IFRS 9. A GBP2m
fair value gain has been recognised through specific items (see
note 5).
The preference shares are held at Level 3 on the fair value
hierarchy, reflecting a valuation methodology that does not use
inputs based on observable market data. See below for sensitivities
we have applied in determining the fair value.
Sensitivities
The group's ordinary equity and preference share investments in
the Sports JV, carry both upside and downside risk from changes in
micro and macro-economic factors affecting the wider market.
Further, there are material commercial and strategic decision
points for the Sports JV in the next twelve months, the outcomes of
which could significantly impact the value of our A and C
preference share investments.
We have applied the following sensitivities to these risk
factors:
-- EBITDA decline from loss of revenue or increase to cost
base;
-- EBITDA improvement from outperformance against revised
forecasts;
-- Increase or decrease in the valuation multiple achieved;
and
-- Increase or decrease in the discount rate applied.
Fair value of
A and C preference Headroom on impairment
shares in Sports test over equity-accounted
Sensitivity JV investment
5% increase or decrease in +/- GBP23m +/- GBP26m
EBITDA
10pp increase or decrease +/- GBP11m +/- GBP13m
in discount rate
10% change in valuation multiple - +/- GBP51m
None of these sensitivities generated an impairment on the
group's equity-accounted investment in the Sports JV.
11. Related party transactions
British Telecommunications plc and certain of its subsidiaries
act as a funder and deposit taker for cash-related transactions for
both its parent (BT Group Investments Ltd) and ultimate parent
company (BT Group plc). The loan arrangements described below with
these companies reflect this. Cash transactions normally arise
where the parent and ultimate parent company are required to meet
their external payment obligations or receive amounts from third
parties. These principally relate to the payment of dividends, the
buyback of shares and the exercise of share options. Transactions
between the ultimate parent company, the parent company and the
group are settled on both a cash and non-cash basis through these
loan accounts depending on the nature of the transaction.
In FY02 the group demerged its former mobile phone business and
as a result BT Group plc became the listed ultimate parent company
of the group. The demerger steps resulted in the formation of an
intermediary holding company, BT Group Investments Ltd, between BT
Group plc and British Telecommunications plc. This intermediary
company held an investment of GBP18.5bn in British
Telecommunications plc which was funded by an intercompany loan
facility with British Telecommunications plc.
A dividend of GBP850m was declared and settled with the parent
company (FY22: nil).
A summary of the balances with the parent and ultimate parent
companies and the finance income or expense arising in respect of
these balances is shown below:
Asset (liability) Finance income
(expense)
---------------------------------- --------------------------------
30 September 31 March 30 September 30 September
2023 2023 2023 2022
---------------------------- ---------------- ---------------- --------------- ---------------
GBPm GBPm GBPm GBPm
---------------------------- ---------------- ---------------- --------------- ---------------
Amounts owed by (to) parent
and
ultimate parent company
Loan facility - non-current
asset investments 10,962 10,916 325 139
Trade and other receivables 42 26 n/a n/a
Trade and other payables (25) (11) n/a n/a
Associates and joint ventures related parties include the Sports
JV formed in August 2022 (see note 10). Sales of services to the
Sports JV during the half year to 30 September 2023 were GBP18m and
purchases from the Sports JV were GBP152m. The amount receivable
from the Sports JV as at 30 September 2023 was GBP32m (31 March
2023 GBP10m) and the amount payable to the Sports JV was GBP91m (31
March 2023 GBP123m).
As part of the BT Sport transaction, the group has committed to
providing the Sports JV with a sterling Revolving Credit Facility
(RCF), up to a maximum for GBP300m, for short-term liquidity
required by the Sports JV to fund its working capital and
commitments to sports rights holders. Amounts drawn down by the
Sports JV under the RCF accrue interest at a market reference rate,
consistent with the group's external short-term borrowings. The
outstanding balance under the RCF of GBP233m is treated as a loan
receivable and held at amortised cost. The capacity of the RCF is
expected to reduce to GBP200m in the medium term. There is also a
loan payable to the Sports JV of GBP10m.
The Sports JV has a foreign exchange hedging arrangement with
the group to secure Euros required to meet its commitments to
certain sports rights holders; the group has external forward
contracts in place to purchase the Euros at an agreed sterling rate
in order to mitigate its exposure to exchange risk. The group holds
a GBP6m derivative liability in respect of forward contracts
provided to the Sports JV.
Transactions from commercial trading arrangements with
associates and joint ventures, including the Sports JV, are shown
below:
30 September 31 March 2023
2023
---------------------------
GBPm GBPm
Sales of services to associates and joint
ventures 20 29
Purchases from associates and joint ventures 177 216
Amounts receivable from associates and
joint ventures 32 10
Amounts payable to associates and joint
ventures 92 124
Other related party transactions include the purchase of energy
from an entity owned by the BT Pension Scheme. Total purchases
during the half year to 30 September 2023 were GBP4m (H1 FY23:
GBP5m). GBP1m was due to the other party as at 30 September 2023
(H1 FY23: GBP1m). The balance is unsecured and no guarantees have
been given.
12. Principal risks and uncertainties
We hav e processes for identifying, evaluating and managing our
risks. Whilst individual risks continue to evolve, overall we do
not consider that there has been a material change to any of our
principal risks and uncertainties as presented on pages 17 to 24 of
the Annual Report 2023. These are summarised below and have the
potential to have an adverse impact on our profit, assets,
liquidity, capital resources and reputation.
Strategic
Strategy, technology and competition - While developing and
executing a strategy to grow value for stakeholders, we must manage
risks from an uncertain economic context, intensifying competition
and rapid changes in customer and technology trends. Similarly,
pursuing the wrong strategy, not reflecting strategy in business
plans, or not executing against it could make us less competitive
and create less long-term sustainable value.
Stakeholder management - Trusted stakeholder management is
essential to us achieving our ambitions. We listen to and
communicate with stakeholders fairly and transparently to build
strong, sustainable relationships. Some sensitive topics need extra
focus. These include network plans, customer fairness, net
neutrality, using technology responsibly, ESG and industrial
relations.
Financial
Financing - We rely on cash generated by business performance
supplemented by capital markets, credit facilities and cash
balances to finance operations, pension scheme, dividends and debt
repayments. We might not be able to fund our business cash flows or
meet payment commitments to shareholders, lenders or our pension
schemes.
Financial control - We have financial controls in place to
prevent fraud (including misappropriation of assets) and to report
accurately. If these failed it could result in material financial
losses or cause us to misrepresent our financial position. We might
fail to apply the correct accounting principles and treatment. This
could result in financial misstatement, fines, legal disputes and
reputational damage.
Compliance
Communications regulation - We work with key regulators as they
define clear, predictable and proportionate regulations which
protect customers and society while ensuring service providers can
compete fairly. We must work in compliance with those regulations,
maintain trust and strong relationships while delivering on our
vision and sustainable value growth. Areas of ongoing,
industry-wide regulatory scrutiny include billing accuracy,
customer complaints, support for vulnerable customers, migration
away from legacy services and management of major incidents.
Data - Our data strategy seeks to create value and enable
efficiency while providing a robust framework for data governance
and regulatory compliance. Not following data protection laws or
regulations could damage our reputation and stakeholder trust, harm
colleagues, customers or suppliers and/or lead to litigation, fines
and penalties.
Legal compliance - We focus on remaining in compliance with all
substantive laws. Key areas of focus are anti-bribery and
corruption, competition law, trade sanctions, export controls and
corporate governance obligations.
Financial services - Operating outside FCA rules, requirements
or permissions could harm customers and lead to fines, loss of FCA
permissions, slow service take-up and broader reputational
damage.
Operational
Operational resilience - We want to deliver best-in-class
performance across our fixed and mobile networks and IT by managing
all the risks that could disrupt our services. Service
interruptions could be caused by things like bad weather or
accidental or deliberate damage to our assets. Some service
interruptions might depend on suppliers' and partners' reliability
- making picking the right ones important.
Cyber security - Our aim is to protect the group, colleagues and
customers from harm and financial loss from cyber security events.
Because we run critical national infrastructure, a cyber attack
could disrupt both customers and the country and compromise data. A
poorly managed cyber security event might cost us money, damage our
reputation and impact our market share. The regulator might also
impose fines or penalties.
People - Our people strategy is to enable a culture where all
our colleagues can be their best and help deliver our ambition.
This means we must manage risk around our organisational structure,
skills and capabilities, engagement and culture, wellbeing and
diversity.
Health, safety and environment - Not maintaining or continually
improving the right health, safety and environmental management
systems could impact our provision of a safe and compliant business
which protects colleagues, partners or the public. Ineffective
health, safety and environmental standards could lead to legal or
financial penalties, and reputational and commercial damage.
Major customer contracts - We offer and deliver a diverse mix of
major contracts which contribute to our business performance and
growth. Customer contractual terms can be onerous and challenging
to meet which might lead to delays, penalties and disputes.
Delivery or service failures against obligations and commitments
could damage our brand and reputation, particularly for critical
infrastructure contracts or security and data protection services.
Not managing contract exits, migrations, renewals and disputes
could erode profit margins and affect future customer
relationships.
Customers, brand and product - We want to give customers
standout service, building personal and enduring relationships and
taking extra care of vulnerable customers. Not digitising or
continually improving our customer experience could affect customer
satisfaction and retention, colleague pride and advocacy, revenues
and brand value. Central to this is being accurate and competitive
with our pricing, billing and collection. We must also manage our
product and service lifecycles, inventory and supply chain, and
comply with our customer obligations and product and service
standards.
Supply management - Successfully selecting, bringing on board
and managing suppliers is essential for us to deliver quality
products and services. We have a lot of suppliers. We must make
supplier decisions on concentration, capability, resilience,
security, costs and broader issues that could impact our business
and reputation.
Transformation delivery -We are modernising and streamlining our
IT, simplifying and refining our product portfolio, switching to
next-generation strategic networks, unlocking cost efficiencies
through better and more agile ways of working, improving our
customers' digital journeys, automating our processes and using AI.
Failing to transform could make us less efficient and damage our
financial performance and customer experience.
RESPONSIBILITY STATEMENT
We confirm that to the best of our knowledge:
-- the condensed set of financial statements has been prepared
in accordance with UK-adopted IAS 34 'Interim Financial
Reporting';
-- the interim management report includes a fair review of the
information required by DTR 4.2.7R (the indication of important
events and their impact during the first six months and description
of principal risks and uncertainties for the remaining six month of
the year); and
-- the interim management report includes a fair review of the
information required by DTR 4.2.8R (disclosure of related parties'
transactions and changes therein).
By order of the Board
Simon Lowth
Director
10 November 2023
INDEPENT REVIEW REPORT TO BRITISH TELECOMMUNICATIONS PLC
Conclusion
We have been engaged by British Telecommunications plc ("the
Company") to review the condensed set of financial statements in
the half-yearly financial report for the six months ended 30
September 2023 which comprises Group income statement, Group
statement of comprehensive income, Group balance sheet, Group
statement of changes in equity, Group cash flow statement and the
related explanatory notes.
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
September 2023 is not prepared, in all material respects, in
accordance with IAS 34 Interim Financial Reporting as adopted for
use in the UK and the Disclosure Guidance and Transparency Rules
("the DTR") of the UK's Financial Conduct Authority ("the UK
FCA").
Basis for conclusion
We conducted our review in accordance with International
Standard on Review Engagements (UK) 2410 Review of Interim
Financial Information Performed by the Independent Auditor of the
Entity ("ISRE (UK) 2410") issued for use in the UK. A review of
interim financial information consists of making enquiries,
primarily of persons responsible for financial and accounting
matters, and applying analytical and other review procedures. We
read the other information contained in the half-yearly financial
report and consider whether it contains any apparent misstatements
or material inconsistencies with the information in the condensed
set of financial statements.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK) and
consequently does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than
those performed in an audit as described in the Basis for
conclusion section of this report, nothing has come to our
attention that causes us to believe that the directors have
inappropriately adopted the going concern basis of accounting, or
that the directors have identified material uncertainties relating
to going concern that have not been appropriately disclosed.
This conclusion is based on the review procedures performed in
accordance with ISRE (UK) 2410. However, future events or
conditions may cause the Group to cease to continue as a going
concern, and the above conclusions are not a guarantee that the
Group will continue in operation.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the DTR of the UK FCA.
As disclosed in note 1, the annual financial statements of the
Group are prepared in accordance with UK-adopted international
accounting standards.
The directors are responsible for preparing the condensed set of
financial statements included in the half-yearly financial report
in accordance with IAS 34 as adopted for use in the UK.
In preparing the condensed set of financial statements, the
directors are responsible for assessing the Group's ability to
continue as a going concern, disclosing, as applicable, matters
related to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate the
Group or to cease operations, or have no realistic alternative but
to do so.
Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review. Our conclusion, including our
conclusions relating to going concern, are based on procedures that
are less extensive than audit procedures, as described in the Basis
for conclusion section of this report.
The purpose of our review work and to whom we owe our
responsibilities
This report is made solely to the Company in accordance with the
terms of our engagement to assist the Company in meeting the
requirements of the DTR of the UK FCA. Our review has been
undertaken so that we might state to the Company those matters we
are required to state to it in this report and for no other
purpose. To the fullest extent permitted by law, we do not accept
or assume responsibility to anyone other than the Company for our
review work, for this report, or for the conclusions we have
reached.
Jonathan Mills for and on behalf of KPMG LLP
Chartered Accountants
15 Canada Square, London, E14 5GL
10 November 2023
Additional Information
Notes
Our commentary focuses on the trading results on an adjusted
basis, which is a non-GAAP measure, being before specific items.
The directors believe that presentation of the group's results in
this way is relevant to an understanding of the group's financial
performance as specific items are those that in management's
judgement need to be disclosed by virtue of their size, nature or
incidence. This is consistent with the way that financial
performance is measured by management and reported to the Board and
the Executive Committee of BT Group plc and assists in providing a
meaningful analysis of the trading results of the group. In
determining whether an event or transaction is specific, management
considers quantitative as well as qualitative factors such as the
frequency or predictability of occurrence. Reported revenue,
reported operating profit, reported profit before tax and reported
net finance expense are the equivalent unadjusted or statutory
measures. Reconciliations of reported to adjusted revenue,
operating costs, operating profit and profit before tax are set out
in the group income statement. Reconciliations of adjusted earnings
before interest, tax and depreciation and amortisation from the
nearest measures prepared in accordance with IFRS are provided in
this Additional Information.
Reconciliation of adjusted earnings before interest, tax,
depreciation and amortisation
In addition to measuring financial performance of the group and
customer-facing units based on adjusted operating profit, we also
measure performance based on adjusted EBITDA. Adjusted EBITDA is
defined as the group profit or loss before specific items, net
finance expense, taxation, depreciation and amortisation and share
of post tax profits or losses of associates and joint ventures.
We consider adjusted EBITDA to be a useful measure of our
operating performance because it approximates the underlying
operating cash flow by eliminating depreciation and amortisation.
Adjusted EBITDA is not a direct measure of our liquidity, which is
shown by our cash flow statement, and needs to be considered in the
context of our financial commitments.
A reconciliation of reported profit for the period, the most
directly comparable IFRS measure, to adjusted EBITDA, is set out
below.
Half year to 30
September
-------------------------------------------------
2023 2022
GBPm GBPm
------------------------------------------------- ------------------ ------------------
Reported profit for the period 1,181 1,030
Tax 232 (62)
------------------------------------------------- ------------------ ------------------
Reported profit before tax 1,413 968
Net finance expense 159 265
Depreciation and amortisation 2,356 2,332
Specific revenue 7 2
Specific operating costs before depreciation and
amortisation 153 309
Share of post tax (profits) losses of associates
and joint ventures 7 (2)
------------------------------------------------- ------------------ ------------------
Adjusted(1) EBITDA 4,095 3,874
------------------------------------------------- ------------------ ------------------
(1) See Glossary on page 3 .
Adjustments to prior period published financial information:
changes in central cost allocation methodology, the creation of
Business and the Sports JV pro forma
Changes in central cost allocation methodology and the creation
of Business
From 1 April 2023 we have revised the methodology used to
allocate shared Network, Digital and support function costs across
our units to more closely align the recharges received by each unit
to their actual consumption.
Also from 1 April 2023, the Business customer-facing unit
(formed from the merger of Enterprise and Global) began reporting
as a single unit.
As explained in note 1 to the condensed consolidated financial
statements (page 13 ) we have re-presented relevant FY23
comparatives to reflect both of these changes in line with IFRS
accounting requirements. These adjustments are reflected in the
operating review section of the release and the condensed
consolidated financial statements.
The tables below presents a bridge between the results presented
in the Results for the half year to 30 September 2023 (published on
2 November 2022) and the re-presented FY23 comparatives presented
within this release.
Half year to 30 Reported basis Re-presentation Re-presented
September adjustment basis
2022
------------------------------- ------------------------------
GBPm GBPm GBPm
-------------------- ------------------------------- ------------------------------ -------------------------------
Adjusted revenue
Consumer 4,992 - 4,992
Business - 4,041 4,041
Legacy Enterprise 2,439 (2,439) -
Legacy Global 1,617 (1,617) -
Openreach 2,836 - 2,836
Other 14 - 14
Intra-group items (1,530) 15 (1,515)
-------------------- ------------------------------- ------------------------------ -------------------------------
Total Group 10,368 - 10,368
-------------------- ------------------------------- ------------------------------ -------------------------------
Adjusted EBITDA
Consumer 1,295 (70) 1,225
Business - 903 903
Legacy Enterprise 660 (660) -
Legacy Global 197 (197) -
Openreach 1,711 24 1,735
Other 11 - 11
-------------------- ------------------------------- ------------------------------ -------------------------------
Total Group 3,874 - 3,874
-------------------- ------------------------------- ------------------------------ -------------------------------
Adjusted operating
costs
Consumer 3,697 70 3,767
Business - 3,138 3,138
Legacy Enterprise 1,779 (1,779) -
Legacy Global 1,420 (1,420) -
Openreach 1,125 (24) 1,101
Other 3 - 3
Intra-group items (1,530) 15 (1,515)
-------------------- ------------------------------- ------------------------------ -------------------------------
Total Group 6,494 - 6,494
-------------------- ------------------------------- ------------------------------ -------------------------------
Adjusted
depreciation
& amortisation
Consumer 701 103 804
Business - 536 536
Legacy Enterprise 437 (437) -
Legacy Global 155 (155) -
Openreach 987 (47) 940
Other 52 - 52
-------------------- ------------------------------- ------------------------------ -------------------------------
Total Group 2,332 - 2,332
-------------------- ------------------------------- ------------------------------ -------------------------------
Adjusted operating
profit
Consumer 594 (173) 421
Business - 367 367
Legacy Enterprise 223 (223) -
Legacy Global 42 (42) -
Openreach 724 71 795
Other (41) - (41)
-------------------- ------------------------------- ------------------------------ -------------------------------
Total Group 1,542 - 1,542
-------------------- ------------------------------- ------------------------------ -------------------------------
Capital expenditure
Consumer 583 13 596
Business - 448 448
Legacy Enterprise 311 (311) -
Legacy Global 125 (125) -
Openreach 1,490 14 1,504
Other 104 (39) 65
-------------------- ------------------------------- ------------------------------ -------------------------------
Total Group 2,613 - 2,613
-------------------- ------------------------------- ------------------------------ -------------------------------
Adjusted external
revenue
Consumer 4,962 - 4,962
Business - 3,999 3,999
Legacy Enterprise 2,382 (2,382) -
Legacy Global 1,617 (1,617) -
Openreach 1,393 - 1,393
Other 14 - 14
-------------------- ------------------------------- ------------------------------ -------------------------------
Total Group 10,368 - 10,368
-------------------- ------------------------------- ------------------------------ -------------------------------
Adjusted internal
revenue
Consumer 30 - 30
Business - 42 42
Legacy Enterprise 57 (57) -
Legacy Global - - -
Openreach 1,443 - 1,443
Other - - -
-------------------- ------------------------------- ------------------------------ -------------------------------
Total Group 1,530 (15) 1,515
-------------------- ------------------------------- ------------------------------ -------------------------------
Sports JV pro forma basis
On 3 September 2022 BT and Warner Bros. Discovery announced
completion of their transaction to form a 50:50 joint venture (JV)
combining the assets of BT Sport and Eurosport UK. On 18 October
2022 we published unaudited pro forma financial information
estimating the impact on the group as if trading in relation to BT
Sport had been equity accounted for in previous periods, akin to
the JV being in place historically.
Within pages 1 to 7 of this results release, when discussing the
performance of BT and our Consumer customer-facing unit we
reference pro forma information relating to FY23 prior period
comparatives (i.e. the half year ended 30 September 2022). We
consider analysis on a pro forma basis to be appropriate as it
enables comparison of results on a like-for-like basis.
Results presented in the condensed consolidated financial
statements (pages 8 to 12 ) do not reflect these unaudited pro
forma adjustments.
The table below presents a bridge between the re-presented FY23
comparatives and the pro forma FY23 comparatives presented within
this release.
Half year to 30 Reported basis Sports JV pro Sports JV pro
September (re-presented(1) forma adjustment forma basis
2022 )
----------------------------- -------------------------------
GBPm GBPm GBPm
----------------------- ----------------------------- ------------------------------- -----------------------------
Group
Adjusted(2) revenue 10,368 (238) 10,130
Adjusted(2) EBITDA 3,874 71 3,945
----------------------- ----------------------------- ------------------------------- -----------------------------
Consumer
Adjusted(2) revenue 4,992 (238) 4,754
Adjusted(2) EBITDA 1,225 71 1,296
Capital expenditure 596 (1) 595
----------------------- ----------------------------- ------------------------------- -----------------------------
(1) Consumer prior period comparatives as reported in the Q2
FY23 results release have been re-presented for the changes
detailed under the 're-presented' heading of the Glossary on page 3
.
(2) See Glossary on page 3 .
Forward-looking statements - caution advised
Certain information included in this announcement is forward
looking and involves risks, assumptions and uncertainties that
could cause actual results to differ materially from those
expressed or implied by forward looking statements. Forward looking
statements cover all matters which are not historical facts and
include, without limitation, projections relating to results of
operations and financial conditions and the Company's plans and
objectives for future operations. Forward looking statements can be
identified by the use of forward looking terminology, including
terms such as 'believes', 'estimates', 'anticipates', 'expects',
'forecasts', 'intends', 'plans', 'projects', 'goal', 'target',
'aim', 'may', 'will', 'would', 'could' or 'should' or, in each
case, their negative or other variations or comparable terminology.
Forward looking statements in this announcement are not guarantees
of future performance. All forward looking statements in this
announcement are based upon information known to the Company on the
date of this announcement. Accordingly, no
assurance can be given that any particular expectation will be
met and readers are cautioned not to place undue reliance on
forward looking statements, which speak only at their respective
dates. Additionally, forward looking statements regarding past
trends or activities should not be taken as a representation that
such trends or activities will continue in the future. Other than
in accordance with its legal or regulatory obligations (including
under the UK Listing Rules and the Disclosure Guidance and
Transparency Rules of the Financial Conduct Authority), the Company
undertakes no obligation to publicly update or revise any forward
looking statement, whether as a result of new information, future
events or otherwise. Nothing in this announcement shall exclude any
liability under applicable laws that cannot be excluded in
accordance with such laws.
[1] See Glossary on page .
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IR LBLFFXFLZFBZ
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Br.tel. 81 S (LSE:RF99)
과거 데이터 주식 차트
부터 11월(11) 2024 으로 12월(12) 2024
Br.tel. 81 S (LSE:RF99)
과거 데이터 주식 차트
부터 12월(12) 2023 으로 12월(12) 2024
