July 31, 2020
BT's fiscal Q1 results signaled that operations were clearly impacted by the COVID-19 pandemic in the quarter to end-June 2020.
Figure 2: Shifting goalposts: Coronavirus meant no live sport – hitting BT Sport hard.
Despite this, the UK-based operator appeared sufficiently confident to provide its first guidance for the financial year to 31 March 2021.
Revenue in fiscal Q1 fell 7% to £5.24 billion ($US6.88 billion), a slump that was blamed on reduced revenue from BT Sport, the closure of retail stores and a reduction in business activity at its enterprise units.
EBITDA was also 7% lower at £1.81 billion ($2.37 billion), while pre-tax profit dropped 13% to £561 million ($737 million) and net profit fell 11% to £448 million ($588 million).
Capital expenditure was flat at £927 million ($1.2 billion), although normalized free cash flow plummeted by £372 million ($488 million) to an outflow of £49 million ($64 million).
In terms of outlook, BT said adjusted revenue is forecast to be down by 5%-6% in the fiscal year, while adjusted EBITDA is expected to be in the range of £7.2 billion-£7.5 billion ($9.4 billion-$9.8 billion).
Figure 3: Source: BT
Capital expenditure is forecast at £4 billion-£4.3 billion ($5.2 billion-$5.6 billion), with normalized free cash flow of £1.2 billion-£1.5 billion ($1.5 billion-$1.9 billion).
Analysts at Jefferies said their initial reaction is that the telecom giants revenue and EBITA figures "are slightly ahead of expectations with no obvious one-offs," although they expressed surprise BT had issued guidance for the year to end-March 2021 — "something we had not expected until November."
The analysts pointed out that EBITDA, capex and free cash flow ranges "are wide," but the revenue range is not, "suggesting management feels it has visibility into post-furlough 2H."
Philip Jansen, CEO of BT Group, described the operator's operating performance in fiscal Q1 as "strong" and "relatively resilient".
"Although uncertainties remain, we are now able to provide an outlook for this financial year,” he said.
Figure 1: Special spaghetti: Despite the pandemic, BT's fiber-to-the-premises hit 3 million.
"Despite our strong operational performance in the first three months of the year, it is clear that COVID-19 will continue to impact our business as the full economic consequences unfold."
"Beyond this year and based on current expectations, we expect to return the business to sustainable adjusted EBITDA growth, driven in part by the recovery from COVID-19."
BT also hailed some key milestones for network build, noting its fiber-to-the-premises (FTTP) network has now passed 3 million installations, and is on track to reach the target of 4.5 million by March 2021.
With regards to 5G, the need to reduce the use of equipment provided by Huawei is clearly a concern.
Yet BT claimed both 5G and fiber rollouts remain on track, and that the cost of complying with additional restrictions should be absorbed by the previously reported estimate of £500 million ($656 million).
Want to know more about 5G? Check out our dedicated 5G content channel here on Light Reading. The 5G network has been rolled out to 100 towns and cities throughout the UK. BT confirmed it intends to participate in the upcoming auction of the 700MHz and 3.6GHz spectrum bands, which UK communications regulator Ofcom has indicated will take place in November 2020 at the earliest. Looking at individual business divisions, BT Enterprise gains a new CEO in the form of Rob Shuter, who is currently CEO of mobile giant MTN, based in South Africa. Shuter is expected to replace Gerry McQuade, who is retiring, by the end of FY 2020/2021. Related posts: Huawei preps for UK vanishing act with no-show at govt. hearing Eurobites: Openreach pushes fiber into 'final third' of UK Ericsson: Huawei swap in UK 'will not take five to seven years' BT says Huawei ban is not so bad after all — Anne Morris, contributing editor, special to Light Reading
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