Key points:
- Revenue growth of 5% driven by acquisitions and foreign exchange
- EBITDA1 decline due to poor performance in BT Global Services and one-off charges
- Rest of the business performed ahead of expectations, with EBITDA1 growth of 5% being the best year on year performance for five years
- Total one-off charges of £336m as a result of the financial and contract reviews in BT Global Services
- Completion of the ongoing contract and operational reviews may result in further substantial one-off charges in the fourth quarter
- Decisive action to improve performance in BT Global Services
- Free cash flow improved due to lower working capital outflow and lower capital expenditure
- Total labour resource reduction of 9,500 in the nine months to 31 December
- BT's retail share of the DSL and LLU installed base remained steady at 34% (28% share of net additions in the quarter)
- BT Global Services order intake remained steady at GBP 1.8bn in the quarter and GBP 8.3bn over the past 12 months
Ian Livingston, Chief Executive, commenting on the third quarter results, said:
"Three of our businesses performed ahead of expectations in the quarter and the group, excluding Global Services, delivered the best year on year profit growth for five years. However, as previously announced, the group results have been severely impacted by the performance of our Global Services division.
"We need to build a solid base in Global Services from which we can deliver positive cash flows. We have already announced changes in management and are making significant financial and operational changes to the business. We are also trying to change the division's cash flow profile to ensure it's less concentrated towards the fourth quarter and, as a result, fourth quarter cash inflow in Global Services will be significantly lower than last year's exceptionally high figure.
"With our focus on improving the performance of Global Services, continued cost savings and control on capex across the group, we expect group free cash flow, before any pension deficit payments, to be over GBP 1bn next year."
Notes:
Unless otherwise stated, any reference to earnings before interest, tax, depreciation and amortisation (EBITDA), operating profit, profit before tax and earnings per share (EPS) and operating costs is measured before specific items and leaver costs. Unless otherwise stated, the change in results is year on year. Underlying revenue, underlying operating costs and underlying EBITDA refer to the amount excluding contribution from acquisitions and exchange rate movements.
The commentary focuses on the results before specific items and leaver costs. This is consistent with the way that financial performance is measured by management and we believe allows a meaningful analysis to be made of the trading results of the group. Specific items are defined in note 4 on page 21 of the attachments. Leaver costs are shown in note 3 on page 20 of the attachments.
The income statement, cash flow statement and balance sheet are provided on pages 12 to 16 of the attachments. A reconciliation of EBITDA to group operating profit is provided on page 24 of the attachments. A definition and reconciliation of free cash flow and net debt are provided on pages 22 to 24 of the attachments.
1 Before specific items and leaver costs
2 One-off charges of GBP 336m relate to BT Global Services
3 Includes payment of pension deficiency contributions of GBP 320m and tax receipts of GBP 504m
- Revenue growth of 5% driven by acquisitions and foreign exchange
- EBITDA1 decline due to poor performance in BT Global Services and one-off charges
- Rest of the business performed ahead of expectations, with EBITDA1 growth of 5% being the best year on year performance for five years
- Total one-off charges of £336m as a result of the financial and contract reviews in BT Global Services
- Completion of the ongoing contract and operational reviews may result in further substantial one-off charges in the fourth quarter
- Decisive action to improve performance in BT Global Services
- Free cash flow improved due to lower working capital outflow and lower capital expenditure
- Total labour resource reduction of 9,500 in the nine months to 31 December
- BT's retail share of the DSL and LLU installed base remained steady at 34% (28% share of net additions in the quarter)
- BT Global Services order intake remained steady at GBP 1.8bn in the quarter and GBP 8.3bn over the past 12 months
Ian Livingston, Chief Executive, commenting on the third quarter results, said:
"Three of our businesses performed ahead of expectations in the quarter and the group, excluding Global Services, delivered the best year on year profit growth for five years. However, as previously announced, the group results have been severely impacted by the performance of our Global Services division.
"We need to build a solid base in Global Services from which we can deliver positive cash flows. We have already announced changes in management and are making significant financial and operational changes to the business. We are also trying to change the division's cash flow profile to ensure it's less concentrated towards the fourth quarter and, as a result, fourth quarter cash inflow in Global Services will be significantly lower than last year's exceptionally high figure.
"With our focus on improving the performance of Global Services, continued cost savings and control on capex across the group, we expect group free cash flow, before any pension deficit payments, to be over GBP 1bn next year."
Notes:
Unless otherwise stated, any reference to earnings before interest, tax, depreciation and amortisation (EBITDA), operating profit, profit before tax and earnings per share (EPS) and operating costs is measured before specific items and leaver costs. Unless otherwise stated, the change in results is year on year. Underlying revenue, underlying operating costs and underlying EBITDA refer to the amount excluding contribution from acquisitions and exchange rate movements.
The commentary focuses on the results before specific items and leaver costs. This is consistent with the way that financial performance is measured by management and we believe allows a meaningful analysis to be made of the trading results of the group. Specific items are defined in note 4 on page 21 of the attachments. Leaver costs are shown in note 3 on page 20 of the attachments.
The income statement, cash flow statement and balance sheet are provided on pages 12 to 16 of the attachments. A reconciliation of EBITDA to group operating profit is provided on page 24 of the attachments. A definition and reconciliation of free cash flow and net debt are provided on pages 22 to 24 of the attachments.
1 Before specific items and leaver costs
2 One-off charges of GBP 336m relate to BT Global Services
3 Includes payment of pension deficiency contributions of GBP 320m and tax receipts of GBP 504m
