BT Group Finals, including dividend suspension.

[idpickering]

Fourth quarter and year to 31 March 2020 (7 May 2020)

Highlights:
•2019/20 results overall in line with expectations
•New FTTP target to reach 20m premises by mid- to late-2020s, on the assumption we obtain the required critical enablers
•Phase 1 of our transformation programme complete; next phase of modernisation to deliver annualised gross benefits of £1bn by March 2023 and £2bn by March 2025, with £1.3bn one-off cost to achieve in total across the five years
•Keeping the nation connected during the Covid-19 crisis
•Final dividend suspended for 2019/20 and all dividends for 2020/21 to create capacity for value-enhancing investments and managing confidently through the Covid-19 crisis; expect to resume dividends in 2021/22 at an annual rate of 7.7 pence per share

Keeping the nation connected during the Covid-19 crisis:
•Our priority is protecting our people, in particular our frontline keyworkers who have continued to work to keep the nation connected
•Our networks are performing well, and comfortably within capacity, despite the change in demand patterns
•We have supported the national response to the crisis, including providing connectivity to the NHS Nightingale hospitals and are working closely with Government on a wide range of initiatives

Operational:
•FTTP rollout at c.32k premises passed per week; FTTP premises passed to date doubled in the year to 2.6m
•Divested Tikit and progressing disposals of selected domestic operations in Latin America and France
•5G now live in 80 cities and large towns; investing significantly to more than double current footprint by March 2021 subject to the right conditions
•EE named best overall operator in RootMetrics' biannual awards
•Consumer fixed ARPC £38.1, down 2% year on year; postpaid mobile ARPC £20.4, down 2% year on year due to impact of regulation and continued trend towards SIM-only; RGUs per address 2.38
•Postpaid mobile churn improved to 1.1% quarter on quarter; fixed churn improved to 1.3% year on year due to improvements to customer experience and shift to fairer, predictable and competitive pricing strategy

Financial:
•Reported revenue £22,905m down 2%1 mainly reflecting the impact of regulation, declines in legacy products, strategic reductions in low margin business and divestments
•Reported profit before tax £2,353m down year on year; includes charges of £95m as a result of Covid-19 mainly reflecting increased debtor provisions
•Adjusted2 EBITDA £7,907m, down 3%1, due to lower revenue and investment in customer experience, partly offset by cost savings from transformation programmes
•Net cash inflow from operating activities £6,271m, up 47%, due to lower pension contributions and one-off cash flows; normalised free cash flow2 £2,011m, down 18%, primarily due to increased cash capital expenditure
•Capital expenditure £3,960m, up £193m excluding BDUK funding deferral, driven by network and customer investment
•Net debt2 increased primarily due to implementation of IFRS 16, and net business cash outflows
•Given the uncertainty created by Covid-19 we will not be providing a financial outlook statement for 2020/21

1 Changes on prior year are presented on an IAS 17 basis where meaningful except for adjusted EBITDA, which is presented on an IFRS 16 pro forma basis
2 See Glossary

Philip Jansen, Chief Executive, commenting on the results, said

"BT had a positive year delivering results in line with expectations and completing our £1.6bn phase 1 transformation programme, one year ahead of schedule.

"Covid-19 has changed everybody’s world and I am immensely proud of how BT has responded to the challenges the Covid-19 crisis has presented. Our strong and resilient networks, both fixed and mobile, have proved critical to the continuing functioning of the UK economy, providing unrivalled connectivity and services for the nation.

"Of course, Covid-19 is affecting our business, but the full impact will only become clearer as the economic consequences unfold over the next 12 months. Due to Covid-19, BT is not providing guidance for 2020/21, at this time.

"BT has the best network infrastructure in the UK. We have the leading 4G network and are rapidly expanding our leadership position in 5G, that today covers over 80 towns and cities. We have the largest and most extensive fixed network and are leading the UK on the next generation Fibre-to-the-Premises (FTTP) network where we now pass 2.6 million premises. Today we are announcing a rapid acceleration of our FTTP build with a target of 20 million premises passed by the mid- to late-2020s, including a significant build in rural areas. After passing 1.3 million premises last year, we are aiming at over 2 million in 2020/21, and envisage a maximum build rate of 3 million premises per year. Our FTTP investment should deliver pre-tax nominal returns of between 10% to 12% and is based on a regulatory framework consistent with Ofcom’s preferred policy direction and continued support for infrastructure investment and competition.

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

"BT is delivering, but is also changing. BT needs to be leaner, simpler and more agile. Today we are announcing a radical modernisation and simplification programme that will use technology to create a better BT for the future. This 5-year initiative will re-engineer old and out of date processes, rationalise products, reduce re-work and switch off many legacy services. This next stage in the modernisation of BT will deliver gross annualised savings of £2 billion over the next 5 years.

"In order to deal with the potential consequences of Covid-19, allow us to invest in FTTP and 5G, and to fund the major 5-year modernisation programme, we have also taken the difficult decision to suspend the dividend until 2022 and re-base thereafter.

"These decisions, particularly on the dividend, network investment and transformation are key to underpinning BT’s investment case; driving network strength, competitive strength and financial strength, providing more clarity to the market, and driving long-term value for shareholders. I am confident that these decisions position us really positively for the future."

https://www.btplc.com/Sharesandperforma ... /index.htm

I had mentioned elsewhere that I was waiting to see what was happening with the dividend before topping up my BT.A holdings. That question is now answered. For me a hold now, grudgingly to be honest. Not sure I'm happy to wait until 2022 to get a dividend, and might just dump them on market opening? Does anyone else think this share is a good HYP one now, and what are other HYPers doing about this?

Ian.

[Arborbridge]

•Final dividend suspended for 2019/20 and all dividends for 2020/21 to create capacity for value-enhancing investments and managing confidently through the Covid-19 crisis; expect to resume dividends in 2021/22 at an annual rate of 7.7 pence per share



I had mentioned elsewhere that I was waiting to see what was happening with the dividend before topping up my BT.A holdings. That question is now answered. For me a hold now, grudgingly to be honest. Not sure I'm happy to wait until 2022 to get a dividend, and might just dump them on market opening? Does anyone else think this share is a good HYP one now, and what are other HYPers doing about this?

Ian.

Worse than I expected, but interesting that they have "levelled" with us, to us the PM's phrase.

Now time to decide what to do - tough it out or crystallise my quite large loss to pull at least some dividend in.

May be the first item on the agenda will be "let the knees stop jerking"? - on the grounds that reacting now is too late. TJH's rule is to sell a cutter if we think the dividend will not be resumed for a very long time: does 21/22 count? or is that a "reasonable" time?
At least for me BT won't be at the top of my rankings for cash for a very long time whatever happens.


Arb.

[idpickering]

Worse than I expected, but interesting that they have "levelled" with us, to us the PM's phrase.

Now time to decide what to do - tough it out or crystallise my quite large loss to pull at least some dividend in.

May be the first item on the agenda will be "let the knees stop jerking"? - on the grounds that reacting now is too late.

Arb.

I hear you Arb, thanks for your input. I'm showing a 44% loss in capital value on my BT.A holdings, not including dividends thus far. I'm not keen to make that paper loss a reality I must admit. I have held other cutters such as HSBC though, so maybe that's an option? If I sold out (not very HYP), what else to buy?

Ian.

[Arborbridge]

If I sold out (not very HYP), what else to buy?

Ian.

Only two choices: another of your HYP shares, trusting it won't be frying pan to fire, or an income IT.
The dirst option, in my experience, is usually a 50/50 success, the second option could be a lower yield but you would be making use of the IT's reserve to increase the probabilty of a continuation of your income.

The classic gambit would, of course, to sit tight and let the market sort things out. Given a well constructed HYP like yours, it will carry on battered but unbowed.

Arb.

[idpickering]

If I sold out (not very HYP), what else to buy?

Ian.

Only two choices: another of your HYP shares, trusting it won't be frying pan to fire, or an income IT.
The dirst option, in my experience, is usually a 50/50 success, the second option could be a lower yield but you would be making use of the IT's reserve to increase the probabilty of a continuation of your income.

The classic gambit would, of course, to sit tight and let the market sort things out. Given a well constructed HYP like yours, it will carry on battered but unbowed.

Arb.

Thanks for your input and kind comment Arb. For now, I’m going to watch the market opening and see what happens re BT.A. I would favour the do nothing option, but 2022 is a long time to wait for a dividend. I’ll Pickering it over for a bit.

Ian.

[Arborbridge]

Thanks for your input and kind comment Arb. For now, I’m going to watch the market opening and see what happens re BT.A. I would favour the do nothing option, but 2022 is a long time to wait for a dividend. I’ll Pickering it over for a bit.

Ian.

It is a long time, but not much different to the setback with Lloyds - although this crisis has now knocked that on the head again!

The difference this time is that we will have at least a third of our companies struggling to pay out, possibly more. The damage is much wider than in the banking crisis. and diversity is of little help. Even those selling down capital to take advantage of capital gains are in the same boat as HYPers, for their gains are not going to come back any quicker than our dividends.

Arb.

[onthemove]

...expect to resume dividends in 2021/22 at an annual rate of 7.7 pence per share

Hmm...

Me, personally, I'd treat that claim with a healthy dose of scepticism.

Even several years later, I still feel aggrieved at First Group and their rights issue during which they promised to pay the dividend later in the year at an amount that would work out at around 8% at the time. Fast forward to just 6 months later, and they not only ditched the promise on the amount, they didn't pay anything at all. …...…. And now several years later, they still haven't paid a single penny in dividends since then. Nor do they show any real (believable) sign of doing so.

Don't know what to do about BT though. I don't like selling at a loss. But I'm starting to feel in my experience that holding onto dividend cutters more often than not just results in a drawn out slow decline even further - gradually haemorrhaging even more capital, without any further dividend to offset it. Not absolutely every time, but perhaps more often than I'd like to admit to myself.

Is BT's cut *really* anything to do with the pandemic? Surely telecoms connectivity is more in demand now than ever?

And as for "value-enhancing investments"... I struggle to see that there's an awful lot telecoms companies can do these days. For most people data speeds are now fast enough. I can't imagine many people would be all that interested in paying much, if anything, more for anything more. Like me - I'll happily have a 5g phone, but not if it costs more - 4g and home broadband (at current speed) do me just fine.

I haven't yet looked how far down I am on BT, but my head is telling me I should probably sell. A complete dividend cut for a company that should have seen increased demand during a pandemic, and a promise to re-instate 18 months later... nah, I just don't believe it... what do they think will have changed in 18 months? The virgin / o2 merger is going to create more competition. If they can't pay a dividend now, with huge demand for home working connectivity, just how do they think they're going to afford a dividend in 2022?

I just cannot think of any reason to keep hold

(though I bet I end up doing so, and then haemorrhaging capital like I seem to have done so many times with other companies over the years)

Arrggghhh…

Other cutters that are genuinely likely to be pandemic related, I've just been largely turning a blind eye, and figuring I'll re-evaluate them in 9 months or so. But a telecoms company cutting? While everyone is working from home and making more use of telecoms? Really?!

[Quint]

Sold a small holding in the wife's SIPP a couple of weeks ago. Telecommunications is not a good place to be investing. Ever greater capital investment required for diminishing returns. Even though the reality is that it is now critical infrastructure.

I should have listened to DOD. Lesson learned.

[Wizard]

•Final dividend suspended for 2019/20 and all dividends for 2020/21 to create capacity for value-enhancing investments and managing confidently through the Covid-19 crisis; expect to resume dividends in 2021/22 at an annual rate of 7.7 pence per share



I had mentioned elsewhere that I was waiting to see what was happening with the dividend before topping up my BT.A holdings. That question is now answered. For me a hold now, grudgingly to be honest. Not sure I'm happy to wait until 2022 to get a dividend, and might just dump them on market opening? Does anyone else think this share is a good HYP one now, and what are other HYPers doing about this?

Ian.

Worse than I expected, but interesting that they have "levelled" with us, to us the PM's phrase.

Now time to decide what to do - tough it out or crystallise my quite large loss to pull at least some dividend in.

May be the first item on the agenda will be "let the knees stop jerking"? - on the grounds that reacting now is too late. TJH's rule is to sell a cutter if we think the dividend will not be resumed for a very long time: does 21/22 count? or is that a "reasonable" time?
At least for me BT won't be at the top of my rankings for cash for a very long time whatever happens.


Arb.

My bold.

I am not sure I agree they have. Bluntly IMHO they have used Covid-19 is an excuse for a dividend cut they were going to make anyway. If it is really driven by Covid-19 what makes them able to predict now how long the impact will be? If it is really driven by Covid-19 how come the planned resumption is at so much lower level? It is no surprise this has happened, I expected it, but I would not describe it as levelling with shareholders.

But at least it is clear now that this share is uninvestable for an income investor until the dividend has actually been restored. Where a holder should sell comes down to two factors in my view. If they need the income before 2021 they have to sell and use what is left of their capital to try and secure an income. If they do not need an income they need to take a view as to whether their capital will recover under the stewardship of BT rather than another company - but that is not an HYP discussion.

[idpickering]

I made my mind up, and as of ten minutes ago, I dumped BT.A out of my HYP. The monies rescued, quite apt in the circumstances I think, was invested equally between Rio Tinto and GlaxoSmithkline. No regrets from me, but that’s more than enough excitement for one day. Back to sleep now......yeah right?

Ian.

[Darka]

I made my mind up, and as of ten minutes ago, I dumped BT.A out of my HYP. The monies rescued, quite apt in the circumstances I think, was invested equally between Rio Tinto and GlaxoSmithkline. No regrets from me, but that’s more than enough excitement for one day. Back to sleep now......yeah right?

Ian.

I think that was the right decision Ian, not that I know anything of course

It will be some time before they restart paying dividends no matter what they say, I sell most cutters straightaway now, unless it looks like only a temporary stoppage, e.g. I'm keeping HSBC.

[johnhemming]

Bluntly IMHO they have used Covid-19 is an excuse for a dividend cut they were going to make anyway.

I would see it that they have used Covid-19 as cover for making a dividend cut that they wanted to make, but had been avoiding.

I hold BT.A and would intend to keep holding them with a view to the future. (I am on a paper loss of something, I have not looked it up).

[Dod101]

BT has never been a very reliable share as I have kept saying. Dividend suspension until 2022? Does that mean they will start paying an interim for the year 2022, meaning the next dividend will not be until mid 2022? This is not even due to the virus.

I am glad I do not hold. Ditched them in January 2018 at £2.59.

Dod

[idpickering]

I think that was the right decision Ian, not that I know anything of course

It will be some time before they restart paying dividends no matter what they say, I sell most cutters straightaway now, unless it looks like only a temporary stoppage, e.g. I'm keeping HSBC.

Thank you Darka. It wasn’t a snap knee-jerk reaction. It’s something I’ve been thinking about for a while now. The BT.A board just made my final decision easier. I’m still holding on to my HSBC shares too, and that other dire investment that has been Lloyd’s too. Mind you, even they’re on a shakey footing in my HYP. I can feel a clear out coming on....

Ian.

[Dod101]

I made my mind up, and as of ten minutes ago, I dumped BT.A out of my HYP. The monies rescued, quite apt in the circumstances I think, was invested equally between Rio Tinto and GlaxoSmithkline. No regrets from me, but that’s more than enough excitement for one day. Back to sleep now......yeah right?

Ian.

Not Schroders then?

Dod

[idpickering]

I made my mind up, and as of ten minutes ago, I dumped BT.A out of my HYP. The monies rescued, quite apt in the circumstances I think, was invested equally between Rio Tinto and GlaxoSmithkline. No regrets from me, but that’s more than enough excitement for one day. Back to sleep now......yeah right?

Ian.

Not Schroders then?

Dod

Our posts crossed in the either Dod. I might swap Lloyd’s for them maybe?

Ian.

[Dod101]

Our posts crossed in the either Dod. I might swap Lloyd’s for them maybe?

Ian.

I would not want to influence you and anyway Lloyds may reinstate their dividend by the year end who knows?

Dod

[Wizard]

Thank you Darka. It wasn’t a snap knee-jerk reaction. It’s something I’ve been thinking about for a while now. The BT.A board just made my final decision easier. I’m still holding on to my HSBC shares too, and that other dire investment that has been Lloyd’s too. Mind you, even they’re on a shakey footing in my HYP. I can feel a clear out coming on....

Ian.

I guess all shares are always under review for potential top-up or disposal, but this seems an extreme case as at 7.09am the dividend suspension made the decision not to top up, now disposal had been under consideration "for a while". I guess three hours is a long time in HYP, well some HYPs anyway

[idpickering]

Our posts crossed in the either Dod. I might swap Lloyd’s for them maybe?

Ian.

I would not want to influence you and anyway Lloyds may reinstate their dividend by the year end who knows?

Dod

Thanks Dod. That’s my thinking too. CO-VID 19 seems to be a major factor in the banks latest woes. That, and the dividend suspension, are evidenced enough in the share price graph. I’ll think about it. Hmm?

Ian.

[Arborbridge]

Worse than I expected, but interesting that they have "levelled" with us, to us the PM's phrase.

Now time to decide what to do - tough it out or crystallise my quite large loss to pull at least some dividend in.



Arb.

My bold.

I am not sure I agree they have. Bluntly IMHO they have used Covid-19 is an excuse for a dividend cut they were going to make anyway. If it is really driven by Covid-19 what makes them able to predict now how long the impact will be? If it is really driven by Covid-19 how come the planned resumption is at so much lower level? It is no surprise this has happened, I expected it, but I would not describe it as levelling with shareholders.

But at least it is clear now that this share is uninvestable for an income investor until the dividend has actually been restored. Where a holder should sell comes down to two factors in my view. If they need the income before 2021 they have to sell and use what is left of their capital to try and secure an income. If they do not need an income they need to take a view as to whether their capital will recover under the stewardship of BT rather than another company - but that is not an HYP discussion.

I didn't mean that in the sense of explaining the cause of the cut which is not unexpected - I was just thinking of the forward visibility. They told us plainly that no dividend is on the cards until 2121/22 and then it will be halved. That's what I meant by levelling with us - the alternative would have been a vague statement as others have given us about "we'll see how it goes". Of course, they could be lying through their teeth and might already know it will be worse! - but at the moment it looks as thought they have been more forthright than one might expect.


Arb.