BT Group has scrapped dividends for two years on the back of falling sales and profits for the year-ending 31 March 2020 – before the full effects of the pandemic may create an even bigger cloud over the company's future financial performance. Group revenue for the year was £22.9bn, down 2%, “mainly reflecting the impact of regulation, declines in legacy products, strategic reductions in low margin business and divestments”, said BT.
Profit before tax slumped to £2.35bn, including a charge of £95m as a result of Covid-19 - “mainly reflecting increased debtor provisions”. The adjusted EBITDA was down 3% to £7.90bn.
The net cash inflow from operating activities was actually up 47% to £6.27bn, due to lower pension contributions [to BT's mammoth group pension deficit] and one-off cash flows. Normalised free cash flow was down 18% to £2bn, primarily as a result of increased cash capital expenditure.
Adjusted revenue from BT’s Enterprise business (which provides company services in the UK and Ireland) was down 4.7% to £6.1bn. The Global business services unit fell 7.9% to £4.4bn in sales. The dividend for the year was cancelled, and, “given the uncertainty created by Covid-19 we will not be providing a financial outlook statement for 2020/21”, said the firm. BT declared that Phase 1 of its transformation programme was complete. The next phase targets delivering annualised gross benefits of £1bn by March 2023, and £2bn by March 2025, with £1.3bn one-off costs expected to achieve these totals across five years.
In addition to this year's dividend axe, all dividends for 2020/21 will instead be used to “create capacity for value-enhancing investments and managing confidently through the Covid-19 crisis”.
Philip Jansen, chief executive of BT, said: “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.
"BT is delivering, but is also changing. BT needs to be leaner, simpler and more agile. We are announcing a radical modernisation and simplification programme that will use technology to create a better BT for the future. This five-year initiative will re-engineer old and out-of-date processes, rationalise products, reduce re-work and switch off many legacy services.”
BT is currently negotiating a disposal of its France business service operations to Computacenter. And it is now set to face a new challenge to its key UK consumer business, as a result of Virgin Media and O2 joining forces in the UK as a single company, to offer a joint package of broadband, entertainment and mobile services.
