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Chancellor Rachel Reeves’ recently announced budget is set to hike up BT’s costs as a result of national insurance payment increases
BT released its financial results for the half year ending on 30 September 2024 this week, which showed a mixed bag of developments in a challenging economic landscape.
The UK incumbent reported a 3% decline in revenue, primarily driven by issues in non-UK operations and a competitive retail environment. Reported profit before tax sits at £1 billion, down 10%. This was “primarily due to lower revenue, higher specific costs and higher net finance expenses,” the company explained.
A significant highlight in BT’s recent performance is the speed of its fibre rollout, which has now reached over 16 million premises. Openreach passed 2.1 million premises with fibre-to-the-home (FTTH) in the last six months and has set an ambitious target to reach 4.2 million premises for FY25. The company has reported 446,000 new active connections on this network, raising its total to 5.5 million.
Additionally, BT’s 5G network expansion continues to lead the market, covering 80% of the UK population, more than any other operator.
I addition to its rollout updates, BT also confirmed that its workforce has been cut by 2,000, or 4% year-on-year, to 118,000, which saved the £433 million in annual costs in the first half alone.
However, the latest UK budget posed new hurdles for the operator. The government’s decision to hike employers’ National Insurance contributions could cost BT an additional £100 million annually. In response, CEO Allison Kirkby outlined several measures to mitigate this impact, including potentially passing costs on to mobile and broadband customers. She also said that cost-cutting initiatives through automation and AI would be accelerated.
“We are confirming our EBITDA, capex and cash flow guidance for FY25, albeit on lower revenue guidance. We remain firmly on track to meet our long-term cost savings and cash flow targets, and today announce an interim dividend of 2.40pps. The accelerated modernisation of our operations, combined with a focus on connecting the UK, puts us in a strong position to generate significant value for all our stakeholders,” said Kirkby in the announcement.
Despite these financial pressures, BT remains ‘committed to its strategic priorities’, particularly its full fibre and 5G rollout plans. The company is also exploring options for its international arm, BT Global, which may include a sale or restructuring to better optimise its operations.
Back in May, the company said it had hit its target to save £3 billion by 2025 a year early, with much of this total being driven by the company’s ongoing job cutting programme that will see 55,000 jobs eliminated by the end of the decade.
Kirkby now says it will aim to repeat this, cutting a further £3 billion in costs by 2029.
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