RESULTS FOR THE SECOND QUARTER AND HALF YEAR TO 30 SEPTEMBER 2012
BT Group plc (BT.L) today announced its results for the second quarter and half year to 30 September 2012.
Ian Livingston, Chief Executive, commenting on the results, said:
“We have delivered another solid quarter of growth in profit before tax despite the economic conditions and regulatory impacts. We continue to make significant investments in the future of our business and we are again accelerating our fibre roll-out. We now expect fibre to be available to
two-thirds of UK premises during spring 2014, more than 18 months ahead of our original schedule, and we are recruiting more than 1,000 engineers in 2012 to help deliver this.
“Over the summer we helped to deliver the most connected Olympic and Paralympic Games ever and I am proud of the part that our people played in its success.
“Our confidence in the future of our business is demonstrated by the 15% increase in the interim dividend.”
Key points:
- More than 12m premises passed by fibre with over 950,000 now connected and growing strongly
- 47% share of DSL, LLU and fibre broadband market net additions
- For the 2013 financial year we expect
- underlying revenue excluding transit to show an improved trend for the second half of the year compared with the first half, but not for the year as a whole
- to grow adjusted EBITDA and deliver normalised free cash flow broadly level with 2012
1 Before specific items
2 Before specific items, pension deficit payments and the cash tax benefit of pension deficit payments
Note: Reported revenue and EBITDA include a specific item charge of £85m and £58m, respectively, in both the second quarter and half year to 30 September 2012 relating to the retrospective regulatory impact of the Court of Appeal decision on ladder pricing. In the prior year reported revenue included a specific item charge of £410m relating to a retrospective regulatory ruling in Germany, which had no impact on profits or cash. See Group results – Specific items for more details.
1 Before specific items. Specific items are defined below
2 Underlying revenue excluding transit is defined below
3 Before specific items, pension deficit payments and the cash tax benefit of pension deficit payments
n/m = not meaningful
Notes:1) Unless otherwise stated, any reference to revenue, operating costs, earnings before interest, tax, depreciation and amortisation (EBITDA), operating profit, profit before tax, earnings per share (EPS) and free cash flow are measured before specific items. The commentary focuses on the trading results on an adjusted basis being before specific items. This is consistent with the way that financial performance is measured by management and is reported to the Board and the Operating Committee and assists in providing a meaningful analysis of the trading results of the group. The directors believe that presentation of the group’s results in this way is relevant to the understanding of the group’s financial performance as specific items are those that in management’s judgement need to be disclosed by virtue of their size, nature or incidence. In determining whether an event or transaction is specific, management considers quantitative as well as qualitative factors such as the frequency or predictability of occurrence. Specific items may not be comparable to similarly titled measures used by other companies. Reported revenue, reported EBITDA, reported operating profit, reported profit before tax, reported EPS and reported free cash flow are the equivalent unadjusted or statutory measures.
2) Underlying revenue, underlying costs and underlying EBITDA are measures which seek to reflect the underlying performance of the group that will contribute to long-term profitable growth and as such exclude the impact of acquisitions and disposals, foreign exchange movements and any specific items. We are focusing on the trends in underlying revenue excluding transit revenue as transit traffic is low-margin and is significantly affected by reductions in mobile termination rates.
3) Unless otherwise stated, the references 2011, 2012, 2013, 2014 and 2015 are the financial years to 31 March 2011, 2012, 2013, 2014 and 2015, respectively, except in relation to our fibre roll-out plans and recruitment plans which are based on calendar years.
BT Group plc
RESULTS FOR THE SECOND QUARTER TO 30 SEPTEMBER 2012
GROUP RESULTS
Operating results overview
This quarter a number of prior year and/or one-off items have impacted the year on year revenue trends.
Our key revenue trend measure, underlying revenue excluding transit, was down 5.5% in the quarter, a larger decline than in recent quarters due to the negative impact of the accelerated contract milestones recognised in the second quarter of last year and the Court of Appeal decision on ladder pricing (see Regulation below). Together these two items accounted for 1.9 percentage points of the decline and excluding these, underlying revenue excluding transit was down 3.6%, which is more in line with recent quarters. Our underlying revenue continues to be impacted by the tough conditions in Europe and the financial services sector, regulatory price reductions and lower revenue from calls and lines.
Reported revenue of £4,389m was down only 2%, benefitting from lower specific item charges to revenue compared with the prior year (see Specific items below). Our adjusted revenue measure, which excludes specific items, was down 9% at £4,474m, which is a larger decline than in recent quarters due to the negative impact of the contract milestones and ladder pricing noted above. The adjusted revenue trend was also impacted by a £79m decline in transit revenue (including mobile termination rate reductions of £48m), a £74m negative impact from foreign exchange movements, and a £14m impact from disposals.
Underlying operating costs before depreciation and amortisation were down 10%, a better trend than in recent quarters, partly due to the costs associated with the accelerated contract milestones in the prior year. Excluding these costs, underlying operating costs before depreciation and amortisation were down 9%. This reflects the impact of our cost efficiency programmes and reduced cost of sales due to the decline in revenue, including lower payments to other telecommunications operators. Excluding transit, underlying operating costs before depreciation and amortisation were also down 9%. Total operating costs before depreciation and amortisation and specific items decreased by £435m, or 12%, to £3,063m.
Adjusted EBITDA was broadly flat at £1,497m. Excluding a £7m negative impact from foreign exchange movements and a £4m impact from disposals, underlying EBITDA was up 1%, or 3% excluding the impact of ladder pricing and accelerated contract milestones recognised in the prior year.
Depreciation and amortisation of £722m was down 4%, largely due to the impact of additional depreciation and amortisation recognised in the prior year relating to some contract-specific assets and to lower overall capital expenditure over the last three financial years. Adjusted net finance expense was £169m, down 3%, and adjusted profit before tax was £608m, up 7%. Reported profit before tax (after specific items) was £602m, up 9%.
Capital expenditure was £596m, down 9% due to timing, having been up 7% in the first quarter.
Tax
The effective tax rate on the profit before specific items was 22.7% (Q2 2012: 24.1%) and is in line with our outlook of around 23% for the full year.
Regulation
In the quarter the Court of Appeal ruled that wholesale ladder termination pricing should not be applied for 0800, 0845 and 0870 calls from mobile phones terminating on our network. This overruled the Competition Appeal Tribunal judgment in August 2011 that found in favour of ladder pricing. Ladder pricing links the termination charge to the retail call prices charged by mobile operators for retail prices above a certain threshold. We are seeking leave to appeal the Court of Appeal decision and are supported by a number of other fixed line operators.
In 2012 we recognised revenue of £56m from ladder pricing, of which £27m was transit revenue arising from ladder pricing introduced by other communications providers, and £29m of EBITDA. However, as a result of the ruling, we are not recognising any revenue or profit from ladder pricing this year. This means that in the quarter we have reversed the £24m of revenue, of which £13m was transit revenue, and £11m of EBITDA which we had recognised in the first quarter. As revenue and EBITDA from ladder pricing was recognised last year, the year on year impact in the quarter has been to reduce revenue by £40m, of which £18m was transit revenue, and EBITDA by £22m. In addition, we have recognised a specific item charge of £85m against revenue and £58m against EBITDA, as well as a specific item cash payment of £63m, relating to amounts recognised from ladder pricing in the 2011 and 2012 financial years.
For 2013 we had expected ladder pricing to generate around £110m of revenue, of which around £50m was transit revenue, and around £60m of EBITDA and cash. The decision means that we now expect transit revenue for the group to decline by £250m-£350m this year.
The charge controls for WLR, LLU and ISDN30 products which became effective in April 2012 impacted revenue in the quarter. We continue to expect these to have a negative impact of around £100m-£200m on group external revenue in 2013 with a further similar year on year impact in 2014.
The above regulatory decisions had a negative year on year impact of more than £40m on both underlying revenue excluding transit and EBITDA in the quarter.
We expect Ofcom’s final determination on disputes over historic Ethernet pricing in the next few months. The draft determinations proposed that we should repay up to £145m to other communications providers and if the final determination upholds the drafts, in line with our accounting policy, we would expect this payment to be treated as a specific item in revenue and free cash flow.
Specific items
Specific items resulted in a net credit after tax of £95m (Q2 2012: £63m).
One-off charges of £85m and £58m were recognised against revenue and EBITDA, respectively, following the ladder pricing decision relating to the 2011 and 2012 financial years. In 2012, a one-off charge of £410m was recognised against revenue, with an equal reduction in operating costs, in relation to a retrospective regulatory ruling in Germany.
During the quarter a profit of £121m was recognised on the disposal of a 14.1% interest in Tech Mahindra. Our remaining 9.1% stake will now be accounted for as an investment and recognised at market value on the balance sheet with changes in market value being recognised in reserves.
We make provisions for legal or constructive obligations arising from insurance, litigation and regulatory risks and this quarter we have increased our provisions by £43m having reassessed potential claims relating to certain historic matters. An impairment charge of £17m was recognised to write down our total investment in OnLive Inc., after it entered into creditor protection status. Specific operating costs also include BT Global Services restructuring charges of £17m
(Q2 2012: £20m). Net interest income on pensions was £8m (Q2 2012: £49m).
The UK Finance Bill, under which the UK corporation tax rate changes from 24% to 23% on 1 April 2013, was enacted in the quarter. As a result, a specific tax credit of £78m (Q2 2012: £82m) has been recognised for the re-measurement of deferred tax balances.
Earnings per share
Adjusted EPS was 6.0p, up 7%, and reported EPS (after specific items) was 7.2p, up 13%. These are based on a weighted average number of shares in issue of 7,839m
(Q2 2012: 7,762m).
Free cash flow
Normalised free cash flow was an inflow of £316m, a decrease of £247m compared with the prior year, principally reflecting the timing of customer billing and receipts, increased tax and the timing of supplier payments.
Adjusted free cash flow, which includes a £162m tax benefit from pension deficit payments
(Q2 2012: £108m), was an inflow of £478m (Q2 2012: £671m).
The cash cost of specific items was £90m (Q2 2012: £42m). This comprised cash payments of £63m following the ladder pricing decision relating to the 2011 and 2012 financial years, BT Global Services restructuring costs of £16m (Q2 2012: £27m) and property rationalisation costs of £11m (Q2 2012: £15m).
Net debt and liquidity
Net debt was £9,037m at 30 September 2012, £45m lower than at 31 March 2012. The movement in the six months reflects the adjusted free cash inflow of £516m, an inflow of £85m from the exercise of employee share options, and disposal proceeds of £163m, of which £157m was from the disposal of our 14.1% interest in Tech Mahindra. These inflows were offset by dividend payments of £445m, an outflow of £154m for the purchase of 73m shares under our share buyback programme and an outflow of £123m relating to specific items.
At 30 September 2012 we had cash and current investment balances of £1.6bn and available facilities of £1.5bn providing us with a strong liquidity and funding position. During the quarter we repaid £0.3bn of debt which was funded through cash and investments. During the second half of 2013 £1.4bn of term debt and £0.6bn of short-term borrowings, including £0.3bn of commercial paper, are repayable.
During the quarter we bought back 33m shares for a total consideration of £72m. This forms part of our £300m share buyback programme this year to counteract the dilutive effect of employee share plans. In the second half of the year we expect to execute the remainder of the buyback of around £150m, which may be through a combination of continued direct market purchases and market purchases through an Employee Benefit Trust, which has the same economic effect. This increases the flexibility in managing our various share plans.
Fibre and broadband
We have passed more than 12m premises with our fibre broadband. Take-up is growing strongly and we achieved around 190,000 connections in the quarter, with over 950,000 premises now connected. We are again accelerating our fibre roll-out and now expect fibre to be available to two-thirds of UK premises during spring 2014, more than 18 months ahead of our original schedule.
We added 81,000 retail broadband customers in the quarter, representing 47% of the broadband1 market net additions of 174,000. We added around 160,000 retail fibre broadband customers and the retail fibre customer base is now more than 875,000.
Pensions
The IAS 19 net pension position at 30 September 2012 was a deficit of £3.1bn net of tax (£4.0bn gross of tax) compared with a deficit of £1.9bn at 31 March 2012 (£2.4bn gross of tax). The higher deficit reflects the impact on liabilities of a reduction in the discount rate, partially offset by a reduction in the RPI inflation assumption, and a reduction in the long-term assumption for the CPI/RPI differential.
The IAS 19 accounting position and key assumptions for the liability valuation are provided in Note 10.
IAS 19 ‘Employee Benefits (revised)’ will impact our pensions accounting with effect from 1 April 2013 as explained in ‘Accounting standards, interpretations and amendments not yet effective’ in Note 3 to the 2012 Annual Report & Form 20-F. Had this applied to the half year ended
30 September 2012, operating costs would have been £18m higher and net finance income on pensions, which is classified as a specific item, £75m lower.
Dividends
In line with our outlook for 10% -15% annual growth in dividends per share, the Board has declared an interim dividend of 3.0p per share (Q2 2012: 2.6p), an increase of 15%. The interim dividend amounts to £236m (Q2 2012: £202m) and will be paid on 4 February 2013 to shareholders on the register on 28 December 2012. The ex-dividend date is 24 December 2012. The election date for participation in BT’s Dividend Investment Plan in respect of this dividend is 28 December 2012.
The final dividend for the year to 31 March 2012 of 5.7p per share, amounting to £449m, was approved at the Annual General Meeting on 11 July 2012 and was recognised paid in the second quarter.
Outlook
We expect an improved trend in underlying revenue excluding transit for the second half of the year compared with the first half, helped by a better trading performance. Due to the impact of the ladder pricing decision and the tougher than expected conditions facing BT Global Services we do not expect an improving trend in underlying revenue excluding transit for the year as a whole compared with the previous year.
We are making progress on reducing BT Global Services’ cost base but we do not expect its EBITDA to grow this year. Despite this and the impact of ladder pricing, our cost transformation initiatives mean that at the group level we continue to expect to grow adjusted EBITDA for 2013 and to deliver normalised free cash flow that is broadly level with 2012.
In 2014 we continue to expect an improving trend in underlying revenue excluding transit, adjusted EBITDA to be broadly level with 2013 and normalised free cash flow to be above £2.2bn. We continue to expect normalised free cash flow to be around £2.5bn in 2015.
1 DSL, LLU and fibre, excluding cable
RESULTS FOR THE HALF YEAR TO 30 SEPTEMBER
Operating results overview Our key revenue trend measure, underlying revenue excluding transit, was down 4.4% in the first half. The negative impact of the accelerated contract milestones recognised in the second quarter of last year and the Court of Appeal decision on ladder pricing together accounted for 0.9 percentage points of the decline. Excluding these, underlying revenue excluding transit was down 3.5%. Reported revenue, which includes specific items, was down 4%. Our adjusted revenue measure, which excludes specific items, was down 7% at £8,958m partly due to the negative impact of the contract milestones and ladder pricing. The adjusted revenue trend was also impacted by a £146m decline in transit revenue (including mobile termination rate reductions of £108m), a £130m negative impact from foreign exchange movements, and a £27m impact from disposals.
Underlying operating costs before depreciation and amortisation were down 9%, partly due to the costs associated with the accelerated contract milestones in the prior year. Excluding these costs, underlying operating costs before depreciation and amortisation were down 8%. This reflects the impact of our cost efficiency programmes and reduced cost of sales due to the decline in revenue, including lower payments to other telecommunications operators. Excluding transit, underlying operating costs before depreciation and amortisation were down 7%. Total operating costs before depreciation and amortisation and specific items decreased by £752m, or 11%, to £6,172m.
Adjusted EBITDA of £2,960m was up 1%. Excluding a £14m negative impact from foreign exchange movements and a £7m impact from disposals, underlying EBITDA was up 2%, or 3% excluding the impact of ladder pricing and accelerated contract milestones recognised in the prior year.
Depreciation and amortisation of £1,445m was down 3%, and with adjusted net finance expense broadly flat at £338m, adjusted profit before tax increased by 8% to £1,186m. Reported profit before tax (after specific items) was £1,186m, up 11%. Capital expenditure was down 1% at £1,218m.
Tax The effective tax rate on profit before specific items was 22.7% (HY 2012: 24.1%).
Specific items Specific items resulted in a net credit after tax of £99m (HY 2012: £44m). One-off charges of £85m and £58m were recognised against revenue and EBITDA, respectively, following the ladder pricing decision. In 2012, a one-off charge of £410m was recognised against revenue, with an equal reduction in operating costs, in relation to a retrospective regulatory ruling in Germany.
A profit of £121m was recognised on the disposal of a 14.1% interest in Tech Mahindra. We also disposed of a non-core business in Italy resulting in a profit of £6m. We have increased our provisions by £43m having reassessed potential claims relating to certain historic matters. An impairment charge of £17m was recognised to write down our total investment in OnLive Inc. and BT Global Services restructuring charges of £25m (HY 2012: £42m) were incurred. Net interest income on pensions was £16m (HY 2012: £99m). A specific item tax credit of £78m
(HY 2012: £82m) has also been recognised for the re-measurement of deferred tax balances.
Earnings per share
Adjusted EPS was 11.7p, up 8%, and reported EPS (after specific items) was 13.0p, up 15%. These are based on a weighted average number of shares in issue of 7,813m (HY 2012: 7,759m).
Free cash flow
Normalised free cash flow was an inflow of £192m, a decrease of £572m compared with the prior year, principally reflecting the timing of supplier payments and customer receipts, including contract-related receipts in BT Global Services, and increased tax.
Adjusted free cash flow, which includes a £324m tax benefit from pension deficit payments (HY 2012: £215m), was an inflow of £516m (HY 2012: £979m). The cash cost of specific items was £123m (HY 2012: £103m). This comprised cash payments of £63m following the ladder pricing decision relating to the 2011 and 2012 financial years, BT Global Services restructuring costs of £31m (HY 2012: £73m) and property rationalisation costs of £29m (HY 2012: £28m).
Related party transactions Transactions with related parties during the half year to 30 September 2012 are disclosed in Note 13.
Principal risks and uncertainties A summary of the group’s principal risks and uncertainties is provided in Note 14.
OPERATING REVIEW
1 Net of other operating income
n/m = not meaningful
Revenue
Underlying revenue excluding transit decreased by 9%, or 6% excluding the impact of accelerated contract milestones recognised in the prior year, reflecting the tough conditions in Europe and the financial services sector. Revenue was down 13%, including a £67m negative impact from foreign exchange movements and a £14m impact from disposals.
Despite the tough conditions and the continued market trend towards lower contract order values and longer lead times our total order intake was £1.3bn in the quarter (Q1 2013: £1.1bn; Q2 2012: £1.4bn). In the quarter we signed contracts with leading organisations around the world including: British American Tobacco, for a global managed services agreement valued at more than $100m, covering its global wide area network infrastructure across nearly 1,000 sites in 119 countries; Surrey County Council, to provide communications infrastructure and cloud services; and the European Commission to provide network and consultancy services to all major European Commission institutions.
Operating results
Net operating costs reduced by 12% reflecting the reduction in revenue, lower contract milestone-related costs and the impact of our cost transformation programmes. Underlying operating costs excluding transit costs declined by 9%, or 6% excluding the accelerated contract milestones recognised in the prior year.
We are intensifying our efforts to transform our cost base. In the quarter we completed the closure of a major legacy network and migrated the last of the 3,500 financial services customer sites to a new platform which provides improved reliability and service. A review of our commercial arrangements and processes for managing overseas access circuits is lowering the cost of contract delivery and enabling price renegotiations for our circuits globally. We are also working with suppliers of customer premises equipment to leverage best practice and improve pricing across some of our major contracts. In addition, the migration of contract management back-office functions into shared service centres is leading to more efficient processes, lower costs and better customer service.
EBITDA decreased by 18%, or 12% excluding foreign exchange movements and disposals. Excluding the profit associated with the accelerated contract milestones recognised in the prior year, underlying EBITDA was down 5%. Operating losses were 26% lower due to a 19% reduction in depreciation and amortisation reflecting the additional depreciation and amortisation recognised in the prior year relating to some contract-specific assets and lower overall capital expenditure over the last three financial years.
Capital expenditure reduced by 19% as the prior year included additional customer contract-related capital expenditure. Operating cash flow was an outflow of £171m compared with an outflow of £55m in the prior year. The decline reflects the timing of contract-related receipts as expected, but also a delay in some debtor receipts.
1 Net of other operating income
Revenue
Revenue declined by 3%, in line with the previous quarter, including an £8m negative impact from foreign exchange movements.
Consumer revenue decreased by 3%, with lower calls and lines revenue partially offset by growth in broadband, driven by an increasing contribution from fibre. This growth contributed to an increase in consumer ARPU from £350 to £355 in the quarter.
In the quarter we added 81,000 retail broadband customers, representing 47% of the DSL, LLU and fibre broadband market net additions. We added around 160,000 retail fibre broadband customers with the majority of our new broadband customers in enabled areas choosing fibre. The retail fibre customer base is now more than 875,000, representing around 14% of our retail broadband customer base. BT Wi-fi minutes trebled to reach 3bn minutes in the quarter, helped by the impact of London 2012.
BT Vision added 21,000 customers in the quarter with the customer base now over 750,000. Building on the Premier League football broadcast rights secured in June, we have reached agreements for exclusive live rights with English Premiership Rugby covering a four-year period and for the Top 14 French rugby championship. We have also reached agreements to broadcast games from the top football leagues of Italy, France, Brazil and the USA.
Business revenue showed an improving trend, and was down 3% largely due to our withdrawal from low-margin IT hardware trade sales during the second quarter last year. We have seen an improved revenue trend in voice and IT services, particularly in BT iNet, our networked IT services division.
BT Enterprises revenue decreased by 2%, reflecting slower growth in BT Conferencing and BT Expedite and declines in BT Directories and BT Redcare. We are developing our BT Conferencing propositions and have entered into a technology partnership with Dolby Laboratories Inc., which will introduce the next generation of conferencing services.
BT Ireland revenue increased by 1%, excluding the impact of foreign exchange movements. In the quarter, we agreed a wholesale deal to provide Sky with managed voice and broadband services, to support their launch in the Republic of Ireland. Our fibre roll-out in Northern Ireland has now reached over 90% coverage with more than 100,000 premises already using the service.
Operating results
Net operating costs decreased by 6% reflecting the impact of our cost transformation initiatives and reduced cost of sales associated with the lower revenue. EBITDA increased by 7% and with depreciation and amortisation decreasing by 4%, operating profit was up 10%.
Capital expenditure decreased by 9%. Operating cash flow decreased by 8% principally due to movements in working capital.
1 Net of other operating income
2 Prior year not restated for ladder pricing impact
Revenue
Underlying revenue excluding transit decreased by 5%, or 2% excluding ladder pricing (see Group results - Regulation above), primarily due to the ongoing migration of broadband lines to LLU. Revenue decreased by 12%, or 8% excluding ladder pricing, including a £79m decline in transit revenue driven by both mobile termination rate reductions and lower volumes.
Total order intake was around £300m compared with around £120m last year. In the quarter we also extended our relationship with EE to provide increased backhaul capacity at key base station sites to help underpin 4G services and to help EE launch fibre-to-the-cabinet services to their customers.
Our Mobile Ethernet Access Service is now available at more than 14,000 sites. This coverage and a number of new technological innovations reinforce our market-leading position. IP Exchange now has more than 160 wholesale customers and continues to grow rapidly with voice minutes in the quarter increasing by nearly 90% compared with last year.
Operating results
Net operating costs decreased by 14%, or 3% excluding transit costs, reflecting lower managed service contract costs and a reduction in labour costs. EBITDA decreased by 8%, or 1% excluding ladder pricing, and with depreciation and amortisation reducing by 1%, operating profit declined by 15%, or 1% excluding ladder pricing.
Capital expenditure decreased by 36% primarily due to lower spend on Ethernet as a result of improvements in capacity management and lower spend on our Wholesale Broadband Connect network. Operating cash flow decreased by 10% principally due to movements in working capital.
1 Net of other operating income
Revenue
Revenue was down 1%, with growth in Ethernet and fibre largely offsetting the impact of regulatory price reductions for WLR, LLU and ISDN30 products.
The physical line base declined by 38,000 in the quarter due to the prolonged adverse weather conditions which have resulted in more resources being deployed on repair activity and an increase in provision lead times.
Our fibre broadband is now available to over 12m premises. We achieved around 190,000 connections in the quarter, with over 950,000 premises now connected. We now expect fibre to be available to two-thirds of UK premises during spring 2014, more than 18 months ahead of our original schedule. We are recruiting more than 1,000 engineers in 2012 to help deliver this and reduce our provision lead times.
In the quarter we won the Broadband Delivery UK regional bids to deploy fibre broadband in North Yorkshire and Surrey. We have already started work in North Yorkshire where the first customers are expected to be connected within six months of signing the contract. We were also awarded preferred bidder status in Cumbria, Suffolk and Norfolk.
Operating results Net operating costs reduced by 4%, partly due to lower leaver costs, despite significant additional costs relating to the adverse weather. EBITDA increased by 3% and with depreciation and amortisation increasing by 5%, reflecting the investment in fibre broadband and Ethernet, operating profit was up 1%.
Capital expenditure increased by 11% reflecting investment in our fibre roll-out programme. Operating cash flow decreased by 30% due to the timing of debtor receipts and the increased capital expenditure.
