BT ‘on path to growth’ despite first-quarter revenue slip
BT today issued a bullish forecast for its prospects for the rest of the year despite posting a decline in revenue and pre-tax profit in the first quarter.
The FTSE 100 firm reported a three per cent slip in revenue to just over £5bn due to the continued impact of the pandemic.
This was offset in part by higher rental bases in its Openreach broadband division and improved revenue from BT Sport and handsets following the easing of lockdown restrictions.
Reported pre-tax profit was down four per cent to £536m, which BT blamed on the sale of its Spanish operations in the comparative quarter last year.
But adjusted earnings before interest, tax, depreciation and amortisation was up three per cent at £1.9bn and BT said it was on track to meet expectations for the full year.
Despite the upbeat tone, shares in BT fell more than eight per cent in morning trading.
The figures come as the former state monopoly races to roll out full-fibre broadband across the UK. It has now reached 5m premises and has set a target of 25m premises by the end of 2025.
Today newly-merged rival O2 Virgin Media ramped up the pressure by announcing it would upgrade its entire network of 14m premises to full-fibre by 2028.
William Ryder, equity analyst at Hargreaves Lansdown, said BT’s capital spending of £1.5bn over the quarter showed the “massive capital requirements of telecoms groups”.
“Ultimately, this is the problem for sector – largely homogenous products and eye watering investment. Overall, this quarter showed how hard it can be to get ahead in telecoms,” he said.
Julie Palmer, partner at Begbies Traynor, added: “It is an interesting time for BT, especially with connections sparking between foreign investors and other UK companies such as Morrisons and Avast. This could potentially welcome calls from abroad, especially after BT Sport was politely rejected from ITV.
“Despite reshuffling and looking at ways to refresh business, BT shares have lost more than half their value over the past five years, despite a positive start to 2021 with a 38 per cent recovery. Revenue remains down three per cent and it may be a way away until they are done dialling in for potential buyers.”
Microsoft deal
Earlier this month BT reached a deal with its largest union the CWU over pay and redundancy plans, avoiding its first major strike in more than three decades.
The update marks the first set of results since French telecoms group Altice took a significant stake in the company in a shock move last month.
Altice, which is controlled by billionaire Patrick Drahi, now holds a 12.1 per cent stake in BT, but has insisted it has no intention of making a takeover bid.
BT today also announced a new tie-up with Microsoft that will focus on enterprise voice, security and industry-focused services.
BT said it hopes the partnership, which will see BT provide connectivity and cybersecurity for Microsoft business services, will generate revenue of around £1bn.
It comes a week after BT took a multi-million-pound stake in US cyber firm Cyber Security.
“Our operational performance remained strong and our Ebitda grew during the first three months of the year, reflecting improved trading across most of our business and the positive benefits of our plans to modernise BT,” said chief executive Philip Jansen.
“Our results were overall in line with our expectations during the quarter, with good performance in the UK offsetting challenging conditions in Global’s markets.”
BT has previously announced plans for a potential sale of a stake in BT Sport as the company doubles down on its costly fibre rollout programme.
ITV chief executive Carolyn McCall yesterday said her company was not interested in taking a stake in BT Sport, but said it was open to potential collaborations.
BT’s Jansen said the company was “open-minded” about options for its sports business and said it hoped to reach a deal by next quarter.