Here's how four City analysts reacted to BT's full-year results, chief exec pay cut and £300m corporate shakeup

Courtney Goldsmith
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Analysts had a lot to say about BT today (Source: Getty)

BT's stock dropped today after the FTSE 100 telecoms giant reported profit fell while it works through a number of issues that made 2016/17 a "challenging year".

Not only did profits fall over the year, but the firm announced it will cut 4,000 jobs as part of a £300m corporate shake-up of its overseas operations and its top bosses had their bonuses scrapped.

What did City analysts have to say on the matter?

"Cause for some relief"

“Ahead of these results there was concern we would see a further profit warning, partially from corporate/government services, further issues from Italy and additional Ofcom regulation. However, this has not proved to be the case and today’s results look positive, so should be cause for some relief," said Stephen Snaith, head of telecoms and media research at Allianz Global Investors.

Snaith also noted BT's new dividend policy guidance, which changed from at least 10 per cent growth to "progressive".

"The current price doesn’t give enough credit to their improving product proposition with EE, convergence and ability to drive future efficiencies.”

Read more: Top BT executives will not receive bonuses after annual profit drops

"Hardly inspires much confidence"

"The results themselves are broadly in line with expectations, but the comment with the numbers hardly inspires much confidence," said George Salmon, equity analyst at Hargreaves Lansdown.

Salmon also noted a "distinct lack of guidance beyond the coming year".

"BT has got several millstones hanging around its neck at the moment, not least the huge debts taken on to acquire EE and its sizable pension deficit, which is due for a funding review in June. In addition, compensation relating to malpractice at Openreach is set to drain another £300m from the coffers this year, so one has to wonder how ‘progressive’ the new dividend policy can be."

Lack of visibility

Analysts at Jefferies said BT's guidance statement underlines a lack of visibility on the company's return to free cash flow after March 2018.

"BT has elected to diverge from traditional practice by not offering a second year of guidance. This may draw attention to the free cash flow headwinds queuing up in FY2018/19 (Ofcom charge control proposals, unresolved Openreach capex plans, higher UEFA rights costs, structural pressures in UK public sector)."

Read more: BT to cut 4,000 jobs as part of £300m overseas shake-up

BT should shift focus

“Latest results from rivals underline the competitive nature of the UK multiplay market and the headwinds’ that lie ahead," said Paolo Pescatore, vice president of mulitplay and media at CCS Insight.

"Moving forward BT must focus efforts on other content areas to make a serious move on its main competitor, Sky. This may involve decoupling its TV service from BT broadband. And it still needs to make some decisions as to the future viability of managing two competing but significantly overlapping lines of businesses, BT Consumer and EE.”

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