BT shares drive upwards as it improves guidance after boosting profits
BT shares pushed upwards this morning as it reported a rise in profits.
The figures
BT posted a two per cent rise in earnings to £3.7bn in the first half of the year and a 24 per cent year-on year increase to profits before tax to £1.3bn, boosting shares by over nine per cent this morning.
Adjusted revenue fell one per cent to £11.6bn, while the company said earnings for the year are expected to be in the upper end of its £7.3bn to £7.4bn range.
Why it’s interesting
After five years in the job, chief executive Gavin Patterson is presenting his penultimate results before leaving in January. He welcomed the results on a conference call, but declined to say he felt they vindicated his plan for the company.
BT intends to cut 13,000 job cuts, but create more services roles, after facing increased pressure from competitors.
In June Chairman Jan du Plessis said the board was confident in Patterson's strategy, but doubted his ability to carry it out. Then last month it said he would be replaced by Philip Jansen, the co-chief executive of Worldpay, at the beginning of next year.
The leadership change has also tempered speculation over the future of Openreach.
Patterson said BT would not spin off the division, despite pressure from activist investor Greenlight Capital.
He confirmed that the activist investor has met with management in group shareholder meetings.
Graham Spooner, investment research analyst at The Share Centre, told City A.M. that after Jansen's appointment the chance of a spin off “has probably receded a little. The last thing you want as a new chief executive is to come to a company that's been broken up".
The company’s results in the first half were boosted by better than expected performances from Openreach and security section Global Services.
Meanwhile mobile sales, including of the latest Apple smartphones, helped grow the company’s consumer section, while subsidiary EE is trialling 5G in Canary Wharf.
What BT said
Chief executive Gavin Patterson said: “We continued to generate positive momentum in the second quarter resulting in encouraging results for the half year.
“We are successfully delivering against the core pillars of our strategy with improved customer experience metrics, accelerating ultrafast deployment and positive progress towards transforming our operating model.
What analysts said
The results mean that after a turbulent few years, BT is finally looking like a more stable investment, Hargreaves Lansdown analyst George Salmon said.
However, Paolo Pescatore, an independent telco analyst said: “Worrying times for BT. More turmoil awaits and the incoming chief executive will have to make some tough decisions across the board and with all of BT’s business segments.
“Despite its strong network assets, BT is struggling to standout in a competitive landscape. This will only proliferate with the arrival of Comcast (through Sky) and potential others in the future as well.
“The consumer segment continues to stand out. BT Plus has made a modest start. However, greater focus needs to be placed on retention and upselling into existing base. And more importantly ensuring costs do not spiral out of control due to the roll-out of 5G and fibre broadband connections. No easy feat while trying to renew and secure key sports rights.
“Its rivals are strengthening their respective positions in content which might prove to be a tough end to the calendar year for BT.”