Hobson: BT Figures Speak for Themselves

THE WEEK: Morningstar columnist Rodney Hobson say that BT management needs to brush up its communication skills

Rodney Hobson 11 May, 2018 | 2:06PM
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When a company tells you that it puts the customer at the heart of its strategy you can bet your life it doesn’t. Companies that genuinely look after the customers don’t need to say so.

BT (BT.A) has assiduously built a reputation over many years for not giving two hoots about its customers and it is hard to believe on the strength of this week’s strategy update that anything will change. It is “focusing on delivering differentiated customer experiences” while being “uniquely positioned to drive network, product and service convergence across consumer and business markets”.

Management may know what that is supposed to mean but any company putting customers first would speak in plain English. It sounds as if we are all going to be treated differently while at the same time we will all get the same service. But that’s only my interpretation – and I am only an unimportant, ungrateful customer. I should really be enjoying the “continued improvement in customer experience metrics”.

The figures for the fourth quarter, and full year, to March 31 are more eloquent. Underlying revenue was down 1.4% for the quarter and 1% for the year; underlying profit edged up 1% in the last three months but was still 2% lower over 12 months.

The outlook for the current year is for a further 2% fall in revenue. Still, “the removal of 13,000 roles” should help after an initial cost of £800 million. BT could have said it was getting rid of 13,000 staff but apparently the workforce is no more entitled to plain speaking than the customers are.

BT shares fell 8% on the figures to stand one third lower than they were worth last August. I could be persuaded that the slide has been overdone – but only in understandable English.

Greggs Regulars Braved the Snow

A constant theme of stock market investing, whether you’re in for the long or short term, is to spot an overreaction to an announcement. One such moment came with Greggs (GRG), the sausage rolls and sandwiches shops.

Total sales were up 4.7% in the first 18 weeks of 2018, with like-for-like figures at 1.3%. Not bad, but alas well down on respective figures of 7.4% and 3.5% in the same period last year. There has clearly been a slowdown since February: like-for-likes were 3.2% up in the first eight weeks.

However, we must make some allowance for the ghastly spells of weather in March and April, although to its credit the Greggs board plays down this excuse. Unfortunately, the conditions came up against an unfavourable comparison with a particularly strong period last year.

Sales in May have started strongly but Greggs remains sensibly cautious and is promising no more than to match last year’s underlying profits for the full 12 months. I note, though, that although customer numbers were down in March and April, those hardy souls who ventured out bought more per person. If customer numbers increase in the summer, then sales could recover very strongly.

I thought that the 15% drop in the share price in response to the update was grossly overdone. I have backed my judgement by buying a modest stake.

RBS: Shareholder Punishment

Rarely has a £3.6 billion hit been greeted with such joy as the proposed fine imposed by US regulators on Royal Bank of Scotland (RBS). As provisions had already been made against the eventuality, RBS will need to set aside a mere £1 billion more to meet the bill.

Yet the shares jumped 4% on the news and edged up a further 1% the following day. We still have the overhang of the government’s 71% holding, no prospect of a dividend and the reality that the punishment for the horrors that were RBS fall on the shareholders while the perpetrators go unpunished. What on earth is the attraction?

Rodney Hobson is a long-term investor commenting on his own portfolio; his comments are for informational purposes only and should not be construed as investment advice, nor are they the opinions of Morningstar.


The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
BT Group PLC139.95 GBX-0.99Rating
Greggs PLC2,866.00 GBX-0.14
NatWest Group PLC339.30 GBX0.21Rating

About Author

Rodney Hobson

Rodney Hobson  is a columnist for Morningstar.co.uk and author of several investing books, including The Dividend Investor and How to Build a Share Portfolio.

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