BT Profits Trigger Share Rise

Half-year results sees nearly 30% rise in pretax profits amid cost-cutting drive

Alliance News 2 November, 2023 | 9:46AM
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BT (BT.A) on Thursday reported a jump in profit, sending shares up 6.7% to 118.50 pence each in London on Thursday morning. This made it the top performer in early trade on the FTSE 100 index.

BT reported that in the six months ended September 30, revenue rose to £10.41 billion from £10.37 billion a year earlier.

Pretax profit rose 29% to £1.08 billion from £831 million.

Adjusted earnings before interest, tax, depreciation and amortisation rose to £4.09 billion from £3.87 billion.

It explained that this was driven due to revenue flow through and strong cost control more than offsetting cost inflation and one-off items in the prior year

Despite rising profits and revenue, BT kept its interim dividend unchanged at 2.31p each.

Looking ahead, BT confirmed its financial outlook for the full year. It expects normalised free cash flow towards the top end of the guidance range.

BT also said that it is on track to deliver annualised savings of £3 billion by financial 2025. Currently, its programme has deliver £2.5 billion in annualised savings.

Noting the company's significant cost-cutting efforts, Matt Britzman, equity analyst at Hargreaves Lansdon, said:

"All in, this was a decent set of results with cash flow now expected at the top of its guided range as some cost pressures ease on the fibre buildout side."

Morningstar Analyst Reaction

Analyst Javier Correonero maintained the fair value estimate of 200p per share for BT (current price 118p). 

"Once again, we liked how BT Group is doing in a complicated macroeconomic environment. Results were slightly ahead of company-complied consensus expectations and shares are up 5% early on November 2. The consumer and Openreach divisions continue to lift revenue and EBITDA at the group level, which grew 2% and 3% this quarter to £ 5.3 billion and £2.1 billion, respectively.

"BT Group and the remainder of UK telecommunication companies are doing well in managing inflationary pressures by passing on price increases to customers. Postpaid mobile and consumer broadband average revenue per user grew by 9% and 4% year on year, respectively, with almost no effect on churn rates. The firm is also doing well in keeping operating costs under control, up 2.3% excluding TV program rights for the first 6 months, which we consider satisfactory given the high inflationary environment."

Handover to Allison Kirkby

Chief executive Philip Jansen said: "These results show that BT Group is delivering and on target: we're rapidly building and connecting customers to our next generation networks, we're simplifying our products and services, and we're now seeing predictable and consistent revenue and EBITDA growth."

"BT Group has a bright future and I'm pleased to be handing the baton to Allison Kirkby early in the new year. She knows the sector, she knows the company and she's the right person to lead BT Group from this position of operational strength."

In July, BT named Kirkby as its new chief executive.

She will take over from outgoing CEO Jansen around the end of January 2024 at the latest. Jansen will be available to support the handover until the end of March, when BT's financial year 2024 ends.

Kirkby has been CEO of Telia since early 2020. Telia, headquartered in Sweden, is a digital communications and telecommunications provider with around 25 million customers across the Nordic and Baltic region.

Morningstar's Correonero says of the transition: "In January 2024 the current CEO Philip Jansen will be replaced with a new CEO Allison Kirkby, the current CEO of Telia. In our view, Jansen, who has been CEO since 2018, has done a good job in managing Openreach’s network rollout, steering the firm through the coronavirus pandemic and current economic environment, and launching an ambitious long-term cost-cutting plan. We hope Kirkby will follow suit."

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
BT Group PLC106.54 GBX-0.85Rating

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