BT Soars while EasyJet and Sage Drag FTSE 100 Down

The FTSE 100 opened down but BT bucked the trend with strong earnings

Alliance News 16 May, 2024 | 11:52AM
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Stock prices in London opened lower on Thursday, ignoring the rally over on Wall Street on Wednesday. BT (BT.A) was the star performer, whilst EasyJet (EZJ) and Sage Group (SGE) dragged the FTSE 100 index down.

The FTSE 100 index opened down 31.09 points, 0.4%, at 8,414.71. The FTSE 250 was up 34.30 points, 0.2%, at 20,809.93, and the AIM All-Share was up 0.2 of a point at 791.81.

Key Morningstar Metrics for BT Stock

• Fair Value Estimate: £2.00
• Morningstar Rating: ★★★★★
• Morningstar Economic Moat Rating: Narrow
• Fair Value Uncertainty: High

BT – Increased Dividend, Revenue Growth

BT is rallying after reporting revenue growth in its full financial year earnings, alongside increased dividend. The stock shot up 8.9% on market open.

The telecommunications firm reported that revenue edged up to £20.80 billion from £20.68 billion a year earlier. Pretax profit fell to £1.19 billion from £1.73 billion. BT explained that pretax profit fell due to impairment of goodwill and increased depreciation. Dividend is increased by 3.9% annually to 8.0p.

BT also forecast significantly improved cash flow in the coming years now that peak investment in its full-fibre roll-out has passed and said it would focus on the UK and “explore all options to optimise our global business”.

Commenting, recently installed Chief Executive Allison Kirkby said: “Having passed peak capex on our full-fibre broadband rollout and achieved our £3 billion cost and service transformation programme a year ahead of schedule, we've now reached the inflection point on our long-term strategy.”

Kirkby said this gave BT the confidence to provide new guidance for “significantly increased short term cash flow” and set out a path to “more than double our normalised free cash flow over the next five years”.

EasyJet – CEO Leaving, Revenue Up, Stock Down

Key Morningstar Metrics for EasyJet Stock

• Fair Value Estimate: £5.79 (Quantitative Rating)
• Morningstar Rating: ★★★★ (Quantitative Rating)
• Morningstar Economic Moat Rating: None (Quantitative Rating)
• Fair Value Uncertainty: High

EasyJet – which reported half-year results in line with earlier guidance – lost 7.0% on market open as it said it will promote its chief financial officer to chief executive next year. The airline said that revenue came in at £3.27 billion for the six months ended March 31, up from £2.69 billion a year earlier. Pretax loss narrowed to £347 million, versus £415 million.

Johan Lundgren will step down as chief executive and leave the company in 2025 having then served seven years as CEO. At that time, Kenton Jarvis will succeed Johan and become CEO. Jarvis joined EasyJet in February 2021 as chief financial officer, and the search for his replacement will now start.

Pretax losses narrowed to £347 million in the six months that ended March 31 from £415 million a year before, as revenue rose by 21% to £3.27 billion from £2.69 billion.

Airlines, particularly leisure-focused carriers, tend to lose money in the winter low season, making up for this with profit in the summer high season. On this, CEO Lundgren said: “We are now absolutely focused on another record summer which is expected to deliver strong FY24 earnings growth and are on track to achieve our medium-term targets.”

EasyJet said it remains on track for its medium-term target of more than £1 billion in annual pretax profit. In financial 2023, EasyJet reported pretax profit of £432 million.

Sage Group – Dividend Increased, Stock Down

Key Morningstar Metrics for Sage Group Stock

• Fair Value Estimate: £8.80
• Morningstar Rating: ★★
• Morningstar Economic Moat Rating: Narrow
• Fair Value Uncertainty: Medium

On the other hand, Sage Group lost 10% after it predicted slightly slower than expected full-year revenue growth despite making progress in the first half of the financial year. It also increased the half-year dividend by 6.1% to 6.95 pence per share from 6.55p.

The enterprise software company reported that revenue in the six months ended March 31 rose to £1.15 billion from £1.09 billion a year ago. Pretax profit increased 47% to £203 million from £139 million.

Chief executive Steve Hare commented: “Sage performed well in the first half of the year, delivering broad-based revenue growth and significant margin expansion. Demand for our solutions remains robust, with small and mid-sized businesses continuing to trust Sage to automate their accounting, HR and payroll workflows.”

Looking ahead, Sage Group said it expects full year revenue growth to be broadly in line with the first half.

This article was written by Alliance News compiled by Sunniva Kolostyak.

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