Raised fibre expenditure will cut future profit but a restart of the dividend offers a yield of over 4%.
Full-year results to 31 March
BT Group (LSE:BT.A) appeared to trumpet a tough but transitional year with these latest full-year results.
Greater certainty following developments including regulatory clarity and the government’s new tax related investment incentive, are enabling it to increase and accelerate its total Fibre-to-the-Premises (FTTP) build from 20 million to 25 million homes by December 2026. An increase from this year’s two million build towards an annual four million will start immediately.
News of its assessment of a potential joint venture for an additional five million builds offers further momentum, while a plan to repair its staff pension plan deficit improves shareholder clarity.
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Full-year results were hindered by reduced business use during required pandemic closures, and the numbers are light of expectations. Revenue fell 7% year-over-year to £21.3 billion, with adjusted earnings (EBITDA) down 6% to £7.4 billion. Guidance for the year ahead was also crimped given increased capital expenditure under its upgraded fibre build plans.
In all, BT’s previous decision to halt and then rebase the dividend was a difficult one for income investors to swallow. But the prioritisation of investment over dividend payments is likely the sensible decision. Recent service price increases are not to be forgotten and the dividend payment is due to restart, albeit at half of the previous level.
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BT shares were up around two-thirds from pandemic lows, so today’s 4% slump is put down to profit taking. But plenty of City analysts are finding reasons to be positive after these numbers.
For now, and while clear assessment continues to be blurred by Covid, a growing fibre business and an undemanding valuation leave analyst consensus opinion currently pointing towards a ‘buy’.
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