BT shares steady amid huge relief at dividend decision

There was relief as BT's new boss announced final results. Our head of markets has the detail.

An element of "out with the old and in with the new" accompanies BT Group's (LSE:BT.A) full-year numbers. The incoming chief executive was not going to be able to change the fortunes of this telecom behemoth overnight, but has instead chosen for the moment to accelerate the previously announced streamlining of the group.

As expected, the marginal gain in pre-tax profit (although down in adjusted terms) was largely driven by cost efficiencies as announced at the half-year statement. Annualised cost savings of £875 million are well on track, and previously damaging one-off payments have dropped off the page, thus improving the figures further. 

In terms of the key metrics, earnings per share show a healthy 6% increase, whilst the unchanged dividend will be of relief to income-seeking investors, who are currently enjoying a yield of almost 7%.

Source: TradingView     Past performance is not a guide to future performance

There are ambitious plans afoot at BT, particularly with regard to the Fibre To The Premises (FTTP) and 5G offerings. Inevitably, this will come at a cost, and the expected capital expenditure of around £4 billion for investment in the business is testament to BT's determination to remain comfortably in the pack.

All is not plain sailing however. Net cash inflows have dropped by 14%, whilst the perennial problem of the pensions deficit was a contributor to a net debt figure which has spiked by 15%. The regulated price reductions weighed heavily on Openreach, and overall revenues showed a moderate decline. 

Management outlook is cautious rather than reassuring in tone, and in the meantime, ferocity of competition in the sector is likely to intensify. In addition, there may also be an element of disappointment to investors who were expecting rather more meat on the bone in terms of a fresh strategy.

•    The Week Ahead: BT results outlook

As such, the next year will be something of an acid test for investor patience. The share price has not kept pace with the wider FTSE 100's resurgence in the year to date, whilst over the last 12 months the shares have lost 7%, as compared to a drop of 5% for the FTSE. 

Even so, the company will be given some leeway to show that its plans are bearing fruit and indeed the market consensus of the shares has recently strengthened to a 'buy' on those prospects.