BT shares steady amid huge relief at dividend decision

by Richard Hunter from interactive investor |

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.

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

get more news and expert articles direct to your inbox
Sign up for a free research account and get the latest news and discussion, and create your own Virtual Portfolio