ii view: BT restarts dividend and shares rally
Upping its cost saving ambition and offering a future estimated dividend yield of around 5%.
4th November 2021 10:55
by Keith Bowman from interactive investor
Upping its cost saving ambition and offering a future estimated dividend yield of around 5%. We look at BT's latest results.
First-half results to 30 September
- Revenue down 3% to £10.31 billion
- Adjusted profit (EBITDA) up 1% to £3.75 billion
- Interim dividend payment of 2.31p per share
- Net debt up 3.5% year-over-year to £18.24 billion
ii round-up:
BT Group (LSE:BT.A) today underlined its determination to become a more efficient and increasingly greater cash generative company.
Recent management confirmation that it had delivered on its £1 billion of gross annualised cost savings 18 months ahead of the March 2023 target, has now been followed by a bringing forward of its £2 billion cost saving target from the full-year 2025 to 2024.
Furthermore, the eventual peak build out of its fibre broadband network will allow it to reduce capex expenditure and operating costs by £1 billion and £500 million respectively. That will increase free cashflow by at least £1.5 billion come the end of the decade and allow for raised shareholder returns going forward.
This all comes on the back of largely inline results and, importantly for investors, the restarting of a rebased dividend payment with an interim dividend of 2.31p. The ex-dividend date is 30 December 2021 for payment on 7 February 2022.
The telecoms provider reaffirmed its financial guidance for the full years 2022 and 2023. Its shares rose by more than 7% in UK trading, leaving them up by more than a quarter since pandemic market lows in March 2020. Shares for rival Vodafone (LSE:VOD) are little changed in that time, while the broader FTSE 100 index is up by around 45%.
BT third-quarter results are scheduled for 3 February.
ii view:
BT Group provides and sells communications products and services to consumers, small and medium sized enterprises and the public sector. It operates across the four divisions of consumer, enterprise, global and Openreach. Its three consumer division brands are BT itself, EE and Plusnet, while its enterprise business connects businesses and public sector organisations. The global division manages IT infrastructure networks for companies in over 150 countries. Its Openreach division physically connects homes and businesses across the UK.
For investors, the competitive environment remains intense while shareholder returns, at least for now, are not what they were. More favourably, greater previous regulatory clarity has allowed BT to increase and accelerate its total Fibre-to-the-Premises (FTTP) build out. Speculative interest following a share stake ultimately taken by multi-billionaire telecoms dealmaker Patrick Drahi in June, is not to be forgotten, with BT now building towards the potential for increased future shareholder returns. In all, and given an undemanding valuation and an estimated forward dividend yield of over 5% (not guaranteed), BT shares may again increasingly appeal to income seeking investors.
Positives
- Supportive government measures
- Resumed dividend payments
Negatives
- Subject to regulatory rulings
- Net debt up to £18.24 billion
The average rating of stock market analysts:
Tentative buy
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