25th Jul 2024 16:35
(Alliance News) - BT Group PLC's trading quarter was a mixed bag, according to analysts at UBS.
On Thursday, BT touted progress in its fibre roll-out, but said legacy issues and pressures in its Business and Consumer units meant revenue fell.
In the three months to June 30, the London-based telecommunications provider said reported pretax profit fell 3.0% to GBP520 million from GBP536 million a year prior. Decreased revenue was broadly offset by a reduction in reported operating costs, BT noted.
Adjusted revenue fell 2.1% to GBP5.05 billion from GBP5.16 billion. This was due to legacy managed contract declines, reduced low margin sales activity and contraction in the business unit, the company said in a statement.
Adjusted earnings before interest, tax, depreciation and amortisation rose 1.5% to GBP2.06 billion GBP2.03 billion with tight cost control, including lower staff costs, partly offset by the revenue decline.
Chief Executive Allison Kirkby reflected on a "solid" start to the financial year, noting "excellent growth in both fibre build and connections, and increased Ebitda."
"Our ongoing cost transformation contributed to Ebitda growth, and more than offset the expected revenue declines in Consumer and Business in the quarter," she added.
Kirkby said BT was "on track to deliver our financial outlook for this year", but stressed "there is much more to do to simplify BT Group and deliver for our customers."
BT flagged a record FTTP build of over 1 million premises passed in the quarter at an average build rate of 78,000 per week. The FTTP footprint is now 15 million, BT said.
The company said FTTP demand was strong with orders up 29% year-on-year with net adds of 387,000 in the quarter.
Openreach broadband average revenue per user grew by 6% year-on-year due to price rises and increased volumes of FTTP.
But Openreach broadband line losses of 196,000 reflected higher competitor losses combined with a weaker overall broadband and new homes market, the firm said.
UBS said revenue was 1.6% below its forecast, and Ebitda 2.1% above with line losses at Openreach being notably worse than expected.
"While there may be an initial positive reaction to the Ebitda beat, concerns on Openreach are likely to grow and investor opinion will likely remain polarised," UBS thinks.
UBS believes that risks to BT Group have been underestimated - Sky/TalkTalk shifting more business away from Openreach, a GBP1.3 billion class action lawsuit and pricing pressures in Consumer - and that lower capital expenditure may only be temporary as Openreach has to accelerate its fibre rollout/raise capex to fend off growing broadband infrastructure competition.
Robert Grindle at Deutsche Bank noted the Ebitda beat and Openreach line loss slide.
"BT shares have enjoyed a recent recovery. We see little reason for investors to pursue higher and remain concerned on Openreach line losses," he added.
"We see substantial risk to BT’s prospects given the push by alt-nets building full fibre networks and increasingly targeting customer growth (both wholesale and retail)," the Deutsche analyst added.
By Jeremy Cutler, Alliance News reporter
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