Strong demand for high-speed fibre broadband and a new sport channel helped consumer sales at BT Group (BT.A) rise 4 per cent last year. The telecom titan's gains were especially strong in the final quarter ending 31 March, when it signed up 170,000 retail broadband customers - 79 per cent of the market's total net additions. The gains were driven by its one-year-old BT Sport channel, which is now shown in 5m UK homes. BT's average share of net additions to the DSL and fibre-broadband markets has climbed from 50 to over 75 per cent since the channel's launch.
But its success hasn't come cheaply. BT has already spent over £2bn building its sports offering and securing live broadcasting rights to European football, and that figure could rise after the Premier League broadcasting rights auction later this year. Those high costs helped precipitate a 14 per cent decline in divisional cash profits.
It's also important to view its success with consumers in context. "TV's sexy, sport is sexy," says finance chief Tony Chanmugam. "But our consumer business is worth a quarter of our revenue streams."
Sales fell at BT's other four divisions - global services, wholesale, business and Openreach - so that group revenues inched up less than 1 per cent. Moreover, cash profits only rose in two of the units, despite a 4 per cent reduction in capital spending to £2.3bn. Government regulation has been a thorn in BT's side, causing a £150m-£200m reduction in cash profits last year. BT also expects lower spending in the local government sector to have a £100m impact on sales this year.
There was better news from the group's global services division, its largest by sales, which saw order intake rise 9 per cent to £6.9bn. BT agreed to continue delivering broadband services to the NHS, and extended a global IT services agreement with agriculture giant Syngenta.
Broker Bernstein, which downgraded BT to 'market perform' in April, expects EPS of 30.3p this fiscal year, up from 27.6p.
| BT (BT.A) | ||||
|---|---|---|---|---|
| ORD PRICE: | 388p | MARKET VALUE: | £30.7bn | |
| TOUCH: | 387-388p | 12-MONTH HIGH: | 421p | LOW: 272p |
| DIVIDEND YIELD: | 2.8% | PE RATIO: | 15 | |
| NET ASSET VALUE: | 217p* | NET DEBT: | 41% | |
| Year to 31 Mar | Turnover (£bn) | Pre-tax profit (£bn) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2010 | 20.9 | 1.0 | 13.3 | 6.9 |
| 2011 | 20.1 | 1.7 | 19.4 | 7.4 |
| 2012 | 18.9 | 2.5 | 25.8 | 8.3 |
| 2013 (restated) | 18.1 | 2.3 | 24.8 | 9.5 |
| 2014 | 18.3 | 2.3 | 25.7 | 10.9 |
| % change | +1 | - | +4 | +15 |
Ex-div: 13 Aug Payment: 8 Sep *Includes intangible assets of £3.1bn, or 39p a share | ||||
