BT rings in retail profits

BT's underlying revenues were flat as sales slid in four of its five divisions. But widespread cost-cutting helped drive underlying operating profit up 9 per cent to £3.73bn. Once again, the consumer division outperformed as strong demand for TV and broadband drove cash profits up 24 per cent to just over £1bn. It added 52,000 TV customers, taking the total beyond 1.1m, and secured broadcasting rights to the Premier League for the next four years, albeit by paying 18 per cent more per game. Finally, BT recently launched a low-cost mobile service that attracted 50,000 customers in the first six weeks.

The group's continued rollout of high-speed fibre broadband helped its Openreach division increase its net connections by 31 per cent to a quarterly record of 455,000. It has now connected around 4.2m homes and businesses. But regulatory price reductions lowered full-year group revenue by 4 per cent, or £180m.

BT's business sales were hit by lower call and line volumes as customers migrated to data and voice-over-internet services. On the bright side, the division signed major deals with Primark and leading charity Shaw Trust. It also launched BT Cloud Phone, an internet-connected phone system for small businesses.

Flagging landline usage, regulatory price pressure and the loss of a key contract drove sales and profits down at BT's wholesale division. Meanwhile, the global services segment battled against flagging public sector demand. More positively, it managed to ink major contracts with Dixons Carphone and Kimberly-Clark that span 1,200 sites and 42,000 users, respectively.

Broker JPMorgan Cazenove expects pre-tax profits of £2.93bn, giving EPS of 31.0p (from £2.65bn and 31.5p for 2015).