BT has already slashed 30,000 jobs this year, saving £900m in the process, so employees may have been somewhat perturbed to hear that chief executive Ian Livingston say that there's "a lot more to do". He's upped his targeted cost savings from £1bn to "at least" £1.5bn.
At least shareholders finally have something to cheer about. Coupled with lower capital expenditure - which fell 27 per cent to £558m, even as it accelerated the roll-out of the new network - these measures resulted in adjusted earnings for the second quarter of £1.4bn, £100m ahead of expectations. Free cash flow was ahead of forecasts, too, rising £336m to £705m. Meanwhile, its Global Services division, which supplies solutions and networks to global companies, is showing signs of recovery after massive write-offs earlier this year. Adjusted earnings there rose 53 per cent to £95m from first to second quarter.
Its household lines business, BT Retail, also saw improvement, with average revenue per unit rising by £6 to £296. The recent easing of restrictions on the bundling of its services is expected to drive further improvement, although analysts were disappointed that BT didn't announce new triple-play services alongside its results. In the Wholesale business, continued growth in managed network solutions has helped offset weakness elsewhere. It signed £1.4bn of managed services deals in the half, which saw contracted revenues rise 8 percentage points to 40 per cent.
As a result, the group lifted full-year revenue expectations, and is now guiding for a 3 to 4 per cent decline, up from the previously expected 4 to 5 per cent contraction. It also upped free cash flow guidance from £1bn to £1.6bn, excluding pension deficit payments and the admittedly hefty restructuring costs. Mr Livingston also said that full-year dividends will be 5 per cent higher than last year's 6.5p.
Broker Collins Stewart expects adjusted full-year earnings of £5.4bn, giving EPS of 13.5p (2009: £3.2bn/1.8p).
| ORD PRICE: | 150p | MARKET VALUE: | £11.6bn | |
| TOUCH: | 149-150p | 12-MONTH HIGH: | 150p | LOW:70p |
| DIVIDEND YIELD: | 2.3% | PE RATIO: | na | |
| NET ASSET VALUE: | * | NET DEBT: | £9.9bn | |
| Half-year to 30 Sep | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2008 | 10.5 | 991 | 9.8 | 5.4 |
| 2009 | 10.3 | 547 | 8.3 | 2.3 |
| % change | -2 | -45 | -15 | -57 |
Ex-div: 23 Dec Payment: 8 Feb *Negative shareholders funds | ||||
