BT qualifies dividend intentions

The group has already stepped up its objectives for FTTP – now targeting 4m premises by March 2021 (up from 3m), and 15m by the mid-2020s (up from 10m). Such ambitions are, naturally, “subject to conditions being right” – with chief executive Philip Jansen, who joined three months ago, pointing specifically to “regulatory and policy enablers”.

For the 12 months to March 2019, normalised free cash flow came in at £2.4bn; bang in the middle of BT’s guidance. For FY2020, it expects anything within the range of £1.9bn-£2.1bn. On this basis, the dividend looks well-covered. That said, we must remember that this measure of cash flow excludes various items – the largest being pension deficit payments. Last year, the group contributed £2bn to its pension scheme. In turn, net debt expanded by 15 per cent, to £11bn.

A slight dip in revenues reflected growth in the consumer business (up 3 per cent to £10.7bn), tempered by regulated price reductions in Openreach and declines in its enterprise business – especially in fixed voice. Reported pre-tax profits were flattered by costs incurred in the prior year, pertaining to the settlement of one-off EE acquisition warranty claims. Encouragingly, the group’s cost transformation programme “remains on track” with around 4,000 jobs cut.

BT says it “remains well-positioned in a challenging market” and is working to “strengthen our competitive position”. Beyond its updated FTTP goals, it is also ramping up investment in areas including 5G coverage. Encouragingly, EE is due to launch 5G “imminently”, and is prepared to go live in 16 cities during 2019.

Per Bloomberg consensus estimates, analysts expect EPS of 21.7p for the March 2020 year-end, rising to 24.2p in FY2021.