25 July 2024
If you are covering BT’s trading update for the three months to 30 June 2024, please see comment below from Matt Dorset, equity research analyst at Quilter Cheviot.
“BT’s latest quarterly results were largely in line with expectations. Revenue dipped by 2% year-on-year, slightly missing consensus estimates due to a smaller price increase this year and declines in legacy managed contracts within the Business division. However, earnings (EBITDA) showed a positive surprise, rising by 1.4% and beating consensus by 2.1%, which had anticipated a decline.
“Openreach continues to be a bright spot for BT, with revenue growth of 2% and a 6% increase in EBITDA, driven by price hikes and fibre upsell. On the other hand, the Consumer and Business divisions saw a 2% drop in EBITDA, mainly due to a lower price increase amidst moderating inflation.
“The fibre rollout is progressing well, with over 1 million homes passed this quarter, bringing the total to 15 million, and a strong take-up rate of 34%. However, Openreach line losses were slightly higher than expected at 196,000, attributed to competitive pressures and a weaker broadband market.
“BT has reiterated its guidance and mid-term free cash flow targets, forecasting revenue growth of 0-1%, EBITDA of around £8.2 billion, and free cash flow of £1.5 billion for FY 2025. The company’s valuation remains attractive at 4x EV/EBITDA, with significant cash flow improvements expected as capital expenditures peak.
“Government growth policies and the construction revolution are likely to benefit BT by increasing the number of homes eligible for broadband connections, helping to mitigate broadband line losses. BT appears to be in a stronger position than competitors like Vodafone to capitalise on any changes in planning regulations.”
