16 May 2024
If you are covering BT’s latest financial results, please find below a comment from Matt Dorset, equity research analyst at Quilter Cheviot:
“New chief executive, Allison Kirby, has unveiled a decent set of results for BT, with expectations largely in-line, but importantly guidance for next year has been boosted. While revenue was slightly negative for the fourth quarter, once you strip out one-offs they were in line. The fibre build has accelerated with a record 1m homes passed this quarter and 14m homes passed in total, with take up increasing 40%. That said, BT continued to lose broadband lines with a 2% reduction in the Openreach base over the year – BT cite a weaker than expected broadband market but competitor losses are also responsible given the number of challengers to incumbents like BT.
“More positively, capital expenditure was lower than expected and therefore cash flows were 8% ahead of expectations. That is the key message longer term too with BT now at peak capex and this investment should start to pay off generously. BT guide to a 4% reduction in capex and a 15% increase in free cash flow next year, but have also provided mid-term guidance for free cash flow of £2bn in FY27 and £3bn by the end of the decade – the equivalent figure this year was £1.3bn for context. These mid-term targets are significantly ahead of where consensus was. The Capex cut does not mean reduced fibre rollout; in fact, rollout will remain unchanged, and this is testament to BT’s ability to increase efficiency in their roll out.
“To further signal their confidence, management also raised the dividend by 4% which is reassuring given a couple of brokers were expecting a cut, so BT now has a 7% dividend yield. The valuation remains very attractive and is significantly below the sector average and below BT’s longer-term average.”
