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BT profits up but revenue down

Microscope contributor
BT has announced £2.4bn in pre tax profits for the year ending 31st March but seen a fall in revenue of a couple of percent, writes Linda Endersby.

A one off tax credit and interest from the pension fund boosted the pre-tax profits, up 16% on the year, with a 9% growth in the last quarter at £8.6m. Revenue was affected by falling demand for lines and calls and regulatory payments.

"Increasing pricing pressure from rivals saw an accelerated decline in fixed voice subscribers in 4Q," commented Ovum analyst Mark Giles. "Although, BT is sticking to its guns and not looking to follow suit, which makes sense given that it has tended to differentiate more on quality rather than on price."

BT said the fall in revenue was within its target range and that cash flow remained strong at £2.5bn, a rise of 13%.

"In what remains a challenging environment we have delivered another year of growth in profits and free cash flow, commented Ian Livingston, Chief Executive.

"Our financial strength has allowed us to invest in the business, make a £2bn payment into the pension fund, reward employees and deliver double digit growth in shareholder returns."

Net debt is up £266m after the pension payment while the proposed final dividend is up 14% at 5.7p with a full year dividend of 8.3p, up by 12%.

"At a time when many of our corporate customers are facing their own challenges, our investments internationally will help those seeking to expand in faster growing economies and this is reflected in £2bn of new orders won by BT Global Services this quarter," continued Livingston.

BT are predicting growth over the next two years with revenue to show and improving trend and cash flow to grow in 2014 after a dip in 2013.

"While we will be impacted by economic and regulatory headwinds, we expect to continue to grow profits over the next two years, with normalised free cash flow growing to above £2.4bn in 2014," predicted Livingston.

Giles added "BT have presented solid results both financially and operationally in terms of subscribers. Despite its lack of content in comparison to Sky and Virgin, net broadband additions continued strongly in 4Q, signalling consumers' preference for a strong bundle of services, and how much BT's fiber offering is proving to be a differentiator."

BT also expects dividends to show a 10-15% growth per year for the next 3 years.

"We will continue to pursue our prudent financial strategy, investing in the long-term future of the business, supporting the pension scheme, paying down debt and enhancing shareholder returns," concluded Livingston. "We have made progress again this year delivering for all our stakeholders, but we know there is more to do."


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