BT Profit Beats Forecasts -- Update
October 29 2015 - 5:53AM
Dow Jones News
(Adds detail.)
By Simon Zekaria
LONDON--BT Group PLC (BT.A.LN) Thursday lauded its strategic
direction as the U.K.-based telecommunications group recorded a
forecast-beating rise in quarterly profit, with demand for its
fiber-optic Internet broadband and sports television channels
boosting business.
The U.K. company's net profit in its second quarter, ended Sept.
30, rose to 525 million pounds ($801 million), compared with a
market consensus forecast of GBP481 million, up from GBP446 million
in the same period a year earlier.
BT's closely-watched earnings before interest, taxes,
depreciation and amortization on an adjusted basis fell 1%
year-on-year to GBP1.44 billion, hit by spending on its sports TV
business.
Revenue in the second quarter on an adjusted basis was unchanged
at GBP4.38 billion, higher than a consensus market forecast of
GBP4.33 billion. Excluding exceptional items, foreign exchange
movements and acquisitions or disposals, as well as transit costs,
revenue rose 2%.
On a reported basis, revenue from global services--BT's largest
division, which supplies information technology to large
multinational companies, organizations and governments--fell 5%,
hit by lower sales in the U.K., U.S. and Canada, amid public sector
cutbacks and lower outsourcing of services.
Still, consumer revenue rose 7%, up from 3% growth in the
previous three months. BT says it has 3.4 million retail fiber
broadband customers, adding 212,000 in the quarter. It also added
106,000 TV customers.
"Our strategy is delivering and our results show we're on track
to achieve our outlook for the year," said Chief Executive Gavin
Patterson.
BT battles media rivals such as Sky PLC (SKY.LN) in the U.K. for
a share of soccer TV viewers, which is seen as key to attract
consumers to its TV channels. As well as covering domestic soccer,
BT has spent billions of dollars to secure the rights to live
European soccer in a bid to take on Sky's longstanding dominance of
soccer broadcasting in the U.K. BT's sports-broadcasting platform
is also key to its core broadband business, compensating for
declining fixed-line telephony customers.
Mr. Patterson said BT has seen "good demand" for its channels
showing European soccer. "Its contribution has been better than we
expected," he added, without providing further details.
Key to BT's consumer revenue growth is building customer loyalty
by connecting products and services for retail bundling, such as
high-definition television and mobile. These multi-service packages
keep down 'churn,' or the rate at which customers leave services.
Wednesday, BT received a boost for this strategy after its proposed
multi-billion dollar acquisition of mobile operator EE was
provisionally cleared without competition remedies by U.K.
antitrust regulators.
"Mobile is another growth area and I am pleased our consumer
customer base now stands at more than 200,000," said Mr. Patterson,
without elaborating on the company's growth targets or marketing
strategy for its consumer mobile operation.
Still, BT faces calls from rivals that its infrastructure
division Openreach--which runs a countrywide network that peers
like Sky and TalkTalk Telecom Group PLC (TALK.LN) rely on to serve
their broadband customers--should be broken off from the group on
competition grounds. Communications regulator Ofcom is reviewing
the matter and will submit its findings next year. BT says keeping
Openreach as part of the company is key to investing in the
country's communications infrastructure.
The group recommended an interim dividend of 4.4 pence, up 13%.
BT expects to grow its fiscal-year dividend per share by
10%-15%.
At 0859 GMT, BT shares were down 0.6% at 466 pence, valuing the
company at GBP39.2 billion.
Jefferies analyst Jerry Dellis said the results are solid, with
encouraging trends for the company's consumer business, but noted
there is no mention of the dividend policy beyond next year.
Write to Simon Zekaria at simon.zekaria@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires
(END) Dow Jones Newswires
October 29, 2015 05:38 ET (09:38 GMT)
Copyright (c) 2015 Dow Jones & Company, Inc.
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