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BT Profit Rises on Broadband Customers

British Telecom (BT) posted a full-year operating profit of 849 million pounds ($1.37 billion) on Thursday on revenue of 4.8 billion pounds, attributed in large part to the addition of 10 million broadband customers in the last year.

The British Telecom logo is pictured in London.
Ben Stansall
The British Telecom logo is pictured in London.

The bottom line number rose 24 percent from last year’s 647 million pounds. However, the group missed expectations on earnings per share, providing EPS of 5.7 pence for the quarter – up 14 percent - versus some analysts’ expectations of 5.9 pence – an increase of 18 percent.

For the overall year, the Group proposed a dividend of 8.3 pence per share, an increase of 12 percent on a year earlier.

Ian Livingstone, chief executive of BT Group , told CNBC that BT’s customers were finding the current economic environment difficult, but added the increase in the Group’s broadband customers was encouraging.

Responding to criticism that BT had missed the EPS target of some analysts, Livingstone told CNBC: “Our job isn’t to manage the share price. It’s to increase profits, increase revenue, and the rest will take care of itself.”

However, revenue was also down nearly 2 percent in the quarter, a decline Livingstone blamed on the difficulties faced by small businesses in the UK, as well as the euro zone debt crisis.

“SMEs (small and medium enterprise) are tough, Europe is tough.There are issues with the UK SME market. There’s not great surprise there and while we are doing reasonably well in the marketplace SME’s are struggling,” he said.

For the year, the group posted a 4 percent fall in revenue to 19 billion pounds but it also lifted core earnings by 3 percent to 6.1 billion pounds. Full-year free cash flow was 2.5 billion pounds, well ahead of expectations.

Livingstone was positive on the long-term outlook for the group, saying BT expected to grow its profits over the next two years with normalized cash flow growing to more than 2.5 billion pounds in 2014

The group also said it expected dividend growth of between 10 and 15 percent over the next two to three years.

Net debt increased by 266 million pounds after BT paid 2 billion pounds to help plug the deficit in its pension scheme, which it estimated had stood at 3.9 billion pounds. A previous estimate had valued the deficit at 4.1 billion pounds.

“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,” Livingstone said.

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