BT has reported another quarterly drop in sales and earnings, although the impact of cost cutting helped reduce the strain of lower revenues on its bottom line.
At 207.5p per share, BT’s share price was last 4.1% higher on the day.
Adjusted revenue dropped 3% in the three months to 30 June, the FTSE 100 company said, to £4.9 billion. This was chiefly down to “weaker handset sales in Consumer and continued challenging international trading,” it commented, headwinds that offset price increases and the benefits of its fibre rollout programme.
Adjusted UK service revenue declined 1% to £3.9 billion. The business said this was “largely due to the seasonal impact of price changes in Consumer and traditional voice in Business.”
Adjusted EBITDA was down by 1% in the first quarter, to £2.1 billion. BT commented that ongoing cost reductions helped reduce the impact of lower revenues on its earnings.
BT said that “cost transformation delivered efficiencies across all units, fully offsetting higher employer costs of National Living Wage and National Insurance.”
Due to increased net finance costs, and depreciation and amortization, pre-tax profit sank 10% year on year to £468 million.
Mixed Result
Adjusted sales at Consumer – the company’s single largest division – reversed 3% in the quarter, to £2.3 billion. Adjusted EBITDA dropped by the same percentage to £636 million.
Corresponding earnings at BT’s business division fell by a sharper 9%, to £344 million, as adjusted revenues declined 6% to £1.8 billion.
This was despite its broadband and post-paid mobile customer bases rising 11,000 and 41,000 respectively over the quarter.
Its Openreach infrastructure division grew adjusted sales by 1%, to £1.6 billion, while adjusted EBITDA increased 5% to £1.1 billion.
Openreach enjoyed record demand in the quarter, BT said, as its full fibre expansion programme rolled on. Net additions came in at 566,000, up 46% year on year.
On Track
Describing BT’s performance as “a solid start to the year,” chief executive Allison Kirkby said that “we’re seeing strong customer demand for our next-generation broadband and mobile connectivity across all our brands, with record Openreach fibre take-up again this quarter.”
BT’s full fibre broadband rollout has now reached 19 million homes and businesses, it said. And its 5G mobile network meanwhile now covers 87% of the UK population.
Kirkby added that “BT is investing more than anyone else in the nation’s networks, we’re connecting customers faster, and we’re on track to deliver our targets for this year, next year, and the end of the decade.”
The company said it remains on track to hit full-year guidance.
Transformation Working
Analyst Mark Crouch of eToro commented that “BT has been laser-focused on streamlining operations, cutting costs, and improving service, and it’s paying off. Retention is up, churn is down, and customers are staying because they want to, not because they have to.”
He added that “there are still two major overhangs however, BT’s debt pile and its pension deficit, but this is a company that now looks more capable of managing them than it has in years. Openreach is ahead of schedule, margins are improving, and management is delivering on its promises.”