BT Group plc (LON:BT.A) shares fell after it posted a big drop in headline first-quarter profits after a further charge related to its Italian accounting scandal, but an fall in underlying earnings was much as expected.
For the first quarter to June 30, the FTSE 100-listed firm reported a 42% fall in pretax profit to £418mln after taking a £225mln charge in the quarter for the settlement of warranty claims with Deutsche Telekom and Orange arising from the previously reported issues in Italy.
READ: BT Group tries to reassure as Italian issues overshadow quarterly results
However, the group’s adjusted underlying earnings (EBITDA) were only down 2% to £1.785bn, in line with expectations, reflecting increased pension costs, business rates, and sport programme rights.
The group’s reported revenue rose by 1% in the first quarter to £5.837bn, while underlying revenue was up 0.2% driven by its consumer facing businesses.
Mobile, broadband sUBScribers rise
BT said its mobile net sUBScriber additions in the quarter were 210,000, with churn remaining low at 1.1%.
It added that Openreach fibre connections remained high at 437,000, with fibre broadband now passing 26.8mln UK households.
The group said the retail broadband net additions represented a 53% market share, with fibre net additions of 170,000 in the first quarter.
BT’s net cash inflow from operating activities in the first quarter was £1.315bn, down £19mln on a year earlier, although normalised free cash flow of £556mln was up £108mln due to working capital phasing.
The group said it has maintained its outlook with a share buyback of £200mln in the quarter.
Shares top FTSE 100 fallers list
BT shares topped the FTSE 100 fallers board in early trading, shedding almost 3%, or 9.05p at 307.1p.
In an initial note on the BT results, analysts at UBS said: “The modest beat for Q1 is encouraging but we note the shares have rallied into these numbers.
“Separately, uncertainties remain over medium-term EFCF with lack of visibility on both pension costs and capex.”
UBS reiterated a ‘neutral’ rating and 310p price target on BT shares.
BT continues to simplify and streamline the business
Gavin Patterson, BT’s chief executive, said: "BT has delivered an encouraging performance in the first quarter of the year. We've made good progress in our key areas of strategic focus: deliver great customer experience, invest for growth, and transform our costs. In particular, I'd highlight the growth achieved by our consumer facing businesses, helped by mobile.”
He added: “Our new Consumer business will operate our three distinct brands; BT, EE and Plusnet; to leverage our position as the largest and only fully converged player in the market, spanning fixed and mobile networks, consumer products and services as well as content.
"We will continue to simplify and streamline the business and rationalise our costs as demonstrated by our ongoing performance transformation programme.”
In a separate announcement today, BT said Marc Allera, currently CEO of the EE mobile business acquired last year has been appointed to lead a newly created Consumer business, bringing together BT's Consumer and EE businesses.
The group also announced the appointment of Cathryn Ross, currently chief executive of water regulator Ofwat, as its new Director of Regulatory Affairs.
-- Adds share price, broker comment --