BT Group PLC (LSE:BT.A) shares have been doing a strange thing for the month ahead of this coming Thursday’s half-year results, the same as they did this time last year – they have been climbing higher, which is unusual as investor have got pretty used to them sliding lower as they have done for the second half of the past decade.
It seems the presence of French billionaire Patrick Drahi on the shareholder register - and maybe the spinning off of BT Sport - is enough to counterbalance the past few months alone seeing a torrent of apparently bad news: stiffening competition in the UK telecoms market, concern over rising interest rates with BT’s huge debt pile, an ongoing staff pay dispute, alarms for its pension fund and a fine for its accountant over audit failings.
Results for the six month to 30 September are expected to be “mixed” but with full-year guidance reiterated, said analysts at UBS, with “a lot of moving parts to the story”.
Second-quarter revenue are forecast by City analysts to come in at £5.3bn over average, very slightly higher than the first quarter (which saw the first revenue growth in five years) and a year ago (£5.13bn Q1-22 and £5.24mln Q2-21).
Underlying profit (EBITDA) is seen rising 3.4% to £1.95bn, slower than the 3.1%and 2% growth seen in the preceding two quarters.
In the first months of the year, price rises boosted BT’s consumer unit but this was offset by declines for the Enterprise arm, with UBS saying it is “wary that growing pressures on the consumer could mean the tailwind from price rises is fading in the consumer unit”.
As well as an update on cost inflation, investors will be looking out for signs that the Enterprise and Global arms are not getting any worse, as well as the effects of rising broadband infrastructure competition on Openreach, which saw a decline in its broadband base in Q1.
Analysts at Berenberg wondered if this might be the first evidence of alternative networks starting to impact, leading to a downgrade - though Deutsche Bank argued the risks around alt-nets was largely already in BT's share price.
At the start of September, BT and Discovery finalised the deal for the spinning off of BT Sport into a joint venture with Eurosport.
BT said would be expected to reduce revenue by £0.5-0.6bn per year on a pro forma basis and along with other effects would have increased its EBITDA by £42mln in the first quarter of the current financial year, though this benefit reduces “materially” in subsequent quarters.
BT will receive £93mln from Warner Bros Discovery and up to approximately £540mln by way of an earn-out from the JV, subject to certain conditions being met.