BT rings in lower earnings, shuffles executive team

Earnings at BT fell in the first quarter, the telecommunications group reported on Friday, with adjusted EBITDA down 2% to £1.79bn, while reported revenue was 1% higher at £5.84bn.

The FTSE 100 company’s underlying EBITDA was off 2.5%, while adjusted profit before tax was 1% weaker at £791m.

Its board put the change down increased pension costs and business rates, along with sports programme rights and what it described as an “investment in customer experience”.

Adjusted basic earnings per share were 5% lower at 6.3p, while normalised free cash flow improved by £108m to £556m.

BT’s net debt at the end of the period stood at £8.81bn.

On a reported basis, profit before tax was down 42% at £418m, while basic earnings per share fell 51% to 2.9p and net cash inflow from operating activities was down £19m at £1.32bn.

“BT has delivered an encouraging performance in the first quarter of the year,” said chief executive Gavin Patterson.

“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.”

The company maintained its outlook, with a share buyback of £200m in the quarter.

It also confirmed the settlement of warranty claims with Deutsche Telekom and Orange under the EE acquisition agreement, arising from previously-reported issues in Italy, with a specific item charge of £225m.

On the strategic front, BT launched a consultation with Openreach on building an investment case for a large-scale fibre-to-the-premises (FTTP) network.

Its consumer and EE divisions would be brought together, the firm said, to “drive converged products” and “accelerate transformation.

The forthcoming spectrum auction was another focus, the board said, which would allow BT to bid for high-frequency spectrum which would facilitate upgrades to 5G technology.

BT claimed a “continued improvement” in customer experience metrics, and also won exclusive live rights for European elite rugby cup competitions for the 2018/19 to 2021/22 seasons.

"BT, with Openreach, is well placed to support the roll out of FTTP in the UK, and we're consulting with Ofcom, Government and other communications providers to build the investment case to achieve this outcome,” Gavin Patterson 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.”

Looking at its operations, BT said its restructuring programme was on track, with plans announced to streamline its Italian business.

Mobile postpaid net subscriber additions were 210,000 during the quarter, with the board pointing to its low churn rate - that is, the proportion of customers leaving the network - at 1.1%.

Openreach “fibre” connections in the period were 437,000, with BT saying fibre broadband now passed 26.8 million households.

BT said its net additions in retail broadband represented 53% market share in the quarter, with “fibre” net additions of 170,000.

Consumer revenue generating units per customer increased 4% to 2.00, the board added, with monthly mobile average revenue per unit of £20.40 up 9%.

“We will continue to simplify and streamline the business and rationalise our costs as demonstrated by our ongoing performance transformation programme,” concluded Patterson.

“Our businesses are leaders in their core segments and as we drive the business forward I am confident in the outlook for our company.”

BT makes executive changes to reflect changing consumer, regulatory environment

In a separate announcement on Thursday morning, BT Group also announced organisational changes, which it said would “simplify” its operating model, “strengthen accountabilities” and also “accelerate” its transformation.

Marc Allera, currently CEO of the EE business acquired last year by BT, has been appointed to lead a newly created consumer business, bringing together BT's consumer and EE businesses.

“This appointment reflects the growing scale and ambition of BT,” Gavin Patterson said.

“Marc has led the successful integration and delivered the improved customer experience and strong financial performance of EE.

“He will lead our continued integration and convergence in consumer telecommunications.”

Allera’s appointment would be effective 1 September.

Additionally, after almost four years as CEO of BT Consumer and 13 years at BT, John Petter announced he was stepping down to pursue roles outside the group.

“I'd like to record my sincere thanks to John for all he has done for BT over a number of years,” Patterson said.

Finally, as part of what the board called the group's “continued transformation”, BT announced the appointment of Cathryn Ross, currently chief executive of water sector regulator Ofwat, as its new director of regulatory affairs.

“We are delighted Cathryn has agreed to join BT,” Patterson commented.

“She will bring huge experience relevant to our business, and will work closely with me on developing our regulatory strategy and overseeing our relationship with Ofcom.”

Her appointment followed the decision of BT Group’s chief strategy officer Sean Williams to leave BT to pursue new opportunities outside the group.

Cathryn Ross was expected to take up her role in January 2018.