Thursday newspaper share tips: Fears of BT Openreach split overdone

Sharon White, the head of Ofcom, told the BBC earlier this week that it is looking at four options to for the FTSE 100 telco as it plans to merge with mobile phone operator EE.

She said one option is the “structural separation” of Openreach from BT, which would please a number of the former state-owned business’ rivals.

Other options include maintaining the current arrangement, more deregulation, or adjusting the current system.

Questor highlighted that the future of BT’s Openreach has been a black cloud hanging over the company’s future.

That division is a “cash cow” for the business, it said, as it charges BT’s rivals for every connection to the internet it makes.

It noted that the regulator said it is unlikely to keep the status quo and that a more realistic option would be to change it and restrict the ability to charge for the use of the infrastructure.

With that taken into account and with long-term investors focusing on the company’s strong position and steady dividend growth, Questor rated it at ‘hold’.

Meanwhile The Times’ Tempus considered what to do with Sage.

The software company said strong growth in recurring revenue helped drive an 8% rise in organic group full year operating profits to £380m.

However, statutory figures reflected the impact of currency fluctuations in Sage's key markets of Europe, the US and Brazil, with operating profits down to £297m from £300.

Revenue on an organic basis rose 6% to £1.4bn, with recurring revenue up 9% to £953m.

Pre-tax profits were down slightly to £275.8m from £278.7m.

Tempus noted that the reaction to the news was odd, with a nearly 5% fall in opening trading, but the stock finishing up 0.5p.

It said it could be due to a combination of the market coming to terms with the tough target set for the company, which would’ve been hit under the old accounting policy but not in the new one, as well as a bit of profit taking on the back of the absence of unexpected good news.

Tempus said that the company has been turned around under the recent leadership of chief executive Stephen Kelly and is heading in the right direction.

However it said while the company has been remodelled to focus on its strengths, further progress may be slow.

With that in mind as well as the shares selling on 22 times earnings, Tempus suggested to ‘avoid for now’.