Tuesday newspaper share tips: BT Group still worth holding despite Openreach review

It comes after the FTSE 100 company announced on Monday that third quarter revenues have risen 3%, leaving the company’s year-to-date revenues flat but sending shares up.

It said revenue for the three months to 31 December 2015 was £4.59bn, with revenue for the nine months at £13.25bn.

Reported profit before tax also rose 24% for the quarter, up to £862m, and year to date profit up 18% to £2.14bn.

Chief executive Gavin Patterson said it was a strong set of results.

"BT Consumer had a standout quarter, increasing its overall line base for the first time in well over a decade and capturing 71% of new broadband customers.

“Good customer growth in broadband, TV and mobile helped to grow ARPU by 7%.”

The telco also announced a new organisational structure following the acquisition of EE, a brand which is said will be retained. It will see the business focus on six lines of business and will be supported by BT’s Technology, Service and Operations division.

Questor noted that Openreach appears to be crucial to the company’s success, delivering the majority of cash and profits for the group.

“The loss of this business unit would, therefore, be a bitter blow,” it said.

It comes as the telco launches a war against Sky, with the main battle being football which will add extra costs to the company’s next annual results.

On top of that, Questor said that companies like BT needs to offer TV, mobile, home internet and a phone line otherwise they can lose customers.

“With costs set to rise in the year ahead and having just completed one of its biggest acquisitions, the steady revenue and cashflow provided by Openreach is even more important than usual.”

However the column pointed out that if Openreach was split from BT, shareholders would receive shares in both companies or be paid cash.

It also said if past decisions are anything to go by, Ofcom isn’t likely to completely carve it off.

With BT’s strong UK position, Questor recommended holding the shares.

Over in The Times, Tempus was keeping an eye on Conviviality after the off-licence group showed solid underlying growth in the retail business and plenty of encouraging signs from recently acquired wholesaler Matthew Clark.

Group sales of £252m in the 27 weeks to 1 November were a 38% improvement on the equivalent period the year before, with earnings before interest, tax, depreciation and amortisation up 43% to £6.5m.

Earnings per share were 3% higher at 3.8p and there was a 5% increase in the dividend to 2.1p per share.

Chief executive Diana Hunter said the integration of Matthew Clark was well ahead of schedule, with a new organisational structure in place and negotiations to deliver the buying synergies now expected to deliver "significantly ahead of plan", benefiting the next financial year and onwards.

Tempus said the company’s shares have been on a good run since coming to market just under two and a half years ago.

It said the acquisition has benefited the company, especially with strong Matthew Clark Christmas sales, up 20% year-on-year.

“Conviviality has almost completed sorting through its estate, weeding out the less successful outlets and is growing again with perhaps 50 net additions over the next year.”

Tempus said the shares are selling at 15 times earnings, and while there is room for growth it has already been priced in.