BT Shares Soar as Profit Beat Smooths Path for New CEO Jansen
BT Shares Soar as Profit Beat Smooths Path for New CEO Jansen
(Bloomberg) -- BT Group Plc shares jumped the most in five years after a quarterly earnings beat showed an overhaul by outgoing Chief Executive Officer Gavin Patterson is kicking in, smoothing the way for his successor.
The former phone monopoly narrowed its profit guidance for the year to the upper end of a target range after it squeezed more revenue from fixed-line customers and fewer mobile subscribers defected to rivals.
The improving outlook helps vindicate Patterson’s plan and could make it less likely that his replacement, Worldpay Inc. executive Philip Jansen, will rein in expectations for BT’s profitability when he starts in February.
The results were “stellar,” said Bernstein analyst Dhananjay Mirchandani in a note to clients, and made past bad surprises including a January 2017 profit warning “look increasingly like historical artifacts.”
All of BT’s businesses except its consumer division are shrinking and the company is under regulatory pressure to boost takeup of faster internet services from its wholesale broadband network. Announcing the overhaul in May, Patterson had told investors not to expect meaningful profit growth for three years from the effort to make BT less bloated and more agile.
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BT shares rose as much as 10 percent to 265 pounds, the highest intraday since January. The stock was up 8.5 percent as of 9:35 a.m. in London.
It now sees earnings before interest, tax, depreciation and amortization in the upper half of a range of 7.3 billion pounds ($9.4 billion) to 7.4 billion pounds.
Smoother Handover
Patterson said 2,000 job cuts during the first half of BT’s financial year brought an annualized saving of 350 million pounds. The company plans to cut 13,000 roles overall.
Patterson’s removal was announced in June just four weeks after he unveiled the revamped strategy, his position undermined by multiple outlook downgrades, writedowns and an accounting scandal in Italy.
“It’s my complete focus to make sure we get off to a fast start,” Patterson said on a call with reporters. “I’m determined to hand over the business to Philip, making it a forward pass, and with momentum.”
As the consumer business improves, other divisions continue to suffer, with wholesale and ventures revenue falling 8 percent. BT has cut prices of leasing out broadband capacity at its network division, Openreach, to move customers to faster internet connections.
The Openreach volume discount “has increased the intensity in the marketplace” around retail pricing during the quarter, Patterson said.
BT said it could face hundreds of million of pounds in additional liabilities in light of a High Court judgment on defined benefit pension schemes.
Second-quarter revenue of 5.91 billion pounds beat a company-compiled consensus analyst estimate of 5.79 billion pounds. Ebitda was 1.88 billion pounds, above the consensus of 1.77 billion pounds.
To contact the reporter on this story: Thomas Seal in London at tseal@bloomberg.net
To contact the editors responsible for this story: Rebecca Penty at rpenty@bloomberg.net, Thomas Pfeiffer
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