- Final dividend of 5.39p takes full year payout to 7.7p
- Telco agrees sport TV tie-up with Discovery
- Analyst suspects investors would have preferred full sale
UK telco BT (BT.A) reinstalled its final dividend as it reported lower revenue but underlying profits that beat expectations, and confirmed its mooted TV tie-up with Discovery.
The FTSE 100 company reported a 2% fall in revenue to £20.9 billion but a 2% increase to £7.6 billion in EBITDA (earnings before interest, tax, depreciation and amortisation) as management continued to take an axe to costs.
While dividends are a major reason to own the shares, the big news is the deal with Discovery.
The joint venture will see BT and Discovery create a new premium sport offering through the transfer of BT’s Sport business to Discovery, which broadcasts Eurosport UK, and will show a host of major sporting events, including the UEFA Champions League and Premier League football, Premiership Rugby, and the Olympic Games amongst others.
BT Group will receive an initial £93 million from Discovery, increasing to circa £540 million by way of an earn-out, subject to undisclosed conditions being met.
‘For reference, the value of the gross assets of BT Sport business to be contributed to the joint venture and the operating businesses of BT Sport was £339 million and it had an operating loss for the year of £222 million,’ said Megabuyte analyst James Preece.
When first mooted, investors were left underwhelmed, which Preece suspects reflects shareholder preference for a full sale but today’s announcement does outline the potential for a cash windfall if the combined operation delivers.
It also offers multiple options for a full exit should either party wish to do so down the line.
RAPID FAST FIBRE EXPANSION
Chief executive Philip Jansen hailed infrastructure arm Openreach’s fast fibre roll-out that he said was continuing ‘like fury’ with 7.2 million premises connected to high-speed broadband and 5G mobile networks now covering more than 50% of the UK population.
A final dividend of 5.39p per share adds to the 2.31p paid at the half-year stage and delivers on Jansen’s pledge to return a rebased payment.
Guidance for the year ahead calls for a reversal in revenue declines, although it failed to give more detail, and at least £7.9 billion EBITDA, with capital expenditure likely at around £.9 billion. Market estimates are calling for around £21 billion revenue this year.
Management is also extending its cost savings target of £2 billion by the end of the 2024 year to £2.5 billion by the end of 2025.
BT shares initially rallied around 1.6% in early trading on Thursday, but by 10.30am, the stock had lost much of its oomph as investors digested the deluge of news. The shares were up 0.7% at 177.6p, implying a 40%-plus decline over the past five years.
