It’s been a year to forget for BT (BT.A). An accounting scandal in its Italian business, a subsequent profit warning, Ofcom fines and ongoing competitive pressures in its public sector and international operations have all dragged on the stock.
The share price has slumped 17.5% so far in 2017, and declined by more than 30% during the past 12 months.
The stock is down again on 11 May, showing a 3%-odd fall to 302.2p, after posting a 19% drop in profit.
BT has unveiled plans to slash 4,000 jobs and stripped the chief executive and former finance director of their annual bonuses.
EBITDA came in track at £7.645bn versus the circa £7.6bn expected. This was down from an initial outlook for around £7.9bn. Revenue was a fraction more than £24bn and free cash flow was £2.78bn.
BRAKES ON DIVIDENDS
A plan to scale back dividend growth is a particular drag on the market mood.
BT announced a 10.55p per share final dividend for the year to 31 March 2017, up 10% to put the full year payout at 15.4p.
‘2017/18 dividend growth to be lower than the 10% previously anticipated,’ says the company. This effectively puts an end to several years of double-digit dividend growth.
| Year to 31 March | Dividend | Growth |
| 2012 | 8.3p | |
| 2013 | 9.5p | 14.5% |
| 2014 | 10.9p | 14.7% |
| 2015 | 12.4p | 13.8% |
| 2016 | 14.0p | 12.9% |
| 2017 | 15.4p | 10.0% |
| 2018 forecast | 16.8p? | 9%? |
LITTLE GUIDANCE
‘BT broadly seems to have matched the performance set out in its revised outlook in January,’ says Neil Wilson, analyst at ETX Capital.
What other analysts will make of the news is hard to say. We have yet to see any updated forecasts but the 16.8p per share consensus estimate for this year (to 31 March 2018) now looks too high.
‘Dividend growth will also be slower than expected, which was always the big risk of the dent to free cash from this scandal,’ adds Wilson, referring to the accounting fiasco.
‘Removing CEO Gavin Patterson’s bonus is aimed at assuaging investor anger but shareholders won’t be that impressed. His pay is down £4m, small fry in the ocean of BT revenues.’
Assuming 5% dividend growth this year would imply a 16.17p payout. On that basis, the stock at today’s levels would yield 5.3%.
