As BT reports its full year results Helal Miah, investment research analyst at The Share Centre, explains what it means for investors.
BT described 2016-2017 as a challenging year and this has been reflected somewhat in its full year results published this morning. The global telecommunications provider said profits before tax fell by 19% to £2.35bn. This takes into account the adjustments made to reflect the Italian accounting scandal and an Ofcom fine, as well as the difficult market conditions in certain areas of its business, such as the UK public sector and International corporate markets.
The group also has one of the largest pension deficits in the UK and a net debt load close to £9bn.
However, interested investors may want to note that these issues are leading management to take a more aggressive approach to put things right and navigate the market. BT have announced that they will accelerate a programme to save £300m over two years and look to shed 4,000 jobs. Moreover, a strategic review of the Global Services business will be carried out with the aim to develop a more digital business.
While the news headlines and share price performance have not been great lately, and management’s outlook for the current financial year is for flat underlying revenue growth, there are areas of the business to be pleased with, offering investors plenty of hope for the future. The consumer related businesses are doing well, as customers continue to take up broadband, TV and mobile services. Whilst management have raised the final dividend by 10%, albeit at the same time suggesting that the progressive dividend policy will see a slower growth rate.
We therefore continue to recommend BT as a ‘buy’ for higher risk investors. We believe in the longer term potential of the group and the current low prices are looking attractive given the dividend yields.