BT profits flattered by EE acquisition

5th May 2016

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BT has reported an 11% growth in profits before tax in the latest quarter, but this figure is nudged up by the acquisition of EE says Hargreaves Lansdown.

Excluding EE, the company’s results show a more modest growth in annual profits of 1%, helped by performance in BT’s consumer division, in particular sales of BT broadband and TV.

However, the broker notes that  BT now expects to make greater synergies from its acquisition of EE than previously thought, and at lower cost.

The company announced a 9.6p final dividend, taking the total for the year to 14p. The company committed to continue growing the dividend by more than 10% for the next two financial years.

Laith Khalaf, Senior Analyst, Hargreaves Lansdown says: “BT’s headline profits are somewhat flattered by the acquisition of EE. Taking that out of the equation leaves a more muted picture of the business, which has achieved modest growth in line with the expectations fostered by management.

“Performance was helped by increasing revenues from its TV and broadband services, and audience numbers for BT sport have risen by almost half over the course of the year. Shareholders are being rewarded by a dividend which is expected to grow by more than 10% for each of the next two years.

“Customers have not always been as happy with BT’s performance as shareholders, but the company is now recruiting 900 more call centre staff to bring customer services back to the UK. BT is focusing more on improving its service, as well it might with higher bills for line rental and broadband hitting doormats later in the summer.

“The deal with EE provides BT access to over 30 million mobile customers it can sell broadband and TV services to, as the company gears up to offer ‘quad-play’ packages which incorporate broadband, TV, and both fixed and mobile phone lines. This provides significant growth potential, though both Sky and Virgin will want to challenge BT in this market.”

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