2nd UPDATE: BT Tops Views On Internet, TV Improvements
11 November 2010 - 2:14PM
Dow Jones News
U.K. telecommunications firm BT Group PLC (BT.A.LN) Thursday
posted strong earnings that beat market expectations and raised its
guidance, as a mix of faster Internet speeds and the recent
addition of Sky Sports attracted more customers.
At Global Services, the company's IT-services division that has
been subject to significant restructuring, earnings also rose
sharply as cost reductions continued to feed through.
BT made "significant progress in improving profitability and
cash flow, enabling us to invest in building the foundations for
revenue growth in 2012/13," said Chief Executive Ian Livingston,
who said he expects the roll-out of fiber, to which over three
million premises now have access, as well as the growth in
small-to-medium enterprises and Global Services to drive revenue
growth.
BT added 114,000 new broadband customers in the second fiscal
quarter after a fierce marketing battle with rival British Sky
Broadcasting Group PLC (BSY.LN) as it started broadcasting Sky
Sports in August.
News Corp. (NWS), owner of Dow Jones & Co., publisher of
this newswire and the Wall Street Journal, has roughly a 39.1%
stake in BSkyB.
BT's share of net broadband additions was 45%, "one of our
highest shares ever," it said, as it accelerated the migration of
customers to its higher speed-speed broadband service. BT said it
now has 1.6 million customers on its 20 megabits per second
broadband service, a six-fold increase on last year, and is adding
4,000 customers a week to its fiber-based BT Infinity service.
Its IPTV service, BT Vision, signed 24,000 net new customers in
the quarter, taking its total customer base to 520,000. Of these,
more than 50,000 have taken its Sky Sports services, the first
indication of take-up since launch.
BT said it would further enhance the TV service to offer 3D
programming and faster High-Definition downloads in time for
Christmas, and would also add the BBC's popular iPlayer during the
second-half of the financial year.
Global services, which provides information-technology systems
to big companies such as Unilever PLC (UL) and Novartis AG (NVS),
posted a 45% rise in adjusted earnings before interest, taxes,
depreciation and amortization to GBP138 million in the second
quarter from a year earlier. Earnings are adjusted for specific
one-off items such as regulatory, operating and financial
expenses.
The unit also reported a 50% rise in order intake to GBP2.1
billion, after it won new contracts with UBS AG (UBS) and Anglo
American PLC (AAL.LN) as well as contract extensions with the U.K.
Ministry of Defence and Network Rail.
BT said it now expects annual adjusted Ebitda of around GBP5.8
billion, up from previous guidance of around GBP5.63 billion, and
free cash flow before specific items to reach GBP2 billion by
fiscal 2011, two years earlier than expected. For fiscal 2012 and
2013, BT forecast free cash flow before specific items of more than
GBP2 billion.
Adjusted Ebitda rose 3% to GBP1.45 billion in the quarter ended
Sept. 30 from a restated GBP1.42 billion, ahead of market
expectations of GBP1.41 billion, as improved efficiency led to
lower costs.
The better-than-expected second quarter performance and annual
guidance upgrade was well received by the market and at 1236 GMT
the stock was up 5.6%, or 9p, at 168p, making it the biggest riser
on a lower FTSE-100.
The numbers "indicate that BT remains well placed to cut costs
better and faster than some of its European peers," Liberum Capital
analyst Mark James said. He noted that BT's staff costs are down 4%
to GBP1.45 billion in the second quarter, while France Telecom SA's
(FTE) were up 3% recently.
Net profit fell 6.8% to GBP399 million from GBP428 million a
year earlier because of a tax credit in the prior year. Revenue
fell 1.8% to GBP4.98 billion from GBP5.07 billion a year earlier as
customers made fewer landline calls, as widely expected.
BT last week detailed changes to the calculations for its hefty
pension fund deficit that knocked GBP2.9 billion off its most
recent valuation, a welcome relief to investors. The company is
currently paying GBP525 million a year for the next three years to
cut its GBP9.1 billion pension deficit.
BT declared an interim dividend of 2.4 pence a share, up 4% from
a year earlier.
-By Lilly Vitorovich, Dow Jones Newswires; 44-0-207 842 9290;
lilly.vitorovich@dowjones.com
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