Britain's BT Group posted in-line second-quarter headline numbers on Thursday and promised further growth but market disappointment at lower-than-expected earnings and margins pushed its stock down nearly 5 percent.
BT posted a 2-percent rise in earnings before interest, tax, depreciation and amortisation (EBITDA) before specific items to 1.45 billion pounds for the three months to end September.
Revenues rose 3 percent to 5.09 billion pounds, both in line with expectations. But earnings per share missed some analysts' forecasts while profits were affected by restructuring costs. "Significantly, in our view, this is the first time that the company has missed market expectations for six quarters," Morgan Stanley analysts said in a note to clients. Other analysts said the results were mixed.
BT unveiled a major shake up earlier this year, creating two new business units in an attempt to cut costs as part of its move to transform the group from a operator with a declining fixed-line business to an IT and communications provider. It said it had incurred restructuring costs of 167 million pounds ($351 million) in the second quarter as the group established the two new units and some management left. It expects restructuring costs of 450 million pounds in total and for that to generate a payback within 2 to 3 years.
Some 2,000 managers have left voluntarily since BT announced the changes and it expects up to 5,000 to go in the year. However BT is taking on more engineers and IT staff. "Our performance underpins our confidence that we can continue to grow revenue, (underlying) EBITDA ..., earnings per share ... and dividends for the year," Chief Executive Ben Verwaayen said in a statement. Analysts had been expecting EBITDA at 1.43 billion pounds and revenues at 5.07 billion pounds, according to Reuters Estimates. Pretax profit fell 31 percent to 435 million pounds after it paid for the staff leaving costs and reinvestment.
BROADBAND LEADER: It had another strong performance from broadband, with the BT Retail unit accounting for 37 percent of net DSL additions during the quarter, giving it a broadband customer base of over 4 million and making it the largest provider in Britain.
Due to regulatory changes, rival broadband providers can now install their own technology into telephone exchanges rather than rent lines from BT, known as local loop unbundling (ULL), which reduces BT's wholesale revenues.
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