Saturday, 16 December 2017

BT earnings down, hit by cost of sports rights

By Mary Lennighan, Total Telecom
Thursday 02 November 17

Global Services reports 11% decline in underlying revenue and 39% earnings drop in Q2, hitting group numbers

BT reported a 4% decline in earnings in the second quarter of its financial year as a result of the cost of sports rights, higher pension costs and a weak performance from its Global Services unit, amongst other things. The U.K. incumbent posted adjusted EBITDA of £1.81 billion (€2 billion) for the three months to the end of September…

BT reported a 4% decline in earnings in the second quarter of its financial year as a result of the cost of sports rights, higher pension costs and a weak performance from its Global Services unit, amongst other things.

The U.K. incumbent posted adjusted EBITDA of £1.81 billion (€2 billion) for the three months to the end of September, on revenues of £5.95 billion; revenues slid by 1% on a reported basis while underlying revenue fell by 1.5%.

BT Consumer, which accounts for just over a fifth of group turnover, saw revenue increase by £10 year-on-year to £1.26 billion, but EBITDA at the unit was down by 3% to £245 million and operating costs rose by 2% to £1.02 billion. BT said costs rose due the creation of new customer service roles and additional sports rights costs, including for Premier League football.

Revenue at mobile business EE grew by 4% to £1.33 billion, but the incumbent's mobile customer base slipped to 29.7 million from 30.2 million a year earlier.

Its TV customer base crept up to 1.8 million from 1.7 million over the same period.

It was a difficult quarter for BT's Global Services business, which saw revenue drop by 10% to £1.26 billion and report an 11% decline in underlying revenue. EBITDA at the unit fell by 39% to £81 million.

"This underlying revenue decline reflects lower IP exchange volumes and equipment sales in the U.K., in line with our strategy to reduce low margin business, the ongoing impact of a major customer insourcing services in the U.S., a large contract in Brazil that has now completed and lower general trading across all our regions," BT said.

Global Services' order intake in the quarter was £0.9 billion, down 38% on-year.

BT's closely-watched pension deficit stood at £7.7 billion net of tax in 30 September, a slight improvement from £8 billion at the end of June.

The telco said it is "considering a number of funding options to address the deficit, including arrangements that wold give the BT Pension Scheme a prior claim over certain BT assets,"

Discussions with labour unions are ongoing, BT said.

BT will pay an interim dividend of 4.85 pence per share in the 2017-2018 financial year, but said it will fix its interim dividend at 30% of the prior year's full-year payout from 2018-2019.

The telco maintained its full-year outlook. It expects underlying revenue to be broadly flat and adjusted EBITDA to come in at £7.5 billion-£7.6 billion. Adjusted EBITDA for the first half of the financial year was £3.6 billion.
 

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