BT’s share price shows promise but caution remains as competition dials up

Shares rise 9% despite drop in revenue and dividend cuts.

Article updated: 1 November 2018 10:00am Author: Helal Miah

  • Shares in global communication group BT jump 9% as restructuring comes through.
  • Results seen in positive light despite revenue falls and dividend cut.
  • We recommend BT as a ‘hold’ for income seeking investors.

After a terrible few years of suffering issues of various kinds, BT’s share price lately has shown some promise. Management have been forced into making a number of structural changes and in this morning’s half year update, we have begun to see some of the results beginning to come through. Although revenues continued to slide, down by 1% on an adjusted basis, adjusted EBITDA actually rose by 2% to £3,675m mainly driven by higher volume and mix of high-end smartphones in their consumer business and restructuring related cost savings. Despite this, cash flow generation has suffered as the group continues to make cash capital investments and the timing of working capital movements haven’t helped.

Overall, the earnings per share of 13.39 for the first half beat the expected figure of 12.4p, this along with the fact the outgoing CEO, Gavin Patterson said it expects operating profits for the full year to be at the upper end of its previous guidance of £7.3-£7.4bn left investors very pleased and encouraged leading to the shares to rise as much as 9% in early trading. Management highlighted that they are meeting a number of their core strategy pillars including improved customer experience metrics, accelerating ultrafast deployment and transforming the operating model.

The small cut in the interim dividend has been taken in a positive light as restructuring will be ongoing for some time with further capital expenditures still needed. With the new CEO expected to take the helm in the New Year and to execute upon strategies already in place, some investors may feel that better times could be a little further down the road. Pending further review, we still maintain our hold recommendation on the shares, but the dividend is still attractive and the shares will appeal to income seekers taking a contrarian approach. We remain cautious on the shares because of the massive amounts of investments needed to turn the business around, with competition in the mobile space being intense and heating up in the fixed line broadband area from the likes of Vodafone, and despite making contributions to the pension plan, it still has a massive deficit.

All information given including prices, yields and our opinion is correct at the time of publication. Our opinions on investments can change at any time and for our latest view please go to To understand how our Investment research team arrive at their views please read our Investment Research Policy.

Helal Miah portrait photo
Helal Miah

Investment Research Analyst

After graduating with an economics degree from University College London, Helal started his career within private banking at Smith & Williamson Investment Management and later held analyst and fund manager roles with the Industrial Bank of Japan, Schroders and Mitsubishi Corporation. He is a chartered fellow of the Chartered Institute for Securities & Investment.