May 10, 2012 8:54 am

BT pledges 10%-15% dividend growth

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BT Group has moved to keep investors onside by committing to boost its dividend 10-15 per cent over each of the next three years, in spite of full-year revenues shrinking at the telecoms group.

The UK’s leading fixed-line telephone company by sales on Thursday said annual turnover fell 6 per cent year-on-year to £18.9bn, which it attributed to lower revenue from calls and the gloomy economic conditions.

However, pre-tax profit jumped 42 per cent compared with the previous year to £2.4bn, on the back of cost cutting and lower restructuring charges.

The stronger profit figure encouraged BT to boost its final dividend by 14 per cent, bringing the full-year payout to 8.3p, up 12 per cent year on year.

“The key message here is that in an uncertain world, management is aiming to be boringly predictable – to deliver 10-15 per cent dividend growth year-in year-out irrespective of what is thrown at them,” said Michael Williams, analyst at Exane BNP Paribas.

Ian Livingston, BT chief executive, said: “While we will be impacted by economic and regulatory headwinds, we expect to continue to grow profits over the next two years.”

BT was hurt by regulations that have cut mobile termination rates – wholesale charges to rival providers for connecting calls – knocking £286m from the telecoms group’s top line. Underlying losses narrowed at Global Services, BT’s division that builds networks for governments and large companies such as Anglo American, from £141m to £85m from revenues that slipped 3 per cent to £7.9bn.

The division has long been a thorn in BT’s side, dragging the FTSE 100 group in 2009 to its second annual pre-tax loss since privatisation. “We have come a long way with Global Services, but I think we have a long way to go,” said Mr Livingston, adding that cashflow at the division would fall in 2013 before returning to growth in 2014.

More positive news came from the group’s £2.5bn programme to make fibre-optic broadband available to two-thirds of the UK’s homes, which BT said it had rolled out to 10m premises seven months ahead of deadline.

In March, BT moved to eliminate its £3.9bn pension fund’s net deficit within a decade through a programme that included a £2bn upfront payment. The £2bn payment contributed to a £266m increase in BT’s net debt to £9.1bn at the year end at March 31.

The group signed up 589,000 retail broadband customers over the year – compared with 702,000 at BSkyB – taking BT’s total to 6.3m and countering a decline in its fixed-line phone business.

“It is remarkable to think that less than 10 per cent of BT’s revenues now come from calls,” said Mr Livingston.

While at BT Vision, the group’s pay-TV division, subscribers rose by 23 per cent over the year to 700,000. In the 12-month period, revenues fell from £20.1bn to £18.9bn, and diluted earnings per share fell from 7.7p to 6.4p. BT shares fell 2.3 per cent to 212.2p.

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