BT on Thursday regained its status as the UK’s largest broadband provider, as it reported a 22 per cent rise in annual pre-tax profit.
The UK’s leading telecommunications group also confirmed that it was gearing up to pay for a £2.5bn (€3.7bn) share buy-back programme. BT said it was abandoning its £8bn net debt target, and would instead seek a “solid” investment grade credit rating.
Net debt is expected to be £10bn in March 2009 when the buy-back programme is completed.
BT underlined its transformation by reporting a fifth consecutive quarter of year-on-year growth in adjusted earnings before interest, tax, depreciation and amortisation.
It had sales of £20.2bn during 2006-07, up 4 per cent, and pre-tax profit of £2.5bn, up 22 per cent.
BT plans a full-year dividend of 15.1p per share, up 27 per cent. A dividend pay-out ratio of two-thirds of earnings before exceptional items has been reached. Shares in the company closed at 306.25p, down almost 3 per cent.
It was the last set of full-year results presented by Sir Christopher Bland, chairman, who took charge in 2001 when the group had almost £30bn of debt and pre-tax losses of £1bn.
Sir Christopher gave a bullish outlook for the future, expressing confidence that BT could grow revenue and earnings in 2007-08.
Explaining why BT was faring better than Deutsche Telekom or France Telecom, Sir Christopher said it did not suffer from the “dead hand of the government shareholder”. He added: “You think it is a blanket of protection but actually it is a curse.”
Ben Verwaayen, chief executive, expressed delight that BT had regained its position as the UK’s largest retail broadband provider, with 3.7m customers.
Expanding broadband provision and serving the telecoms and IT needs of multinationals have underpinned BT’s turnround. Mr Verwaayen pledged to accelerate BT’s transformation into a company focused on delivering software solutions.
BT will run up restructuring costs of £450m in the next two years to facilitate the changes.
Future dealmaking is likely to continue a two-year trend of relatively small acquisitions that bolster the capability of BT Global Services, the division that supplies and manages networks and IT for multinationals. Mr Verwaayen also promised a renewed assault on costs after generating £500m of savings in operating expenses in 2006-07.
He said savings of £600m would be made in 2007-08. BT is leaving open the possibility of gearing up by pushing debt down from group level into BT Openreach, the division that provides rivals with access to its main telecoms network.