BT’s first quarter revenue falls 3% to £5.1bn

Philip Jansen BT CEO

Philip Jansen, BT CEO

BT’s has revealed that its first quarter underlying revenue fell 3% to £5.1bn.

The drop reflects declines in the Corporate and Public Sector segments in the Enterprise and Global divisions.

Underlying cash profits (EBITDA) rose 3% to £1.9bn. All business areas saw growth except for Global. Reported profit after tax fell £446m to just £2m thanks to a one-off tax charge following the change to a new 25% corporation tax rate.

Reported profit before tax was £536m – down 4% despite higher adjusted EBITDA. The company stated that this was primarily due to the prior year gain on disposal of its domestic Spanish operations.

Overall, trading is in line with expectations and management is not making any changes to guidance.

The shares fell 4.8% following the news.

Philip Jansen, Chief Executive, commenting on the results, said: “Our operational performance remained strong and our EBITDA grew during the first three months of the year, reflecting improved trading across most of our business and the positive benefits of our plans to modernise BT. Our results were overall in line with our expectations during the quarter, with good performance in the UK offsetting challenging conditions in Global’s markets.

“We’re powering ahead with our network build programmes: Openreach has now built full fibre broadband to more than 5m premises with growing customer demand; EE has set out plans for 5G on demand anywhere in the UK by 2028. We’ve also reached a partnership agreement with our largest trade union, the CWU1 , allowing us to keep our modernisation plans on track.

“We continue to invest in new strategic growth areas and have also today announced a strengthened strategic partnership with Microsoft that will see us accelerate co-innovation across all areas of our business, including enterprise voice and cyber security, supporting our growth strategy.

“With trading conditions expected to see some improvement through the year, we have confirmed our outlook and remain confident that BT is on a path to growth.”

Industry reaction

William Ryder, equity analyst at Hargreaves Lansdown said: “BT’s headline profit figure for the quarter, £2m, is on the puny side for a telecoms giant. Fortunately, that largely reflects a one-off tax payment, and on an underlying basis things look a little rosier. All major segments delivered cash profit (EBITDA) growth except for Global, where management attributed declines to project delays and lower equipment sales, as well as divestments and currency movements. The delays are likely to be primarily Covid-19 related, but their return is likely to depend on the economic recovery abroad. Closer to home things seem to be going better for BT, with the domestically focussed segments showing growth.

“However, free cash flow was still negative as the group shelled out over £1.5bn in capital spending. A decent chunk of this went on more electromagnetic spectrum, but it highlights the massive capital requirements of telecoms groups. Ultimately, this is the problem for sector – largely homogenous products and eye watering investment. Overall, this quarter showed how hard it can be to get ahead in telecoms.”