BT has warned of a sharp drop in revenue and earnings for the year due to the impact of coronavirus as it reported a 13 per cent fall in quarterly profit.
The FTSE 100 telecoms group said its revenue fell 7 per cent to £5.2bn in the three months to June 30 while pre-tax profit declined to £561m as the lack of sport and lower activity from business customers hit its performance.
It had earlier this year withdrawn its full-year profit guidance at the same time that it cut its dividend, as the pandemic made it difficult for management to accurately forecast the group’s performance.
BT said on Friday that it now expected revenues, adjusted to exclude certain items, to fall 5 per cent to 6 per cent in the year to March 2021. Adjusted earnings before interest, taxes, depreciation and amortisation are expected to fall to £7.2bn-£7.5bn, from £7.9bn during the previous financial year. Free cash flow is expected to be between £1.2bn and £1.5bn.
Shares in the company had fallen by more than 7 per cent to just below £1.00 by late afternoon.
The wide-ranging guidance was below market expectations. Chief executive Philip Jansen said he expected the company to return to sustainable earnings growth “beyond this year”.
Robert Grindle, an analyst with Deutsche Bank, said the first-quarter performance was an “oasis of calm” compared with the situation in May when BT cut its dividend and withdrew its outlook. He said the restoration of the outlook was “progress”.
BT, which owns the EE network, has also had to contend with the uncertainty surrounding the use of Huawei equipment during the period. Mr Jansen described the government’s move to introduce a seven-year phase out of Huawei from 5G networks in the UK as a “sensible plan” despite the cost and logistical implications.
He added that Openreach, BT’s infrastructure division that is used by most of the country’s broadband providers to offer internet to consumers, was accelerating its network upgrade with an additional 31,000 premises passed with full fibre every week. He expects Openreach to have passed 4.5m homes by the end of the year.
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However, he was cautious about signing up rivals such as Sky and TalkTalk to use the new network in the immediate term by offering lower prices for guaranteed volumes of customer upgrades, due to the complexity of complying with competition law. “I don’t think we’ve nailed the notion of longer-term contracts,” said Mr Jansen.
BT also signalled a change at the top with industry veteran Gerry McQuade, who joined when it acquired EE, set to retire. He will be replaced as head of BT’s enterprise division by Rob Shuter, a former Vodafone executive, who has run South African telecoms company MTN for four years.
The company also announced a plan to subsidise broadband upgrades for small UK businesses looking for ultrafast speeds as a way to help struggling companies.
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