The latest Investing Matters Podcast episode featuring Jeremy Skillington, CEO of Poolbeg Pharma has just been released. Listen here.
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Maybe it’s him being biased given who he works for
I’ve noticed that Alistair Osborne of the Times has never been a fan of BT..... in fact I’m struggling to remember if he has said anything complimentary at all about BT while he has worked for the Times. Best ignore it, otherwise you will find yourself gnashing your teeth and foaming at the mouth at the “anti BT rhetoric” that appears to come from most of the so called experts working for the major papers! ?? Obviously I’m sure he has some valid views, but they never seem balanced IMHO, but then maybe it’s just me being biased as a BT shareholder! ??
Fleccy. I think that the newer employees pensions are with insurance providers, possibly since 2001, but not sure when they actually started using insurers. So those newer pensions would not have any debt linked to BT as the company simply pays in each month the percentage required by the employer. Fairly sure that’s how it now works, so should not be any liability for BT
"The BT bashing continues, the pension deficit is £4.9 billion, not bloody £8 billion."
That's Gross of tax, the Deficit is actually £4 Billion Net of Tax. Also bear in mind, that includes the EE Pension and other pension plans. I'm not sure they'll do a breakdown until next year. Not all of that deficit is down to the BTPS.
"These include an £8 billion pension deficit"
The BT bashing continues, the pension deficit is £4.9 billion, not bloody £8 billion.
Yet, looking through Covid-19, he has two bigger challenges: his strategy and a bunch of legacy issues. Rightly, Mr Jansen has gone big on full-fibre broadband, something BT should have done years ago. He aims to reach 20 million premises by the mid-2020s: a big jump on the 3.5 million today, whatever recent progress at upping the run rate to 40,000 a week. Since lockdown, inquiries to BT call centres about faster broadband are up by 70 per cent. So demand is clearly there.
But the payback is ages away. And Mr Jansen has raised the stakes by nicking £2.5 billion from the dividend to help fund his £12 billion roll-out. Suspending the payout for more than a year before bringing it back at a half-size 7.7p led to an exodus of income investors; one reason for the weak share price. Plus the fact that the broadband investment case is still out of his hands. He wants what he calls a “fair bet” internal rate of return of between 10 per cent and 12 per cent for putting the fibre in the ground. But that depends on regulator Ofcom and tax breaks from BoJo’s distracted government.
Then comes his inheritance. True, he’s lucked out on EE: the £12.5 billion purchase by his predecessor Gavin Patterson that’s central to BT’s converged mobile and fixed-line offer. Elsewhere, though, as Mr Jansen puts it: “With heritage comes a lot of legacy issues.” These include an £8 billion pension deficit, just £2 billion shy of BT’s market cap, and an antiquated voice calls system. There’s also £17.6 billion net debt. Yes, the virus has proved the case for the better business lurking within BT. Dialling it up is another thing altogether.
https://www.thetimes.co.uk/edition/business/bt-s-recovery-still-stuck-on-hold-rhshzrql3
Here’s a business built for a pandemic-changed world. Look what it’s got: zippy broadband for all the home-working, movie-streaming sofa surfers; 5G for mobile connectivity; a line into the expanding communication needs of companies big and small; and sports TV for fans barred from the match.
Yes, BT. Shouldn’t it be raking it in? Instead, it’s just popped up with half-year profits down a fifth to £1.06 billion pre-tax. Plus the dangled carrot that adjusted ebitda for the financial year after next will be at least £7.9 billion: not wildly higher than the midpoint £7.4 billion it’s shooting for this year.
Sadly there’s quite a gap between the real BT and the idealised model. But is its boss Philip Jansen making progress bridging it? Well, not if you look at the share price. When he took over in February last year it was around 230p. Now it’s just 99p, down 2 per cent. So it’s a bold call to say that despite all that he’s on the right lines.
He has excuses for the falling profits. The virus has boosted big picture trends. But, for now, it’s also brought pain. BT is the biggest telecoms provider to small businesses. Its hospitality and leisure customers are “having a nightmare”, Mr Jansen says, and he expects “insolvencies to tick up” all round once the furlough scheme ends. Big clients include IAG, the largely grounded owner of British Airways and Iberia. And less footie in the pubs has hit BT Sports’ income.