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"The BT share price has bombed 74% in 5 years. Are you saying that in 5 years time the price might be back where it was 5 years ago? Love the super optimism here."
In 5 years time, Openreach will have insalled at least ten million more FTTP.
They are selling buildings, consolidating control staff and premises, and maybe some of the 5,000 exchanges they have.
The pension deficit will be reduced and every other fibre provider will be renting our infrastructure.
There will come a time when BT will reap the huge benefits of FTTP. That's when the shares will be worth x2, x3 or maybe x5 what they are now.
Time will tell.
The BT share price has bombed 74% in 5 years. Are you saying that in 5 years time the price might be back where it was 5 years ago? Love the super optimism here.
Market down today on lockdown fears.No reason for The SP to fall as BT are not affe ted d by any lockdown extensions.The Casino that is the FTSE continues.
Zico72 .............."Buying shares just now for a quid, in three or five years time, at least treble their value"
I agree, BT will become a cash cow once FTTP is done, throwing off very good dividends within 3 -5 years.
Openreach have just announced £12Bn funding for contractors to provide FTTP throughout the UK.
Once the infrastructure is built, it's just pure profit.
Buying shares just now for a quid, in three or five years time, at least treble their value
Yeah agree. They are spending a billion more a year in capex than normal at the moment. Once that passes it’s 2.2 to 2.5 a year cash flow. That is to equity, after debt. At 10x FCF it’s a 22-25bn market cap. Just got to hope there aren’t too many bad breaks along the way with regulation, pension top ups, etc. I am betting there won’t be but that’s why the share price is bombed out
To be fair, BT are in the midst of FTTP and 5G rollout and they're projecting Capital Expenditure for this year to increase to between £4bn and £4.3bn, resulting in normalised free cash flow in the range of £1.2bn to £1.5bn. It's easy for analysts to point at reducing profit, but it isn't like the money's being frittered away, it's being used to build infrastructure that will probably last for generations. As i've stated previously, Telecoms are at the technological limits allowed by physics. In the absence of some kind of Quantum communications breakthrough, none of us, on here, are likely to see any further network hierarchy upgrades in our lifetime's.
As far as the declining revenue's concerned, that will stabilise at some point. It's up to others what they do, but I like BT as a company and I'm super confident in my BT investments. I will just await the inevitable upturn in the price and take my profits when the time comes, probably in the next 5 years.
A quick blast on the latest Analysts consensus forecast and I'm done..
https://www.bt.com/bt-plc/assets/documents/investors/financial-reporting-and-news/latest-consensus/bt-group-consensus-18-sep-2020.pdf
1) No change in bearish sentiment, with very little monetary adjustments compared to previous consensus updates, but what little there was, was downwards.
2) Revenue has at least stopped being indecipherable as previously they had:
year 1 = down, Year 2 = up, year 3 = down.
Now in this update it's clearer - years 1 to 3 revenue are all consecutively down, one after the other. So a clear pattern. Continuance of a declining revenue forecast for year after year, into the future.
3) Net Profit forecast, they have as the worst ever this year at £1.414bn.
However, the good news is they have all subsequent years as showing increases. So next year is showing as £1.607bn net profit and the 3rd year as £1.635bn net profit.
But even year 3 net profit is still below last year's net profit of £1.7bn!
So it's the long haul before a return back to £2bn net profit days of old. No quick turnaround forecast.
But that may not be the case for the SP. I'm expecting at some point the SP to climb ahead of BT actually producing an increase in revenue. All it will take is for the market to agree by consensus that one year in the near future will signal the floor and show - an increase in their forecasts!
Whatever, they have an utterly disastrous forecast for Q2's net profit coming up - the worst so far at only a derisory average of £290m net profit forecast.
Personally I think that's far too bearish (Q1 they forecast £300m+ odd yet BT came in with £448m which I thought was v commendable).
So in effect the market, via the analysts, is saying that after BT produced £448m net profit for the first 3 months they will only come in with £290m for Q2 thus making the H1 report to be published at Late Oct/early Nov only £738m????
Can't believe it!
Surely they must be in error?
Last year's H1 was £1.068bn for net profit
- now they're saying this year's H1 to only expect £738m?!?
I shall enjoy BT proving them wrong by this month's end, but will the market respond positively?
What happened to the traditional response of an uplift in the SP every time a company beats market expectations????
Bugger! Missed Tony's post. Could have saved myself endless typing and simply said:
Ditto - what he said
:)
(Page 2 of 2)
. . . It makes some "tax exempt funds" now to be regarded as profit, so should INCREASE net profit as it is a capital gain (leases) and therefore taxable where previously they were "hiding" it from the tax man.
Some of it has now gone into the net debt calculations, increasing net debt because it was never an asset, where in previous years it was omitted for tax reasons.
The CEO was "blaming" depreciation in Q1 for a reduction against Q1 last year of pre-tax profit due to an increase in the depreciation account - yet all funds in there are tax free so an increased depreciation account is a BONUS for FCFlow!
So, net profit being down as well, but depreciation being up - is still all profit - yet all told in summary the whole lot was less than last year as FCF had fallen to £1bn.
So no, IRFS does not put the £2nm net profit all back together again. No IFRS, and net profit would still be down this year. That's a result of a poor trading result.
- Revenue is unrelenting in it's retracing, that's the central issue, that is being overlooked for pension deficit/ net debt talk.
This new accounting malarkey doesn't whip money 100% away by the taxman. It makes things more upfront and transparent from potentially damaging misappropriation by "some" unscrupulous directors. The money is always there despite the moves. Yet everything was down in Q1 because of the cumulative effect of revenue being down, which I'll come to in the forecast update.
Ends.
(Page 1 of 2)
*** "I see mentions in posts of BT being a £2billion Net Profit company - no it isn't anymore! That's buried in history. And is nowhere forecast to be that for years and years to come."
Velo, when you state that, are you taking BT's projected £2 Billion annualised cost saving by 2025 into account? Would that not increase Net profit considerably? ***
----------------
Hee, Hi Fleccy :) I thought you would think I was referring to you as well; but I've noticed a few posters on here still saying £2bn even after the full year was in.
Bear in mind the cost savings don't always show up pound for pound down at the net profit; rather they can prevent net profit getting worse than expected (but currently net profit is still going to be worse than last year though).
The upcoming Q2 in isolation (H1 terminates in a fortnight so those results will be published in November; have heard they might publish on last day of October though) is forecasting net profit of gulp! only circa £290m! Contrast that to +/- circa £500m of yester-years. I think BT will come in a lot higher as they did in Q1 and got zero commendation for it. But we'll see in a month or so.
But you quote 2025.
One should at least expect no further serious deterioration in the net profit anyway, and hopefully further positive progress whatever amount it will be by that date, but that's too far out for a meaningful speculation, although I am speculating SP-wise the SP will by then (2025) show some decent progress.
------------------
" To add to my previous post, BT reported Normalised Free Cash Flow of £2 Billion in the 2019/20 figures, with Net Profit (Income) coming in at £1.734 Billion, but the 2019 results were based on the IAS 17 accounting standard, whereas the 2020 results were based on the IFRS 16 accounting standard. "
- Can't have your cake and eat it both ways Fleccy:)
The money is always there. It's just moved from one (tax free or shown as non-profit, ie., leases) account to another. Had a quote somewhere but too bushed (literally and horticulturally) but transparency is cited. It's protection for investors from perhaps some BOD's falling to temptation. Remember Tesco getting roasted and directors castigated for fiddling the figures on discounts moved from one year to another to make the accounts "look better"? The money was always there, they didn't steal it, it's just how you declare it.
Besides earlier this year, Free Cashflow was down from £1.7bn to just £1bn at one point which caused widespread concern in the market. It's been improved now. It was 'remedied' quite quickly that made me suspicious - and at the same time net profit was down! Now that's not right if you dislike this IFRS carry on.
Cont >>>
Re the accounting standards change net profit shouldn’t really move. It’s EBITDA, EBIT, debt and operating and financing cash flow that moved. Basically operating leases are now capitalised and expensed as a finance cost rather than operating cost. So you get higher EBITDA plus EBIT and higher debt. Reported leverage actually should have probably decreased
To add to my previous post, BT reported Normalised Free Cash Flow of £2 Billion in the 2019/20 figures, with Net Profit (Income) coming in at £1.734 Billion, but the 2019 results were based on the IAS 17 accounting standard, whereas the 2020 results were based on the IFRS 16 accounting standard. I'm not an Accountant, but the BT results are complicated by the change in accounting standards, making direct year over year comparison harder to determine.
"Reported profit before tax was £2,353m and adjusted profit before tax was £2,860m, impacted by the higher upfront interest expense associated with IFRS 16 lease liabilities recognised on 1 April 2019."
https://www.bt.com/bt-plc/assets/documents/investors/financial-reporting-and-news/quarterly-results/2019-2020/q420-release.pdf
On the plus side, Free Cash Flow exceeds Net Income.
"If cash flow from operations exceeds net income, on the other hand, the company may be much healthier than its net income suggests. That's why many investors, when they try to value a stock, will use the price/cash-flow ratio the share price divided by cash flow from operations per share-instead of the P/E ratio."
https://www.morningstar.com/InvGlossary/cash_flow_from_operations.aspx
"I see mentions in posts of BT being a £2billion Net Profit company - no it isn't anymore! That's buried in history. And is nowhere forecast to be that for years and years to come."
Velo, when you state that, are you taking BT's projected £2 Billion annualised cost saving by 2025 into account? Would that not increase Net profit considerably?
"Next phase of transformation: the modernisation of BT
annualised gross cost savings of £1 billion pa by March 2023, £2 billion pa by March 2025 to be realised through reductions in total labour costs and spend with external suppliers"
https://www.bt.com/bt-plc/assets/documents/investors/investment-overview/investor-meeting-pack.pdf
Will do a write up on it tomorrow (if time as getting ready to hit the road next week; disappearing for a week and a half) but nothing upbeat in the latest Consensus forecasts out this morning dated for Friday 18th Sept.
Here's the link in the meantime for your perusal:
https://www.bt.com/bt-plc/assets/documents/investors/financial-reporting-and-news/latest-consensus/bt-group-consensus-18-sep-2020.pdf
Small point that irks me:
I see mentions in posts of BT being a £2billion Net Profit company - no it isn't anymore! That's buried in history.
And is nowhere forecast to be that for years and years to come.
This current year is looking like £1.4 billion, one of the worst ever, but increasing every year afterwards but still only in the £1.6 billion area for years from now!
If you can't let go of talking of £2 billion net profit say so and I'll start including Pre-tax Profit which is much higher, but it's like saying who gets to keep their full salary with no tax deducted?
£1.4 billion - been posting it regularily but I keep seeing posts of £2 billion. That's yesteryear!
- Perhaps it's the media's fault with quotes abounding of £1.9billion profit during the bid talk, but that is not net!
The primary reason I take interest in the updates is to check if a change in sentiment is apparent by a general uplift in revenue and net profit. But none is forthcoming; in fact the full year's net profit is slightly worse, with revenue now in some sort of shape but sadly from top left to bottom right trajectory for 3 years.
So no jump in the SP on Monday as sentiment is still undesirably bearish towards BT.
Will write up more tomorrow, if I finish tree cutting round the back in time.