BT hits full year earnings target thanks to cost cutting in fourth quarter

Annual results from BT Group beat City forecasts as the UK telecoms giant added a record number of new broadband customers in the fourth quarter.Adjusted earnings before interest, tax, depreciation and amortisation rose 7% in the fourth quarter to £1.79%, ahead of forecasts and producing EBITDA of £6.27bn for the full year, up 3% on the previous year and marginally ahead of market forecasts of £6.2bn.This was despite a slightly weak sales performance in the fourth quarter with a 2% decline in reported revenues to £4.6bn, 1.5% below consensus forecasts, which also led to a 2% fall for the year as a whole to £17.85bn.However, adjusted profit before tax rose 14% in the final three months of the year as underlying operating costs were cut by 6% as BT claimed its best ever quarter for Openreach fibre broadband net connections of 455,000, up 31%, with consumer fibre additions hitting a record 266,000.Adjusted earnings per share rose 11% in the fourth quarter, to help generate a full-year increase of 12% to 31.5p.Normalised free cash flow rose 16% to £2.83bn, which was 5% ahead of the consensus estimate, with the dividend raised 14% to 12.4p."It's been a ground-breaking year for BT, in which we've made some key decisions and announced some major investments to underpin the future growth of the business," said chief executive Gavin Patterson. "Profit before tax and free cash flow have both grown strongly and we have delivered or beaten the outlook we set at the start of the year."He noted that the superfast Openreach broadband network, which regulator Ofcom is poised to begin a review into, now passes more than three-quarters of the UK and there are plans to upgrade to ultrafast."This will be another multi-year investment by Openreach and is the right thing for both BT and the UK, providing even faster speeds in an already competitive market."On the outlook for 2015/16, Patterson and his team continue to expect growth in underlying revenue and modest growth in adjusted EBITDA despite extra year-on-year costs of around £170m plus costs relating to the launch of its UEFA Champions League and UEFA Europa League television content in the year.With normalised free cash flow expected to be largely flat, the 2016 dividend is guided as 'up 10-15%' with a circa £300m, share buyback.Societe Generale noted free cash flow guidance was 4% above current consensus and highlighted a "solid" performance from key performance indicators (KPIs), with fibre now representing 39% of the baseNomura remained bullish on BT's fibre broadband story and was also heartened by the group's emerging "cashflow potential", saying that there could be "significant further upside" to FCF growth if BT can normalise its working capital position - "confirming our view that post EE, BT will generate more cashflow than its UK rival Vodafone".