(Sharecast News) - Telecoms giant BT saw shares pop on Thursday despite reporting a 31% drop in annual profits in the year to 31 March, as the company laid out plans to save £3bn of costs a year by the end of the decade.
The landline, mobile and broadband provider's results, the first under new boss Allison Kirkby, included an increase in the dividend and another round of cost-cutting with the company said to be at an "inflection point" following peak capital expenditure of its full fibre broadband roll-out.
Kirkby said BT had achieved its £3bn cost and service transformation programme a year ahead of schedule, as she announced another £3bn in gross annualised cost savings to be reached by the year ending March 2029.
The stock was up nearly 9% at 122.95p in early deals in London.
"As we move into the next phase of BT Group's transformation, we are sharpening our focus to be better for our customers and the country, by accelerating the modernisation of our operations, and by exploring options to optimise our global business," Kirkby said.
"This will create a simpler BT Group, fully focused on connecting the UK, and well positioned to generate significant growth for all our stakeholders."
BT reported pre-tax profit totalled £1.19bn, down from £1.73bn the year before, after taking a £488m impairment of goodwill.
Group revenues were just 1% higher at £20.80bn. Consumer revenues were up 4% at £9.83bn, Openreach revenues rose 7% to £6.08bn, but Business revenues were down 2% at £8.13bn and continued to be impacted by "higher input costs, legacy declines, a one off revenue adjustment and prior year one-offs".
Normalised free cash flow was down 4% year-on-year at £1.3bn but ahead of guidance of £1.0bn-1.2bn.
Looking ahead, BT said it is targeting just 0-1% growth in adjusted revenue in the year ending March 2025, and EBITDA of £8.2bn, up from £8.1bn previously.
However, it now expects to double normalised free cash flow over the next five years, rising to £1.5bn this year, £2.0bn in 2027 and £3.0bn by the end of the decade.
"Having passed peak capex on our full fibre broadband rollout and achieved our £3 billion cost and service transformation programme a year ahead of schedule, we've now reached the inflection point on our long-term strategy," Kirkby said,
"This delivery and greater capex efficiency gives us the confidence to provide new guidance for significantly increased short term cash flow and sets out a path to more than double our normalised free cash flow over the next five years. This enhanced cash flow allows us to increase our dividend for FY24 by 3.9% to 8.0 pence per share."
BT (BT.A)