BT has reported its financial results for the three-month period to June 30, with the revenues taking a 7% decline due to the impact of the coronavirus.
In the consumer business, revenues declined by 7% year-on-year, while the enterprise unit saw a dip of 9%. The wholesale broadband unit Openreach saw growth of 1%, and with positive news coming out of the national regulatory, Ofcom, this is an area which could continue to drive profits for BT.
“Despite Covid-19, BT delivered a strong operating performance in the first quarter and delivered a relatively resilient set of financial results,” said CEO Philip Jansen. “We continue to invest in the long-term future of the business
“Despite our strong operational performance in the first three months of the year, it is clear that Covid-19 will continue to impact our business as the full economic consequences unfold. Beyond this year and based on current expectations, we expect to return the business to sustainable adjusted EBITDA growth, driven in part by the recovery from Covid-19.”
It is impossible to avoid the massive impact of COVID-19, and there are few positive to takeaway here. With live sport paused, revenues from both residential customers and pubs and clubs declined, while the closure of all retail stores also weighed heavily on the spreadsheets. The SME segment took the biggest hit in the enterprise unit, with companies slimming down expenditure as their own sales slowed.
Looking at the minor positives, customer churn was lower and there was increased activity through the online channels, but clearly this had minimal impact in terms of offsetting the negatives.
And while this all sounds very negative, what is worth noting is that a 7% year-on-year decline is not the end of the world. There are telcos who have had seen worse impacts, though BT executives will be hoping the UK economy does return to prosperity very quickly.
|BT financial results for three months ending June 30 (in millions, £)|
|Profit before tax||561||-13%|
|Profit after tax||448||-11%|
|Capital Expenditure||927||Not material|
“BT has updated the market this morning with its Q1 earnings and with the shares hovering close to a 10-year low, investors would not have been expecting much in the way of good news in the current environment,” said Graham Spooner, Investment Research Analyst at The Share Centre.
“As expected, revenue and earnings fell, but not by as much as some analysts had feared; there was a 7% decline in revenue and a profit before tax of £561 million.
“The CEO described the group’s performance as being resilient but warned Covid-19 will continue to impact. Long-suffering investors won’t need reminding that it’s likely to be a long and uphill road on the route to recover.”
While BT has been negatively impacted by the coronavirus pandemic, it could be worse. Telefonica’s investors had to stomach a 14.8% year-on-year decline in revenues for the three-month period containing the lockdown.
What you also have to remember is BT does have a good starting point. No-one in the UK can compete with the company’s assets (largest geographical coverage for mobile, biggest broadband network and largest public wifi footprint) and should the team figure out how to sell the brand it should be market leader. Dropping EE in favour of BT branding is a step towards making convergence work, but there is perhaps a suspicion that services are a bit too expensive.