Coming just three days after detailed price cuts were announced for its telecoms infrastructure backbone Openreach, BT’s (BT.A) largely in-line first quarter results are not terribly surprising.

That the share price is rallying today - up 3.5% to 232.8p, the third biggest riser among FTSE 100 blue-chips on Friday - is perhaps a sign of relief that there are no particularly nasty surprises, although the 68% jump in reported pre-tax profit may have something to do with it.

For the record, the earnings before interest, tax, depreciation and amortisation (EBITDA) are up 1% to £1.8bn (albeit, after stripping out various adjustments) on £5.72bn revenue, down about 2.1%. Capex (capital expenditure) was roughly flat at £839m and net debt stands at £11.2bn, about half the group’s £23bn market value after today’s share price rise.

In keeping with recent years, Consumer remains the star turn, only now it also includes the mobile customers acquired with EE. This division (by far its biggest worth 40% of core income) saw revenue increase 2% to £2.59bn and a 10% EBITDA hike. Business & Public Sector were mixed, while Openreach and Wholesale reported both revenue and EBITDA declines.

BIG DECISIONS AHEAD

The big questions facing BT now are what it plans to do for growth, how much costly restructuring is on the cards (and what benefits might that bring), and importantly, who is going to be running the show.

Against the backdrop of prior year accounting and regulatory issues BT launched a major new strategy in May, only to announce the departure of chief executive officer (CEO) Gavin Paterson in June. A new boss is expected to be in place before the year ends in March 2019 but it leaves the feeling that BT’s ambitions to change into something more relevant for the digital age are on hold until there is someone in situ to steer the business.

New CEOs like to have the freedom to stamp their own identity and authority on companies and for the time being, visibility about the direction that BT is going to take is pretty limited.

And that means that investors can’t be entirely certain about future dividends, one of the chief reasons to own the stock. The rough 14.9p per share payouts anticipated for this year and next imply a 6.4% yield, if they can be relied on.

The shares might be up a bit today but they are down over the past three months, six months, one and three year periods. In 2015 the stock was close to 500p but ever since the trajectory resembles an Alpine red run. Reversing that dismal trend remains a fundamental objective.

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Issue Date: 27 Jul 2018