BT’s Q2 results reveal a good performance on signing up broadband customers, but the picture on services revenues and wins is less convincing.
Total revenue in the quarter was down 2% to £4.89bn. EBITDA was up 3% to £1.50bn, taking the EBITDA margin to 30.5%, compared to 29.1% this time last year. PBT was up 36% to £552m. Shares in the company are up 2.5% currently, making it the second highest riser on the FTSE100 this morning.
BT has become well accustomed to the challenge of eking out profit growth from a shrinking overall income pot, and these results show it is still able to do this, not least by driving productivity and headcount efficiencies. The best news on business expansion came from broadband services, where BT added 166k new customer lines in the quarter. That meant it had a 63% market share of new lines, compared to its 37% share of installed lines. Clearly discounting plays a big part at this end of the market, but nonetheless BT is proving competitive in this space right now, which is helping to drive its revenue per customer, and hence provide another positive lever on profitability.
Meanwhile BT Global Services, BT’s biggest revenue-earner and the bit that handles enterprise, government and international services, returned 1% headline growth in the quarter to £2.01bn. Revenue performance was almost exactly flat once we strip out currency changes and disposals. EBITDA was up 15% to £159m, but BTGS is still loss making at the operating level (i.e. post amortisation and depreciation) to the tune of £31m. But it’s the order intake numbers that most caught our eye. With £1.4bn of orders bagged, BTGS had its lowest quarter on this measure since Q1 of FY10, which was nine quarters ago. Year on year, orders were down 34%, and sequentially they were down 10%. It’s true that BT, like everyone else, is facing major headwinds in the business services market. But its order intake for the quarter still looks below par, especially given its exposure to good growth opportunities in places like Asia Pacific and, increasingly, Latin America.
We’ll be getting more detail from BT over the next couple of days, so will bring further comment to TechMarketView subscribers once we’ve digested that.