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The BT (LSE: BT.A) share price is up 38% in a year. That’s pretty good going for a FTSE 100 company that only recently looked sunk by chronic issues, including spiralling capex, a costly pension scheme, fierce competition, and eye-watering debt.
Chief executive Allison Kirkby has enjoyed a storming start since stepping into the role in February 2024. But when I read the full-year results published on 18 May, I didn’t find them quite as dazzling as recent performance might suggest.
Cash strong, revenue weak
Annual revenues dipped 2% to £20.4bn, below the group’s January forecast of 1%–2% growth from the previous year’s £20.8bn. BT blamed weak international sales and softer handset trading. That drop offset solid gains in Openreach and the benefit of price hikes across the network.
Profit before tax jumped 12% to £1.3bn, helped by a one-off goodwill impairment the year before. Adjusted EBITDA came in at £8.2bn, in line with guidance. That’s steady progress rather than explosive growth.
With normalised free cash flow of £1.6bn beating guidance, the board hiked the dividend by a modest 2%.
Leaner, smarter?
Kirkby is pushing hard to streamline BT’s operations. She’s raised the group’s full-fibre target by 20%, aiming to reach 25m premises by the end of next year. But she also has a battle to stem losses to smaller alt-net rivals.
She’s also talking about the potential of artificial intelligence to drive further efficiency, even hinting that BT could shrink further beyond the previously announced 55,000 job cuts by 2030. That’s four in 10 workers, which is brutal, but would save £3bn.
BT reckons the value of its Openreach network isn’t reflected in the share price. A full demerger remains an option. That could unlock value in time.
There’s also speculation BT might consider snapping up troubled rival TalkTalk. I’m not sure how likely that is, but TalkTalk’s plunging customer base and ballooning £1.2bn debt make it tempting. Also a little worrying. Bolting on the business would be another struggle.
Still reasons to pause
I was close to buying BT at the start of 2023, but feared its legacy problems would continue to hang over the business. And yes, a part of me does regret that decision. Thankfully, other shares in my portfolio stepped up.
Today, even after the surge, the shares don’t look wildly expensive. The price-to-earnings ratio is just 10.3. The forecast yield suggests modest growth to 4.26% in 2026 and 4.46% in 2027. It’s well covered by earnings.
BT’s net debt still hovers just over £20bn, which isn’t far off its annual revenue. Return on capital employed sits at 9.6%, which I find underwhelming.
Earnings per share growth has been erratic. That might change, especially if Kirkby keeps delivering. No guarantees, though.
The 15 analysts tracking the stock predict a median target of 199.4p over the next 12 months. From today’s 195.25p, that’s only a 2% gain. Add the dividend, and it’s a decent overall return, but hardly explosive.
I missed my chance and wouldn’t consider buying BT today. There are so many other FTSE 100 stocks I’d rather buy first.
