BT share price falls as pension deficit soars to £7 billion

on Jan 30, 2015
Updated: Oct 21, 2019

BT Group Plc (LON:BT.A) has seen an increase in third-quarter earnings, driven by strong growth in broadband customers. In a trading update released today, the telecoms giant said that adjusted pre-tax profit had risen 13 percent to £814 million in the three months to the end of December, despite revenues falling to £4.47, down three percent from a year earlier. The company’s adjusted earnings per share increased by 10 percent on those of a year earlier at eight pence.

BT’s enjoyed its “best ever quarter for fibre broadband net additions”, as people flocked to its broadband services, lured by an offering for free access to BT Sport. The company added 119,000 retail broadband customers during the quarter.
“This quarter we have delivered good growth in profit before tax and strong free cash flow,’ commented the company’s chief executive officer Gavin Patterson. He added that BT’s superfast fibre broadband network now covered roughly three quarters of the UK. He also revealed that the company would upgrade its fibre broadband network to achieve speeds of up to 500Mbps across most of the country within a decade.

In today’s statement BT also outlined a plan to pay down its pension deficit by pouring £2 billion into its pension scheme over the next three years. This is part of a 16-year recovery plan agreed with the trustee of the scheme.
However, it was also revealed that BT’s pension deficit had almost doubled from three years ago to £7 billion. The figure was higher than some analysts’ predictions, contributing to a decline in BT’s share price in early trading. BT attributed the increase to “the low interest rate environment”.

In today’s trading, BT shares were down 2.3 percent at 419.40p, as of 09:21 UTC. The company’s stock has risen 4.5 percent since the start of the year.
Patterson also touched upon the company’s mobile ambitions and the ongoing negotiations over the acquisition of mobile carrier EE, though he did not go into much detail. He said:
“Mobility is a key growth area for us. We are making good progress on our due diligence in relation to a possible acquisition of EE and will make further announcements in due course. In the meantime, our Consumer mobile launch plans remain on track.”
According to the Financial Times, the 18 analysts offering 12 month price targets for BT Group plc have a median target of 470.00p, with a high estimate of 580.00p and a low estimate of 355.00p. As of January 24, 2015, the consensus forecast amongst 27 polled investment analysts covering BT has it that the company will outperform the market. This consensus forecast has been maintained since November 05, 2013, when the sentiment of investment analysts improved from “hold”.
As of 09:58 GMT, Friday, 30 January, BT Group plc share price is 419.80p.

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