Full-year underlying revenue fell 4% to £19.6bn (£19.7bn expected). Declines in Consumer, Business and International were partly offset by growth at Openreach, where higher fibre take-up and price increases helped steady performance, despite ongoing broadband line losses.
Underlying cash profit (EBITDA) was broadly flat at £8.2bn (£8.2bn expected), with cost savings helping to offset weaker revenue.
Free cash flow fell 6% to £1.5bn (£1.5bn expected). Net debt was broadly stable, ending the period at £20.0bn. A final dividend of 5.87p was announced, up 2%, bringing the full year total to 8.32p.
Full-year guidance points to underlying revenue of £19.0-19.5bn in FY27, with underlying cash profit expected to grow to £8.2-8.3bn. BT also reiterated its target for free cash flow to rise to around £2.0bn in FY27 and around £3.0bn by the end of the decade.
The shares were broadly flat in early trading.
Our view
BT’s full-year results were light on fireworks, but they did what they needed to do. Revenue remains under pressure, with declines across Consumer, Business and International only partly offset by Openreach. But tight cost control helped cash profits hold up, while free cash flow came in a fraction better than expected. That matters most for the investment case from here.
The wider strategy involves significantly modernising and simplifying operations and product lines. That includes bringing the BT brand back into parts of the consumer offering, while continuing to move customers onto the new 5G and fibre broadband networks, which have lower running costs than legacy infrastructure. Fewer repairs, better customer journeys and network efficiencies are also helping to support profits.
Cost cuts remain a long-term focus, with management now targeting a leaner workforce by the end of the decade and raising the overall transformation savings plan. There should also be a further benefit from lower investment as the heaviest phase of the fibre build passes. That’s good news for future cash flows, with BT reiterating its target for free cash flow to rise to around £2bn in 2027 and around £3bn by the end of the decade.
The asset we’re most excited about is Openreach, which is responsible for maintaining and building the new fibre networks. Full fibre now reaches 23mn premises, and BT remains on track to reach 25mn by the end of 2026.
This technical-heavy business is unique and higher margin. New fibre connections are growing nicely, and line losses were slightly better than BT had guided for. But it’s too early to declare victory. Competition remains fierce, and legacy broadband lines still make up a large part of the base, so Openreach needs to keep proving that better fibre take-up can offset pressure from older services.
The Business division has secured some encouraging customer wins, but it remains a tougher area to fix. Structural changes, rising costs and a competitive market continue to weigh, and there are some near-term headwinds to work through before efficiencies help in the second half.
BT’s future relies heavily on getting through this major buildout phase and turning investment into sustainable growth, not just better cash flow as spending falls. Progress looks good, and the updated dividend policy is a helpful signal.
All in, we think BT is one of the better-placed names in the sector. But the balance sheet is still stretched, earnings growth is expected to be hard to find for the next few years, and we think upside could be limited.
Environmental, social and governance (ESG) risk
The telecom industry is low/medium in terms of ESG risk. Data privacy and security is the most significant risk driver, not only because customers are increasingly concerned about privacy, but also because cybersecurity breaches can be costly. Product quality is another key risk, particularly given the networks they manage are considered critical infrastructure. Carbon emissions, human capital and business ethics are also risks worth monitoring.
According to Sustainalytics, BT’s overall management of material ESG issues is strong.
BT follows strict security measures to protect personal data and has 3,600 cybersecurity employees. Greenhouse gas reduction policies are strong, including net zero alignment, emissions reduction coverage, audits and verification. BT scores well on board structure, shareholder rights, remuneration, audit and financial systems, and stakeholder governance.
BT key facts
All ratios are sourced from LSEG Datastream, based on previous day’s closing values. Please remember yields are variable and not a reliable indicator of future income. Keep in mind key figures shouldn’t be looked at on their own – it’s important to understand the big picture.
This article is original Hargreaves Lansdown content, published by Hargreaves Lansdown. It was correct as at the date of publication, and our views may have changed since then. Unless otherwise stated estimates, including prospective yields, are a consensus of analyst forecasts provided by LSEG. These estimates are not a reliable indicator of future performance. Yields are variable and not guaranteed. Investments rise and fall in value so investors could make a loss.
This article is not advice or a recommendation to buy, sell or hold any investment. No view is given on the present or future value or price of any investment, and investors should form their own view on any proposed investment.