BT sees profits leap 21% to £833m

A day after announcing that it will be offering free live Premier League action to its broadband customers, the UK company said profits jumped 21% to £833 million in the quarter to March 31. Underlying revenues were flat against expectations of a 2.8% fall.

The company’s shares jumped by 8% today as it also said it added 136,000 retail broadband customers in the period.

The launch of BT Sport is the company’s response to satellite broadcaster BSkyB’s efforts to win more internet customers by bundling broadband together with its TV and phone services.

BT also announced today that high-speed fibre web connections were now available to more than half of UK home and businesses, with roll-out accelerating in rural areas.

The company also raised its outlook for the current financial year, despite the level of investment going into its TV offering.

BT said it was looking to cut costs by around £200 million a year and that it was expecting £400 million in “specific restructuring costs” in the current financial year.

BT said this would involve some “people costs” as some employees would be given “the option to pursue other activities”. But no compulsory redundancies were expected.

Chief executive Ian Livingston said the figures showed BT was well-placed as it laid out plans to invest in the future.

Mr Livingston said: “In an environment where it is easier to focus only on the short term, we are investing in our future and delivering growth in profits and dividends.

“We have a lot more to do but we are now a lot better positioned to do it.”

He hit back at Sky’s description of BT’s free TV offering as a “marketing gimmick” amid suggestions that it would upset sports rights holders by using sports coverage as a loss leader for other services.

Mr Livingston said: “We talk about customers. They talk about sports rights holders.

“It would be strange if they weren’t pleased about the chance for more people to watch football and to watch the rugby.”

BT is muscling in on Sky’s dominance of sport after winning a three-year deal to show 38 Premier League games a season, while also cutting its broadband price for new customers.

The company expects earnings to fall slightly this financial year as a result of investment in the move - together with higher pensions charges - but start to rise again in the following two years.

Underlying revenues were expected to show an “improving trend”. Full-year results showed they declined by 3%, although profits before tax were up 11% to £2.7 billion and the proposed shareholder dividend was raised 14% to 9.5p.

The revenue fall was blamed on falling income in BT’s traditional base of telephone call and line charges, as well as tough conditions in Europe and the financial services sector, as well as price cuts forced by regulation

The company, whose network is also used by other internet providers, saw its own number of retail broadband customers rise to 6.7 million. TV customers were up 40,000 in the quarter to 810,000.

Richard Hunter, head of equities at Hargreaves Lansdown, said: “Prospects for the company look extremely attractive. The company continues to generate high levels of cash whilst reducing its net debt.”

But he added: “On the sporting front there is no guarantee of success given the fact that BT is a newcomer to a market still dominated by Sky.”