BT Group has hiked its annual dividend despite seeing a significant decline in broadband customers.
The telecoms giant lost 491,000 Openreach customers in the 12 months ending March, amid slower-than-anticipated growth in the wider broadband market.
Yet it plans to hand investors a final dividend of 5.69 pence per share, bringing its full-year payout 4 per cent higher to 8p on the back of better-than-expected free cash flow.
Shareholder rewards: Telecoms giant BT Group has hiked its annual dividend despite seeing a significant decline in broadband customers last year
And Allison Kirkby, the firm’s chief executive, said the payouts were possible because BT expects future cash flow to expand considerably.
She said the company had reached an ‘inflection point’ in its long-term strategy after achieving its £3billion cost-cutting scheme a year early and passing the peak of capital investment in its fibre broadband rollout.
As a consequence, BT now forecasts normalised free cash flow to increase from around £1.5billion this year to £3billion by the end of this decade.
BT Group shares soared 8.7 per cent to 122.7p on Thursday morning, making them the best-performing FTSE 100 stock, although they have still fallen by around a quarter over the past 12 months.
Kirkby said: ‘As we move into the next phase of BT Group’s transformation, we are sharpening our focus to be better for our customers and the country, by accelerating the modernisation of our operations, and by exploring options to optimise our global business.
‘This will create a simpler BT Group, fully focused on connecting the UK, and well positioned to generate significant growth for all our stakeholders.’
For the current year, it forecasts adjusted revenues and earnings before nasties to experience modest growth at most.
BT also plans to cut capital expenditure to about £4.8billion, having already reduced it by 3 per cent last year even though its fibre-to-the-premises footprint grew to over 14 million premises.
The group’s turnover tipped up by 1 per cent to £20.8billion in the 2024 financial year due partly to price hikes and rising fibre-enabled product sales by Openreach.
However, pre-tax profits slumped by more than half to £855million, largely owing to a £488m goodwill impairment in its business operation.
Mark Crouch, analyst at eToro, said: ‘The biggest issue BT faces is the ferociously competitive market in which they operate.
‘Broadband providers seek to undercut rivals – forcing down prices, which in turn has heaped pressure on BT’s margins. With hungry competitors ready to gobble up disgruntled customers, BT will have to work even harder to retain them.’
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