Sign up Australia
Proactive Investors - Run By Investors For Investors

BT to offset fibre investment costs with cut to pension liabilities, says Barclays

Barclays has repeated an 'overweight' rating and target price of 450p on BT
BT
Barclays expects BT to provide clarity on pensions and fibre by May 2018

BT Group plc’s (LON:BT.A) plan to reduce its pension liabilities should offset rising expenditure on fibre investment and will continue to support current dividend payments, according to analysts at Barclays.

Last month, the company revealed that it would seek approval to switch the rate used to calculate its pension increases for about 80,000 members from the retail price index (RPI) to the lower consumer price index (CPI) in a High Court hearing late this year.

READ: BT Group faces higher capital expenditure and loss of wholesale customers, says Citigroup

“Recent moves indicate in our view a potential reduction in liabilities, and possibly also deficit repair payments,” Barclays said.

The bank a sees an improving pensions picture with changes to mortality assumptions. It also believes that using asset-backed partnerships could reduce the need for material near-term pension deficit repair payments.

On the BT’s plans to invest in fibre, Barclays has forecast capital expenditure will rise by 6%, or £200mln, in fiscal year 2019 and by 9%, or £300mln, in 2020.

“Offsetting this increase, we model higher wholesale fibre ARPU (average revenue per user) in later years. From a FCF (free cash flow) perspective this results in a 6% reduction in FY19E (fiscal year 2019 estimate).”

READ: Morgan Stanley thinks “dividend sustainability appears the main risk” currently for BT Group

Barclays expects BT to provide clarity on pensions and fibre by May 2018 when it publishes its full year results.

BT’s second quarter results in November this year are forecast to show a 5% decline in under lying earnings (EBITDA) as the group invests in the business and as regulatory headwinds and challenges at the  Global Services division persist, Barclays said.

Barclays repeated an ‘overweight’ rating and target price of 450p, saying it believes improving operational performance and continued cost-cutting can improve free cash flow generation at BT. 





Register here to be notified of future BT.A Company articles
View full BT.A profile View Profile

BT Group plc Timeline

Article
February 02 2016
Newswire
January 15 2016

Related Articles

1504096349_shutterstock_420468130.jpg
August 30 2017
It also confirmed it expects growth for the full-year to be in line with market expectations

No investment advice

The information on this Site is of a general nature only. It does not take your specific needs or circumstances into consideration, so you should look at your own financial position, objectives and requirements and seek financial advice before making any financial decisions. You acknowledge and understand that neither the Company, its related bodies corporate, the information providers or their affiliates will advise you personally about the nature, potential value or suitability of any particular security, portfolio of securities, transaction, investment strategy, or other matter. You should read our FSG and any other relevant disclosure documents and if necessary seek persona advice prior to making any investment decision.

You understand and agree that no Content (as defined below) published on the Site constitutes a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable or advisable for any specific person.

You understand that in certain circumstances the Company, its related bodies corporate, the information providers or their affiliates may have received, or be entitled to receive, financial or other consideration in connection with promoting, and providing information about, certain entities on the Site and in communications otherwise provided to you.

You understand that price and other data is supplied by sources believed to be reliable, that the calculations herein are made using such data, and that neither such data nor such calculations are guaranteed by these sources, the Company, the information providers or any other person or entity, and may not be complete or accurate. From time to time, reference may be made in our marketing materials to prior articles and opinions we have published. These references may be selective, may reference only a portion of an article or recommendation, and are likely not to be current. As markets change continuously, previously published information and data may not be current and should not be relied upon.

Before you act on any general advice we provide, please consider whether it is appropriate for your personal circumstances.

© Proactive Investors 2017

Proactive Investors Australia PTY LTD ACN:132787654 ABN:19132787654.

Market Indices, Commodities and Regulatory News Headlines copyright © Morningstar. Data delayed 15 minutes unless otherwise indicated. Terms of use