Picture supply: Getty Pictures
BT Group (LSE:BT.A) shares have doubled in worth over the previous 18 months. Meaning £10,000 invested then could be value £20,000 right now. What’s extra, an investor would have obtained round £700 in dividends over the interval.
Again then BT shares had been among the many hardest to worth on the FTSE 100, primarily resulting from its large fibre-to-the-premise (FTTP) investments and internet debt. Nonetheless, it continues to current an attention-grabbing funding case.
Loads of shifting elements
The most recent quarterly outcomes (Q1) inform us a narrative of an organization actively remodeling itself. And from a bullish perspective, BT’s operational momentum is obvious.
The corporate continues to ship on its fibre rollout targets, now overlaying over 19m premises, with document FTTP demand resulting in a 46% rise in internet provides yr on yr. Take-up charges have reached 37%, a market-leading determine, additional validating the long-term strategic guess on community funding.
Retail fibre adoption can also be climbing steadily, up 32% yr on yr, whereas the 5G subscriber base expanded to 13.5m. This additionally reveals continued migration to next-generation connectivity.
Importantly, Openreach is a robust revenue driver, with ARPU rising by 4%. Alongside this, value efficiencies are flowing via, with labour down 5%, decrease power consumption, and streamlined operations offsetting inflationary pressures.
And that is good to see. The inventory began rallying final yr after CEO Allison Kirkby set a brand new goal to ship £3bn of gross annualised value financial savings by the top of fiscal yr 2029. She famous that the enterprise had hit inflection level of FTTP rollout.
Steering confirmed, however debt a priority
Latest efficiency has allowed administration to recommit to its full-year and medium-term steering. On a statutory foundation, analysts now see BT buying and selling at 15.7 instances ahead earnings. This determine falls to 13.6 instances for 2026 and 13.2 instances for 2027. That appears affordable for a capital-intensive operator with defensive traits.
Dividend stability can also be interesting, with payout ratios easing into the 50%-60% vary and ahead yields close to 4%-5%. This means some sustainable income-backed returns.
Nonetheless, there are a number of causes for buyers to be cautious. Headline revenues declined by 3% final quarter, pressured by weaker handset gross sales and softness in worldwide operations. Whereas document fibre take-up is encouraging, underlying broadband line losses of 169,000 spotlight the continued aggressive depth.
Crucially, profitability has dipped, with adjusted EBITDA falling 1%, and statutory revenue earlier than tax dropping 10%, largely from rising finance prices and depreciation. Most significantly, leverage stays a difficulty, with internet debt near £20bn, limiting monetary flexibility.
All-in-all, BT represents an intriguing proposition. Bulls will see a leaner, future-proofed infrastructure chief buying and selling at modest multiples. Bears will argue that progress is fragile, debt-heavy, and returns muted.
Personally, I don’t see the margin of security I’d be on the lookout for on the present value. It’s even buying and selling above its common share value goal. I believe buyers might need to think about different choices.
