February 3, 2012 / 7:47 AM / 6 years ago

BT posts solid earnings and raises guidance

LONDON (Reuters) - Lower regulatory charges, cost cuts and strong demand for a wide range of services enabled Britain’s BT to post solid third-quarter core earnings on Friday and lift aspects of its forecasts.

BT, which has offset falling revenues in recent years by deep cost cuts and an improving operational performance, said revenues for the three months were down 5 percent but that earnings and cash generation remained good.

Adjusted free cash flow was up 65 million pounds to 634 million pounds while adjusted earnings per share was up 13 percent to 6.1 pence.

The group said it now expects to exceed its target of 6 billion pounds of adjusted core earnings a year early and it also lifted its expectations for free cash flow to around 2.4 billion pounds, from an earlier forecast of 2.2 billion pounds.

“We have delivered another quarter of growth in profits and cash flow despite the economic headwinds,” Chief Executive Ian Livingston said.

The group posted third-quarter revenues down 5 percent to 4.77 billion pounds, broadly in line with forecasts. When excluding transit revenues which pass through the business and do not affect profits, revenues were down 3 percent. This was below the previous quarter but due to timing issues on certain contracts.

Due to continued strong cost control, core earnings were up 3 percent to 1.5 billion pounds, also in line with forecasts.

Amongst the highlights within the group was demand for broadband, with 146,000 new retail broadband customers, representing 56 percent of the market of net additions.

On the pension front, on an IAS 19 basis, the deficit was 4.1 billion pounds net of tax at the end of December, compared with a deficit of 2.5 billion pounds at the end of September.

Investors and analysts are likely to be looking at the group’s pension situation particularly closely this quarter, as a new triennial review began at the end of 2012, which could lead to a review of how much the group pays into the scheme.

Reporting by Kate Holton

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