LIVEBUSINESS LIVE: BT to boost free cash flow; EasyJet CEO to exit; United Utilities profits slump

Mark Crouch, analyst at investment platform eToro:

‘On the face of it, BT’s full year earnings look positive. Average revenues per user increased by 10% year-on-year, investors are getting a small bump in the annual dividend and the business added nearly 400,000 Openreach customers in Q4 alone.

‘Under the bonnet however, things don’t look quite so rosy. While revenues increased, BT’s profits actually fell by 31%. Another growing concern is the firm’s mounting debt pile, which has risen by another 4% and now stands just short of £20bn. The company has set out £3bn of annualised cost savings to be reached by the end of 2029 and vowed to double free cash flow, which will go some way in countering this.

‘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. It’s no surprise then that the company has hinted at disposing of its global business in order to focus on the UK where they are working hammer and tongs, investing in a rapid rollout of full fibre broadband and 5G to millions of us by 2026.’

The chief executive of EasyJet, Johan Lundgren, is stepping down from the airline early next year.

Lundgren will be replaced by the airline’s chief financial officer, Kenton Jarvis, EasyJet told investors on Thursday.

It came as EasyJet unveiled a bigger than expected first-half loss, ahead of the crucial summer season.

However, ancillary revenue, from things like seat selections or food orders, continued to soar.

Neil Shah, executive director at Edison Group:

‘Financial performance continued to be impacted, showing pressure reflecting higher input costs and legacy declines, showing 2% decline in adjusted revenue. 

‘This was offset by cost transformation and growth in Small & Medium Business (SMB) and Security.

‘This year, BT faced strong geopolitical tension, with conflict in the Middle East region amplifying a wide range of potential impacts, including disruption to suppliers, higher energy costs and increased cyber security threats. This is expected to be a continued risk factor in the future.

‘Moving forward, BT Group’s new guidance for increased short term cash flow and outlook show its desire to deliver consistent growth.

‘BT Group has announced its plans to focus on the UK on the business side, focusing on strong commercial opportunities in the growth of the international secure multicloud market.

‘It will be interesting to see the impact of continued geopolitical tensions, changing technology and other operational costs on BT’s growth.’

Premier Foods beat market expectations for full-year profit, thanks to robust demand as customers opted for their quick meals such as mince pies and gravies and increased marketing spend.

The company, which makes a variety of products from plain flour to cooking sauces and quick meals, expects a return to volume-driven revenue growth this year as consumers chose to eat at home rather than going to restaurants as inflationary pressures loom.

‘We have a strong set of plans for this year, across each of our strategic pillars and with our return to volume growth, we are on track to deliver on full-year expectations,’ boss Alex Whitehouse said.

Electric car quotas being forced on manufacturers risk creating ‘volatility and disruption’ in the market, the boss of one of Britain’s biggest dealerships has warned.

That could mean higher prices as companies scale back the supply of petrol and diesel vehicles to meet the targets and avoid fines, Vertu chief executive Robert Forrester said.

Aarin Chiekrie, equity analyst, Hargreaves Lansdown:

‘Despite some of its infrastructure desperately needing upgrades, United Utilities showed no leaks in its profit pipeline last year. The UK water sector continues to find itself in the spotlight, and there’s significant work to do in restoring public confidence and trust.

‘But United Utilities looks like it’s ready for the fight, bringing forward £400mn of investment to the current year to help reduce its use of storm overflows at a faster pace.

‘Outcome Delivery Incentives (ODIs) came in at £34mn last year, which, despite being a record reward, is roughly £30mn lower than the group’s original expectations. ODI’s are bonuses for delivering above and beyond committed levels of service to customers.

‘The shortfall stems from the negative impact of exceptionally high levels of rainfall last year – the wettest year in the North West for the last 69 years. This put pressure on the group’s capacity to manage it all properly, ultimately leading to burst pipes and unwanted spills from storm overflows.

‘Despite the lower ODIs, full-year profits jumped higher at double-digit rates, in line with market expectations. This growth was largely driven by inflation-linked increases in revenue.

‘Alongside strong cash generation, the group’s debt levels remain within the lower half of its target range, which supports its ambitious £13.7bn plans to expand and upgrade its assets between 2025-2030.’

Under-fire water firm United Utilities has missed market expectations for annual profit, as higher consumer bills failed to offset a steep rise in costs as the group struggles to bolster its envrionmental reputation.

Expensive consumer bills, however, helped lift annual revenue by 8.1 per cent to £1.95billion.

The water supplier to North West England reported an adjusted operating profit of £517.8million for the year to the end of March, compared with analysts’ expectations of £522.2million.

United faced the ire of consumers, politicians and regulators on Tuesday after it emerged the group was responsible for for millions of litres of raw sewage illegally pumped into one of England’s most famous lakes.

It failed to stop the illegal pollution of Windermere, in the Lake District, for 10 hours in February and did not report the incident to the Environment Agency until 13 hours after it started, according to the BBC.

An almost identical incident occurred at the same location in 2022.

Anglo American is eyeing the quick sale of its coking coal business as it seeks to convince investors its radical shake-up is working.

The London-listed mining giant, which has turned down two bids from BHP worth £31billion and £34billion, this week unveiled plans to break up the company to fend off takeover interest.

EasyJet boss Johan Lundgren will step down in early 2025, the budget airline said this morning, as it reported a bigger than expected first-half loss on Thursday ahead of a busy summer season.

Lundgren, who has helped to lead the airline out of its pandemic debt and has grown the holiday business, will be succeeded by finance chief Kenton Jarvis.

The company reported a headline pretax loss of £350million, higher than an expected loss of £340million but down from £392million a year earlier.

‘We are now absolutely focused on another record summer which is expected to deliver strong FY24 earnings growth and are on track to achieve our medium term targets,’ Lundgren said in a statement.

The new chief executive of BT Group has set out a plan to more than double free cash flow over the next five years as the telecoms giant passes the peak of its investment in fibre networks.

Allison Kirkby, who previously led Sweden’s Telia, said BT would increase its dividend for the 2024 financial year by 3.9 per cent to 8p a share after free cash flow beat expectations.

Some analysts had expected free cash flow to suffer during the period as a result of bumper spending on BT’s full-fibre roll-out, potentially even forcing a dividend cut.

While BT surpassed expectations in this respect, broadband line losses to competitors were worse than expected at 491,000 in the year to 31 March – up from 210,000 the prior year.