The 21st century has not been kind to BT Group (LSE: BT-A) (NYSE: BT.US).
First came the turn-of-the-millennium tech stock crash, sending the telecom giant’s shares crashing down around 90%. And no sooner had the price started to pull up from that slump and start moving upwards again, than the pension-fund crisis hit and triggered a new slump.
Pension hole
The multi-billion-pound deficit led to BT’s having to stump up for massive extra pension fund contributions each year. And coupled with the recession-led retreat from shares, that caused the BT share price slide as low as 72p in 2009 — its lowest in decades, and around 95% down on that late 1999 peak.
Things have been looking more favourable of late and BT’s long-suffering shareholders have had some cause for cheer, but it’s really only in 2013 that the wilderness years are finally being consigned to history.
Since the start of 2013, BT shares have climbed 63% to today’s 377p — and they’re up more than six-fold since the dark days of 2009.
And though dividends were slashed in that crunch year, they’ve been creeping back year on year and are set to deliver a yield of 2.8% for the year ending March 2014. That’s a bit short of the FTSE average of around 3%, but not by much, and it could overtake it in 2015.
The pensions issue hasn’t gone away, of course, and we’ll still have sarcastic writers referring to BT as a “pension fund manager running a telecoms firm on the side” for some time to come, but it’s being dealt with apparently successfully and BT has been able to concentrate on its real business.
Growing profits
And that business really hasn’t been doing badly.
For the year ending March 2013, BT reported an adjusted pre-tax profit rise of 11% to £2,694m with adjusted earnings per share (EPS) up 12% to 26.6p, and lifted its dividend 14% to 9.5p per share.
And by the halfway stage at 30 September, things were firming up further — adjusted pre-tax profit and EPS were up another 3%, and we saw a 13% rise in the interim dividend. Chief executive Gavin Patterson told us that “This has been our strongest ever quarter for fibre take-up with Openreach net connections up 70%. Our fibre network now passes more than 17 million premises“.
Beating Sky
And, of course, the big news has been the early success of the firm’s BT Sports channels, culminating in this week’s coup (albeit an expensive one) that saw BT wrestle the TV rights to UEFA Champions League and UEFA Europa League football for three seasons away from British Sky Broadcasting. Sky shares slumped in response.
So here we are approaching the end of the year, BT shares are up more than 60% so far, the company looks like its getting its business plans firmly on the right tracks, and yet the shares are still on a forward P/E of only 15.7 based on full-year forecasts. Sure, that’s a bit above the FTSE average of 14, but 2015 expectations drop it to under 15 and we’re very likely to be in for a few years of solid earnings growth.
A 2013 winner? Undoubtedly!
