LONDON (Reuters) - Britain’s BT (BT.L) reported second-quarter profit ahead of forecasts on Thursday, as strong demand for broadband and sports TV got the group off to a winning start under new Chief Executive Gavin Patterson.
The 168-year-old former state telecoms monopoly, revealing the impact of a push to offer sports channels along with its core broadband offering, said consumer revenue was up 4 percent, its best performance in 10 years.
Group revenue was flat - the first time it has not contracted in more than four years - while adjusted profit before tax, up 2 percent to 609 million pounds, was ahead of forecasts.
“These are good results, with growth in earnings per share and free cash flow,” said Patterson, the former head of BT Retail who was promoted to CEO in September. “BT Sport has made a confident start and is already delivering for viewers. It is also delivering for the business.”
BT, which had been cutting costs to recover from two profit warnings in 2008 and 2009, stunned the sporting world in 2012 when it agreed to pay 246 million pounds ($382 million) per season to show 38 live football matches.
It put BT up against dominant pay-TV group BSkyB BSY.L which, with the right to show 116 games per season, had already seen off two other challengers in the British pay-TV market.
The move was designed to help BT defend its core broadband business, offering new sports channels for free to existing broadband customers who renewed their contracts or to those who signed up as new customers for BT broadband.
It knocked the group’s core earnings by 4 percent, as expected, but analysts said the strong operating performance would help to offset this over time.
BT said more than 2 million homes had signed up for the new sports service and it was now in 4 million homes due to a wholesale deal with cable operator Virgin Media VMED.O.
“BT Sport may grab the headlines, but these numbers are a reminder of the sheer size and scope of the business,” said Richard Hunter, Head of Equities at Hargreaves Lansdown Stockbrokers.
“BT remains a company in transition but it already has extremely firm foundations in place for further progress.”
In broadband, the BT Retail unit took 93 percent of all new lines that were switched on across the BT network, or 156,000 out of 168,000.
BSkyB reported growth of 111,000 in the last three months to the end of September, meaning results for TalkTalk (TALK.L), which also uses lines from the BT network, could be poor. Shares in TalkTalk were down 3 percent in early trading, while BT was down 1 percent.
“BT’s results today demonstrate that a turnaround followed by a sustained period of improvement in results is achievable with the right strategy,” analysts at Bernstein said.
Reporting by Kate Holton; editing by Lorraine Turner and Tom Pfeiffer