FTSE 100: BT shares slump as cost cuts bite

[MongiIG]

As BT spends money on expansion of fibre services it’s cutting costs in other areas of its business. Growth in its consumer and Openreach networks arm offset lower spending by large corporate customers.

 Jeremy Naylor | Writer, London | Publication date: Thursday 03 November 2022

BT shares pummeled after H1

BT, the UK's biggest mobile operator and broadband supplier, has seen its shares pummeled today as a result of news coming through for first half (H1) earnings.

Let's take a look at the figures. The main sweep of this big drop in the stock has been as a result of cost savings. It's raised its cost savings target by a margin of half a billion pounds to help fund the rising cost of building its fiber network as it met its earnings forecasts in the first half.

You can see that revenue up 1% to £10.4 billion. Adjusted EBITDA was up 3% to £3.9 billion. But it's this CapEx outlook that's been revised. And all this has caused such a problem for investors this morning.

Share price chart

Let's take a look at the share price chart. You can see here on the far right hand side that we're now trading at levels pretty much not seen since November 2020.

BT said growth in its consumer and Openreach networks offset lower spending by large corporate customers and the impact of BT sport disposals delivering a 1% rise in adjusted revenue to £10.4 billion.

And you can see here the reaction in the stock. If we close at these levels, it will be the lowest close since December 2020. So very close to two-year lows in the stock of BT.

Where's it to go from here? Well at the moment at least, it's settling out at this 117 pence level. So I wouldn't want to be too short on this stock at the moment. Quite often what happens is you then end up getting a little bit of a retracement. In other words, it might be a little bit of an uplift in the next few days or so.

The problem is that BT, as part of the FTSE 100, which has been pummeled in its own right today because of the big drop in stocks in the wake of the Fed interest rate announcement, we are trading ahead of the Bank of England (BoE).

That shouldn't have too much of an effect on BT stock, but I think from here on in we could well end up being supported at these levels for some little time to come.