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Trevor Neal

BT

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Hello Trevor, thanks for asking.

BT Group, the parent company of BT Sport and BT Mobile, reported its first-quarter results last week. The media giant said its pre-tax profit posted a 12% decline to £2.3 billion for the quarter ending March 31. As a result, the dividend payout has been suspended while its reintroduction is scheduled for 2020, with a 50% decrease. 

Technically, Class A of BT shares is trading near the 11-year low just above 100. Despite the stock market moving higher in April, the BT stock price made a very shallow attempt to rebound higher. Hence, I’d say you should stay away from the BT stock for the time being.


 

 

Edited by Beniamin Thomas

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Hi Trevor,

Per the recent Q1 announcement, BT’s net debt hit £18 billion on March 31, 2020, an increase from last year’s £11 billion. Out of the £7 billion increase, £6.5 billion came from the new lease regulations demanding assets and liabilities on lessee balance sheets
At the same time, the balance sheet indicated a £6.1 billion plunge in the company’s pension deficit. The report also announced the discontinuation of the year’s dividends to March 2021. The move will cushion the organization’s credit rating and release up to £2.5 billion for other value-adding investments during the Coronavirus pandemic. 
This year on May 13, a story emerged of BT’s plan to offload a multibillion-pound share of its Openreach branch. According to the source, the proceeds would fund a £12 billion fiber project. Although the rumor was dispelled, this narrative emphasized the potential value of the telecommunication giant’s stocks. With experts estimating Openreach at £14 billion-£22 billion, all is not lost for BT shares.
 

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Hi Trevor, thanks for asking.

A recent review of BT Group’s financial statements, conducted by one of the big four accounting organizations, KPMG International Cooperative showed that the telecommunications company “did not maintain effective internal control over financial reporting as of 31 March 2020 [the end of its financial year], because of … material weaknesses related to general IT controls and risk assessments.”

KPMG’s review was a major blow to BT. The company appointed KPMG as its external auditor two years ago, after terminating the relationship with PwC after the 2017 event involving the revelation of accounting irregularities in BT’s operations. 

Together with the regulatory filing and BT’s yearly report, KPMG also sent a letter to the board. In the annual report, BT acknowledged it had to make improvements in its internal controls. 

“In 2018/19 management undertook a continuous improvement and enhancement program in relation to its framework of internal control over financial reporting,” said the annual report. “This program identified two areas requiring remediation, specifically, IT general controls and risk assessment, which were reported as material weaknesses in 2018/19.”

The accounting organization also pointed out several factors that might have an impact on BT’s future performance, such as the impacts of COVID-10, Brexit and ban on specific high-risk vendors. 

Concerning this year and 2019, KPMG didn’t find financial irregularities in BT’s financial statements, however, there were some technical issues, said BT Group spokesperson. 

He added that the accounting concerns reviewed by KPMG were not related to BT’s Italian operations, but relate to American Sarbanes-Oxley accounting regulations instead.  
 

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Hi Trevor,

The British government recently announced that no 5G equipment from Huawei can be integrated after next year, and all of the existing 5G equipment will have to be removed over the next few years. Philip Jansen, the Chief Executive of BT Group said that it would be ‘impossible’ to completely get rid of Huawei technology from the British telecoms infrastructure in ‘under ten years’.

The network of the British telecommunications company is interlinked with Huawei technology, as its gear fuels BT’s 2G, 4G and 5G connectivity. Jansen added that Huawei’s technology has been a part of British infrastructure ‘for about 20 years’.

During the last two months, several notable brokers have reduced their target prices for the BT stock, in the range between 110p - 220p.

Analysts predict that BT’s earnings will drop significantly in 2020 and 2021, more than 15% for this year.

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