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BT Group (LSE:BT.A) shares have doubled in worth over the previous 18 months. Which means £10,000 invested then can be value £20,000 as we speak. What’s extra, an investor would have acquired round £700 in dividends over the interval.
Again then BT shares have been among the many hardest to worth on the FTSE 100, primarily resulting from its large fibre-to-the-premise (FTTP) investments and web debt. Nonetheless, it continues to current an attention-grabbing funding case.
Loads of shifting components
The most recent quarterly outcomes (Q1) inform us a narrative of an organization actively reworking itself. And from a bullish perspective, BT’s operational momentum is obvious.
The corporate continues to ship on its fibre rollout targets, now masking over 19m premises, with file FTTP demand resulting in a 46% rise in web provides yr on yr. Take-up charges have reached 37%, a market-leading determine, additional validating the long-term strategic guess on community funding.
Retail fibre adoption can also be climbing steadily, up 32% yr on yr, whereas the 5G subscriber base expanded to 13.5m. This additionally reveals continued migration to next-generation connectivity.
Importantly, Openreach is a robust revenue driver, with ARPU growing by 4%. Alongside this, price efficiencies are flowing via, with labour down 5%, decrease power consumption, and streamlined operations offsetting inflationary pressures.
And that is good to see. The inventory began rallying final yr after CEO Allison Kirkby set a brand new goal to ship £3bn of gross annualised price financial savings by the top of fiscal yr 2029. She famous that the enterprise had hit inflection level of FTTP rollout.
Steering confirmed, however debt a priority
Current efficiency has allowed administration to recommit to its full-year and medium-term steerage. On a statutory foundation, analysts now see BT buying and selling at 15.7 occasions ahead earnings. This determine falls to 13.6 occasions for 2026 and 13.2 occasions for 2027. That appears affordable for a capital-intensive operator with defensive traits.
Dividend stability can also be interesting, with payout ratios easing into the 50%-60% vary and ahead yields close to 4%-5%. This implies some sustainable income-backed returns.
Nonetheless, there are a number of causes for traders to be cautious. Headline revenues declined by 3% final quarter, pressured by weaker handset gross sales and softness in worldwide operations. Whereas file fibre take-up is encouraging, underlying broadband line losses of 169,000 spotlight the continuing aggressive depth.
Crucially, profitability has dipped, with adjusted EBITDA falling 1%, and statutory revenue earlier than tax dropping 10%, largely from rising finance prices and depreciation. Most significantly, leverage stays a problem, with web debt near £20bn, limiting monetary flexibility.
All-in-all, BT represents an intriguing proposition. Bulls will see a leaner, future-proofed infrastructure chief buying and selling at modest multiples. Bears will argue that development is fragile, debt-heavy, and returns muted.
Personally, I don’t see the margin of security I’d be on the lookout for on the present value. It’s even buying and selling above its common share value goal. I feel traders might wish to take into account different choices.
