BT jumps after new CEO aims to double free cash flow, focus on UK

By Paul Sandle

LONDON (Reuters) - The new boss of BT set out a path to more than double free cash flow over the next five years and potentially dispose of its global enterprise business as it focuses on Britain where it has been investing heavily, sending its shares up by over 10%.

Allison Kirkby, who became BT CEO in February after having previously led Sweden's Telia, signalled her confidence in BT's prospects by upping the dividend by 3.9% to 8 pence after cash flow beat expectations in the annual results.

The group's shares, which have fallen 25% in the last 12 months, rose as much as 12% to 126 pence in early trade, hitting a four-month high and on course for their biggest one day gain since November 2021.

Kirkby has taken the helm at Britain's biggest mobile and broadband provider as its fibre network reaches more than 14 million properties, more than halfway towards the 25 million target set by her predecessor Philip Jansen.

"We have now passed peak capex (capital expenditure)," she said on Thursday. "This, together with ongoing operating efficiencies, means we expect normalised free cash flow to increase substantially from this point on."

Hargreaves Lansdown analyst Matt Britzman said BT's future relied heavily on getting past the peak fibre build-out phase.

"To its credit, progress looks good," he said.

BT reported a 1% rise in revenue to 20.8 billion pounds ($26.4 billion) for the year to the end of March, helped by price rises.

Adjusted core earnings rose 2% to 8.1 billion pounds, driven by its consumer and Openreach networks businesses, it said.

Openreach, which serves Sky and TalkTalk as well as BT's own consumers, was seeing strong demand for fibre, it said, with net adds of 397,000 in the final quarter and more than 4.8 million premises now connected.

But BT Business continued to be a weak point, recording a 2% drop in annual revenue and a 16% fall in core earnings.

It includes its international operation, which was called BT Global until it merged with its UK enterprise unit in 2023, that provides services to multi-nationals.

Kirby said she was "exploring a number of options for all of our international footprint", which could include partnerships as well as disposals.

"We are just now kicking off the carve out. So it will take 12, 18, even 24 months," she added.

BT said it expected revenue to be flat to up 1% this year, while core earnings were forecast to edge up to about 8.2 billion pounds. ($1 = 0.7888 pounds)

(Reporting by Paul Sandle; editing by Jason Neely and Keith Weir)