BT Group (LSE: BT-A) (NYSE: BT.US) has enjoyed another storming year. Here are five ways it could make you rich.
1) By continuing its momentum
The old British Telecom was a bit of a joke in its day. The only people laughing at BT Group are those who bought its shares five years ago (sadly, I’m not one of them). The stock is up a ringing 300% since then, roughly six times the growth rate on the FTSE 100. It has been firing on all cylinders lately, defying the flat market to rise 45% in the last 12 months. If you’re looking for a momentum play, BT could be the one.
2) Winning and winning again
British Sky Broadcasting looked unbeatable on its Premier League home turf, swatting aside upstarts such as Setanta and ESPN, until BT unveiled its gameplan. Its bold attacking strategy and clinical finishing swept BSkyB away, allowing it to pick up some priceless TV rights silverware. It has since strengthened its football proposition, paying £300 million a season for exclusive live broadcast rights to the UEFA Champions League and Europa League for the next three seasons. A mighty 2.5 million people signed up to BT sport by the third quarter, contributing to 6% revenue growth in its consumer business. Millions more have signed up via a wholesale deal with Virgin Media. BT is on the attack.
3) Building on these great numbers
BT’s Q3 pre-tax profits leapt 8% to £617 million, while revenues rose 2% to £4.59 billion year-on-year. Earnings per share (EPS) rose 12%. Even its debt position improved, down £500 million to £7.64 billion over nine months. After a record quarter, a massive 18 million households now have access to its fibre network. Better still, it is enjoying double-digit revenue growth overseas. While the FTSE 100 companies have been downgrading their profits outlook, BT has had a more uplifting story to tell. EPS are forecast to grow 11% in the year to June 2015, and 9% the year after.
4) By being and bigger and faster than its competitors
BT has also been quick off the blocks when it comes to superfast fibre broadband, putting on a net total of 150,000 new customers in the third quarter, a rise of 23%. That accounts for 60% of market growth, walloping rivals Sky and TalkTalk. It is now looking to take the lead in ultra-high-definition TV technology, using its £2.5 billion investment in fibre-optic cables to send pictures in 4K, which are said to be four times sharper than current HD broadcasts. BT needs to stay sharp, however, as BSkyB will be keen to strike back. Investors will expect to see signs of positive growth, given the underperforming 2.4% yield.
5) Keeping it tight at the back
BT has its challenges as well. Doing battle with BSkyB is an expensive business, and launching BT Sport hit group earnings. There is the constant worry of its staff pension scheme, whose deficit actually widened by £400,000 in the third quarter to £5.8 billion. TalkTalk has been winning the battle for TV customers, thanks to the success of its YouView box. BT has been brave in grabbing market share, but now management needs to be equally bold in cutting costs, to maintain profits. This company could make you rich, but it still has a battle on its hands.