BT dips as forecast-hitting results seen lacklustre

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LONDON, Nov 8 (Reuters) Britain's BT Group posted in line second-quarter headline numbers on Thursday and promised further growth but market disappointment at lower than expected earnings and margins pushed its stock down over 3 percent.

BT posted a 2-percent rise in earnings before interest, tax, depreciation and amortisation (EBITDA) before specific items to 1.45 billion pounds for the three months to end September.

Revenues rose 3 percent to 5.09 billion pounds, both in line with expectations. But earnings per share missed some analysts' forecasts while profits were affected by the move to restructure the business.

''Significantly, in our view, this is the first time that the company has missed market expectations for six quarters,'' Morgan Stanley analysts said in a note to clients. Other analysts said the results were mixed.

BT unveiled a major shake up earlier this year, creating two new business units in an attempt to cut costs as part of its move to transform the group from a operator with a declining fixed-line business to an IT and communications provider.

It said it had incurred restructuring costs of 167 million pounds (1 million) in the second quarter as the group established the two new units and some management left.

It expects restructuring costs of 450 million pounds in total and for that to generate a payback within 2 to 3 years.

''Our performance underpins our confidence that we can continue to grow revenue, (underlying) EBITDA ..., earnings per share ... and dividends for the year,'' Chief Executive Ben Verwaayen said in a statement.

Analysts had been expecting EBITDA at 1.43 billion pounds and revenues at 5.07 billion pounds, according to Reuters Estimates.

Pretax profit fell 31 percent to 435 million pounds after it paid for the staff leaving costs and reinvestment.

BROADBAND LEADER It had another strong performance from broadband, with the BT Retail unit accounting for 37 percent of net DSL additions during the quarter, giving it a broadband customer base of over 4 million and making it the largest provider in Britain.

In a bid to improve customer loyalty, it has also launched a broadband television service called BT Vision and it said on Thursday that it had already signed more than 100,000 customers.

The so-called new wave revenues from broadband and corporate networked IT services together rose 10 percent.

But margins at the Global Services unit also disappointed, staying flat on last quarter's 10.6 percent. BT has a medium target of 15 percent margins at the unit and Finance Director Hanif Lalani said they would improve in the second half.

''The margin, mainly the Global Services margin, is not fantastic ... but I think they will deliver on that,'' said Dresdner Kleinwort analyst Lawrence Sugarman.

''I would argue that the weakness in the stock price is in part the market and it's maybe slightly worse than that as yesterday we had some signs of life from Virgin Media,'' he said, referring to Virgin Media's hailing a turnaround in its fortunes and a quarterly 13,000 net growth in customer numbers.

REUTERS BJR RAI1723

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