Citi Maintains Sell Rating on BT Group as Annual Report Exposes One-Off EBITDA Flatter

Citigroup has reaffirmed its ‘sell’ rating and 175p price target on BT Group (LSE: BT.A) after the telecoms giant’s annual report disclosed that last year’s EBITDA was bolstered by an £18 million bonus provision unwind — a one-off benefit that has deepened the bank’s concerns over the quality of the group’s underlying cash flows.

Citi analyst Carl Murdock-Smith contends that BT’s revenue, EBITDA and earnings per share growth place it amongst the weakest performers of any incumbent telecoms operator in the sector, raising serious questions over the company’s ambition to achieve £3 billion in normalised free cash flow by the end of the decade.

BT’s full-year results, published in May, came in broadly in line with Citi’s forecasts but left investors disappointed, having anticipated more robust dividend growth. The figures also reignited debate around the quality of the group’s underlying cash generation.

Whilst the bank concedes that normalised free cash flow should improve in the near term as capital expenditure eases, it maintains that this provides little comfort against the structurally challenged backdrop of the UK telecoms market.

BT shares fell 3 per cent to 203.9p in afternoon trading.