The appointment of a new CEO at BT Group plc (LON:BT.A) (BT.A.L) does not appear to have been met with a significant amount of positivity by investors. Its share price has fallen by over 5% since the announcement was made.
Of course, the new CEO is not due to start working at the company until 1 January 2019, with him set to take on the CEO role from 1 February 2019 after a one-month handover. Therefore, there are still a number of months to go until he starts working at the company. In the meantime, I wouldn’t be surprised if the company’s shares continue to drift, since it remains unclear as to what the long-term strategy of the business will be.
Clearly, there was a strategy change made earlier in the year which included plans to make significant headcount reductions as part of major cost reductions. It could be the case that BT continues with this strategy under a new CEO. This would not be a bad move in my view, since a focus on cost reductions and improving customer service levels could be a means of improving its long-term financial prospects.
The BT share price continues to offer a margin of safety in my view. It has a P/E ratio of around 9, which suggests that it could offer good value for money in the long run. In the short term, though, I wouldn’t be surprised if there is heightened volatility due to the changes that may be ahead over the coming months.
Therefore, while I’m optimistic about the recovery prospects of the stock after a challenging few years, I’m cautious about its performance outlook in the near term. I believe there is the basis of a strong and highly-profitable business, but it could take time for it to be delivered under a new CEO.