The last five years have been a challenging period for investors in BT Group plc (LON:BT.A) (BT.A.L). The company has made major changes to its business model which have included £billions in investment. Ultimately, though, its shares are trading 30% lower than they were five years ago, which means that it has been an unsuccessful period for the business from an investment perspective.
Of course, the company has experienced difficulties in that time period. For instance, there was a profit warning in early 2017, with accounting issues in Italy holding back its performance and investor sentiment. The business has also been unable to deliver rising profitability in spite of the acquisition of EE and investment in sports rights. In fact, its bottom line has fallen for the last three years, and is due to continue this trend in the next two years.
That’s a key reason why I think the recent increase in the BT share price may not continue in future months. The business is lacking profit growth potential in the near term in my eyes, and this may mean that investors seek to maintain a margin of safety. Although progress seems to have been made in the implementation of its new strategy, further changes could be ahead as a new CEO commences work in the New Year.
Therefore, I’m cautious about the prospects for the stock over future months. I do, however, feel that over the next five years it could deliver improving performance. I believe that it now has a sound strategy which focuses on capital discipline, costs and customer service. This may allow it to become increasingly competitive in what is a crowded quad play marketplace.
As a result, I’m cautiously optimistic about BT after a tough period. Weakness in the wider market may cause further volatility in future months, but in the long run I believe it could offer a successful turnaround.