BT shares back to flat (they were +3% leading the UK Index ), albeit still outperforming an otherwise mild risk-off session for the index into the weekend. Shareholders delivering a tepid welcome to a change (long overdue?) at the top. The board has decided that, following the “broader reaction to our recent results” that new leadership is required, in which case a successor is being sought for CEO Gavin Patterson after 5 years at the helm.

While BT shares rallied 85% (from circa 270p in 2013, to highs just shy of 500p in late 2015), on hopes of a new strategy paying off, they have since been in terminal decline (-60%), most recently flirting with the psychological 200p last seen this time 6 years ago.

Faith in the strategy has implemented has been waning, with big money spent on premiership football rights, buying back into mobile, a bulging pension deficit and an increasingly attractive divided yield that has merely begged questions about its sustainability.

However, the board also says it is “fully supportive of the strategy recently set out by Gavin and his team”. Well they would say that, seeing as they approved it. But what’s the point in changing the man at the top if he is merely tasked with carrying on with a flawed strategy? Patterson is also potentially in place for another 6-7 months. Will he continue to lead his troops on the same bumpy trail?

Shares well off their highs of the day. Reality setting in about the strategy itself rather than the face of it? Poisoned chalice for both bargain hunters and the replacement CEO? Is there a danger of plus ca change…..?

Mike van Dulken, Head of Research, 8 Jun 2018