Citi keeps BT on sell as annual report reveals EBITDA boost from one-off provision unwind

Citi has reiterated its 'sell' rating and £1.75 price target on BT Group PLC (LSE:BT.A) after the telecoms company's annual report revealed that last year's EBITDA was flattered by an £18 million bonus provision unwind, adding to existing concerns about the quality of the group's cash flows.

Analyst Carl Murdock-Smith argues that BT's revenue, EBITDA and earnings per share growth rank among the worst performances of any incumbent telecoms operator in the sector, casting doubt on the company's target of £3 billion in normalised free cash flow by the end of the decade.

BT's full-year results in May came in broadly in line with Citi's expectations but disappointed investors who had anticipated stronger dividend growth, while also prompting questions about underlying cash generation quality.

The bank acknowledges that normalised free cash flow will improve this year as capital expenditure falls, but argues this does not address the structurally challenging nature of the UK market.

In afternoon trading, the shares were off 3% at 203.9p.