The uncertainty surrounding the Brexit vote is already having a significant effect on the UK economy. Economic growth is slowing, and many companies are reporting that customers have become more cautious on purchases ahead of the crucial vote this summer.
However, there’s one industry that’s still reporting robust growth despite economic uncertainty and that’s telecoms.
Indeed, it seems as if customers are still willing to fork out for broadband, TV and mobile services despite broader economic trends, which is great news for Vodafone (LSE: VOD), Sky (LSE: SKY) and BT (LSE: BT.A).
Steady growth
At a time when many other companies are reporting slowing sales as consumers adopt more conservative spending habits, Vodafone, Sky and BT have all reported revenue growth over the past 12 months, and it’s likely that this trend will continue going forward.
For example, for the nine months to the end of March 2016, Sky reported a 5% increase in group revenue and 12% increase in operating profit. In the company’s third financial quarter, 177,000 new customers joined Sky across its pan-European offering. Meanwhile, for the year to the end of March, BT reported revenue growth of 6% year-on-year and reported earnings per share growth of 13%. These impressive results allowed BT’s management to hike the company’s dividend payout per share by 13% to 14p for the full year.
And finally, for the quarter ending 31 December 2015, Vodafone reported organic group revenue growth of 2.6%. Most of this growth came from outside the company’s European area of operations. Vodafone’s revenue from its African, Middle Eastern and Asia-Pacific operations grew at 6.5% year-on-year during the fourth quarter of last year.
International operations
So, customers are still looking to buy the services of Sky, BT, and Vodafone. What’s more, these three companies all have operations outside the UK implying that if the UK economy fell into recession following a Brexit event, Sky, BT, and Vodafone would still be able to generate growth from their international divisions to supplement a lack of growth here in the UK. This should ensure that profits continue to grow even if other companies struggle.
Steady growth forecast
Vodafone is yet to report its results for the year ending 31 March 2016, but City analysts believe that the company will report a 9% fall in earnings per share. But next year the company is expected to return to growth with earnings per share growth of 18% pencilled-in and earnings growth of 29% predicted for the year ending 31 March 2018. Based on these figures, Vodafone currently trades at a 2017 P/E of 40.1 and supports a dividend yield of 5.1%.
Sky’s earnings per share are expected to jump by 10% this year. Based on these forecasts the company is trading at a forward PE of 14.9 and the shares support a dividend yield of 3.5%.
After racking up impressive growth last year, BT’s earnings per share are expected to contract by 7% this year before expanding by around 5% again next year. Based on these projections the company’s shares are currently trading at a forward PE of 14.5 and support a dividend yield of 3.2%.
