Shares in BT Group were up on the FTSE 100 in morning trading after the company raised its forecast for the full year 2010/11 after a strong rise in profit in the second quarter ended 30 September.
The group said that adjusted revenue dropped three per cent to just under five billion pounds, but that adjusted pre-tax profit rose 13 per cent to £496 million. Reported pre-tax profit rose 48 per cent to £406 million.
BT also said that it managed to cut its net debt by £1.2 billion to £8.6 billion and added that it would be raising its interim dividend by four per cent to 2.4 pence per share.
The group said it had raised its outlook for the full year, with adjusted EBITDA expected to be around £5.8 billion.
Ian Livingston, Chief Executive of BT, said, "We have made significant progress in improving profitability and cash flow, enabling us to invest in building the foundations for revenue growth in 2012/13.
"We have increased our EBITDA outlook for the year and now expect to hit our £2bn free cash flow target two years early.
"Global Services order intake was up 50% at £2.1bn. Our fibre roll out has passed three million premises and BT Infinity orders are now running at over 4,000 per week. BT Vision customers now stand at more than half a million, with more developments planned to enhance our offering. Our share of DSL broadband net additions was 45%, one of our highest shares ever."
Richard Hunter, Head of UK Equities at Hargreaves Lansdown Stockbrokers, commented, "The raising of the full year earnings outlook has driven BT shares forward in early trade.
"The company has begun to deliver across a number of strands as it had previously hoped - the broadband roll out continues apace, Global Services has shown a marked improvement, the free cash flow position looks likely to be significantly ahead of plan, and the BT Vision service is also growing at an impressive clip. The shares more recently have also benefited from the recent government announcement on pensions, which could be a beneficial development in reducing its pension deficit. Meanwhile, at around 4.2% the dividend yield is an attraction in the current interest rate environment. Set against this, BT operates in a number of markets which are notoriously competitive, whilst intense pressure on its fixed line offering remains.
"The shares have had a good run of late, rising 37% over the last six months as opposed to a 9% gain in the wider FTSE100. Even so, following on from an unusually upbeat outlook and a solid set of numbers, the general market view of the shares as a strong hold may come under positive pressure."
By 09:40 shares in BT Group were up 3.51 per cent on the FTSE 100 to 165.00 pence per share.