BT cuts dividend, 15,000 jobs on $2.4 bn writedown

BT cuts dividend, 15,000 jobs on $2.4 bn writedown
Comment E-mail Print Share
First Published: Thu, May 14 2009. 03 06 PM IST
Updated: Thu, May 14 2009. 03 06 PM IST
London: British telecoms carrier BT cut its dividend and announced 15,000 further job losses on Thursday after a £1.58 billion ($2.4 billion) writedown tipped it into a quarterly loss and its pension costs almost doubled.
The writedown is to be taken at its Global Services unit, which supplies the IT needs of multinational companies and which the company had for years striven to make its growth engine.
The group also said it would almost double its pension contributions to £525 million ($794.1 million) a year.
Its shares fell 3.6% by 12.40 pm to 91 pence.
BT, which has twice previously in the past year warned about profits at the Global Services unit, said adjusted earnings before interest, tax, depreciation and amortisation were £1.35 billion, down 14%.
Profit before tax on an adjusted basis was down 40% and on a reported basis showed a £1.28 billion loss.
Chief Executive Ian Livingston, who took over under a year ago, had pledged to turn around the Global Services division and analysts said the market had already factored in many of the charges and said the update should bring an end to the uncertainty.
BT said it would take a total charge of £1.3 billion as a result of the completion of contract and financial reviews. It took a specific charge of £280 million relating to the restructuring of the unit and said it would take further charges of around £420 million in total over the next two years.
The analysts also welcomed the pledge to deliver a net reduction in capital expenditure and the further job cuts.
BT said its total labour workforce, of both permanent and contract staff, fell by 15,000 to 147,000 in March, 2009 and said they expected a similar number next year.
The job cuts were all voluntary and through not replacing staff and BT said they expected this to be the case next year.
“Although far from impressive, the worst seems to be out of the way for BT,” Trader Manoj Ladwa said.
“Shareholders are likely to be encouraged by its dividend policy and measures undertaken to turn around its underperforming Global Services Division.”
To help meet its increased pension obligations, BT cut its final dividend to 1.1 pence to give a full year dividend of 6.5 pence, which was down 59% on last year.
Pension gap
The pension contributions will almost double from the previous £280 million annual payment to £525 million a year for the next three financial years.
BT has been engaged in a three-yearly pension review to establish the size of its deficit and what it should contribute to the scheme on an annual basis, based on its asset values and liabilities.
The last review in 2006 put BT’s deficit at £3.4 billion and set annual contributions on a 10-year recovery plan at £280 million.
BT did not reveal the new deficit from the three-year review, but a leading pensions expert said on Wednesday that BT’s pension deficit now stood at £11 billion, although most city analysts expected it to be between £6 to £8 billion.
BT said its triennial pension funding valuation was at an advanced state of completion. It did give its pension position at March 31 on an IAS 19 accounting basis as a deficit of £2.9 billion net of tax or £4 billion gross, compared with a net surplus of £2 billion last year.
Comment E-mail Print Share
First Published: Thu, May 14 2009. 03 06 PM IST