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BT downsizes but can’t find quick route to growth

FTSE 100 edges higher with BT tumbling 8% after restructuring and 13,000 job cuts disappoints investors who are told telecoms group will not return to profits growth for three years.

 
BT downsizes but can’t find quick route to growth

BT (BT) shares tumbled 8% after a restructuring involving 13,000 job cuts disappointed investors who were told the telecoms group would not return to profits growth for three years.

Chief executive Gavin Patterson is slashing costs by removing managerial and back-office jobs and shifting to a smaller head office in London in a bid to turnaround a business hit last year by an accounting scandal in Italy and a profits warning based on a downturn in trading.

Dividends have been kept at last year’s level and will be held there for two years, the company said.

‘If we compare how we manage the business with our peers, we’re frankly too complex and overweight. This is a big deal,’ Patterson told reporters.

The job cuts will save £1.5 billion over three years and cost £800 million to implement. The shares dropped, however, sinking 19p to 220p after fourth quarter revenue missed analysts’ forecasts, coming in 3% down at £5.967 billion, though core earnings rose 1% to £2.083 billion.

BT forecast that in its current financial year to the March 2019 underlying revenues would drop 2% and adjusted core earnings would be between £7.3 billion and £7.4 billion, down from £7.5 billion in the last year.

It also announced a 13-year funding plan for its pension scheme, which has a deficit of £11.3 billion. BT will pay £2.1 billion into the scheme by 2020 and another £2 billion from the sale of bonds.

‘New initiatives announced today appear to represent self-help measures that reinforce existing strategy rather than taking BT in a bolder new direction,’ said analysts at Jefferies, adding ‘we feared that today's strategy update would be a missed opportunity to acknowledge overbuild threat and go bold on FTTP. That appears to be the case.’

Ian Forrest, analyst at The Share Centre, sid the results provided clarity on important issues and brought more investment in 5G and fibre networks but added: ‘While some parts of the consumer-facing businesses are seeing good growth and investors should be interested in the plans to restructure, the group is still under pressure on a number of fronts and therefore the shares are no better than a hold.’

The FTSE 100 edged eight points or 0.1% higher to 7,670 as investors waited for the Bank of England’s interest rate announcement. It is expected to hold the cost of borrowing.

Next (NXT) shone brightly, rising nearly 8% or 414p to £56.60 after the clothing chain upgraded its full-year profit forecast saying improved spring weather had revived first-quarter sales.

Royal Bank of Scotland (RBS) advanced 4.3% or 11.9p to 288p after agreeing to pay a smaller-than-expected $4.9 billion to settle a US probe into its sale of mortgage-backed securities before the financial crisis.

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2 comments so far. Why not have your say?

Hank Elvis Dobbs (texan)

May 10, 2018 at 20:48

Building a new house...applied for connection , surveyor from BT came out and decided i needed 7 lengths of ducting...a week later two guys arrive in a van to deliver..something obviously got lost in translation as they had me down for three.Anyway after several calls they finally came back..again two blokes to deliver plastic ducting.

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Hank Elvis Dobbs (texan)

May 10, 2018 at 20:51

Then on monday another van turned up this time a solo driver to deliver three pipes..ha ha ...he even asked me if i wanted more..ha ha ..in fact i could have had the run of the van !...complete and utter shambles reminiscent of the bad old days ..

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