BT BT Group PLC

(Expands on BT's share fall, restructuring and dividend; adds analyst comment.)

 
   By Adria Calatayud 
 

Shares of BT Group PLC (BT.A.LN) fell Thursday after the company said it will cut 13,000 jobs over the next three years as it steps up restructuring efforts, and forecast on-year falls in both adjusted earnings and revenue for fiscal 2019.

The British telecommunications and TV provider--which employs 106,400 people globally according to FactSet--said it will exit its headquarters in central London to focus on around 30 strategic hubs. The company expects to achieve cash savings of around 1.5 billion pounds ($2.03 billion) after three years, but said its actions will cost GBP800 million.

BT said the job cuts--which will mainly involve back office and middle management roles--will help offset near-term cost and revenue pressures, and provide capacity to invest in value-enhancing projects. The company said it is hiring 6,000 new employees to support network deployment and customer service. Last year, BT slashed 4,000 jobs.

BT unveiled its strategic overhaul as it guided for lower revenue and adjusted earnings in the year ending March 31, 2019 after underlying revenue for fiscal 2018 missed expectations and adjusted earnings before interest, taxes, depreciation and amortization--the company's preferred profit measure--came in at the lower end of the guided range, falling 2% on year to GBP7.51 billion.

At 0919 GMT, BT shares traded 8% lower at 219.60 pence, posting their largest one-day drop since January 2017 and leading the FTSE 100 fallers.

Hargreaves Lansdown analyst George Salmon said the "13,000 job cuts and a move out of central London are drastic actions, and should help deliver GBP1.5 billion in cost savings. But they still aren't going to be enough to dig BT out the hole it's in."

He warns that profit looks likely to fall again next year.

In the fourth quarter of the fiscal year ended March 31, the telecoms company made a pretax profit of GBP872 million compared with GBP440 million in the year-earlier period, it said. Analysts forecast a pretax profit of GBP887 million, according to a consensus estimate provided by the company.

Quarterly revenue declined 2.5% to GBP5.97 billion from GBP6.12 billion a year earlier, BT said. Analysts expected revenue of GBP6.06 billion, according to a consensus the company provided.

For fiscal 2019, BT forecasts underlying revenue will fall 2% and adjusted Ebitda will be between GBP7.3 billion and GBP7.4 billion. The company expects capital expenditure of GBP3.7 billion as it increases its fiber broadband and mobile infrastructure investment. This is below current analysts' expectations for fiscal 2019 of an underlying revenue rise of 0.1% and adjusted Ebitda of GBP7.52 billion, according to a consensus provided by BT.

The board declared a final dividend of 10.55 pence a share, leaving total dividends for the year at 15.4 pence, the same as in the prior year. The company said it will keep dividends unchanged for the next two fiscal years, given its outlook for the period. In fiscal 2017, BT raised dividends by 10%.

"There are silver linings here and there, for example EE and the consumer businesses continue to grow. However, these improvements are being more than offset by challenging conditions elsewhere. Openreach terms are getting tougher, and the business-to-business and global divisions are having a torrid time," Mr. Salmon said.

Separately, BT said Thursday that it reached an agreement with the trustee of its pension plan on the pension valuation and recovery plan after a triennial review. The company agreed to pay GBP2.1 billion within the three years to March 31, 2020 to the pension plan, a further GBP2.0 billion contribution to be funded from the issuance of bonds and further annual payments of around GBP900 million for the next decade.

Write to Adria Calatayud at adria.calatayudvaello@dowjones.com

(END) Dow Jones Newswires

May 10, 2018 06:18 ET (10:18 GMT)

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