BT Group Shares Fall on Plans to Cut 13,000 Jobs, Lower Guidance -- Update
May 10 2018 - 6:33AM
Dow Jones News
(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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