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BT plunged into the red last year, forcing it to slash its dividend for the first time in eight years.
It also announced much bigger job cuts than had been expected. A total of 30,000 posts will have gone by next March. The City had been forecasting total cuts of 20,000 over two years.
The final dividend had always been under threat once new chief executive Ian Livingston unearthed the scale of how much massive contracts had been overstated at Global Services, the division which supplies IT and communications to multi-national companies and government departments.
Today the group said that it had written down another £1.3 billion on Global Services' contracts which more than wiped out any fourth-quarter profit.
Of these writedowns the vast majority - £1.2 billion - were on just two contracts which are believed to be the NHS in London and a major private sector client which is either Reuters or Credit Suisse.
"We think that we taken all the prudent measures on the contracts that we should," said Livingston, who sent his successor as BT finance director Hanif Lalani directly to take charge of Global Services to replace Francois Barrault whom he made resign last October.
"You can never say that we won't have to adjust any of those contracts downwards again but I would say that we have at least started to fix things," claimed Livingston.
"You can see that we are moving on it because more than 2,000 people left Global in the final quarter of the financial year. We always said it would be 2009-10 until we start to see the results."
He said of the job cuts: "There is no getting away from it that this is not good news but we have got to take action to reduce costs.
"These are tough times and I am determined that BT emerges from this recession as a stronger company."
BT swung from pre-tax profits of £1.98 billion to losses of £134 million in the year to end-March. Global Services writedowns and charges for the year were £1.6 billion. Revenues rose 3% to £21.4 billion across the group, but ignoring Global Services the other three profitable divisions increased revenues by 12%.
Livingston said there were some positive signs, including BT taking its greatest share of new broadband installations for five years and cutting costs in the final quarter faster than the City had predicted.
The dividend cut sees the final dividend slashed from 10.4p a share to just 1.1p. That was what most analysts had expected and means that the total for the year is 6.5p. Livingston said that would be the new "rebased" level for the full year payout which he hopes to be able to grow next year.
He also said that he expects executives at the group to get "substantially reduced or even nil bonuses" for the year which just ended.
Livingston, who became chief executive last July, is on a basic salary of £850,000 and could have earned double that or £1.7 million as an annual bonus and the same again in deferred share bonuses in a good year. However, he will have got nothing like that last year.
Unexpectedly, BT did not come up with a final number for its pension black hole as it is still in final negotiations with the Pensions Regulator. But it has agreed with the Trustees to nearly double the amount it pays into the closed funds from £280 million a year to £525 million for the next three years.
Today the shares dropped 4.2p to 90.2p. They have fallen more than 60% in the last 12 months.
Reader views (3)
i used to be with bt for years. They thought i was a captive customer and so never give me freebies and they were right, until talktalk came along and gave free broadband, with their call package. so i switched and am happy with it. now BT keep sending me letters asking me togo back.Too late. haha.
- Anthony Wong, london uk, 15/05/2009 09:49
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BT's problems are self inflicted. BT concentrated on Revenue rather than margin. Also, BT wanted to become a Global player and compete with likes of IBM and IT service providers. Additionally, BT relies on big Government contracts such as NHS, Defence, Local authorities, which are good revenue earners, but may not have good margins.
Anyway, what is still unkwon is the impact of current economic climate on BT. The write downs have been as result of previoud bad contracts and not the current economic climate. What one has to wait for is the impact of government cutback as well as major companies on future revenue of BT>
Also, it would be interesting to know where the money for the shareholder dividen is coming from - sacking Employees or are we likely to get increase in prices?
- Amit, London, 14/05/2009 22:57
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Don't worry BT; the tax payers are here to help you.
We dread you being nationalised again; if you are, you will only become a service industry to the British People like in the bad old days; and not a private company for the benefit of wealthy shareholders etc.
Sack all your British workers; and employ cheaper foreign workers; [ try India etc ] we don’t want the British people having jobs and money in their pockets to spend on luxuries, like BT broadband. Houses, TVs, and Cars etc.
Go to it BT; sack-em, and prosper; with the full blessing of the British Government..
- Mickyinlondon, london, 14/05/2009 21:57
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