BT slashes divi, 15,000 jobs to go

14th May 2009 07:02

Telecoms giant BT has slashed its dividend and cut another 15,000 jobs after a £1.3bn charge sent it to a full year loss of £134m.The charge, which follows completion of contract and financial reviews at its troubled Global Services unit, resulted in a reported loss of £1.28bn for the fourth quarter versus a £494m profit a year earlier. It made a full year profit of £1.98bn last time.Adjusted profit for the quarter slumped 40% to £429m and by 21% for the 12 months ended 31 March to £2.08bn. Final quarter revenue rose just 1% to £5.47bn, leaving the annual figure up by 3% at £21.39bn. It expects revenue to fall by 4-5% in 2009/10, reflecting lower mobile termination rates and the refocusing of Global Services. BT, which sacked 5,000 full-time staff last year and about 10,000 indirect employees, said it expects further reductions of "a similar level" next year as part of a plan to slash spending by £2.7bn.It blamed today's poor results on an "unacceptable" performance at Global Services, which provides IT services for corporate customers. The unit suffered an operating loss of £1.5bn against a profit of £103m in 2008.The division took a restructuring charge of £280m in the last quarter, with further charges of about £420m expected over the next two financial years, most of which will be in 2009/10.About £1.2bn of BT's total charge of £1.3bn was attributed to two of the unit's major contracts, one of which is thought to be the NHS programme to computerise patient records. The final dividend of 1.1p a share is down from 10.4p a year ago and gives a total payout of just 6.5p.Chairman Mike Rake says a deal with the trustees of the BT pension scheme for pension contributions makes him confident the dividend is sustainable.BT will make increase pension deficit contributions to £525m for each of the next three financial years, up from £280m, to try and plug the fund's £2.9bn shortfall. It was £2bn in surplus a year ago.But experts reckon this is way short of the real figure, which some put at more than £11bn, taking into account factors such as life expectancy risk.Killik Capital thinks the outlook for the dividend is poor. "Given the level of the pension contributions, we struggle to see how the group can fulfil all of its objectives for free cash flow and remain sceptical over the potential for dividend growth in the near term - particularly in the next year," said head of equities Jonathan Jackson."However, given our negative view on the dividend and the fact a safe and progressive dividend yield is one of the key tenets of an investment in BT Group, we do not see attraction in the shares."