As BT updates the market Ian Forrest explains what it means for investors
BT shares drop as it cuts 13,000 jobs and revenues fall
- BT is cutting 13,000 managerial and back-office jobs and leaving its London headquarters as part of restructuring programme
- Despite a large pension deficit and a 2% fall in revenue, the group managed to maintain its dividend
- The Share Centre maintains its ‘hold’ recommendation
BT provided the market with answers to a number of long running questions today with news on its pension deficit and future strategy alongside fourth quarter results. The company said it plans to leave its London headquarters and cut 13,000 management and administrative jobs. To offset this cull, BT also said it will take on 6,000 engineers and customer service staff to support its roll-out of a fibre and 5G mobile networks.
The pension deficit now stands at £11.3bn which is clearly a significant figure but less than many had feared. BT also announced a new funding plan for tackling this deficit; it plans to make payments of £4.5bn to the pension scheme, including an extra £2bn contribution.
As part of the plan to restructure and modernise, the group will increase investment in its 5G and fibre networks. The other good news for investors is that the dividend was maintained this year and the company hopes to keep its dividends at the same level for the next two years.
Today’s results provided some clarity on important issues although the shares responded negatively. In early trading they dropped by over 8% to near a six-year low due to guidance for the new financial year being lower than hoped. Revenue is expected to fall further by 2% and earnings are due to be £7.3-7.4bn, which is lower than the £7.5bn last year.
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.
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