BT has disclosed a further £3bn cost-cutting drive as the telecoms group signalled it had now passed peak investment in the rollout of its UK full-fibre broadband network and raised its dividend.
Allison Kirkby, who took over as chief executive this year, said the company had reached an “inflection point” in its strategy, as she faces pressure to revive the flagging group.
A number of short sellers took positions in the group after its shares plummeted by 45% over the past five years from 208p in May 2019 to as low as 105p this year.
Announcing its full-year results, BT said it would target a further £3bn gross annualised cost savings by the end of 2029 after hitting its existing cost savings target early. The group had already announced cuts of up to 42% of the company’s 130,000-strong workforce by the end of the decade.
Kirkby said that despite the cost-cutting plan, there was “no change” to the company’s current jobs reduction target. Last May BT said it would reduce its workforce by as much as 55,000 by 2030, from 130,000 at the time to 75,000-90,000. The cuts are expected to include about 10,000 jobs replaced by artificial intelligence.
BT indicated improved cashflow going forward following peak capital expenditure for its fibre network rollout and raised its dividend for the year to March 2024 by 4% to 8p a share.
Pre-tax profits fell by 31% to £1.1bn for the year from £1.7bn in the previous year after BT took an large impairment charge. Shares were up 10% on Thursday at 125p, making it the top FTSE riser on the day.
BT is facing tough competition from scores of rival alternative network providers, or “alt nets”, as it rolls out next-generation 5G mobile and full-fibre broadband through its Openreach subsidiary across the UK. The company has set itself a £15bn plan to roll out high-speed broadband to 25m homes by 2026 and said it has now laid fibre to more than 14m premises, with a further 6m where initial build is under way and is on track to reach 25m by December 2026.
However, the company said it continued to lose Openreach broadband customers with line losses of 491,000 in the year, a 2% decline in the broadband base due to weaker than expected growth.
BT has a 74% share of broadband lines in the UK and had expected to lose customers each year but had also expected to pick up business from new homes being built. “Last year housebuilding was minimal and broadband saw a slight decline because of the consumer squeeze,” Kirkby said.
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Its business division, which serves small businesses and public-sector clients, continued to struggle with a 2 % fall in revenue.
Matt Britzman, equity analyst at Hargreaves Lansdown, said: “BT is growing … slowly. Credit where it’s due, there are clear signs of progress here. Costs associated with the fibre buildout look to be at their peak, and that’s vitally important as telecom giants continue to be punished for investing heavily in the future. Once that spending comes down, free cashflow should jump higher, and markets can reassess how to price these businesses.”
However, he said the business division “continues to be the problem child” and noted that BT had to write down the value of the asset to the tune of nearly £500m.
