BT to cut 10% of workforce as it announces £1.28bn loss

BT to cut 10% of workforce as it announces £1.28bn loss

  • BT axing 15,000 jobs this year, on top of the 15,000 already lost
  • £1.28bn loss for the last three months pushes firm into a £134m annual loss
  • Performance of BT Global Services ‘unacceptable’

BT is axing 15,000 jobs over the coming year, roughly 10% of its workforce, as it tries to save costs after announcing a dramatic plunge into the red and warning that revenues will drop this year.

Unveiling a £1.28bn loss for the last three months, which has pushed it into a £134m annual loss, the company also cut its dividend to shareholders and admitted that the global economic downturn has knocked a huge hole in its £29bn pension fund, the largest private sector pension scheme in the UK.

To fill the hole in the scheme, which has 360,000 members, BT will increase its annual payments to £525m over the next three years, from the current level of £280m.

The increased pension contributions, coupled with the dreadful performance of the company’s IT business, the value of which BT slashed by a further £1.3bn in the fourth quarter, have pushed BT into a cash squeeze.

The company said it wants to cut operating costs and capital expenditure by more than £1bn this year. As it looks to cut costs, BT has already axed 15,000 jobs over the past year – a third more than had originally been expected – and the company said today that it expects to lose a similar number this year.

Andy Kerr, deputy general secretary of the Communication Workers Union (CWU), said: “15,000 is a very challenging level of job losses, especially on the back of last year’s reductions.

“We expect the majority of job losses to be third party – contractors and agency staff – as they were last year with many jobs being lost outside of the UK. However, this is a serious day for staff at BT.

“We’re working closely with the company to ensure any losses are voluntary and we’re looking at new ways of finding new work and retaining permanent employees, including secondment agreements.”

BT, which earlier this year introduced a pay freeze for all staff, is also slashing its dividend to shareholders to conserve cash. The company announced a final dividend of 1.1p, which makes the full-year payout to shareholders 6.5p this year, compared with 15.8p last year.

This will save the company upwards of £700m but is bad news for its army of 1.2 million shareholders.

‘Unacceptable performance’

“Three out of four of BT’s lines of business have performed well in spite of fierce competition and the global economic downturn,” said chief executive Ian Livingston. “However, this achievement has been overshadowed by the unacceptable performance of BT Global Services and the resulting charges we have taken.”

BT Global Services made an operating loss of £198m in the year to end March, on revenues of £2.36bn. The wildly over-optimistic profit projections made by the business in the past have already caused two profit warnings over the past few months and BT has been forced top slash the value of the unit. BT took a £1.3bn writedown in the last quarter of the year, the vast majority of which is related to problems with two of Global Services’ contracts – including its part in the upgrade of the NHS IT systems. Having already wiped millions off the value of the business earlier in the year, BT’s total writedown for last year was £1.6bn, which plunged the company into an overall loss for the year of £134m.

Total annual revenue was up 1% at £5.47bn in the last quarter of the year, leaving full-year revenues at £21.4bn, up 3%. The company warned, however, that it expects revenue to decline by 4% to 5% this year at least in part because of the problems at Global Services.

The company also gave more details of the position of its pension scheme. It was showing a deficit of £4bn at the end of March, compared with a surplus of £2.8bn last year. At the end of March the market value of the assets in the scheme was £29.3bn, down from £37.3bn last year, while its liabilities were £33.1bn, down from £34.4bn.

BT is still calculating the triennial valuation of the pension fund – which provides a much clearer picture of its true position – and said the Pensions Regulator has indicated it wishes to discuss with the scheme’s trustee and BT “the underlying assumptions and basis of the valuation” .

Sourced from the Guardian Newspaper [Link]

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