BT profits set to soar as pensions burden eases
Friday 07 February 1997
BT disclosed that an actuarial valuation of its pensions liabilities was expected to show that the fund was in surplus at the end of last year. The group has previously had to set aside cash from its earnings to fund future pensions payments. Over the past nine months it spent pounds 274m on the voluntary redundancy programme, of which pounds 196m was to cover pensions costs.
James Ross, from stockbrokers Hoare Govett, predicted the reduced pensions burden would add some pounds 200m to BT's annual profits next year. He raised his forecast to pounds 3.4bn, compared with pre-tax earnings of just over pounds 3bn last year.
Robert Brace, the finance director, also said fewer people were leaving BT than he had previously estimated. By the end of the financial year in March, he expected about 6,000 people to have left BT at a cost of pounds 350m in voluntary severance and pensions payments. The earlier forecast cost was of pounds 400m.
Mr Brace said the average payout per employee of pounds 39,000 was considerably less than the pounds 65,000 paid the previous year.
The news came as BT revealed a 9 per cent rise in its profits in the last quarter of 1996 to pounds 909m. Earnings for the nine months to the end of December were pounds 2,508m, up just 3 per cent. However analysts were disappointed by a lower- than-expected 7 per cent annual increase in UK inland call volumes and a 10 per cent drop in BT's revenues from international calls. The shares fell 5.5p to 438.5p.
BT also revealed yesterday that Telenor, a Norwegian mobile phone operator, had agreed to join its Viag Interkom German joint venture.
Investment column, page 20
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