BT is to slash a further 15,000 jobs, as the "unacceptable" performance at its Global Services division sent the company tumbling to a full-year loss.
The chief executive, Ian Livingston, apologised for the company's performance, as he revealed that the dividend payout would be more than halved from the previous year. He also announced plans to tackle the ballooning pension deficit.
The scale of the latest round of job cuts came as a surprise. It already reduced headcount by 15,000 last financial year, a third of whom were direct BT employees, and the rest made up of outside contractors.
BT hopes that voluntary redundancy and natural turnover will account for the latest round, which accounts for about 10 per cent of the group. Of those 80 per cent are based in the UK.
The telecoms giant announced losses of £134m in the year to 31 March, swinging from a £1.9bn profit the year before. It added that revenue would fall by up to 5 per cent next year. Mr Livingston said: "I apologise to shareholders, it has been a difficult year."
The staggering turnaround was sparked by writedowns on contracts at BT Global Services, the division that manages networks and IT outsourcing for multinational corporations.
The group has been reviewing all its contracts and the ensuing writedowns hit £1.3bn in the last quarter, twice as much as forecast. Restructuring of the beleaguered division cost a further £280m, with £420m in similar charges expected over the next two years.
The management said it was committed to turning the division round and was not contemplating a sale.
Mr Livingston, who was appointed chief executive in July, blamed poor management practice from his predecessor and the weakening economic environment for Global Services' problems. Mr Livingston said a recovery programme was in place for the division.
Tom Gidley-Kitchin, an analyst at Charles Stanley, said: "BT is aware that this is pretty much its last chance on Global Services: there may be the odd small contract that goes wrong, but no more major write-offs will be tolerated."
The final dividend was cut from 15.8p a share last year to 6.5p, Mr Livingston announced. Some analysts had feared it would be shelved altogether.
The rest of the business – BT Retail, Wholesale and Openreach – performed solidly, with earnings before interest, taxation, depreciation and amortisation up 4 per cent. Mr Livingston also announced that the plan to overhaul its broadband network, doubling the pace of its roll-out of super fast broadband, had been accelerated. The group said cost-cutting would save £1bn this year.
Rumours had circulated in the past few days that BT's pension shortfall had hit £11bn. John Ralfe, an independent pensions consultant, said on Wednesday that a deficit of anything less was "wishful thinking". BT declined to put a value on the pension hole yesterday, but said it had agreed with the pension regulator to pay in £525m for the next three years.
Sir Michael Rake, the chairman of BT, said: "The world is a very different place than a year ago. Global Services and the questions over the pension deficit has overshadowed the company, but we have made progress."Reuse content