BT axes board bonuses and 4,000 jobs to cut costs as profits plunge

BT Group has reported a big decline in annual profits, as expected, and announced it was stepping up its cost cutting programme by axeing 4,000 jobs, while also revealing it was trimming executive pay after a challenging year.

Following January's profit warning over the £530m Italian accounting scandal and a slowdown in its public sector and international business, revenue for the year to 31 March rose 27% to £24.06bn but profit before tax tumbled 19% to £2.35bn.

Earnings per share fell by a third to 19.2p and a final dividend of 10.55p was declared to give a 15.4p final payout, up 10% on last year.

There was a warning about the dividend for the ongoing year, though, as while the board said the policy remains progressive but growth will be lower than the 10% previously anticipated.

This belt-tightening will accompany what chief executive Gavin Patterson said was an "accelerating and expanding" of existing cost transformation programmes, most significantly in central group functions, in technology, service and operations, as well as in several other lines of business, including a restructuring of the Global Services division to become a "more focused digital business" with much fewer physical local network assets around the world.

"This will help offset market and regulatory pressures and create the capacity for future investment," he said, with the job cuts calculated to save around £300m over two years a restructuring cost of the roughly £300m.

Openreach, the infrastructure arm that now operates as a separate business with a largely independent board, has launched a consultation with its UK broadband provider customers about developing a business case to support better rural broadband and extending fibre-to-the-premises further around the country.

Guidance for the current year was given that broadly flat revenue will feed through to £7.5-7.6bn EBITDAm £2.7-2.9bn free cash flow an increase in the dividend but at a lower rate, but with a £100m share buyback.

Pay packets pared

Patterson and ex-finance director Tony Chanmugam had their total pay packets chopped as the company scrapped bonus payments for the year.

Patterson saw his earnings fall by three quarters from the £5.28m he received last year to £1.34m, which includes his annual salary of £993,000.

Chanmugam's pay dropped from £2.8m to £258,000.

BT’s remuneration committee chief Tony Ball said: “The past year has been challenging. Although good progress has been made in a number of areas, unfortunately our performance has been significantly affected by the accounting irregularities in our Italian business, the issues that arose in Openreach around deemed consent and the significant challenges we faced in the UK public sector and international corporate markets.

“The committee has made a number of difficult decisions this year in light of these circumstances and exercised its discretion accordingly.”

Taking into account the company’s share price performance in the financial year the level of share incentives that will be awarded for Gavin Patterson in 2017/18 has been reduced from 400% to 350% of salary.