The British telecoms group will eliminate positions and cut bomus payments for top executives after an Italian accounting scandal was revealed to be worse than feared.
BT axes 4,000 jobs and scraps bonuses for top executives
The UK telecoms conglomerate BT Group is clawing back management pay and eliminating 4,000 jobs as it seeks to rebuild investor confidence and overhaul the division involved in an accounting scandal in Italy.
The cuts involve scrapping bonuses for chief executive Gavin Patterson and former chief financial officer Tony Chanmugam for the 2017 fiscal year, BT said on Thursday as it released fourth-quarter results that narrowly beat analysts’ estimates. The company also reduced its outlook for 2018 normalised free cash flow and dividend growth.
Shareholders have been pushing the former British phone monopoly to adjust executive pay after it revealed in January that accounting irregularities in its Italian business were worse than expected, leading to a larger writedown and contributing to a reduced profit outlook. The scandal added to investor concerns over regulatory, investment and competitive pressures for BT, making it one of the worst-performing stocks in the FTSE 100 this year.
“I felt it was inappropriate to take a bonus,” Mr Patterson said on Thursday immediately after the results. Shareholders have been supportive in a challenging year, he said.
Mr Patterson would have had the opportunity to earn a bonus of as much as 240 per cent of his salary of £993,000 (Dh4.6 million) in fiscal 2017. A reduction in deferred bonus plan share awards for the two executives totals more than £500,000.
The 4,000 job cuts will come from global services and BT’s technology, service and operations unit and the company will face a restructuring charge of about £300m over the next two years, BT said. The carrier has more than 100,000 employees.
The weaker financial outlook included a 10 per cent reduction in the estimate for normalised free cash flow in the 2018 fiscal year, to £2.7bn to £2.9bn. Underlying sales will be broadly flat. Adjusted earnings before interest, taxes, depreciation and amortisation will be slightly lower, at a range of £7.5bn to £7.6bn. Dividend growth is now forecast to be lower than the 10 per cent or more previously expected.
“There are a couple of things that we need better visibility on before we can guide beyond the next 12 months,” Mr Patterson said. Additional fibre investment “could be a significant number” and would have a long payback period, he said.
Revenue in the three months ended March 31 increased 10 per cent to £6.12bn, beating the £6.03bn average of five analysts’ estimates compiled by Bloomberg. Adjusted Ebitda rose 2 per cent to £2.07bn, above the £2.03bn average estimates.
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