BT cuts final dividend by almost 90% amid writedown and major jobs cull

BT chief executive Ian Livingston yesterday apologised to shareholders after the company cut its final dividend payout by almost 90% to tackle spiralling pension costs, high debt and problems at a key division.

Livingston, who is also a director of Celtic Football Club, yesterday confirmed BT is seeking to shed another 15,000 roles, after having axed the same number of permanent and agency workers last year as profits plummeted.

The company posted a £1.3bn loss for the first three months of 2009, taking it to a £134m loss for its financial year to the end of March.

Its shares closed down 6p or 6.4% for the day at 88.4p The company swallowed £1.3bn of charges after a review of the value of contracts taking on by BT Global Services, which supplies information technology services to multi-national companies, and took another £280m charge in restructuring, largely redundancy, costs.

It warned that the division would face further restructuring charges of £420m in the next two years.

In a blow to its 1.1m shareholders, including many small investors holding the stock for income, it is to pay a final dividend of just 1.1p, compared to 10.4p for 2008.

This gives investors in the company, which was privatised in 1984, a full-year pay-out of 6.5p down from 15.8p last year.

But it saves the company more than £700m.

Chairman Sir Michael Rake said: "We are all extremely unhappy. The best we can do for all shareholders is fix it quickly and grow the dividend again from a sustainable basis."

Livingston said: "We are certainly not the only company cutting its dividend. We are still among the higher yielding in the FTSE. I apologise to shareholders. It has been a very difficult year."

The company's problems stem from the global services division which caters mainly to large multinational companies which BT had hoped would spearhead its growth in coming years.

Some 85% of the management has been axed since problems started emerging at the division last year and the company is seeking massive cuts in supplier rates and headcount to bring costs under control.

Livingston avoided suggestions that the company might seek to offload the division.

"Had what should have been delivered been delivered, we would be looking at a very different position," he said. "While the assumptions were not unreasonable, the delivery was not good enough. The cost base was too high."

But BT denied that Livingston, who has held the top job for less than a year, held responsibility for the division's problems, having had an overseer role as finance director of the group for three years until 2005.

Tony Chanmugam, who became finance director in December when predecessor Hanif Lalani was shifted to sort out the problems in global services, said: "These are not issues relating to when Ian was CFO.

"These issues have come about because of poor management practices, changes in the economic environment that have taken place in the past few years."

Livingston is under pressure financing the company's giant pension scheme. It said yesterday it would pay £525m per year into the scheme for the next three year, almost double the current payments.

But it was unable to confirm the pension deficit after the Pensions Regulator told the company it wanted to scrutinise its assumptions and valuations.

Analysts are speculating that the deficit could have ballooned to as much as £8bn, from £3.4bn at its last actuarial review three years ago.

At the same time the board is keen for BT to cut its debt, which totals £10.4bn, up 10% on last year.

Rake said: "I believe very strongly the debt level is too high."

Livingston said: "We will do our best to avoid compulsory redundancies."

He said the company is trying to place existing workers in other roles within the company and has cut back on hires.