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BT to axe 10,000 staff
Contractors, consultants and agency staff hit

By Reuters

Published: Thursday 13 November 2008

BT said on Thursday it is in the process of cutting 10,000 jobs, as it reported second-quarter core earnings and revenues just ahead of revised forecasts.

BT warned less than two weeks ago it would miss original earnings forecasts due to the poor performance of its Global Services unit which had struggled to introduce cost savings.

It said at the time it expected to report group revenue ahead of original forecasts but that earnings per share and earnings before interest, tax, depreciation and amortisation (Ebitda) would be slightly below forecasts.

Its second quarter Ebitda, reported on Thursday, was down one per cent but ahead of forecasts at £1.43bn, underlying earnings per share was 5.9 pence and revenues were up four pe rcent at £5.3bn.

Analysts had been expecting Ebitda of £1.38bn, earnings per share of 4.9 pence and revenues of £5.28bn, according to a Reuters poll of seven brokers who revised their forecasts after the warning.

As part of an ongoing group drive to cut costs, BT said it will reduce its total workforce by around 10,000 this financial year, with around 4,000 from its direct BT staff and the remainder from contractors, consultants and agency staff.

BT has a global workforce of around 160,000 direct and indirect staff.

The company said it was halfway through this process and had already cut 4,000 jobs to date. It said it hoped to achieve the cuts through natural turnover and that the direct jobs were mostly coming from Britain.

The profit warning spooked BT investors, sending its shares crashing to an all-time low, and also raised fears that the group would have to cut its full-year dividend due to the weakness in its "growth engine" Global Services and its pension contributions.

The group had free cash inflow of £369m, up by £198m on last year. Its pension was in surplus by £0.6bn net of tax, compared with a surplus of £2bn at the end of March 2008.

Chief executive Ian Livingston said in a statement: "We continue to expect BT group revenue to grow for the full year."

"However because of the reduction in profitability in BT Global Services, group Ebitda is likely to show a small decline in the current financial year."