BT has announced a further £3billion in cost cuts over the coming years, as new chief executive Allison Kirkby expanded on plans to turn around the struggling telecoms giant.
New chief executive Allison Kirkby said the company had hit its initial target of £3billion in savings a year before schedule, and said it would slash the same sum by 2029. The telecoms giant revealed that pre-tax profits dropped by 31% to £1.18billion last year while revenue rose 1% to £20.8billion. It attributed the boost in revenues to recent price increases for broadband customers, which have drawn criticism over the past year.
However, it also lost 491,000 Openreach customers in the 12 months ending March 31, amid slower-than-anticipated growth in the wider broadband market.
BT is currently under pressure as it plans to aggressively expand its full-fibre broadband network across the UK, whilst also cutting tens of thousands of jobs and reducing costs throughout the company. This has led investors to place a record £300million in stock market bets against the group as Ms Kirkby faces pressure to reverse its share price.
Canada Pension Plan Investment Board and BlackRock Investment Management, along with hedge funds including AKO Capital and Kintbury Capital, have all shorted the FTSE 100 company's stock, according to public disclosures. Investors short stocks when they predict a company's share price will fall, borrowing the stock and selling the shares, intending to buy them back at a lower price to make a profit.
The hedge funds' short positions indicate they believe BT's share price will drop. Ms Kirkby stated that the company has reached an "inflection point" in its broadband rollout, having already established fibre broadband in 14 million homes and begun construction on an additional six million.
This is part of a strategy to reach 25 million homes by late 2026. She noted that the business had surpassed the peak spending point on infrastructure expansion, which is carried out through its subsidiary Openreach.
Ms Kirkby took over to turn the business around in February, and today laid out her intention to double its already-mammoth efforts to reduce overheads. Ms Kirkby also revealed that the company achieved its £3billion savings target a year ahead of schedule, marking another "inflection point" in its long-term plan. This involved reducing the workforce by 10,000, bringing BT's total number of employees down to 120,000.
The firm aims to further reduce this number to between 75,000 and 90,000. Despite these cuts, Ms Kirkby confirmed that BT will increase its dividend to shareholders by 3.9% to 8p per share.
BT is now initiating a further savings plan of £3billion between now and 2029, which will include an additional £600million from the current process. The company did not provide specific details on how it plans to achieve these savings, but stated it would continue to focus on the UK market, digitise and "reskill" its workforce, and "optimise" its portfolio of global businesses.
In her concluding remarks, Ms Kirkby said: "As we move into the next phase of BT Group's transformation, we are sharpening our focus to be better for our customers and the country, by accelerating the modernisation of our operations, and by exploring options to optimise our global business."
"This will create a simpler BT Group, fully focused on connecting the UK, and well positioned to generate significant growth for all our stakeholders."