Firm unclear as to exact cost of coronavirus pandemic but now faces challenge from O2-Virgin Media merger
BT has scrapped its dividend for the first time in more than a decade to free up billions to invest in building 5G and next-generation full-fibre broadband across the UK.
BT, which is facing a new rival after the owners of Virgin Media and O2 announced a £31bn merger on Thursday, reported a 12% fall in pre-tax profits to £2.3bn for the year to the end of March.
The company said profits had been affected by a £95m charge due to Covid-19, “mainly reflecting increased debtor provisions”.
Philip Jansen, the chief executive, said: “Of course, Covid-19 is affecting our business. But the full impact will only become clearer as the economic consequences unfold over the next 12 months.”
The company said it had suspended the £1bn final dividend for last year and the estimated £1.5bn in dividends for the coming financial year to the end of March 2021. When the dividend is re-introduced in 2022 it will be at half the previous annual amount, saving another £750m for BT. The company last moved to cut or suspend its dividend during the financial crisis in 2008-09.
Jansen said the money would form part of a £12bn investment to accelerate the process of getting “gold-standard” full-fibre broadband to 20m UK homes by the mid- to late 2020s. BT had previously pledged to reach 15m homes on that timescale.
“In order to deal with the potential consequences of Covid-19, allow us to invest in FTTP [full-fibre broadband] and 5G, we have taken the difficult decision to suspend the dividend until 2022 and rebase thereafter,” he said.
Jansen also unveiled a new five-year modernisation plan for the business, resulting in £2bn a year in savings, which will include cuts to its 100,000-strong global workforce.
“BT needs to be leaner, simpler and more agile,” he said. “This initiative will re-engineer old and out-of-date processes, rationalise products, reduce re-work and switch off many legacy services. But in five years’ time will we end out with less people in BT, definitely.”
He added that the company had completed a three-year, £1.6bn cost-savings plan, which included 13,000 job losses and selling BT’s London headquarters, a year ahead of schedule.
The company has experienced a surge in broadband and mobile use during the coronavirus lockdown, and it said its networks were “performing well, and comfortably within capacity”.