BT Deepens Cost-Cutting Drive to Tackle Energy and Inflation
BT Group announced another extension to a long-running cost savings program as CEO Philip Jansen strives to grow earnings.
BT Group Plc announced another extension to a long-running cost savings program as Chief Executive Officer Philip Jansen strives to grow earnings amid higher energy costs and a challenging economic outlook.
The London-based telecommunications group set a new target of £3 billion by the end of 2025, versus its 2020 cost base, up from £2.5 billion.
That came with second-quarter results which were broadly in line with expectations. Adjusted earnings before interest, tax, depreciation and amortization were £1.97 billion, the company said Thursday, versus the £1.95 billion average of analysts' estimates compiled by Bloomberg. Adjusted revenue was £5.24 billion compared with £5.26 billion estimated by analysts.
BT shares fell 7.2% to 118.5 pence at 8:41 a.m. in London on Thursday.
BT reported a hit of about 40,000 to its Openreach customer connections due to industrial action -- in effect delayed new transfers from other networks, which may or may not happen later. The carrier is in an ongoing dispute over pay with the Communication Workers Union. Last month workers including emergency services call handlers staged walkouts.
“Given the current high inflationary environment, including significantly increased energy prices, we need to take additional action on our costs to maintain the cash flow needed to support our network investments,” Jansen said in the results statement. “We remain laser focused on modernizing and simplifying BT Group.”
The company nudged up an annual capital expenditure forecast to £5 billion from £4.8 billion, citing inflation. It said previous guidance of normalized free cash flow would come in toward the bottom of a previously outlined £1.3 billion to £1.5 billion range.
Jansen previously said that the £7.9 billion Ebitda outlook was deliverable “under any imaginable scenario.”
On a call with reporters, Jansen said supply chain efficiencies and reducing internal duplication are focuses for his cost savings target
BT has absorbed a £200 million year-on-year increase in energy costs this year, Chief Financial Officer Simon Lowth said on the call. The company is about 50% hedged “at good prices” for next year, and it's looking to market purchase or power-purchase agreements for the rest.
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