EARNINGS PREVIEW: BT 4Q Marred By Global Services Woes
12 Mayo 2009 - 7:52AM
Noticias Dow Jones
U.K. telecommunications company BT Group PLC (BT) will Thursday
report another set of results marred by the poor performance of its
Global Services IT outsourcing division.
BT is expected to announce further write-downs relating to the
unit, hoping to draw a line under its cost troubles. Additional job
cuts and a dividend cut are also expected as part of ongoing
cost-control measures, while the market will be looking for details
on how it intends to restructure its pension payments amid a
ballooning deficit.
BT is expected to post a 45% drop in fourth quarter earnings
before interest, taxes, depreciation and amortization before
one-off charges, specific items and leaver costs, to GBP863 million
from GBP1.57 billion last year, according to a company consensus of
12 analysts.
Analysts expect a loss per share before leavers and specific
items of 0.8 pence for the quarter, compared with earnings per
share of 7 pence last year.
The steep drop in earnings is largely the result of spiraling
costs at Global Services, which manages communications systems for
businesses and which BT had expanded in recent years.
But in January the company reported a GBP340 million non-cash
charge resulting from its review of the unit and analysts expect
further write-downs on Thursday of about GBP481 million. Total
charges for the full-year relating to Global Services are expected
to come to as much as GBP1.5 billion, partly as a result of
covering the costs of upgrading and reinstalling the U.K.'s
National Health Service computer system, and a similar contract for
Thomson Reuters Corp. (TRI).
BT is expected to announce further job cuts in addition to the
10,000 jobs it cut in November as it looks to shore up cashflow,
while analysts estimate that the result of its three-yearly pension
review could throw up a deficit of about GBP6 billion to as much as
GBP8 billion.
"We expect pension top-up payments to be increased to GBP500
million per annum, reflecting a GBP6 billion deficit; BT may spread
payments over more than 10 years," Investec said in an investor
note.
BT's current pension payments are GBP280 million a year over 10
years.
BT's limited free cash flow and growing pension deficit look set
to pressure its dividend which is forecast to fall to 1.1 pence
from 10.4 pence last year, according to consensus.
"Our main concerns are connected to a likely disappointing
outcome of the pension fund review, which could involve significant
deficit payments for BT, hurting cash-flow generation," Oppenheim
Research said in an investor note. "The ability to pay dividends
could thus be negatively affected."
Investec said BT may even shelve its final dividend.
According to consensus, the company is forecast to report free
cash flow, pre-pension top up, for the fourth quarter of GBP956
million compared with GBP1.71 billion last year.
The company's other divisions are expected to perform relatively
well, with fourth quarter Ebitda for BT Retail forecast to rise
7.1% to GBP420 million, Ebitda at Openreach remaining steady at
GBP496 million and just a 3.1% drop in Ebitda in the company's
Wholesale division to GBP310 million.
Although earnings look set to be dented, due to cost overruns at
Global Services, revenue for the fourth quarter is expected to rise
2.2% to GBP5.5 billion.
Shares in BT have more than halved since levels a year ago above
220 pence, largely as a result of concerns over its pension deficit
and Global Services. Shares at 1210 GMT Tuesday were up 1.3% at 95
pence.
Company Web site: www.btplc.com
-By Erica Herrero-Martinez, Dow Jones Newswires; 44 20 7842
9353; erica.herrero-martinez@dowjones.com