BT beats forecasts and reveals pensions boost

City A.M. Reporter
BT posted a better-than-expected rise in fourth quarter core earnings due to cost cuts, strong broadband and enterprise sales and showed a huge improvement in its pension scheme.

Britain's biggest fixed-line services supplier, which has been hampered in the last two years by concerns over its pension deficit, said total revenues for the quarter were down six per cent but core earnings up 3 percent due to cost cuts.

Profits before tax on a reported basis nearly doubled in the last three months of the year, also ahead of forecasts, after the removal of a spate of one off costs to do with its turnaround and pensions.

The company generated free cash flow ahead of its recently improved target and proposed a final dividend up 9 percent. It also set lofty targets for 2012 and 2013, predicting that core earnings would be above 6 billion pounds by 2013.

Analysts had been expecting core earnings for 2013 of £5.9bn.

"We have delivered profits and free cash flow ahead of expectations for the year, while making significant investment in the business for the future," chief executive Ian Livingston said. "Free cash flow has nearly trebled compared with two years ago."

BT posted fourth quarter core earnings of £1.55bn, compared to a Reuters forecast of £1.5bn.

The group also said its pension deficit net of tax was at £1.4bn, down £4.3bn in the year, and in a more important boost, a review into its deficit repayment scheme by the pension regulator has been put on hold.

BT announced in February 2010 a 17-year scheme to fund its £9bn deficit but said at the time that the pensions regulator had "substantial concerns" with certain features of the agreement, which caused its shares to slide at the time.