BT reported full-year revenue down 1% to £20.7bn, as gains in Openreach were more than offset by declines elsewhere.
Underlying cash profit (EBITDA) rose 5% to £7.9bn, driven by Openreach and Consumer which offset declines in Enterprise.
Underlying free cash flow fell 5% to £1.3bn, with increased cash capital expenditure a key contributor to the decline. Net debt rose £850m to £18.9bn.
For the coming year, BT expects growth in revenue and cash profit, as well as underlying free cash flow of £1.0bn-£1.2bn. New tax incentives will allow Openreach to deliver increased connections and offset inflation and the Group confirmed guidance to reach 25m premises by 2026.
BT plans to reduce its workforce from 130,000 to 75,000-90,000 by the end of the decade.
The board declared a dividend of 5.39p, bringing the full year to 7.70p - in line with last year.
The shares fell 8.9% in early trading.
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Our view
Cost cuts remain in focus as full-year results were dominated by news that the workforce is planned to drop by up to 42% by 2030. Job cuts are hardly surprising, but the plans' scale surprised markets and pointed to many of the issues BT's been facing.
Costs have been a bugbear recently, and the £2.1bn in savings already delivered has undoubtedly helped. But once the fibre and 5G infrastructure is built and adopted, a much leaner operation is needed to generate long-term growth.
The wider strategy involves significantly modernising and simplifying operations and product line. This includes digitising customer journeys and moving customers onto the new 5G and fibre broadband networks, which have lower running costs than legacy infrastructure.
The real workhorse for this is the group's infrastructure arm, Openreach, which is responsible for maintaining and building out the new fibre networks. It hopes to reach 25m premises by 2026 and spending's set to ramp up even further as BT looks to take advantage of government tax breaks. This technical-heavy business is unique and higher margin, and an asset to the business.
However, substantial improvements aren't free. Constant investment is one of the realities of the telecoms business, as infrastructure needs to be maintained and upgraded. We worry that despite the progress and the goal of reducing spend once infrastructure's in place, BT will have to keep shelling out to keep itself on the cutting edge. It doesn't help that telecoms is an inherently difficult sector to deliver attractive margins. Both regulators and customers will always want more for less.
Another drain on cash is BT's large pension deficit. The current payment plan cost just shy of £1bn last year, and there's a new review coming up in a month or so. There's the potential for a write-down on the some of the assets, increasing the deficit. That won't necessarily mean higher payments, but at the very least it'll extend their duration. Add to that the debt pile, especially in the current higher-interest rate, and the demands on cash are considerable.
BT has its attractions. Its mobile networks are broad and generally high quality, while Openreach is unique and higher margin. We were also pleased to see an agreement reached with the union over worker pay, but strike action toward the back end of last year didn't do performance any favours.
Ultimately, while BT is a strong player, it needs to leverage all of its advantages if it's to satisfy the never-ending investment demands and return to sustained dividend growth.
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