City welcomes BT's return to the dividend list

The telecoms group BT yesterday shrugged aside fears its core business was coming under pressure as it cut debt by more than expected and resumed dividend payments, pushing its shares up 9 per cent.

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The telecoms group BT yesterday shrugged aside fears its core business was coming under pressure as it cut debt by more than expected and resumed dividend payments, pushing its shares up 9 per cent.

Separately, it emerged that its chief executive Ben Verwaayen and the company's executive directors have agreed to a pay-freeze this year as part of a wider overhaul of the group's remuneration scheme.

The pay revamp, which will also affect about 14,000 BT staff, will see automatic inflation-linked pay increases scrapped and replaced with performance-related bonuses and share schemes.

BT posted a £2.5bn pre-tax loss, for the three months to 31 March, after taking a £2.9bn charge to cover the write-down of goodwill and assets mainly in its Ignite division.

Sales from continuing operations for the quarter came in at £4.7bn, up 5 per cent from the same period a year earlier and BT said it would pay a final dividend of 2p a share.

The company, which has undergone a major financial restructuring over the past year including a £6bn rescue rights issue, also said it had cut debt to £13.7bn from £27.9bn a year earlier.

"It has not been an easy year but we have taken the hard decisions early and are now in a position of relative strength," Sir Christopher Bland, the chairman, said.

The results were well received by the market and sent shares in BT up 23p to close at 279p, making the stock the biggest riser in the FTSE 100.

"BT delivered a strong set of Q4 figures ... reassuring in the light of a weak reporting season for Europe's incumbents," analysts at JP Morgan said.

On an underlying, or Ebitda, basis, the company reported a fourth-quarter profit of £1.4bn – beating most analysts' expectations – and produced a pre-tax profit, before exceptional items, of £371m.

Analysts were particularly pleased with the performance of BT Retail, its consumer-facing arm, where revenues grew 1 per cent to just over £3bn.

They were also relieved to see the company's pension deficit had fallen to £1.8bn at the end of March compared with about £4bn at the end of September.

BT also confirmed yesterday that it planned to hang onto its landmark head office near St Paul's, saying it would, instead, close a number of its other London offices in a bid to cut costs.

In the face of calls for BT to be broken up, Mr Verwaayen stuck by his guns, saying the businesses would not be split and there was "absolutely no foundation" for such model.