Member Info for fleccy

"When is the reintroduced dividend going to be paid ? Please advise"

All they've said is that there'll be a 7.7p dividend during 2021/22, but they haven't said when it will be paid. It isn't surprising that they haven't specified dividend dates as the last results were for 2020/21. We'll hear more in the interims going forward, and it could be paid as an interim and a final, or they could pay it in one go as an announcement in the FY21/22 results.

"Openreach are replacing their fleet with EV's, so in tandem with the new passive network, BT should become one of the greenest Telecom companies on the planet, which will go a long way to attracting investment as funds become more focused on Green/Eco companies/investments."

A Green Agenda isn't for everyone.

https://www.youtube.com/watch?v=BMjJ6vCZX_I

This drop is a blip. and doesn't change the bull case for BT. The Triennial pension review could have produced a much smaller deficit, and I suspect the negotiations between BT and the Trustees wasn't plain sailing. Much is made of BT's debt, but it's not a problem, and neither is the pension deficit in my opinion.
The rollout plan was previously touted as "accelerating FTTP with 20m premises passed target by mid- to late-2020s", now the narrative is "Increase and accelerate full fibre build to 25m premises passed by end of December 2026 ". BT weren't previously guaranteeing 20 million premises passed by 2025, only by the late 2020's, now it's a definite 26 million premises passed by 2026. The leaseback contract with Telereal Trillium is due to end around 2031, I think, so by then all the redundant exchanges will be stripped out in readiness for the handing back of the buildings. As properties are handed back to Telereal, BT's lease liabilities will reduce as a result. As the lease liabilities reduce, so will the associated net debt figure. BT have stated £2 Billion in annual cost saving from 2025.
By Dec 2026 the PSTN network will be switched off, and BT's access network will be majority passive with far less buildings required. BT will only need to provide power at the sites where the OLT's are located, which will reduce BT's operating costs massively, and since the access network will be much simpler fewer Engineers, with lower skill sets, will be required. Due to the passive nature of BT's new network, very little on street maintenance will be required as there'll be hardly any powered street cabinets, without the need to service batteries and on street Equipment. Since the splitters will be in manholes, or up poles, Engineer attendance will only be required for cursory inspections and when faults occur.
Openreach are replacing their fleet with EV's, so in tandem with the new passive network, BT should become one of the greenest Telecom companies on the planet, which will go a long way to attracting investment as funds become more focused on Green/Eco companies/investments.

"7% down is a joke results ain't that bad"

Just the market makers playing their usual games.

"As previously disclosed, no final dividend for 2020/21, but payments expected to resume at an annual rate of 7.7p per share in 2021/22"

Yep, 2020/21 didn't have a dividend. We're now in the 2021/22 tax year, so investors can expect dividends to be allocated in the current tax year.

"Eightyeight88"??

"Deficits overblown everywhere imv- life expectancy was falling even before covid and with interest rates and bond yield certain to tick up deficits will melt away over the next couple of years , i believe."

Indeed, it explains why the agreement has been structured to include a payment switch off, and:

"3. Payments of £600m pa from 1 July 2023 to 30 June 2030 which BT can choose to pay either to the BTPS or to a new co-investment vehicle. This vehicle enables:

funds not needed by the BTPS in 2034 to be returned to BT, reducing the risk of trapped surplus"

"The deficit repair plan is made up of:

1. An Asset Backed Funding (‘ABF’) arrangement to meet £2bn of the deficit:

Provides payments of £180m pa to BTPS over 13 years, secured on EE Limited shares

Payments switch off if the deficit is eliminated earlier than expected

On implementation, BT receives tax relief on £1.7bn fair value of arrangement (allowing for the possibility that payments may switch-off)

2. Payments between 1 July 2020 and 30 June 2023 of £2.7bn (further detail in table in section 3.1 below):

£500m paid in March 2021

£900m by 31 March 2022

£800m by 31 March 2023

£500m by 30 June 2023

3. Payments of £600m pa from 1 July 2023 to 30 June 2030 which BT can choose to pay either to the BTPS or to a new co-investment vehicle. This vehicle enables:

funds not needed by the BTPS in 2034 to be returned to BT, reducing the risk of trapped surplus

assets to be invested as if part of the overall BTPS investment strategy

4. Potential additional payments of up to £200m pa to the BTPS, if required, to meet any increase in the deficit above £1bn that arises at a future annual review. The payments will stop once the deficit at a future annual update has improved such that the remaining deficit repair plan is sufficient to meet the deficit. This provides more certainty to BT over the incremental cash impact in the event of any additional deficit."

https://newsroom.bt.com/bt-announces-triennial-pension-valuation

"Restructuring charges
We incurred charges of £421m (2019/20: £322m), primarily relating to leaver costs. These costs reflect projects within the next stage of our group-wide modernisation programme, as announced in May 2020, which will deliver annualised gross benefits of £1bn by March 2023 and £2bn by March 2025, with a £1.3bn one-off cost to achieve across the five years. "

"Class action claim In January, law firm Mishcon de Reya applied to the Competition Appeal Tribunal to bring a proposed class action claim for damages estimated at £608m (inclusive of compound interest) or £589m (inclusive of simple interest) on behalf of our landline-only customers alleging anti-competitive behaviour through excessive pricing by BT to customers with certain residential landline services. We regret being drawn into litigation on a topic which Ofcom considered more than three years ago. At that time, Ofcom’s final statement made no finding of excessive pricing or breach of competition law more generally. The claim seeks to hold against us the fact that we implemented a voluntary commitment to reduce prices for customers that have a BT landline only and not to increase those prices beyond inflation (CPI). At the reporting date we are not aware of any evidence to indicate that a present obligation exists such that any amount should be provided for. Class actions must be certified by the Competition Appeal Tribunal at a Collective Proceedings Order (CPO) hearing before proceeding to a substantive trial. The CPO hearing is listed on 24 and 25 June 2021. If the class action is certified the substantive trial will not conclude during 2021/22. BT intends to defend itself vigorously. "

Down 5% currently. My hopes around the pension deficit weren't realised, but the current drop has to be a shakeout, combined with a drop in the FTSE. BT's results were ok, but the market's decided to punish them on the flimsiest of reasons.

Yep saw that, I honestly thought it would be much less. I think the trustees haven't been very friendly since:

"The IAS 19 deficit has increased from £1.1bn at 31 March 2020 to £5.1bn at 31 March 2021. Net of deferred tax, the deficit has increased from £1.0bn to £4.2bn"

So the IAS 19 Deficit is actually £4.2 Billion Net, with the quoted deficit being an actuarial calculation based on forecasts and opinion.

"A bit of a game - what do you think sp will be at cob tomorrow"

My wild guess is similar to wetherboy and Larry. If i'm right that the Pension review will signal a significant drop in the deficit, accompanied by a significant cut in contributions, then I can see a good 10% jump in the share price to around 185p. Hopefully BT have negotiated hard with the Trustees to drive down contributions now, allowing BT to divert the money into the FTTP rollout, taking advantage of the tax "super deduction". Should the deficit worsen over the next 3 years, due to cuts in contributions, BT could then contribute more in the following 3 years when corporate tax will have increased to 25%, and BT will realise their projected £1 Billion, increasing to £2 Billion, annual cost savings. If the trustees were compliant and the Pension regulator agrees, it would make most sense to drop contributions to zero over the next 3 years. (185p)

"Only thing I didn’t understand was my 25% tax free wasn’t 25% the quote was about 16% but was told final salary is different."

DC Pension scheme members are allowed to take the full amount in cash, as well as other drawdown options, so the 25% tax free allowance is built into the product rules and tax law. You can't cash in a DB pension, you can only transfer it to an alternative scheme, and I believe the law allows a 25% tax free lump sum, but most DB scheme rules don't allow that. I've got two DB pensions, due to start paying out later this year, as well as a DC pension that I view as surplus to requirement. I intend to put the DC Pension into Drawdown, taking the full 25% lump sum as part of the first payment, and drawdown the rest the following year, or in yearly payments. I consider myself in good health, so I don't currently anticipate taking lump sums on my DB pensions, since I'm approaching 60 and not 65, and may have a lot of fuel left in the tank lol. I'm looking at my DB pensions as a safety net, as they'll pay out irrespective of stock market performance. Either way it's a gamble, since I haven't got a crystal ball, so I'm taking the chance that I'll live a long time. Everyone's circumstances are different, so it's a game of possibilities and probabilities.

"Yes some will be near six figures if they take the option for the largest lump sum with the lowest annual pension. There are several combinations, smaller lump and highest annual pension through part fixed pension and part increasing pension."

Say 10,000 people leave and all take lump sum payments of £100,000 The immediate impact on the pensions scheme would be:

Assets - £1 Billion
Liabilities - £1 Billion
Deficit/Surplus Unchanged

The individuals who decide to take a large lump sum, will see a big cut in their income going forward, with the spouses pension likely remaining the same, where applicable. Since the scheme will see reduced benefits payed in future years, the asset/Liability balance will likely see a bigger reduction in the deficit. I suspect BT would prefer the majority of retirees to take large lump sums.

"Some will already be near to doing so and as they have been with BT since the early eighties will be possibly taking around a six figure lump sum."

Six figure lump sum, how much are these guys on?

It doesn't matter how much lump sum they take, as it will subtract equally from the liabilities and assets, so will have zero impact on the deficit for that year. It may even reduce liabilities, going forward, if lots of members take large lump sums.

"BT’s pension deficit is forecast to come in at £7.5bn, around £2.2bn lower than the market previously anticipated"

Yet again £7.5bn mentioned, but that figure would be an inflated one decided by the Trustees, not based on IAS 19 alone imo.
It probably will be £7.5bn, since the Telegraph seem to have an uncanny knack of getting these figures right, but i repeat it should ne lower than that in my unprofessional opinion. The Telegraph probably have contacts giving them a heads up on these things, we'll find out on Thursday.

"Biggest problem is, most people , customers included, think BT is a " Not For Profit" organisation With Ofcom and the government doing all they can to make it so."

The current regulatory environment wont last forever. Openreach will always be the biggest infrastructure provider in the UK. Even though profit margins reduce, due to other providers using PIA, Openreach will always get a cut. Even councils are getting in on the act, and building their own metro networks, using PIA, which incidentally reduces competition from others. No matter what OFCOM does, it doesn't appear to change the competitive climate in the UK, with all the other providers dependant on BT/Openreach infrastructure. BT are spending "£12 Billion" on FTTP, but they get more Bang for the Buck, since they own Openreach. The VM/O2 merged company are talking about spending £10 Billion on rollout, with much of it using Openreach infrastructure, so Openreach will get a cut of that £10 Billion as well as ongoing income from rental charges.
Whatever OFCOM does seems to backfire, with nothing really changing. Even if OFCOM force BT to sell Openreach, current shareholders will gain from that and BT will still own the poles, ducts, wayleaves, and much of the Fibre.
As I've said previously, telecoms providers need scale to profit so many of the current altnets will disappear into the ether, with just a few big players remaining.
Vodafone could have spent a fraction of their German investments fibering out the UK, but they decided not too, and the same could be said of others. There's an argument that OFCOM have actually stifled true competition by regulating BT to provide wholesale services to others

"Net Profit minimum and maximum should be swap places with each other too"

I suspect all eyes are on the Pension review, with no big surprises expected around earnings.
The pension deficit is by far the most interesting part of the upcoming results as far as I'm concerned. Even the dividend suspension, with the intention to restart it at half the previous level, could have an effect through the employers covenant.
Currently spot RPI is up, but the year on year RPI has dropped steadily since 2017.
Spot Gilt and Corporate bond yields are above September levels, which is a positive.
If the stars align, I can see the deficit much lower than expected, and deficit contributions dramatically reduced. If the deficit comes in at £7.5 Billion, or above, it won't be the macro financial background, it will be based on the opinions of the Trustees imo.

"Was last year a fk-up and just an inaccurate fouling up in the books with a corrective bill to be suffered this year?"

I very much doubt it was wrong, since it was part of the official published results and was reiterated in the Pension Teach In. The Q4 results advised that the decrease in the deficit was driven by an increase in Corporate Bond Yields.
In simple terms, if they can maintain the value of the assets while paying out the Benefits, then the liabilities should reduce by the amount payed out in benefits, therefore reducing the deficit. Last year the value of the assets held up, due to Deficit contributions and investment returns, with the benefits paid reducing the liabilities by £2.764 Billion; "Changes in discount rate, inflation expectations, mortality assumptions" reduced the liabilities by a further £4.244 Billion, having the biggest impact on the deficit, and is variable dependant on the macro environment, as are the Asset Values.
My personal view is that the deficit will be well below £7 Billion, hopefully we'll find out on Thursday.

"I'm probably wrong, but I'm convinced the deficit will be much lower than £7.5 Billion."

EMMJANE, from your previous posts, I get the impression you have some knowledge around Gilts, etc. Are you willing to stick your neck out and hazard a guess on the pension deficit? I'm sticking with around £4 Billion.