BT ups full-year outlook as cost cuts help

By Kate Holton

LONDON (Reuters) - BT Group increased its outlook for the full year after stringent cost cuts helped the former telecoms monopoly deliver strong core earnings as it recovers from a debacle at its key division.

BT, which is in the process of restructuring following two profit warnings last year, said on Thursday it was seeing improvements at its troubled Global Services division.

Shares in the group were up 3.9 percent at 147.5 pence at 10;57 a.m., after earlier hitting a 13-month high.

The boost to trading followed a reduction in underlying costs of 932 million pounds in the first half, with total underlying labour costs down by 16 percent.

That early progress means it now expects to take out at least 1.5 billion pounds of costs in the full year, with full-year revenue to be down between 3 to 4 percent, compared with an earlier forecast of a 4-5 percent drop.

Free cash flow targets have also been hiked, with the group now forecasting at least 1.6 billion pounds, compared with the earlier forecast of over 1 billion pounds, allowing it to forecast a full-year dividend up around 5 percent on last year.

"We have had another quarter of progress but there remains a lot more to do," Chief Executive Ian Livingston said, adding that they had commented on the dividend raise because they wanted to give some reassurance to investors.

"Shareholders have had a tough year with BT and we're just trying to give some insight and certainty," he told reporters.