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Earnings soar at BT Global Services

Alex Scroxton

BT's troubled IT services division, BT Global Services (BTGS) appears to have secured its recovery at long last after adjusted EBITDA soared to £130m in the first quarter, and overall losses continued to reverse.

Sales at the unit were down 3% year-on-year to £2bn, while operating loss improved to £54m from £124m this time last year.

BT said the modest revenue decline was mainly down to slowing UK calls and lines revenue and the impact of mobile termination rate reductions, with foreign exchange movements having no significant impact in the three months to 30 June.

BTGS upped its order intake by £200m year-on-year, signing services contracts with Unilever, Capgemini and Nationwide during the quarter.

The unit also reduced net operating costs by 7% and capital expenditure by 21%.

All told, BT Group sales were down 4% to £5bn, while pre-tax profit rose 17% to £446m, and net profit rose 33% to £284m after the firm took out £291m in costs during the quarter.

BT also said it had been in talks with the government over the planned scale of its public sector cuts; the telco owns a majority slice of the government telecoms business.

All the same chief executive Ian Livingston hailed an "acceptable start to the year".

"We hit the first major milestone in our fibre roll out, passing over 1.5m premises, and we are now running at an average rate of around 100,000 premises passed every week. In BT Global Services we continue to win significant contracts due to our ability to deliver a world class service to our customers."

Livingston said that in spite of the challenging macroeconomic environment, the Q1 numbers underpinned BT's overall outlook for the financial year.

Broken out by unit, BT Retail saw revenues slide 7% to £1.92bn, with operating profit down 1% to £331m, declines that were as usual attributed to the ongoing reduction in traditional telephone sales. The unit added 96,000 broadband accounts in the quarter, taking 40% of the market.

The b-2-b Wholesale unit booked a 6% decline in revenues to £1.05bn, but operating profit rose 11% to £185m, reflecting growth in managed network services deals.

Finally, BT Openreach saw sales decline 8% to £1.2bn, primarily due to a one-off internal compliance-related billing. Operaing profit at the unit rose 8% to £296m.


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