BT sees Q1 profits jump despite unchanged turnover

THE BT Group reported a 56% jump in first-quarter pre-tax profits yesterday, but turnover was flat compared with the previous year, as its core voice revenues continued to fall.

The former state-owned telephone company did not break out its Irish figures for Esat BT.

First-quarter earnings per share before goodwill and amortisation rose 64% to 4.1p.

Net debt fell below £9 billion, down by a third on one year ago, helping to slash the interest payments which had weighed on profits.

Underlying pre-tax profit rose to £502 million in the three months to the end of June, helped by the lower interest payments as well as cost cuts.

Turnover was unchanged at £4.586bn.

The lack of top-line growth at BT has worried analysts for some time. Chief executive Ben Verwaayen was forced to abandon ambitious revenue targets last November, but he is now trying to focus investors’ attention on the increased profitability.

He spoke yesterday of “defending the core and growing the new”.

Mr Verwaayen sees BT’s four “growth engines” as broadband internet access, mobility, computing and corporate services.

“The top line will depend on how you are doing in the new wave and how robust you are in your defence of the traditional business,” Verwaayen told reporters on a conference call.

BT maintained residential market share of around 73%, against an aggressive attack by mobile phone seller Carphone Warehouse.

Carphone said yesterday it signed up 100,000 users to its home phone service in four months.

BT also reported total geographic call volumes down 7% on last year, offsetting growth in newer services.

Nomura analyst Chris Alliott, who rates BT a ‘buy’, recognised the concerns among investors about the lack of revenue growth.

“But BT is a low-growth, highly cash-generative company where the focus must be to continue to seek operating efficiencies and drive cash flow, whilst looking for opportunities to generate limited top-line growth,” he said.