BT reports fall in profits

BT posted a further fall in profits today after its troubled IT services division continued to overshadow better trading at its retail arm.

Underlying earnings declined 3% to £1.37bn (€1.6bn) in the quarter to June 30, driven by a 66% year-on-year fall in global services, the division which carries out IT networking services for clients such as the NHS and Nationwide in the UK.

Operational problems at the business left BT more than £100m (€117m) in the red last year, but chief executive Ian Livingston said there were signs of progress after global services improved earnings on the previous three month period.

It cut 2,300 jobs from the division in the quarter, part of around 15,000 posts set to go at the company this year. BT’s direct staff costs, including pension charges, decreased by 12% in the quarter to £1.2bn (€1.4bn).

While its other businesses have been performing well, BT first signalled the problems at the global services division last October, sending its shares below their flotation price more than 20 years ago.

Shares jumped 12% today after Mr Livingston said the company had made a “solid start to the year”.

He added: “BT Global Services is making progress although there is still much to do.”

Underlying revenues in the division fell 4% to £2.1bn (€2.5bn), but total order intake was £1.4bn (€1.6bn).

In retail, turnover declined by 2% to £2.11bn (€2.5bn) in a mature market, driven by a reduction in calls and lines revenues. However, BT said it added 78,000 broadband customers in the quarter, taking its total to 4.8 million, as underlying earnings rose 26% to £476m (€558m).