Sales down at BT but profit soars

UK telecommunications and IT services provider BT saw profit rise 71% to £1.7 billion in its most recent financial year, despite revenue falling 4% to £20 billion.

The company attributed the sharp rise in profitability to the fact that it undertook a radical and expensive restructuring programme in 2009. The focus of that restructuring plan was BT Global Services, which includes the IT services practice. As well as cutting many thousands of jobs, it dropped divisional CEO Francois Barrault in favour of group finance director Hanif Lalani.

Sales at BT Global Services fell 5% to £8 billion last year, BT revealed today, while profit (as measured by adjusted EBITDA) increased by 30% to £593 million. Costs incurred by the division as a result of the restructuring, including redundancy payments, dropped from £301 million in 2009 to £192 million in 2010, hence the profit increase.

This is still well short of the 15% margin target that BT said it wanted to achieve for Global Services when it announced the restructuring in 2008. However, a BT spokesperson told Information Age today that the 15% figure "has not been a target … for a number of years."

"Our public stated target [for the group] is profitable revenue growth by 2012/13," the spokesperson said.

Both BT’s retail and wholesale units also shrank. BT attributed the drop in retail revenue – down 4% £1.9 billion – to the continued impact of local loop unbundling, which allows competitors to use BT’s exchanges to offer broadband services.

However, local loop unbundling helped push sales for OpenReach, the network infrastructure leasing business, up 2% to  £1.3 billion.

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Ben Rossi

Ben was Vitesse Media's editorial director, leading content creation and editorial strategy across all Vitesse products, including its market-leading B2B and consumer magazines, websites, research and...

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