The telecoms group said this morning that its pre-tax profits fell a painful 30% in the three months to December, to £447m, thanks partly to £76m in costs from its ongoing restructuring efforts. Most of this money was spent on managers leaving the company, along with other ‘transformation costs’ (taking down the name badges on their office doors, that kind of thing), as BT looks to move away from its traditional strengths in fixed line telephones to focus on broadband and software.
Profits were also hit by slow sales in its wholesale division, the bit that rents out its fixed lines to other telecoms companies (much to their chagrin) – as the likes of Sky and Carphone Warehouse started rolling out their own services, BT’s sales fell 11% on last year, sending profits down by nearly a tenth. And the consumer divisions that used to be BT’s bread-and-butter also saw further falls in revenue during the period.
On the other hand, BT’s new focus seems to be paying off. Revenue in its networked IT service business was up 9%, while broadband revenue was up 6%. BT is now the leading broadband supplier in the UK, with about 4.25m subscribers, and it bagged about a third of the half a million new connections made during the quarter. As an added bonus, the customer base of its BT Vision TV service also doubled (admittedly from a low base). It said today that the amount of money its customers are spending on BT services rose for the eighth quarter in a row, which shows that its cross-selling efforts are going pretty well.
Other areas of the business also saw some decent growth. Revenue from its Business customer division, which provides services to SMEs, was up 7%, again driven mostly by broadband take-up. It also saw a 22% boost in its sales outside the UK.
What’s more, since last year’s profit figure got a one-off boost from a big tax credit (of nearly £1bn), it was always going to be a tough comparison. So although his share price has fallen more than 20% in the last year, CEO Ben Verwaayen won’t be too worried. Revenue was a bit lower than expected and profits just about in line, so his summary – ‘another solid performance’ – sounds about right. Could have been better, could have been worse.
You might find that endless advertising campaign a bit annoying, but it seems to be having the desired effect...