Things look much healthier at BT – the telecoms giant has just reported a £1bn pre-tax profit for the year to March, after sliding nearly £250m into the red in the previous year. Chief exec Ian Livingston’s turnaround plan seems to be paying off: costs are down by a massive £1.8bn, its massive pension deficit has fallen slightly and there are even signs of life in its ailing Global Services division. In fact, BT’s feeling so chirpy that it’s ramping up the roll-out of its broadband network, not to mention investing in bringing sport to its TV customers (all ten of them). Not quite the basket case it looked a year ago, then.
BT’s full-year revenues came in at a very respectable £20.9bn, higher than the City was expecting – and it’s predicting a similar figure for the current year. There was also good news on Global Services (its biggest division by revenue, which provides telecoms stuff to other corporates). BT took a massive £1.3bn loss on the division last year, which torpedoed the bottom line. But it’s currently undergoing a £420m restructuring, led by ex-EDS man Jeff Kelly, and apparently it’s expected to be cashflow-positive again next year.
Livingston, we presume, has done well on the cost-cutting front: he’s slashed £1.8bn off the cost base in the last year alone, and apparently intends to lop off an extra £900m this year. Nice for investors, though not so nice for the 20,000 staff that have got the boot as a result. Then again, Livingston insists that he’s done his best to protect full-time staff, with the axe largely falling on temps and contractors. And he points out that it hasn’t all been about job losses – they’ve also improved efficiency via better customer service. Not before time, arguably.
All in all, this has swollen BT’s coffers with lots of extra cash – and it plans to spend £1bn of its pile expanding its superfast broadband network. Four million UK homes will get this by the end of the year, and two-thirds of the population by 2015. BT also plans to enhance its TV offering, BT Vision. Now Sky’s being forced to wholesale its premium sports channels to other broadcasters, BT wants to have that in the bag by the time the new football season starts, and it’s also investing in a new on-demand online gaming offering – which sounds rather promising to us.
Let’s not fool ourselves that BT’s out of the woods yet. Its share price may be up 8% to about 130p today, but that’s still way below the 300p it touched in 2008. And perhaps more worryingly, its pension funding deficit still stands at a whopping £7.5bn, which will be a major headache for years to come. Still, at least it seems to be heading in the right direction.
In today's bulletin:
VAT top of the agenda as Government prepares to tackle deficit
A billion for broadband as BT back in the black
Sainsbury's celebrates tasty results - but warns on VAT rise
Editor's blog: Sugar's TV freak show
Good news on NI - as unemployment soars again