Broadband pays as BT rings in 20% profit rise

The struggling telecoms giant has had a good year, thanks in part to its roll-out of high speed broadband.

by Emma Haslett
Last Updated: 03 Feb 2012
After a couple of tough years during which it issued not one, but two major profit warnings, it looks like BT’s plan to offset falling call volumes by selling more broadband services is beginning to pay off: the telecoms giant has just posted a 20% increase in pre-tax profits, which rose to £2.1bn in the year to March 30. And broadband was, unquestionably, its star performer: BT acquired 252,000 new customers during the period, making it officially the largest broadband provider in the UK. Its troubled global services division also staged something of a recovery – turning cash flow positive a full year ahead of expectations. But it may not be out of the woods yet.

Given its high-profile (albeit slightly perplexing) ad campaign for its fibre optic services, as well as an X-Factor-style competition to decide which rural areas should get its high-speed offerings first, it’s perhaps no wonder that BT’s broadband arm has done well. BT Wholesale Broadband Connect, its high speed 20Mbps offering, is now in more than 65% of UK premises, and the company says it wants to increase that to 80% by the end of the year. It’s also planning to double the speed of its broadband by 2012. Ambitious.

BT’s other (albeit moderate) success story was its global services arm, which supplies IT services to businesses and government departments. It’s been on shaky ground for a few years, after it built up huge losses by under-bidding on several large (and complicated) projects. But while the division isn’t exactly out of hot water, it at least recorded a 10% rise in orders, worth £7.3bn. Although some glass-half-empty types might point that it still recorded an operating loss of £141m on revenues which were down 5%, at £8bn.

BT staff may be equally concerned about its pension deficit - but things are beginning to show signs of gentle recovery there, too. The company reported that it has paid £1bn into the scheme in the past year, while the market value of its assets has grown by £1.7bn. That means the deficit has been cut to £1.4bn, £4.3bn down on last year’s figure. Which is good news for staff and shareholders alike.

So it looks like efforts by CEO Ian Livingstone to slash costs and focus on areas of growth are beginning to bear fruit. That said, its share price still slipped by 3.7% this morning, which suggests that investors agree with Livingston, we presume, when he said: ‘We are well aware there remains a lot more to do’.

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