At just over a pound, BT shares this morning were lower than the 130p at which the group was privatised back in the Thatcherite sell-off of 1984. That’s not a great return for two decades of ‘progress’ - anyone who still has shares they bought at the time probably wishes they had flogged them in June 2007, when they were fetching over 330p apiece. Isn’t hindsight a wonderful thing?
It’s all because of a ‘disappointing’ performance from the group’s Global Services arm, effectively BT’s IT consultancy business, which has been involved in many of the nation’s largest and most important – but least popular – IT projects, like the NHS programme, as well as big-ticket deals for companies like Unilever and InBev. Revenues, says BT boss Ian Livingston, will be up 15% but profits will be significantly below expectations at £120m. Perhaps we should all get on the blower this afternoon to try and boost BT’s depleted coffers by more traditional means.
So far, not so bad you might think. At least it is still making a profit, more than some can say in the current economic climate. But such is the nervy state of mind in the markets at present that any news – good or bad – tends to receive a rather emotional over-reaction.
And it is all hugely embarrassing for new boss Livingston, who only took over from previous incumbent Ben Verwaayen less than six months ago. Global Services is pivotal to the group strategy, intended to be both growth engine and cash cow combined. Its big-brained, high- margin deals are supposed firstly to make up for the steady decline in the old fixed-line phone business, and secondly to provide breathing space for new-generation activities like TV on-demand to build up momentum. A role which, as this morning’s announcement makes clear, it is struggling to fill.
The poor performance is put down partly to a paucity of sufficiently juicy deals – understandable given the calamities abroad in the world’s financial systems – but mostly to the non-arrival of ‘expected cost savings’, which is not. To make matters worse, Livingston also announced that BT’s full-year dividend may have to be cut. So he is unlikely to find himself on the ‘friends and family’ phone numbers lists of many City analysts today.
But action has been taken, and heads – or a head, at least – has rolled: the chief exec of Global Services, Francois Barrault, is to resign. To show investors just how seriously the top brass is taking all this, his replacement is corporate big-gun Hanif Lalani, currently group finance director. Coincidentally – or perhaps not – that’s the job Livingston occupied until his elevation to the hot seat. Surely two former BT FDs should be able to get a grip on Global Services’ cost base? If they can’t, the accountant’s club will probably take away their gold calculator awards...