BT today posted a better-than-expected 3 per cent fall in first-quarter adjusted core earnings and said it had made a good start to its cost cutting programme, sending its shares soaring.
The telecoms group announced a restructuring with new spending and cost saving targets at its year-end results in May after two profit warnings at the multinational Global Services division prompted a massive writedown, a cut to the dividend and 15,000 job cuts.
BT said it had made a good start to the cost cutting, through renegotiating contracts and merging operations, and had achieved £357 million in savings already.
For the first quarter, BT reported adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) before specific items and staff leaving costs of £1.37 billion for the three months to end June.
BT was forced to restructure at the end of last year after reviewing the Global Services division, a supplier of IT services to multinational companies which the telecoms group had for years touted as its growth engine.
It posted a £1.58 billion writedown for the unit in May after reviewing the division and some of its more optimistic contracts.
Underlying earnings at the Global Services division were down 66 per cent but revenues were up 4 per cent.
The fixed-line telecoms provider said overall revenues rose 1 per cent to £5.24 billion, also ahead of forecasts at £5.02 billion.
"We are on track to deliver reductions in operating costs and capital expenditure of well over £1 billion and to generate group free cash flow of over £1 billion this year," Mr Livingston said.
Free cash flow improved by £612 million during the quarter to an outflow of £122 million, also ahead of expectations.
Locally, BT Ireland was unable to provide a breakdown of figures but chief executive Chris Clark told the Irish Timesthat the subsidary had performed well over the last quarter.
“While revenue growth was impacted by the challenging economic conditions, we have made exceptional progress on profitability through rigorous cost management and success in securing corporate and public sector contracts," said Mr Clark.
"We've got off to a good strong start this year. Profits are up substantially, revenue is certainly under pressure but ahead of expectation and our customer numbers are on the rise," he added.
During the quarter, BT Ireland said it secured contracts with a number of corporate customers including Cryptologic, the National Centre for Technology in Education, the Department of Foreign Affairs Trinity Biotech and Coillte.
Last week, BT Ireland announced it is to transfer its small business and consumer customers to Vodafone.
"The logic behind the deal is that we felt we could deliver a better performance for our shareholders and our customers if we really just focused entirely on businesses and the public sector and as a result of the partnership, subject to the Competition Authority’s approval, our revenues will grow this year," said Mr Clark.
Additional reporting: Reuters
