BT revenues fail to impress

BT today revealed its results for the fourth quarter of its fiscal year, showing a number of its divisions with falling incomes.

Total revenue for the telecoms firm fell by 4% to £4.8bn in the three-month period, with BT Wholesale the worst performer, dropping revenues by 6% to under £1bn.

BT Retail revenues also fell by 3% to £1.8bn, while its troubled Global Services division slumped by 4% to just shy of £2bn.

A glimmer of hope was represented by Openreach – the division that deals with the company’s broadband infrastructure – which managed to be the only part of the business to grow, raising its revenues by 4% to £1.3bn.

Despite the breakdown looking grim for BT, it still managed to record earnings before interest, taxes, depreciation and amortisation (EBITDA) of £6bn and grow its free cash flow by 13% to a healthy £2.5bn.

“While we will be impacted by economic and regulatory headwinds, we expect to continue to grow profits over the next two years, with normalised free cash flow growing to above £2.4bn in 2014,” said Ian Livingstone, chief executive CEO of BT.

“We will continue to pursue our prudent financial strategy, investing in the long-term future of the business, supporting the pension scheme, paying down debt and enhancing shareholder returns.” 

Livingstone was proud of the progress the company had made, but also admitted he knew there was more to do.

While admitting the results were solid, Mark Giles, analyst at Ovum, claimed the saga of the Global Services division was still an issue for BT.

The business line has been in trouble since 2007 when it began failing to live up to BT’s expectations for revenues. It has continued to lose money, had three bosses come and go in just two years and cut tens of thousands of jobs to try and save the struggling division.

“BT Global Services’ margin is still clearly a worry for the company, with finance director Tony Chanmugam claiming that operating cash flow for the year of circa £200 million was 'unacceptable' for a division with revenues of close to £8 billion [for the year],” said Giles.

“Legacy network migration is progressing slower than expected, while the European market and select verticals such as banking remain weak.”

However, there was hope for Global Services, as despite its revenue failings, it is still attracting customers.

“The order book remains strong, with a large number of smaller (and one would imagine less risky) deals signed in 4Q,” added Giles.

“Furthermore, the addition of around 450 new hires planned in BT's new target regions of Asia PAC, Latin America, and the Middle East will help it to capitalise on opportunities in these regions.”

Earlier this week, BT confirmed a £90m bonus package for executives and staff thanks to an investment scheme, which started three years ago to encourage improved results after a drop in profits of 81%.

Livingstone himself will receive £5m, while other senior managers will receive £90,000, on average. Employees who invested £100 in the scheme will receive a pay-out this summer of £8,500.