BT makes progress with Global Services restructuring

BT has made 2,000 people redundant in the past three months – most of them at its problematic Global Services business – as part of an extensive package of 13,000 job cuts first announced in May 2018, as it attempts to steady the ship.

The group-wide restructuring plan will also see BT shut down its central London headquarters, which has been in the family since the 19th century, and is also likely to have cost outgoing CEO Gavin Patterson his job.

The plan focuses largely on BT’s IT services business, Global Services, which has been a poor performer for the group for a number of years and was also the nexus of a major accounting scandal in 2017.

In September 2018, BT set out a path to transform Global Services for the future, saying it would reposition around several core markets and multinational customers, build value in “strategically selected” growth areas such as cloud, collaboration and security, and move to lower costs, reduce risk and improve returns.

BT believes that, as a result of this, the troubled unit will be able to “deliver differentiated service” and in the medium term “reduce operating costs and capital employed, resulting in improved Ebitda [earnings before interest, tax, depreciation and amortisation] and free cash flow”.

In the past month, it has also sold off part of its German services business, BT Stemmer, a networking and communications services specialist it acquired nine years ago, to local systems integrator Bechtle.

In the second quarter of the group’s financial year, which closed on 30 September 2018, Global Services revenues dipped 7% to £2.33bn, but Ebitda grew by 35% to £208m, the highest earnings growth seen across any of the group’s units during the period.

All told, BT painted a positive picture at the end of its second quarter: while group-wide revenues dipped 2% to £11.59bn, pre-tax profit was up 24% to £1.34bn and adjusted Ebitda grew 2% to £3.68bn.

“We continued to demonstrate positive momentum, resulting in encouraging results for the half-year,” said Patterson. “We are successfully delivering against the core pillars of our strategy with improved customer experience metrics, accelerating ultrafast [broadband] deployment and positive progress towards transforming our operating model.”

Patterson – who will be replaced by Philip Jansen, currently co-chief executive at fintech firm Worldpay, at the end of January 2019 – pointed to the consumer business unit as a stand-out success story for the period, with strong sales of its recently launched converged household network product, while EE was making good progress towards being early to market with a commercial 5G network.

The second quarter also saw the transfer of 31,000 group employees into the newly independent Openreach business, which means regulator Ofcom has since been able to formally release BT from the 2005 undertakings set up to manage Openreach.