Profits to Fall at BT Global Services

BT Group plc are today providing an update on trading for the second quarter of its 2008/9 financial year and revising guidance for the full year.

BT will be announcing its results for the second quarter and first half year to 30 September 2008 on 13 November 2008 and further information will be provided at that time.

For the second quarter BT expects to report that group revenue will be ahead of expectations but that EBITDA and earnings per share will be slightly below expectations. BT anticipates that BT Retail, BT Wholesale, Openreach and Other activities will deliver results in line with or ahead of expectations.

However, the performance of BT Global Services will be disappointing. BT expects revenue growth in this division will remain strong, up 15 per cent year on year, but EBITDA of around £120 million will be significantly below expectations. The fall in EBITDA is due to slower than anticipated delivery of efficiency savings and the continued decline in higher margin UK business.

The Board intends to declare an interim dividend of 5.4 pence per share in line with last year.

Full year ending 31 March 2009

A statement from BT Group noted, “At the time of BT’s first quarter results on 31 July 2008 we stated that we continued to expect to deliver growth in revenue, EBITDA and earnings per share in this financial year. We continue to expect to grow group revenue in the current financial year. However, given we now expect BT Global Services’ EBITDA margin to be in the range of 7%-8% for the current financial year, we anticipate that group EBITDA is likely to show a small decline compared with last year, with the consequent impact on earnings per share and free cash flow.”

Ian Livingston, Chief Executive of BT, said, “BT is performing in line with or ahead of expectations in all but one of its divisions, so the results in BT Global Services are particularly disappointing. We acknowledge that the performance in this part of the group is unsatisfactory and are committed to taking decisive action to rectify the situation. BT Global Services already has a number of cost efficiency and margin improvement initiatives in place and we are now focused on speeding up the execution of these initiatives which will deliver margin improvement going forward. We intend to set new targets for this division as improved performance is delivered.

“Since its formation, BT Global Services has delivered strong revenue growth, providing business critical services to major organisations around the world. We remain committed to providing world class networked IT services to our customers. We now need to focus on improving the operational efficiency of this business to drive shareholder value.”