BT cost-cutting drives small rise in earnings

BRITAIN’S FORMER telephone monopoly BT managed a small rise in third-quarter core earnings, relying on cost-cutting and lower regulatory charges to offset falling sales, with broadband a rare bright spot on the demand side.

BT, which has increasingly relied on deep cuts and operational efficiencies in recent years as its fixed-line business struggles, said earnings and cash generation for the three months to end December were up, despite a further 5 per cent fall in revenues.

It added 146,000 new retail broadband customers, however, representing 56 per cent of all net additions in the market, confirming its position alongside BSkyB as the main provider of broadband in Britain.

The group also repaid more than a billion pounds of debt in the period. But its pension deficit jumped, reminding investors that cash and the company’s ability to raise its dividend could be constrained for some time to come.

“We have delivered another quarter of growth in profits and cash flow despite the economic headwinds,” said chief executive Ian Livingston. “These are a reasonable set of results . . . We are becoming a more efficient and better business, but we’ve still got more to do.”

BT, which competes with Virgin Media, TalkTalk and other corporate providers, has been steadily recovering after profit warnings in 2008 and 2009 over the poor running of its corporate Global Services division, and has also invested heavily in new fibre networks.

The group posted third-quarter revenues down 5 per cent at £4.77 billion, slightly below forecasts and down on the previous quarter. But the group said that was due to timing issues on some contracts and it remained on course to meet its full-year sales forecast.

Due to continued strong cost control, core earnings were up 3 per cent at £1.5 billion, in line with forecasts. Adjusted free cash flow was up £65 million to £634 million, while adjusted earnings per share was up 13 per cent to 6.1p.

The group said it now expected to exceed its target of £6 billion of adjusted core earnings one year early. It also lifted its expectations for free cash flow to about £2.4 billion, from an earlier forecast of £2.2 billion. – (Reuters)