LONDON (Reuters) - BT
The top line result was even worse than the 7 percent drop the market was expecting, but investors were impressed by BT's ability to deliver efficiency savings and the shares rose 6 percent in early trade.
Chief Executive Ian Livingston said it was a solid quarter given the continued tough conditions for the company's corporate customers.
"Whilst it's a difficult environment in terms of recession and in terms of regulatory impacts, we still delivered profit growth," he said on Thursday.
Britain's biggest fixed-line telecoms company posted headline revenue of 4.47 billion pounds ($7.2 billion), 100 million pounds short of market forecasts. But pretax profit rose by a better-than-expected 7 percent to 608 million pounds.
BT's revenues were hit by a triple whammy of recession, regulation and rain.
Half of the group's turnover is dependent on corporate spending, across both its Global Services division, which serves multinationals around the world, and its business with small- and medium-sized companies.
Livingston said the economy, in continental Europe in particular, had stayed weak for longer than he had expected.
"Continental Europe, particularly Mediterranean countries, is difficult. We've seen double-digit declines there," he said. He added that conditions in the banking sector were also tough.
"(But) we have seen some encouraging signs, both in significant costs reductions and in the order book," he said.
A judgment in UK courts on charges for terminating some mobile phone premium calls also went against the company, which impacted revenue by 40 million pounds year-on-year in the quarter.
And rain increased the number of repairs needed on phone networks, resulting in a backlog of new installations, the company said.
The combination meant BT had to abandon its hope that underlying revenue excluding transit would show an improving trend on the minus 1.9 percent seen last year for the full year, but said the second half would still see an improvement.
The group was able to grow profit by cutting its underlying costs by 10 percent, the best performance in terms of efficiency in recent quarters.
It also maintained its full-year forecasts, to grow adjusted core earnings and to deliver free cash flow in line with last year, and lifted its interim dividend by 15 percent.
RELIEF RALLY
Shares in the company, which have declined by more than 8 percent in the last month, were 6.7 percent higher at 226.8 pence at 1130 GMT, the top riser in the FTSE 100 index <.ftse>.
Hargreaves Lansdown analyst Keith Bowman said BT continued to act as something of a corporate bellwether, with global economic uncertainties affecting company confidence.
"Nonetheless, management continues to attack costs, a key driver for current earnings progress, whilst the group's cash generative nature underwrites increasing shareholder returns," he said.
"In all, the group's perceived status as an 'Internet utility' continues to appeal in uncertain times."
Edwin Lloyd at Edison Investment Management said BT was continuing to roll out its fibre network while also managing to make cost savings.
"BT can't continue its cost cutting to offset declining revenues as it has done in these results but when the economy turns it will have a strong platform in contrast with many of its European neighbours," he said.
BT's retail division, which supplies telephony, broadband and television in Britain in competition with Virgin Media
Livingston said the group was accelerating its superfast broadband fibre roll-out, making the lines available to 100,000 premises a week, and he now expected fibre to be available to two-thirds of UK premises by spring 2014, more than 18 months ahead of its original plan. ($1 = 0.6207 British pounds)
(Editing by Kate Holton and Sonya Hepinstall)
Source: http://news.yahoo.com/cost-cuts-help-bt-protect-earnings-outlook-120128833--finance.html
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