Friday, 31 October 2008

Francois Barrault resigns as CEO of BT Global Services

(By Richard Holway) BT has just announced that François Barrault has resigned as Chief Executive, BT Global Services and as a BT Group plc Board director . He has been replaced by Hanif Lalani, currently Group Finance Director. Barroult was appointed in April 07 to take the place of Andy Green when he left to join Logica.

BT also announced that performance at BT Global Services will be “disappointing”. Although revenues are apparently up 15%, 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.

"BT 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.”

I have to admit that this news is not that surprising. It seems to have been an open secret for a long time that BT Global Services was highly unlikely to meet its 15% margin target. And that was before the current market turmoil. They have been tardy in growing their offshore operations so winning work (which they have managed to do) against competitors with large offshore operations just eats into the profits margins still further. On top of that you can add continuing problems on the NPfIT projects and continued internal ‘discussion’ about what kind of IT services company BT Global Services is or wants to be and therefore what its M&A strategy should be.

Saying that, I believe that the UK bit (which is much nearer the conventional definition of an IT services company) is doing much, much better than the international bits. Indeed it's the UK that makes what profits there are.

The appointment of a numbers man to head the division is ‘interesting’ too. But, maybe, BT will at long last grasp the nettle and decide that "proper" IT Services isn’t really in its DNA and do some cash-raising divestments.

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