BT

(By Richard Holway) BT will undoubtedly make the headlines today for their announcement of 10,000 job cuts. Most of these cuts will take place in contractors and consultants rather than permanent staff. But, interestingly, Ian Livingstone said that 2500 full time employees would leave due to ‘performance management’. In other words, BT will, at last, take a harder line on the poor performers. Of course, getting rid of employees for performance issues requires less compensation – and cash.

Announcements around BT Global Services didn’t take us much further than the ‘shock’ announcement last week.

Revenues at BT GS increased 15% in Q2 to £2.2b but EBITDA before leaver costs declined 36% to £119m and an Operating Loss (before leaver costs) of £53m. EBITDA margin fell to 5.5% - if you remember, BT GS was aiming for a 15% EBITDA margin. They now expect a 7-8% EBITDA margin but expect that it “will get worse before it better”.

This 15% revenue growth was “in broadly equal proportions to organic growth, the impact of foreign exchange rate movements and acquisitions”. In other words, organic growth was around 5%.

Interestingly, listening into the conference call, almost all of the BT GS-related talk related to its network management bits; rather than the UK IT services activities. Focus was on ‘step change’ in three areas – cutting people, circuit costs and inventory. The last two having no relevance to much of BTGS UK IT services business.

I’m sure we will return to BT Global Services as we plough through the news today. But my views are unchanged from my 8th Nov 08 post - What is BT Global Services for? . BT GS now has a team of ‘new blood’ - its best 30 people – looking at the best way to take BTGS forward. I really hope that they address the differences between BT GS in the UK and internationally and decide, once and for all, which of those models is to be followed.

Footnote on NHS IT

There was discussion on the concall about the NHS IT contract. Livingston made the usual comments about the successful bits of the contracts but admitted that “some contracts are difficult and some we are making money on. Problems over Royal Free not in software but in specs and how it operates - these are fixable.”

One of the main issues right now is who will take over from Fujitsu in the South. Again Livingston said what one would expect him to say “On the right terms we would do the South business but not otherwise. We are going to wait and see .We would only enter into contract if there is good margin to be made”.