BT Global Services Q3

(By Richard Holway) There weren’t any more real surprises from BT Global Services in the Q3 results announcement this morning. Revenues for the quarter increased by 15% to £2.25b. But, as foreign currency gains contributed 9% of that and acquisitions the other 6%, organic growth was flat at £1.96b. Even then, the only growth came from outside the UK. UK revenues declined 3%.

Order intake “remained steady” at £1.8b and BT expects longer lead times in customer decision making. Good news included an extension to the Liverpoool City Council contract and a new contract at Sandwell.

There was no further news on the fate (and associated right downs) on the two largest contracts. The review will be completed in Q4 and “may result in further substantial one-off charges in the current financial year” to add to the £336m writedown on the first 15 contracts already announced.

On top of all that, the ongoing review into all aspects of BT Global Services could result in additional one-off charges. The labour force has already been reduced by 1500 and “further reductions are expected”. Excluding all the bad stuff, BT Global Services is now breakeven (£17m) on the EBITDA level; where all the previous excuses are cited: high costs, slow delivery of cost savings, continued decline in high margin UK business ‘changes in assumptions and estimates on some major contracts’ etal.

So nothing to change anything we have said in the past (see BT Global Services Part 1 and BT Global Services Part 2) BT’s review must decide what BT Global Services is for and either acquire (extremely unrealistic!) or divest accordingly.

BT shares have opened nearly 5% lower and, at 99.9p (9.00am), have just broken the very physiologically important £1 level. Down nearly 30% YTD.