Page last updated at 16:47 GMT, Thursday, 30 July 2009 17:47 UK

Global IT unit knocks BT profits

BT sign

Telecommunications firm BT has reported a sharp drop in quarterly profits, following problems at its global IT services arm.

Pre-tax profit dropped 45% to £272m in the three months to 30 June from £497m in the same period a year earlier.

BT also said the deficit before tax in its pension fund had doubled to £8bn in the three-month period.

The company cut 2,300 jobs from the global IT services division during the quarter, as it tried to reduce costs.

"We are on track to deliver reductions in operating costs and capital expenditure of well over £1bn and to generate group free cash flow of over £1bn this year," said chief executive Ian Livingston.

"BT Global Services is making progress although there is still much to do," he said. The division saw revenue down 4%, as firms cut their spending on telecoms services.

Despite the problems, BT shares closed 12.6% higher as the results were better than analysts' forecasts. Investors were also buoyed by chief executive Ian Livingston saying that the firm had seen a "solid start to the year".

Cost cutting

Global Services, which gives large organisations telephone and IT services, made a loss of £124m, down from a £1m profit a year ago. Overall revenue increased 1% during the period to £5.2bn.

BT's retail revenue fell 2% to £2.11bn mainly because of a reduction in calls and lines revenue, the firm said.

The firm has offered staff the opportunity to take long holidays in exchange for a pay cut, to avoid redundancies.

One option available to staff is an upfront sum of 25% of annual salary in return for taking the whole year off.

In May, BT said it would cut about 15,000 jobs this year, mostly in the UK, after posting an annual loss of £134m.

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