BT profits rescued by heavy cost cutting

2 November 2012

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3 November 2012 | Anna Reynolds

BT's pre-tax profits rose by 8 per cent to £1.19 billion, including a 7 per cent rise during the past three months despite revenues dropping by 9 per cent.

In its latest results, which include both second quarter and half-year figures, BT announced that its revenues were down compared with last year. It said contracts were delivered more quickly in 2011 which meant it got paid earlier. Other reasons for the revenue drop were the recession in Italy and Spain, regulations imposing lower prices on certain services and heavy rain in the UK which meant more engineering repair work was needed on broadband and telephone lines.

However, despite this, profits were up because operating costs fell 10 per cent as a result of BT’s cost transformation programme. As part of this, 180 deals have been moved into a new contract management shared service centres in Latin America and Malaysia, generating £20 million savings a year. 

Additional cost savings have come from more efficient procurement from third parties and reduced consultancy spend and labour costs. Rather than making permanent staff redundant, BT has been training staff in roles that were previously outsourced to agencies.

In its annual report the company said the way customers buy BT products is changing, with services bought together in bundles. The company has been reviewing the way orders flow through the business to provide more efficient delivery.

In its annual report BT said: “Cost transformation is as much about cost avoidance as it is about reducing the unit cost of specific items.” Money has also been saved across BT’s two internal customer service units through implementing automated processes.

Commenting on the results, BT chief executive Ian Livingston, said: “We have delivered another solid quarter of growth in profit before tax despite the economic conditions and regulatory impacts. We continue to make significant investments in the future of our business and we are again accelerating our fibre [optic broadband] roll-out. We now expect fibre to be available to two-thirds of UK premises during spring 2014, more than 18 months ahead of our original schedule, and we are recruiting more than 1,000 engineers in 2012 to help deliver this.”

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