"International headwinds" as no short term recovery in services is predicted
BT is restructuring its Global Services division under a new chief executive, and will prioritise cloud hosting and service delivery over network connectivity, to “better support the digital transformation ambitions of its multinational customers”.
News of the restructure comes after the BT group posted a disappointing set of annual results, which saw pre-tax profits plunge almost 20%. The year saw the Italian accounting scandal in Global Services and the integration of the acquired EE mobile business.
Total group revenue grew 28% year-on-year to £24bn - including £5bn from EE, but was flat organically. Similarly, adjusted EBITDA was up 18% to £7.6bn, but down 3% without EE. Adjusted pre-tax profit of £3.5bn represented a 5% year-on-year increase, but reported pre-tax profits were down 19% to £2.4bn. Group operating profits also slumped 12% to £3.2bn. Revenue at the Global Services and Business and Public Sector divisions dropped 2% and 6% year-on-year respectively. The Italian accounting scandal cost around £530m in adjustments and investigation costs.
Gavin Patterson, BT chief executive, said: “This has been a challenging year for BT. We’ve faced headwinds in the UK public sector and international corporate markets and must learn from what we found in our Italian business. Openreach also received a fine from Ofcom after an investigation into historical Deemed Consent practices revealed it fell short of the high standards we expect.
“We take these issues extremely seriously and are putting in place new measures, controls and people to prevent them happening again. Learning from the challenges of this year will make BT a stronger company for the future.”
Patterson added: “Our integration of EE is going well, our UK consumer, SME and corporate businesses are performing strongly, and we’ve made significant progress in improving customer experience across the group. Our agreement with regulator Ofcom on Openreach governance brings to an end a period of uncertainty.
“We’ve undertaken a strategic review of Global Services. Technology trends mean that we are now less dependent on owning physical local network assets around the world, creating the opportunity to reposition Global Services as a more focused digital business. We are therefore restructuring our Global Services organisation to enable this strategic refocusing.”
Openreach has just announced that it is consulting with customers and industry stakeholders on a business case that could support better rural broadband and a large scale fibre-to-the-premises roll-out across the UK.
TechMarketView analyst Martin Courtney said: “New chairman Jan du Plessis takes the reins in November and current Americas president Bas Burger will become the new CEO of Global Services, and we don’t think the reorganisation will stop there. Not much is expected to improve in the short term however. Underlying revenue excluding EE transit is forecast to be flat in the next FY, with adjusted EBITDA guidance of £7.5-7.6bn.”