Update: BT surges despite profit slump

30th Jul 2009 11:09

Telecoms giant BT posted a 45% drop in first quarter profits and said its pension deficit ballooned by £3bn but shares ticked higher as investors concentrated on the firm's cost cutting measures. Investors were also buoyed by the adjusted EBITDA falling only 3% to £1.37bn, which was ahead of analyst's expectations. But pre-tax profits slid 45% to £272m, weighed by BT Global Services and net finance expenses rising by £153m. Revenue came in at £5.2bn from £5.1bn before, up 1% but down 3% excluding foreign exchange movements and acquisitionsThe group said net pension position at 30 June 2009 was a deficit of £5.8bn, compared with a deficit of £2.9bn at 31 March 2009 "The deterioration in the position since 31 March 2009 is due to the reducing discount rate and increasing inflation rate, more than offsetting the asset value increase of £1.1bn," said the group.The group said it is 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.Underlying operating costs and underlying capital expenditure was reduced by £357m to £4,295m, a reduction of 8%.The group revealed in May that 15,000 jobs will be cut this year. It said today 2,300 jobs were lost in the first quarter. BT said apart from Global Services, where earnings plunged 66% to £62m in the first quarter, the group performed well. BT Retail saw underlying earnings rise 26%, BT Wholesale fell 1% and Openreach rose 2%. "We have made a solid start to the year against a background of challenging trading conditions,' he said. BT Global Services is making progress although there is still much to do," said chief executive Ian Livingston.