BT takes a hit after missing revenue forecasts

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THE recession in southern Europe and retrenchment in the financial services sector has caused headaches for BT in the first quarter of its financial year.

Shares in the company, which provides jobs for 7,000 people in Yorkshire and North Lincolnshire, fell yesterday, after it revealed that it had missed revenue forecasts.

It posted a six per cent fall in revenues to £4.5bn in the three months to June 30, reflecting “tough conditions in Europe”.

In addition, a £27m deposit on its £738m deal for Premier League broadcast rights hit the group’s free cash flow, a key measure which allows a company to pursue opportunities that enhance shareholder value.

BT’s consumer-facing Retail division added 85,000 broadband customers, half of net additions across the whole market, while the superfast fibre broadband added 150,000 customers.

“Companies that are selling globally are doing reasonably well still, but particularly domestic companies that are reliant on their own domestic markets, across Europe, are finding things more difficult,” chief executive Ian Livingston told reporters.

“It just takes longer for decisions to be made about contracts and contracts tend to be smaller sized”.

Mr Livingston added: “Our financial performance allows us to keep investing for the future. Our engineers are rolling out fibre at pace bringing fibre broadband to over 2m more homes and businesses in the quarter and it’s now available to over 11m premises. Our investment plans are creating around 2,000 jobs in 2012 by recruiting engineers to support our fibre plans and opening four new UK call centres. We continue to make good progress with our investments in the faster growing economies.”

Richard Hunter, head of equities at Hargreaves Lansdown Stockbrokers, said: “BT has had to put its progress on hold, as sales declined in the quarter and the market reaction was unforgiving.

“Particular focus is on the Global Services division, where corporate spending sales were down sharply year on year as the ongoing global economic uncertainty places restraints on new investment.

“In addition, the free cash flow number was also light of expectations, while competition in BT’s space shows no signs of abating.”

However, the group said pre-tax profits were up eight per cent at £578m and it left its full year guidance unchanged. The company said free cash flow in the period was an outflow of £124m, down from an inflow of £201m last year.

The figure was weaker than expected due to around £150m of late payments by customers and the Premier League deposit, BT added.

The broadcast rights cover 38 live games and 18 first picks, around half of those available, for the 2013/14 to 2015/16 Premier League football seasons.

The games will be shown on a new football-focused channel which BT will launch next year.

In retail, BT Vision added 21,000 customers in the period, bringing the customer base to 728,000.

BT Global Services, its corporate arm, saw revenues slide nine per cent to £1.7bn in the quarter while total order intake slipped to £1.1bn from £1.6bn.

The group signed contracts in the period with Rolls-Royce, Tesco, Unilever, and Caixa Economica Federal, the state-owned development bank in Brazil.

The shares closed down 7.25p at 210.25p.