BT shares tumble on £340m Global Services bill
More big charges expected
Investors again rushed to dump BT stock this morning after the group warned its Global Services division would trammel overall financial performance this quarter.
At time of writing BT shares are down more than 13 per cent, at 106.6p.
In the three months to December 31 2008, outsourcing unit Global Services was hit by a one-off charge of £340m "as a result of the outcome of the financial and contract reviews". BT also cautioned that "substantial" further charges could be forthcoming in the current financial year, arising from two of its largest existing contracts, which are currently under discussion.
Seeking to soften the blow, group chief executive Ian Livingstone said: "BT remains committed to the success of Global Services, and I believe these changes will create a stronger business that can deliver positive cash flow and excellent customer service.
"The performance of the rest of the group is ahead of expectations for the third quarter, but unfortunately this will be more than offset by the issues in Global Services."
In response to the charges, BT said it was conducting a detailed review of Global Services finances, contracts and operations. Previously announced cost-cutting and restructuring affect its bottom line until the next financial year.
In November, BT said it would axe 10,000 jobs as a result of Global Services' poor performance.
Global Services revenues are actually expected to rise 15 per cent in the third quarter of this financial year, but BT credited acquisitions and the weak pound.
BT's three other divisions - Retail, Wholesale and Openreach - are all expected to beat financial expectations for the third quarter, boosting profits five per cent when Global Services is excluded from the balance sheet.
This time last year BT shares cost 245p each. ®