On November 11, 2010, BT announced its 2Q10 results, the first half yearly performance results since its announcement that it would return to growth in 2012/13.
When it made the announcement in May, BT envisaged that its Global Services and Retail divisions would drive growth, and it made investments in both accordingly.
At the time of the announcement, we agreed that there was potential in BT Global Services, but were more skeptical on BT Retail’s outlook. However, while the decline in 2Q10 revenues marked a continuation of recent trends, the positive performance of its two key divisions, in particular BT Global Services, have exceeded our expectations.
The 2009/10 financial year saw revenues decline across each of its four divisions, and this continued for its Global Services, Retail, and Wholesale divisions during 2Q10, contributing to a top-line decline of 3% (adjusted for specific items). While the company continued to improve its profitability and cash flow by cutting costs (opex before specific items fell by 4.7% year-on-year during 2Q10), there was a danger that its focus on the bottom-line would come at the expense of initiatives to drive top-line growth.
Its focus on a return to growth was therefore a welcome statement, both to investors and BT’s employees. However, with the recovery of the UK economy uncertain, and the government’s spending review due in October, we anticipated that 2010 would be a difficult year for BT.
Despite the drop in revenues, BT’s 2Q10 results were impressive. While BT Global Services recorded a 2% drop in revenues in 2Q10, the division’s sales performance was impressive, with £2.1bn worth of orders signed.