BT warns on profits
British telecoms operator BT Group warned Thursday it would take a €340-million(€364-million, $472-million) hit on its badly-performing Global Services division.
In reaction, BT stock tumbled 12.11% to 108.10 pence in early morning deals on the London Stock Exchange.
The FTSE 100 leading shares index, on which the group is listed, was up 1.69% at 4,128.53 points.
BT said in a trading update that the one-off hit would affect its profits for the third-quarter.
The company added that the charge followed a review of its BT Global Services (BTGS) unit that provides IT network services to corporate customers.
At BTGS, earnings before interest, tax, depreciation and amortisation (Ebitda), a measure of underlying profitability, was forecast to total €17 million.
"We expect to report Ebitda of £17 million in the quarter before one-off charges, primarily due to insufficient delivery of cost savings and the continued decline in the higher margin UK business," BT said.
However, Ebitda for the rest of the group was expected to climb 5%, compared with the same period one year earlier.
Chief executive Iain Livingston said the group’s performance was ahead of market expectations in the third quarter.
"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," Livingston added in the release.
BT had already issued a profits warning because of rising costs at Global Services in October, when the head of the unit had also resigned.
"Ongoing contract and operational reviews in BTGS may result in further substantial one-off charges in the current financial year," BT also warned on Thursday.
BT, which publishes its third-quarter results on February 12, had said in November that it would axe 10,000 jobs by March 2009 and further staff in the future as a recession looms in Britain.
In October, BT finance director Hanif Lalani replaced Global Services chief executive Francois Barrault.
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