Updated: BT Global Services continues to make heavy loss

BT Global Services recorded losses of £96 million in the second quarter of the year, and accelerated cost cutting, prompting speculation the group may eventually part sell the division.

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BT Global Services recorded losses of £96 million in the second quarter of the year, and accelerated cost cutting, prompting speculation the group may eventually part sell the division.

Delays to its work on the NHS National Programme for IT have led to it receiving only 40 percent of the originally scheduled revenues from that scheme so far. The programme was originally intended to be complete next year but is expected to run until 2014 to 2015.

The Global Services Unit, which provides IT services, narrowed losses from a £124 million deficit in the previous quarter, and beat analyst expectations.

But in spite of a £2 billion revenue, the results still dragged on the proftiability of the whole company, which reported a £550 million operating profit. All BT divisions apart from Global Services recorded a profit.

It emerged today from new government figures that BT has so far received only four-tenths of what was originally expected as revenues for its work on the NHS National Programme for IT.

It would have originally been paid £1.02 billion for patient record rollouts by next year, when the programme was intended to be completed. But under the strict payment-on-delivery terms in its contract, delays to the rollouts - with the programme now scheduled to be four years late - mean it has been paid £326 million.

BT is working fast to make sure a workable patient administration system goes live at Kingston Hospital in the next three weeks, or it faces potential loss of the large contract if the NHS is not satisfied. BT told Computerworld UK last week it was confident the system would go live on time.

Problems at the unit on its £1.7 billion deal with Thomson Reuters have also hurt results in recent months, according to reports. Not as much is publicly known about the problems on that deal, under which it is providing network services for the company to deliver to 330,000 clients.

BT today declined to comment on those deals.

The company has been cutting staff aggressively, removing 15,000 jobs primarily in Global Services, as part of a bid to cut annual costs by £1 billion. Today it said it would accelerate cost cutting, targeting over £1.5 billion in cost reductions, and would also look for “higher quality new business”.

Costs had been reduced by over £900 million in the first six months of the financial year, to 30 September. But Ian Livingston, chief executive, said in a statement to investors that there “remains a lot more to do”.

With the increased cost cuts, analysts speculated today that BT may be attempting to shape parts of the Global Services division into an attractive takeover target for other companies.

Richard Holway, chairman at analyst house TechMarketView, said: “My own view is that BT are clearing up parts of BT Global Services for a sale when valuations improve. They at least seem to be on the right road to achieve this.”

He called the results “bad but not as bad as expected”, noting that "informal" feedback from within BT was that the company was “on the right road”.

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