BT insists it can meet growth targets after sales disappoint

BT's chief executive Ben Verwaayen insisted the company was on track to hit its growth targets despite reporting weak first-quarter sales growth that sent its shares diving 5.7 per cent yesterday.

The company produced first-quarter sales of £4.59bn, up 2 per cent from the same quarter a year ago but beneath market expectations of sales of about £4.8bn. Shares in BT responded with a 12p drop to close at 199p.

"Would I have loved to come to you and say the first quarter is 6 [per cent growth]? Absolutely," Mr Verwaayen said, but added: "We're not changing our targets. We think we're well under way."

In a strategy presentation at the beginning of April, he laid down an annual growth target of 6 to 8 per cent, pledging the company would "fight back". But analysts were yesterday left questioning whether, in the wake of the first-quarter numbers and in the midst of tough market conditions, that target was still realistic.

"Weakness at the revenue line supports the market view that management's revenue guidance is too optimistic," analysts at Cazenove said.

BT, which admitted the 2 per cent turnover growth was "slower than expected", blamed the shortfall on flat sales to other telecoms operators. "Despite BT Retail's core voice business showing a solid performance, we have experienced a difficult market in sales to other telecoms operators and in elements of our solutions business," the company said.

In the three-month-period to 30 June, BT made a pre-tax profits before goodwill and exceptional items of £322m, up 61 per cent from the year earlier. But on an underlying, or Ebitda, basis, profits were £1.3bn, down 8.4 per cent from 2001. The figure included about £156m of costs associated with staff leaving the business as part of its cost reduction programme. The figure was broadly in line with forecasts.

Mr Verwaayen said: "I think we had a good quarter and I'm pleased with the results. The mood is full of energy and confidence and there is drive in the business." He said the company already had a hat-trick of new multi-million pound contracts to announce.

The company's debt, which has already been slashed from about £30bn last year, fell by another £304m in the first quarter to £13.4bn. BT also swept aside concerns yesterday that it would be hit with rising pension liabilities because of plunging equity markets, saying its external actuary did not believe its funding deficit had materially changed.