BT posted a bumper 71 per cent boost in profits and slashed its pensions deficit during its past financial year, although the group did not predict a return to growth until 2013.
The UK telecoms giant showed it had firmly shaken off the woes of two years earlier when it tumbled to a full-year loss, as it posted pre-tax profits of £1.7bn in the 12 months to the end of March.
The chief executive Ian Livingston said BT had "delivered on profits and free cashflow ahead of expectations for the year, while making significant investment in the business for the future".
Growth was driven by a strong performance in its broadband business, adding the most new customers to its fibre-based broadband package in eight years. "We have consolidated our position as the leading provider of broadband in the UK," Mr Livingston said.
The company is carrying out "one of the most rapid" deployments of superfast broadband in the world, the chief executive said. It is adding 80,000 premises a week to its network, and it has announced plans to double download speeds to around 80Mb. BT's so-called Infinity broadband package, which competes with Virgin Media, now has 144,000 subscribers and is growing at around 5,000 a week.
Yet, the group saw revenues decline 4 per cent to £20bn during the financial year. The drop slightly missed market expectations, sending the shares down 1.4 per cent to 199p. Management said the revenues could fall further this year, by up to 2 per cent, before returning to growth in 2013.
The revenue decline was offset by the company's cost-cutting drive outstripping its targets. Management had budgeted for cuts of around £900m, but they actually came in at £1.1bn.
Morten Singleton, an analyst at Investec, said there was "more to come from the cost-cutting" and BT's forecast of a return to growth "should help to convince the sceptics there is more to this stock than profit growth being based on, ultimately unsustainable, cost-cutting".
BT's problems in the year to the end of March 2009 stemmed from what the chief executive called at the time an "unacceptable" performance at its Global Services Division.
The performance of the division that manages networks and IT outsourcing for multinational corporations, sent the group tumbling to a £134m loss after making more than £1bn the previous year. It forced a cost-cutting drive, which included axing 30,000 jobs.
Yet, the group announced yesterday that the division had become cashflow positive a year earlier than expected, and its order intake had risen a tenth to £7.3bn. Analysts at Megabuyte said the results "cap a year of further solid progress for BT, lifting earnings before interest, taxation depreciation and amortisation back above levels prior to the 2009 crisis".
There was more good news for the group over its pension deficit, an issue that has weighed heavily on the shares. BT reported yesterday that the deficit stood at £1.8bn, compared with £5.7bn a year earlier. Net debt also fell in 2010, by £467m to £8.8bn.
In February last year, BT agreed a 17-year plan to pay off the black hole in its scheme with the trustees of the BT Pension Scheme. However, the Pensions Regulator said it had "substantial concerns" with parts of the agreement. The review has now been put on hold and is likely to report next year.
The independent pensions expert John Ralfe said the reduction in the deficit was partly down to technical reasons, including BT's decision to calculate annual pension rises using CPI inflation rates rather than RPI.