BT Group suffered one of its darkest days as a publicly traded company yesterday when a profit warning and the resignation of a senior executive resulted in the collapse of its shares to a record low.

The telecommunications group said that it was abandoning profit targets at its global services division, which provides communication networks for multinational companies, and gave warning that earnings for the year would fall below expectations.

Ian Livingston, chief executive of BT Group, announced that François Barrault, head of the global services division, was stepping down after only 18 months in the job. Hanif Lalani, the finance director of BT, will replace Mr Barrault.

The shares closed at 115.1p, down 19 per cent, wiping nearly £2.1 billion off BT’s market value. The stock was as much as 25 per cent down during the day and closed below the 130p price its shares were offered at when it floated in November 1984. The group has 1.5 million small shareholders.

Saeed Baradar, an analyst with Société Générale, said: “It is now hard to see any bottom for the stock.”

BT said that a failure to cut costs and a continued decline in its higher-margin British business dashed hopes of edging profit margins in the global services division closer to the 2011 target of 15 per cent. Margins would remain between 7 per cent and 8 per cent.

Staff in the global services division are reported to be bracing themselves for job losses as a result of a renewed cost-cutting drive. About half of the division’s 37,000 workforce are based in Britain.

The disclosure alarmed investors because the division has generated most of BT’s revenue growth in recent years. It expanded rapidly under Ben Verwaayen, Mr Livingston’s predecessor, who bet on global services as a vehicle to reduce reliance on fixed-line markets.

But costs have proved difficult to control. The 15 per cent growth in revenue at the division this quarter, which now accounts for £9 billion of BT’s £20 billion total revenue, has not translated through to the bottom line.

Mr Livingston said that the performance in global services was “particularly disappointing”, as all other parts of the business were in line with or ahead of expectations. “We acknowledge that the performance in this part of the group is unsatisfactory and are committed to taking action to rectify the situation. BT global services has a number of cost, efficiency and margin-improvement initiatives in place and we are focused on speeding up the execution of these initiatives which will deliver margin improvement.” He added that he would set new targets for the division once performance improved.

The company said that earnings before interest, tax, depreciation and amortisation would be significantly below expectations at £120 million. Analysts had forecast £200 million.

BT said that it was retaining its 5.4p interim dividend but analysts believe that the full-year payout will be slashed.

Separately, analysts warned that BT would be forced to address a yawning pensions deficit, which will have widened after the steep falls in the stock market over the past quarter. A review of the group’s pension scheme will be held in December and this will determine how much money BT will have to pay into its pension fund. Morten Singleton, an analyst at Orion Securities, said that BT would need to pay in an extra £300 million.

Yesterday’s warning was the second this year. Mr Singleton said: “My perception is that they have thrown the kitchen sink at global services, to clear the decks to make progress against that benchmark.”

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