BT profits rise despite falling sales.

The company reported a 42 per cent rise in pre-tax profits.

Photograph: Getty Images

British telecoms group British Telecoms (BT) has recorded a rise in profits after spending cuts and a hike in broadband demand helped earnings despite falling sales.

Sales were down 4 per cent, while pre-tax profits rose 42 per cent.

The group's profits were also helped by £166m in one-off gains, which included interest from the pension fund and tax credit. The company grew its customer base by 10 per cent last year, with an additional 590,000 users.

The positive news is a sign of BT's gradual recovery after profit warnings in 2008 and 2009, due to problems at its corporate Global Services division. The company is increasing its yearly payout to shareholders by 12 per cent.

"In what remains a challenging environment we have delivered another year of growth in profits and free cash flow," said Chief Executive Ian Livingston.