BT expects to "well over" £1bn of cost savings in its current financial year, according to the telecoms giant’s chairman Sir Michael Rake.

Rake told shareholders at the company’s annual general meeting at the Barbican Centre in London today that the performance of BT’s Global Services (BTGS) division had been “unacceptable” and that turning the operation around was a key priority.

BTGS was responsible for a £1.2bn write-off due to problems with a number of major contracts – in particular two high-profile deals, one with Reuters and the other for the NHS National Programme for IT.

In April, BT announced it had made 6,000 contractors redundant during the previous few months, introduced pay cuts of between 10 per cent and 30 per cent for workers in Global Services, and warned of a potential further 10,000 job cuts.

But despite the problems at BTGS, the rest of the business was performing well, said Rake, with priorities for the year ahead to include a focus on customer service, cost transformation and investing in next-generation broadband network rollout.

“The board is committed to delivering attractive returns for shareholders,” said Rake.

“We believe that operational improvements in the business will generate sufficient cash flow to allow the dividend to grow at the same time as we invest in the business, reduce debt and support the pension scheme”.