SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
20 MAY 2004
BT Group plc
(Translation of registrant's name into English)
BT Centre
81 Newgate Street
London
EC1A 7AJ
England
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual
reports under cover Form 20-F or Form 40-F.
Form 20-F..X... Form 40-F.....
Indicate by check mark whether the registrant by furnishing the
information contained in this Form is also thereby furnishing the
information to the Commission pursuant to Rule 12g3-2(b) under the
Securities Exchange Act of 1934.
Yes ..... No ..X..
If "Yes" is marked, indicate below the file number assigned to the
registrant in connection with Rule 12g3-2(b): 82- ________
Enclosures: 1. Annual Report and Accounts announcement made on 20 May 2004
May 20, 2004
PRELIMINARY RESULTS - YEAR TO MARCH 31, 2004
FOURTH QUARTER HIGHLIGHTS
Group turnover up 1 per cent, excluding the impact of mobile termination rate
reductions, at GBP4,787 million. Maintained after mobile termination rate
reductions
New wave turnover of GBP1,078 million, up 38 per cent
Profit before taxation, goodwill amortisation and exceptional items of
GBP459 million, down 6 per cent. Up 8 per cent before leaver costs
Earnings per share before goodwill amortisation and exceptional items,
maintained at 3.9 pence. Up 13 per cent before leaver costs
Net debt of GBP8,425 million, 12 per cent lower than previous year
ICT contract wins of GBP2.3 billion in the quarter
Broadband end users approaching 2.5 million at May 14, 2004
FULL YEAR HIGHLIGHTS
Group turnover maintained, excluding the impact of mobile termination rate
reductions, at GBP18,519 million. Down 1 per cent after mobile termination rate
reductions
New wave turnover of GBP3,387 million, up 30 per cent
Profit before taxation, goodwill amortisation and exceptional items of
GBP2,016 million, up 10 per cent
Earnings per share before goodwill amortisation and exceptional items of
16.9 pence, up 19 per cent
Full year dividend of 8.5 pence per share, up 31 per cent
Free cash flow before acquisitions, disposals and dividends of GBP2.1 billion,
up 21 per cent
Further significant improvements in customer satisfaction
The full profit and loss account, cash flow statement and balance sheet, drawn
up in accordance with UK generally accepted accounting principles, from which
this information is extracted is set out on pages 18 to 23.
Chairman's statement
Sir Christopher Bland, Chairman, said:
"The group has continued to make good progress this year, and delivered strong
financial results while continuing to transform the business. New wave revenues,
including ICT, broadband, mobility and managed services, grew by 30 per cent to
GBP3,387 million. Earnings per share* grew by 19 per cent to 16.9 pence, almost
doubling in two years.
"We generated free cash flow of over GBP2 billion and reduced net debt to GBP8.4
billion while continuing to invest for the future. Our net debt is now one third
of the level three years ago.
"I am pleased to announce a full year dividend of 8.5 pence which is 31 per cent
up on last year and four times higher than two years ago. "These results
demonstrate our continuing ability to reduce debt, reward our shareholders and
build for the future."
Chief Executive's statement
Ben Verwaayen, Chief Executive, said:
"In our transformation process the fourth quarter was very encouraging. The
results from our new wave businesses show our strategy is working. We grew new
wave revenues by 38 per cent in the fourth quarter which more than offset the
decline in revenue from the traditional business. The ICT order book continues
to grow strongly with GBP2.3 billion of orders in the fourth quarter, taking
orders for the full year to more than GBP7 billion.
"We are enabling broadband Britain. We now have approaching 2.5 million
connections, a 162 per cent increase in a year. We aim to have over 99 per cent
of the UK broadband enabled within a year, putting the UK towards the top of the
broadband league.
"Our transformation of the business will continue to accelerate. We expect the
environment to remain challenging but we will also increase our investment to
build on the significant progress already achieved. Our actions and future plans
give us confidence in our strategy for the future."
*Before goodwill amortisation and exceptional items.
RESULTS FOR THE FOURTH QUARTER AND
YEAR ENDED MARCH 31, 2004
Fourth Quarter Year
2004 2003 Better 2004 2003 Better
(worse) (worse)
GBPm GBPm % GBPm GBPm %
Group turnover 4,787 4,778 - 18,519 18,727 (1)
EBITDA before
exceptional
items 1,412 1,511 (7) 5,816 5,805 -
EBITDA before
exceptional
items and
leaver costs 1,561 1,582 (1) 6,018 6,081 (1)
Profit before
taxation
- before
goodwill
amortisation
and
exceptional
items 459 490 (6) 2,016 1,829 10
- after
goodwill
amortisation
and
exceptional
items 423 1,717 (75) 1,948 3,157 (38)
Earnings per
share
- before
goodwill
amortisation,
exceptional
items and
leaver costs 5.1p 4.5p 13 18.5p 16.5p 12
- before
goodwill
amortisation
and
exceptional
items 3.9p 3.9p - 16.9p 14.2p 19
- after
goodwill
amortisation
and
exceptional
items 3.5p 19.1p (82) 16.4p 31.2p (47)
Capital
expenditure 844 724 (17) 2,673 2,445 (9)
Free cash flow 819 931 (12) 2,071 1,708 21
Net debt 8,425 9,573 12
The commentary focuses on the results before goodwill amortisation and
exceptional items. This is consistent with the way that financial performance is
measured by management and we believe allows a meaningful comparison to be made
of the trading results of the group.
The full profit and loss account, cash flow statement and balance sheet are
provided on pages 18 to 23. A reconciliation of EBITDA to group operating profit
is provided on page 31.
GROUP RESULTS
Fourth quarter results
During the fourth quarter we continued to strengthen our position whilst driving
the transformation of our business. Turnover was maintained year on year at
GBP4,787 million. Excluding the regulatory reductions to mobile termination
rates the underlying turnover increased by 1.4 per cent, which compares to a
decline of 1.4 per cent in the third quarter. The operating results in the
quarter were impacted by leaver costs of GBP149 million (GBP71 million last
year). Excluding leaver costs, earnings per share before goodwill amortisation
and exceptional items increased by 13 per cent to 5.1 pence compared to quarter
four last year.
The growth in new wave turnover accelerated to 38 per cent, reaching GBP1,078
million in the quarter, compared to growth of 25 per cent and 31 per cent in the
second and third quarters, respectively. New wave turnover accounted for 23 per
cent of the group's turnover compared to 16 per cent in the fourth quarter of
last year. New wave turnover is mainly generated from Information and
Communications Technology (ICT) solutions, broadband, mobility and managed
services. Broadband turnover grew by 112 per cent to GBP165 million. The growth
of ICT turnover to GBP805 million reflects our strong order book, including our
new NHS contracts which generated revenues of GBP77 million in the quarter. The
fourth quarter is generally the strongest quarter and builds on the momentum
gained during the year.
The strong growth in new wave turnover, our ICT order book and the growth in
broadband show our strategy is working. We have announced a strategic
go-to-market communications and IT alliance with HP which will address mutual
growth opportunities in the global information and communications market place.
Under this alliance BT and HP have entered into managed services agreements with
a combined value of $1.5 billion over the next seven years. To build on this
success we will be making further investment within our new wave businesses to
accelerate the pace of this transformation.
Turnover from the group's traditional businesses declined by 7 per cent. This
decline reflects regulatory intervention, competition, price reductions and
technological changes that we are using to drive customers from traditional
services to better value and more flexible new wave services, such as broadband
and IPVPN's.
Total consumer turnover in the fourth quarter was 2 per cent lower (1 per cent
lower excluding the impact of reductions to mobile termination rates) year on
year, compared to the 3 per cent decline last quarter. The underlying 12 month
rolling average revenue per customer household (net of mobile termination
charges) of GBP268 declined by GBP1 compared to the last quarter.
With effect from July 1, 2004 we are building on the success of the BT Together
family of packages and simplifying our pricing structure. This will bring low
call charges and reductions in line rental to our three BT Together fixed
monthly fee packages and will make it easier for customers to compare the value
they get from BT with similar offerings from competitors. Existing standard rate
customers will be moving to join the existing 5 million BT Together option 1
customers.
The success of broadband and the BT Together packages provide greater certainty
to our customers and to BT with a committed revenue stream.
BT Business Plan, launched in January 2003, has successfully increased take up
by over 23 per cent compared to the third quarter, serving 267,000 business
locations (175,000 customers) by March 31, 2004. This, together with our BT
Local Business activity has helped mitigate the decline in the traditional
business as well as the growth in new wave turnover of 43 per cent. As a result,
turnover from smaller and medium sized businesses declined by only 1 per cent
(maintained excluding the impact of reductions to mobile termination rates),
compared to the 6 per cent decline last quarter.
Major Corporate (UK and international) turnover increased by 8 per cent to
GBP1,652 million with the strong growth in new wave turnover offsetting the
decline in traditional UK services. There is a continued migration from
traditional voice only services to managed ICT solutions contracts. The fourth
quarter typically benefits from higher solutions revenues and in addition the
new NHS contracts have contributed to the turnover in the quarter. ICT contract
wins amounted to more than GBP2 billion for the second successive quarter.
Wholesale (UK and Global Carrier) turnover fell by 7 per cent (4 per cent
decrease excluding the impact of reductions to mobile termination rates). Growth
in new wave turnover of 83 per cent from our UK Wholesale business was driven by
broadband and managed services, which compensated for the majority of the
decline in our UK Wholesale prices. The international carrier business turnover
declined by 26 per cent in the fourth quarter partly impacted by lower revenues
from AT&T as well as the general decline in global carrier revenues.
Our estimates of one of our measures of market share, as measured by the volume
of fixed to fixed voice minutes, are based on our actual minutes, market data
provided by Ofcom and an extrapolation of the historical trends. As a result of
revisions to Ofcom's historical data, which were announced on May 19, we have
revised our historical market share estimates. Our own actual minutes are
unchanged. Ofcom's revisions have added approximately 600 million minutes
to the fixed to fixed voice market in the first quarter of this year.
BT's estimated consumer market share declined by 0.5 per cent in the fourth
quarter to 69 per cent compared to last quarter, and by an estimated 2.9 per
cent compared to the fourth quarter of last year. The estimated business market
share declined by 0.8 per cent in the fourth quarter to 40 per cent compared to
last quarter, and by an estimated 3.6 per cent compared to the fourth quarter of
last year.
Group operating costs before goodwill amortisation, exceptional items and leaver
costs were reduced by 1 per cent compared to the fourth quarter of last year
reflecting the group's continued focus on operational efficiency and
effectiveness initiatives offset by investment in new wave businesses. Leaver
costs increased in the quarter to GBP149 million (GBP71 million last year) with
the number of staff in post declining by 5 per cent since March 31, 2003 to
99,900 employees. Net staff costs, excluding leaver costs, increased by GBP40
million to GBP875 million due to the impact of increases in pay rates, national
insurance and the SSAP24 pension charge, offset by improved efficiency. Payments
to other telecommunication operators were GBP58 million (6 per cent) higher than
last year mainly reflecting lower net charges in the prior year. Other operating
costs (excluding goodwill amortisation and exceptional items) were reduced by
GBP91 million largely due to efficiency cost savings arising mainly from
marketing, billing and general overheads.
Depreciation was GBP37 million lower than the fourth quarter of last year at
GBP740 million reflecting more efficient capital expenditure over recent years.
As a result of these cost reductions the group operating profit margin before
goodwill amortisation, exceptional items and leaver costs was 17.1 per cent, an
increase of 0.3 percentage points on the fourth quarter of last year. Group
operating profit before goodwill amortisation, exceptional items and leaver
costs increased by 2 per cent compared to the fourth quarter of last year. This
performance reflects improvement in BT Global Services which achieved its first
positive operating profit in the quarter, offset by lower profits in the group's
Retail and UK Wholesale businesses. The GBP78 million increase in leaver costs
means that group operating profit, before goodwill amortisation and exceptional
items, after leaver costs was 8 per cent lower than the fourth quarter of last
year.
BT's share of associates and joint ventures operating losses before goodwill
amortisation and exceptional items was GBP6 million in the quarter (GBP19
million profit last year).
Net interest payable before exceptional items was GBP222 million for the
quarter, an improvement of GBP44 million against last year as a result of the
reduction in the level of net debt. Profit before taxation, goodwill
amortisation and exceptional items of GBP459 million in the quarter decreased by
6 per cent and includes the impact of the GBP78 million increase in leaver
costs.
The taxation rate on the profit before exceptional items and goodwill
amortisation was 26.8 per cent in the quarter (32.4 per cent last year). The
lower effective tax rate reflects reduced overseas losses for which relief is
not available and greater tax efficiency in the group.
Earnings per share before goodwill amortisation and exceptional items were
maintained compared to the fourth quarter last year at 3.9 pence. Earnings per
share before goodwill amortisation, exceptional items and leaver costs were up
13 per cent at 5.1 pence for the quarter.
Full year results
Group turnover decreased by 1 per cent to GBP18,519 million in the year
(maintained excluding the impact of reductions to mobile termination rates). New
wave turnover grew by 30 per cent to GBP3,387 million in the year driven by
strong growth in ICT solutions and broadband. This offsets the decline in
traditional turnover of 5 per cent (excluding the impact of reductions to mobile
termination rates). New wave turnover represents 18 per cent of the group's
turnover for the year compared to 14 per cent last year.
Group operating profit before goodwill amortisation and exceptional items at
GBP2,892 million for the year was 4 per cent higher than the prior year. The
main reasons for this increase include cost efficiencies achieved during the
year, improved performance of BT Global Services and lower leaver costs.
BT's share of associates and joint ventures operating losses before goodwill
amortisation and exceptional items was GBP8 million (GBP181 million profit last
year). The prior year includes the results of our interest in Cegetel which was
sold in January 2003.
Net interest payable before exceptional items was GBP886 million for the year,
an improvement of GBP260 million against last year as a result of the reduction
in the level of net debt.
The above factors have resulted in the group achieving a profit before taxation,
goodwill amortisation and exceptional items of GBP2,016 million, a 10 per cent
increase, reflecting the improved operating results of the group and lower net
interest costs.
The taxation charge for the year was GBP568 million on the profit before
exceptional items and goodwill amortisation, an effective rate of 28.2 per cent
(32.7 per cent last year).
Earnings per share before goodwill amortisation and exceptional items were
19 per cent higher at 16.9 pence for the year.
Exceptional items and goodwill
Net exceptional items in the quarter reduced profit before taxation by
GBP33 million. This includes our share of an exceptional goodwill impairment
charge made by one of our associates, Albacom, which reduced BT's profit before
tax by GBP26 million and net exceptional operating costs of GBP7 million.
Other exceptional items in the full year include a charge for the premium on
buying back bonds (GBP89 million), a credit from the one off interest recognised
on full repayment of loan notes received as part of the original consideration
from the disposal of Yell (GBP34 million) and the profit on disposal of the
group's 7.8 per cent interest in Inmarsat (GBP32 million). These net exceptional
items resulted in a full year charge before tax of GBP56 million.
Goodwill amortisation was GBP3 million for the quarter (GBP6 million last year).
Earnings per share after goodwill amortisation and exceptional items were
3.5 pence in the quarter compared to 19.1 pence last year reflecting the net
exceptional credit in 2002/3 relating to the sale of our interest in Cegetel.
This also had an impact on the full year earnings per share after goodwill
amortisation and exceptional items which were 16.4 pence compared to 31.2 pence
last year.
Dividends
In line with the policy announced in November 2003, the Board recommends a final
dividend of 5.30 pence per share to shareholders, amounting to GBP454 million.
This will be paid, subject to shareholder approval, on September 6, 2004 to
shareholders on the register on August 6, 2004. The full year dividend has
increased by 31 per cent to 8.50 pence per share, compared to 6.50 pence last
year. This year's dividend pay out ratio is 50 per cent of earnings before
goodwill amortisation and exceptional items and we expect this to increase to
around 60 per cent for 2005/6.
Cash flow and net debt
Cash inflow from operating activities amounted to GBP1,568 million in the
quarter. The strong cash generation enabled the early payment of GBP380 million
deficiency contributions to the BT Pension Scheme, which represents most of the
deficiency payments for 2004/5 and 2005/6. The full year cash flow from
operating activities amounted to GBP5,389 million.
Return on investments and servicing of finance reflected a net cash inflow of
GBP148 million compared to an outflow of GBP528 million in the fourth quarter
last year. This movement was driven by lower interest payments following the
reduction in net debt and receipt of funds (GBP303 million) on restructuring a
significant part of the group's swap portfolio hedging foreign exchange and
interest rate exposures. This will be offset by higher cash interest payments in
future years. The prior year fourth quarter included an interest payment of
GBP293 million on closing out GBP2.6 billion of fixed interest rate swaps
following receipt of the Cegetel sale proceeds. The full year return on
investment and servicing of finance reflected a net cash outflow of GBP527
million compared to GBP1,506 million last year influenced by the same factors.
The net cash outflow on fixed asset purchases and sales was GBP765 million in
the quarter which compares to GBP632 million last year reflecting the rising
investment in our network transformation programme. The full year net cash
outflow was GBP2,477 million compared to GBP2,381 million last year. Capital
expenditure for 2004/5 is expected to rise from this year's level of GBP2,673
million, but remain within its GBP3 billion annual target, as the group invests
in its 21st century network programme. This is designed to support the next
generation of services and revenues, whilst enhancing the customer experience
and generating significant cost savings.
Free cash flow (before acquisitions and disposals, dividends and financing) was
a net inflow of GBP819 million in the quarter compared to GBP931 million last
year and the full year inflow was GBP2,071 million compared to GBP1,708 million
last year.
The share buyback programme continued with the repurchase of 48 million shares
for GBP86 million in the quarter. This brings the full year position to the
repurchase of 81 million shares for GBP144 million.
Net debt at March 31, 2004 was GBP8,425 million, 12 per cent below last year. We
continue to target a net debt level of around GBP7 billion in 2006/7.
Pensions
The FRS17 position at March 31, 2004 showed a deficit of GBP3.6 billion, net of
tax, being a reduction of GBP2.7 billion (43 per cent) since March 31, 2003.
However, pension costs will continue to be accounted for in accordance with
SSAP24 for 2004/5.
Customer satisfaction
BT has an extensive market research programme conducted by external agencies
which focuses on the level and causes of customer dissatisfaction. The group
achieved a further 4 percentage point improvement in the level of customer
dissatisfaction in the quarter to 22 per cent for the year which follows the
improvement of 37 per cent in the 2003 financial year.
Broadband
There was an installed base of 2.45 million Wholesale broadband lines by May 14,
2004, an increase of 162 per cent on the number of connections 12 months ago,
with net additions in the quarter growing at more than 35,000 per week. The
increasing base is reflected in a 112 per cent increase in broadband revenues to
GBP165 million in the quarter which brings the full year revenue to GBP491
million, an increase of 107 per cent over last year.
During the fourth quarter, BT announced four cutting-edge consumer broadband
products and services called Flexible Bandwidth, BT Rich Media, BT Communicator
and BT Remote Management System. These services will provide our customers with
additional capabilities from broadband and stimulate further take up.
On April 27, 2004, we announced the roll out of ADSL broadband to a further
1,128 exchanges by no later than Summer 2005. This will help bring broadband to
exchanges serving 99.6 per cent of UK homes and businesses, compared to the
current coverage of 90 per cent. This will give the UK one of the most extensive
broadband networks in the world.
Outlook
The strong growth in new wave turnover, our ICT order book and the growth in
broadband show our strategy is working. We will build on this success and
accelerate the transformation of our business.
We remain committed to our strategy and are confident in our ability to deliver
our key strategic goals.
_____________________________________________________________________
The Annual Report and Form 20-F is expected to be published on June 2, 2004.
The Annual General Meeting of BT Group plc will be held in Cardiff on
July 14, 2004.
OPERATING PERFORMANCE BY LINE OF BUSINESS
Fourth quarter Group Group operating EBITDA Capital
ended turnover profit (loss) (iii) (iii) expenditure
March 31, 2004 GBPm GBPm GBPm GBPm
(i)
BT Retail 3,520 310 346 46
BT Wholesale 2,708 397 888 544
BT Global
Services 1,649 7 163 160
Other 15 (43) 15 94
Intra-group
items (ii) (3,105) - - -
Total 4,787 671 1,412 844
================= ======== ============ ========== ===========
Year ended Group Group operating EBITDA Capital
March 31, 2004 turnover profit (loss) (iii) (iii) expenditure
) GBPm GBPm GBPm GBPm
BT Retail 13,534 1,434 1,596 118
BT Wholesale 10,859 1,681 3,600 1,809
BT Global
Services 5,782 (105) 508 479
Other 35 (118) 112 267
Intra-group
items (ii) (11,691) - - -
Total 18,519 2,892 5,816 2,673
================= ======== ============ ========== ===========
(i) See note 2 on pages 24 to 28 for prior year figures.
(ii) Elimination of intra-group turnover between businesses,
which is included in the turnover of the originating business.
(iii) Before goodwill amortisation and exceptional items.
There is extensive trading between BT's lines of business and the line of
business profitability is dependent on the transfer price levels. The
intra-group trading arrangements are subject to review and changed with effect
from April 1, 2003 in certain circumstances to reflect reorganisations within
the group and regulatory changes. The comparative figures for the lines of
business have been restated to reflect these changes but there is no impact at a
group level.
The line of business commentaries refer to EBITDA, which is defined as group
operating profit before depreciation and amortisation.
BT Retail
Fourth quarter ended March Year ended March 31
31
2004 2003* Better 2004 2003* Better
(worse) (worse)
GBPm GBPm % GBPm GBPm %
Group turnover 3,520 3,554 (1) 13,534 13,882 (3)
Gross margin 918 981 (6) 3,722 3,936 (5)
Sales, general and
administration 572 564 (1) 2,126 2,207 4
costs
EBITDA 346 417 (17) 1,596 1,729 (8)
Depreciation 36 48 25 162 201 19
Operating profit 310 369 (16) 1,434 1,528 (6)
Operating profit
before leaver costs 392 385 2 1,546 1,567 (1)
Capital expenditure 46 40 (15) 118 109 (8)
*Restated to reflect changes in intra-group trading arrangements.
Growth in new wave turnover of 48 per cent, the highest ever quarterly growth,
was offset by the 9 per cent decline in traditional turnover which resulted in
an overall decline of 1 per cent compared to the fourth quarter of last year.
After adjusting for the regulatory reductions to mobile termination rates,
turnover was maintained.
Fourth quarter ended March Year ended March 31
31
BT Retail turnover 2004 2003* Better 2004 2003* Better
(worse) (worse)
GBPm GBPm % GBPm GBPm %
Voice Services 2,196 2,397 (8) 9,012 9,665 (7)
Intermediate 578 652 (11) 2,356 2,534 (7)
Products
Traditional 2,774 3,049 (9) 11,368 12,199 (7)
ICT 594 440 35 1,734 1,502 15
Broadband 101 42 140 307 131 134
Mobility 34 19 79 84 42 100
Other 17 4 n/m 41 8 n/m
New Wave 746 505 48 2,166 1,683 29
Total 3,520 3,554 (1) 13,534 13,882 (3)
Sales to other BT
businesses incl.
above 277 240 15 904 903 -
*Restated to reflect changes in intra-group trading arrangements.
Turnover from voice services was 8 per cent lower than the fourth quarter of
last year.
The overall market for fixed to fixed voice call minutes is estimated to have
declined by 1 per cent compared to the fourth quarter of last year, partly
reflecting the migration to new wave products and services such as IPVPN's and
substitution by e-mail, instant messaging and mobile services.
BT Group's total originating measured call volumes have decreased by 5 per cent
in the quarter versus the fourth quarter last year. Internet and data related
call volumes decreased by 6 per cent reflecting the slow down in the growth of
flat rate internet access products offset by the migration to broadband which is
not measured in minutes. Total geographic (local, national and international)
call volumes declined by 7 per cent which is similar to the trend in previous
quarters and largely reflects the decline in the market and loss of market
share. The rate of fixed to mobile call volume decline was maintained at
2 per cent, the same decline as the third quarter.
Turnover from intermediate products decreased by 11 per cent compared to the
fourth quarter of last year mainly driven by a decline in retail private
circuits and ISDN as customers migrate to cheaper wholesale partial private
circuits and new wave products including broadband and IPVPN.
BT Retail's rate of new wave turnover growth increased to 48 per cent compared
to the fourth quarter of last year. ICT turnover increased by 35 per cent,
reflecting the growth in new IP based services, and additional turnover from
contract wins, including the NHS, partly offset by a decline in business
telephony equipment. Broadband turnover continued to grow rapidly at
140 per cent in the quarter, with 928,000 BT Retail customers at March 31, 2004.
In November, BT launched BT Mobile Home Plan through retail stores. BT now has a
consumer and corporate mobile customer base of 144,000. Total BT Retail turnover
from mobility services increased by 79 per cent.
Our mobility and convergence strategy took a major step forward with the
announcement of our partnership with Vodafone which will create one of the
world's first fully converged fixed-mobile communications service. We will be
launching a convergent handset, Project Bluephone, in collaboration with
Alcatel, Ericsson and Motorola, by the end of the year. These are critical steps
to convergence that will mean customers no longer need to own multiple phones
and their single device will switch seamlessly between networks. Our goal is to
generate around GBP1 billion of annual mobility and convergence revenues for BT
Group within five years.
As we build our broadband and mobility customer base we will incur subscriber
acquisition costs which we write off as incurred. The creation and development
of new value added services will involve the recognition of upfront development
costs. In addition, we will undertake additional advertising to support our new
service propositions and reinforce our position in our new wave growth
businesses.
The total number of BT Retail lines, which includes voice, digital and
broadband, increased by 0.2 per cent to 29.6 million compared to March 31, 2003,
reflecting the continued growth in broadband partially offset by declining PSTN
and ISDN lines.
The gross margin reduced by 1.5 percentage points to 26.1 per cent compared to
the fourth quarter of last year, reflecting lower prices partly offset by lower
charges from BT Wholesale in line with market and regulatory prices, and the
change in the revenue mix from traditional business to new wave services.
Cost transformation programmes continue to generate significant savings with
GBP71 million before leaver costs (15 per cent) achieved in the traditional
business in the quarter resulting in full year savings of GBP228 million. BT
Retail incurred leaver costs of GBP82 million in the quarter, an increase of
GBP66 million over last year.
Operating profit in the quarter of GBP310 million was 16 per cent lower than the
prior year. However, excluding the impact of leaver costs, operating profit
increased by 2 per cent.
BT Wholesale
Fourth quarter ended March Year ended March 31
31
2004 2003* Better 2004 2003* Better
(worse) (worse)
GBPm GBPm % GBPm GBPm %
External turnover 864 900 (4) 3,445 3,525 (2)
Internal turnover 1,844 1,915 (4) 7,414 7,722 (4)
Group turnover 2,708 2,815 (4) 10,859 11,247 (3)
Total operating
costs 1,841 1,890 3 7,351 7,691 4
before depreciation
Other operating
income 21 31 (32) 92 125 (26)
EBITDA 888 956 (7) 3,600 3,681 (2)
Depreciation 491 485 (1) 1,919 1,923 -
Operating profit 397 471 (16) 1,681 1,758 (4)
Capital expenditure 544 478 (14) 1,809 1,652 (10)
*Restated to reflect changes in intra-group trading arrangements.
BT Wholesale's turnover for the quarter of GBP2,708 million was 4 per cent
lower, and operating profit of GBP397 million was 16 per cent lower than the
fourth quarter of last year.
Excluding leaver costs, operating profit was 11 per cent lower than the fourth
quarter of last year.
External turnover fell by GBP36 million (4 per cent) almost all of which is
accounted for by price reductions on mobile call termination rates which have no
impact on profitability. New wave external turnover has continued to show strong
growth with an 83 per cent increase to GBP115 million reflecting the increase in
broadband volumes and managed services. This growth offsets the reduction in
traditional turnover after excluding the impact of the reduced mobile call
termination rates. Traditional turnover was impacted by the reductions from the
regulatory Network Charge Control (NCC) pricing formulae resulting in weighted
average price reductions of around 7 per cent across the basket of relevant
products. The continued migration from retail private circuits to partial
private circuits has also reduced traditional turnover.
Turnover from other parts of BT of GBP1,844 million in the quarter decreased by
4 per cent reflecting lower call and retail private circuit volumes, reductions
on mobile call termination rates and other price reductions.
Despite an increase in network volumes, BT Wholesale's operating costs of
GBP1,841 million excluding depreciation and exceptional items, decreased by
GBP49 million (3 per cent) compared to the fourth quarter of last year. Leaver
costs in the quarter were GBP42 million, an increase of GBP19 million compared
to last year. The focus on improved operational efficiencies has resulted in
efficiency savings of GBP77 million in the quarter, taking the full year total
to GBP280 million, well ahead of the full year target of GBP250 million.
BT Global Services
Fourth quarter ended March 31 Year ended March 31
2004 2003* Better 2004 2003* Better
(worse) (worse)
GBPm GBPm % GBPm GBPm %
Group turnover 1,649 1,526 8 5,782 5,417 7
EBITDA 163 89 83 508 238 113
Operating profit
(loss) 7 (79) n/m (105) (375) 72
Capital expenditure 160 152 (5) 479 445 (8)
*Restated to reflect changes in intra-group trading arrangements.
BT Global Services has produced another quarter of improved profitability,
generating a positive operating profit for the first time. The operating profit
of GBP7 million represents an GBP86 million improvement on last year.
Turnover for the quarter rose by 8 per cent to GBP1,649 million. Solutions
turnover grew by 12 per cent reflecting the conversion of the strong order
intake over the past twelve months into turnover. BT Syntegra produced another
strong quarter's results, with turnover from the NHS contracts contributing
towards the growth of 32 per cent. Global Products turnover grew by 10 per cent,
benefiting from growth in Multi Protocol Label Switching (MPLS).
For the second quarter in succession orders were in excess of GBP2 billion with
Solutions and BT Syntegra orders of GBP2.3 billion in the quarter, our highest
ever in a single quarter. Solutions has been awarded the leading role in a
7 year contract worth an estimated GBP533 million, to procure, integrate and
manage networking services for the new national network for the NHS. In total,
ICT contract wins for the last 12 months amount to more than GBP7 billion,
providing a committed revenue stream over a number of years. Further large
contract wins are likely to lead to increased upfront bid and contract set up
costs.
EBITDA increased by 83 per cent from the fourth quarter of last year to GBP163
million. Higher turnover, together with lower network, selling, general and
administration costs following continuing cost reduction initiatives helped
generate a GBP7 million operating profit. The majority of this improvement arose
in the Global Products and Solutions businesses.
Global Services' transformation is continuing. To further enhance BT's position
in the ICT market we will devote additional resources to this sector in 2004/5,
in particular by strengthening our international network centric solutions and
systems integration capabilities.
___________________________________________________________________________
GROUP PROFIT AND LOSS ACCOUNT
for the three months ended March 31, 2004
-------------------- ------ ---------- ----------- ---------
Before goodwill Goodwill Total
amortisation and amortisation and
exceptional items exceptional items
(note 6)
(unaudited) Notes GBPm GBPm GBPm
-------------------- ------ ---------- ----------- ---------
Group turnover 2, 4 4,787 - 4,787
Other
operating
income 44 - 44
Operating
costs 3 (4,160) (10) (4,170)
Group
operating
profit (loss) 2 671 (10) 661
Group's share
of operating
losses of
associates and
joint ventures 4 (6) (26) (32)
Total
operating
profit (loss) 665 (36) 629
Profit on sale
of fixed asset
investments
and group
undertakings 4 - 4
Profit on sale
of property
fixed assets 12 - 12
Net interest
payable 7 (222) - (222)
Profit (loss)
before
taxation 459 (36) 423
Taxation (123) 2 (121)
Profit (loss)
after taxation 336 (34) 302
Minority
interests 1 - 1
Profit (loss)
attributable
to
shareholders 337 (34) 303
Earnings per
share 9
- basic 3.9p 3.5p
- diluted 3.9p 3.5p
-------------------- ------ ---------- ----------- ---------
GROUP PROFIT AND LOSS ACCOUNT
for the three months ended March 31, 2003
-------------------- ------ ---------- ----------- ---------
Before goodwill Goodwill Total
amortisation and amortisation and
exceptional items exceptional items
(note 6)
(unaudited) Notes GBPm GBPm GBPm
-------------------- ------ ---------- ----------- ---------
Group turnover 2, 4 4,778 - 4,778
Other operating
income 67 - 67
Operating
costs 3 (4,112) (4) (4,116)
Group
operating
profit (loss) 2 733 (4) 729
Group's share
of operating
profits
(losses) of
associates and
joint ventures 4 19 (2) 17
Total
operating
profit (loss) 752 (6) 746
Profit on sale
of fixed asset
investments
and group
undertakings 5 - 1,526 1,526
Profit on sale
of property
fixed assets 4 - 4
Net interest
payable 7 (266) (293) (559)
Profit before
taxation 490 1,227 1,717
Taxation (159) 88 (71)
Profit after
taxation 331 1,315 1,646
Minority
interests 5 - 5
Profit
attributable
to
shareholders 336 1,315 1,651
Earnings per
share 9
- basic 3.9p 19.1p
- diluted 3.9p 19.0p
-------------------- ------ ---------- ----------- ---------
GROUP PROFIT AND LOSS ACCOUNT
for the year ended March 31, 2004
-------------------- ------ ---------- ----------- ---------
Before goodwill Goodwill Total
amortisation and amortisation and
exceptional items exceptional items
(note 6)
Notes GBPm GBPm GBPm
-------------------- ------ ---------- ----------- ---------
Group turnover 2, 4 18,519 - 18,519
Other
operating
income 177 - 177
Operating
costs 3 (15,804) (19) (15,823)
Group
operating
profit (loss) 2 2,892 (19) 2,873
Group's share
of operating
losses of
associates and
joint ventures 4 (8) (26) (34)
Total
operating
profit (loss) 2,884 (45) 2,839
Profit on sale
of fixed asset
investments
and group
undertakings 4 32 36
Profit on sale
of property
fixed assets 14 - 14
Net interest
payable 7 (886) (55) (941)
Profit (loss)
before
taxation 2,016 (68) 1,948
Taxation (568) 29 (539)
Profit (loss)
after taxation 1,448 (39) 1,409
Minority
interests 8 - 8
Profit (loss)
attributable
to
shareholders 1,456 (39) 1,417
Dividends (732)
Retained
profit for the
period 685
Earnings per
share 9
- basic 16.9p 16.4p
- diluted 16.8p 16.3p
-------------------- ------ ---------- ----------- ---------
GROUP PROFIT AND LOSS ACCOUNT
for the year ended March 31, 2003
-------------------- ------ ---------- ----------- ---------
Before goodwill Goodwill Total
amortisation and amortisation and
exceptional items exceptional items
(note 6)
Notes GBPm GBPm GBPm
-------------------- ------ ---------- ----------- ---------
Group turnover 2, 4 18,727 - 18,727
Other
operating
income 215 - 215
Operating
costs 3 (16,152) (218) (16,370)
Group
operating
profit (loss) 2 2,790 (218) 2,572
Group's share
of operating
profits of
associates and
joint ventures 4 181 148 329
Total
operating
profit (loss) 2,971 (70) 2,901
Profit on sale
of fixed asset
investments
and group
undertakings 5 - 1,691 1,691
Profit on sale
of property
fixed assets 11 - 11
Amounts
written off
investments (7) - (7)
Net interest
payable 7 (1,146) (293) (1,439)
Profit before
taxation 1,829 1,328 3,157
Taxation (598) 139 (459)
Profit after
taxation 1,231 1,467 2,698
Minority
interests (5) (7) (12)
Profit
attributable
to
shareholders 1,226 1,460 2,686
Dividends (560)
Retained
profit for the
period 2,126
Earnings per
share 9
- basic 14.2p 31.2p
- diluted 14.1p 31.0p
-------------------- ------ ---------- ----------- ---------
GROUP CASH FLOW STATEMENT
for the three months and year ended March 31, 2004
--------------------- ----------------- -----------------
Fourth quarter Year ended
ended March 31 March 31
2004 2003 2004 2003
(unaudited)
GBPm GBPm GBPm GBPm
--------------------- -------- --------- --------- --- ---------
Net cash inflow from operating
activities* (note 10) 1,568 2,247 5,389 6,023
Dividends from associates and
joint ventures - 2 3 6
Net cash inflow (outflow) for
returns 148 (528) (527) (1,506)
on investments and servicing
of finance**
Taxation paid (132) (158) (317) (434)
-------- --------- --------- ---------
Purchase of tangible fixed (802) (676) (2,684) (2,580)
assets
Net sale of fixed asset
investments 4 17 131 105
Sale of tangible fixed assets 33 27 76 94
-------- --------- --------- ---------
Net cash outflow for capital
expenditure and financial
investments (765) (632) (2,477) (2,381)
--------------------- -------- --------- --------- --- ---------
Free cash inflow before
acquisitions, disposals and
dividends 819 931 2,071 1,708
--------------------- -------- --------- --------- --- ---------
-------- --------- --------- ---------
Acquisitions (33) (63) (61) (77)
Disposals - 2,706 1 2,919
-------- --------- --------- ---------
Net cash (outflow) inflow for
acquisitions and disposals (33) 2,643 (60) 2,842
Equity dividends paid (277) (194) (645) (367)
Cash inflow before use of
liquid 509 3,380 1,366 4,183
resources and financing
Management of liquid resources 857 (2,379) 1,123 (1,729)
-------- --------- --------- ---------
Issue of ordinary share capital - - - 42
Repurchase of ordinary share
capital (86) - (144) -
New loans 6 - 1,326 20
Repayment of loans (1,475) (958) (3,627) (2,471)
Net movement on short-term
borrowings - - - (64)
-------- --------- --------- ---------
Net cash outflow from financing (1,555) (958) (2,445) (2,473)
(Decrease) increase in cash (189) 43 44 (19)
Decrease in net debt from cash
flows (note 11) 423 3,380 1,222 4,225
--------------------- -------- --------- --------- --- ---------
*Net of deficiency and special
pension contributions (380) - (742) (329)
**Net of interest receipts on 303 - 420 -
restructuring currency swap
portfolio
GROUP BALANCE SHEET
at March 31, 2004
------------------------------ --------- ---------
March 31 March 31
2004 2003
GBPm GBPm
------------------------------ --------- ---------
Fixed assets
Intangible assets 204 218
Tangible assets 15,487 15,888
Investments 377 555
16,068 16,661
Current assets
--------- ---------
Stocks 89 82
Debtors 5,189 5,043
Investments 5,163 6,340
Cash at bank and in hand 109 91
10,550 11,556
Creditors: amounts falling due within one year
Loans and other borrowings 1,271 2,548
Other creditors 7,277 7,132
8,548 9,680
--------- ---------
Net current assets 2,002 1,876
Total assets less current liabilities 18,070 18,537
Creditors: amounts falling due after more than
one year
Loans and other borrowings 12,426 13,456
Provisions for liabilities and charges (note 12) 2,504 2,376
Minority interests 46 63
Capital and reserves (note 13)
--------- ---------
Called up share capital 432 434
Reserves 2,662 2,208
--------- ---------
Total equity shareholders' funds 3,094 2,642
18,070 18,537
------------------------------ --------- ---------
NOTES
1 Basis of preparation
The preliminary results of BT Group, which are not statutory accounts, have been
prepared on the basis of the accounting policies as set out in the Report and
Accounts of BT Group plc for the year ended March 31, 2003. Figures for the
years ended March 31, 2004 and 2003 are extracts from the group accounts for
those years.
The group accounts for the year ended March 31, 2004, on which the auditors
issued an unqualified report which did not contain a statement under Section 237
(2) or (3) of the Companies Act 1985, were approved by the Board of Directors on
May 19, 2004 and have not yet been delivered to the Registrar of Companies but
are expected to be published on June 2, 2004.
2 Results of businesses
The tables below show the results of BT's lines of business. There is extensive
trading between many of the business units and profitability is dependent on the
transfer price levels. These intra-group trading arrangements are subject to
review and have changed in certain instances. Comparative figures have been
restated for these changes but there is no impact at a group level. The
eliminations are intra-group eliminations.
With effect from January 1, 2003 the operations of BT Openworld were transferred
under the management control of BT Retail. The comparative figures have been
restated to report BT Openworld as part of BT Retail for all the periods under
review.
2 Results of businesses continued
(a) Operating results
External Internal Group Group EBITDA
operating
turnover turnover turnover profit (loss) (iii)
(iii)
GBPm GBPm GBPm GBPm GBPm
Fourth quarter ended
March 31, 2004
BT Retail 3,243 277 3,520 310 346
BT Wholesale 864 1,844 2,708 397 888
BT Global
Services 665 984 1,649 7 163
Other 15 - 15 (43) 15
Intra-group
items (ii) - (3,105) (3,105) - -
Total 4,787 - 4,787 671 1,412
Fourth quarter ended
March 31, 2003 (i)
BT Retail 3,314 240 3,554 369 417
BT Wholesale 900 1,915 2,815 471 956
BT Global
Services 560 966 1,526 (79) 89
Other 4 - 4 (28) 49
Intra-group
items (ii) - (3,121) (3,121) - -
Total 4,778 - 4,778 733 1,511
Year ended March 31,
2004
BT Retail 12,630 904 13,534 1,434 1,596
BT Wholesale 3,445 7,414 10,859 1,681 3,600
BT Global
Services 2,410 3,372 5,782 (105) 508
Other 34 1 35 (118) 112
Intra-group
items (ii) - (11,691) (11,691) - -
Total 18,519 - 18,519 2,892 5,816
Year ended March 31,
2003 (i)
BT Retail 12,979 903 13,882 1,528 1,729
BT Wholesale 3,525 7,722 11,247 1,758 3,681
BT Global
Services 2,183 3,234 5,417 (375) 238
Other 40 1 41 (121) 157
Intra-group
items (ii) - (11,860) (11,860) - -
Total 18,727 - 18,727 2,790 5,805
(i) The results of the lines of business for the quarter and
year ended March 31, 2003 have been restated to reflect changes to intra-group
trading arrangements.
(ii) Elimination of intra-group turnover between businesses,
which is included in the total turnover of the originating business.
(iii) Before goodwill amortisation and exceptional items.
2 Results of businesses continued
BT Global Services analysis
-------------------- ---------------------
Fourth quarter Year ended March 31
ended March 31
------------------- ---------------------
2004 2003 Better 2004 2003 Better
(worse)
(worse)
GBPm GBPm % GBPm GBPm %
Group turnover
Solutions 822 731 12 2,802 2,455 14
Syntegra 253 192 32 721 623 16
Global Products 487 444 10 1,831 1,674 9
Global Carrier 252 268 (6) 962 974 (1)
Other and
eliminations (165) (109) (51) (534) (309) (73)
1,649 1,526 8 5,782 5,417 7
EBITDA
Solutions 119 73 63 337 286 18
Syntegra 17 15 13 37 34 9
Global Products 36 16 125 113 (44) n/m
Global Carrier 51 49 4 163 148 10
Other (i) (60) (64) 6 (142) (186) 24
163 89 83 508 238 113
Operating profit (loss)
(ii)
Solutions 100 50 100 261 209 25
Syntegra 14 12 17 28 24 17
Global Products (61) (85) 28 (273) (432) 37
Global Carrier 29 24 21 74 57 30
Other (i) (75) (80) 6 (195) (233) 16
7 (79) n/m (105) (375) 72
Capital expenditure 160 152 (5) 479 445 (8)
(i) Other is after charging leaver costs of GBP14m in the fourth quarter
(GBP19m last year) and GBP33m in the year ended March 31, 2004
(GBP65m last year).
(ii) Before goodwill amortisation.
2 Results of businesses continued
(b) Group turnover analysis
-------------------- -------------------
Fourth quarter Year ended
ended March 31 March 31
-------------------- -------------------
2004 2003 Better 2004 2003 Better (worse)
(worse)
GBPm GBPm % GBPm GBPm %
Traditional 3,709 3,997 (7) 15,132 16,115 (6)
New wave 1,078 781 38 3,387 2,612 30
4,787 4,778 - 18,519 18,727 (1)
Consumer 1,474 1,509 (2) 5,974 6,067 (2)
Business 660 666 (1) 2,600 2,716 (4)
Major Corporate 1,652 1,534 8 5,909 5,794 2
Wholesale/Carrier 986 1,065 (7) 4,002 4,110 (3)
Other 15 4 n/m 34 40 (15)
4,787 4,778 - 18,519 18,727 (1)
Note: New wave includes the external new wave turnover of BT Retail (ICT,
broadband, mobility and classified directories) and BT Wholesale (broadband and
managed services) and the external turnover of Global Solutions and BT Syntegra.
Consumer includes the external turnover of BT Retail from consumer customers.
Business includes the external turnover of BT Retail from SME customers.
Major Corporate includes the external turnover of BT Retail from major corporate
customers and the external turnover of BT Global Services, with the exception of
Global Carrier.
Wholesale/Carrier includes the external turnover of BT Wholesale and Global
Carrier.
(c) Capital expenditure on plant, equipment and motor vehicle additions
Fourth Year ended
quarter
ended March March 31
31
2004 2003 2004 2003
GBPm GBPm GBPm GBPm
BT Retail 46 40 118 109
BT Wholesale
Access 249 252 966 888
Switch 17 30 87 164
Transmission 64 81 213 260
Products/systems support 214 115 543 340
544 478 1,809 1,652
BT Global Services
Syntegra and Solutions 41 30 121 66
UK Networks 39 56 131 140
Other 80 66 227 239
160 152 479 445
Other (including fleet vehicles and property) 94 54 267 239
Total 844 724 2,673 2,445
2 Results of businesses continued
(d) Net operating assets (liabilities)
March 31 March 31
2004 2003
GBPm GBPm
BT Retail (40) (430)
BT Wholesale 11,940 12,041
BT Global Services 1,291 1,912
Other 188 217
Total 13,379 13,740
Note: Net operating assets (liabilities) comprise tangible and intangible fixed
assets, stocks, debtors less creditors (excluding loans and other borrowings)
and provisions for liabilities and charges (excluding deferred tax).
3 Operating costs
Fourth quarter Year ended
ended March 31 March 31
2004 2003 2004 2003
GBPm GBPm GBPm GBPm
Net staff costs before leaver costs 875 835 3,533 3,395
Leaver costs 149 71 202 276
Net staff costs 1,024 906 3,735 3,671
Depreciation 740 777 2,921 3,011
Payments to telecommunication operators 973 915 3,963 3,940
Other operating costs 1,423 1,514 5,185 5,530
Total before goodwill amortisation 4,160 4,112 15,804 16,152
and exceptional items
Goodwill amortisation 3 4 12 20
Exceptional items 7 - 7 198
Total 4,170 4,116 15,823 16,370
4 Group's share of associates and joint ventures
Fourth quarter Year ended
ended March 31 March 31
2004 2003 2004 2003
GBPm GBPm GBPm GBPm
Share of associates and joint ventures 91 188 395 1,455
turnover
Share of operating (losses) profits before
goodwill amortisation and exceptional items (6) 19 (8) 181
Impairment of associates and joint ventures
and (26) - (26) 150
release of related costs
Amortisation of goodwill - (2) - (2)
Total share of operating (losses) profits of
associates and joint ventures (32) 17 (34) 329
5 Profit on sale of fixed asset investments and group undertakings
The profit in the three months ended March 31, 2003 of GBP1,526m was mainly
attributable to the profit on sale of our stake in Cegetel of GBP1,509m. After
recognition of an exceptional interest charge of GBP293m on closing out GBP2.6bn
of fixed interest rate swaps, following receipt of the Cegetel sale proceeds of
GBP2.6bn, the net profit on sale was GBP1,216m.
6 Exceptional items and goodwill amortisation
Fourth quarter Year ended
ended March 31 March 31
2004 2003 2004 2003
GBPm GBPm GBPm GBPm
Profit on sale of fixed asset investments and
group undertakings - 1,233 32 1,398
Property rationalisation costs - - - (198)
Impairment of investments and release for
related costs (26) - (26) 150
Exceptional operating costs (7) - (7) -
Net interest payable - - (55) -
Goodwill amortisation (3) (6) (12) (22)
Net (charge) credit before tax and minority
interests (36) 1,227 (68) 1,328
7 Net interest payable
Fourth quarter Year ended
ended March 31 March 31
2004 2003 2004 2003
GBPm GBPm GBPm GBPm
Group 265 609 1,220 1,609
Joint ventures and associates 5 4 19 25
Total interest payable 270 613 1,239 1,634
Interest receivable (48) (54) (298) (195)
Net interest payable 222 559 941 1,439
Analysed:
Before exceptional items 222 266 886 1,146
Exceptional items - 293 55 293
Total 222 559 941 1,439
8 Dividends
Year ended Year ended
March 31 March 31
2004 2003 2004 2003
pence per share GBPm GBPm
Interim dividend 3.20 2.25 278 194
Proposed final dividend 5.30 4.25 454 366
8.50 6.50 732 560
9 Earnings per share
The basic earnings per share are calculated by dividing the profit attributable
to shareholders by the average number of shares in issue after deducting the
company's shares held by employee
share ownership trusts and treasury shares. In calculating the diluted earnings
per share, share options outstanding and other potential ordinary shares have
been taken into account.
The average number of shares in the periods were:
Fourth quarter Year ended
ended March 31 March 31
2004 2003 2004 2003
million of shares million of shares
Basic 8,597 8,623 8,621 8,616
Diluted 8,645 8,671 8,676 8,668
10 Reconciliation of operating profit to operating cash flow
Fourth quarter Year ended
ended March 31 March 31
2004 2003 2004 2003
GBPm GBPm GBPm GBPm
Group operating profit 661 729 2,873 2,572
Depreciation and amortisation 744 782 2,936 3,035
Changes in working capital 527 814 237 501
Provision movements, pensions (364) (78) (657) (85)
and other
Net cash inflow from operating activities 1,568 2,247 5,389 6,023
11 Net debt
(a) Analysis
At March 31
2004 2003
GBPm GBPm
Long-term loans and other borrowings falling due after
more than one year 12,426 13,456
Short-term borrowings and long-term loans and other
borrowings falling due within one year 1,271 2,548
Total debt 13,697 16,004
Short-term investments (5,163) (6,340)
Cash at bank (109) (91)
Net debt at end of period 8,425 9,573
11 Net debt continued
(b) Reconciliation of net cash flow to movement in net debt
Fourth quarter Year ended
ended March 31 March 31
2004 2003 2004 2003
GBPm GBPm GBPm GBPm
Net debt at beginning of period 8,795 12,917 9,573 13,701
Decrease in net debt resulting from
cash flows (423) (3,380) (1,222) (4,225)
Net debt assumed or issued on
acquisitions 1 - 1 (13)
Currency and other movements 15 35 4 67
Other non-cash movements 37 1 69 43
Net debt at end of period 8,425 9,573 8,425 9,573
12 Provisions for liabilities and charges
At March 31
2004 2003
GBPm GBPm
Deferred taxation 2,191 2,017
Pension provisions (a) 36 33
Other provisions 277 326
2,504 2,376
(a) The pension prepayment relating to the BT Pension Scheme of GBP1,172m at
March 31, 2004 (GBP630m last year) is included in debtors and falls due after
more than one year.
13 Share capital and reserves
Share capital Reserves Total
GBPm GBPm GBPm
Balances at April 1, 2003 434 2,208 2,642
Repurchase of share capital (2) (142) (144)
Profit for the financial year - 1,417 1,417
Dividend - (732) (732)
Currency movements - (89) (89)
Balances at March 31, 2004 432 2,662 3,094
14 Earnings before interest, taxation, depreciation and amortisation (EBITDA)
Fourth quarter Year ended
ended March 31 March 31
2004 2003 2004 2003
GBPm GBPm GBPm GBPm
Group operating profit 661 729 2,873 2,572
Exceptional items 7 - 7 198
Depreciation 741 778 2,924 3,015
Goodwill amortisation 3 4 12 20
EBITDA before exceptional items 1,412 1,511 5,816 5,805
15 Pensions
The group continues to account for pensions in accordance with SSAP24. Full
implementation of FRS17 has been deferred by the Accounting Standards Board and
would apply to BT for the 2005/06 financial year. However, in the 2005/06
financial year the group will adopt International Financial Reporting Standards
(IFRS). The requirements for disclosure under FRS17 remain in force between its
issue and full implementation of IFRS and extracts of the required information
are set out below.
The assumptions used to calculate the BTPS liabilities under FRS17 at
March 31, 2004 are:
Real rates (per annum) Nominal rates (per annum)
2004 2003 2004 2003
% % % %
Average future
increases in wages and
salaries 1.00* 1.50* 3.63* 3.78*
Average increase in
pensions in payment
and deferred pensions - - 2.60 2.25
Rate used to discount
scheme liabilities 2.83 3.08 5.50 5.40
Inflation - average
increase in retail
price index - - 2.60 2.25
*There is a short term reduction in the real salary growth assumption to 0.75%
for the first three years (2003) and first two years (2004).
The net pension deficit set out below under FRS17 is as if this standard was
fully applied. The fair value of the BTPS assets, the present value of the BTPS
liabilities based on the financial assumptions set out above, and the resulting
deficit, together with those of unfunded pension liabilities at March 31, 2004
are shown below. The fair value of the BTPS assets is not intended to be
realised in the short term and may be subject to significant change before it is
realised. The present value of the liabilities is derived from long-term cash
flow projections and is thus inherently uncertain.
March 31, 2004 March 31, 2003
Assets Present value Deficit Assets Present value Deficit
of liabilities of liabilities
GBPm GBPm GBPm GBPm GBPm GBPm
BTPS 26,900 32,000 5,100 21,500 30,500 9,000
Other
liabilities - 36 36 - 33 33
Total 5,136 9,033
deficit
Deferred tax
asset (1,541) (2,710)
at 30 per
cent
Net pension
liability 3,595 6,323
16 United States Generally Accepted Accounting Principles
The results set out above have been prepared in accordance with accounting
principles generally accepted in the United Kingdom. The table below sets out
the results calculated in accordance with United States Generally Accepted
Accounting Principles.
Fourth quarter Year ended
ended March 31 March 31
2004 2003 2004 2003
Net income attributable to 373 2,987 883 4,134
shareholders (GBPm) including
exceptional items
Earnings per ADS (GBP)
- basic 0.43 3.46 1.02 4.80
- diluted 0.43 3.45 1.02 4.77
Each American Depositary Share (ADS) represents 10 ordinary shares of BT Group
plc.
Shareholders' equity, calculated in accordance with United States Generally
Accepted Accounting Principles, is GBP1,455m deficit at March 31, 2004 (March
31, 2003 - GBP2,258m).
Forward-looking statements - caution advised
Certain statements in this results release are forward-looking and are made in
reliance on the safe harbour provisions of the US Private Securities Litigation
Reform Act of 1995. These statements include, without limitation, those
concerning: cash flow, earnings per share and customer satisfaction targets;
expectations regarding broadband, ICT and mobility growth, ADSL broadband roll
out, and revenues from new wave products and services; the possible or assumed
future results of operations of BT and/or its lines of business; investment in
the 21st century network and the generation of long-term cost savings and
customer benefits; and expectations regarding revenue growth, dividend pay-out
ratio, debt reduction, rewarding shareholders and investing for the future.
Although BT believes that the expectations reflected in these forward-looking
statements are reasonable, it can give no assurance that these expectations will
prove to have been correct. Because these statements involve risks and
uncertainties, actual results may differ materially from those expressed or
implied by these forward-looking statements.
Factors that could cause differences between actual results and those implied by
the forward-looking statements include, but are not limited to: material adverse
changes in economic conditions in the markets served by BT and its lines of
business; future regulatory actions and conditions in BT's operating areas,
including competition from others in the UK and other international
communications markets; selection by BT and its lines of business of the
appropriate trading and marketing models for its products and services;
fluctuations in foreign currency exchange rates and interest rates;
technological innovations, including the cost of developing new products and the
need to increase expenditures for improving the quality of service; prolonged
adverse weather conditions resulting in a material increase in overtime, staff
or other costs; developments in the convergence of technologies; the anticipated
benefits and advantages of new technologies, products and services, including
broadband and other new wave initiatives, not being realised; the timing of
entry and profitability of BT and its lines of business in certain communication
markets; significant changes in market shares for BT and its principal products
and services; to the extent that BT chooses to sell assets or minority interests
in its subsidiaries, prevailing market levels for such sales; general financial
market conditions affecting BT's performance. BT undertakes no obligation to
update any forward-looking statements whether as a result of new information,
future events or otherwise.
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
BT Group PLC
(Registrant)
By: /s/ Patricia Day
--------------------
Patricia Day, Assistant Secretary. Head of Shareholder Services
Date 20 May 2004