1st Quarter Results
BT Group PLC
31 July 2003
July 31, 2003
FIRST QUARTER RESULTS TO JUNE 30, 2003
FIRST QUARTER HIGHLIGHTS
• Earnings per share* of 4.1 pence, up 64 per cent
. Profit before taxation* of £502 million, up 56 per cent
. Group turnover maintained at £4,586 million
. Free cash generated of £618 million (£206 million last year)
. Net debt reduced below £9 billion, £4.4 billion less than June 30, 2002
• One million broadband connections achieved in June
Chief Executive's statement
Ben Verwaayen, Chief Executive, said:
"Our focus on financial discipline, defending our core business and creating new
business streams continues to deliver results. I am pleased to report earnings
per share* growth of 64 per cent on flat revenues, free cash flow of £618
million and net debt reduced below £9 billion.
The group reached another key milestone early, achieving one million broadband
connections in June. This was also a further record quarter for the corporate
order book and the group continues to deliver efficiency savings throughout the
business."
* Before goodwill amortisation and exceptional items. The full profit and loss
account is presented on page 12.
RESULTS FOR THE FIRST QUARTER TO JUNE 30, 2003
BT Group's results before goodwill amortisation and exceptional items
First quarter Year ended
March 31
2003 2002 Better (worse) 2003
£m £m % £m
Group turnover 4,586 4,587 - 18,727
EBITDA 1,460 1,303 12 5,805
Group operating profit 730 570 28 2,790
Net interest charge 225 300 25 1,146
Profit before taxation 502 322 56 1,829
Profit after taxation 349 215 62 1,231
Earnings per share 4.1p 2.5p 64 14.2p
Capital expenditure 552 549 (1) 2,445
Net debt 8,988 13,397 33 9,573
Total earnings per share and profit before tax, after goodwill amortisation and
exceptional items, for the first quarter are 4.1 pence (2002 - 3.2 pence) and
£498 million (2002 - £384 million) respectively.
The results in the table above and the commentary focus on the results before
goodwill amortisation and exceptional items.
The full profit and loss account, cash flow statement and balance sheet are
provided below.
GROUP RESULTS
Group turnover was flat year on year at £4,586 million in the first quarter.
This performance represents an improvement on the 1 per cent underlying decline
in turnover in the fourth quarter of last year. The 3 per cent decline in the
group's core business was offset by the 23 per cent growth in new wave revenues.
The consumer sector has shown continued growth although revenue from SME's
declined.
Group operating profit before goodwill amortisation at £730 million for the
quarter was £160 million higher than the first quarter of last year. Leaver
costs of £11 million were £145 million lower than the first quarter of last year
and further operational efficiencies have resulted in cost savings across the
lines of business. These savings were partly offset by increased pension costs,
wage inflation, higher national insurance rates and the continued investment in
new wave activities. Group operating profit margin increased to 15.9 per cent
(12.4 per cent last year) and excluding leaver costs was 16.2 per cent (15.8 per
cent last year).
BT's share of associates and joint ventures operating losses before goodwill
amortisation was £3 million in the quarter (£49 million profit last year) with
the reduction due to the disposal of our stake in Cegetel in January 2003.
Net interest payable was £225 million for the quarter, an improvement of £75
million against last year as a result of the reduction in the level of net debt.
The above factors resulted in the group achieving a profit before taxation,
goodwill amortisation and exceptional items of £502 million in the quarter, an
increase of 56 per cent.
The taxation charge was £153 million for the quarter on the profit before
goodwill amortisation and exceptional items, an effective rate of 30.5 per cent
(33.2 per cent last year). The lower effective tax rate partially reflects
reduced overseas losses for which relief is not available.
Earnings per share before goodwill amortisation and exceptional items were 4.1
pence for the first quarter (2.5 pence last year), an increase of 64 per cent.
Earnings per share after goodwill amortisation and exceptional items were 4.1
pence compared to 3.2 pence last year, an increase of 28 per cent.
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 6 per cent improvement in the level of customer dissatisfaction
over the quarter, including significant improvements among the group's Global
Services and Wholesale customers.
Broadband
A major broadband milestone was passed in the first quarter. The initial
target of one million wholesale broadband connections was achieved in early
June, ahead of the target date. The challenging target had been set in February
2002 when BT had only 143,000 connections.
There was an installed base of 1,058,000 ADSL lines at June 30, 2003 and at the
end of the quarter weekly orders were in excess of 25,000, a 127 per cent
increase compared to the end of the first quarter last year.
At June 30, 2003 ADSL broadband was available to 71 per cent of the country. In
July, trigger levels were set for a further 500 exchanges under the innovative
demand registration scheme, which means that if the demand is there, ADSL
broadband will be made available to 90 per cent of UK homes and businesses.
Lines of business results
With effect from January 1, 2003 the operations of BT Openworld were
transferred under the management control of BT Retail. The prior periods have
been restated to report BT Openworld's results as part of BT Retail for all
periods under review.
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 have changed in
certain circumstances so as 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. In addition,
reference is made to operating free cash flow, which is defined as EBITDA less
capital expenditure.
OPERATING PERFORMANCE BY LINE OF BUSINESS
First quarter ended Group Group operating EBITDA Capital
June 30, 2003 (i) turnover profit (loss) (iii) expenditure
£m £m £m £m
BT Retail 3,332 392 439 20
BT Wholesale 2,769 436 910 368
BT Global Services 1,345 (51) 95 102
Other 6 (47) 16 62
Intra-group items (ii) (2,866) - - -
Total 4,586 730 1,460 552
i. See note 2 below 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.
BT Retail
First quarter ended June 30 Year ended
March 31
2003 2002* Better (worse) 2003*
£m £m £m % £m
Group turnover 3,332 3,345 (13) - 13,882
Gross margin 924 969 (45) (5) 3,936
Sales, general and 485 553 68 12 2,207
administration costs
EBITDA 439 416 23 6 1,729
Depreciation 47 51 4 8 201
Operating profit 392 365 27 7 1,528
Capital expenditure 20 19 (1) (5) 109
Operating free 419 397 22 6 1,620
cash flow
*Restated to reflect changes in intra-group trading arrangements.
Growth in the new wave revenues of 20 per cent has offset the 3 per cent decline
in the core revenues, resulting in flat revenues compared to the first quarter
of last year. A significant proportion of the core decline was due to reduced
revenues from private circuits.
BT Retail increased operating profit by 7 per cent and operating free cash flow
by 6 per cent compared to the first quarter of last year. The operating profit
improvement is primarily driven by continued cost reduction programmes,
including lower property and IT costs, and lower leaver costs partially offset
by the expected decline in the gross margin and investment in new wave products
and services.
First quarter ended June 30 Year ended
March 31
BT Retail turnover 2003 2002* Better (worse) 2003*
£m £m £m % £m
Voice Services 2,307 2,362 (55) (2) 9,665
Intermediate Products 586 616 (30) (5) 2,534
Core 2,893 2,978 (85) (3) 12,199
New Wave 439 367 72 20 1,683
Total 3,332 3,345 (13) - 13,882
Sales to other BT
businesses incl. above 198 192 6 3 903
*Restated to reflect changes in intra-group trading arrangements.
Turnover from voice services was 2 per cent lower than the first quarter of last
year driven primarily by lower volumes of fixed network calls.
The overall market for fixed to fixed voice calls is estimated to have declined
by 3 per cent compared to the first quarter of last year. In the residential
fixed voice market BT Retail has maintained market share, as measured by volume
of fixed voice minutes, at around 73 per cent. In the business fixed voice
market, BT Retail's market share has declined by 0.8 percentage points to 42 per
cent compared to the last quarter.
Total geographic (local, national and international) call volumes declined
by 7 per cent compared to the first quarter of last year.
In the consumer market, BT Retail continued to innovate with the launch in June
of its improved, new and simpler BT Together packages which for the first time
in the UK removed the difference between local and national call rates; the
three packages allow customers a choice from a maximum call charge of 6 pence
for up to 60 minutes, or free UK calls for a fixed monthly fee. For the second
quarter running, the historical decline in BT residential international call
volumes was stemmed by the extension of the BT Together packages to
international calls, launched in the third quarter of last year. Existing
customers had signed up for 165,000 international packages by June 30, 2003.
Including revenues from new wave products and services, in the consumer sector,
the average revenue per customer household has increased.
In the business market, the decline in geographic call volumes was driven
by a combination of customers switching out of traditional telephony into
services, such as VPN's, which are not measured in minutes and the continued
competitive pressure of Carrier Pre-Selection in the SME market. BT Business
Plan was launched in January 2003 and has attracted more than 100,000 business
locations and 65,000 customers by July 25, 2003. This highly competitive package
places a ceiling of 10 pence on national and local business calls, rewards
loyalty and provides a single BT customer contact. The package was enhanced in
July, offering among other features, outstanding value on international calls,
with for example, call prices to the US capped at 10 pence for 60 minutes.
Within the major corporate market the defence of core revenues is based on the
migration of traditional voice only services into managed ICT (information,
communications and technology) contracts; enhanced account management; and
deployment of Billing Analyst, an application which allows large corporates to
more closely manage their telecommunications spend.
Internet, data and fixed to mobile call volumes declined by 9 per cent,
with fixed to mobile growth of 5 per cent offset by a reduction in internet and
data related call minutes of 11 per cent mainly due to customers continuing to
switch to flat rate internet access products and broadband.
Within voice services, external turnover from directory services reduced by £7
million in the first quarter compared to last year with the deregulation of this
market and BT's replacement of 192 by 118 500.
Turnover from intermediate products of £586 million decreased by 5 per cent
compared to the first quarter of last year mainly driven by a decline in private
circuits as customers migrate to cheaper partial private circuits. The effect of
this on the BT Group revenues is about £60 million in the first quarter.
New wave revenue increased by 20 per cent year on year in the quarter with
the continued focus on the ICT, broadband and mobility products and solutions.
During the first quarter, further momentum was gained in the ICT order book with
contract wins with Royal Mail, Visa, Travelex, Securicor and Sheffield City
Council.
Both BT Broadband and BT Openworld Broadband continue to perform strongly
in the marketplace with a combined customer base of 536,000 at June 30, 2003.
This represents 51 per cent of BT Wholesale's total ADSL connections.
The total number of BT Retail lines, which includes voice, digital and
broadband, increased by 1 per cent, to 29.6 million, since June 30, 2002,
reflecting the growth in digital lines and broadband offsetting the reduction in
voice lines.
The gross margin reduced by £45 million (1.3 percentage points to 27.7 per cent)
compared to the first quarter of last year. Lower call volumes and the migration
from retail private circuits to partial private circuits, being only partially
offset by lower wholesale prices, account for the reduction.
Cost transformation programmes, including a reduction in expenses such as
travel, accommodation and IT, lower service costs resulting from improvements in
service quality, and billing initiatives and lower leaver costs have generated
£68 million (12 per cent) savings in sales, general and administration costs
against the first quarter of last year. These programmes delivered savings in
the core business which were partially offset by investment in new wave
activities.
Operating profit in the first quarter of £392 million was 7 per cent higher than
the prior year which enabled BT Retail to contribute an operating free cash flow
(EBITDA less capital expenditure) of £419 million in the quarter; £22 million
better than the first quarter of last year.
BT Wholesale
First quarter ended June 30 Year ended
March 31
2003 2002* Better (worse) 2003*
£m £m £m % £m
External turnover 879 854 25 3 3,525
Internal turnover 1,890 1,894 (4) - 7,722
Group turnover 2,769 2,748 21 1 11,247
Total operating costs
before depreciation 1,887 1,974 87 4 7,691
Other operating income 28 31 (3) (10) 125
EBITDA 910 805 105 13 3,681
Depreciation 474 472 (2) - 1,923
Operating profit 436 333 103 31 1,758
Capital expenditure 368 359 (9) (3) 1,652
Operating free cash flow 542 446 96 22 2,029
*Restated to reflect changes in intra-group trading arrangements.
BT Wholesale's turnover for the first quarter of £2,769 million was 1 per
cent higher than last year, with external revenue increasing by 3 per cent.
Operating profit of £436 million was 31 per cent higher and operating free cash
flow of £542 million was 22 per cent higher than the first quarter of last year.
Before leaver costs of £102 million in the first quarter of last year (£nil this
year), both operating profit and operating free cash flow have been broadly
maintained at last year's level.
Within traditional products, the impact of price reductions, due mainly to
the Network Charge Control (NCC) pricing formulae and Oftel determinations, have
offset the growth in volumes and continued to stem external turnover growth.
FRIACO revenues continue to grow but are partly offset by the decrease in the
conveyance revenues they replace. Revenues from retail private circuits have
continued to decline, due to the migration of customers to lower priced partial
private circuits.
New wave external revenues of £72 million showed a strong growth of 44 per
cent over the first quarter of last year. This reflected gains made in
broadband, facilities management and consultancy.
Internal turnover in the first quarter of £1,890 million was flat year on
year due to network volume growth being offset by price reductions.
Operating costs, excluding depreciation, of £1,887 million decreased by 4
per cent. The first quarter of last year included one-off early leaver payments
of £102 million. Excluding leaver costs, operating costs would be broadly flat
despite a 3 per cent increase in network volumes, reflecting the continued drive
for operational efficiencies.
Operating profit at £436 million increased by 31 per cent and operating
profit margin of 16 per cent increased by 4 percentage points - both movements
mainly reflecting the leaver payments in the prior year.
BT Wholesale has maintained its focus on managed cash costs (defined as
operating costs excluding payments to other network operators and depreciation,
plus capital expenditure) through its best in class costs programme. Managed
cash cost savings were £65 million for the quarter and BT Wholesale remains on
track to achieve the full year target savings of £200 million after allowing for
price and volume effects.
BT Global Services
First quarter ended June 30 Year ended
March 31
2003 2002* Better (worse) 2003*
£m £m £m % £m
Group turnover 1,345 1,284 61 5 5,417
EBITDA 95 28 67 239 238
Group operating loss (51) (112) 61 54 (375)
Capital expenditure 102 96 (6) (6) 445
Operating free cash flow (7) (68) 61 90 (207)
*Restated to reflect changes in intra-group trading arrangements.
BT Global Services has produced a very positive start to the year in
achieving significant improvements in profitability and cash flow despite
continuing difficult market conditions. Operating losses for the quarter were
more than halved to £51 million.
Turnover for the quarter rose by 5 per cent to £1,345 million despite a 6
per cent fall in Global Carrier. This reduction is in line with the previous
quarter and is partly caused by the decline in trade with AT&T and MCI following
the unwind of the Concert global venture. Solutions grew by 16 per cent
partially reflecting growth in orders over the past three quarters and Global
Products grew by 10 per cent on the back of strong growth in MPLS revenues.
Syntegra achieved growth of 1 per cent in what remains a difficult market.
Solutions continued its strong momentum in the corporate sector from last
year by signing record sales orders to the value of £1.9 billion in the first
quarter. Despite a strong revenue performance, the operating profits in
Solutions reflect contract costs that are recognised up-front in accordance with
the group's accounting policies.
A combination of higher gross margin and lower network, selling, general
and administration costs following cost reduction initiatives throughout the
previous year helped BT Global Services generate an EBITDA improvement of £50
million before leaver costs over the first quarter of last year. Leaver costs
were £8 million for the first quarter (£25 million last year).
Capital expenditure totalled £102 million and was £6 million higher than
the first quarter of last year. Operating free cash outflow (EBITDA less capital
expenditure) was consequently 90 per cent (£61 million) better than the first
quarter of last year and before leaver costs there was a cash inflow of £1
million.
CASH FLOW AND NET DEBT
Cash inflow from operating activities amounted to £1,509 million in the first
quarter, a year on year increase of £197 million. This improvement reflects the
higher operating profits and better working capital management.
Free cash flow (before acquisitions and disposals, dividends and financing) was
£618 million in the quarter, representing a year on year improvement of £412
million. As well as improvements in cash flow from operations, free cash flow
benefited from the lower cash outflow from fixed asset purchases, interest and
tax.
Net debt at June 30, 2003 was £8,988 million, a reduction of £585 million in the
first quarter and £4,409 million lower when compared to the position at June 30,
2002.
The group's gross borrowings at June 30, 2003 totalled £15,993 million (£16,004
million at March 31, 2003). After deducting short term investments and cash of
£7,005 million (£6,431 million at March 31, 2003), net debt was £8,988 million
at June 30, 2003.
___________________________________________________________________________
The second quarter and half year's results are expected to be announced on
November 13, 2003.
GROUP PROFIT AND LOSS ACCOUNT
for the three months ended June 30, 2003
Before goodwill Goodwill
amortisation and amortisation and
exceptional items except-ional
items
(note 6) Total
(unaudited) Notes £m £m £m
Group turnover 2, 4 4,586 - 4,586
Other operating income 52 - 52
Operating costs 3 (3,908) (3) (3,911)
Group operating profit (loss) 2 730 (3) 727
Group's share of operating losses of
associates and joint ventures 4 (3) - (3)
Total operating profit (loss) 727 (3) 724
Loss on sale of fixed asset
investments and group undertakings - (1) (1)
Net interest payable 5 (225) - (225)
Profit (loss) before taxation 502 (4) 498
Taxation (153) - (153)
Profit (loss) after taxation 349 (4) 345
Minority interests 6 - 6
Profit (loss) attributable to
shareholders 355 (4) 351
Earnings per share 7
- basic 4.1p 4.1p
- diluted 4.1p 4.0p
GROUP PROFIT AND LOSS ACCOUNT
for the three months ended June 30, 2002
Before goodwill Goodwill Total
amortisation and amortisation and
exceptional items except-ional items
(note 6)
(unaudited) Notes £m £m £m
Group turnover 2, 4 4,587 - 4,587
Other operating income 52 - 52
Operating costs 3 (4,069) (8) (4,077)
Group operating profit (loss) 2 570 (8) 562
Group's share of operating profits of
associates and joint ventures 4 49 - 49
Total operating profit (loss) 619 (8) 611
Profit on sale of fixed asset investments
and group undertakings - 70 70
Profit on sale of property fixed assets 3 - 3
Net interest payable 5 (300) - (300)
Profit before taxation 322 62 384
Taxation (107) - (107)
Profit after taxation 215 62 277
Minority interests (2) - (2)
213 62 275
Profit attributable to shareholders
Earnings per share 7
- basic 2.5p 3.2p
- diluted 2.5p 3.2p
GROUP PROFIT AND LOSS ACCOUNT
for the year ended March 31, 2003
Before goodwill Goodwill
amortisation and amortisation and
exceptional items except-ional items
(note 6) Total
Notes £m £m £m
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 - 1,691 1,691
Profit on sale of property fixed assets 11 - 11
Amounts written off investments (7) - (7)
Net interest payable 5 (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 7
- basic 14.2p 31.2p
- diluted 14.1p 31.0p
GROUP CASH FLOW STATEMENT
for the three months ended June 30, 2003
First quarter ended June 30 Year ended
(unaudited) March 31
2003 2002 2003
£m £m £m
Net cash inflow from operating activities*
(note 8) 1,509 1,312 6,023
Dividends from associates and joint ventures - - 6
Net cash outflow for returns on investments
and servicing of finance (290) (371) (1,506)
Taxation paid (8) (88) (434)
Purchase of tangible fixed assets (607) (667) (2,580)
Net sale of fixed asset investments - - 105
Sale of tangible fixed assets 14 20 94
Net cash outflow for capital expenditure and
financial investments (593) (647) (2,381)
Free cash flow before acquisitions,
disposals and dividends 618 206 1,708
Acquisitions - (22) (77)
Disposals - 128 2,919
Net cash inflow for acquisitions and
disposals - 106 2,842
Equity dividends paid - - (367)
Cash inflow before use of liquid resources
and financing 618 312 4,183
Management of liquid resources (391) 783 (1,729)
Issue of ordinary share capital - 42 42
New loans - 3 20
Repayment of loans (12) (1,086) (2,471)
Net movement on short-term borrowings - (64) (64)
Net cash outflow from financing (12) (1,105) (2,473)
Increase (decrease) in cash 215 (10) (19)
Decrease in net debt from cash flows
(note 9) 618 354 4,225
*Net of deficiency and special
pension contributions - - 329
GROUP BALANCE SHEET
at June 30, 2003
June 30 June 30 March 31
2003 2002 2003
(unaudited)
£m £m £m
Fixed assets
Intangible assets 205 235 218
Tangible assets 15,676 16,293 15,888
Investments 551 886 555
16,432 17,414 16,661
Current assets
Stocks 92 112 82
Debtors 4,784 5,311 5,043
Investments 6,928 3,803 6,340
Cash at bank and in hand 77 132 91
11,881 9,358 11,556
Creditors: amounts falling due within
one year
Loans and other borrowings 2,684 1,075 2,548
Other creditors 6,898 7,136 7,132
9,582 8,211 9,680
Net current assets 2,299 1,147 1,876
Total assets less current liabilities 18,731 18,561 18,537
Creditors: amounts falling due after
more than one year
Loans and other borrowings 13,309 16,257 13,456
Provisions for liabilities and 2,350 2,328 2,376
charges (note 10)
Minority interests 57 69 63
Capital and reserves (note 11)
Called up share capital 434 434 434
Reserves 2,581 (527) 2,208
Total equity shareholders' funds 3,015 (93) 2,642
(deficiency)
18,731 18,561 18,537
NOTES
1 Basis of preparation
The unaudited interim 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 year ended March 31, 2003 are extracts from the group accounts for that
year.
The group accounts for the year ended March 31, 2003, 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 21, 2003, were published on June 4, 2003 and have been delivered to the
Registrar of Companies.
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. 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 operating EBITDA
turnover turnover turnover profit (loss) (iii)
£m £m £m £m £m
First quarter ended
June 30, 2003
BT Retail 3,134 198 3,332 392 439
BT Wholesale 879 1,890 2,769 436 910
BT Global Services 567 778 1,345 (51) 95
Other 6 - 6 (47) 16
Intra-group items (ii) - (2,866) (2,866) - -
Total before exceptional items 4,586 - 4,586 730 1,460
First quarter ended
June 30, 2002 (i)
BT Retail 3,153 192 3,345 365 416
BT Wholesale 854 1,894 2,748 333 805
BT Global Services 567 717 1,284 (112) 28
Other 13 - 13 (16) 54
Intra-group items (ii) - (2,803) (2,803) - -
Total before exceptional items 4,587 - 4,587 570 1,303
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 before exceptional items 18,727 - 18,727 2,790 5,805
i. The results of the lines of business for the quarter ended June 30, 2002 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
First quarter ended June 30 Year ended
Before goodwill amortisation Better (worse) March 31
and exceptional items 2003 2002 Actual 2003
£m £m £m % £m
Group turnover
Solutions 634 545 89 16 2,455
Syntegra 144 142 2 1 623
Global Products 433 393 40 10 1,674
Global Carrier 231 246 (15) (6) 974
Other and eliminations (i) (97) (42) (55) n/m (309)
1,345 1,284 61 5 5,417
EBITDA
Solutions 62 62 - - 286
Syntegra 4 3 1 33 34
Global Products 21 (30) 51 n/m (44)
Global Carrier 40 40 - - 148
Other (i) (32) (47) 15 32 (186)
95 28 67 239 238
Group operating profit (loss)
Solutions 43 45 (2) (4) 209
Syntegra 2 1 1 100 24
Global Products (74) (123) 49 40 (432)
Global Carrier 17 17 - - 57
Other (i) (39) (52) 13 25 (233)
(51) (112) 61 54 (375)
Capital expenditure 102 96 (6) (6) 445
Operating free cash flow (7) (68) 61 90 (207)
i. Other is after charging leaver costs of £8m in the first quarter (£25m last
year). The distributor margin payable to BT Retail on Solutions contract
revenues is reported within Other and accordingly Solutions turnover and
profit is reported gross.
2 Results of businesses continued
b. Capital expenditure on plant, equipment and motor vehicle additions
Year ended
First quarter ended June 30 March 31
2003 2002 2003
£m £m £m
BT Retail 20 19 109
BT Wholesale 368 359 1,652
BT Global Services 102 96 445
Other 62 75 239
Total 552 549 2,445
c. Net operating assets (liabilities)
June 30 March 31
2003 2003
£m £m
BT Retail (291) (430)
BT Wholesale 12,014 12,041
BT Global Services 1,691 1,912
Other 112 217
Total 13,526 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 Other operating costs
Year ended
First quarter ended June 30 March 31
2003 2002 2003
£m £m £m
Net staff costs 913 1,031 3,671
Depreciation 729 732 3,011
Payments to telecommunication operators 1,017 982 3,846
Other operating costs 1,249 1,324 5,624
Total before goodwill amortisation
and exceptional items* 3,908 4,069 16,152
Goodwill amortisation 3 8 20
Exceptional items - - 198
Total 3,911 4,077 16,370
*Includes leaver costs of 11 156 276
4 Group's share of turnover and (losses) profits of associates and joint
ventures
Year ended
First quarter ended June 30 March 31
2003 2002 2003
£m £m £m
Share of associates and joint ventures
turnover 107 411 1,455
Share of operating (losses) profits before
goodwill amortisation and exceptional items (3) 49 181
Release of provision for exit related costs - - 150
Amortisation of goodwill - - (2)
Share of operating (losses) profits of
associates and joint ventures (3) 49 329
5 Net interest payable
Year ended
First quarter ended June 30 March 31
2003 2002 2003
£m £m £m
Group 288 335 1,609
Joint ventures and associates 5 10 25
Total interest payable 293 345 1,634
Interest receivable (68) (45) (195)
Net interest payable 225 300 1,439
Analysed:
Before exceptional items 225 300 1,146
Exceptional items - - 293
225 300 1,439
6 Exceptional items and goodwill amortisation
Year ended
First quarter ended June 30 March 31
2003 2002 2003
£m £m £m
Property rationalisation costs - - (198)
Release of provision for exit related costs - - 150
(Loss) profit on sale of group undertakings
and fixed asset investments (1) 70 1,398
Goodwill amortisation (3) (8) (22)
Net (charge) credit before tax and minority
interests (4) 62 1,328
7 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. 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 was:
Year ended
First quarter ended June 30 March 31
2003 2002 2003
million of shares
Basic 8,623 8,619 8,616
Diluted 8,673 8,672 8,668
8 Reconciliation of operating profit to operating cash flow
Year ended
First quarter ended June 30 March 31
2003 2002 2003
£m £m £m
Group operating profit 727 562 2,572
Depreciation and amortisation 733 741 3,035
Changes in working capital 12 5 501
Provision, pension movements
and other 37 4 (85)
Net cash inflow from operating activities 1,509 1,312 6,023
9 Net debt
a. Analysis
At June 30 At March 31
2003 2002 2003
£m £m £m
Long-term loans and other borrowings
falling due after more than one year 13,309 16,257 13,456
Short-term borrowings and long-term
loans and other borrowings falling due
within one year 2,684 1,075 2,548
Total debt 15,993 17,332 16,004
Short-term investments (6,928) (3,803) (6,340)
Cash at bank (77) (132) (91)
Net debt at end of period 8,988 13,397 9,573
9 Net debt continued
b. Reconciliation of net cash flow to movement in net debt
Year ended
First quarter ended June 30 March 31
2003 2002 2003
£m £m £m
Net debt at beginning of period 9,573 13,701 13,701
Decrease in net debt resulting from cash flows (618) (354) (4,225)
Decrease in net debt on acquisitions - (13) (13)
Currency and other movements 5 33 67
Other non-cash movements 28 30 43
Net debt at end of period 8,988 13,397 9,573
10 Provisions for liabilities and charges
At June 30 At March 31
2003 2002 2003
£m £m £m
Deferred taxation 2,017 2,146 2,017
Pension provisions (a) 33 32 33
Other provisions 300 150 326
2,350 2,328 2,376
(a) The pension prepayment relating to the BT Pension Scheme of
£590m at June 30, 2003 (£231m last year) and £630m at March 31, 2003 is
included in debtors and falls due after more than one year.
11 Share capital and reserves
Share capital Reserves Total
£m £m £m
Balances at April 1, 2003 434 2,208 2,642
Profit for the three months ended June 30, 2003 - 351 351
Currency movements (a) - 22 22
Balances at June 30, 2003 434 2,581 3,015
a. Includes £39m movement on the retranslation of foreign borrowings and other
hedging instruments in the three months ended June 30, 2003.
12 Earnings before interest, taxation, depreciation and amortisation
(EBITDA) before exceptional items
Year ended
First quarter ended June 30 March 31
2003 2002 2003
£m £m £m
Group operating profit 727 562 2,572
Exceptional items - - 198
Depreciation and amortisation of intangible 730 733 3,015
assets
Goodwill amortisation 3 8 20
EBITDA before exceptional items 1,460 1,303 5,805
13 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.
Year ended
First quarter ended June 30 March 31
2003 2002 2003
£m £m £m
Net income attributable to
shareholders (£m) including
exceptional items 288 211 4,134
Earnings per ADS (£)
0.33 0.24 4.80
- basic
- diluted 0.33 0.24 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 £2,334m deficit at June 30, 2003 (June 30,
2002 - £4,208m deficit, March 31, 2003 - £2,258m deficit).
Non-financial statistics
June 30 June 30 March 31
2003 2002 2003
BT Group
Exchange lines:
Business, including wholesale (000s) 9,215 9,122 9,197
Consumer, including service providers (000s) 20,492 20,192 20,448
BT Retail
BT Openworld Broadband (000s) 333 167 292
BT Broadband (000s) 203 - 137
Total ISP customer base (000s) 2,035 1,754 1,948
BT Wholesale
ADSL lines provided (000s) 1,058 277 800
Network volume growth (a) 3% 3% 6%
% of UK households with Broadband availability 71% 66% 67%
BT Global Services
Inter-city fibre network (kms) (b) 48,000 57,000 48,000
Web hosting centres 22 19 22
Dial access ports (000s) 615 637 606
(a) Compared to same quarter in the prior year.
(b) Of which over 45,000 route kilometres are held through our wholly owned
businesses in Europe.
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: expectations regarding broadband growth and the benefits of
other new wave initiatives; the possible or assumed future results of operations
of BT and/or its lines of business; expectations regarding revenue growth,
capital expenditure, investment plans, cost reductions, improved efficiencies
and cash savings, and pension funding.
Although BT Group 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; and general
financial market conditions affecting BT's performance. BT Group undertakes no
obligation to update any forward-looking statements whether as a result of new
information, future events or otherwise.
This information is provided by RNS
The company news service from the London Stock Exchange
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