Interim Results - Highlights

BT Group PLC
09 November 2006


BT Group Half Year Results and Interim Report

Chairman's Statement

These strong half year results show sustained momentum across the business with
revenues up 3 per cent and earnings per share before specific items up 19 per
cent.

I am pleased to report that we will be paying an interim dividend of 5.1 pence,
up 19 per cent on last year, showing our continued commitment to improving
shareholder returns and our confidence for the future.

Sir Christopher Bland, 8 November 2006

Review

These results show another strong team performance with every part of the
business playing its part. Revenue increased 3 per cent with continued strong
growth in new wave revenue, up 20 per cent, driven by our networked IT services,
broadband and mobility businesses. Total networked IT services contract wins
amounted to £4.0 billion over the last twelve months. BT had 9.3 million
wholesale broadband connections at 30 September 2006, including 838,000 local
loop unbundled lines, an increase of 2.8 million connections year on year. The
strong growth in new wave revenue more than offset the 4 per cent decline in
traditional revenue.

Group profit before taxation, specific items and leaver costs increased by 17
per cent driven by operational efficiencies and a reduction in net finance
costs, partly offset by the costs of supporting the growth in new wave
activities. Reported profit before taxation, including specific items and leaver
costs, was 26 per cent higher than last year. Specific items for the half year
were £3 million (see note 2) and principally comprise costs of £23 million
relating to the further rationalisation of the group's office portfolio, partly
offset by a profit of £20 million arising from the group's partial disposal of 
its interest in an associated undertaking.

Earnings per share before specific items and leaver costs were 11.8 pence, an
increase of 20 per cent. Reported earnings per share, including specific items
and leaver costs, were 28 per cent higher at 11.3 pence.

Net debt was £8,079 million, £54 million below last year. Free cash flow
generated in the first half amounted to £321 million.

An interim dividend of 5.1 pence per share will be paid on 12 February 2007 to
shareholders on the register on 29 December 2006.

Our performance underpins our confidence that we will continue to grow revenue,
EBITDA, earnings per share and dividends this financial year. Revenue growth
will continue to be fuelled by new wave services; EBITDA improvement will be
driven by the continued growth in BT Retail's profitability and an acceleration
through the year of the EBITDA growth in BT Global Services. We are confident in
our ability to improve shareholder returns and accelerate the strategic
transformation of the business.

This advertisement is a summary of the interim results of BT Group plc ("the
group") for the six months ended 30 September 2006. The full interim results
statement, including the group's results for the three months ended 30 September
2006, is available on the internet at www.btplc.com/Sharesandperformance. If you
have any queries as a shareholder please call Freefone 0808 100 4141.

BT Group plc 81 Newgate Street, London EC1A 7AJ



Independent Review Report to BT Group plc

Introduction

We have been instructed by the group to review the financial information for the
six months ended 30 September 2006, which comprises the summarised group income
statement, group statement of recognised income and expense, group cash flow
statement and group balance sheet at 30 September 2006. We have read the other
information contained in the interim report and considered whether it contains
any apparent misstatements or material inconsistencies with the financial
information.

Directors' responsibilities

The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by the directors. The Listing Rules
of the Financial Services Authority require that the accounting policies and
presentation applied to the interim figures should be consistent with those
applied in preparing the preceding annual accounts except where any changes, and
the reasons for them, are disclosed.

This interim report has been prepared in accordance with the basis set out in
note 1.

Review work performed

We conducted our review in accordance with guidance contained in Bulletin 1999/4
issued by the Auditing Practices Board for use in the United Kingdom. A review
consists principally of making enquiries of group management and applying
analytical procedures to the financial information and underlying financial data
and, based thereon, assessing whether the accounting policies have been
consistently applied. A review excludes audit procedures such as tests of
controls and verification of assets, liabilities and transactions. It is
substantially less in scope than an audit and therefore provides a lower level
of assurance. Accordingly we do not express an audit opinion on the financial
information. This report, including the conclusion, has been prepared for and
only for the group for the purpose of the Listing Rules of the Financial
Services Authority and for no other purpose. We do not, in producing this
report, accept or assume responsibility for any other purpose or to any other
person to whom this report is shown or into whose hands it may come save where
expressly agreed by our prior consent in writing.

Review conclusion

On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 30 September 2006.

PricewaterhouseCoopers LLP, Chartered Accountants
1 Embankment Place, London WC2N 6RH
8 November 2006



Summarised statements

Group income statement for the six months ended 30 September
(unaudited)                                                   2006        2005
                                                                £m          £m
Revenue                                                      9,805       9,498
                                                            _______     _______
Operating profit                                             1,318       1,222
Finance costs                                               (1,293)     (1,392)
Finance income                                               1,192       1,150
Share of profits of associates and joint ventures                7           8
Profit on disposal of associate                                 20           -
                                                            _______     _______
Profit before taxation                                       1,244         988
Taxation                                                      (305)       (243)
                                                            _______     _______
Profit for the period                                          939         745
                                                            =======     =======
Earnings per share                                            
- basic                                                       11.3p        8.8p
- diluted                                                     11.1p        8.7p
Earnings per share before specific items (note 2)
- basic                                                       11.3p        9.5p
- diluted                                                     11.1p        9.3p

Interim dividend proposed per share                            5.1p        4.3p
Prior year final dividend paid per share                       7.6p        6.5p


Group statement of recognised income and expense for the six months
ended 30 September
(unaudited)                                                     2006      2005
                                                                  £m        £m
Profit for the period                                            939       745
                                                              _______   _______
Actuarial (losses) gains on defined benefit pension schemes     (369)    1,090
Net gains on revaluation of available-for-sale investments         -         1
Net gains (losses) on cash flow hedges                            61        (5)
Exchange differences on translation of foreign operations        (72)       (4)
Tax on items taken directly to equity                             82      (327)
                                                              _______   _______
Net (losses) gains recognised directly in equity                 298       755
                                                              _______   _______
Total recognised income and expense for the period               641     1,500
                                                              _______   _______


Group cash flow statement for the six months ended 30 September
(unaudited)                                                   2006        2005
                                                                £m          £m
Net cash inflow from operating activities                    2,193       2,104
Net cash used in investing activities                       (2,059)       (767)
Net cash used in financing activities                         (997)     (1,138)
Effects of exchange rate changes                                 -          23
                                                            _______     _______
Net (decrease) increase in cash and cash equivalents          (863)        222
Cash and cash equivalents at beginning of period             1,784       1,310
                                                            _______     _______
Cash and cash equivalents at end of period                     921       1,532
                                                            =======     =======
Free cash flow                                                 321         377
                                                            _______     =======


Group balance sheet
                         (unaudited)   30 September   30 September   31 March
                                               2006           2005       2006
                                                 £m             £m         £m
Non current assets                           18,164         17,977     17,978
Current assets                                6,586          9,130      6,722
                                             _______        _______    _______
Total assets                                 24,750         27,107     24,700
Current liabilities                          10,053         11,596      9,480
                                             _______        _______    _______
Total assets less current liabilities        14,697         15,511     15,220
                                             =======        =======    =======
Non current liabilities                      13,156         14,755     13,613
Equity shareholders' funds                    1,494            707      1,555
Minority interest                                47             49         52
                                             _______        _______    _______
Total equity                                  1,541            756      1,607
                                             _______        _______    _______
                                             14,697         15,511     15,220
                                             =======        =======    =======


Notes
     
1    The financial information set out in these interim financial results has 
     been prepared in accordance with the Listing Rules of the Financial 
     Services Authority. The accounting policies which have been applied to 
     prepare these interim financial results are the same as those used for 
     preparation of the audited consolidated financial statements for the year 
     ended 31 March 2006.

2    The results as shown in the summarised income statement are reported 
     inclusive of specific items. Specific items comprise significant one off or 
     unusual items, which are separately identified and disclosed. This is 
     consistent with the way that financial performance is measured by 
     management and provides a meaningful analysis of the trading results of the 
     group. Specific items recognised for the six months ended 30 September 2006 
     were a net charge before taxation of £3 million (2005: £82 million). Costs 
     of £23 million relating to the further rationalisation of the group's 
     office portfolio were incurred (2005: £12 million). This was partly offset 
     by a profit of £20 million arising from the group's disposal of 6 per cent 
     of its equity interest in Tech Mahindra Limited, an associated undertaking, 
     reducing the group's holding to 36 per cent. In the prior year, a provision 
     of £70 million was recognised relating to the incremental and directly 
     attributable costs in connection with creating the Openreach line of 
     business.



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