Preliminary Results

BT Group PLC 16 May 2002 May 16, 2002 PRELIMINARY RESULTS - YEAR TO 31 MARCH 2002 FOURTH QUARTER HIGHLIGHTS â€¢ Group turnover* of Â£4.7 billion, up 5 per cent â€¢ Profit before taxation* up 43 per cent to Â£371 million â€¢ Dividends resumed - final dividend of 2.0 pence per share â€¢ Net exceptional charges of Â£2.9 billion, includes goodwill and asset impairments of Â£2.5 billion â€¢ New three year strategic plan announced FULL YEAR HIGHLIGHTS â€¢ Group turnover* of Â£18.4 billion, 8 per cent up on prior year â€¢ Profit before taxation* down 28 per cent to Â£1,273 million â€¢ Net exceptional gains of Â£0.8 billion â€¢ Net debt reduced from Â£27.9 billion to Â£13.7 billion â€¢ Successful corporate restructuring programme *from continuing activities before goodwill amortisation and exceptional items Chairman's statement Sir Christopher Bland, BT Group's Chairman, said: "The last year has been a significant one for BT Group. We raised Â£5.9 billion through a rights issue in June, demerged mmO2 in November, unwound our Concert joint venture, and sold assets, including our businesses in Japan and Spain, and Yell for Â£8.0 billion. Debt has been halved from Â£27.9 billion at March 31, 2001 to Â£13.7 billion at March 31, 2002. We have a new Chief Executive, a new Group Finance Director, and our Board has been reshaped. We are focused on meeting our customers' needs profitably, with broadband at the heart of our business. It has not been an easy year but we have taken the hard decisions early and are now in a position of relative strength. We are pleased to announce that we are able to propose a final dividend of 2.0 pence per share." Chief Executive's statement Ben Verwaayen, BT Group's Chief Executive, said: "Our primary objectives are to enhance customer satisfaction and grow BT's business profitably. The strategic plan, which we announced in April, confirmed BT is a single integrated telecommunications company focused on achieving profitable growth. The group's operating results continue to improve. Turnover for the quarter grew by 5 per cent and underlying profit before taxation was 43 per cent higher than last year. We begin the new year in a stronger financial position. Our focus will be on improving customer satisfaction, introducing new and innovative services, reducing our costs and managing our cash flow. In this way we will deliver real value to our shareholders and customers." BT Group's results, excluding discontinued activities, exceptional items and goodwill amortisation, are summarised in the following table: FOURTH QUARTER AND YEAR ENDED MARCH 31, 2002 BT Group's continuing activities, before goodwill amortisation and exceptional items Fourth quarter Year ended ended March 31 March 31 2002 2001 2002 2001 Â£m Â£m Â£m Â£m Group turnover 4,735 4,509 18,447 17,141 EBITDA 1,431 1,478 5,748 5,774 Group operating profit 650 713 2,771 3,082 Net interest charge (301) (396) (1,417) (1,196) Profit before taxation 371 259 1,273 1,763 Earnings per share 2.6p 3.1p 8.8p 19.3p The consolidated profit and loss account is presented in full in the accompanying statements. KEY FEATURES OF THE GROUP RESULTS Fourth quarter â€¢ Group turnover from continuing activities increased by 5 per cent to Â£4,735 million â€¢ EBITDA for continuing activities before exceptional items decreased by 3 per cent to Â£1,431 million, with a 9 per cent improvement in underlying performance excluding additional early leaver costs and the effect of the property sale and leaseback transaction â€¢ Profit before taxation from continuing activities before goodwill amortisation and exceptional items increased by 43 per cent to Â£371 million â€¢ Net exceptional charges of Â£2,883 million largely reflect the impairment of goodwill and overseas assets â€¢ Capital expenditure on property, plant and equipment additions in continuing operations reduced by 24 per cent to Â£982 million â€¢ Operating free cash flow (EBITDA less capital expenditure) from continuing operations increased by Â£257 million to Â£449 million before exceptional items â€¢ Earnings per share from continuing activities before goodwill amortisation and exceptional items of 2.6 pence per share decreased by 16 per cent. Adjusting for the effect of the abnormally low tax charge in the prior year: underlying earnings per share were about 8 per cent higher Full year â€¢ Dividends resumed with a proposed final dividend of 2.0 pence per share â€¢ Net debt was Â£13.7 billion at the end of March 2002, below our target range of Â£15 billion to Â£20 billion â€¢ Â£5.9 billion rights issue completed in June 2001 â€¢ The demerger of mmO2 completed in November 2001 and the disposal of interests in Yell, Japan Telecom, J-Phone, Airtel and other businesses raised Â£8.0 billion â€¢ Sale and leaseback of our properties to Telereal raised Â£2.4 billion â€¢ Group turnover from continuing operations increased by 8 per cent to Â£18,447 million â€¢ EBITDA for continuing activities before exceptional items in line with last year at Â£5,748 million â€¢ Profit before taxation from continuing activities before goodwill amortisation and exceptional items down 28 per cent to Â£1,273 million â€¢ Net exceptional gains of Â£753 million include: â€¢ profits on disposal of investments of Â£4,389 million including Yell, Japan Telecom, J-Phone and Airtel; and â€¢ impairment of goodwill and overseas assets of Â£3,922 million â€¢ Capital expenditure on property, plant and equipment additions in continuing activities reduced by 20 per cent to Â£3,100 million â€¢ Operating free cash flow (EBITDA less capital expenditure) from continuing operations increased by Â£731 million to Â£2,648 million before exceptional items â€¢ Earnings per share from continuing activities before goodwill amortisation and exceptional items of 8.8 pence per share compared to 19.3 pence per share in prior year Three year strategy On April 8, 2002 we announced our new three year strategy under which BT, as a single integrated company, intends to be the best provider of communications services and solutions for everybody in the UK, for corporate customers in Europe and with global reach through partnerships. Under the plan there are seven key priorities, which are summarised below. Customer satisfaction Customer satisfaction is the cornerstone of the new strategy and BT aims to be the most customer focused and efficient communications company in the markets in which it operates. BT's target is to reduce customer dissatisfaction by 25 per cent per year. BT will continue to become a more "e-Centric" company to improve processes and services whilst constraining costs and will continue to develop bt.com as a service channel. Financial discipline There will be a focus on achieving world-class operating costs and resulting systematic improvements in operating cash flow and profit levels. The financial model for the company is based on a balance between organic revenue growth and cash generation. The key financial measures will be earnings per share growth and cash generation. Broadband Broadband will be at the heart of BT and we intend to have 5 million UK connections by 2006. BT Retail will continue to expand its brand into other new areas such as communications services for small and medium-sized businesses and wider corporate communications technology solutions including mobile services. BTopenworld is to continue to offer the full-service product for consumers and SMEs whilst also increasing its focus on value-added services. Focus for BT Ignite BT Ignite is streamlining its activities to focus on multi-site corporate customers with European operations. It is driving all current loss making businesses to reach EBITDA break even by March 2003, and the ex-Concert business to EBITDA break even by December 2003. All networks under unified management BT will act as an integrated telecommunications company and to that end will place responsibility for management of its business and services where it is most logical. All UK networks will be managed centrally by BT Wholesale. BT will migrate existing services to the newest platforms to reduce costs and investments, while maintaining its service capability and will limit investment in legacy voice and data platforms, maximising its return on capital employed. BT Wholesale will focus both on its internal customers and its growing number of external customers, aiming to become the supplier of choice for value added services, network management and outsourcing. Brand extension BT is committed to an increased level of organic revenue growth through movement into adjacent markets, including a wider range of wireless and mobile services. BT will use DSL to enhance the communications experience to the PC through video and multi-media. Over time, BT will expand this to other devices, linking PC, telephone, sound systems and TV, adding interactivity to TV and the entertainment experience. Motivated BT people BT will encourage a strong performance orientation amongst its people. It will grow the skills base of all in BT to meet new or growing requirements, especially in areas such as solutions, broadband and applications. BT will encourage diversity and develop its culture, all aimed at creating a customer focused business. OPERATING PERFORMANCE The operating results by line of business in the fourth quarter and full year were: Group turnover EBITDA Group operating profit Capital expenditure on (loss) before goodwill plant, equipment and before amortisation and property additions exceptional exceptional items items Â£m Â£m Â£m Â£m Fourth quarter ended March 31, 2002 (i) BT Retail 3,022 293 231 49 BT Wholesale 3,167 1,141 642 637 BT Ignite 1,213 30 (108) 214 BTopenworld 60 (16) (18) 5 Other 103 (17) (97) 77 Intra-group items (ii) (2,830) - - - Total continuing activities 4,735 1,431 650 982 before exceptional items Group turnover EBITDA Group operating profit Capital expenditure on (loss) before goodwill plant, equipment and before amortisation and property additions exceptional exceptional items items Â£m Â£m Â£m Â£m Year ended March 31, 2002(i) BT Retail 12,085 1,302 1,102 143 BT Wholesale 12,256 4,156 2,242 1,974 BT Ignite 4,476 146 (353) 609 BTopenworld 222 (102) (118) 10 Other 373 246 (102) 364 Intra-group items (ii) (10,965) - - - Total continuing activities 18,447 5,748 2,771 3,100 Discontinued activities (iii) 2,112 234 (191) 808 Total before exceptional items 20,559 5,982 2,580 3,908 (i) See note 2 for prior year figures. (ii) Includes elimination of turnover between businesses, which is included in the turnover of the originating business. (iii) Discontinued activities comprise mmO2, Yell, Japan Telecom, J-Phone and Airtel and are stated net of the elimination of turnover between continuing and discontinued activities. BT Retail Fourth quarter ended Year ended March 31 March 31 Before goodwill amortisation and 2002 2001 2002 2001 exceptional items Â£m Â£m Â£m Â£m Group turnover 3,022 3,003 12,085 12,063 Gross margin 827 781 3,399 3,443 Sales, general and administration 534 558 2,097 2,371 costs EBITDA 293 223 1,302 1,072 Operating profit 231 174 1,102 888 Capital expenditure 49 24 143 157 Operating free cash flow 244 199 1,159 915 Results BT Retail's results have continued to benefit from its strategic plan focus on defending core revenues and gross margins, cost reduction through a series of cost transformation programmes and positioning BT Retail to grow top line revenue through new wave revenues. Turnover increased by 0.6 per cent on the corresponding quarter of 2001 and 0.2 per cent in the full year. Initiatives such as BT Answer 1571 and BT Together fixed price packages, together with increased focus on business customers, has contributed to stemming the decline in turnover. As a result of changes required by Oftel, private circuits used by UK fixed network operators are no longer provided by BT Retail, but are provided as a Wholesale product. This has reduced revenue in BT Retail by Â£36 million in the quarter and Â£90 million in the year. Gross margin in the fourth quarter was 27.4 per cent compared to 26.0 per cent for the fourth quarter last year. The result for the full year at 28.1 per cent compared to 28.5 per cent for the 2001 financial year. Cost transformation has produced a total saving of Â£24 million in selling, general and administration costs, excluding exceptional items, against the fourth quarter of 2001 and a saving of Â£274 million (12 per cent) for the full year. These cost savings have contributed towards the EBITDA growth in the fourth quarter of Â£70 million (31 per cent) over the prior year comparative and Â£230 million (21 per cent) for the full year. It has also enabled BT Retail to contribute an operating free cash flow (EBITDA less capital expenditure) of Â£244 million in the quarter and Â£1,159 million in the year, which is Â£244 million (27 per cent) better than the 2001 financial year. In addition, BT Retail generated Â£170 million cash inflow as a result of an 18 per cent improvement in stock and debtors over the year. The number of employees (full time equivalent) in BT Retail at March 31, 2002 at 48,062 was 5 per cent lower than at March 31, 2001. Early leaver costs in the fourth quarter totalled Â£54 million (Â£19 million last year), including pension enhancement costs of Â£7 million. In addition, BT Retail launched the Next Generation Contact Centre Programme, which will rationalise the number of call centres from 104 sites to 30 over the next two years. Turnover BT Retail provides an end to end service to its customers over 28.3 million lines in the UK. BT Retail's turnover is mainly derived from calls, lines, private services and total business solutions to the consumer, SME and major business markets. BT Retail has undertaken a number of pricing and other initiatives, which has resulted in the slowing down of the estimated loss of market share. Within the residential voice market BT Retail maintained market share, as it has done since June 2000. In the business voice market, internal estimates put BT Retail's market share down 3 per cent in the year against a 4.5 per cent fall in the prior year. Within the Dial IP market, BT Retail continues to gain market share in both business and residential sectors, with market share up 8 per cent in the year. Turnover for the quarter is summarised as follows: Fourth quarter ended March 31 BT Retail turnover 2002 2001 Â£m Â£m Fixed network calls 1,167 1,225 Exchange lines 913 894 Customer premises equipment supply 148 148 Private services 132 141 Other sales and services 258 259 Total external sales, including mmO2 2,618 2,667 Sales to other BT businesses, excluding mmO2 404 336 Total 3,022 3,003 Turnover from fixed network calls declined by 5 per cent to Â£1,167 million compared to the corresponding quarter of 2001. Fixed network calls comprise all calls made by customers on the BT fixed line network in the UK, including outbound international calls, calls to mobile phones and calls to the internet. Absolute call volumes in BT Retail declined by 2 per cent in the quarter compared to the fourth quarter last year. The year saw the stemming of the rate of decline of inland geographic call volumes driven by initiatives such as BT Together with unlimited local and UK calls, Chataway weekends and the 1571 service. Total geographic call volumes declined by 5 per cent in the quarter compared to the fourth quarter last year, the same level of decline as the previous two quarters. Following the rapid growth in the previous year, internet related and other non-geographic call minutes within BT Retail have now stabilised mainly due to customers switching to FRIACO (Flat Rate Internet Access Call Origination) based internet products. The growth in fixed to mobile of 4 per cent, compares to 22 per cent in the fourth quarter last year, primarily due to the slowing growth in handsets and the introduction of BT Talk Together, encouraging customers to call fixed lines rather than mobiles. BT Group originating call volumes grew by 19 per cent in the fourth quarter, year on year, largely due to the increase in the level of FRIACO based call volumes. Total internet related volumes grew by 51 per cent compared to the fourth quarter of last year. Overall, turnover from exchange lines grew by 2 per cent in the quarter, year on year, to Â£913 million and by 6 per cent to Â£3,617 million for the year. Changes in prices and supplier costs together with volume growth in both the residential and business sectors has improved gross margin for this product. The number of business lines grew by 1.5 per cent in the 2002 financial year with high speed ISDN services being the main driver behind this growth. The number of residential lines increased marginally (by 0.3 per cent) in the year due to a combination of the success of the BT Together packages and customers returning to BT. Residential primary lines increased by 42,000 lines over the year with much of this attributed to the success of our overall approach in attracting and retaining customers. Overall, BT Retail's total fixed network lines grew by 1 per cent to 28.3 million in the 2002 financial year. Sales to other BT businesses grew by 20 per cent to Â£404 million in the fourth quarter compared to last year, benefiting from the growing revenues from data and solutions products provided by Ignite Solutions to major business customers. Operations The fourth quarter saw continued progress in customer satisfaction with consumer, SME and major business customers all expressing greater levels of overall satisfaction with BT against our key competitors in all three months of the fourth quarter. In addition, the quarter saw a significant improvement in satisfaction with customer service (provision and repair) where average satisfaction levels were significantly higher than the fourth quarter of last year. As part of the ongoing improvements in Customer Service the Next Generation Contact Centre Programme was launched during the quarter. This two year project will reduce the number of high volume residential and business call centres from 104 sites to 30 larger call centre locations, while providing our customers with consistent, higher levels of service and a broader range of service offerings. The first phase of the UK's biggest ever Consumer customer survey was launched in the quarter. Four million, of an eventual 19 million, survey forms have been despatched with nearly half a million responses already received. The returns are already providing valuable information on customer needs and future intentions, particularly for broadband based services. The successful launch of the BT Together UK calls option in January has resulted in an additional 657,000 customers taking one of the new option plans while BT Answer 1571, launched in November 2001, has increased messaging customers to 6.8 million (an increase of 1.2 million since December 2001). These initiatives are having a significant effect in retaining customers, contributing to the continued stabilisation of core revenue. January saw bt.com launch a new consolidated web-site which rationalised and integrated over 26 web-sites enabling greater flexibility for customers to order new services, report faults and check on-line inventory of communications services. In the major business market, Customer Relationship Management (CRM) initiatives launched under the BT Contact Central banner in October 2001 have achieved Â£108 million of incremental revenue for BT Group in the year to March 31, 2002. Key wins include Halifax Group Treasury & Wholesale Banking, where a bespoke real time online trading application provides highly personalised real time information for the bank's corporate customers and Newcastle Building Society providing state of the art call centre functionality with IP networking capability. In April, BT launched a new Mobility Strategy designed to support and encourage business agility. Plans to establish the UK's first public access wireless LAN service were announced, together with a reinforcement of BT's position as a significant market force in the provision of business mobile solutions. In addition, a new Corporate Teleworker proposition, based on the power of broadband, was unveiled, with Microsoft as its launch customer, securing up to 1,500 broadband connections. BT Retail is the number one ISP provider for businesses with between 1 and 49 employees (NOP February 2002) and connects a UK business to the internet every 5 minutes. In October 2001, BT joined forces with Cisco Systems, Dell, Microsoft and mmO2 to offer the first end-to-end digital technology ICT solution for SMEs in the UK. This one stop shop, backed by a fully trained BT client relationship team, has already achieved sales of Â£32 million. BT Wholesale Fourth quarter Year ended ended March 31 March 31 2002 2001 2002 2001 Before exceptional items Â£m Â£m Â£m Â£m Group turnover 3,167 3,112 12,256 11,728 EBITDA 1,141 1,124 4,156 4,276 Operating profit 642 672 2,242 2,538 Capital expenditure 637 717 1,974 2,273 Operating free cash flow 504 407 2,182 2,003 Results BT Wholesale maintained its strong cash generation capability with operating free cash flow (EBITDA less capital expenditure) of Â£504 million, up 24 per cent on last year's fourth quarter and 9 per cent higher for the full year. Turnover was Â£3,167 million, up 2 per cent on the fourth quarter of 2001; an increase of 5 per cent in network volumes being partly offset by a 3 per cent decrease due to price and mix. The full year increase of 5 per cent reflects an 8 per cent increase in network volumes offset by price and mix variance. Turnover for the quarter is summarised as follows: Fourth quarter ended March 31 2002 2001 BT Wholesale turnover Â£m Â£m BT Retail 1,962 2,031 Other BT lines of business 162 144 Concert global venture 147 146 UK fixed operators 534 480 UK mobile operators, including mmO2 362 311 Total 3,167 3,112 External turnover grew by 11 per cent to Â£1,043 million in the quarter and by 19 per cent for the full year. 'New business' revenues, including broadband and solutions, at Â£33 million, were 135 per cent higher than the corresponding quarter of last year and amounted to Â£102 million for the year. FRIACO contributed revenues of Â£46 million to the fourth quarter and Â£68 million to the full year. However, the impact of price reductions - due to flat rate price packages and Oftel determinations - coupled with the volume effects of unfavourable market conditions have continued to slow transit and conveyance revenue growth. Low margin transit revenues, at Â£360 million for the quarter and Â£1,405 million for the year, have been affected by the slow down in the mobile market and the TMT sector, reducing growth to 10 per cent when compared with the fourth quarter of last year. Conveyance revenues, being for calls to or from other operators originating from or terminating on the BT network, decreased by Â£21 million compared with the same quarter of 2001 and were flat for the year as a result of FRIACO substitution of internet traffic, stabilisation in other network operators' market share and the Oftel NTS price determination. Revenues from partial private circuits, which began in August 2001, totalled Â£11 million in the quarter and Â£56 million in the year and substituted for higher priced retail private circuits. BT Wholesale's operating costs, excluding depreciation, rose by 3 per cent to Â£2,099 million compared with the fourth quarter of last year and 9 per cent to Â£8,355 million for the full year. The increase was mainly due to: â€¢ Payments to other network operators at Â£962 million increased by Â£6 million in the quarter although they increased by 11 per cent to Â£3,849 million for the year. These costs are mainly recharged to BT Retail with no margin or as transit revenues with minimal margin. â€¢ Net staff costs in the quarter increased by Â£42 million to Â£195 million with early leaver costs of Â£17 million, including pension strain and a change in the mix of capital and current work. Costs increased by Â£91 million in the year to Â£686 million. â€¢ Payments to other BT lines of business increased by Â£48 million to Â£861 million for the quarter and increased by Â£201 million for the year. This was mainly due to a Â£33 million increase (Â£100 million full year) in payments to BT Ignite for the supply of broadband services and a volume driven increase in payments to BT Retail for field engineering services and cost of sales of BT Retail's products. In addition to the exceptional bad debt charge of Â£79 million the bad and doubtful debt costs before exceptional items were Â£47 million for the full year compared to Â£15 million last year. Excluding payments to other network operators and the bad and doubtful debt costs, the operating cost increase was 3 per cent for the quarter and 7 per cent for the year against network volume increases of 5 per cent and 8 per cent for the quarter and full year, respectively. Depreciation costs rose by 10 per cent to Â£499 million for the quarter and Â£1,914 million for the year as a result of the effect of a reduction in the assumed asset lives resulting from the adoption of new technology, higher capital expenditure in the year to March 31, 2001 and broadband investment. EBITDA at Â£1,141 million was Â£17 million up on the fourth quarter of last year. The margin of 36 per cent was maintained compared to the same quarter last year. The full year margin of 34 per cent was 2 percentage points down on last year. Capital expenditure on plant and equipment at Â£637 million for the quarter was 11 per cent lower than in the corresponding quarter of last year and at Â£1,974 million for the year was 13 per cent lower than last year reflecting continued tight control of investment. Broadband BT Wholesale sells DSL based broadband solutions to other UK network operators and service providers. BT Wholesale has signed up around 200 wholesale customers and, at the end of March, had connected 170,000 ADSL subscribers across this customer base. Demand for broadband ADSL has been stimulated by the introduction of new self install products, substantially lower prices and increased marketing activity. As a result of these initiatives, BT Wholesale aims to reach 1 million ADSL subscribers by summer 2003. The lower costs of the new self install products, launched in January 2002, the higher volume projections, lower core IP costs, greater automation and sustained customer service improvements have allowed BT Wholesale to substantially reduce its wholesale broadband prices. In February 2002, BT Wholesale announced that the wholesale price of its 'consumer' product to service providers would drop from Â£30 a month for the engineer installed version (BT IPStream 500), and Â£25 a month for the self-install version (BT IPStream Home), to Â£14.75 for both. Businesses also stand to benefit as similar price reductions have been introduced for the wholesale 'business' quality variants. The wholesale price changes came into effect on April 1, 2002. However, some service providers decreased their retail prices ahead of this, and as a result demand increased from 3,000 to 4,000 orders a week to over 8,000 in March and continues to accelerate. BT Wholesale has also launched a new marketing campaign designed to stimulate end-user demand. BT Wholesale had upgraded 1,010 exchanges for ADSL services by the end of March 2002. These exchanges serve 60 per cent of UK households (some 15 million homes) and 70 per cent of current internet users in the UK. BT Wholesale plans to upgrade a further 100 exchanges by the end of May, which will increase broadband ADSL coverage to 66 per cent of the UK. 21st Century network On January 26, 2002, BT Wholesale successfully brought into service the world's first hybrid Next Generation Switch (NGS) at Ilford London. The new switches use Voice over Asynchronous Transfer Mode (VoATM) technology, and mark a major step in the ongoing transformation of the BT core network and ensuring IP readiness. Glasgow and Reading were cut over in February and March and it is planned to cut over a further 20 switches this coming year. Mobile 3G networks BT Wholesale has been chosen by Hutchison 3G UK Limited to provide it with third generation network connectivity. A two-year contract has been signed for the provision of 6,000 private circuits connecting Hutchison 3G's Node B sites with its core and backbone networks. The agreement means that data will be relayed back to the core network via BT's fixed line network. BT Ignite Fourth quarter Year ended ended March 31 March 31 Before goodwill amortisation and 2002 2001 2002 2001 exceptional items Â£m Â£m Â£m Â£m Group turnover 1,213 1,057 4,476 3,468 EBITDA 30 40 146 50 Group operating loss (108) (77) (353) (309) Share of losses of associates and (6) (26) (38) (121) joint ventures Capital expenditure 214 394 609 935 Operating free cash flow (184) (354) (463) (885) Results BT Ignite's group turnover was Â£1,213 million for the fourth quarter, an increase of 15 per cent year on year. Full year turnover was 29 per cent higher at Â£4,476 million. Excluding the effect of acquisitions and disposals, the growth in turnover was 11 per cent for the quarter and 18 per cent for the year. This underlying increase was mainly driven by the growth in Solutions, European Connectivity and UK IP revenues. Ignite Solutions' turnover grew 14 per cent in the fourth quarter to Â£540 million, with turnover growing by 17 per cent to Â£1,828 million for the year. Syntegra's revenue for the quarter of Â£175 million was comparable to last year as a result of difficult market conditions but grew by 8 per cent for the year as a whole. Turnover from European Connectivity grew by 69 per cent to Â£273 million for the quarter. Excluding the effect of acquisitions, turnover growth was 28 per cent for the fourth quarter and 23 per cent for the full year. Turnover from UK IP and other operations of Â£1,024 million for the year grew 29 per cent. However, the fourth quarter showed a year on year decrease of Â£11 million reflecting the disposal of Clear Communications in December 2001, which had revenues of Â£25 million in the fourth quarter last year. In addition, a major customer relationship transferred to BT Wholesale impacted the fourth quarter's revenue. Excluding these items, turnover growth for the quarter was 21 per cent. EBITDA for the fourth quarter decreased by Â£10 million to Â£30 million, reflecting early leaver costs of Â£39 million (Â£1 million last year). Excluding these costs, EBITDA for the fourth quarter of Â£69 million shows a year on year increase of Â£28 million. EBITDA for the year of Â£146 million compares to Â£50 million in the previous year and includes early leaver costs of Â£55 million and Â£8 million, respectively. Headcount was reduced by 2,400 from 18,800 at March 31, 2001 to 16,400 at March 31, 2002. Ignite Solutions' EBITDA increased by 16 per cent for the year to Â£158 million. Syntegra's performance showed an improvement, with profitability in the quarter recovering to the level seen in the previous year and up by Â£6 million against the third quarter this year. Ignite Media Distribution's EBITDA for the fourth quarter decreased by Â£4 million to Â£14 million compared to last year due to the change in status of satellite consortia. The impact was Â£10 million and Â£39 million on the quarter and full year. EBITDA losses from European Connectivity for the fourth quarter of Â£12 million were Â£14 million better than last year. Excluding the effect of acquisitions and one-off credits of Â£16 million relating to prior quarters, the underlying EBITDA shows a year on year improvement for the quarter of Â£12 million. The decrease in EBITDA from BT Ignite's UK IP and other operations of Â£28 million in the fourth quarter reflected early leaver costs of Â£39 million and the disposal of Clear Communications in December 2001, which had contributed EBITDA of Â£7 million in the same period last year. The results were also affected by increased bad debt charges of Â£12 million. EBITDA for the year of Â£70 million shows an improvement of Â£133 million compared to the previous year. BT Ignite's capital expenditure for the fourth quarter was Â£214 million, a reduction of Â£180 million compared to last year. For the year, capital expenditure decreased by 35 per cent to Â£609 million. Operations Following a strategic review during the fourth quarter, BT Ignite has refocused its strategy, to provide an integrated data and value-added services business, meeting the European needs of global multi-site corporates, and the global needs of European corporates. BT Ignite has seen some early successes with a number of notable contracts being signed across Europe within our target corporate customer segment. Ignite Solutions has seen a number of major new contract wins in the UK including a network outsource solution for Royal Bank of Scotland Group, a voice and data outsource solution for the British Airports Authority, a voice and managed billing solution for Visa International and an Operations Control Centre Solution for ATOC (Association of Train Operating Companies). An outsourcing and partnership contract with Dutch company, Pink Roccade, heralds the first European outsourcing deal outside the UK for Solutions. Ignite Solutions' order book is strong with over 75 per cent of expected revenue for 2002/3 already committed. Ignite Media Distribution signed contracts with French broadcaster, Motors TV, to enable the company to target the UK direct-to-home market with its dedicated motoring channel and with the BBC to provide transmission services for this summer's XVII Commonwealth Games in Manchester. Syntegra has signed contracts with the British Museum and the Natural History Museum to use Rialto, Syntegra's e-ticketing service. Syntegra has reinforced its strong position in the global finance industry by supplying Merrill Lynch with voice trading technology at its new London trading room and is working with the American Stock Exchange to renovate its major New York trading facility. In the UK, BT Ignite signed a contract with Star Internet for delivery of Netstream Corporate, showing our strength in the UK ISP business. In Europe, important contract wins included the Regional Community of Madrid for Internet Access, and Kiala, a distribution company in Belgium, for Frame Relay. During the fourth quarter, BT Ignite continued building on its IP VPN (Virtual Private Network) capabilities in two key directions. Firstly, IP Clear was launched in the UK, aimed at solutions providers and systems integrators who provide bundled services to multi-site corporates. Secondly, BT Ignite's MPLS (Multi Protocol Label Switching) IP network (over which IP Clear operates) has continued to grow, driven by demand from existing IP VPN products. Ignite Solutions' Security Business Centre at Milton Keynes has been awarded the status of "Centre of Expertise" by the European Union. Content Hosting has become the first stand alone operation in the European hosting industry to achieve the ISO 9001:2000 international quality system standard accreditation. BTopenworld Fourth quarter Year ended ended March 31 March 31 Before goodwill amortisation 2002 2001 2002 2001 Â£m Â£m Â£m Â£m Group turnover 60 43 222 140 EBITDA (16) (69) (102) (198) Group operating loss (18) (91) (118) (233) Share of losses of associates - (6) (7) (59) and joint ventures Capital expenditure 5 (20) 10 10 Operating free cash flow (21) (49) (112) (208) Results Turnover for the fourth quarter was Â£60 million, an increase of Â£17 million (40 per cent) over the same period last year. Turnover for the year was Â£222 million, Â£82 million (59 per cent) higher than last year. The improvement is mainly due to growth in the new Broadband products as well as the existing Narrowband product range. The total number of UK internet service provider customers of BTopenworld (excluding those served via Virtual ISPs) at March 31, 2002 was approximately 1.75 million, representing annual growth of 40 per cent. With over 1 million customers on unmetered packages at March 31, 2002, BTopenworld is one of the leading unmetered internet access providers in the UK. EBITDA loss for the fourth quarter was Â£16 million, a 30 per cent improvement on the third quarter and a 77 per cent improvement on the same period last year. EBITDA loss for the year was Â£102 million, representing a Â£96 million (48 per cent) improvement on last year. BTopenworld continues to review its products and services with a view to driving the business to profitability whilst continuing on a rapid growth track. The line of business continues to launch innovative new products, such as on-line music and games, whilst withdrawing old products where they are not expected to become profitable. Subscriber and revenue growth continue to result in economies of scale and overheads continue to be reduced. BTopenworld offers a range of broadband products, serving consumer and SME markets with single or multi-user connections which provide customers with the flexibility to choose the product that best matches their requirements. The Plug and Go (self install) product launched in March 2002 has been very successful with significant increases in orders. A broadband satellite product has been launched providing businesses in rural areas with broadband access. Other broadband packages are being rolled out as part of a continued programme of product development. GROUP RESULTS Fourth quarter BT's EBITDA from continuing operations in the fourth quarter before exceptional items of Â£1,431 million was Â£47 million lower than the prior year. Group operating profit from continuing operations before goodwill amortisation and exceptional items for the fourth quarter of Â£650 million was Â£63 million lower than the prior year, after early leaver costs of Â£135 million (compared to Â£23 million last year). The early leaver costs include Â£21 million of incremental pension costs. Previously incremental pension costs had been absorbed by the accounting surplus in the pension scheme. In addition, the rentals payable under the sale and leaseback transaction undertaken with Telereal in December 2001 have had an adverse impact on EBITDA of Â£50 million and of Â£30 million on operating profit after depreciation savings. Adjusting for these items the underlying EBITDA was up 9 per cent and operating profit was up 11 per cent, compared to the fourth quarter last year. BT's share of its continuing ventures' operating profits for the quarter was Â£17 million before goodwill amortisation and exceptional items compared to a loss of Â£79 million last year. BT Group continues to hold a 26 per cent interest in Cegetel, which contributed Â£60 million to total operating profit before goodwill amortisation. The results include BT's 50 per cent share of Concert's operating losses, which amounted to Â£26 million before exceptional items compared to a loss of Â£89 million in the prior year. Profit before taxation from continuing activities before goodwill amortisation and exceptional items of Â£371 million was 43 per cent higher than last year, partly reflecting a reduction in the interest payable of Â£95 million. BT's underlying earnings per share (continuing operations before exceptional items and goodwill amortisation) for the quarter were 2.6 pence. This compares with earnings of 3.1 pence per share on a comparable basis in the corresponding quarter of 2001. Earnings per share were lower despite an improvement in profit before tax, mainly due to the increased number of shares in issue following the rights issue and an abnormally low tax rate in the previous year. BT's total losses per share (including goodwill amortisation and exceptional items) for the fourth quarter to March 31, 2002 were 30.2 pence per share. These losses were after net exceptional costs and goodwill amortisation of 32.8 pence per share. This compares to losses of 40.4 pence per share in the comparable quarter of 2001, which reflected a loss of 40.9 pence per share from discontinued operations and 2.6 pence relating to net exceptional costs and goodwill amortisation. Full year BT's EBITDA from continuing operations before exceptional items of Â£5,748 million was Â£26 million lower than the prior year. Group operating profit from continuing operations before goodwill amortisation and exceptional items of Â£2,771 million was Â£311 million lower than the prior year. BT's share of its continuing ventures' operating losses for the year was Â£108 million before goodwill amortisation and exceptional items. Cegetel contributed Â£168 million to total operating profit before goodwill amortisation. Concert's loss attributable to BT for the year was Â£225 million before exceptional items compared to a profit of Â£19 million in the prior year. Profit before taxation from continuing activities before goodwill amortisation and exceptional items of Â£1,273 million was Â£490 million lower than last year reflecting reduced operating profits, Concert losses and higher interest payable arising from previous acquisitions and investments in 3G licences. BT's underlying earnings per share for the year ended March 31, 2002 were 8.8 pence per share compared to 19.3 pence per share in 2001. The decline reflected the higher interest charges and losses from acquisitions in Europe. BT's total earnings per share for the year ended March 31, 2002 were 12.0 pence per share, compared to losses of 25.7 pence per share in 2001. Interest Net interest payable from continuing activities was Â£301 million in the fourth quarter. This is an improvement of Â£95 million on the corresponding quarter in 2001 and a reduction of Â£17 million on the third quarter of this current financial year. This reflects the significant reduction in net debt. Interest was covered 2.2 times by total operating profit from continuing activities for the quarter before goodwill amortisation and exceptional items. For the full year, net interest, including BT's share of its ventures' interest charge but excluding that attributable to discontinued operations and exceptional items, was Â£1,417 million, an increase of Â£221 million on 2001. This increase reflects the timing of the investments in 3G licences made in 2001 and the rights issue and disposals in 2002. Exceptional items and goodwill Exceptional items in the quarter reduced profit before tax by Â£2,883 million and increased profit by Â£753 million in the full year. The exceptional items were: Exceptional items for period to March 31, 2002 Fourth Year quarter Continuing activities: Â£m Â£m Impairment of goodwill and tangible fixed assets in BT Ignite (2,202) (2,202) European activities Impairment of Concert and AT&T Canada investments - (1,153) Concert unwind costs (195) (253) Impairment of other investments and related costs (396) (643) BT Retail call centre rationalisation (68) (68) BT Wholesale bad debt expense (79) (79) Other - (127) Total impairment and other exceptional charges (2,940) (4,525) Profit on property transactions - 900 Net profit on disposal of investments and group undertakings 57 21 Total continuing activities (2,883) (3,604) Other gains on disposals - 4,357 Total exceptional items (2,883) 753 Impairment of assets in BT Ignite's European activities On April 8, 2002 we announced that BT Ignite was streamlining its activities to focus on multi-site corporates with European activities. In the light of this strategy and the assimilation of BT's share of Concert's activities the Board has reviewed the carrying value of BT Ignite's investment in its European activities. We have therefore taken an exceptional goodwill impairment charge of Â£1,939 million, fully writing down the goodwill, and tangible fixed asset impairment charge of Â£263 million in the fourth quarter. Following this write down, the net assets of BT Ignite's activities in Europe were about Â£750 million. Concert On April 1, 2002, the Concert global joint venture was unwound with the businesses, customer accounts and networks being returned to the two parent companies, with BT and AT&T each taking ownership of substantially those parts of Concert originally contributed by them. Some 2,300 people have joined BT on completion. The working capital and other liabilities of Concert on completion were divided equally between BT and AT&T, with the exception that BT receives an additional US$400 million reflecting the allocation of the businesses. Of this, US$50 million was received before March 31, 2002, US$161 million has subsequently been received and the balance is expected to be received in Autumn 2002. On completion BT ceased to have any interest in AT&T Canada, and was released from its future expenditure commitment associated with AT&T Canada. As a result, in the second quarter BT wrote down the carrying value of its investments in both Concert and AT&T Canada. The exceptional impairment charge of Â£1.2 billion comprised BT's investment in AT&T Canada of Â£347 million, Concert goodwill impairment of Â£260 million and Concert tangible fixed asset write downs of Â£546 million. At the half year BT estimated that further charges of around Â£200 million would be recognised in relation to the unwind of Concert. The fourth quarter results include an exceptional charge of Â£195 million and the full year reflects a charge of Â£253 million for Concert unwind costs. Impairment of other investments The Board has reviewed the value of BT's investments in the light of the rapidly changing global telecoms market conditions. The fourth quarter results include an exceptional impairment charge and exit costs of Â£396 million, principally relating to Blu and SmarTone. Total exceptional impairment charges and exit costs in the year amount to Â£643 million and also includes an impairment of our investment in Impsat. BT Retail call centre rationalisation An exceptional charge of Â£68 million has been recognised in the fourth quarter in relation to the Next Generation Contact Centre Programme that will reduce the number of BT Retail's high volume residential and business call centres from 104 to 30 over the next two years. Additional costs of Â£50 million associated with employee redeployment, training and property refurbishment are expected to be incurred over the next two years. BT Wholesale bad debt expense As a result of severe liquidity problems in the TMT sector during the fourth quarter an exceptional bad debt charge of Â£79 million has been recognised in addition to increased bad debt provisions taken through normal operating activities. Sale of investments and businesses On February 28, 2002, BT completed the sale of its 50 per cent interest in e-Peopleserve, the human resources outsourcing business, to Accenture for US$70 million. In addition, BT will receive earn out payments, in the range US$35 million to US$223 million, based on the results over the next five years. A profit of Â£61 million has been recognised on this sale based on the initial consideration and the additional minimum payments of US$35 million. Other exceptional items Depreciation costs in the year included an exceptional impairment charge of Â£29 million as a result of BT Retail's payphone rationalisation programme. In addition, costs of Â£98 million associated with the demerger of mmO2 were charged during the year. In December 2001 a net profit of Â£857 million was recorded on the sale and leaseback of the majority of our UK properties to Telereal, bringing the total exceptional profit on sale of properties to Â£900 million for the year. Other gains on disposals The net exceptional gain on discontinued activities of Â£4,357 million is the total gain realised on the disposals of Yell, Japan Telecom, J-Phone and Airtel. Taxation The taxation charge for the year of Â£443 million comprises Â£528 million on the profit before taxation before exceptional items from continuing activities, offset by tax relief of Â£143 million on certain exceptional charges and a charge of Â£58 million on discontinued activities. The tax charge on profit from continuing activities before exceptional items and goodwill amortisation is at an effective tax rate of 36.4 per cent for the quarter and 41.5 per cent for the full year. The effective tax rate in the fourth quarter of 2001 was abnormally low at 20.4 per cent reflecting tax relief on losses surrendered by discontinued activities. The tax charge is in excess of the standard UK tax rate of 30 per cent due to the impact of loss making subsidiaries outside the UK for which tax relief is not immediately available and associate company taxation. Dividends The Board recommends a final dividend of 2.0 pence per share to shareholders, amounting to Â£173 million. This will be paid, subject to shareholder approval, on September 9, 2002 to shareholders on the register on August 9, 2002. BT's future dividend policy will be progressive, reflecting the growth in earnings per share and an improving balance sheet. It is likely the dividend cover during the next three years will be in the range of 2.5 to 2.0 times, reducing within the range as the group's cash position improves. Cash flow and net debt Cash inflow from operating activities amounted to Â£1,496 million in the quarter ended March 31, 2002, bringing the total for the year to Â£5,257 million. Capital expenditure payments totalled Â£881 million in the fourth quarter, giving the total for the year of Â£4,069 million (excluding discontinued activities - Â£3,232 million). Free cash flow (defined as cash flow before acquisitions and disposals and financing) was an outflow of Â£12 million for the quarter. Net debt at March 31, 2002 was Â£13.7 billion, compared with Â£13.6 billion at December 31, 2001, Â£16.5 billion at September 30, 2001 and Â£27.9 billion at March 31, 2001. The net debt was broadly flat in the fourth quarter after the Â£14.3 billion reduction in the first nine months of the year chiefly realised through the rights issue, the sale of our Japanese investments and our directories business, Yell, and the sale and leaseback of our properties. BT expects a continued improvement in its financial position and is seeking to obtain a single A rating from all of the major rating agencies. Balance sheet The group balance sheet has undergone a major transformation since March 31, 2001 as a result of the mmO2 demerger and other significant transactions completed in the year. To help in understanding the changes, we have presented a pro forma balance sheet in this release to illustrate the impact of the demerger and principal sales of investments and businesses as if they had occurred on March 31, 2001. The net assets attributable to mmO2 at the date of demerger totalled Â£19,490 million, including Â£16,191 million of goodwill, mobile licences and other intangible assets, and Â£4,215 million of tangible fixed assets. These net assets were distributed by way of a demerger distribution, which is the main cause of the reduction in group shareholders' funds from Â£12,054 million at March 31, 2001 to a deficiency of Â£358 million at March 31, 2002. The reduction has been mitigated by the impact of the June 2001 rights issue, which increased shareholders' funds by Â£5,876 million and the retained profit for the year of Â£822 million. The group's gross borrowings at March 31, 2002 totalled Â£18,440 million and after deducting short-term investments and cash amounting to Â£4,739 million, BT's net debt was Â£13,701 million at that date. BT's fixed assets totalled Â£17,551 million of which Â£16,078 million were tangible assets, principally forming the UK fixed network. The group made a return on capital employed from continuing activities before goodwill amortisation and exceptional items of 19 per cent in the year. BT Group plc, the company, has reserves at March 31, 2002 of Â£9.5 billion, although the consolidated reserves are showing a deficit of Â£792 million. Pensions BT employees agreeing to leave during the year caused approximately Â£174 million of incremental liabilities in the BT Pension Scheme of which Â£64 million arose in the fourth quarter. In accordance with UK Accounting Standards, of these liabilities only Â£27 million has been charged against the total operating profit before exceptional items, with the balance absorbed by the accounting surplus and not charged to the profit and loss account. In the 2003 financial year, we will charge the full cost of the incremental liabilities of leavers against group profit. We are continuing to make additional funding deficiency contributions to the pension scheme of Â£200 million per annum, and in December 2001 we made additional special contributions of Â£400 million in respect of incremental pension liabilities arising on leavers in the previous calendar year. Under the new Accounting Standard FRS 17 "Retirement benefits", we will be required to change the basis of accounting for our defined benefit pension scheme in our 2004 accounts. At March 31, 2002 we have calculated the pension fund deficit in accordance with the rules of FRS 17 and this indicates a deficit of Â£1.8 billion on pension fund assets of Â£27.1 billion. It should be noted that the deficit is significantly influenced by the strength of the capital markets, which largely explains the reduction from the level of Â£4 billion estimated at September 30, 2001. _________________________________________________________________ The Annual Report and Form 20-F is expected to be published on May 31, 2002. The Annual General Meeting of BT Group plc will be held in Edinburgh on July 17, 2002. GROUP PROFIT AND LOSS ACCOUNT for the three months ended March 31, 2002 Continuing activities Before goodwill Goodwill Total amortisation and amortisation exceptional and items except-ional items (note 9) (unaudited) Notes Â£m Â£m Â£m Total turnover 5,511 - 5,511 Group's share of associates and joint (932) - (932) ventures turnover Trading between group and principal joint 156 - 156 venture Group turnover 2 4,735 - 4,735 Other operating income 3 103 - 103 Operating costs (4,188) (2,573) (6,761) Group operating profit (loss) 2 650 (2,573) (1,923) Group's share of operating profits 4 17 (400) (383) (losses) of associates and joint ventures Total operating profit (loss) 667 (2,973) (2,306) Profit on sale of fixed asset investments 5 - 57 57 and group undertakings Profit on sale of property fixed assets 7 5 - 5 Net interest payable 8 (301) - (301) Profit (loss) before taxation 371 (2,916) (2,545) Taxation (135) 93 (42) Profit (loss) after taxation 236 (2,823) (2,587) Minority interests (9) - (9) Profit (loss) attributable to 227 (2,823) (2,596) shareholders Earnings (loss) per share 11 - basic 2.6p (30.2)p - diluted 2.6p (30.2)p GROUP PROFIT AND LOSS ACCOUNT for the three months ended March 31, 2001 Continuing activities Before goodwill Goodwill Discontinued Total amortisation and amortisation and activities and exceptional except-ional eliminations items items (note 1(c)) (note 9) (unaudited) Notes Â£m Â£m Â£m Â£m Total turnover 5,437 - 2,310 7,747 Group's share of associates and joint (1,115) - (1,397) (2,512) ventures turnover Trading between group and principal 187 - - 187 joint venture Group turnover 2 4,509 - 913 5,422 Other operating income 3 108 - 10 118 Operating costs (3,904) (229) (3,811) (7,944) Group operating profit (loss) 2 713 (229) (2,888) (2,404) Group's share of operating profits 4 (79) (16) 23 (72) (losses) of associates and joint ventures Total operating profit (loss) 634 (245) (2,865) (2,476) Profit on sale of fixed asset 5 - 54 - 54 investments and group undertakings Profit on sale of property fixed 7 21 - - 21 assets Net interest payable 8 (396) - (26) (422) Profit (loss) before taxation 259 (191) (2,891) (2,823) Taxation (53) - (58) (111) Profit (loss) after taxation 206 (191) (2,949) (2,934) Minority interests 22 - (37) (15) Profit (loss) attributable to 228 (191) (2,986) (2,949) shareholders Earnings (loss) per share 11 - basic 3.1p (40.4)p - diluted 3.1p (40.4)p GROUP PROFIT AND LOSS ACCOUNT for year ended March 31, 2002 Continuing activities Before goodwill Goodwill Discontinued Total amortisation amortisation activities and and exceptional and eliminations items except-ional items (note 1(c)) (note 9) (unaudited) Notes Â£m Â£m Â£m Â£m Total turnover 21,815 - 2,827 24,642 Group's share of associates and joint (4,049) - (715) (4,764) ventures turnover Trading between group and principal 681 - - 681 joint venture Group turnover 2 18,447 - 2,112 20,559 Other operating income 3 361 - 1 362 Operating costs (16,037) (2,817) (2,546) (21,400) Group operating profit (loss) 2 2,771 (2,817) (433) (479) Group's share of operating profits 4 (108) (1,335) 62 (1,381) (losses) of associates and joint ventures Total operating profit (loss) 2,663 (4,152) (371) (1,860) Profit on sale of fixed asset 5 - 21 4,368 4,389 investments and group undertakings Amounts written off investments 6 - (535) - (535) Profit on sale of property fixed 7 27 1,062 - 1,089 assets Net interest payable 8 (1,417) (162) (43) (1,622) Profit (loss) before taxation 1,273 (3,766) 3,954 1,461 Taxation (528) 143 (58) (443) Profit (loss) after taxation 745 (3,623) 3,896 1,018 Minority interests (10) - (13) (23) Profit (loss) attributable to 735 (3,623) 3,883 995 shareholders Dividends (see note below) 10 (173) Retained profit for the financial 822 year Earnings per share 11 - basic 8.8p 12.0p - diluted 8.8p 11.9p In addition to the final dividend recommended for the year of Â£173m there was a demerger distribution of Â£19,490m, representing the net assets of mmO2 (including purchased goodwill) as at the date of demerger. GROUP PROFIT AND LOSS ACCOUNT for year ended March 31, 2001 Continuing activities Before goodwill Goodwill Discontinued Total amortisation and amortisation and activities and exceptional except-ional eliminations items items (note 1(c)) (note 9) (unaudited) Notes Â£m Â£m Â£m Â£m Total turnover 21,068 - 8,598 29,666 Group's share of associates and joint (4,625) - (5,312) (9,937) ventures turnover Trading between group and principal 698 - - 698 joint venture Group turnover 2 17,141 - 3,286 20,427 Other operating income 3 346 - 13 359 Operating costs (14,405) (95) (6,259) (20,759) Group operating profit (loss) 2 3,082 (95) (2,960) 27 Group's share of operating profits 4 (157) (374) 134 (397) (losses) of associates and joint ventures Total operating profit (loss) 2,925 (469) (2,826) (370) Profit on sale of fixed asset 5 - 618 1 619 investments and group undertakings Profit on sale of property fixed 7 34 - - 34 assets Net interest receivable (payable) 8 (1,196) 25 (143) (1,314) Profit (loss) before taxation 1,763 174 (2,968) (1,031) Taxation (385) (47) (280) (712) Profit (loss) after taxation 1,378 127 (3,248) (1,743) Minority interests 23 (21) (129) (127) Profit (loss) attributable to 1,401 106 (3,377) (1,870) shareholders Dividends 10 (571) Retained loss for the financial year (2,441) Earnings (loss) per share 11 - basic 19.3p (25.7)p - diluted 19.0p (25.7)p GROUP CASH FLOW STATEMENT for the three months and year ended March 31, 2002 Fourth quarter Year ended ended March 31 March 31 2002 2001 2002 2001 (unaudited) Â£m Â£m Â£m Â£m Net cash inflow from operating activities* (note 1,496 2,186 5,257 5,887 12) Dividends from associates and joint ventures - 1 2 10 Net cash outflow for returns on investments and (367) (112) (1,695) (727) servicing of finance Taxation paid (279) (423) (562) (669) Purchase of intangible fixed assets - (12) - (4,208) Purchase of tangible fixed assets (881) (1,428) (4,069) (4,756) Net sale of fixed asset investments - 43 70 82 Sale of tangible fixed assets 19 365 2,645 440 Net cash outflow for capital expenditure and (862) (1,032) (1,354) (8,442) financial investment Acquisitions (110) (8,889) (1,131) (14,501) Disposals 53 157 6,916 747 Net cash inflow (outflow) for acquisitions and (57) (8,732) 5,785 (13,754) disposals Equity dividends paid - (569) - (1,432) Cash inflow (outflow) before use of liquid (69) (8,681) 7,433 (19,127) resources and financing Management of liquid resources 1,387 4,489 (1,864) (480) Issue of ordinary share capital 16 3 6,057 149 Issue of shares to minorities - - - 36 Inflow on demerger of mmO2 (note 14) - - 440 - New loans 24 6,030 30 14,552 Repayment of loans (863) (2) (1,851) (225) Net movement on short-term borrowings (622) (1,967) (10,155) 5,223 Net cash inflow (outflow) from financing (1,445) 4,064 (5,479) 19,735 Increase (decrease) in cash (127) (128) 90 128 Decrease (increase) in net debt (note 14) (53) (8,678) 13,930 (18,942) *Net of deficiency and special pension - 100 600 300 contributions GROUP BALANCE SHEET at March 31, 2002 March 31 March 31 March 31 2002 2001 2001 Pro forma (unaudited) (unaudited) (note 1(d)) (note 1) Â£m Â£m Â£m Fixed assets Intangible assets (note 13) 252 2,350 18,380 Tangible assets 16,078 17,848 21,625 Investments 1,221 3,685 5,204 17,551 23,883 45,209 Current assets Stocks 111 124 361 Debtors 5,272 5,010 6,260 Investments 4,581 2,557 2,557 Cash at bank and in hand 158 412 412 10,122 8,103 9,590 Creditors: amounts falling due within one year Loans and other borrowings 2,195 5,485 12,136 Other creditors 7,195 7,007 8,597 9,390 12,492 20,733 Net current assets (liabilities) 732 (4,389) (11,143) Total assets less current liabilities 18,283 19,494 34,066 Creditors: amounts falling due after more than one year Loans and other borrowings 16,245 18,775 18,775 Provisions for liabilities and charges (note 15) 2,324 2,512 2,738 Minority interests 72 499 499 Capital and reserves (note 16) Called up share capital 434 7,573 7,573 Reserves (792) (9,865) 4,481 Total equity shareholders' funds (deficiency) (358) (2,292) 12,054 18,283 19,494 34,066 NOTES 1. Basis of preparation a. Reorganisation and demerger Following shareholders' and the Court's approvals, the legal separation of the mmO2 business from the rest of the former British Telecommunications plc (BT plc) group was completed on November 19, 2001. mmO2, a leading provider of mobile communications services in Europe, was listed as a separate company on the London and New York Stock Exchanges on the same day. On the demerger, BT plc shareholders were issued with one ordinary share in BT Group plc (the company) and one ordinary share in mmO2 plc in exchange for each BT plc ordinary share. On November 21, 2001, BT Group plc underwent a capital reduction after Court approval and this resulted in a surplus of Â£9,537m, which has been credited to the profit and loss account. For accounting and listing purposes, BT Group plc, which is focused on the provision of voice and data services in the UK and elsewhere in Europe, is the successor company to BT plc. In this document, BT refers to BT Group plc and its subsidiary undertakings. The reorganisation has been accounted for using merger accounting principles: the financial statements are presented as if the company had been the parent company of the group throughout the year ended March 31, 2001 and up to the date of the demerger. The results of mmO2 have been included in discontinued activities in all periods. b. Basis of preparation The unaudited 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 plc for the year ended March 31, 2001, with the exception that deferred taxation is now stated on a full liability basis in accordance with FRS 19 "Deferred tax", in place of the partial provisioning basis formerly adopted. The deferred tax liabilities are not being discounted. The comparative figures in the profit and loss account and balance sheet have been restated. Figures for the quarter and the year ended March 31, 2001 have been restated for the effects of FRS 19 and the earnings per share and dividend per share have been restated for the dilutionary effect of BT plc's rights issue, which closed on June 15, 2001. 1 Basis of preparation continued (c) Discontinued operations On June 1, 2001, BT disposed of its interests in Japan Telecom and J-Phone Communications and, on June 29, 2001, its interest in Airtel. On June 22, 2001, BT sold Yell, its classified advertising directory businesses in the UK and the USA. These activities, together with mmO2, are shown as discontinued operations in the profit and loss accounts. The eliminations are intra-group eliminations. The interest charge allocated to mmO2 for all periods presented up to the demerger has been calculated assuming that mmO2's net debt at the date of the demerger of Â£500m, had been in existence for the whole of the period, and had been bearing an interest charge of 8% per annum. (d) Pro forma balance sheet at March 31, 2001 Balance sheet information prepared on a pro forma basis has been presented for BT at March 31, 2001 as if the demerger of mmO2 and the sale of other discontinued businesses noted above had occurred on that date. The pro forma balance sheet does not reflect the impact of the BT plc rights issue which closed in June 2001, nor the capital reduction which occurred on November 21, 2001. (e) Group accounts The group accounts of BT Group plc for the year ended March 31, 2002, have not yet been delivered to the Registrar of Companies and are expected to be published on May 31, 2002. 2 Results of businesses The tables below show the results of BT's current business organisation, which was put in place during the year ended March 31, 2001. Elements of the prior year information are a restatement of the actual results of the group to show the businesses as if they had traded as separate units throughout the relevant comparative period. There is extensive trading between many of the business units and profitability is dependent on the transfer price levels. These intra-group trading arrangements have been subject to review and have changed in certain instances. Comparative figures have been restated for these and other changes and in certain instances have been determined using apportionments and allocations. 2 Results of businesses continued a. Operating results Group turnover EBITDA before Group operating profit Share of associates and Fourth quarter ended exceptional (loss) before goodwill joint ventures total items amortisation and operating profit (loss) March 31, 2002 exceptional items before goodwill amortisation and exceptional items Â£m Â£m Â£m Â£m BT Retail 3,022 293 231 - BT Wholesale 3,167 1,141 642 - BT Ignite 1,213 30 (108) (6) BTopenworld 60 (16) (18) - Other 103 (17) (97) 49 Concert - - - (26) Intra-group items (ii) (2,830) - - - Total continuing activities before 4,735 1,431 650 17 exceptional items Discontinued activities - - - - Intra-group items (ii) - - - - Total before exceptional items 4,735 1,431 650 17 Fourth quarter ended March 31, 2001 (i) BT Retail 3,003 223 174 - BT Wholesale 3,112 1,124 672 - BT Ignite 1,057 40 (77) (26) BTopenworld 43 (69) (91) (6) Other - 160 35 42 Concert - - - (89) Intra-group items (ii) (2,706) - - - Total continuing activities before 4,509 1,478 713 (79) exceptional items Discontinued activities 1,142 174 41 45 Intra-group items (ii) (229) - - - Total before exceptional items 5,422 1,652 754 (34) 2 Results of businesses continued a. Operating results Group turnover EBITDA before Group operating profit Share of associates and Year ended exceptional (loss) before goodwill joint ventures total items amortisation and operating profit (loss) March 31, 2002 exceptional items before goodwill amortisation and exceptional items Â£m Â£m Â£m Â£m BT Retail 12,085 1,302 1,102 - BT Wholesale 12,256 4,156 2,242 - BT Ignite 4,476 146 (353) (38) BTopenworld 222 (102) (118) (7) Other 373 246 (102) 162 Concert - - - (225) Intra-group items (ii) (10,965) - - - Total continuing activities before 18,447 5,748 2,771 (108) exceptional items Discontinued activities 2,836 234 (191) 74 Intra-group items (ii) (724) - - - Total before exceptional items 20,559 5,982 2,580 (34) Year ended March 31, 2001 (i) BT Retail 12,063 1,072 888 - BT Wholesale 11,728 4,276 2,538 - BT Ignite 3,468 50 (309) (121) BTopenworld 140 (198) (233) (59) Other 138 574 198 4 Concert - - - 19 Intra-group items (ii) (10,396) - - - Total continuing activities before 17,141 5,774 3,082 (157) exceptional items Discontinued activities 4,137 541 175 277 Intra-group items (ii) (851) - - - Total before exceptional items 20,427 6,315 3,257 120 (i) The results of the lines of business for the quarter and year ended March 31, 2001 have been restated. (ii) Includes elimination of intra-group turnover between businesses which is included in the total turnover of the originating business. 2 Results of businesses continued BT Retail analysis Fourth quarter Year ended ended March 31 March 31 2002 2001 2002 2001 Â£m Â£m Â£m Â£m Group turnover Fixed network calls 1,167 1,225 4,691 4,963 Exchange lines 913 894 3,617 3,398 Private services 132 141 559 616 Customer premises equipment supply 148 148 605 609 Other sales and services 258 259 1,048 1,078 Sales to other BT businesses, excluding mmO2 404 336 1,565 1,399 Total group turnover 3,022 3,003 12,085 12,063 Payments to network operators and other cost 2,195 2,222 8,686 8,620 of sales Gross margin 827 781 3,399 3,443 Selling, general and administration costs 534 558 2,097 2,371 EBITDA before exceptional items 293 223 1,302 1,072 Depreciation 62 49 200 184 Group operating profit before goodwill 231 174 1,102 888 amortisation and exceptional items Operating free cash flow 244 199 1,159 915 2 Results of businesses continued BT Wholesale analysis Fourth quarter Year ended ended March 31 March 31 2002 2001 2002 2001 Â£m Â£m Â£m Â£m Group turnover BT Retail 1,962 2,031 7,819 7,940 Other BT lines of business 162 144 526 492 Concert global venture 147 146 566 605 UK fixed operators 534 480 2,036 1,659 UK mobile operators, including mmO2 (a) 362 311 1,309 1,032 Total group turnover 3,167 3,112 12,256 11,728 Operating costs Net staff costs 195 153 686 595 Payments to network operators (b) 962 956 3,849 3,477 Payments to other BT businesses (b) 861 813 3,429 3,228 Other operating costs 81 124 391 356 Total operating costs before depreciation 2,099 2,046 8,355 7,656 Other operating income 73 58 255 204 EBITDA before exceptional items 1,141 1,124 4,156 4,276 Depreciation 499 452 1,914 1,738 Group operating profit before exceptional items 642 672 2,242 2,538 Operating free cash flow 504 407 2,182 2,003 (a) Revenues generated from mmO2 are now aggregated within UK mobile operators for all periods. (b) Payments to mmO2 are now excluded from payments to other BT businesses and included in payments to network operators for all periods. 2 Results of businesses continued BT Ignite analysis Fourth quarter Year ended ended March 31 March 31 2002 2001 2002 2001 Â£m Â£m Â£m Â£m Group turnover Syntegra 175 176 609 563 Ignite Solutions 540 473 1,828 1,566 Application service provision 20 21 68 59 Content hosting 25 22 94 62 Media distribution 75 65 283 257 European connectivity 273 162 998 471 UK IP and other 230 241 1,024 795 Eliminations (125) (103) (428) (305) Total group turnover 1,213 1,057 4,476 3,468 EBITDA before exceptional items Syntegra 16 15 31 48 Ignite Solutions 47 47 158 136 Application service provision (4) (7) (17) (38) Content hosting (12) (16) (49) (46) Media distribution 14 18 59 92 European connectivity (12) (26) (106) (79) UK IP and other (19) 9 70 (63) Total EBITDA before exceptional items 30 40 146 50 Operating profit (loss) before goodwill amortisation and exceptional items Syntegra 11 14 18 37 Ignite Solutions 24 22 77 61 Application service provision (5) (14) (24) (52) Content hosting (21) (18) (71) (53) Media distribution 8 9 34 66 European connectivity (56) (68) (276) (198) UK IP and other (69) (22) (111) (170) Total operating loss before goodwill (108) (77) (353) (309) amortisation and exceptional items Operating negative free cash flow (184) (354) (463) (885) 2 Results of businesses continued (b) Capital expenditure on plant, equipment and property additions Fourth quarter Year ended ended March 31 March 31 2002 2001 2002 2001 Â£m Â£m Â£m Â£m BT Retail 49 24 143 157 BT Wholesale 637 717 1,974 2,273 BT Ignite 214 394 609 935 BTopenworld 5 (20) 10 10 Other 77 171 364 482 Total continuing activities 982 1,286 3,100 3,857 Discontinued activities - 494 808 1,129 Total 982 1,780 3,908 4,986 (c) Net assets Net operating assets Associates and joint ventures At March 31, 2002 (liabilities) (i) Â£m Â£m BT Retail 927 (3) BT Wholesale 12,133 1 BT Ignite 1,603 83 BTopenworld (28) - Concert - 338 Other (303) 259 Total 14,332 678 At March 31, 2001 BT Retail 1,114 - BT Wholesale 12,511 - BT Ignite 3,584 178 BTopenworld (42) 10 Concert - 1,430 Other 1,065 1,001 Total continuing activities 18,232 2,619 Discontinued activities 19,344 1,537 Total 37,576 4,156 (i) 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 income Fourth quarter ended Year ended March 31 March 31 2002 2001 2002 2001 Â£m Â£m Â£m Â£m Provision of administration services to the 33 37 135 168 Concert global venture Other 70 81 227 191 Total 103 118 362 359 4. Group's share of profits (losses) of associates and joint ventures Fourth quarter Year ended ended March 31 March 31 2002 2001 2002 2001 Â£m Â£m Â£m Â£m Share of operating profits (losses) before 17 (79) (108) (157) goodwill amortisation and exceptional items Provision for impairment of Concert joint venture - - (546) - tangible fixed assets on unwind Provision for impairment of other associates and (229) - (234) - joint ventures assets Share of Concert redundancy and unwind costs (26) - (81) - Write-off of subscriber acquisition costs - - - (96) Goodwill impairment (142) - (433) (200) Amortisation of goodwill (3) (16) (41) (78) Share of operating losses of continuing (383) (95) (1,443) (531) associates and joint ventures Discontinued activities - 23 62 134 Total share of operating losses of associates and (383) (72) (1,381) (397) joint ventures 5 Profit (loss) on sale of fixed asset investments and group undertakings The profit in the year ended March 31, 2002 of Â£4,389m is mainly attributable to the profit of Â£2,357m on the sale of BT's interests in Japan Telecom and J-Phones Communications, the profit of Â£844m on the sale of BT's interest in Airtel, the profit of Â£1,128m on the sale of Yell, the group's classified advertising directory business, Â£120m profit recognised on BSkyB shares that were able to be sold on receipt, obtained in exchange for the residual interest in British Interactive Broadcasting in May 2001, Â£61m profit on the sale of e-Peopleserve offset by Â£4m loss on the sale of BT's interest in Maxis Communications and a loss of Â£126m on the sale of Clear Communications. 6 Amounts written off investments The amounts written off investments in the year to March 31, 2002 of Â£535m are mainly attributable to AT&T Canada, Â£347m and Impsat, Â£157m. 7. Profit on sale of property fixed assets In December 2001 as part of an overall property outsourcing transaction, the group disposed of the vast majority of its properties and leased them back on short leases. Of the profit in the year from the sale of property, Â£1,019m relates to this transaction. Under the terms of the transaction, BT transferred substantially all of the group's interest in most of its freehold and long-leasehold properties and also its obligations in respect of rack rented properties for cash consideration of Â£2,380m. BT is renting the properties back from the purchaser for a 30-year term. BT has outsourced its facilities management services. The deal comprised the effective sale of freeholds (through leases of up to 999 years) of the majority of the group's UK properties and the assignment of short-leasehold property obligations. The resulting leases of the portfolio to BT Group are being accounted for as operating leases under applicable UK accounting standards. 8 Net interest payable Fourth quarter Year ended ended March 31 March 31 2002 2001 2002 2001 Â£m Â£m Â£m Â£m Group 358 482 1,879 1,426 Joint ventures and associates 13 80 103 296 Total interest payable 371 562 1,982 1,722 Interest receivable (70) (140) (360) (408) Net interest payable 301 422 1,622 1,314 Analysed: Continuing activities, before exceptional 301 396 1,417 1,196 items Exceptional items - - 162 (25) Discontinued activities - 26 43 143 301 422 1,622 1,314 9 Exceptional items and goodwill amortisation Fourth quarter Year ended ended March 31 March 31 2002 2001 2002 2001 Â£m Â£m Â£m Â£m Attributable to continuing activities: Impairment of goodwill and tangible fixed assets in (2,202) (200) (2,202) (200) BT Ignite European activities Impairment of Concert and AT&T Canada investments - - (1,153) - Concert unwind costs (195) - (253) - Impairment of other investments and related costs (396) - (643) (200) Call centre rationalisation (68) - (68) - Provision for bad and doubtful debts (79) - (79) - Impairment of payphone assets - - (29) - Costs related to mmO2 demerger - - (98) - Profit on sale of property transactions - - 900 - Profit on sale of group undertakings and fixed asset 57 54 21 618 investments Rates refund relating to prior periods - - - 193 Write off of subscriber acquisition costs - - - (96) Interest receivable on rates refund - - - 25 Goodwill amortisation (33) (45) (162) (166) Net credit (charge) before tax and minority (2,916) (191) (3,766) 174 interests Attributable to discontinued activities: Profit on sale of group undertakings and fixed asset - - 4,368 1 investments Goodwill impairment in subsidiary undertakings - (2,800) - (2,800) Other asset impairment - (43) - (43) mmO2 demerger costs - - (11) - Write off of subscriber acquisition costs - - - (43) Goodwill amortisation - (108) (243) (392) Net credit (charge) before tax and minority - (2,951) 4,114 (3,277) interests Total exceptional credit (charge) less goodwill (2,916) (3,142) 348 (3,103) amortisation Taxation 93 13 143 (22) Minority interests - - - (21) Total favourable (adverse) impact on earnings (2,823) (3,129) 491 (3,146) 10. Dividends Year ended Year ended March 31 March 31 2002 2001 2002 2001 restated restated pence per share Â£m Â£m - 7.8 - 571 Interim dividend 2.0 - 173 - Proposed final dividend 2.0 7.8 173 571 11 Earnings (loss) per share The basic earnings (loss) per share are calculated by dividing the profit (loss) 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. Comparative figures have been restated for the BT plc rights issue which closed on June 15, 2001. The average number of shares in the periods were: Fourth quarter Year ended ended March 31 March 31 2002 2001 2002 2001 restated restated millions of shares millions of shares Basic 8,598 7,292 8,307 7,276 Diluted 8,652 7,369 8,377 7,383 12 Reconciliation of operating profit (loss) to operating cash flow Fourth quarter Year ended ended March 31 March 31 2002 2001 2002 2001 Â£m Â£m Â£m Â£m Group operating profit (loss) (1,923) (2,404) (479) 27 Depreciation and amortisation 3,013 4,013 6,001 6,431 Changes in working capital 341 712 301 (296) Provision movements and other 65 (135) (566) (275) Net cash inflow from operating activities 1,496 2,186 5,257 5,887 13 Intangible assets At March 31 2002 2001 Â£m Â£m Goodwill 237 8,648 Mobile and other licences 15 9,732 252 18,380 Mobile licences with a book value of Â£9,647m and capitalised goodwill with a book value of Â£6,544m were transferred to mmO2 on the demerger on November 19, 2001. 14 Net debt a. Analysis At March 31 2002 2001 Â£m Â£m Long-term loans and other borrowings falling due 16,245 18,775 after more than one year Short-term borrowings and long-term loans and other 2,195 12,136 borrowings falling due within one year Total debt 18,440 30,911 Short-term investments (4,581) (2,557) Cash at bank (158) (412) Net debt at end of period 13,701 27,942 14 Net debt continued b. Reconciliation of net cash flow to movement in net debt Fourth quarter Year ended ended March 31 March 31 2002 2001 2002 2001 Â£m Â£m Â£m Â£m Net debt at beginning of period 13,636 19,050 27,942 8,700 Increase (decrease) in net debt resulting 53 8,678 (13,930) 18,942 from cash flows Net debt assumed or issued on acquisitions - 2 - 48 Debt assumed by demerger and disposal of - - (75) - undertakings Currency and other movements (5) 5 32 26 Other non-cash movements 17 207 (268) 226 Net debt at end of period 13,701 27,942 13,701 27,942 On the demerger, mmO2 had net debt of approximately Â£500m of which BT Group was owed approximately Â£440m in addition to ordinary trading account balances. mmO2 repaid this loan to BT Group on November 19, 2001. 15. Provisions for liabilities and charges At March 31 2002 2001 Â£m Â£m Restated Deferred taxation (a) 2,140 2,285 Pension provisions (b) 29 335 Other provisions (c) 155 118 2,324 2,738 a. Following the adoption of FRS 19 on April 1, 2001, the deferred tax provision has been restated to a full liability provision method and has increased on restatement by Â£2,015m at March 31, 2001. b. Contributions of Â£600m were paid in the year ended March 31, 2002 in respect of redundancies in the calendar year 2000 and the funding deficit disclosed at December 31, 1999. Consequently the pension provision relating to the BT Pension Scheme of Â£320m at March 31, 2001 has moved into a prepayment of Â£231m at March 31, 2002 and is included in debtors. (c) Other provisions at March 31, 2002 include Â£72m relating to obligations arising from the property transaction described in note 7. 15. Share capital and reserves Share capital Reserves Total Â£m Â£m Â£m Balances in BT plc group at April 1, 2001, as reported 1,646 12,423 14,069 Adjustment for restatement of deferred tax provision - (2,015) (2,015) Merger accounting adjustments to reflect new parent company (a): Eliminate BT capital (1,646) (2,942) (4,588) BT shares shown at BT Group nominal value 7,573 (2,985) 4,588 Balances in BT plc group at April 1, 2001, as restated 7,573 4,481 12,054 BT rights issue (b) 2,272 3,604 5,876 BT shares issued to special purpose trust (c) 65 108 173 Other allotments of ordinary shares prior to demerger 61 160 221 Distribution relating to demerger of mmO2 (d) - (19,490) (19,490) Capital reduction on November 21, 2001 - transfer from share (9,537) 9,537 - capital to distributable reserves (e) Goodwill written back on disposals - 68 68 Profit for the financial year - 822 822 Currency movements (f) - (15) (15) Movement relating to BT Group's employee share ownership - (70) (70) trust Other movements - 3 3 Balances in BT Group at March 31, 2002 434 (792) (358) (a) On November 19, 2001, BT Group plc became the parent company of the group. The transaction is being accounted for using the principles of merger accounting, which require the opening capital balances to be restated to the new parent company basis. The initial nominal value of the company's shares was 115p per share, issued with no premium. (b) BT's rights issue closed on June 15, 2001 while British Telecommunications plc was the parent company of the group. A total of 1,976 million ordinary shares of 25p were issued at 300p per share in a 3 for 10 rights issue. Of the total of Â£5,876m raised, net of Â£52m expenses, Â£494m was credited to share capital and Â£5,382m to the share premium account of BT plc. Following the introduction of BT Group plc as the parent company of the group, the increase in share capital has been restated to reflect the initial nominal value of BT Group plc shares and the balance credited to other reserves. 16 Share capital and reserves continued (c) In connection with outstanding employee share options at the date of the demerger, 57 million BT plc shares were issued on November 14, 2001 to a special purpose trust established for this purpose for Â£173m, of which Â£159m was credited to the share premium account of BT plc. Following the introduction of BT Group plc as the parent company of the group, the increase in share capital has been restated to reflect the initial nominal value of BT Group plc shares and the balance credited to other reserves. The shares, which were subsequently exchanged for 57 million shares in BT Group and mmO2, are being held in an employee share trust and were available in connection with the exercise of options by BT Group and mmO2 employees before May 13, 2002. (d) The demerger distribution represents the consolidated net assets, including goodwill, of mmO2 at the date of the demerger. Of the Â£19,490m, Â£9m represents a cash dividend paid by BT plc to mmO2 plc as part of the demerger process. (e) On November 21, 2001 after approval by the Court, the nominal value of BT Group shares was reduced from 115p per share to 5p per share by way of a reduction of capital under Section 135 of the Companies Act 1985. The surplus of Â£9,537m arising from this reduction has been credited to profit and loss reserves. The amount represents a distributable profit of BT Group plc. (f) Net of Â£36m movement on the retranslation of foreign borrowings and other hedging instruments in the year to March 31, 2002. 17 Earnings before interest, taxation, depreciation and amortisation (EBITDA) Fourth quarter Year ended ended March 31 March 31 2002 2001 2002 2001 Â£m Â£m Â£m Â£m Group operating profit before exceptional 620 639 2,228 2,884 items Depreciation 781 898 3,402 3,058 Amortisation 30 115 352 373 EBITDA before exceptional items 1,431 1,652 5,982 6,315 Analysed: Continuing activities 1,431 1,478 5,748 5,774 Discontinued activities - 174 234 541 Total before exceptional items 1,431 1,652 5,982 6,315 18 Group's share of results of associates and joint ventures Turnover EBITDA Total operating before profit (loss) before exceptional items goodwill amortisation and exceptional items Â£m Â£m Â£m Fourth quarter ended March 31, 2002 Concert global venture 513 7 (26) Cegetel 273 90 60 Other continuing 146 10 (17) Discontinued investments - - - Total 932 107 17 Fourth quarter ended March 31, 2001 Concert global venture 605 (48) (89) Cegetel 178 77 44 Other continuing 332 17 (34) Discontinued investments 1,397 205 45 Total 2,512 251 (34) Year ended March 31, 2002 Concert global venture 2,158 (60) (225) Cegetel 1,068 295 168 Other continuing 823 71 (51) Discontinued investments 715 155 74 Total 4,764 461 (34) Year ended March 31, 2001 Concert global venture 2,576 170 19 Cegetel 860 196 90 Other continuing 1,189 (86) (266) Discontinued investments 5,312 916 277 Total 9,937 1,196 120 19 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 2002 2001 2002 2001 Net loss attributable to (2,874) (2,720) (732) (2,357) shareholders (Â£ million) Loss per ADS (Â£) (3.34) (3.73)* (0.88) (3.24)* *restated for rights issue 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 Â£4,355m in deficit at March 31, 2002 (March 31, 2001 - Â£10,231m surplus). Under UK GAAP, the terms of the new property leases require BT to account for them as operating leases and, in future, rents will be charged against the group's results as they are incurred. In contrast, US GAAP requires the leases to be treated as a financing transaction with book values of the properties continuing to be depreciated, part of the rental payments to be recognised as interest and the outstanding minimum lease payments to be recognised as borrowings. ____________________________________________________________ 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 turnover, costs, growth and the communications industry; including broadband growth; the possible or assumed future results of operations of BT and/or its lines of business, associates and joint ventures; break-even targets for BT Ignite's loss-making and ex-Concert businesses; expectations regarding capital expenditure, investment plans, cost reductions and return on capital employed and expectations regarding future dividend policy and dividend cover. 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; general financial market conditions; fluctuations in foreign currency exchange rates and interest rates; technological innovations, including the cost of developing new products and the need to increase expenditure 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, not being realised; the timing of entry and profitability of BT and its lines of business in certain communication markets; factors not wholly within BT's control which may affect its ability to implement its cost reduction programme, improve quality, and maximise return on capital employed; and the reintegration of Concert. This information is provided by RNS The company news service from the London Stock Exchange

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BT Group (BT.A)

Thursday, 23rd May 2024

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HL. QQ. AJB

Another day and another round of takeover talk with Hargreaves Lansdown being eyed by private equity suitors. AJ Bell also advances on upbeat earnings news whilst QinetiQ upgrades its profit guidance, too.

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