BT Group plc Results For The Third Quarter And Nine Months To 31 December 2012
BT Group plc Results For The Third Quarter And Nine Months To 31 December 2012
PR Newswire
LONDON, Feb. 1, 2013
LONDON, Feb. 1, 2013 /PRNewswire/ -- BT Group plc (BT.L) today announced its
results for the third quarter and nine months to 31 December 2012.
Ian Livingston, Chief Executive, commenting on the results, said:
"Our fibre plans are helping to make the UK a broadband leader in Europe. More
than 13 million premises can access our fibre broadband and we are passing
around 100,000 additional premises every week. Take-up is growing strongly
with around 1.25 million homes and businesses now enjoying the benefits of
faster speeds. This gives us an excellent platform for our push into TV and
Sport later this year. Our pre-season training is going well. We have secured
attractive new content and world class production facilities at the Olympic
Park and are building a strong team.
"Our engineers have worked tirelessly following some of the wettest weather on
record. Not only did they complete a record number of field visits in the
quarter, they also connected a further 281,000 homes and businesses to
broadband and helped us grow the number of landlines. BT Global Services has
also done well securing £1.9bn of new orders, up 17%.
"We have made progress in a number of areas and delivered solid financial
results. These are in line with our expectations for the year, which remain
unchanged."
Third quarter and nine months results:
Third quarter to Nine months to
31 December 2012 31 December 2012
£m Change £m Change
Revenue^1 4,510 (6)% 13,468 (7)%
Underlying revenue excluding transit (3)% (4)%
EBITDA^1 1,548 2% 4,508 1%
Profit before tax^1 675 7% 1,861 8%
Earnings per share - adjusted^1 6.6p 8% 18.4p 9%
- reported 6.2p (2)% 19.1p 8%
Normalised^2 free cash flow 807 £173m 999 £(399)m
Net debt 8,140 £404m
^1 Before specific items
^2 Before specific items, pension deficit payments and the cash tax benefit of
pension deficit payments
RESULTS FOR THE THIRD QUARTER AND NINE MONTHS TO 31 DECEMBER 2012
Group results
Third quarter to 31 December Nine months to 31 December
2012 2011 Change 2012 2011 Change
£m £m % £m £m %
Revenue
- adjusted^1 4,510 4,774 (6) 13,468 14,432 (7)
- reported (see Note 4,359 4,774 (9) 13,232 14,022 (6)
below)
- underlying excluding transit^2 (3) (4)
EBITDA
- adjusted^1 1,548 1,524 2 4,508 4,455 1
- reported (see Note 1,484 1,498 (1) 4,307 4,296 0
below)
Operating profit
- adjusted^1 842 790 7 2,357 2,229 6
- reported 778 764 2 2,156 2,070 4
Profit before tax
- adjusted^1 675 628 7 1,861 1,731 8
- reported 628 652 (4) 1,814 1,721 5
Earnings per share
- adjusted^1 6.6p 6.1p 8 18.4p 16.9p 9
- reported 6.2p 6.3p (2) 19.1p 17.7p 8
Capital expenditure 572 665 (14) 1,790 1,899 (6)
Free cash flow
- normalised^3 807 634 27 999 1,398 (29)
- adjusted^1 964 634 52 1,480 1,613 (8)
Net debt 8,140 7,736 5
Note: Reported revenue and EBITDA include a specific item charge of £151m and
£36m, respectively, in the third quarter and nine months to 31 December 2012
relating to Ofcom's determinations on historic Ethernet pricing. See Group
results – Specific items for more details.
Line of business results^1
Revenue EBITDA Operating cash flow
Third quarter to 2012 2011 Change 2012 2011 Change 2012 2011 Change
31 December £m £m % £m £m % £m £m %
BT Global 1,746 1,894 (8) 163 144 13 88 134 (34)
Services
BT Retail 1,793 1,849 (3) 474 453 5 450 284 58
BT Wholesale 890 979 (9) 289 303 (5) 251 145 73
Openreach 1,274 1,300 (2) 579 591 (2) 365 304 20
Other and
intra-group (1,193) (1,248) 4 43 33 30 (190) (233) 18
items
Total 4,510 4,774 (6) 1,548 1,524 2 964 634 52
^1 Before specific items. Specific items are defined below
^2 Underlying revenue excluding transit is defined below
^3 Before specific items, pension deficit payments and the cash tax benefit of
pension deficit payments
Notes:
1) Unless otherwise stated, any reference to revenue, operating costs,
earnings before interest, tax, depreciation and amortisation (EBITDA),
operating profit, profit before tax, earnings per share (EPS) and free cash
flow are measured before specific items. The commentary focuses on the trading
results on an adjusted basis being before specific items. This is consistent
with the way that financial performance is measured by management and is
reported to the Board and the Operating Committee and assists in providing a
meaningful analysis of the trading results of the group. The directors believe
that presentation of the group's results in this way is relevant to the
understanding of the group's financial performance as specific items are those
that in management's judgement need to be disclosed by virtue of their size,
nature or incidence. In determining whether an event or transaction is
specific, management considers quantitative as well as qualitative factors
such as the frequency or predictability of occurrence. Specific items may not
be comparable to similarly titled measures used by other companies. Reported
revenue, reported EBITDA, reported operating profit, reported profit before
tax, reported EPS and reported free cash flow are the equivalent unadjusted or
statutory measures.
2) Underlying revenue, underlying costs and underlying EBITDA are measures
which seek to reflect the underlying performance of the group that will
contribute to long-term profitable growth and as such exclude the impact of
acquisitions and disposals, foreign exchange movements and any specific items.
We are focusing on the trends in underlying revenue excluding transit revenue
as transit traffic is low-margin and is significantly affected by reductions
in mobile termination rates.
3) Unless otherwise stated, the references 2013 and 2014 are the financial
years to 31 March 2013 and 2014, respectively.
A conference call for analysts and investors will be held at 9.00am today and
a simultaneous webcast will be available at www.bt.com/results
The fourth quarter and full year results for 2013 are expected to be announced
on Friday 10 May 2013.
About BT
BT is one of the world's leading providers of communications services and
solutions, serving customers in more than 170 countries. Its principal
activities include the provision of networked IT services globally; local,
national and international telecommunications services to its customers for
use at home, at work and on the move; broadband and internet products and
services and converged fixed/mobile products and services. BT consists
principally of four lines of business: BT Global Services, BT Retail, BT
Wholesale and Openreach.
In the year ended 31 March 2012, BT Group's revenue was £18,897m with profit
before taxation of £2,445m.
British Telecommunications plc (BT) is a wholly-owned subsidiary of BT Group
plc and encompasses virtually all businesses and assets of the BT Group. BT
Group plc is listed on stock exchanges in London and New York.
For more information, visit www.btplc.com
BT Group plc
RESULTS FOR THE THIRD QUARTER TO 31 DECEMBER 2012
GROUP RESULTS
Operating results overview
Our key measure of the underlying revenue trend, underlying revenue excluding
transit, was down 3.1%, an improvement compared with recent quarters
reflecting better performances from BT Global Services and BT Wholesale.
Whilst improving, our underlying revenue trend continues to be impacted by the
tough conditions in Europe and the financial services sector, regulatory price
reductions and lower revenue from calls and lines.
Reported revenue of £4,359m was down 9% which includes the impact of certain
regulatory decisions which have been treated as a specific item (see Specific
items below). Excluding specific items, revenue was down 6% at £4,510m. This
decline includes a £66m reduction in transit revenue (including mobile
termination rate reductions of £37m), a £50m negative impact from foreign
exchange movements, and an £8m impact from disposals.
Underlying operating costs before depreciation and amortisation were down 7%,
or 5% excluding transit, reflecting the impact of our cost transformation
programmes and reduced cost of sales due to the decline in revenue. Total
operating costs before depreciation and amortisation and specific items
decreased by £274m, or 8%, to £3,069m, and have reduced by over £1bn for the
nine months.
Adjusted EBITDA increased by 2% to £1,548m. Foreign exchange movements and
disposals had no significant impact on EBITDA.
Depreciation and amortisation decreased by 4% to £706m largely due to lower
overall capital expenditure over the last three financial years. Capital
expenditure decreased by 14% to £572m primarily reflecting the higher spend
last year on Wholesale Broadband Connect.
Profit before tax
Adjusted profit before tax was £675m, up 7%, reflecting the higher EBITDA and
lower depreciation and amortisation. Reported profit before tax (which
includes specific items) was £628m, down 4%.
Tax
The effective tax rate on the profit before specific items was 22.7% (Q3 2012:
24.1%) and is in line with our outlook of around 23% for the full year.
Fibre and broadband
We have passed more than 13m premises with our fibre broadband, an increase of
around 1.3m in the quarter. Take-up is growing strongly and we achieved around
250,000 connections in the quarter, with around 1.25m homes and businesses now
taking a fibre based service.
Total broadband market net additions^1 grew 7% to 281,000 of which we added
122,000 retail broadband customers, a 44% share.
Regulation
In the quarter Ofcom issued its final determinations on disputes over historic
Ethernet pricing (see Specific items below). We disagree with the
determinations and are likely to appeal against them. These determinations
cover the period from April 2006 to March 2011 and do not impact Openreach's
current pricing for Ethernet products.
The charge controls for WLR, LLU and ISDN30 products which became effective in
April 2012 impacted revenue in the quarter. We continue to expect these to
have a negative impact of around £100m-£200m on group revenue in the 2013
financial year with a further similar year on year impact in the 2014
financial year. The July 2012 Court of Appeal decision against wholesale
ladder termination pricing also impacted the third quarter year on year EBITDA
trend by £12m.
Ofcom's final determination on the Business Connectivity Market Review and the
associated Leased Lines Charge Control is expected to be issued in the next
few months. We also expect the consultation on the Wholesale Narrowband Market
Review in the next few weeks.
^1 DSL and fibre, excluding cable
Specific items
Specific items resulted in a net charge after tax of £38m (Q3 2012: £15m net
credit).
Charges of £151m and £36m were recognised against revenue and EBITDA,
respectively, following Ofcom's determinations on historic Ethernet pricing.
Restructuring charges of £28m (Q3 2012: £8m) were incurred. In the quarter we
started the next phase of our group-wide restructuring programme which is
expected to generate future cost savings and further improve customer service
delivery. As part of this programme, we commenced the reorganisation of BT
Innovate & Design and BT Operate, our two internal service units, to form BT
Technology, Service and Operations (BT TSO). This new unit is responsible for
the innovation, design, test, build and running of our global networks and
systems on an end to end basis. We are also further rationalising and
transforming our resources, processes, networks and systems within BT Global
Services. We expect additional group restructuring costs to be incurred over
the remainder of this year and next.
A profit of £9m was recognised on the disposal of our remaining 9.1% interest
in Tech Mahindra. Our total investment in Tech Mahindra has in aggregate
generated returns of around £350m. Net interest income on pensions was £8m (Q3
2012: £50m).
Earnings per share
Adjusted EPS was 6.6p, up 8%, reflecting the growth in profit before tax.
Reported EPS (which includes specific items) was 6.2p, down 2%. These are
based on a weighted average number of shares in issue of 7,865m (Q3 2012:
7,766m).
Free cash flow
Normalised free cash flow was an inflow of £807m, an increase of £173m
compared with the prior year principally reflecting the timing of customer
receipts and lower capital expenditure.
Adjusted free cash flow, which includes a £157m tax benefit from pension
deficit payments (Q3 2012: nil), was an inflow of £964m (Q3 2012: £634m).
The cash cost of specific items was £96m (Q3 2012: £48m) including £44m
following the regulatory decision on historic Ethernet pricing, restructuring
costs of £29m (Q3 2012: £27m) and property rationalisation costs of £17m (Q3
2012: £21m).
Net debt and liquidity
Net debt was £8,140m at 31 December 2012, a reduction of £897m in the quarter
largely reflecting the adjusted free cash inflow of £964m and Tech Mahindra
disposal proceeds of £113m. These inflows were partly offset by an outflow of
£96m for specific items and £75m for the purchase of 32m shares under our
share buyback programme.
At 31 December 2012 the group had cash and current investment balances of
£2.2bn and available facilities of £1.5bn providing us with a strong liquidity
and funding position. In January 2013 £1.4bn of term debt matured and was
funded from these cash and investment balances.
Pensions
The IAS 19 net pension position at 31 December 2012 was a deficit of £4.3bn
net of tax (£5.5bn gross of tax), compared with a deficit of £1.9bn (£2.4bn
gross of tax) at 31 March 2012 and £3.1bn (£4.0bn gross of tax) at 30
September 2012. The higher deficit over the nine months principally reflects
the lower discount rate, with asset values up £0.3bn. The IAS 19 accounting
position and key assumptions for the liability valuation are:
31 December 2012 31 March 2012
£bn £bn
IAS 19 liabilities - (43.9) (40.6)
BTPS
Assets - BTPS 38.6 38.3
Other schemes (0.2) (0.1)
IAS 19 deficit, gross (5.5) (2.4)
of tax
IAS 19 deficit, net of (4.3) (1.9)
tax
Discount rate 4.25% 4.95%
(nominal)
Discount rate (real) 1.51% 1.84%
RPI inflation 2.70% 3.05%
0.75% below RPI for three 0.75% below RPI for three
CPI inflation years and 1.00% below RPI years and 1.20% below RPI
thereafter thereafter
OPERATING REVIEW
BT Global Services
Third quarter to 31 December Nine months to 31 December
2012 2011 Change 2012 2011 Change
£m £m £m % £m £m £m %
Revenue 1,746 1,894 (148) (8) 5,233 5,813 (580) (10)
- underlying (5) (6)
excluding transit
Net operating costs^1 1,583 1,750 (167) (10) 4,821 5,372 (551) (10)
EBITDA 163 144 19 13 412 441 (29) (7)
Depreciation & 156 169 (13) (8) 464 534 (70) (13)
amortisation
Operating profit 7 (25) 32 n/m (52) (93) 41 44
(loss)
Capital expenditure 121 139 (18) (13) 374 411 (37) (9)
Operating cash flow 88 134 (46) (34) (398) 19 (417) n/m
^1 Net of other operating income
n/m = not meaningful
Revenue
Underlying revenue excluding transit decreased by 5%, reflecting the continued
tough conditions in Europe and the financial services sector. Revenue was down
8%, including a £44m negative impact from foreign exchange movements and an
£8m impact from disposals.
Order intake was strong at £1.9bn in the quarter (Q2 2013: £1.3bn; Q3 2012:
£1.6bn). We signed contracts with leading organisations around the world
including: Novartis, for new collaboration services and to connect additional
global locations; Visa Europe, to provide managed solutions for its payments
processing and corporate services; KPMG, for the provision of managed network,
voice and conferencing services; HTC, for a global customer contact management
solution covering 60 countries; the City of Edinburgh, for a technology
refresh of the council's education service; Clarins Group, to transform its
global IT infrastructure and improve the management of its critical
applications; and the Public Employment Agency of Spain, to provide
cloud-based IP telephony and contact centre services for 800 branches.
Operating results
Net operating costs decreased by 10% reflecting the reduction in revenue and
the impact of our cost transformation programmes. Underlying net operating
costs excluding transit costs declined by 7%. In the quarter we continued our
network optimisation programme, adding new points of presence in Europe and
Asia to enhance service delivery to customers and to reduce third party
network costs. We have also improved commercial terms with some of our
suppliers, which reduced contract delivery costs, and we opened a new centre
for contract management services, which will provide better customer service
and lead to more efficient processes.
EBITDA increased by 13%, or 17% excluding foreign exchange movements and
disposals, partly reflecting the timing of costs during the year. For the nine
months, EBITDA was down 7%, or 1% excluding foreign exchange movements and
disposals. Operating profit increased by £32m to £7m reflecting the improved
EBITDA and an 8% reduction in depreciation and amortisation.
Capital expenditure reduced by 13% as the prior year included additional
customer contract-related spend. This contributed to EBITDA less capital
expenditure increasing by £37m to £42m. Operating cash flow of £88m was below
the prior year partly reflecting the timing of customer receipts.
BT Retail
Third quarter to 31 December Nine months to 31 December
2012 2011 Change 2012 2011 Change
£m £m £m % £m £m £m %
Revenue 1,793 1,849 (56) (3) 5,360 5,532 (172) (3)
Net operating costs^1 1,319 1,396 (77) (6) 3,936 4,188 (252) (6)
EBITDA 474 453 21 5 1,424 1,344 80 6
Depreciation & 99 101 (2) (2) 292 305 (13) (4)
amortisation
Operating profit 375 352 23 7 1,132 1,039 93 9
Capital expenditure 86 108 (22) (20) 280 311 (31) (10)
Operating cash flow 450 284 166 58 1,014 922 92 10
^1 Net of other operating income
Revenue
Revenue decreased by 3%, in line with the previous quarter.
Consumer revenue decreased by 3% with lower calls and lines revenue partially
offset by growth in broadband, driven by an increasing contribution from
fibre.
In the quarter we added 122,000 retail broadband customers, representing 44%
of the DSL and fibre broadband market net additions. We added 200,000 retail
fibre broadband customers and have more than 1m customers, representing 16% of
our retail broadband customer base. We added 21,000 BT Vision customers in the
quarter and now have over 60,000 customers with a YouView box. BT Wi-fi
minutes trebled year on year for the second quarter running and reached 3.9bn
minutes, with the number of hotspots increasing by around 40% to 4.8m.
Business revenue decreased by 3% with lower calls and lines revenue partially
offset by growth in IT services. We provided our first major customer with BT
Managed Compute, a cloud-based IT infrastructure platform.
BT Enterprises revenue was flat, excluding the impact of foreign exchange
movements, with growth in BT Expedite offset by decline in the other
divisions.
BT Ireland revenue increased by 5%, excluding the impact of foreign exchange
movements, with growth across all areas of the business. Half of our retail
broadband customers in Northern Ireland are now taking fibre which is helping
to drive revenue growth. In the quarter, we were selected as the NI Direct
strategic partner to develop and improve access to Northern Ireland government
services.
Operating results
Net operating costs decreased by 6% primarily as a result of our cost
transformation initiatives and reduced cost of sales associated with the lower
revenue. EBITDA increased by 5% and with depreciation and amortisation
decreasing by 2%, operating profit was up 7%.
Capital expenditure decreased by 20%. Operating cash flow increased by 58%
largely reflecting the timing of working capital including customer receipts.
BT Wholesale
Third quarter to 31 December Nine months to 31 December
2012 2011 Change 2012 2011 Change
£m £m £m % £m £m £m %
Revenue 890 979 (89) (9) 2,674 2,965 (291) (10)
- underlying (3) (3)
excluding transit
Net operating costs^1 601 676 (75) (11) 1,805 2,050 (245) (12)
EBITDA 289 303 (14) (5) 869 915 (46) (5)
Depreciation & 149 149 - - 444 450 (6) (1)
amortisation
Operating profit 140 154 (14) (9) 425 465 (40) (9)
Capital expenditure 52 82 (30) (37) 181 245 (64) (26)
Operating cash flow 251 145 106 73 580 486 94 19
^1 Net of other operating income
Revenue
Underlying revenue excluding transit decreased by 3%, or 1% excluding ladder
pricing, with growth in managed network services offset by the ongoing impact
of broadband lines migrating to LLU. Revenue decreased by 9%, or 7% excluding
ladder pricing, including a £67m decline in transit revenue driven by both
lower volumes and mobile termination rate reductions.
IP Exchange continues to grow with voice minutes in the quarter increasing by
over 80%. We expect revenue from IP Exchange in BT Wholesale and BT Global
Services to be around £100m this year. This quarter we have supported the
launch of 4G services in the UK through increased backhaul capacity at key
base station sites.
Total order intake was around £400m compared with around £340m last year and
has more than doubled in the nine months. We signed a new five-year contract
with BSkyB to continue to provide wholesale voice services for their
off-network fixed-line customers, in addition to a number of new contract
wins.
Operating results
Net operating costs decreased by 11%, or 2% excluding transit costs primarily
due to a reduction in labour costs. EBITDA decreased by 5%, or 1% excluding
ladder pricing, and with depreciation and amortisation flat, operating profit
declined by 9%, or 1% excluding ladder pricing.
Capital expenditure decreased by 37% primarily due to lower spend on Ethernet,
as a result of improvements in capacity management, and on Wholesale Broadband
Connect. Operating cash flow increased by 73% principally due to the timing of
customer receipts and lower capital expenditure.
Openreach
Third quarter to 31 December Nine months to 31 December
2012 2011 Change 2012 2011 Change
£m £m £m % £m £m £m %
Revenue 1,274 1,300 (26) (2) 3,800 3,835 (35) (1)
Net operating costs^1 695 709 (14) (2) 2,086 2,139 (53) (2)
EBITDA 579 591 (12) (2) 1,714 1,696 18 1
Depreciation & 244 236 8 3 731 700 31 4
amortisation
Operating profit 335 355 (20) (6) 983 996 (13) (1)
Capital expenditure 287 292 (5) (2) 851 796 55 7
Operating cash flow 365 304 61 20 820 831 (11) (1)
^1 Net of other operating income
Revenue
The continued impact of regulatory price changes reduced revenue by around
£50m. This was partially offset by growth in Ethernet and fibre resulting in a
revenue decline of 2%.
The physical line base grew by 48,000. The additional engineering resource we
have recruited has helped to address the increase in provision lead times and
repair activity resulting from one of the wettest years on record.
Our fibre broadband is available to over 13m premises, an increase of around
1.3m in the quarter. We achieved around 250,000 fibre connections in the
quarter, with around 1.25m homes and businesses now connected. Total DSL and
fibre broadband net additions of 281,000 were 7% higher.
In the quarter we won the Broadband Delivery UK (BDUK) regional bids to deploy
fibre broadband in Cumbria, Herefordshire & Gloucestershire, Norfolk and
Suffolk. We were also awarded preferred bidder status in Devon & Somerset and
Wiltshire & South Gloucestershire, which we have since won. We connected the
first BDUK customers in North Yorkshire, less than six months after signing
the contract.
Operating results
Net operating costs reduced by 2%. This was a smaller decline than in the
second quarter, reflecting the impact of the additional engineering resource
we have recruited. EBITDA declined by 2% and with depreciation and
amortisation increasing by 3%, reflecting the investment in fibre broadband
and Ethernet, operating profit was down 6%.
Capital expenditure was 2% lower in the quarter. Operating cash flow increased
by 20% due to the timing of customer receipts.
FINANCIAL STATEMENTS
Group income statement
For the third quarter to 31 December 2012
Before Specific
specific items items Total
£m £m £m
Revenue 4,510 (151) 4,359
Other operating income 107 - 107
Operating costs (3,775) 87 (3,688)
Operating profit 842 (64) 778
Finance expense (169) (493) (662)
Finance income 2 501 503
Net finance expense (167) 8 (159)
Profit on disposal of associate - 9 9
Profit before tax 675 (47) 628
Tax (153) 9 (144)
Profit for the period 522 (38) 484
Attributable to:
Equity shareholders 522 (38) 484
Non-controlling interests - - -
Earnings per share
- basic 6.6p 6.2p
- diluted 6.3p 5.9p
Group income statement
For the third quarter to 31 December 2011
Before Specific
specific items items Total
£m £m £m
Revenue 4,774 - 4,774
Other operating income 93 - 93
Operating costs (4,077) (26) (4,103)
Operating profit 790 (26) 764
Finance expense (169) (522) (691)
Finance income 3 572 575
Net finance expense (166) 50 (116)
Share of post tax profits of associates and 4 - 4
joint ventures
Profit before tax 628 24 652
Tax (151) (9) (160)
Profit for the period 477 15 492
Attributable to:
Equity shareholders 476 15 491
Non-controlling interests 1 - 1
Earnings per share
- basic 6.1p 6.3p
- diluted 5.8p 6.0p
Group income statement
For the nine months to 31 December 2012
Before Specific
specific items items Total
£m £m £m
Revenue 13,468 (236) 13,232
Other operating income 281 7 288
Operating costs (11,392) 28 (11,364)
Operating profit 2,357 (201) 2,156
Finance expense (515) (1,480) (1,995)
Finance income 10 1,504 1,514
Net finance expense (505) 24 (481)
Share of post tax profits of associates and 9 - 9
joint ventures
Profit on disposal of associate - 130 130
Profit before tax 1,861 (47) 1,814
Tax (422) 108 (314)
Profit for the period 1,439 61 1,500
Attributable to:
Equity shareholders 1,438 61 1,499
Non-controlling interests 1 - 1
Earnings per share
- basic 18.4p 19.1p
- diluted 17.5p 18.3p
Group income statement
For the nine months to 31 December 2011
Before Specific
specific items items Total
£m £m £m
Revenue 14,432 (410) 14,022
Other operating income 290 (19) 271
Operating costs (12,493) 270 (12,223)
Operating profit 2,229 (159) 2,070
Finance expense (515) (1,568) (2,083)
Finance income 7 1,717 1,724
Net finance expense (508) 149 (359)
Share of post tax profits of associates and 10 - 10
joint ventures
Profit before tax 1,731 (10) 1,721
Tax (418) 69 (349)
Profit for the period 1,313 59 1,372
Attributable to:
Equity shareholders 1,311 59 1,370
Non-controlling interests 2 - 2
Earnings per share
- basic 16.9p 17.7p
- diluted 16.0p 16.7p
Group cash flow statement
For the third quarter and nine months to 31 December
Third quarter Nine months
to 31 December to 31 December
2012 2011 2012 2011
£m £m £m £m
Profit before tax 628 652 1,814 1,721
Depreciation and amortisation 706 734 2,151 2,226
Net finance expense 159 116 481 359
Investments impairment charge - - 17 -
(Profit) loss on disposal of subsidiary - - (7) 19
Associates and joint ventures - (4) (9) (10)
Profit on disposal of associate (9) - (130) -
Share-based payments 16 18 55 58
Decrease (increase) in working capital 320 88 (535) (374)
Provisions, pensions and other non-cash (145) (17) (121) 106
movements
Cash generated from operations 1,675 1,587 3,716 4,105
Tax paid (11) (163) (39) (228)
Net cash inflow from operating activities 1,664 1,424 3,677 3,877
Cash flow from investing activities
Interest received 3 1 8 3
Dividends received from associates and joint - - 1 4
ventures
Proceeds on disposal of property, plant and 6 3 14 13
equipment
Acquisition of subsidiaries, net of cash - - (6) (5)
acquired
Sale of subsidiaries, net of bank overdrafts - - 17 13
Acquisition of joint ventures - - (5) -
Disposal of associates and joint ventures 113 - 270 7
Purchases of property, plant and equipment and (592) (642) (1,880) (1,888)
software
Sale of non-current asset investments - 1 1 1
Purchase of current financial assets (1,968) (2,609) (6,675) (6,327)
Sale of current financial assets 1,557 1,948 5,513 4,984
Net cash used in investing activities (881) (1,298) (2,742) (3,195)
Cash flow from financing activities
Interest paid (213) (201) (560) (548)
Equity dividends paid (4) (3) (449) (388)
New borrowings - - 796 -
Repayment of borrowings (3) (8) (308) (22)
Repayment of finance lease liabilities - - (11) (2)
Cash flows from derivatives related to net (6) 15 (6) 286
debt
Net repayment of commercial paper (265) - (46) (69)
Proceeds on issue of treasury shares 12 3 97 11
Repurchase of ordinary share capital (75) - (229) -
Net cash used in financing activities (554) (194) (716) (732)
Effect of exchange rate movements (2) (1) (9) -
Net increase (decrease) in cash and cash 227 (69) 210 (50)
equivalents
Cash and cash equivalents, net of bank 306 344 323 325
overdrafts, at beginning of period
Cash and cash equivalents, net of bank 533 275 533 275
overdrafts, at end of period
Group balance sheet
31 December 31 December 31 March
2012 2011 2012
£m £m £m
Non-current assets
Intangible assets 2,926 3,189 3,127
Property, plant and equipment 14,158 14,426 14,388
Derivative financial instruments 861 1,112 886
Investments 46 63 68
Associates and joint ventures 29 151 153
Trade and other receivables 184 220 169
Deferred tax assets 1,255 1,382 626
19,459 20,543 19,417
Current assets
Inventories 117 116 104
Trade and other receivables 2,946 3,655 3,307
Current tax receivable - - 139
Derivative financial instruments 76 77 137
Investments 1,675 1,342 513
Cash and cash equivalents 540 283 331
5,354 5,473 4,531
Current liabilities
Loans and other borrowings 2,731 912 2,887
Derivative financial instruments 93 46 89
Trade and other payables 5,010 5,997 5,962
Current tax liabilities 277 423 66
Provisions 144 86 251
8,255 7,464 9,255
Total assets less current liabilities 16,558 18,552 14,693
Non-current liabilities
Loans and other borrowings 7,999 9,075 7,599
Derivative financial instruments 917 819 757
Retirement benefit obligations 5,492 5,435 2,448
Other payables 871 881 875
Deferred tax liabilities 1,000 1,167 1,100
Provisions 507 852 606
16,786 18,229 13,385
Equity
Ordinary shares 408 408 408
(Deficit) reserves (646) (95) 889
Total parent shareholders' (deficit) equity (238) 313 1,297
Non-controlling interests 10 10 11
Total (deficit) equity (228) 323 1,308
16,558 18,552 14,693
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1 Basis of preparation and accounting policies
These condensed consolidated financial statements ('the financial statements')
comprise the financial results of BT Group plc for the quarters and nine
months to 31 December 2012 and 31 December 2011 together with the audited
balance sheet at 31 March 2012.
Except as described below, the financial statements have been prepared in
accordance with the accounting policies as set out in the financial statements
for the year to 31 March 2012 and have been prepared under the historical cost
convention as modified by the revaluation of financial assets and liabilities
(including derivative financial instruments) at fair value.
These financial statements do not constitute statutory accounts within the
meaning of Section 434 of the Companies Act 2006 and have not been audited or
reviewed by the independent auditors. Statutory accounts for the year to 31
March 2012 were approved by the Board of Directors on 9 May 2012, published on
25 May 2012 and delivered to the Registrar of Companies. The report of the
auditors on those accounts was unqualified and did not contain any statement
under Section 498 of the Companies Act 2006. These financial statements should
be read in conjunction with the annual financial statements for the year to 31
March 2012.
Government grants
Our policy for the recognition of government grants was changed from 1 April
2012. Under the new policy, capital expenditure and operating costs are
recognised 'net' of government grants receivable. The net presentation is
considered a more appropriate policy than the previous 'gross' presentation as
it better presents the incremental costs to the business. The new policy has
been applied prospectively and comparative financial information has not been
restated on the basis of the immaterial impact of grant funding on prior
period financial information.
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: current and future years' outlook, including revenue trends,
EBITDA and normalised free cash flow; the impact of regulation and regulatory
decisions; our fibre roll-out programme; our group-wide restructuring;
continuing cost transformation and efficiencies in our BT Global Services
business; IP Exchange revenue; effective tax rate; and liquidity and funding.
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; future
regulatory actions and conditions in BT's operating areas, including
competition from others; selection by BT of the appropriate trading and
marketing models for its products and services; fluctuations in foreign
currency exchange rates and interest rates; technological innovations,
including the cost of developing new products, networks and solutions and the
need to increase expenditures for improving the quality of service; prolonged
adverse weather conditions resulting in a material increase in overtime, staff
or other costs; developments in the convergence of technologies; the
anticipated benefits and advantages of new technologies, products and
services, and demand for bundled services, not being realised; the timing of
entry and profitability of BT in certain communications markets; significant
changes in market shares for BT and its principal products and services; the
underlying assumptions and estimates made in respect of major customer
contracts proving unreliable; the aims of the group-wide, and BT Global
Services restructuring programmes not being achieved; and general financial
market conditions affecting BT's performance and ability to raise finance. BT
undertakes no obligation to update any forward-looking statements whether as a
result of new information, future events or otherwise.
SOURCE BT Group plc
Website: http://www.btplc.com
Contact: Press office: Ross Cook, 020 7356 5369; or Investor relations: Damien
Maltarp, 020 7356 4909
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