BT Group plc Results For The Fourth Quarter And Year To 31 March 2013

    BT Group plc Results For The Fourth Quarter And Year To 31 March 2013

PR Newswire

LONDON, May 10, 2013

LONDON, May 10, 2013 /PRNewswire/ --BT Group plc (BT.L) today announced its
results for the fourth quarter and year to 31 March 2013.

Fourth quarter and full year results:

                                         Fourth quarter to Year to

                                         31 March 2013     31 March 2013
                                         £m       Change   £m     Change
Revenue^1                                4,785    (2)%     18,253 (5)%
Underlying revenue excluding transit              0%              (3)%
EBITDA^1                                 1,673    4%       6,181  2%
Profit before tax           - adjusted^1 833      21%      2,694  11%
                            - reported   687      (5)%     2,501  2%
Earnings per share          - adjusted^1 8.3p     22%      26.6p  12%
                            - reported   7.5p     (7)%     26.7p  3%
Normalised free cash flow^2              1,301    £392m    2,300  £(7)m
Net debt                                                   7,797  £(1,285)m
Full year proposed dividend                                9.5p   14%

Ian Livingston, Chief Executive, commenting on the results, said:

"We are doing what we said we would do. In an environment where it is easier
to focus only on the short-term, we are investing in our future and delivering
growth in profits and dividends. We are driving fibre across the UK, launching
high quality sports channels, investing in the high-growth regions of the
world and will use our wi-fi capabilities and 4G spectrum to make sure our
customers will be the best connected. We have created around 3,000 new jobs in
the UK over the last year to support these investments.

"Our focus on improving efficiency across the business will allow us to
continue to deliver strong financial results whilst making these investments.
Our good performance this year is reflected in our dividend which is up 14%
for the year.

"We have a lot more to do but we are now a lot better positioned to do it."

Key points for the fourth quarter:

  oOur key revenue measure^3 was flat – a significantly improved performance
  oUnderlying operating costs^4 excluding transit down 2%, despite our
    investments
  oEBITDA^1 up 4% and earnings per share^1 up 22%
  oFibre available to more than half of UK homes and businesses and roll out
    accelerating in rural areas
  oFibre customer base more than doubled, now at more than 1.5m
  oBT Global Services order intake of £2.0bn

^1 Before specific items
^2 Before specific items, purchases of telecommunications licences, pension
deficit payments and the cash tax benefit of pension deficit payments
^3 Underlying revenue excluding transit
^4 Before specific items, depreciation and amortisation

Key points for the year:

  oResults in line with or better than expectations
  oUnderlying operating costs^1 excluding transit down 6%
  oEBITDA^2 up 2%
  oNormalised free cash flow^3 of £2.3bn
  oNet debt reduced by £1,285m
  oProposed final dividend of 6.5p, up 14%, giving a full year dividend of
    9.5p, also up 14%

Outlook:

^

                                     2013/14        2014/15       2015/16
Underlying revenue excluding transit Improved trend
EBITDA^2                             £6.0−£6.1bn    £6.2−£6.3bn   Growth
Capital expenditure^4                Broadly level  Broadly level
Normalised free cash flow^3          c.£2.3bn       c.£2.6bn      Growth
Dividend per share                   Up 10%−15%     Up 10%−15%
Share buyback programme              c.£300m        c.£300m

  oStrong financial outlook despite significant strategic investments,
    particularly in BT Sport
  oOur EBITDA^2 outlook compares with c.£6,140m in 2012/13 when restated for
    the adoption of IAS 19 Revised
  oNormalised free cash flow^3 is above our previous expectations reflecting
    the benefits of our restructuring programme and capital expenditure
    efficiencies
  oFurther specific restructuring charges of around £400m, most of which will
    be in 2013/14, to further improve operational efficiency

^1 Before specific items, depreciation and amortisation
^2 Before specific items
^3 Before specific items, purchases of telecommunications licences, pension
deficit payments and the cash tax benefit of pension deficit payments
^4 Before purchases of telecommunications licences



RESULTS FOR THE FOURTH QUARTER AND YEAR TO 31 MARCH 2013
Group results
                               Fourth quarter to 31 March Year to 31 March
                               2013      2012    Change   2013   2012   Change
                               £m        £m      %        £m     £m     %
Revenue
- adjusted^1                   4,785     4,875   (2)      18,253 19,307 (5)
- reported                     4,785     4,875   (2)      18,017 18,897 (5)
- underlying revenue excluding transit           0                      (3)
EBITDA
- adjusted^1                   1,673     1,609   4        6,181  6,064  2
- reported                     1,522     1,595   (5)      5,829  5,891  (1)
Operating profit
- adjusted^1                   981       863     14       3,338  3,092  8
- reported                     830       849     (2)      2,986  2,919  2
Profit before tax
- adjusted^1                   833       690     21       2,694  2,421  11
- reported                     687       724     (5)      2,501  2,445  2
Earnings per share
- adjusted^1                   8.3p      6.8p    22       26.6p  23.7p  12
- reported                     7.5p      8.1p    (7)      26.7p  25.8p  3
Full year proposed dividend                               9.5p   8.3p   14
Capital expenditure^2          648       695     (7)      2,438  2,594  (6)
Normalised free cash flow^3    1,301     909     43       2,300  2,307  0
Net debt                                                  7,797  9,082  (14)



Line of business results^1
              Revenue                EBITDA             Free cash flow^3
Fourth
quarter to 31 2013    2012    Change 2013  2012  Change 2013    2012    Change
March
              £m      £m      %      £m    £m    %      £m      £m      %
BT Global     1,933   1,996   (3)    214   186   15     404     164     n/m
Services
BT Retail     1,868   1,861   0      511   486   5      494     440     12
BT Wholesale  914     958     (5)    299   293   2      316     314     1
Openreach     1,267   1,301   (3)    600   603   0      327     364     (10)
Other and
intra-group   (1,197) (1,241) 4      49    41    20     (240)   (373)   36
items
Total         4,785   4,875   (2)    1,673 1,609 4      1,301   909     43
Year to 31
March
BT Global     7,166   7,809   (8)    626   627   0      6       183     n/m
Services
BT Retail     7,228   7,393   (2)    1,935 1,830 6      1,508   1,362   11
BT Wholesale  3,588   3,923   (9)    1,168 1,208 (3)    896     800     12
Openreach     5,067   5,136   (1)    2,314 2,299 1      1,147   1,195   (4)
Other and
intra-group   (4,796) (4,954) 3      138   100   38     (1,257) (1,233) (2)
items
Total         18,253  19,307  (5)    6,181 6,064 2      2,300   2,307   0
^1 Before specific items. Specific items are defined below and analysed in
Note 4 to the condensed consolidated financial statements
^2 Before purchases of telecommunications licences
^3 Before specific items, purchases of telecommunications licences, pension
deficit payments and the cash tax benefit of pension deficit payments
n/m = not meaningful

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 operating costs, 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 focus 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.

The fourth quarter and full year 2012/13 results presentation for analysts and
investors will be held in London at 9.00am today and a simultaneous webcast
will be available at www.bt.com/results

The BT Group plc Annual Report & Form 20-F 2013 is expected to be published on
23 May 2013. The Annual General Meeting of BT Group plc will be held at
Edinburgh International Conference Centre, The Exchange,150 Morrison St,
Edinburgh, EH3 8EE on Wednesday 17 July 2013 at 11.00am.

Results for the first quarter to 30 June 2013 are expected to be announced on
Thursday 25 July 2013.

The full release and financial statements are available to download as a PDF
documents.

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.

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 YEAR TO 31 MARCH 2013

GROUP RESULTS

Operating results overview for the year
Our key measure of the group's revenue trend, underlying revenue excluding
transit, was down 3%. In line with our guidance, underlying revenue excluding
transit showed an improved trend in the second half of the year declining
1.8%, compared with a 4.4% decline in the first half of the year. This
improvement includes stronger performances in the fourth quarter from BT
Global Services, BT Consumer, BT Business and BT Wholesale.

The decline in underlying revenue excluding transit this year reflects lower
revenue from calls and lines, the tough conditions in Europe and the financial
services sector and regulatory price reductions.

Adjusted revenue was down 5% at £18,253m with a £293m reduction in transit
revenue (including mobile termination rate reductions of £187m), a £168m
negative impact from foreign exchange movements and a £36m negative net impact
from acquisitions and disposals. Reported revenue, which includes specific
items, was also 5% lower, at £18,017m.

Underlying operating costs^1 excluding transit were down 6%, reflecting our
cost transformation activities and reduced cost of sales due to the decline in
revenue. Operating costs^1 decreased by £1,166m, or 9%, to £12,464m. In
aggregate, operating costs^1 and capital expenditure^2 have reduced by £4.7bn
over the last four years despite greater investment in new areas of the
business.

Net labour costs decreased by 4% as improved productivity and better systems
and processes offset our investment programmes, the recruitment of around
1,600 engineers and the insourcing of around 4,000 jobs. Payments to
telecommunications operators were down 15% reflecting lower mobile termination
rates and reduced transit and wholesale call volumes. Property and energy
costs were 4% lower in total as we drove better space utilisation but lower
energy usage was more than offset by higher energy prices. Network operating
and IT costs were 7% lower as we rationalise our networks and systems. Other
operating costs decreased by 11% principally reflecting lower cost of sales
due to the decline in revenue and the benefit of our cost transformation
activities.

Adjusted EBITDA of £6,181m increased by 2%.

Depreciation and amortisation decreased by 4% to £2,843m largely due to more
efficient delivery of our capital investment programmes over the last four
years.

Net finance expense
Net finance expense was £653m, a decrease of £28m, due to a lower average cost
of net debt.

Profit before tax
Adjusted profit before tax was £2,694m, up 11% reflecting the higher EBITDA,
lower depreciation and amortisation and lower finance expense. Reported profit
before tax (which includes specific items) was £2,501m, up 2%.

Tax
The effective tax rate on the profit before specific items for the year was
22.5% (2011/12: 24.1%). For 2013/14 we expect the effective tax rate to be
around 23%.

Earnings per share
Adjusted EPS of 26.6p was up 12% principally reflecting the growth in profit
before tax. Reported EPS (which includes specific items) was 26.7p, up 3%.
These are based on a weighted average number of shares in issue of 7,832m
(2011/12: 7,763m). A reconciliation of reported EPS to adjusted EPS is
provided in Note 9.

Specific items
Specific items resulted in a net credit after tax of £3m (2011/12: £166m), the
principal components of which are described below with full details provided
in Note 4.

^1 Before depreciation and amortisation
^2 Before purchases of telecommunications licences

Charges of £151m and £36m were recognised against revenue and EBITDA,
respectively, following Ofcom's determinations on historic Ethernet pricing.
One-off charges of £85m and £58m were recognised against revenue and EBITDA,
respectively, following the Court of Appeal decision that wholesale ladder
termination pricing should not be applied for 0800, 0845 and 0870 calls from
mobile phones terminating on our network. We also increased our provisions for
insurance and litigation risks by £43m, having reassessed potential claims
relating to certain historic matters.

Restructuring charges of £204m (2011/12: £64m) were incurred. These include
amounts relating to the next phase of our group-wide restructuring programme
which started in the third quarter. This programme includes rationalising and
transforming our resources, processes, networks and systems within BT Global
Services and reorganising BT Innovate & Design and BT Operate, our two
internal service units, to form BT Technology, Service & Operations (BT TSO).
By improving group-wide processes and simplifying our business, we will
improve customer service and generate future cost savings. 

A profit of £130m was recognised on the disposal of our remaining 23.2%
interest in Tech Mahindra. Net interest income on pensions was £31m (2011/12:
£197m). A specific item tax credit of £105m (2011/12: £164m) has also been
recognised for the re-measurement of deferred tax balances due to the change
in the UK statutory tax rate to 23% from 1 April 2013.

Capital expenditure
Capital expenditure excluding the purchases of telecommunications licences was
£2,438m. Despite the accelerated fibre programme and other new investments,
this was 6% lower than the prior year and below our guidance of around £2.6bn
due to further efficiencies in our capital programmes. In the fourth quarter
we also secured a 4G licence in the UK for a cost of £202m. This will enable
us to provide our business and consumer customers with an enhanced range of
mobile broadband services, building on our existing strength in wi-fi.

Free cash flow
Normalised free cash flow^1 was broadly level at £2,300m (2011/12: £2,307m)
with lower capital expenditure and growth in EBITDA largely offset by working
capital movements.

The cash cost of specific items was £366m (2011/12: £204m) mainly comprising
restructuring costs of £147m, £95m from the historic Ethernet pricing
determinations, cash payments of £67m from the ladder pricing decision
relating to 2010/11 and 2011/12 and property rationalisation costs of £55m.
Reported free cash flow, which includes the £560m tax benefit from pension
deficit payments (2011/12: £215m), the purchase of our 4G licence and specific
items, was £2,292m (2011/12: £2,318m).

A reconciliation of cash generated from operations to free cash flow is
provided in Note 5.

Net debt and liquidity
Net debt was £7,797m at 31 March 2013, a reduction of £1,285m in the year,
reflecting the strong cash generation of the business. This reduction was
despite making £325m of pension deficit payments, purchasing the 4G licence,
the share buyback of £302m and dividend payments of £683m. Net debt is
reconciled in Note 6.

At 31 March 2013 the group had cash and current investment balances of £1.5bn
and available facilities of a further £1.5bn providing us with a strong
liquidity and funding position. Out of total gross debt of £9.3bn, £1.5bn is
repayable in 2013/14.

Pensions
The IAS 19 net pension deficit at 31 March 2013 was £4.5bn net of tax (£5.9bn
gross of tax), compared with £1.9bn (£2.4bn gross of tax) at 31 March 2012 and
£4.3bn (£5.5bn gross of tax) at 31 December 2012. The increase in the deficit
during the year principally reflects an exceptionally low real discount rate
of 0.87%. This includes the impact of quantitative easing on the debt markets
and a higher inflation assumption. The higher deficit is despite the strong
investment returns and the £325m deficit payment which contributed to the BT
Pension Scheme assets increasing by £3.0bn to a record high of £41.3bn.

The IAS 19 accounting position and key assumptions for the liability valuation
are provided in Note 10.

IAS 19 'Employee Benefits (revised)' (IAS 19 Revised) came into effect from 1
April 2013 and will impact our pensions accounting as explained in 'Accounting
standards, interpretations and amendments not yet effective' in

^1 Before specific items, purchases of telecommunications licences, pension
deficit payments and the cash tax benefit of pension deficit payments

Note 3 to the Annual Report & Form 20-F 2013. Had this applied to the year
ended 31 March 2013, operating costs would have been around £40m higher, at
around £400m, and net finance income on pensions, which is classified as a
specific item, would have been £150m lower, resulting in a net finance expense
of around £120m.

We expect the pension operating charge in the income statement to be around
£450m in 2013/14. This includes around £40m due to the adoption of IAS 19
Revised and a £50m increase mainly due to the lower discount rate and higher
inflation assumptions. The net pension interest expense within specific items
is expected to be around £240m. We also expect regular cash contributions to
the BTPS to be around £210m in 2013/14, similar to 2012/13.

All-employee share option plans
Around 20,000 of our people benefited from our all-employee share option plans
this year, receiving BT shares worth over £12,000 per person on average.To
counteract the dilutive effect of these share options, we acquired 131m shares
as part of our buyback programme.

Over the next two years around 34,500 of our people could each receive shares
worth over £28,000 on average, based on the share price at 31 March 2013.

Dividends
The Board is proposing a final dividend of 6.5p, up 14%, giving a full year
dividend of 9.5p, up 14% (2011/12: 12%). Subject to shareholder approval, this
will be paid on 2September 2013 to shareholders on the register at 9 August
2013. The ex-dividend date is 7 August 2013. The final dividend, amounting to
approximately £514m (2011/12: £453m), will be recognised as an appropriation
of retained earnings in the quarter to 30 September 2013.

Regulation
There were a number of regulatory decisions and outcomes of appeals that
affected us during the year and will impact us in the future.

The charge controls for WLR, LLU and ISDN30 products which became effective in
April 2012 had a negative impact of around £120m on group revenue and EBITDA
in the year. We expect a further similar impact in 2013/14. The July 2012
Court of Appeal decision against wholesale ladder termination pricing also
impacted 2012/13 EBITDA growth by around £30m.

In the fourth quarter Ofcom issued its final determinations on the Business
Connectivity Market Review and the associated Leased Lines Charge Control.
These are likely to have a net negative year on year impact of around
£50m-£100m on group revenue and EBITDA in 2013/14 with a further similar
impact in 2014/15.

Ofcom also issued a consultation document on the Wholesale Narrowband Market
Review setting out proposals for regulating the markets for the next
three-year period. A new charge control has been proposed for certain
services. This will start from 1 October 2013 and is expected to reduce our
revenue from fixed call termination, with this partly offset by an increase in
prices on call origination.

We expect the Fixed Access Market Review and associated charge controls, which
are due to take effect from April 2014, to be published in the next few
months.

Fibre and broadband
We have now passed more than 15m premises with our fibre broadband network,
with an increase of around 6.2m in the year. There are now more than 1.5m
homes and businesses using our fibre-based services, having more than doubled
in the year with 873,000 net connections.

The broadband^1 market continued to grow with 834,000 net additions in the
year. This takes the total number of broadband connections on our network to
17.6m, provided through more than 150 service providers. We added 424,000
retail broadband^1 customers in the year, a 51% share, taking our customer
base to around 6.7m, up 7%.

Principal risks and uncertainties
The group's principal risks and uncertainties are disclosed in Note 11.

^1 DSL and fibre, excluding cable

Outlook
We continue to expect an improved trend in underlying revenue excluding
transit in 2013/14 compared with 2012/13.

We expect adjusted EBITDA to be £6.0bn−£6.1bn in 2013/14. The small decline
compared with 2012/13 is despite underlying improvements in our business
performance and is more than accounted for by our investment in BT Sport and
the higher pension operating charge. The EBITDA performance in the first half
of the year will be impacted by our upfront investment in BT Sport. We expect
adjusted EBITDA to increase to £6.2bn−£6.3bn in 2014/15 and to grow further in
2015/16.

We expect the next phase of our restructuring programme to reduce our cost
base by around £200m per year, with this run-rate largely achieved in 2014/15,
contributing to an improvement in EBITDA and capital expenditure efficiency.
We expect around £400m of further specific restructuring costs, most of which
will be incurred in 2013/14.

We expect capital expenditure in 2013/14 and 2014/15 to be broadly level with
2012/13. We will continue to invest extensively in fibre broadband while
benefiting from efficiency savings in other areas due to our cost
transformation activities, including our restructuring programme.

We expect higher levels of normalised free cash flow than previously, at
around £2.3bn in 2013/14, around £2.6bn in 2014/15 and to grow further in
2015/16.

We continue to expect to increase the dividend per share by 10%−15% per year
for the next two years.

We also expect to spend around £300m per year for the next two years on our
share buyback programme which will partly counteract the dilutive effect of
all-employee share option plans maturing over this period. As in 2012/13 we
may undertake the buyback through a combination of direct market purchases and
purchases by our Employee Benefit Trust.

RESULTS FOR THE FOURTH QUARTER TO 31 MARCH 2013

GROUP RESULTS

Operating results overview
Underlying revenue excluding transit was flat, an improvement compared with
recent quarters reflecting stronger performances from BT Global Services, BT
Consumer, BT Business and BT Wholesale. Adjusted revenue was 2% lower at
£4,785m with transit revenue down by £81m, a £12m favourable impact from
foreign exchange movements and a £2m net negative impact from acquisitions and
disposals.

Underlying operating costs^1 excluding transit were down 2%. Total operating
costs^1 decreased by £140m, or 4%.

Net labour costs decreased by 3% mainly reflecting improved productivity and
better systems and processes offsetting the recruitment of additional
engineers and insourcing of some activities. Payments to telecommunications
operators were down 9% reflecting lower mobile termination rates and reduced
transit and wholesale call volumes. Property and energy costs were 2% lower
and network operating and IT costs were 10% lower as we rationalise our
networks and systems. Other operating costs decreased by 2%.

Adjusted EBITDA increased by 4% to £1,673m.

Depreciation and amortisation decreased by 7% to £692m largely due to more
efficient delivery of our capital investment programmes over the last four
years.

Net finance expense
Net finance expense was £148m, a decrease of £25m due to the lower average
cost of net debt.

Profit before tax
Adjusted profit before tax was £833m, up 21% reflecting the higher EBITDA,
lower depreciation and amortisation and lower finance expense. Reported profit
before tax (which includes specific items) was £687m, down 5%.

Tax
The effective tax rate on the profit before specific items for the quarter was
22.1% (Q4 2011/12: 24.1%).

Earnings per share
Adjusted EPS of 8.3p was up 22%, principally reflecting higher profit before
tax. Reported EPS (which includes specific items) was 7.5p, down 7%. These are
based on a weighted average number of shares in issue of 7,838m (Q4 2011/12:
7,771m).

Specific items
Specific items in the quarter resulted in a net charge after tax of £58m (Q4
2011/12: £107m net credit). Restructuring charges of £151m (Q4 2011/12: £14m)
were incurred as part of the next phase of our group-wide restructuring
programme. Net interest income on pensions was £7m (Q4 2011/12: £48m).

Capital expenditure
Capital expenditure excluding the purchases of telecommunications licences was
£648m, down 7% reflecting efficiencies in our capital programmes.

Free cash flow
Normalised free cash flow was an inflow of £1,301m, up 43% compared with the
prior year. This increase principally reflects favourable working capital
movements, lower capital expenditure, lower tax payments and growth in EBITDA.

The cash cost of specific items was £147m (Q4 2011/12: £53m) comprising
restructuring costs of £87m, property rationalisation costs of £9m and £51m
from the historic Ethernet pricing determinations. Reported free cash flow,
which includes the £79m tax benefit from pension deficit payments (Q4 2011/12:
£nil), the £202m purchase of our 4G licence and specific items, was £1,031m
(Q4 2011/12: £856m).

^1 Before depreciation and amortisation

OPERATING REVIEW

BT Global Services

                            Fourth quarter to 31 March Year to 31 March
                            2013    2012   Change      2013  2012  Change
                            £m      £m     £m    %     £m    £m    £m    %
Revenue                     1,933   1,996  (63)  (3)   7,166 7,809 (643) (8)
- underlying excluding transit                   (3)                     (6)
Net operating costs^1       1,719   1,810  (91)  (5)   6,540 7,182 (642) (9)
EBITDA                      214     186    28    15    626   627   (1)   (0)
Depreciation & amortisation 159     178    (19)  (11)  623   712   (89)  (13)
Operating profit (loss)     55      8      47    n/m   3     (85)  88    104
Capital expenditure         151     149    2     1     525   560   (35)  (6)
Operating cash flow         404     164    240   146   6     183   (177) n/m
^1 Net of other operating income
n/m = not meaningful

Revenue
Underlying revenue excluding transit decreased by 3% in the quarter and 6% in
the year reflecting the tough conditions in Europe and the financial services
sector.

Revenue was down 3% in the quarter including an £18m decline in transit
revenue, an £8m impact from disposals and a £10m positive impact from foreign
exchange movements. Revenue was down 8% in the year.

Total order intake was £2.0bn in the quarter (Q3 2012/13: £1.9bn; Q4 2011/12:
£2.0bn) and £6.3bn in the year. In the quarter, we signed contracts with
leading organisations around the world including: AstraZeneca, to manage their
network IT services; Anglo American, for global networking and for application
performance monitoring; the Department for Work and Pensions, to provide
network, telephony, conferencing and contact centre infrastructure;
Media-Saturn Group, for IP Connect and Ethernet Connect services to around 750
locations across Europe; Rolls-Royce, for BT Connect network services to link
160 locations globally; and Admoncall in Mexico, for communications and voice
services.

Operating results
Underlying net operating costs excluding transit costs declined by 4% in the
quarter and 7% in the year, reflecting the impact of lower revenue and our
cost transformation programmes. Net operating costs decreased by 5% in the
quarter and 9% in the year.

During the quarter we accelerated the transformation of our end-to-end
customer service processes to improve service and reduce costs, and made our
back-office functions more efficient. We continued to optimise our network to
enhance availability and reliability for customers and reduce third party
costs. We have improved commercial terms with our suppliers and launched a
programme of property optimisation outside the UK.

EBITDA in the quarter increased by 15%, or 13% excluding foreign exchange
movements and disposals, partly reflecting the timing of costs during the
year. EBITDA was flat in the year, or up 4% excluding foreign exchange
movements and disposals.

Depreciation and amortisation reduced by 11% in the quarter and 13% in the
year as a result of lower capital expenditure in recent years. Operating
profit was up £47m in the quarter and £88m in the year, resulting in a
positive full year operating profit for the first time in five years.

Capital expenditure was up 1% in the quarter but down 6% in the year. EBITDA
less capital expenditure increased by £26m to £63m in the quarter and by £34m
to £101m for the year.

Operating cash flow of £404m in the quarter was £240m higher, reflecting the
increase in EBITDA and timing of working capital flows. Operating cash flow
for the year was an inflow of £6m. As expected this was lower than the prior
year reflecting the phasing of working capital.

BT Retail

                            Fourth quarter to 31 March Year to 31 March
                            2013    2012   Change      2013  2012  Change
                            £m      £m     £m    %     £m    £m    £m    %
Revenue                     1,868   1,861  7     0     7,228 7,393 (165) (2)
Net operating costs^1       1,357   1,375  (18)  (1)   5,293 5,563 (270) (5)
EBITDA                      511     486    25    5     1,935 1,830 105   6
Depreciation & amortisation 98      105    (7)   (7)   390   410   (20)  (5)
Operating profit            413     381    32    8     1,545 1,420 125   9
Capital expenditure         95      123    (28)  (23)  375   434   (59)  (14)
Operating cash flow         494     440    54    12    1,508 1,362 146   11
^1 Net of other operating income

Revenue
Revenue was flat in the quarter and down 2% in the year.

Consumer revenue was flat in the quarter, the best performance for five years
due to growth in fibre and a slower decline in calls and lines revenue.
Revenue decreased by 2% in the year.

In the quarter we added 136,000 retail broadband customers, representing 48%
of the DSL and fibre broadband market net additions. We added 211,000 retail
fibre broadband customers and now have around 1.3m customers. Our TV net
additions increased to 40,000 taking the customer base to 810,000. There are
now over 5m BT Wi-fi hot spots and minutes trebled year on year for the third
quarter running, reaching 4.7bn minutes in the quarter and over 13bn minutes
for the year.

In the quarter we agreed to acquire ESPN's UK and Ireland TV channels
business. Combining this content with our existing rights will enable BT Sport
customers to see live coverage of the FA Premier League, the FA Cup, Scottish
Premier League, UEFA Europa League, and the top league in Germany, Italy,
France, USA and Brazil. In addition to football, we will also offer live
English and French club rugby, WTA tennis and Moto GP. We have now announced
our BT Sport proposition. Launching in August, the three channels, BT Sport
1, BT Sport 2 and ESPN will show a wide variety of world-class sport and will
be free with BT broadband, or £12 per month to non-BT broadband customers.

Business revenue was flat in the quarter and down 3% in the year. The improved
trend in the quarter was due to 10% growth in IT services and a slower decline
in voice revenue. Our line losses decreased for the second consecutive
quarter.

BT Enterprises underlying revenue was down 2% in the quarter and down 1% in
the year, with growth in BT Wi-fi offset by declines in other divisions.
During the quarter, we acquired Tikit Group plc, one of the largest
independent suppliers of technology solutions and services to legal and
accounting firms, as part of our strategy to expand our specialist IT services
capabilities.

BT Ireland underlying revenue increased by 5% in the quarter and 4% in the
year with growth in both Northern Ireland and the Republic of Ireland. In
Northern Ireland 52% of our consumer broadband customers now take fibre-based
services. In the Republic of Ireland the wholesale business continued to grow
and we agreed a multi-year contract with UTV for BT Ireland to provide
wholesale voice and broadband services.

Operating results
Net operating costs declined by 1% in the quarter. This was below the recent
trend as our cost transformation programmes were partly offset by additional
costs associated with the improved revenue trend, and by the investment in BT
Sport. EBITDA increased by 5% and with depreciation and amortisation
decreasing by 7%, operating profit was up 8%. EBITDA was up 6% in the year.

Capital expenditure decreased by 23% in the quarter and 14% in the year as the
prior year included additional broadband related investment. Operating cash
flow increased by 12% in the quarter and 11% in the year reflecting the growth
in EBITDA and lower capital expenditure.

BT Wholesale

                            Fourth quarter to 31 March Year to 31 March
                            2013   2012   Change       2013  2012  Change
                            £m     £m     £m     %     £m    £m    £m    %
Revenue                     914    958    (44)   (5)   3,588 3,923 (335) (9)
- underlying excluding transit                   2                       (2)
Net operating costs^1       615    665    (50)   (8)   2,420 2,715 (295) (11)
EBITDA                      299    293    6      2     1,168 1,208 (40)  (3)
Depreciation & amortisation 149    154    (5)    (3)   593   604   (11)  (2)
Operating profit            150    139    11     8     575   604   (29)  (5)
Capital expenditure         52     91     (39)   (43)  233   336   (103) (31)
Operating cash flow         316    314    2      1     896   800   96    12
^1 Net of other operating income

Revenue
Underlying revenue excluding transit increased by 2% in the quarter. This was
a significant improvement compared with recent quarters due to growth in
managed network services (MNS) more than offsetting the impact of broadband
lines migrating to LLU. In the year, underlying revenue excluding transit
declined by 2%, or by 1% excluding ladder pricing.

Revenue decreased by 5% in the quarter and 9% in the year mainly due to a
decline in transit revenue of £63m in the quarter and £277m in the year,
driven by mobile termination rate reductions and lower volumes. MNS
represented 32% of external revenue in the year, up from 27% last year.

IP Exchange voice minutes increased by around 60% in the quarter. Revenue from
IP Exchange in BT Wholesale and BT Global Services was over £100m for the
year.

Total order intake in the quarter was over £800m, compared with around £220m
last year. This takes the total to over £2bn for the year (2011/12: around
£750m). This included a number of contract re-signs and extensions including
those with the large UK mobile network operators: EE, MBNL, O2 and Vodafone.
In the quarter we signed a ten year contract with Telefonica UK to support the
introduction of 4G services to its O2 customers. We will provide a sizeable
increase in backhaul capacity to new and existing sites, and also build a
dedicated high capacity transmission network.

Operating results
Net operating costs decreased by 8% in the quarter, but increased by 2%
excluding transit costs. This reflects the higher cost of sales associated
with the growth in revenue and mix changes partly offset by an 11% decrease in
selling, general and administrative costs. EBITDA increased by 2% in the
quarter. In the full year EBITDA declined by 3%, or 1% excluding ladder
pricing. Depreciation and amortisation reduced by 3% in the quarter, and
operating profit increased by 8%.

Capital expenditure decreased by 43% primarily due to lower spend on our
Wholesale Broadband Connect network, which now covers more than 90% of
premises, and due to reduced Ethernet spend. Operating cash flow increased by
1% as the improved operating performance was largely offset by working capital
movements. Operating cash flow was up 12% in the year.

Openreach

                            Fourth quarter to 31 March Year to 31 March
                            2013    2012   Change      2013  2012  Change
                            £m      £m     £m    %     £m    £m    £m   %
Revenue                     1,267   1,301  (34)  (3)   5,067 5,136 (69) (1)
Net operating costs^1       667     698    (31)  (4)   2,753 2,837 (84) (3)
EBITDA                      600     603    (3)   0     2,314 2,299 15   1
Depreciation & amortisation 241     239    2     1     972   939   33   4
Operating profit            359     364    (5)   (1)   1,342 1,360 (18) (1)
Capital expenditure         293     279    14    5     1,144 1,075 69   6
Operating cash flow         327     364    (37)  (10)  1,147 1,195 (48) (4)
^1 Net of other operating income

Revenue
The continued impact of regulatory price changes reduced revenue by around
£50m in the quarter and around £180m in the year. This was partially offset by
growth in fibre broadband and Ethernet resulting in an overall revenue decline
of 3% in the quarter and 1% in the year.

The physical line base grew by 88,000 in the quarter and by 54,000 in the
year. The additional engineering resource we have recruited has helped to
address provision lead times and deliver more fault repair activity resulting
from one of the wettest years on record.

We passed a further 1.8m premises with our fibre broadband network in the
quarter resulting in an increase of 6.2m in the year – a growth rate of around
120,000 per week. We have now passed more than 15m premises. We believe that,
together with government support and subject to an acceptable investment
environment, we can pass more than 90% of premises with our network in the
next three to four years. We achieved around 270,000 fibre connections in the
quarter, with more than 1.5m homes and businesses now connected. This take up
rate compares favourably with experiences of other large European economies.

In the quarter we won 10 Broadband Delivery UK (BDUK) regional bids to deploy
fibre broadband including in Cambridgeshire, Devon & Somerset, Wiltshire,
South Gloucestershire, Hampshire, Shropshire and Highlands & Islands. This
brings the total number of bids won in the year to 19. We have now passed well
over half of the premises in Cornwall, one of the least densely populated
regions in the UK. With the programme progressing well, we will be able to
re-invest efficiencies we are achieving to extend coverage to 95% of homes and
businesses, up from a target of 80%−90% at launch.

Operating results
Net operating costs reduced by 4% in the quarter in part reflecting cost
efficiencies. EBITDA was flat, and with depreciation and amortisation
increasing by 1%, operating profit was down 1%. EBITDA was up 1% in the year.

Capital expenditure increased by 5% in the quarter reflecting the acceleration
of our fibre broadband roll out. Operating cash flow was down 10% due to the
higher capital expenditure and timing of debtor receipts. Operating cash flow
was down 4% in the year.

The full release and financial statements are available to download as a PDF
documents.

SOURCE BT

Website: http://www.btplc.com
Contact: Press office: Ross Cook, Tel: 020 7356 5369; or Investor relations:
Damien Maltarp, Tel: 020 7356 4909