Table of Contents
![(BT LOGO)](https://capedge.com/proxy/20-F/0000950123-10-053013/u08916u0891600.jpg)
BT Group plc Annual Report & Form 20-F 2010 | ![]() |
Annual Report
& Form 20-F
2010
![]() | |||||
2 | |||||
4 | |||||
5 | |||||
6 | |||||
![]() | |||||
11 | |||||
15 | |||||
18 | |||||
22 | |||||
34 | |||||
36 | |||||
38 | |||||
41 | |||||
![]() | |||||
58 | |||||
60 | |||||
62 | |||||
64 | |||||
65 | |||||
66 | |||||
78 | |||||
79 | |||||
82 | |||||
![]() | |||||
84 | |||||
85 | |||||
87 | |||||
145 | |||||
146 | |||||
149 | |||||
150 | |||||
151 | |||||
153 | |||||
154 | |||||
![]() | |||||
156 | |||||
168 | |||||
171 | |||||
174 | |||||
Table of Contents
2010 | 2009a | |||||||||||
£m | £m | Change | Five year record | |||||||||
Revenue | Adjusted revenue (£m) | |||||||||||
– adjustedb,c | £20,911 | £21,431 | ![]() | 2% | ![]() | |||||||
– reported | £20,859 | £21,390 | ![]() | 2% | ||||||||
EBITDAd | Adjusted EBITDA (£m) | |||||||||||
– adjustedb,c | £5,639 | £5,238 | ![]() | 8% | ![]() | |||||||
– reported | £5,162 | £3,191 | ![]() | 62% | ||||||||
Profit (loss) before taxation | Adjusted profit before taxation (£m) | |||||||||||
– adjustedb,c | £1,735 | £1,454 | ![]() | 19% | ![]() | |||||||
– reported | £1,007 | £(244 | ) | ![]() | £1,251m | |||||||
Earnings (loss) per share | Adjusted earnings per share (pence) | |||||||||||
– adjustedb,c | 17.3p | 14.1p | ![]() | 23% | ![]() | |||||||
– reported | 13.3p | (2.5)p | ![]() | 15.8p | ||||||||
Full year dividend (pence) | ||||||||||||
Proposed full year dividend | 6.9p | 6.5p | ![]() | 6% | ![]() | |||||||
Free cash flow (£m) | ||||||||||||
Free cash flowc | £1,933 | £737 | ![]() | £1,196m | ![]() | |||||||
Net debt (£m) | ||||||||||||
Net debtc | £9,283 | £10,361 | ![]() | £1,078m | ![]() | |||||||
a | Restated. See page 94. | |
b | Items presented as adjusted are stated before specific items, BT Global Services contract and financial review charges in 2009 and net interest on pensions. See page 55 for further details. In our quarterly results announcements we also report adjusted measures before leaver costs, consistent with the basis of our outlook for the year (see page 3). From 2011 onwards, we will be reporting our quarterly adjusted results after leaver costs. | |
c | Adjusted revenue, adjusted EBITDA, adjusted profit (loss) before taxation, adjusted earnings (loss) per share, free cash flow and net debt are non-GAAP measures provided in addition to the disclosure requirements of IFRS. The rationale for using non-GAAP measures and the locations of reconciliations to the most directly comparable IFRS measure are provided in theFinancial reviewon pages 54 to 56. | |
d | EBITDA: Earnings before interest, taxation, depreciation and amortisation. |
Table of Contents
Outlook | Outlook | Outlook | ||||||||||||||
May 2009 | updated | Outcome | achieved | |||||||||||||
![]() | Adjusted revenue decline | 4%-5 | % | 3%-4 | % | 2 | % | ![]() | ||||||||
![]() | Total underlying costareductions | >£1bn | >£1.5bn | £1.75bn | ![]() | |||||||||||
![]() | Adjusted EBITDAbbefore leaver costs | – | c.£5.7bn | £5.8bn | ![]() | |||||||||||
![]() | Capital expenditure | c.£2.7bn | c.£2.5bn | £2.5bn | ![]() | |||||||||||
![]() | Free cash flowc | >£1bn | c.£1.7bn | £1.9bn | ![]() | |||||||||||
![]() | Full year dividend | – | c.5%up | 6% up | ![]() | |||||||||||
![]() | Net debtd | – | <£10.0bn | £9.3bn | ![]() |
![]() | Full year results ahead of our outlook | |
![]() | Revenue down 2% | |
![]() | Total underlying costsareduced by £1,752m, down 9% | |
![]() | Capital expenditure reduced by £555m to £2,533m | |
![]() | Free cash flowcof £1,933m, an improvement of £1,196m | |
![]() | Net debtdreduced by over £1bn | |
![]() | Proposed final dividend of 4.6p per share, giving 6.9p for the full year |
![]() | Revenue | c.£20bn | ||
![]() | Operating cost savingse | c.£900m | ||
![]() | Adjusted EBITDAbafter leaver costs | in line with 2010 | ||
![]() | Free cash flowfbefore specific items | c.£1.8bn | ||
![]() | Net debtd | <£9.0bn |
a | Underlying operating costs and capital expenditure, before specific items, leaver costs, depreciation and amortisation and other operating income, excluding BT Global Services contract and financial review charges in 2009. | |
b | Before specific items. | |
c | Before pension deficit payment of £525m but after the cash costs of the BT Global Services restructuring. | |
d | Net debt is defined on page 56. | |
e | Underlying operating costs before specific items and depreciation and amortisation. | |
f | Before pension deficit payment and before specific items of around £150m, with capital expenditure at around £2.6bn. |
Table of Contents
![(SIR MICHAEL RAKE)](https://capedge.com/proxy/20-F/0000950123-10-053013/u08916u0891681.jpg)
CHAIRMAN
12 MAY 2010
Table of Contents
![(PHOTO OF IAN LIVINGSTON)](https://capedge.com/proxy/20-F/0000950123-10-053013/u08916u0891612.jpg)
CHIEF EXECUTIVE
12 MAY 2010
Table of Contents
4 | Global networked IT services | |
4 | Worldwide virtual private network via our multi-protocol label switching service | |
4 | State-of-the-art videoconferencing and telepresence services |
4 | Fixed line and mobile call and broadband packages | |
4 | IT and communications solutions |
4 | Fixed line calls and broadband packages | |
4 | Largest video-on-demand service in the UK | |
4 | Biggest wi-fi network, with more than 1.5m hotspots | |
4 | A new fibre-based access network |
4 | Local loop unbundling, allowing communications providers to install their equipment in BT exchanges, and use these lines to connect to end users | |
4 | White label managed services for customers who want to enter the communications market without the need to invest | |
4 | Managed network solutions for communications providers | |
>More on page 11 |
making BT a better business by focusing on three areas:
4 | Customer service delivery | |
4 | Cost transformation | |
4 | Investing for the future |
![]() | Customer service delivery | |||
Our goal is to provide excellent customer service in every market in which we operate by putting our customers at the heart of everything we do. | ||||
> More on page 11 | ||||
![]() | Cost transformation | |||
We continue our drive to reduce costs across our business and deliver absolute levels of cost reduction. | ||||
> More on page 11 | ||||
![]() | Investing for the future | |||
We are investing in our networks, systems and services to ensure they enable our customers to take advantage of the digital revolution. | ||||
> More on page 12 |
Table of Contents
![]() | Broadband-based consumer services |
>More on page 12 |
![]() | The ‘Brand for Business’ for UK small and medium enterprises |
> More on page 12 |
![]() | BT Global Services – a global leader |
> More on page 12 |
![]() | The wholesaler of choice |
> More on page 13 |
![]() | The best network provider |
> More on page 13 |
Adjusted earnings per sharea,b (pence) ![]() | Free cash flowb (£m) ![]() | Customer service improvementc (%) ![]() |
a | Before specific items, BT Global Services contract and financial review charges in 2009 and net interest on pensions. | |
b | Adjusted earnings per share and free cash flow are non-GAAP measures provided in addition to the disclosure requirements of IFRS. The rationale for using non-GAAP measures is explained on pages 54 to 56. A reconciliation of adjusted earnings per share and free cash flow, to the most directly comparable IFRS measure, is provided on pages 42 and 51, respectively. | |
c | Cumulative improvement from 1 April 2007. |
Table of Contents
![(CHART)](https://capedge.com/proxy/20-F/0000950123-10-053013/u08916u0891617.jpg)
We meet the needs of our different customer groups in more than 170 countries around the world through four customer-facing lines of business – BT Global Services, BT Retail, BT Wholesale and Openreach. These are supported by two internal service units – BT Innovate & Design and BT Operate.
![(IMAGE)](https://capedge.com/proxy/20-F/0000950123-10-053013/u08916u0891618.jpg)
![(IMAGE)](https://capedge.com/proxy/20-F/0000950123-10-053013/u08916u0891619.jpg)
![(IMAGE)](https://capedge.com/proxy/20-F/0000950123-10-053013/u08916u0891620.jpg)
Table of Contents
![(MAP)](https://capedge.com/proxy/20-F/0000950123-10-053013/u08916u0891621.jpg)
> More on page 16
![(IMAGE)](https://capedge.com/proxy/20-F/0000950123-10-053013/u08916u0891622.jpg)
Table of Contents
Table of Contents
Our business and strategy | ||
![]() | Who we are | |
![]() | What we do | |
![]() | Our aim | |
![]() | Our strategic priorities | |
![]() | How we measure our progress | |
![]() | 2010 outlook | |
![]() | 2011 outlook and future plans |
![()](https://capedge.com/proxy/20-F/0000950123-10-053013/u08916u0891628.jpg)
Table of Contents
Table of Contents
![(BAR GRAPH)](https://capedge.com/proxy/20-F/0000950123-10-053013/u08916u0891624.jpg)
![(BAR GRAPH)](https://capedge.com/proxy/20-F/0000950123-10-053013/u08916u0891625.jpg)
a | Before specific items, BT Global Services contract and financial review charges in 2009 and net interest on pensions. | |
b | Adjusted basic earnings per share and free cash flow are non-GAAP measures provided in addition to the disclosure requirements of IFRS. The rationale for using non-GAAP measures is explained on pages 54 to 56. A reconciliation of adjusted earnings per share and free cash flow, to the most directly comparable IFRS measure, is provided on pages 42 and 51, respectively. |
Table of Contents
![(BAR GRAPH)](https://capedge.com/proxy/20-F/0000950123-10-053013/u08916u0891626.jpg)
4 | revenue to decline by 4%-5% | |
4 | a net reduction in group capital expenditure and operating costs of well over £1bn | |
4 | a reduction in group capital expenditure to around £2.7bn | |
4 | group free cash flow, before any pension deficit payments, but after the cash costs of BT Global Services restructuring, to reach over £1bn. |
4 | revenue to decline by 3%-4% | |
4 | total underlying cost reductions of at least £1.5bn | |
4 | EBITDA of around £5.7bn | |
4 | capital expenditure of around £2.5bn | |
4 | free cash flow of around £1.7bn | |
4 | net debt below £10bn | |
4 | dividend growth of around 5%. |
4 | revenue of around £20bn | |
4 | operating cost savingsaof around £900m | |
4 | adjusted EBITDAbafter leaver costs in line with last year’s level with underlying improvement being offset by the increase in the pension service charge of around £100m and targeted investment in the business of around £200m | |
4 | free cash flowcof around £1.8bn before the cash effect of specific items of around £150m, with capital expenditure at around £2.6bn | |
4 | BT Global Services operating cash flow expected to show further significant improvement, turning positive by 2012 | |
4 | Net debt below £9bn. |
4 | we expect improving underlying revenue trends from 2011 to 2013, with growth in 2013 | |
4 | BT Global Services revenue expected to grow by 2013 | |
4 | BT Retail expected to show an improvement in revenue trends over the period to 2013 | |
4 | BT Wholesale and Openreach revenue expected to be broadly level over the period to 2013 | |
4 | adjusted EBITDAbafter leaver costs expected to grow from 2011 to 2013 driven by a combination of further cost reductions and improving revenue trends | |
4 | free cash flowcbefore specific items expected to reach around £2bn by 2013 | |
4 | progressive dividends over the next three years. |
a | Underlying operating costs before specific items, depreciation and amortisation. | |
b | Before specific items. | |
c | Before pension deficit payment. |
Table of Contents
Our markets and customers | ||
![]() | Our markets | |
![]() | Competition | |
![]() | Customers | |
![]() | How we are structured | |
![]() | How we sell our products and services |
4 | In the UK consumer market, our voice and broadband offerings compete with a range of players and propositions. Our competitors include a number of well known brands that utilise BT’s infrastructure to provide competing services in telephony and broadband, and also Virgin Media which provides an alternative service utilising its own cable network. | |
4 | In serving our SME customers, we find competition is fragmented and can depend on which services our customers take from us, simple connectivity, or one of our more popular IT services packages. For smaller accounts, we might be in competition with local start-ups or services firms such as Geek Squad. For larger SMEs, we face competition from, among others, TalkTalk (via Opal) and Cable & Wireless Worldwide. However, we retain the largest market share in voice telephony. | |
4 | The networked IT services market is also challenging, both in the UK and internationally. Companies such as Orange Business Services and Verizon Business are targeting multinational corporations. | |
4 | Finally, while we have the largest network in the UK, our BT Wholesale and Openreach lines of business compete regularly against other CPs either selling network capabilities to others or choosing to build their own infrastructure. |
Table of Contents
4 | Managed solutions which comprise networked IT services, multi-protocol label switching (MPLS) and MNS | |
4 | Broadband and convergence | |
4 | Calls and lines | |
4 | Transit, conveyance, interconnect circuits, wholesale line rental (WLR), global carrier and other wholesale products | |
4 | Other products and services which include BT Global Services’ revenue from non UK global products and BT Retail’s Enterprises division including revenue from conferencing, directories, payphones and other select services. |
Table of Contents
Table of Contents
Our resources | ||
![]() | Brand and reputation | |
![]() | People | |
![]() | Networks and platforms | |
![]() | Global research capability | |
![]() | Suppliers | |
![]() | Property portfolio |
![(IMG)](https://capedge.com/proxy/20-F/0000950123-10-053013/u08916u0891627.jpg)
![()](https://capedge.com/proxy/20-F/0000950123-10-053013/u08916u0891628.jpg)
Target 2011 | 2010 | 2009 | 2008 | |||
BT will maintain a top 10 position in four of five major diversity benchmarks; four UK based, and one global | ![]() | ![]() | ![]() | |||
Table of Contents
![(IMAGE)](https://capedge.com/proxy/20-F/0000950123-10-053013/u08916u0891629.jpg)
![()](https://capedge.com/proxy/20-F/0000950123-10-053013/u08916u0891628.jpg)
Non financial performance | ||||||||||||
Target 2011 | 2010 | 2009 | 2008 | |||||||||
Reduce to 0.18 cases | 0.209 | 0.160 | 0.188 | |||||||||
Financial performance | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
Cost to the business arising from injuries resulting in time off work | £5.6m | £7.0m | new measure in 2009 | |||||||||
![()](https://capedge.com/proxy/20-F/0000950123-10-053013/u08916u0891628.jpg)
Non financial performance | ||||||||||||
Target 2011 | 2010 | 2009 | 2008 | |||||||||
Reduce to 2.21% | 2.46% | 2.17% | 2.43% | |||||||||
Financial performance | ||||||
2010 | 2009 | 2008 | ||||
BT sick pay costs | £95.4m | £85.2m | £89.8m | |||
Table of Contents
4 | Trustworthy: we do what we say we will | |
4 | Helpful: we work as one team | |
4 | Inspiring: we create new possibilities | |
4 | Straightforward: we make things clear | |
4 | Heart: we believe in what we do. |
![()](https://capedge.com/proxy/20-F/0000950123-10-053013/u08916u0891630.jpg)
Table of Contents
![()](https://capedge.com/proxy/20-F/0000950123-10-053013/u08916u0891628.jpg)
Non financial performance | ||||||||||||
Target 2011 | 2010 | 2009 | 2008 | |||||||||
To achieve a rating of 80% or more based on a response of ‘excellent’ or ‘good’ to the question: ‘How would you describe the quality of your company’s relationship with BT?’ | 86 | % | 85 | % | 78 | % | ||||||
Financial performance | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
Total spend with external supply base | £12.0bn | £13.0bn | £12.8bn | |||||||||
Ethical trading– a measure of the application of BT’s supply chain human rights standard ![]() |
Non financial performance | ||||||
Target 2011 | 2010 | 2009 | 2008 | |||
To achieve 100% follow up within three months for all suppliers identified as high | 180 risk | 78 risk | 234 risk | |||
or medium risk, through our ethical standard questionnaires | assessments | assessments | assessments | |||
with 100% | with 100% | with 100% | ||||
follow up | follow up | follow up | ||||
Value of procurement contracts– where our suppliers agree that we work with them to improve sustainability impacts | ||||||
Financial performance | ||||||
2010 | 2009 | 2008 | ||||
Value of spend where our suppliers agree that BT ensures its purchases are made, delivered, used and disposed of in a socially and environmentally responsible manner (extrapolated from supplier survey responses) | 86% of supplier spend | 83% of supplier spend | 66% of supplier spend | |||
![()](https://capedge.com/proxy/20-F/0000950123-10-053013/u08916u0891628.jpg)
Non financial performance | ||||||||||||
UK only | ||||||||||||
Target 2011 | 2010 | 2009 | 2008 | |||||||||
BT Group will reduce the tonnage of waste sent to landfill by 10% from 2010 levels | 15 | % | 17 | % | 22 | % | ||||||
reduction | reduction | reduction | ||||||||||
in waste to | in waste to | in waste to | ||||||||||
landfill from | landfill from | landfill from | ||||||||||
2009 | 2008 | 2007 | ||||||||||
Financial performance | ||||||||||||
UK only | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
Net benefit to the business of the waste programme | £1.61m | £0.67m | £0.32m | |||||||||
Table of Contents
Our lines of business | |||
![]() | BT Global Services | ||
![]() | BT Retail | ||
![]() | BT Wholesale | ||
![]() | Openreach | ||
![]() | BT Innovate & Design | ||
![]() | BT Operate | ||
4 | seamless global connectivity and networked IT services to multinational corporations | |
4 | networked IT services to customers in the UK corporate and public sectors | |
4 | networked IT services to corporate and public sector customers outside the UK. |
Table of Contents
(£bn)
![()](https://capedge.com/proxy/20-F/0000950123-10-053013/u08916u0891631.jpg)
4 | a global contract with FIAT Group to provide and manage their worldwide networked IT services with an MPLS network connecting more than 500 locations in 37 countries | |
4 | a two-year contract extension with Eni Group, one of the world’s major integrated energy companies, to provide and manage their global telecommunications services across five continents. |
4 | global investment bank Nomura to provide dealing room technologies and implementation of market data infrastructure | |
4 | Commerzbank, one of Germany’s biggest banks, to manage local and wide area network across hundreds of sites. |
Table of Contents
2010 | 2009 | a | 2008 | a | ||||||||
£m | £m | £m | ||||||||||
Adjusted revenue | 8,513 | 8,628 | 7,664 | |||||||||
Net operating costs | 8,056 | 8,367 | 6,856 | |||||||||
Adjusted EBITDA | 457 | 261 | 808 | |||||||||
Contract and financial review chargesb | – | 1,639 | – | |||||||||
EBITDA | 457 | (1,378 | ) | 808 | ||||||||
Depreciation and amortisation | 815 | 776 | 744 | |||||||||
Adjusted operating (loss) profit | (358 | ) | (2,154 | ) | 64 | |||||||
Capital expenditure | 599 | 886 | 961 | |||||||||
Operating cash flow | (482 | ) | (912 | ) | (150 | ) | ||||||
a | Restated. See page 101. | |
b | Contract and financial review charges in 2009 include £41m recognised in revenue. |
2010 | 2009 | a | 2008 | a | ||||||||
£m | £m | £m | ||||||||||
Products and services | ||||||||||||
Managed solutions | 5,281 | 5,273 | 4,468 | |||||||||
Calls and lines | 956 | 1,055 | 1,197 | |||||||||
Global carrier | 822 | 904 | 777 | |||||||||
Broadband and convergence | 334 | 321 | 275 | |||||||||
Other products and services | 1,120 | 1,075 | 947 | |||||||||
Total adjusted revenue | 8,513 | 8,628 | 7,664 | |||||||||
a | Restated. See page 101. |
Table of Contents
![()](https://capedge.com/proxy/20-F/0000950123-10-053013/u08916u0891632.jpg)
BT Conferencing | Global provider of audio, video and internet collaboration services | ||||
BT Directories | Directory Enquiries (118 500), operator and emergency services, and The Phone Book | ||||
BT Expedite | Software and IT services for retailers. BT Expedite now supports more than 10,000 points of sale for more than 60 retailers | ||||
BT Payphones | Street, managed, prison, card and private payphones. In a declining market, we are committed to meeting our obligation to provide a public payphone service | ||||
BT Redcare | Alarm monitoring and tracking facilities |
Table of Contents
(£)
![()](https://capedge.com/proxy/20-F/0000950123-10-053013/u08916u0891633.jpg)
(million lines)
![()](https://capedge.com/proxy/20-F/0000950123-10-053013/u08916u0891634.jpg)
Table of Contents
(’000)
![()](https://capedge.com/proxy/20-F/0000950123-10-053013/u08916u0891635.jpg)
Table of Contents
2010 | 2009 | a | 2008 | a | ||||||||
£m | £m | £m | ||||||||||
Revenue | 8,297 | 8,663 | 8,682 | |||||||||
Net operating costs | 6,447 | 6,999 | 7,153 | |||||||||
Adjusted EBITDA | 1,850 | 1,664 | 1,529 | |||||||||
Depreciation and amortisation | 459 | 426 | 445 | |||||||||
Adjusted operating profit | 1,391 | 1,238 | 1,084 | |||||||||
Capital expenditure | 417 | 471 | 579 | |||||||||
Operating cash flow | 1,640 | 1,064 | 1,011 | |||||||||
a | Restated. See page 101. |
2010 | 2009 | a | 2008 | a | ||||||||
£m | £m | £m | ||||||||||
Products and services | ||||||||||||
Calls and lines | 5,031 | 5,422 | 5,745 | |||||||||
Broadband and convergence | 1,316 | 1,313 | 1,201 | |||||||||
Managed solutions | 588 | 599 | 530 | |||||||||
Other products and services | 989 | 986 | 941 | |||||||||
External revenue | 7,924 | 8,320 | 8,417 | |||||||||
Internal revenue | 373 | 343 | 265 | |||||||||
Total | 8,297 | 8,663 | 8,682 | |||||||||
a | Restated. See page 101. |
Table of Contents
(%)
![(PERFORMANCE GRAPH)](https://capedge.com/proxy/20-F/0000950123-10-053013/u08916u0891636.jpg)
(%)
![(PERFORMANCE GRAPH)](https://capedge.com/proxy/20-F/0000950123-10-053013/u08916u0891637.jpg)
Table of Contents
![(PIE CHART)](https://capedge.com/proxy/20-F/0000950123-10-053013/u08916u0891638.jpg)
4 | A 10-year network outsourcing agreement with KCOM Group to provide the operator with a fully-managed, national operational capability and a new streamlined portfolio of next generation products and services | |
4 | A long-term agreement to provide O2 with fixed line broadband services to enable it to offer fixed line services to the SME market in the UK for the first time | |
4 | A long-term contract with Vodafone UK to enable it to introduce unified communications to UK SMEs | |
4 | A five-year agreement to consolidate O2’s core fixed and mobile networks in the UK into one cost-effective network using BT’s IP network platform. |
(%)
![(PERFORMANCE GRAPH)](https://capedge.com/proxy/20-F/0000950123-10-053013/u08916u0891639.jpg)
2010 | 2009 | a | 2008 | a | |||||||||
£m | £m | £m | |||||||||||
Revenue | 4,450 | 4,658 | 4,959 | ||||||||||
Internal revenue | 1,227 | 1,228 | 1,252 | ||||||||||
External revenue | 3,223 | 3,430 | 3,707 | ||||||||||
Net operating costs | 3,171 | 3,381 | 3,553 | ||||||||||
Adjusted EBITDA | 1,279 | 1,277 | 1,406 | ||||||||||
Depreciation and amortisation | 680 | 686 | 893 | ||||||||||
Adjusted operating profit | 599 | 591 | 513 | ||||||||||
Capital expenditure | 325 | 435 | 522 | ||||||||||
Operating cash flow | 844 | 824 | 800 | ||||||||||
a | Restated. See page 101. |
2010 | 2009 | a | 2008 | a | ||||||||
£m | £m | £m | ||||||||||
Products and services | ||||||||||||
Transit, conveyance and WLR | 1,521 | 1,828 | 2,113 | |||||||||
Managed network services | 715 | 518 | 295 | |||||||||
Broadband and convergence | 431 | 482 | 624 | |||||||||
Calls and lines | 306 | 385 | 462 | |||||||||
Other products and services | 250 | 217 | 213 | |||||||||
Total external revenue | 3,223 | 3,430 | 3,707 | |||||||||
Internal revenue | 1,227 | 1,228 | 1,252 | |||||||||
4,450 | 4,658 | 4,959 | ||||||||||
a | Restated. See page 101. |
Table of Contents
![(MAP)](https://capedge.com/proxy/20-F/0000950123-10-053013/u08916u0891644.jpg)
Table of Contents
A BT engineer during the winter snow
![(PICTURE)](https://capedge.com/proxy/20-F/0000950123-10-053013/u08916u0891645.jpg)
2010 | 2009 | 2008 | ||||||||||
£m | £m | £m | ||||||||||
External revenue | 1,211 | 1,013 | 888 | |||||||||
Revenue from other BT lines of business | 3,953 | 4,218 | 4,378 | |||||||||
Revenue | 5,164 | 5,231 | 5,266 | |||||||||
Net operating costs | 3,204 | 3,235 | 3,355 | |||||||||
Adjusted EBITDA | 1,960 | 1,996 | 1,911 | |||||||||
Depreciation and amortisation | 856 | 778 | 689 | |||||||||
Adjusted operating profit | 1,104 | 1,218 | 1,222 | |||||||||
Capital expenditure | 907 | 951 | 1,073 | |||||||||
Operating cash flow | 1,167 | 1,079 | 841 | |||||||||
Depreciation and amortisation increased by 10% to £856m (2009: 13% increase) reflecting the higher value and shorter-lived
Table of Contents
![(PERFORMANCE GRAPH)](https://capedge.com/proxy/20-F/0000950123-10-053013/u08916u0891646a.jpg)
Table of Contents
![(IMAGE)](https://capedge.com/proxy/20-F/0000950123-10-053013/u08916u0891647.jpg)
![]() | Helping tackle climate change | |
![]() | Developing sustainable customer solutions | |
![]() | Enabling skills for an inclusive society | |
![]() | Charity support | |
![]() | Our corporate responsibility risks | |
![]() | Recognition of our contribution | |
![]() | Further information |
![(BAR CHART)](https://capedge.com/proxy/20-F/0000950123-10-053013/u08916u0891648.jpg)
2010 | 2009 | a | 2008 | a | ||||||||
Customer bids with a sustainability element | £2.1bn | £1.5bn | £2.6bn | |||||||||
a | We have improved the way we collect this data during the year and have restated 2009 and 2008 figures. |
Table of Contents
![(IMAGE)](https://capedge.com/proxy/20-F/0000950123-10-053013/u08916u0891649.jpg)
4 | Mitigating climate change impacts such as increased costs associated with changing legislation | |
4 | Adapting our business to reduce our exposure to the direct impacts of climate change, such as severe weather | |
4 | The effect of diversity on employee relations and customer service | |
4 | Unacceptable supply chain working conditions. | |
We manage the following three CR risks at group level: | ||
4 | Health and safety risks to employees and the public exposed to BT operations | |
4 | Breach of integrity leading to a loss of trust in BT | |
4 | Loss of trust caused by unintended release of private customer data which is part of ourSecurity and resiliencerisk (seeOur riskson page 37). |
Table of Contents
![]() | Principal risks and uncertainties | |
![]() | Competitive activity | |
![]() | Global economic and credit market conditions | |
![]() | Regulatory controls | |
![]() | Major contracts | |
![]() | Security and resilience | |
![]() | Pensions |
Table of Contents
In 2009 a failure to achieve anticipated cost savings made a number of our major contracts less profitable or even loss making, adversely impacting our profits. Contract and financial reviews were undertaken in BT Global Services, and resulted in our taking a more cautious view of the recognition of expected and future cost efficiencies, revenues and other changes in underlying assumptions and estimates, particularly in light of the economic outlook, resulting in contract and financial review charges of £1,639m being recognised.
Table of Contents
![]() | Regulation | |
![]() | Our relationship with HM Government | |
![]() | Legal proceedings | |
![]() | Acquisitions and disposals |
Table of Contents
4 | network charge controls (NCC) on wholesale interconnect services – we operate under interconnection agreements with most other CPs | |
4 | partial private circuits (PPC) charge controls applying to certain wholesale leased lines that BT provides to other network operators | |
4 | certain wholesale Ethernet access and backhaul services | |
4 | LLU and WLR. |
Table of Contents
4 | Wire One Holdings Inc (one of the leading providers of videoconferencing solutions in the US) | |
4 | Ufindus Ltd (one of the UK’s leading online business directories) | |
4 | Ribbit Corporation (a Silicon Valley-based ‘Telco 2.0’ platform company) | |
4 | Stemmer GmbH and SND GmbH (two German companies constituting the enterprise IT services segment of net AG, listed on the Frankfurt Stock Exchange). |
4 | an agreement with Sekunjalo Investments Limited, under which Sekunjalo became a 30% shareholder in BT’s South African business | |
4 | an extension of the geographic scope of our joint venture with Enìa SpA in Parma, Italy, and an increase of our stake in the joint venture from 55% to 59.5% | |
4 | the acquisition of the remaining shares of Net2S SA, a publicly-traded IT services company listed in France, other than certain treasury shares and locked-up shares issued under employee share plans (we had acquired over 91% of the outstanding issued share capital of Net2S SA in 2008). |
Table of Contents
![]() | Principal accounting policies, critical accounting estimates and key judgements | |
![]() | Summarised group income statement | |
![]() | Financial results | |
![]() | Financial position and resources | |
![]() | Liquidity | |
![]() | Funding and capital management | |
![]() | Alternative performance measures |
Table of Contents
2010 | 2009 | b | 2008b | |||||||||
Year ended 31 March | £m | £m | £m | |||||||||
Revenue | ||||||||||||
Adjusteda | 20,911 | 21,431 | 20,704 | |||||||||
Specific items | (52 | ) | – | – | ||||||||
Contract and financial review charges | – | (41 | ) | – | ||||||||
Reported | 20,859 | 21,390 | 20,704 | |||||||||
Other operating income | ||||||||||||
Adjusteda | 378 | 352 | 359 | |||||||||
Specific items | 2 | (13 | ) | (10 | ) | |||||||
Reported | 380 | 339 | 349 | |||||||||
Operating costs | ||||||||||||
Adjusteda | (18,689 | ) | (19,435 | ) | (18,168 | ) | ||||||
Specific items | (427 | ) | (395 | ) | (529 | ) | ||||||
Contract and financial review charges | – | (1,598 | ) | – | ||||||||
Reported | (19,116 | ) | (21,428 | ) | (18,697 | ) | ||||||
Operating profit | ||||||||||||
Adjusteda | 2,600 | 2,348 | 2,895 | |||||||||
Specific items | (477 | ) | (408 | ) | (539 | ) | ||||||
Contract and financial review charges | – | (1,639 | ) | – | ||||||||
Reported | 2,123 | 301 | 2,356 | |||||||||
Net finance expense | ||||||||||||
Adjusteda | (890 | ) | (933 | ) | (798 | ) | ||||||
Specific items | 11 | – | – | |||||||||
Net interest on pensions | (279 | ) | 313 | 420 | ||||||||
Reported | (1,158 | ) | (620 | ) | (378 | ) | ||||||
Share of post tax profits (losses) of associates and joint ventures | ||||||||||||
Adjusteda | 25 | 39 | (11 | ) | ||||||||
Specific items | 29 | 36 | – | |||||||||
Reported | 54 | 75 | (11 | ) | ||||||||
(Loss) profit on disposal of associates and joint ventures –specific items | (12 | ) | – | 9 | ||||||||
Profit (loss) before taxation | ||||||||||||
Adjusteda | 1,735 | 1,454 | 2,086 | |||||||||
Specific items | (449 | ) | (372 | ) | (530 | ) | ||||||
Contract and financial review charges | – | (1,639 | ) | – | ||||||||
Net interest on pensions | (279 | ) | 313 | 420 | ||||||||
Reported | 1,007 | (244 | ) | 1,976 | ||||||||
Taxation credit (charge) | ||||||||||||
Adjusteda | (398 | ) | (361 | ) | (455 | ) | ||||||
Specific items | 342 | 43 | 343 | |||||||||
Contract and financial review charges | – | 459 | – | |||||||||
Net interest on pensions | 78 | (88 | ) | (126 | ) | |||||||
Reported | 22 | 53 | (238 | ) | ||||||||
Profit (loss) for the year | ||||||||||||
Adjusteda | 1,337 | 1,093 | 1,631 | |||||||||
Specific items | (107 | ) | (329 | ) | (187 | ) | ||||||
Contract and financial review charges | – | (1,180 | ) | – | ||||||||
Net interest on pensions | (201 | ) | 225 | 294 | ||||||||
Reported | 1,029 | (191 | ) | 1,738 | ||||||||
Basic earnings (loss) per share | ||||||||||||
Adjusteda | 17.3p | 14.1p | 20.2p | |||||||||
Specific items | (1.4)p | (4.3)p | (2.4)p | |||||||||
Contract and financial review charges | – | (15.3)p | – | |||||||||
Net interest on pensions | (2.6)p | 3.0p | 3.7p | |||||||||
Reported | 13.3p | (2.5)p | 21.5p | |||||||||
a | Adjusted revenue, adjusted other operating income, adjusted operating costs, adjusted operating profit, adjusted net finance expense, adjusted share of post tax profits (losses) of associates and joint ventures, adjusted profit (loss) before taxation, adjusted taxation credit (charge), adjusted profit (loss) for the year and adjusted basic earnings (loss) per share are non-GAAP measures provided in addition to the disclosure requirements defined under IFRS. The rationale for using non-GAAP measures is explained on pages 54 to 56. | |
b | Restated. See page 94. |
Table of Contents
(£m)
![(COLUMN CHART)](https://capedge.com/proxy/20-F/0000950123-10-053013/u08916u0891640.jpg)
2010 | 2009a | 2008a | ||||||||||
£m | £m | £m | ||||||||||
Managed solutions | 6,581 | 6,390 | 5,293 | |||||||||
Broadband and convergence | 2,678 | 2,617 | 2,549 | |||||||||
Calls and lines | 6,293 | 6,862 | 7,404 | |||||||||
Transit, conveyance, interconnect, WLR, global carrier and other wholesale products | 2,957 | 3,244 | 3,329 | |||||||||
Other products and services | 2,402 | 2,318 | 2,129 | |||||||||
Adjusted revenue | 20,911 | 21,431 | 20,704 | |||||||||
Specific items | (52 | ) | – | – | ||||||||
Contract and financial review charges | – | (41 | ) | – | ||||||||
Revenue | 20,859 | 21,390 | 20,704 | |||||||||
a | Restated. See page 101. |
(£bn)
![()](https://capedge.com/proxy/20-F/0000950123-10-053013/u08916u0891641.jpg)
Table of Contents
(£m)
![()](https://capedge.com/proxy/20-F/0000950123-10-053013/u08916u0891642.jpg)
a | Underlying costs exclude specific items, leaver costs, depreciation and amortisation, foreign exchange movements and acquisitions. | |
b | Comprises payments to telecommunications operators. |
2010 | 2009 | a | 2008 | a | ||||||||
£m | £m | £m | ||||||||||
Staff costs before leaver costs | 4,862 | 5,412 | 5,231 | |||||||||
Leaver costs | 142 | 204 | 127 | |||||||||
Staff costs | 5,004 | 5,616 | 5,358 | |||||||||
Own work capitalised | (575 | ) | (673 | ) | (724 | ) | ||||||
Net staff costs | 4,429 | 4,943 | 4,634 | |||||||||
Depreciation | 2,304 | 2,249 | 2,410 | |||||||||
Amortisation | 735 | 641 | 479 | |||||||||
Payments to telecommunications operators | 4,083 | 4,266 | 4,237 | |||||||||
Other operating costs | 7,138 | 7,336 | 6,408 | |||||||||
Adjusted operating costs | 18,689 | 19,435 | 18,168 | |||||||||
Specific items | 427 | 395 | 529 | |||||||||
Contract and financial review charges | – | 1,598 | – | |||||||||
Operating costs | 19,116 | 21,428 | 18,697 | |||||||||
a | Restated. See page 94. |
2010 | 2009a | 2008a | ||||||||||
£m | £m | £m | ||||||||||
Staff costs | ||||||||||||
Wages and salaries | 4,182 | 4,499 | 4,242 | |||||||||
Social security costs | 447 | 432 | 417 | |||||||||
Pensions costs | 304 | 544 | 626 | |||||||||
Share-based payments | 71 | 141 | 73 | |||||||||
5,004 | 5,616 | 5,358 | ||||||||||
a | Restated. See page 94. |
Table of Contents
2010 | 2009 | 2008 | ||||||||||
£m | £m | £m | ||||||||||
Revenue | ||||||||||||
Regulatory settlement | 52 | – | – | |||||||||
Other operating income | ||||||||||||
(Profit) loss on disposal of a business | (2 | ) | 13 | 10 | ||||||||
Operating costs | ||||||||||||
BT Global Services restructuring charges | 301 | 280 | – | |||||||||
Property rationalisation costs | 121 | – | – | |||||||||
Costs associated with settlement of open tax years | 5 | – | – | |||||||||
Restructuring costs – group transformation and reorganisation activities | – | 65 | 402 | |||||||||
21CN asset impairment and related charges | – | 50 | – | |||||||||
Creation of Openreach and delivery of the Undertakings | – | – | 53 | |||||||||
Write off of circuit inventory and other working capital balances | – | – | 74 | |||||||||
427 | 395 | 529 | ||||||||||
Finance income | ||||||||||||
Interest on settlement of open tax years | (11 | ) | – | – | ||||||||
Share of results of associates and joint ventures | ||||||||||||
Impact of renegotiated supply contracts on associate | (29 | ) | – | – | ||||||||
Reassessment of carrying value of associate | – | (36 | ) | – | ||||||||
Loss (profit) on disposal of associate | 12 | – | (9 | ) | ||||||||
Net specific items charge before tax | 449 | 372 | 530 | |||||||||
Tax credit in respect of settlement of open tax years | (230 | ) | – | (40 | ) | |||||||
Tax credit on re-measurement of deferred tax | – | – | (154 | ) | ||||||||
Tax credit on specific items above | (112 | ) | (43 | ) | (149 | ) | ||||||
Net specific items charge after tax | 107 | 329 | 187 | |||||||||
Table of Contents
4 | A charge of £52m was recognised in 2010 reflecting an Ofcom determination in relation to 2Mb/s partial private circuit prices. | |
4 | In 2010 and 2009, respectively, the group recognised BT Global Services restructuring charges of £301m and £280m. The main components of the charges are set out below. |
– | Networks, products and procurement channels rationalisation charges of £142m (2009: £183m). In 2010 this included a payment of £127m made to Tech Mahindra for the renegotiation of certain supply contracts as part of the rationalisation of procurement channels. There was an associated credit of £29m in connection with BT’s share of its associate, Tech Mahindra. | ||
– | People and property charges of £132m (2009: £51m) principally comprising leaver costs and property exit costs. | ||
– | Intangible asset impairments and other charges of £27m (2009: £46m) reflecting the costs associated with rationalising the services that are offered to customers and the brands under which customers are served. |
4 | In 2010 £121m of property rationalisation charges were recognised in relation to the rationalisation of the group’s UK property portfolio as detailed on page 21. The charge relates to properties which have been vacated and as a result of which, the associated leases have become onerous, reflecting future commitments to meet rental obligations which exceed future economic benefits. This rationalisation programme is expected to continue over the next two years. Including the charge recognised in 2010, the total cost of the rationalisation programme is expected to be around £300m. | |
4 | In 2010 the group agreed substantially all outstanding tax matters with HM Revenue & Customs (HMRC) relating to the 2006, 2007 and 2008 tax years. Specific items include a tax credit of £230m, associated interest of £11m and costs of £5m in connection with reaching the agreement. In 2008, the group agreed an outstanding tax matter relating to a business disposed of in 2001, the impact of which was a tax credit of £40m. | |
4 | In 2009 and 2008, respectively, the group incurred costs of £65m and £402m in respect of the group’s transformation and reorganisation activities. The costs mainly comprised leaver costs, property exit and transformation programme costs. | |
4 | In 2009 a £50m charge was recognised comprising £31m of asset impairments and £19m of associated costs, following the group’s review of its 21CN programme and associated voice strategy in the light of the move to a customer-led roll out strategy and focus on next generation voice service developments of fibre-based products. | |
4 | In 2008 a charge of £53m was recognised in relation to further estimated costs to create Openreach and deliver the Undertakings agreed with Ofcom. | |
4 | In 2008 a charge of £74m was recognised as a result of the completion of a review of circuit inventory and other working capital balances. | |
4 | In 2009 a credit of £36m was recognised in respect of a reassessment of the value of the group’s share of the net assets of an associate. | |
4 | In 2008 a tax credit of £154m was recognised for the re-measurement of deferred tax balances as a result of the change in the UK statutory corporation tax rate from 30% to 28% effective in 2009. |
2010 | 2009 | 2008 | ||||||||||
£m | £m | £m | ||||||||||
Interest on borrowings | 886 | 935 | 822 | |||||||||
Loss arising on derivatives not in a designated hedge relationship | 19 | 29 | 41 | |||||||||
Interest on pension scheme liabilities | 2,211 | 2,308 | 2,028 | |||||||||
Finance expense | 3,116 | 3,272 | 2,891 | |||||||||
Less: interest on qualifying assets | (3 | ) | – | – | ||||||||
Total finance expense | 3,113 | 3,272 | 2,891 | |||||||||
Other interest and similar income | (12 | ) | (31 | ) | (65 | ) | ||||||
Expected return on pension scheme assets | (1,932 | ) | (2,621 | ) | (2,448 | ) | ||||||
Total finance income | (1,944 | ) | (2,652 | ) | (2,513 | ) | ||||||
Analysed as: | ||||||||||||
Adjusted net finance expense | 890 | 933 | 798 | |||||||||
Net interest on pensions | 279 | (313 | ) | (420 | ) | |||||||
Net finance expense before specific items | 1,169 | 620 | 378 | |||||||||
Specific items | (11 | ) | – | – | ||||||||
Net finance expense | 1,158 | 620 | 378 | |||||||||
Table of Contents
(£bn)
![()](https://capedge.com/proxy/20-F/0000950123-10-053013/u08916u0891643.jpg)
2010 | 2009 | 2008 | ||||||||||
£m | £m | £m | ||||||||||
Share of post tax profit (loss) of associates and joint ventures | 25 | 39 | (11 | ) | ||||||||
Table of Contents
(pence)
![()](https://capedge.com/proxy/20-F/0000950123-10-053013/u08916u0891644a.jpg)
2010 | 2009 | a | ||||||
£m | £m | |||||||
Non current assets | ||||||||
Goodwill | 1,432 | 1,489 | ||||||
Other intangible assets | 2,240 | 2,299 | ||||||
Property, plant and equipment | 14,856 | 15,405 | ||||||
Derivative financial instruments | 1,076 | 2,542 | ||||||
Trade and other receivables | 336 | 322 | ||||||
Deferred tax assets | 2,196 | 1,103 | ||||||
Other non current assets | 259 | 187 | ||||||
22,395 | 23,347 | |||||||
Current assets | ||||||||
Trade and other receivables | 3,696 | 4,185 | ||||||
Cash and cash equivalents | 1,452 | 1,300 | ||||||
Derivative financial instruments | 624 | 158 | ||||||
Other current assets | 513 | 284 | ||||||
6,285 | 5,927 | |||||||
Current liabilities | ||||||||
Loans and other borrowings | 3,269 | 1,542 | ||||||
Derivative financial instruments | 166 | 56 | ||||||
Trade and other payables | 6,531 | 7,215 | ||||||
Current tax liabilities | 320 | 1 | ||||||
Provisions | 134 | 254 | ||||||
10,420 | 9,068 | |||||||
Total assets less current liabilities | 18,260 | 20,206 | ||||||
Non current liabilities | ||||||||
Loans and other borrowings | 9,522 | 12,365 | ||||||
Derivative financial instruments | 533 | 711 | ||||||
Deferred tax liabilities | 1,456 | 1,728 | ||||||
Retirement benefit obligations | 7,864 | 3,973 | ||||||
Provisions | 707 | 466 | ||||||
Other non current liabilities | 804 | 794 | ||||||
20,886 | 20,037 | |||||||
Equity | ||||||||
Ordinary shares and share premium | 470 | 470 | ||||||
Retained loss and other reserves | (3,120 | ) | (328 | ) | ||||
(2,650 | ) | 142 | ||||||
Minority interest | 24 | 27 | ||||||
Total (deficit) equity | (2,626 | ) | 169 | |||||
18,260 | 20,206 | |||||||
a | Restated. See page 94. |
Table of Contents
(£bn)
![()](https://capedge.com/proxy/20-F/0000950123-10-053013/u08916u0891645a.jpg)
2010 | 2009 | |||||||
£m | £m | |||||||
Total equity at the beginning of the year | 169 | 5,432 | ||||||
Profit (loss) for the year | 1,029 | (191 | ) | |||||
Other comprehensive loss for the year | (3,661 | ) | (3,911 | ) | ||||
Dividends to shareholders | (263 | ) | (1,222 | ) | ||||
Share-based payment | 81 | 143 | ||||||
Tax on share-based payment | 19 | (12 | ) | |||||
Net issue (purchase) of treasury shares | 4 | (63 | ) | |||||
Movements in minority interests | (4 | ) | (7 | ) | ||||
Total (deficit) equity at the end of the year | (2,626 | ) | 169 | |||||
Table of Contents
![(CHART)](https://capedge.com/proxy/20-F/0000950123-10-053013/u08916u0891646.jpg)
Table of Contents
Summarised cash flow statement | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
£m | £m | £m | ||||||||||
Cash generated from operations | 4,476 | 4,934 | 5,187 | |||||||||
Net income taxes received (paid) | 349 | (228 | ) | 299 | ||||||||
Net cash inflow from operating activities | 4,825 | 4,706 | 5,486 | |||||||||
Add back pension deficit payment | 525 | – | 320 | |||||||||
Net capital expenditure | (2,480 | ) | (3,038 | ) | (3,253 | ) | ||||||
Net purchase of non current financial assets | – | – | (1 | ) | ||||||||
Dividends from associates and joint ventures | 3 | 6 | 2 | |||||||||
Interest paid | (956 | ) | (956 | ) | (842 | ) | ||||||
Interest received | 16 | 19 | 111 | |||||||||
Free cash flow | 1,933 | 737 | 1,823 | |||||||||
Deduct pension deficit payment | (525 | ) | – | (320 | ) | |||||||
Acquisitions and disposals | (68 | ) | (227 | ) | (364 | ) | ||||||
Net (purchase) sale of current financial assets | (246 | ) | 286 | (159 | ) | |||||||
Net (repayment) drawdown of borrowings | (497 | ) | 522 | 2,061 | ||||||||
Dividends paid | (265 | ) | (1,222 | ) | (1,236 | ) | ||||||
Net issue (purchase) of treasury shares | 4 | (209 | ) | (1,413 | ) | |||||||
Foreign exchange | (7 | ) | 54 | 25 | ||||||||
Net increase (decrease) in cash and cash equivalents | 329 | (59 | ) | 417 | ||||||||
Cash and cash equivalents at the start of the year | 1,115 | 1,174 | 757 | |||||||||
Cash and cash equivalents at the end of the year | 1,444 | 1,115 | 1,174 | |||||||||
![(BAR CHART)](https://capedge.com/proxy/20-F/0000950123-10-053013/u08916u0891647a.jpg)
Table of Contents
Table of Contents
Foreign | ||||||||||||||||||||
exchange | Acquisitions | |||||||||||||||||||
At | and fair | and other | At | |||||||||||||||||
1 April | Cash | value | non cash | 31 March | ||||||||||||||||
2009 | flow | movements | movements | 2010 | ||||||||||||||||
Movements in net debt | £m | £m | £m | £m | £m | |||||||||||||||
Bank overdrafts | 185 | (177 | ) | – | – | 8 | ||||||||||||||
Debt due within 1 year | 1,357 | (1,006 | ) | 377 | 2,533 | 3,261 | ||||||||||||||
Debt due after 1 year | 12,365 | 509 | (817 | ) | (2,535 | ) | 9,522 | |||||||||||||
Cash at bank and in hand | (562 | ) | 360 | 5 | – | (197 | ) | |||||||||||||
Cash equivalents | (738 | ) | (519 | ) | 2 | – | (1,255 | ) | ||||||||||||
Current asset investments | (163 | ) | (246 | ) | 1 | 2 | (406 | ) | ||||||||||||
12,444 | (1,079 | ) | (432 | ) | – | 10,933 | ||||||||||||||
Adjustmentsa | (2,083 | ) | – | 433 | – | (1,650 | ) | |||||||||||||
Net debt | 10,361 | (1,079 | ) | 1 | – | 9,283 | ||||||||||||||
a | Adjustments to net debt of £1,650m at 31 March 2010 (2009: £2,083m) comprise £1,326m (2009: £1,766m) arising from the re-translation of currency denominated balances at swapped rates where hedged and £324m (2009: £317m) to remove fair value adjustments and accrued interest. |
(£m)
![(BAR CHART)](https://capedge.com/proxy/20-F/0000950123-10-053013/u08916u0891648a.jpg)
a | Balances reported at swapped rates where hedged. |
4 | In the event that cumulative shareholder distributions exceed |
Table of Contents
cumulative total pension contributions over the three-year period to 31 December 2011, then BT will make additional matching contributions to the scheme. Total pension contributions (including regular contributions) are expected to be approximately £2.4bn over the three years. | ||
4 | In the event that BT generates net cash proceeds greater than £1bn from disposals and acquisitions in any 12-month period to 31 December 2011, then BT will make additional contributions to the scheme equal to one third of those net cash proceeds. | |
4 | A negative pledge that provides comfort to the scheme that future creditors will not be granted superior security to the scheme in excess of a £1.5bn threshold. |
Payments due by period | ||||||||||||||||||||
Less | Between | Between | More | |||||||||||||||||
than 1 | 1 and 3 | 3 and 5 | than 5 | |||||||||||||||||
Contractual obligations | Total | year | years | years | years | |||||||||||||||
and commitments | £m | £m | £m | £m | £m | |||||||||||||||
Loans and other borrowingsa | 12,493 | 3,253 | 1,753 | 1,204 | 6,283 | |||||||||||||||
Finance lease obligations | 304 | 16 | 28 | 20 | 240 | |||||||||||||||
Operating lease obligations | 7,687 | 494 | 891 | 775 | 5,527 | |||||||||||||||
Capital commitments | 383 | 330 | 28 | 23 | 2 | |||||||||||||||
Pension deficit obligations | 11,012 | 525 | 1,108 | 1,219 | 8,160 | |||||||||||||||
Total | 31,879 | 4,618 | 3,808 | 3,241 | 20,212 | |||||||||||||||
a | Excludes fair value adjustments for hedged risks. |
Table of Contents
Operating | Capital | |||||||||||
costs | expenditure | Total | ||||||||||
Year ended 31 March 2010 | £m | £m | £m | |||||||||
Reported | 19,116 | 2,533 | 21,649 | |||||||||
Less: | ||||||||||||
Specific items | (427) | – | (427 | ) | ||||||||
Depreciation and amortisation | (3,039) | – | (3,039 | ) | ||||||||
Leaver costs | (142) | – | (142 | ) | ||||||||
15,508 | 2,533 | 18,041 | ||||||||||
Less: | ||||||||||||
Foreign exchange | (316) | (16 | ) | (332 | ) | |||||||
Acquisitions | (32) | – | (32 | ) | ||||||||
Total underlying costs | 15,160 | 2,517 | 17,677 | |||||||||
Table of Contents
Table of Contents
Table of Contents
![]() | Sir Michael Rake Chairmanc,d,e,f |
![]() | Ian Livingston Chief Executivea,f |
![]() | Tony Chanmugam Group Finance Directora |
![]() | Gavin Patterson Chief Executive, BT Retaila,e |
![]() | Andrew Parker |
Tony Chanmugam, Group Finance Director
Sally Davis, Chief Executive, BT Wholesale
Jeff Kelly, Chief Executive, BT Global Services
Roel Louwhoff, Chief Executive, BT Operate
Gavin Patterson, Chief Executive, BT Retail
Clive Selley, Chief Executive, BT Innovate & Design
Table of Contents
![]() | Tony Balld |
![]() | J Eric Danielsc,d |
![]() | Phil Hodkinsonb,d,e,f |
![]() | Clayton Brendishb,d,e |
![]() | Rt Hon Patricia Hewittb,c,d,f |
![]() | Carl G Symonb,c,g |
Table of Contents
Former directors | Date of change | |||
Matti Alahuhta | 31 May 2009 | |||
Maarten van den Bergh | 15 July 2009 | |||
Hanif Lalani | 7 January 2010 | |||
Deborah Lathen | 31 January 2010 | |||
New director | ||||
Tony Ball | 16 July 2009 |
4 | Strategy | |
4 | Development | |
4 | Growing shareholder value | |
4 | Oversight and control | |
4 | Corporate governance. |
It approves BT’s: |
4 | values, ethics and business policies and practices | |
4 | strategic plans | |
4 | annual budget | |
4 | capital expenditure and investments budgets | |
4 | larger capital expenditure proposals | |
4 | the overall system of internal controls, governance and compliance authorities. |
Table of Contents
4 | consider each conflict situation separately on its particular facts | |
4 | consider the conflict situation in conjunction with the rest of their duties under the 2006 Act | |
4 | keep records and Board minutes as to authorisations granted by directors and the scope of any approvals given | |
4 | regularly review conflict authorisation. |
Table of Contents
4 | BT Global Services contract performance | |
4 | review of the internal control requirements under the Combined Code and Sarbanes-Oxley | |
4 | draft Annual Report and Form 20-F. | |
May: | ||
4 | review of going concern | |
4 | review of external audit and non-audit fees |
Table of Contents
4 | the Annual Report and Form 20-F, full year results announcements and related formal statements | |
4 | corporation tax provisions | |
4 | accounting estimates and judgements | |
4 | review of the internal control requirements under the Combined Code and Sarbanes-Oxley | |
4 | annual report on the performance of the Internal Audit function and year end Corporate Summary report | |
4 | annual update on ‘whistleblowing’, litigation trends and major litigation report | |
4 | external auditors’ report. | |
July: | ||
4 | review of the external and internal auditors’ effectiveness | |
4 | first quarter results, announcement and related formal statements | |
4 | BT Security update. | |
September: | ||
4 | review of internal audit effectiveness. November: | |
4 | review of fees for audit and non-audit services | |
4 | review of the line of business Audit Committees | |
4 | enterprise risk management review | |
4 | half year results, announcement and related formal statements | |
4 | external audit plan | |
4 | BT Global Services major contracts review | |
4 | review of internal control requirements under the Combined Code and Sarbanes-Oxley | |
4 | forward strategy for Internal Audit. | |
February: | ||
4 | third quarter results, announcement and related formal statements | |
4 | internal audit review update | |
4 | risk management agenda for 2010/11 | |
4 | external auditors’ quarterly report | |
4 | annual review of accounting policies | |
4 | review of the operation of Sarbanes-Oxley s404 processes. |
Table of Contents
4 | the appointment of Patricia Hewitt as Senior Independent Director in succession to Maarten van den Bergh; and | |
4 | the appointment of Tony Ball as a non-executive director to bring industry-relevant knowledge and experience to the Board, having held senior executive positions in broadcasting and telecommunication businesses in the US and Europe, including the UK. |
4 | the appointment of Tony Ball as a director, to bring broadcasting and telecommunication business experience to the Board | |
4 | an increased focus on improving BT Global Services’ performance | |
4 | more frequent discussion at Board meetings on strategic issues and opportunities | |
4 | building further customer and investor confidence | |
4 | improving the quality and depth of oversight functions. |
Table of Contents
AND SUSTAINABLE BUSINESS
4 | progress against CR strategy and key performance indicators | |
4 | community and charity support programmes | |
4 | the development of BT’s volunteering and sustainability skills programmes | |
4 | activities supporting BT’s environment and climate change programmes | |
4 | proposals relating to the development of BT’s low carbon economy solutions. |
Table of Contents
4 | TheRemuneration Committeeendorsed the Chief Executive’s proposal that directors and senior executives should receive no salary increase in 2009/10, in line with the pay freeze for all employees. | |
4 | In view of our executive team’s strong performance, the Committee decided to increase salaries to directors and senior executives from June 2010. Executive directors’ salaries are set to be below the median level for directors of comparable companies. The salary increases proposed for 2010/11 are in line with that principle. | |
4 | The demanding conditions set for the 2009/10 annual bonus were largely met. In particular, BT exceeded the targets for free cash flow and earnings per share (EPS). The Chief Executive was therefore awarded a bonus of 142% of target; 71% of his maximum bonus opportunity. | |
4 | In 2008, shareholders supported a two-stage change in executive remuneration, designed to simplify the structure and bring total remuneration closer to our comparators. As we reported last year, however, the second stage was postponed in view of the company’s disappointing performance. The second stage will now be implemented in 2010/11, but with lower maximum long-term incentive opportunities than originally proposed, and lower than awards granted in previous years. | |
4 | Following consultation with major shareholders, we strengthened the performance measures for our long-term Incentive Share Plan. For awards granted from 2009/10, half of each award is linked to total shareholder return and half to a new three-year cumulative free cash flow measure. | |
4 | The Committee introduced a clawback mechanism into all executive share plans, making BT one of the first companies to take such action. | |
4 | Having considered the impact of personal income tax changes from April 2010, the Committee endorsed the Chief Executive’s recommendation that no changes be made in order to either avoid or to compensate for the higher top tax rate. | |
4 | Hanif Lalani, Chief Executive of BT Global Services and formerly Group Finance Director, resigned as a director on 7 January 2010. Details of his leaving arrangements are disclosed in this report. |
4 | Remuneration policy (not subject to audit) |
(i) | Role of the Remuneration Committee | ||
(ii) | Remuneration principles | ||
(iii) | Remuneration in 2009/10 and 2010/11 | ||
(iv) | Other matters | ||
Executive share ownership | |||
Pensions | |||
Other benefits | |||
Director who has left the Board | |||
Service agreements | |||
Outside appointments | |||
Non-executive directors’ letters of appointment | |||
Non-executive directors’ remuneration | |||
Directors’ service agreements and contracts of appointment | |||
Directors’ interests | |||
Performance graph |
4 | Remuneration review (audited) |
Directors’ emoluments | |||
Former directors | |||
Loans | |||
Pensions | |||
Share options | |||
Share awards under long-term incentive plans | |||
Vesting of outstanding share awards and options | |||
Deferred Bonus Plan awards | |||
Share awards under the Employee Share Investment Plan |
4 | Matti Alahuhta (retired 31 May 2009) | |
4 | Eric Daniels | |
4 | Deborah Lathen (retired 31 January 2010) | |
4 | Carl Symon |
Table of Contents
The Committee is also satisfied that the incentive structure for senior executives does not raise environmental, social or governance risks by inadvertently motivating irresponsible behaviour. Part of the annual bonus depends upon an individual assessment of each senior executive’s personal contribution to environmental, social and governance measures, including results of the regular employee surveys.
2008/09 | 2009/10 | 2010/11 | ||||
Base salary | increases to align | no increases | increases to align | |||
with the market | with the market | |||||
Annual bonus | ||||||
Chief Executive | target 100% salary | target 100% salary | target 125% salary | |||
maximum 200% salary | maximum 200% salary | maximum 200% salary | ||||
Executive directors | target 80% salary | target 80% salary | target 100% salary | |||
maximum 120% salary | maximum 120% salary | maximum 150% salary | ||||
Deferred bonus (in shares) | ||||||
Chief Executive | 1x cash bonus | 1x cash bonus | 1x cash bonus | |||
Executive directors | 75% of cash bonus | 75% of cash bonus | 75% of cash bonus | |||
Incentive shares | ||||||
Chief Executive | 3x salary | 3x salary | 2.5x salarya | |||
Executive directors | 2.5x salary | 2.5x salary | 2x salarya | |||
Retention shares | none | none | none | |||
Share options | none | none | none | |||
a | Although shareholders agreed a maximum award of incentive shares of 3x salary for the Chief Executive (2.5x for executive directors) , theRemuneration Committeeapproved a proposal from the Chairman and Chief Executive to reduce this to 2.5x salary for the Chief Executive (2x salary for executive directors), in view of the wider economic conditions and the base salary increases. |
Table of Contents
% of total bonus opportunity | ||
Earnings per share (EPS) | 30% | |
Free cash flow | 30% | |
Customer service | 25% | |
Environmental, social and | ||
governance objectives | 15% |
Measure (weighting) | Threshold | Target | Stretch | Actual | ||||||||||||
Financial measures (60%) | ||||||||||||||||
EPS (30%) | 15% | 30% | 60% | 43% | ||||||||||||
Free cash flow (30%) | 15% | 30% | 60% | 60% | ||||||||||||
Customer service (25%) | 12.5% | 25% | 50% | 18% | ||||||||||||
Sub-total | 121% | |||||||||||||||
Environment, social and | ||||||||||||||||
governance (15%) | 7.5% | 15% | 30% | a | ||||||||||||
a | Performance is assessed on an individual basis. |
Fixed | Variable | Variable | ||||||||||||||
base pay | cash | shares | Total | |||||||||||||
Ian Livingston | ||||||||||||||||
2010/11 target | 22% | 28% | 50% | 100% | ||||||||||||
compositiona | ||||||||||||||||
2009/10 actual | 38% | 53% | 9% | 100% | ||||||||||||
compositionb | ||||||||||||||||
Tony Chanmugam | ||||||||||||||||
2010/11 target | 28% | 28% | 44% | 100% | ||||||||||||
compositiona | ||||||||||||||||
2009/10 actual | 48% | 46% | 6% | 100% | ||||||||||||
compositionb | ||||||||||||||||
Gavin Patterson | ||||||||||||||||
2010/11 target | 28% | 28% | 44% | 100% | ||||||||||||
compositiona | ||||||||||||||||
2009/10 actual | 46% | 45% | 9% | 100% | ||||||||||||
compositionb | ||||||||||||||||
a | Target remuneration comprises current base salary, on-target annual bonus and the expected value of awards under the deferred bonus and incentive share plans, excluding retention shares. | |
b | Actual remuneration comprises base salary, actual cash bonus and the value received from deferred shares and incentive shares (awards granted in 2006 and vested in 2009) during the financial year, excluding retention shares. |
Table of Contents
Accenture | France Telecom | Telecom Italia | ||
AT & T | Hellenic Telecom | Telefónica | ||
Belgacom | IBM | Telekom Austria | ||
BSkyB | National Grid | Telenor | ||
BT Group | Portugal Telecom | TeliaSonera | ||
Cable & Wireless Worldwide | Royal KPN | Verizon | ||
Cap Gemini | Swisscom | Virgin Media | ||
Centrica | TalkTalk | Vodafone | ||
Deutsche Telekom | ||||
Relative TSR over 3 years | % of share award vesting | |||
Below median | Nil | |||
Median | 12.5% | |||
Between median and upper quartile | Between 12.5% and 50% on straight line basis | |||
Upper quartile | 50% | |||
Table of Contents
Table of Contents
Additional | ||||||||
Committee | Member’s fee | Chairman’s fee | ||||||
Audit | £10,000 | £15,000 | ||||||
Remuneration | £10,000 | £10,000 | ||||||
Nominating | £5,000 | £5,000 | ||||||
Other Board committees | £5,000 | £5,000 | ||||||
Chairman and executive directors | Commencement date | Expiry date of current service agreement or letter of appointment | ||||
Sir Michael Rake I Livingston T Chanmugam G Patterson | 26 September 2007 1 June 2008 1 December 2008 1 June 2008 | ![]() | The contract is terminable by the company on 12 months’ notice and by the director on six months’ notice. | |||
Non-executive directors | ||||||
C Brendish C G Symon | 1 September 2002 14 January 2002 | ![]() | Letters of appointment were for an initial period of three years. The appointments were extended for three years in 2005 and by a further three years in 2008. The appointments are terminable by the company or the director on three months’ notice. | |||
P Hodkinson | 1 February 2006 | Letter of appointment was for an initial period of three years. The appointment was extended for three years in 2009. The appointment is terminable by the company or the director on three months’ notice. | ||||
J E Daniels P Hewitt T Ball | 1 April 2008 24 March 2008 16 July 2009 | ![]() | Letters of appointment are for an initial period of three years and are terminable by the company or the director on three months’ notice. | |||
Former directors | ||||||
H Lalani | 7 February 2005 | The contract was terminable by the company on 12 months’ notice and by the director on six months’ notice. The contract was terminated on 11 January 2010. | ||||
M van den Bergh | 1 September 2000 | Letter of appointment was for an initial period of three years. The appointment was extended for three years in 2003 and extended for a further three years in 2006. The appointment was terminable by the company or director on three months’ notice. The appointment terminated at the conclusion of the Annual General Meeting on 15 July 2009. | ||||
M Alahuhta | 1 February 2006 | Letter of appointment was for an initial period of three years. The appointment was extended for three months in February 2009. The appointment terminated on 31 May 2009. | ||||
D Lathen | 1 February 2007 | Letter of appointment was for an initial period of three years and was terminable by the company or the director on three months’ notice. Appointment terminated on 31 January 2010. | ||||
Table of Contents
Number of shares | ||||||||
Beneficial holdings | 2010 | 2009 | ||||||
Sir Michael Rake | 108,362 | 102,056 | ||||||
I Livingstona,b | 1,084,513 | 759,108 | ||||||
T Chanmugama,b | 205,629 | 49,249 | ||||||
G Pattersona,b | 409,181 | 252,769 | ||||||
T Ballc | 15,000 | – | ||||||
C Brendish | 41,920 | 36,920 | ||||||
J E Daniels | 12,647 | 12,647 | ||||||
P Hewitt | 10,554 | 6,534 | ||||||
P Hodkinson | 16,683 | 9,261 | ||||||
C G Symon | 20,056 | 20,056 | ||||||
Total | 1,924,545 | 1,248,600 | ||||||
a | Includes free shares awarded under the BT Group Employee Share Investment Plan. | |
b | The executive directors decided to receive their annual bonuses for 2008/09 in shares. On 1 June 2009, 224,385 shares were purchased for Ian Livingston, 67,097 shares were purchased for Tony Chanmugam and 105,592 shares were purchased for Gavin Patterson. | |
c | Tony Ball was appointed as a director on 16 July 2009. |
over the five financial years to 31 March 2010
![(LINE GRAPH)](https://capedge.com/proxy/20-F/0000950123-10-053013/u08916u0891661.jpg)
Table of Contents
Pension allowance net of pension contributionsa | ||||||||||||||||||||||||||||||||||||||||
Other benefits excluding pension | ||||||||||||||||||||||||||||||||||||||||
Basic salary and fees | ||||||||||||||||||||||||||||||||||||||||
Total salary and fees | Annual bonus | Expense allowance | Total | Total | Deferred Bonus Planb | |||||||||||||||||||||||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||||||||||||||||||||||||||
£000 | £000 | £000 | £000 | £000 | £000 | £000 | £000 | £000 | £000 | |||||||||||||||||||||||||||||||
Sir Michael Rakec | 600 | – | 600 | – | – | 70 | 670 | 630 | – | – | ||||||||||||||||||||||||||||||
I Livingstonc | 850 | 10 | 860 | 1,206 | – | 39 | 2,105 | 1,174 | 1,206 | 343 | ||||||||||||||||||||||||||||||
T Chanmugamc,d,e | 475 | 143 | 618 | 463 | 19 | 9 | 1,109 | 275 | 346 | 77 | ||||||||||||||||||||||||||||||
G Pattersonc,d | 500 | 100 | 600 | 487 | 19 | 27 | 1,133 | 698 | 365 | 121 | ||||||||||||||||||||||||||||||
T Ballf | 53 | – | 53 | – | – | – | 53 | – | – | – | ||||||||||||||||||||||||||||||
C Brendish | 80 | – | 80 | – | – | – | 80 | 80 | – | – | ||||||||||||||||||||||||||||||
J E Daniels | 75 | – | 75 | – | – | – | 75 | 74 | – | – | ||||||||||||||||||||||||||||||
P Hewittg | 128 | – | 128 | – | – | – | 128 | 75 | – | – | ||||||||||||||||||||||||||||||
P Hodkinson | 100 | – | 100 | – | – | – | 100 | 100 | – | �� | ||||||||||||||||||||||||||||||
C G Symonh | 150 | – | 150 | – | – | 24 | 174 | 150 | – | – | ||||||||||||||||||||||||||||||
H Lalanic,d,i | 458 | 176 | 634 | 503 | 4 | 25 | 1,166 | 805 | – | – | ||||||||||||||||||||||||||||||
M Alahuhtaj | 12 | – | 12 | – | – | – | 12 | 70 | – | – | ||||||||||||||||||||||||||||||
D Lathenh,k | 63 | – | 63 | – | – | 18 | 81 | 75 | – | – | ||||||||||||||||||||||||||||||
M van den Berghl | 44 | – | 44 | – | – | – | 44 | 150 | – | – | ||||||||||||||||||||||||||||||
F Barraultm | – | – | – | – | – | – | – | 1,257 | – | – | ||||||||||||||||||||||||||||||
B Verwaayenn | – | – | – | – | – | – | – | 577 | – | – | ||||||||||||||||||||||||||||||
3,588 | 429 | 4,017 | 2,659 | 42 | 212 | 6,930 | 6,190 | 1,917 | 541 | |||||||||||||||||||||||||||||||
Termination payments | ||||||||||||||||||||||||||||||||||||||||
H Lalanio | 131 | – | ||||||||||||||||||||||||||||||||||||||
F Barraultp | 10 | 1,599 | ||||||||||||||||||||||||||||||||||||||
B Verwaayen | – | 700 | ||||||||||||||||||||||||||||||||||||||
7,071 | 8,489 | |||||||||||||||||||||||||||||||||||||||
a | Pension allowance paid in cash for the 2009/10 financial year – see ‘Pensions’ below. | |
b | Deferred annual bonuses payable in shares in three years’ time, subject to continued employment. | |
c | Other benefits include some or all of the following: company car, fuel or driver, personal telecommunications facilities and home security, medical and dental cover for the director and immediate family, special life cover, professional subscriptions, personal tax advice, and financial counselling. | |
d | Expense allowance in the above table includes a monthly cash allowance in lieu of a company car or part of such allowance which has not been used for a company car. | |
e | Tony Chanmugam was granted a retention cash award in early 2008 prior to his appointment as a director. He will receive a payment of £315,000 in May 2010. | |
f | Tony Ball was appointed as a director on 16 July 2009. | |
g | Patricia Hewitt was appointed as Senior Independent Director on 16 July 2009. | |
h | Includes an additional fee for regular travel from overseas to Board and Board committee meetings. | |
i | Hanif Lalani resigned as a director on 7 January 2010 and left the company on 31 March 2010. | |
j | Matti Alahuhta retired as a director on 31 May 2009. | |
k | Deborah Lathen retired as a director on 31 January 2010. | |
l | Maarten van den Bergh retired as a director on 15 July 2009. | |
m | François Barrault resigned as a director on 30 October 2008 and left the company on 30 November 2008. | |
n | Ben Verwaayen retired as a director on 30 June 2008. | |
o | Hanif Lalani’s contract was terminated on 11 January 2010. In accordance with his contract, his salary of £585,000 per annum and the value of all the benefits to which he is entitled, amounting to £195,000 per annum, will continue to be provided until the earlier of nine months from 31 March 2010 or his obtaining full-time employment. | |
p | François Barrault continued to receive medical insurance until 30 November 2009, in accordance with the terms of his contract. |
Table of Contents
Transfer | ||||||||||||||||||||||||||||
value of | ||||||||||||||||||||||||||||
increase | ||||||||||||||||||||||||||||
Change | in accrued | |||||||||||||||||||||||||||
in transfer | Additional | benefits in | ||||||||||||||||||||||||||
value c-d | accrued benefits | e less | ||||||||||||||||||||||||||
less directors’ | earned in | directors’ | ||||||||||||||||||||||||||
Accrued pension | Transfer value of accrued benefits | contributions | the year | contributions | ||||||||||||||||||||||||
2010 | 2009 | 2010 | 2009 | 2010 | 2010 | 2010 | ||||||||||||||||||||||
£000a | £000b | £000c | £000d | £000 | £000e | £000 | f | |||||||||||||||||||||
T Chanmugamg,h | 180 | 140 | 3,536 | 2,419 | 1,117 | 35 | 693 | |||||||||||||||||||||
H Lalanig,i | 166 | 161 | 2,382 | 1,742 | 640 | – | – | |||||||||||||||||||||
a-d | As required by the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008. | |
a-b | The values represent the deferred pension to which they would have been entitled had they left the company on 31 March 2010 and 2009, respectively. | |
c | Transfer value of the deferred pension in column (a) as at 31 March 2010 calculated on the basis of actuarial advice in accordance with relevant legislation. The transfer value represents a liability of the BTPS rather than any remuneration due to the individual, and cannot be meaningfully aggregated with annual remuneration, as it is not money the individual is entitled to receive. | |
d | The equivalent transfer value but calculated as at 31 March 2009 on the assumption that the director left the company on that date. | |
e | The increase in pension built up during the year, net of inflation. The gross amount can be calculated by deducting the amount under column (b) from the amount under column (a). | |
f | The transfer value of the pension in column (e), less directors’ contributions. | |
g | Directors’ contributions in the financial year 2009/10 were as follows: Hanif Lalani £nil (2009: £nil); Tony Chanmugam, £nil (2009: £9,500). | |
h | Tony Chanmugam was appointed as a director on 1 December 2008. | |
i | Hanif Lalani resigned as a director on 7 January 2010 and left the company on 31 March 2010. |
Table of Contents
Number of shares under option | ||||||||||||||||||||||||||||||||
1 April 2009 | Usual date | |||||||||||||||||||||||||||||||
or date of | 31 March | Option price | from which | Usual expiry | ||||||||||||||||||||||||||||
appointment if later | Granted | Lapsed | Exercised | 2010 | per share | exercisable | date | |||||||||||||||||||||||||
Sir Michael Rake | – | 12,110 | a | – | – | 12,110 | 68p | 01/08/2012 | 01/02/2013 | |||||||||||||||||||||||
I Livingston | – | 12,110 | a | – | – | 12,110 | 68p | 01/08/2012 | 01/02/2013 | |||||||||||||||||||||||
T Chanmugam | 37,384 | b | – | – | – | 37,384 | 192p | 24/06/2007 | 24/06/2014 | |||||||||||||||||||||||
– | 12,110 | a | – | – | 12,110 | 68p | 01/08/2012 | 01/02/2013 | ||||||||||||||||||||||||
G Patterson | 11,198 | d | – | 11,198 | – | – | 146p | 14/08/2009 | 14/02/2010 | |||||||||||||||||||||||
98,178 | b | – | – | – | 98,178 | 192p | 24/06/2007 | 24/06/2014 | ||||||||||||||||||||||||
Former director | ||||||||||||||||||||||||||||||||
H Lalanie | 90,625 | b | – | – | – | 90,625 | 192p | 24/06/2007 | 24/06/2014 | |||||||||||||||||||||||
105,264 | c | – | – | – | 105,264 | 199.5p | 24/06/2004 | 24/06/2013 | ||||||||||||||||||||||||
– | 12,110 | a | 12,110 | – | – | 68p | 01/08/2012 | 01/02/2013 | ||||||||||||||||||||||||
Total | 342,649 | 48,440 | 23,308 | – | 367,781 | |||||||||||||||||||||||||||
All of the above options were granted for nil consideration. | ||
a | Option granted on 7 April 2009 under the Employee Sharesave Scheme, in which all employees of the company are entitled to participate. | |
b | Options granted under the GSOP on 24 June 2004. The exercise of options was subject to a performance measure being met. The performance measure is relative TSR compared with a group of 20 companies from the European Telecom Sector as at 1 April 2004. BT’s TSR had to be in the upper quartile for all the options to become exercisable. At median 30% of the options would be exercisable. Below that point none of the options could be exercised. The three-year performance period ended on 31 March 2007. At that date, the company was at 8th position against the comparator group and as a result, 42% of the options lapsed and 58% of each option became exercisable on 24 June 2007. | |
c | Option granted under the GSOP (Special Incentive Award) on 24 June 2003, prior to Hanif Lalani’s appointment as a director. This option is not subject to a performance measure as the grant was linked to personal performance. | |
d | Option granted on 25 June 2004 under the Employee Sharesave Scheme, in which all employees of the company are eligible to participate. | |
e | Hanif Lalani left the company on 31 March 2010. His options under the GSOP were preserved until 31 March 2011. His options under the Employee Sharesave Scheme lapsed on 31 March 2010. |
Table of Contents
Total | ||||||||||||||||||||||||||||||||||||||||
number of | Monetary | |||||||||||||||||||||||||||||||||||||||
award | value of | |||||||||||||||||||||||||||||||||||||||
shares | Market | vested | ||||||||||||||||||||||||||||||||||||||
1 April | Dividends | 31 March | Normal | Price | price | award | ||||||||||||||||||||||||||||||||||
2009 | Awarded | re-invested | Vested | Lapsed | 2010 | vesting date | on grant | at vesting | £000 | |||||||||||||||||||||||||||||||
I Livingston | ||||||||||||||||||||||||||||||||||||||||
ISP 2007a | 383,307 | – | 9,961 | – | 393,268 | – | 31/3/2010 | 321.67p | – | – | ||||||||||||||||||||||||||||||
ISP 2008b | 1,397,025 | – | 36,307 | – | – | 1,433,332 | 31/3/2011 | 203p | – | – | ||||||||||||||||||||||||||||||
ISP 2009c | – | 1,985,723 | 51,606 | – | – | 2,037,329 | 31/3/2012 | 128.41p | – | – | ||||||||||||||||||||||||||||||
T Chanmugam | ||||||||||||||||||||||||||||||||||||||||
ISP 2007a | 92,411 | – | 2,400 | – | 94,811 | – | 31/3/2010 | 317.67p | – | – | ||||||||||||||||||||||||||||||
ISP 2008b | 145,179 | – | 3,772 | – | – | 148,951 | 31/3/2011 | 203p | – | – | ||||||||||||||||||||||||||||||
ISP 2009c | – | 924,723 | 24,032 | – | – | 948,755 | 31/3/2012 | 128.41p | – | – | ||||||||||||||||||||||||||||||
RSP 2007d | 97,772 | – | 2,540 | 100,312 | – | – | 20/3/2010 | 300p | 121.07 | 121 | ||||||||||||||||||||||||||||||
G Patterson | ||||||||||||||||||||||||||||||||||||||||
ISP 2007a | 124,941 | – | 3,246 | – | 128,187 | – | 31/3/2010 | 317.67p | – | – | ||||||||||||||||||||||||||||||
ISP 2008b | 684,815 | – | 17,797 | – | – | 702,612 | 31/3/2011 | 203p | – | – | ||||||||||||||||||||||||||||||
ISP 2009c | – | 973,393 | 25,296 | – | – | 998,689 | 31/3/2012 | 128.41p | – | – | ||||||||||||||||||||||||||||||
Former director | ||||||||||||||||||||||||||||||||||||||||
H Lalani | ||||||||||||||||||||||||||||||||||||||||
ISP 2007a | 251,887 | – | 6,546 | – | 258,433 | – | 31/3/2010 | 321.67p | – | – | ||||||||||||||||||||||||||||||
ISP 2008b | 801,235 | – | 20,823 | – | 822,058 | – | 31/3/2011 | 203p | – | – | ||||||||||||||||||||||||||||||
ISP 2009c | – | 1,138,870 | 29,597 | – | 1,168,467 | – | 31/3/2012 | 128.41p | – | – | ||||||||||||||||||||||||||||||
a | Awards under the ISP granted in 2007 vest subject to meeting a performance condition, on 31 March 2010. The performance measure is relative TSR compared with a group of 15 companies from the European Telecom Sector as at 1 April 2007. BT’s TSR had to be in the upper quartile for all the shares to vest. At median, 25% of the shares would vest. At 31 March 2010, BT’s TSR was at 14th position against the comparator group. As a result all of the awards lapsed on that date. | |
b | Awards under the ISP granted on 25 June 2008. The number of shares subject to awards was calculated using the average middle market price of a BT share for the three days prior to the grant. The awards will vest subject to meeting a performance condition, on 31 March 2011. The performance measure is relative TSR compared with a group of 15 companies from the European Telecom Sector as at 1 April 2008. BT’s TSR must be in the upper quartile for all the shares to vest. At median, 25% of the shares would vest. Below that point, no shares would vest. | |
c | Awards under the ISP granted on 7 August 2009. The number of shares subject to awards was calculated using the average middle market price of a BT share for the three days prior to the grant. 50% of each award of shares is linked to TSR compared with a group of 25 companies and 50% is linked to a three-year cumulative free cash flow measure. The awards will vest subject to meeting the two performance conditions, on 31 March 2012. | |
d | Tony Chanmugam was granted an RSP award on 20 March 2007. The award vested in full on 20 March 2010. Vesting of RSP awards is not subject to a performance target being met. | |
e | Hanif Lalani left the company on 31 March 2010. On that date, all of his outstanding awards under the ISP lapsed. |
31 March 2010 | 31 March 2009 | |||||||||||||||||||||||||||
Free cash | Percentage of | Percentage of | Percentage of | |||||||||||||||||||||||||
Vesting date | flow position | shares vesting | TSR position | shares vesting | TSR position | shares vesting | ||||||||||||||||||||||
ISP 2006a | 31/03/2009 | N/A | N/A | 14 | 0% | 14 | 0% | |||||||||||||||||||||
ISP 2007b | 31/03/2010 | N/A | N/A | 14 | 0% | 14 | 0% | |||||||||||||||||||||
ISP 2008c | 31/03/2011 | N/A | N/A | 14 | 0% | 14 | 0% | |||||||||||||||||||||
ISP 2009d | 31/03/2012 | 100% | 50% | 10 | 31% | – | – | |||||||||||||||||||||
a | The performance period for the ISP 2006 ended on 31 March 2009. BT’s TSR position was at 14th position against the European Telecom Sector of 17 companies. As a result all the shares lapsed on that date. | |
b | The performance period for the ISP 2007 ended on 31 March 2010. BT’s TSR position was at 14th position against the European Telecom Sector of 15 companies. As a result all the shares lapsed on that date. | |
c | The performance period for the ISP 2008 ends on 31 March 2011. | |
d | The performance period for the ISP 2009 ends on 31 March 2012. 50% of each award of shares is linked to TSR; and 50% is linked to a three-year cumulative free cash flow measure. (SeeLong-term share-based incentiveson page 69). The awards will vest subject to meeting the two performance conditions on 31 March 2012. |
Table of Contents
Total | ||||||||||||||||||||||||||||||||||||||||
number of | Monetary | |||||||||||||||||||||||||||||||||||||||
award | value of | |||||||||||||||||||||||||||||||||||||||
shares | Market | vested | ||||||||||||||||||||||||||||||||||||||
1 April | Dividends | 31 March | Price | price | award | |||||||||||||||||||||||||||||||||||
2009 | Awardeda | re-invested | Vested | Lapsed | 2010 | Vesting date | at grant | at vesting | £000 | |||||||||||||||||||||||||||||||
I Livingston | 167,149 | – | – | 167,149 | – | – | 1/8/2009 | 231.58p | 124.43p | 208 | ||||||||||||||||||||||||||||||
138,708 | – | 3,604 | – | – | 142,312 | 1/8/2010 | 321.67p | – | – | |||||||||||||||||||||||||||||||
221,199 | – | 5,747 | – | – | 226,946 | 1/8/2011 | 203p | – | – | |||||||||||||||||||||||||||||||
– | 267,410 | 6,948 | – | – | 274,358 | 1/8/2012 | 128.41p | – | – | |||||||||||||||||||||||||||||||
T Chanmugam | 51,230 | – | – | 51,230 | – | – | 1/8/2009 | 231.58p | 124.43p | 64 | ||||||||||||||||||||||||||||||
37,450 | – | 972 | – | – | 38,422 | 1/8/2010 | 321.67p | – | – | |||||||||||||||||||||||||||||||
52,007 | – | 1,350 | – | – | 53,357 | 1/8/2011 | 203p | – | – | |||||||||||||||||||||||||||||||
– | 59,972 | 1,557 | – | – | 61,529 | 1/8/2012 | 128.41p | – | – | |||||||||||||||||||||||||||||||
G Patterson | 84,071 | – | – | 84,071 | – | – | 1/8/2009 | 231.58p | 124.43p | 105 | ||||||||||||||||||||||||||||||
57,440 | – | 1,491 | – | – | 58,931 | 1/8/2010 | 321.67p | – | – | |||||||||||||||||||||||||||||||
90,267 | – | 2,344 | – | – | 92,611 | 1/8/2011 | 203p | – | – | |||||||||||||||||||||||||||||||
– | 94,380 | 2,452 | – | – | 96,832 | 1/8/2012 | 128.41p | – | – | |||||||||||||||||||||||||||||||
Former director | ||||||||||||||||||||||||||||||||||||||||
H Lalanib | 127,351 | – | – | 127,351 | – | – | 1/8/2009 | 231.58p | 124.43p | 158 | ||||||||||||||||||||||||||||||
121,533 | – | 3,158 | – | – | 124,691 | 1/8/2010 | 321.67p | – | – | |||||||||||||||||||||||||||||||
154,050 | – | 4,003 | – | 52,679 | 105,374 | 1/8/2011 | 203p | – | – | |||||||||||||||||||||||||||||||
a | Awards granted on 3 August 2009 in respect of the financial year 2008/09. The number of shares subject to awards was calculated using the average middle market price of a BT share for the three days prior to the grant. | |
b | Hanif Lalani left the company on 31 March 2010. His 2008 award was pro-rated and will vest on 1 August 2011. |
Total number of | ||||
shares | ||||
31 March 2010 | ||||
I Livingston | 363 | |||
T Chanmugam | 679 | |||
G Patterson | 247 | |||
Former director | ||||
H Lalania | 679 | |||
a | Hanif Lalani left the company on 31 March 2010. |
Chair of Remuneration Committee
12 May 2010
Table of Contents
Audit | Nominating | Remuneration | ||||||||||||||
Board | Committee | Committee | Committee | |||||||||||||
Number of meetings held | ||||||||||||||||
9 | 6 | 3 | 5 | |||||||||||||
Number of meetings attended (maximum possible) | ||||||||||||||||
Sir Michael Rake | 9 (9) | – | 3 (3) | 3 (5) | ||||||||||||
Tony Balla | 6 (6) | – | 2 (2) | – | ||||||||||||
Clay Brendish | 9 (9) | 6 (6) | 2 (3) | – | ||||||||||||
Tony Chanmugam | 9 (9) | – | – | – | ||||||||||||
Eric Daniels | 9 (9) | – | 3 (3) | 5 (5) | ||||||||||||
Patricia Hewitt | 8 (9) | 6 (6) | 2 (2) | 4 (4) | ||||||||||||
Phil Hodkinson | 9 (9) | 6 (6) | 3 (3) | – | ||||||||||||
Ian Livingston | 9 (9) | – | – | – | ||||||||||||
Gavin Patterson | 9 (9) | – | – | – | ||||||||||||
Carl Symon | 9 (9) | 6 (6) | – | 5 (5) | ||||||||||||
Matti Alahuhtab | 2 (2) | – | – | 1 (1) | ||||||||||||
Maarten van den Berghc | 2 (3) | 2 (2) | – (1) | 1 (1) | ||||||||||||
Hanif Lalanid | 7 (7) | – | – | – | ||||||||||||
Deborah Lathene | 7 (7) | – | – | 2 (3) | ||||||||||||
a | Appointed to the Board on 16 July 2009 | |
b | Resigned from the Board on 31 May 2009 | |
c | Resigned from the Board on 15 July 2009 | |
d | Resigned from the Board on 7 January 2010 | |
e | Resigned from the Board on 31 January 2010 |
Table of Contents
4 | structure of BT’s share capital (refer to page 123) including the rights and obligations attaching to the shares (refer to pages 161 to 164); | |
4 | restrictions on the transfer of BT shares and voting rights (refer to pages 161 and 162); | |
4 | significant direct or indirect shareholdings (refer to page 82); and | |
4 | appointment and replacement of directors (refer to page 163). |
4 | BT has two employee share ownership trusts which hold BT shares for the purpose of satisfying awards made under the various employee share plans. The trustee of the BT Group ESIP |
Table of Contents
may invite participants on whose behalf it holds shares to direct it how to vote in respect of those shares, and if there is an offer for the shares or other transaction which would lead to a change of control of BT, participants may direct it to accept the offer or agree to the transaction. In respect of shares held in the BT Group Employee Share Ownership Trust, the trustee abstains from voting those shares, and if there is an offer for the shares the trustee is not obliged to accept or reject the offer but will have regard to the interests of the participants, may consult them to obtain their views on the offer and may otherwise take the action with respect to the offer it thinks fair: |
4 | we are not aware of any agreements between shareholders that may result in restrictions on the transfer of shares or on voting rights | ||
4 | no person holds securities carrying special rights with regard to control of the Company | ||
4 | proxy appointment and voting instructions must be received by the registrars not less than 48 hours before a general meeting (see also page 161) | ||
4 | the amendment of BT’s articles of association requires shareholder approval in accordance with legislation in force from time to time | ||
4 | the powers of the directors are determined by UK legislation and the articles of association. They are authorised to issue and allot shares, and to undertake purchases of BT shares subject to shareholder approval at the AGM | ||
4 | BT Group plc is not party to any significant agreements that take effect, alter or terminate upon a change of control following a takeover | ||
4 | we do not have any agreements with directors providing for compensation for loss of office or employment that occurs because of a takeover. There is similarly no such provision in standard contracts for employees. |
4 | senior executives collectively review the group’s key risks and have created a group risk register describing the risks, owners and mitigation strategies. This is reviewed by theOperating Committeebefore being reviewed and approved by the Board | |
4 | the lines of business carry out risk assessments of their operations, create risk registers relating to those operations, and ensure that the key risks are addressed | |
4 | senior executives with responsibilities for major group operations report quarterly with their opinion on the effectiveness of the operation of internal controls in their area of responsibility | |
4 | the group’s internal auditors carry out continuing assessments of the quality of risk management and control, report to management and theAudit Committeeon the status of specific areas identified for improvement and promote effective risk management in the lines of business operations | |
4 | theAudit Committee, on behalf of the Board, considers the effectiveness of the operation of internal control procedures in the group during the financial year. It reviews reports from the internal and external auditors and reports its conclusions to the Board. TheAudit Committeehas carried out these actions for the 2010 financial year. |
Table of Contents
Table of Contents
Shares | % of total voting rights | |||||||
Invesco Limited | 780,354,826 | 10.06 | ||||||
BlackRock Inc | 381,255,769 | 4.92 | ||||||
Barclays PLC | 360,935,363 | 4.65 | ||||||
AXA S.A. | 359,297,926 | 4.63 | ||||||
Legal & General Group PLC | 309,597,603 | 3.99 | ||||||
Norges Bank | 240,354,001 | 3.09 | ||||||
Table of Contents
Table of Contents
4 | select suitable accounting policies and then apply them consistently; | |
4 | make judgements and accounting estimates that are reasonable and prudent; | |
4 | state whether IFRSs as adopted by the European Union and IFRSs issued by IASB and applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the consolidated and parent company financial statements respectively; and | |
4 | prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business. |
4 | the consolidated financial statements, which have been prepared in accordance with IFRSs as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and profit of the group; and | |
4 | the Report of the directors on pages 57 to 82 includes a fair review of the development and performance of the business and the position of the group, together with a description of the principal risks and uncertainties that it faces. |
Table of Contents
4 | give a true and fair view of the state of the group’s affairs as at 31 March 2010 and of its profit and cash flows for the year then ended; | |
4 | have been properly prepared in accordance with IFRSs as adopted by the European Union; and | |
4 | have been prepared in accordance with the requirements of the Companies Act 2006 and Article 4 of the IAS Regulation. |
4 | certain disclosures of directors’ remuneration specified by law are not made; or | |
4 | we have not received all the information and explanations we require for our audit. |
4 | the directors’ statement, set out on page 54, in relation to going concern; and | |
4 | the part of the Corporate Governance Statement relating to the company’s compliance with the nine provisions of the June 2008 Combined Code specified for our review. |
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London, United Kingdom
12 May 2010
Table of Contents
London, United Kingdom
12 May 2010
Table of Contents
4 | A subsidiary is an entity that is controlled by another entity, known as the parent. Control is the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. | |
4 | A joint venture is an entity that is jointly controlled by two or more entities. Joint control is the contractually agreed sharing of control over an economic activity, and exists only when the strategic financial and operating decisions relating to the activity require the unanimous consent of the parties sharing control. | |
4 | An associate is an entity over which another entity has significant influence and that is neither a subsidiary nor an interest in a joint venture. Significant influence is the power to participate in the financial and operating policy decisions of an entity but is not control or joint control over those policies. |
Table of Contents
Table of Contents
4 | Goodwill which arose after 1 April 2004: included in the balance sheet at original cost, less any provisions for impairment. This goodwill is not amortised. | |
4 | Goodwill which arose between 1 January 1998 and 1 April 2004: included in the balance sheet at original cost, less accumulated amortisation to the date of transition to IFRS and less any provisions for impairment. This goodwill is not amortised after the date of transition to IFRS. | |
4 | Goodwill which arose before 1 January 1998: written off directly to retained earnings. |
4 | Computer software | 2 to 5 years | ||
4 | Telecommunication licences | 1 to 5 years | ||
4 | Brands, customer lists and customer relationships | 3 to 15 years |
4 | Land and buildings | |||
Freehold buildings | 40 years | |||
Leasehold land and buildings | Unexpired portion of lease or 40 years, whichever is the shorter |
Table of Contents
4 | Network infrastructure and equipment | |||
Transmission equipment: | ||||
Duct | 40 years | |||
Cable | 3 to 25 years | |||
Fibre | 5 to 20 years | |||
Exchange equipment | 2 to 13 years | |||
Payphones and other network equipment | 2 to 20 years | |||
4 | Other | |||
Motor vehicles | 2 to 9 years | |||
Computers and office equipment | 3 to 6 years |
Table of Contents
A financial asset is classified in this category if acquired principally for the purpose of selling in the short-term (held for trading) or if so designated by management. Financial assets held in this category are initially recognised and subsequently measured at fair value, with changes in value recognised in the income statement in the line which most appropriately reflects the nature of the item or transaction. The direct transaction costs are recognised immediately in the income statement.
Table of Contents
Table of Contents
4 | Transaction volumes or other inputs affecting future revenues which can vary depending on customer requirements, plans and market position and other factors such as general economic conditions; | |
4 | Our ability to achieve key contract milestones connected with the transition, development, transformation and deployment phases for customer contracts; | |
4 | The status of commercial relations with customers and the implication for future revenue and cost projections; and | |
4 | Our estimates of future staff and third party costs and the degree to which cost savings and efficiencies are deliverable. |
Table of Contents
Table of Contents
4 | IFRIC 12 ‘Service concession arrangements’; | |
4 | IFRIC 13 ‘Customer loyalty programmes’; | |
4 | IFRIC 16 ‘Hedges of a net investment in a foreign operation’; and | |
4 | IFRIC 18 ‘Transfer of assets from customers’. |
Table of Contents
Before specific | Specific | |||||||||||||||
items | items | a | Total | |||||||||||||
Year ended 31 March 2010 | Notes | £m | £m | £m | ||||||||||||
Revenue | 1 | 20,911 | (52 | ) | 20,859 | |||||||||||
Other operating income | 2 | 378 | 2 | 380 | ||||||||||||
Operating costs | 3 | (18,689 | ) | (427 | ) | (19,116 | ) | |||||||||
Operating profit | 1 | 2,600 | (477 | ) | 2,123 | |||||||||||
Finance expense | 6 | (3,113 | ) | – | (3,113 | ) | ||||||||||
Finance income | 6 | 1,944 | 11 | 1,955 | ||||||||||||
Net finance expense | (1,169 | ) | 11 | (1,158 | ) | |||||||||||
Share of post tax profit of associates and joint ventures | 15 | 25 | 29 | 54 | ||||||||||||
Loss on disposal of associate | 15 | – | (12 | ) | (12 | ) | ||||||||||
Profit before taxation | 1,456 | (449 | ) | 1,007 | ||||||||||||
Taxation | 8 | (320 | ) | 342 | 22 | |||||||||||
Profit for the year | 1,136 | (107 | ) | 1,029 | ||||||||||||
Attributable to: | ||||||||||||||||
Equity shareholders of the parent | 1,135 | (107 | ) | 1,028 | ||||||||||||
Minority interests | 23 | 1 | – | 1 | ||||||||||||
Earnings per share | 9 | |||||||||||||||
Basic | 13.3p | |||||||||||||||
Diluted | 12.9p | |||||||||||||||
a | For a definition of specific items, see page 87. An analysis of specific items is provided in note 5. |
Before specific | Specific | |||||||||||||||
items | b | items | a | Total | b | |||||||||||
Year ended 31 March 2009 | Notes | £m | £m | £m | ||||||||||||
Revenue | 1 | 21,390 | – | 21,390 | ||||||||||||
Other operating income | 2 | 352 | (13 | ) | 339 | |||||||||||
Operating costs | 3 | (21,033 | ) | (395 | ) | (21,428 | ) | |||||||||
Operating profit | 1 | 709 | (408 | ) | 301 | |||||||||||
Finance expense | 6 | (3,272 | ) | – | (3,272 | ) | ||||||||||
Finance income | 6 | 2,652 | – | 2,652 | ||||||||||||
Net finance expense | (620 | ) | – | (620 | ) | |||||||||||
Share of post tax profit of associates and joint ventures | 15 | 39 | 36 | 75 | ||||||||||||
Profit (loss) before taxation | 128 | (372 | ) | (244 | ) | |||||||||||
Taxation | 8 | 10 | 43 | 53 | ||||||||||||
Profit (loss) for the year | 138 | (329 | ) | (191 | ) | |||||||||||
Attributable to: | ||||||||||||||||
Equity shareholders of the parent | 136 | (329 | ) | (193 | ) | |||||||||||
Minority interests | 23 | 2 | – | 2 | ||||||||||||
Loss per share | 9 | |||||||||||||||
Basic | (2.5)p | |||||||||||||||
Diluted | (2.5)p | |||||||||||||||
a | For a definition of specific items, see page 87. An analysis of specific items is provided in note 5. | |
b | Restated. See page 94. |
Table of Contents
Before specific | Specific | |||||||||||||||
items | b | items | a | Total | b | |||||||||||
Year ended 31 March 2008 | Notes | £m | £m | £m | ||||||||||||
Revenue | 1 | 20,704 | – | 20,704 | ||||||||||||
Other operating income | 2 | 359 | (10 | ) | 349 | |||||||||||
Operating costs | 3 | (18,168 | ) | (529 | ) | (18,697 | ) | |||||||||
Operating profit | 1 | 2,895 | (539 | ) | 2,356 | |||||||||||
Finance expense | 6 | (2,891 | ) | – | (2,891 | ) | ||||||||||
Finance income | 6 | 2,513 | – | 2,513 | ||||||||||||
Net finance expense | (378 | ) | – | (378 | ) | |||||||||||
Share of post tax loss of associates and joint ventures | (11 | ) | – | (11 | ) | |||||||||||
Profit on disposal of associate | – | 9 | 9 | |||||||||||||
Profit before taxation | 2,506 | (530 | ) | 1,976 | ||||||||||||
Taxation | 8 | (581 | ) | 343 | (238 | ) | ||||||||||
Profit for the year | 1,925 | (187 | ) | 1,738 | ||||||||||||
Attributable to: | ||||||||||||||||
Equity shareholders of the parent | 1,924 | (187 | ) | 1,737 | ||||||||||||
Minority interests | 1 | – | 1 | |||||||||||||
Earnings per share | 9 | |||||||||||||||
Basic | 21.5p | |||||||||||||||
Diluted | 21.1p | |||||||||||||||
a | For a definition of specific items, see page 87. An analysis of specific items is provided in note 5. | |
b | Restated. See page 94. |
2010 | 2009 | a | 2008 | a | ||||||||||||
Year ended 31 March | Notes | £m | £m | £m | ||||||||||||
Profit (loss) for the year | 1,029 | (191 | ) | 1,738 | ||||||||||||
Other comprehensive (loss) income | ||||||||||||||||
Actuarial (losses) gains relating to retirement benefit obligations | 29 | (4,324 | ) | (7,037 | ) | 2,621 | ||||||||||
Exchange differences on translation of foreign operations | 25 | (119 | ) | 692 | 213 | |||||||||||
Fair value movements on available-for-sale assets | 25 | 7 | 5 | – | ||||||||||||
Fair value movements on cash flow hedges: | ||||||||||||||||
– fair value (losses) gains | 25 | (1,067 | ) | 2,719 | 446 | |||||||||||
– reclassified and reported in net profit (loss) | 25 | 496 | (2,144 | ) | (294 | ) | ||||||||||
– reclassified and reported in non current assets | 25 | (4 | ) | (5 | ) | 11 | ||||||||||
Tax on components of other comprehensive income | 8 | 1,350 | 1,859 | (832 | ) | |||||||||||
Other comprehensive (loss) income for the year, net of tax | (3,661 | ) | (3,911 | ) | 2,165 | |||||||||||
Total comprehensive (loss) income for the year | (2,632 | ) | (4,102 | ) | 3,903 | |||||||||||
Attributable to: | ||||||||||||||||
Equity shareholders of the parent | (2,633 | ) | (4,113 | ) | 3,899 | |||||||||||
Minority interests | 1 | 11 | 4 | |||||||||||||
(2,632 | ) | (4,102 | ) | 3,903 | ||||||||||||
a | Restated. See page 94. |
Table of Contents
Shareholders’ equity (deficit) | ||||||||||||||||||||||||||||||||
Share | Share | Capital | Other | Retained | Minority | Total | ||||||||||||||||||||||||||
capital | a | premium | a | reserve | reserves | b | earnings | Total | interests | c | Equity | |||||||||||||||||||||
£m | £m | £m | £m | £m | £m | £m | £m | |||||||||||||||||||||||||
At 1 April 2007 | 432 | 31 | 2 | 88 | 3,685 | 4,238 | 34 | 4,272 | ||||||||||||||||||||||||
Change in accounting policy for adoption of the amendment to IFRS 2 (see page 94) | – | – | – | – | – | – | – | – | ||||||||||||||||||||||||
Total comprehensive incomed | – | – | – | 344 | 3,555 | 3,899 | 4 | 3,903 | ||||||||||||||||||||||||
Dividends to shareholders | – | – | – | – | (1,241 | ) | (1,241 | ) | – | (1,241 | ) | |||||||||||||||||||||
Share-based payments | – | – | – | – | 55 | 55 | – | 55 | ||||||||||||||||||||||||
Tax on share-based payments | – | – | – | – | (45 | ) | (45 | ) | – | (45 | ) | |||||||||||||||||||||
Issue of ordinary shares | 1 | 31 | – | – | – | 32 | – | 32 | ||||||||||||||||||||||||
Cancellation of shares | (13 | ) | – | 13 | 570 | (570 | ) | – | – | – | ||||||||||||||||||||||
Net purchase of treasury shares | – | – | – | (1,529 | ) | – | (1,529 | ) | – | (1,529 | ) | |||||||||||||||||||||
Other movements in minority interests | – | – | – | – | – | – | (15 | ) | (15 | ) | ||||||||||||||||||||||
At 1 April 2008 | 420 | 62 | 15 | (527 | ) | 5,439 | 5,409 | 23 | 5,432 | |||||||||||||||||||||||
Total comprehensive (loss) incomed | – | – | – | 1,094 | (5,207 | ) | (4,113 | ) | 11 | (4,102 | ) | |||||||||||||||||||||
Dividends to shareholders | – | – | – | – | (1,222 | ) | (1,222 | ) | – | (1,222 | ) | |||||||||||||||||||||
Share-based payments | – | – | – | – | 143 | 143 | – | 143 | ||||||||||||||||||||||||
Tax on share-based payments | – | – | – | – | (12 | ) | (12 | ) | – | (12 | ) | |||||||||||||||||||||
Issue of ordinary shares | – | – | – | 797 | (797 | ) | – | – | – | |||||||||||||||||||||||
Cancellation of shares | (12 | ) | – | 12 | – | – | – | – | – | |||||||||||||||||||||||
Net purchase of treasury shares | – | – | – | (63 | ) | – | (63 | ) | – | (63 | ) | |||||||||||||||||||||
Other movements in minority interests | – | – | – | – | – | – | (7 | ) | (7 | ) | ||||||||||||||||||||||
At 1 April 2009 | 408 | 62 | 27 | 1,301 | (1,656 | ) | 142 | 27 | 169 | |||||||||||||||||||||||
Total comprehensive (loss) incomed | – | – | – | (548 | ) | (2,085 | ) | (2,633 | ) | 1 | (2,632 | ) | ||||||||||||||||||||
Dividends to shareholders | – | – | – | – | (263 | ) | (263 | ) | – | (263 | ) | |||||||||||||||||||||
Share-based payments | – | – | – | – | 81 | 81 | – | 81 | ||||||||||||||||||||||||
Tax on share-based payments | – | – | – | – | 19 | 19 | – | 19 | ||||||||||||||||||||||||
Net issuance of treasury shares | – | – | – | 4 | – | 4 | – | 4 | ||||||||||||||||||||||||
Other movements in minority interests | – | – | – | – | – | – | (4 | ) | (4 | ) | ||||||||||||||||||||||
At 31 March 2010 | 408 | 62 | 27 | 757 | (3,904 | ) | (2,650 | ) | 24 | (2,626 | ) | |||||||||||||||||||||
a | For details of share capital and share premium, see note 24. | |
b | For further analysis of Other reserves, see note 25. | |
c | For further analysis of minority interests, see note 23. | |
d | The group statement of comprehensive income is on page 97. |
Table of Contents
2010 | 2009 | a | 2008 | a | ||||||||||||
Year ended 31 March | Note | £m | £m | £m | ||||||||||||
Cash flow from operating activities | ||||||||||||||||
Profit (loss) before taxationb | 1,007 | (244 | ) | 1,976 | ||||||||||||
Depreciation and amortisation | 3,039 | 2,890 | 2,889 | |||||||||||||
Loss on sale of associates and group undertakings | 10 | 13 | 1 | |||||||||||||
Net finance expense | 1,158 | 620 | 378 | |||||||||||||
Other non cash charges | 77 | 596 | 60 | |||||||||||||
Share of (profits) losses of associates and joint ventures | (54 | ) | (75 | ) | 11 | |||||||||||
Decrease in inventories | 14 | 11 | 23 | |||||||||||||
Decrease (increase) in trade and other receivables | 524 | 1,063 | (498 | ) | ||||||||||||
(Decrease) increase in trade and other payables | (708 | ) | (379 | ) | 451 | |||||||||||
(Decrease) increase in provisions and other liabilitiesd | (591 | ) | 439 | (104 | ) | |||||||||||
Cash generated from operationsb | 4,476 | 4,934 | 5,187 | |||||||||||||
Income taxes paid | (76 | ) | (232 | ) | (222 | ) | ||||||||||
Income tax repayment for prior years | 425 | 4 | 521 | |||||||||||||
Net cash inflow from operating activities | 4,825 | 4,706 | 5,486 | |||||||||||||
Cash flow from investing activities | ||||||||||||||||
Interest received | 16 | 19 | 111 | |||||||||||||
Dividends received from associates and joint ventures | 3 | 6 | 2 | |||||||||||||
Proceeds on disposal of property, plant and equipment | 29 | 44 | 62 | |||||||||||||
Proceeds on disposal of businesses | 2 | – | – | |||||||||||||
Proceeds on disposal of associates and joint ventures | – | – | 13 | |||||||||||||
Proceeds on disposal of non current financial assets | – | – | 1 | |||||||||||||
Proceeds on disposal of current financial assetsc | 8,739 | 6,316 | 4,779 | |||||||||||||
Acquisition of subsidiaries, net of cash acquired | (70 | ) | (227 | ) | (377 | ) | ||||||||||
Purchases of property, plant and equipment and software | (2,509 | ) | (3,082 | ) | (3,315 | ) | ||||||||||
Purchases of non current financial assets | – | – | (2 | ) | ||||||||||||
Purchases of current financial assetsc | (8,985 | ) | (6,030 | ) | (4,938 | ) | ||||||||||
Net cash outflow from investing activities | (2,775 | ) | (2,954 | ) | (3,664 | ) | ||||||||||
Cash flow from financing activities | ||||||||||||||||
Equity dividends paid | (265 | ) | (1,221 | ) | (1,236 | ) | ||||||||||
Dividends paid to minority interests | – | (1 | ) | – | ||||||||||||
Interest paid | (956 | ) | (956 | ) | (842 | ) | ||||||||||
Repayment of borrowings | (307 | ) | (863 | ) | (913 | ) | ||||||||||
Repayment of finance lease liabilities | (24 | ) | (16 | ) | (284 | ) | ||||||||||
Net proceeds (repayment) of issued commercial paper | (697 | ) | 606 | (681 | ) | |||||||||||
New bank loans raised | 522 | 795 | 3,939 | |||||||||||||
Proceeds from finance leases | 9 | – | – | |||||||||||||
Repurchase of ordinary shares | – | (334 | ) | (1,498 | ) | |||||||||||
Proceeds on issue of treasury shares | 4 | 125 | 85 | |||||||||||||
Net cash used in financing activities | (1,714 | ) | (1,865 | ) | (1,430 | ) | ||||||||||
Effect of exchange rate changes on cash and cash equivalents | (7 | ) | 54 | 25 | ||||||||||||
Net increase (decrease) in cash and cash equivalents | 329 | (59 | ) | 417 | ||||||||||||
Cash and cash equivalents at the start of the year | 1,115 | 1,174 | 757 | |||||||||||||
Cash and cash equivalents at the end of the year | 10 | 1,444 | 1,115 | 1,174 | ||||||||||||
a | Restated. See page 94. | |
b | The reconciliation from the loss before taxation of £244m for 2009 to the cash generated from operations of £4,934m for 2009 includes BT Global Services contract and financial review charges of £1,639m, which were non cash charges. | |
c | Primarily consists of investment in and redemption of amounts held in liquidity funds. | |
d | Includes pension deficit payment of £525m (2009: £nil, 2008: £320m). |
Table of Contents
2010 | 2009 | a | 2008 | a | ||||||||||||
At 31 March | Notes | £m | £m | £m | ||||||||||||
Non current assets | ||||||||||||||||
Intangible assets | 12 | 3,672 | 3,788 | 3,355 | ||||||||||||
Property, plant and equipment | 13 | 14,856 | 15,405 | 15,307 | ||||||||||||
Derivative financial instruments | 19 | 1,076 | 2,542 | 316 | ||||||||||||
Investments | 14 | 64 | 55 | 31 | ||||||||||||
Retirement benefit asset | 29 | – | – | 2,887 | ||||||||||||
Associates and joint ventures | 15 | 195 | 132 | 85 | ||||||||||||
Trade and other receivables | 17 | 336 | 322 | 854 | ||||||||||||
Deferred tax assets | 22 | 2,196 | 1,103 | – | ||||||||||||
22,395 | 23,347 | 22,835 | ||||||||||||||
Current assets | ||||||||||||||||
Inventories | 16 | 107 | 121 | 122 | ||||||||||||
Trade and other receivables | 17 | 3,696 | 4,185 | 4,449 | ||||||||||||
Derivative financial instruments | 19 | 624 | 158 | 71 | ||||||||||||
Investments | 14 | 406 | 163 | 440 | ||||||||||||
Cash and cash equivalents | 10 | 1,452 | 1,300 | 1,435 | ||||||||||||
6,285 | 5,927 | 6,517 | ||||||||||||||
Current liabilities | ||||||||||||||||
Loans and other borrowings | 18 | 3,269 | 1,542 | 1,524 | ||||||||||||
Derivative financial instruments | 19 | 166 | 56 | 58 | ||||||||||||
Trade and other payables | 20 | 6,531 | 7,215 | 7,591 | ||||||||||||
Current tax liabilities | 320 | 1 | 241 | |||||||||||||
Provisions | 21 | 134 | 254 | 81 | ||||||||||||
10,420 | 9,068 | 9,495 | ||||||||||||||
Total assets less current liabilities | 18,260 | 20,206 | 19,857 | |||||||||||||
Non current liabilities | ||||||||||||||||
Loans and other borrowings | 18 | 9,522 | 12,365 | 9,818 | ||||||||||||
Derivative financial instruments | 19 | 533 | 711 | 1,014 | ||||||||||||
Retirement benefit obligations | 29 | 7,864 | 3,973 | 108 | ||||||||||||
Other payables | 20 | 804 | 794 | 707 | ||||||||||||
Deferred tax liabilities | 22 | 1,456 | 1,728 | 2,513 | ||||||||||||
Provisions | 21 | 707 | 466 | 265 | ||||||||||||
20,886 | 20,037 | 14,425 | ||||||||||||||
Equity | ||||||||||||||||
Ordinary shares | 24 | 408 | 408 | 420 | ||||||||||||
Share premium | 24 | 62 | 62 | 62 | ||||||||||||
Capital redemption reserve | 27 | 27 | 15 | |||||||||||||
Other reserves | 25 | 757 | 1,301 | (527 | ) | |||||||||||
Retained (loss) earnings | (3,904 | ) | (1,656 | ) | 5,439 | |||||||||||
Total parent shareholders’ (deficit) equity | (2,650 | ) | 142 | 5,409 | ||||||||||||
Minority interests | 23 | 24 | 27 | 23 | ||||||||||||
Total (deficit) equityb | (2,626 | ) | 169 | 5,432 | ||||||||||||
18,260 | 20,206 | 19,857 | ||||||||||||||
a | Restated. See page 94. | |
b | The Group statement of changes in equity is on page 98. |
Chairman
Chief Executive
Group Finance Director
Table of Contents
Table of Contents
BT Global | ||||||||||||||||||||||||
Services | BT Retail | BT Wholesale | Openreach | Other | Total | |||||||||||||||||||
Year ended 31 March 2010 | £m | £m | £m | £m | £m | £m | ||||||||||||||||||
Total segment revenue | 8,513 | 8,297 | 4,450 | 5,164 | 40 | 26,464 | ||||||||||||||||||
Internal revenue | – | (373 | ) | (1,227 | ) | (3,953 | ) | – | (5,553 | ) | ||||||||||||||
Revenue from external customers | 8,513 | 7,924 | 3,223 | 1,211 | 40 | 20,911 | ||||||||||||||||||
Adjusted EBITDAb | 457 | 1,850 | 1,279 | 1,960 | 93 | 5,639 | ||||||||||||||||||
Depreciation and amortisation | (815 | ) | (459 | ) | (680 | ) | (856 | ) | (229 | ) | (3,039 | ) | ||||||||||||
Adjusted operating profit (loss)b | (358 | ) | 1,391 | 599 | 1,104 | (136 | ) | 2,600 | ||||||||||||||||
Specific items (note 5) | – | – | – | – | (477 | ) | (477 | ) | ||||||||||||||||
Operating (loss) profit | (358 | ) | 1,391 | 599 | 1,104 | (613 | ) | 2,123 | ||||||||||||||||
Share of post tax profits of associates and joint ventures | 54 | |||||||||||||||||||||||
Loss on disposal of associate | (12 | ) | ||||||||||||||||||||||
Net finance expense | (1,158 | ) | ||||||||||||||||||||||
Profit before tax | 1,007 | |||||||||||||||||||||||
BT Global | ||||||||||||||||||||||||
Services | BT Retail | BT Wholesale | Openreach | Other | Total | |||||||||||||||||||
Year ended 31 March 2009a | £m | £m | £m | £m | £m | £m | ||||||||||||||||||
Total segment revenue | 8,628 | 8,663 | 4,658 | 5,231 | 40 | 27,220 | ||||||||||||||||||
Internal revenue | – | (343 | ) | (1,228 | ) | (4,218 | ) | – | (5,789 | ) | ||||||||||||||
Adjusted revenue from external customersb | 8,628 | 8,320 | 3,430 | 1,013 | 40 | 21,431 | ||||||||||||||||||
Contract and financial review charges | (41 | ) | – | – | – | – | (41 | ) | ||||||||||||||||
Revenue from external customers | 8,587 | 8,320 | 3,430 | 1,013 | 40 | 21,390 | ||||||||||||||||||
Adjusted EBITDAb | 261 | 1,664 | 1,277 | 1,996 | 40 | 5,238 | ||||||||||||||||||
Depreciation and amortisation | (776 | ) | (426 | ) | (686 | ) | (778 | ) | (224 | ) | (2,890 | ) | ||||||||||||
Adjusted operating profit (loss)b | (515 | ) | 1,238 | 591 | 1,218 | (184 | ) | 2,348 | ||||||||||||||||
Specific items (note 5) | – | – | – | – | (408 | ) | (408 | ) | ||||||||||||||||
Contract and financial review charges | (1,639 | ) | – | – | – | – | (1,639 | ) | ||||||||||||||||
Operating (loss) profit | (2,154 | ) | 1,238 | 591 | 1,218 | (592 | ) | 301 | ||||||||||||||||
Share of post tax profits of associates and joint ventures | 75 | |||||||||||||||||||||||
Net finance expense | (620 | ) | ||||||||||||||||||||||
Loss before tax | (244 | ) | ||||||||||||||||||||||
a | Restated. See pages 94 and 101. |
BT Global | ||||||||||||||||||||||||
Services | BT Retail | BT Wholesale | Openreach | Other | Total | |||||||||||||||||||
Year ended 31 March 2008a | £m | £m | £m | £m | £m | £m | ||||||||||||||||||
Total segment revenue | 7,664 | 8,682 | 4,959 | 5,266 | 28 | 26,599 | ||||||||||||||||||
Internal revenue | – | (265 | ) | (1,252 | ) | (4,378 | ) | – | (5,895 | ) | ||||||||||||||
Revenue from external customers | 7,664 | 8,417 | 3,707 | 888 | 28 | 20,704 | ||||||||||||||||||
Adjusted EBITDAb | 808 | 1,529 | 1,406 | 1,911 | 130 | 5,784 | ||||||||||||||||||
Depreciation and amortisation | (744 | ) | (445 | ) | (893 | ) | (689 | ) | (118 | ) | (2,889 | ) | ||||||||||||
Adjusted operating profitb | 64 | 1,084 | 513 | 1,222 | 12 | 2,895 | ||||||||||||||||||
Specific items (note 5) | – | – | – | – | (539 | ) | (539 | ) | ||||||||||||||||
Operating profit (loss) | 64 | 1,084 | 513 | 1,222 | (527 | ) | 2,356 | |||||||||||||||||
Share of post tax losses of associates and joint ventures | (11 | ) | ||||||||||||||||||||||
Profit on disposal of associate | 9 | |||||||||||||||||||||||
Net finance expense | (378 | ) | ||||||||||||||||||||||
Profit before tax | 1,976 | |||||||||||||||||||||||
a | Restated. See pages 94 and 101. | |
b | Adjusted revenue, adjusted EBITDA and adjusted operating profit (loss) are stated before specific items and BT Global Services contract and financial review charges in 2009 and are non-GAAP measures provided in addition to the disclosure requirements defined under IFRS. The rationale for using non-GAAP measures is explained on pages 54 to 56. |
Table of Contents
BT Global | ||||||||||||||||||||||||
Services | BT Retail | BT Wholesale | Openreach | Other | Total | |||||||||||||||||||
Year ended 31 March 2010 | £m | £m | £m | £m | £m | £m | ||||||||||||||||||
Property, plant and equipment | 395 | 333 | 230 | 816 | 130 | 1,904 | ||||||||||||||||||
Intangible assets | 204 | 84 | 95 | 91 | 155 | 629 | ||||||||||||||||||
Capital expenditure | 599 | 417 | 325 | 907 | 285 | 2,533 | ||||||||||||||||||
BT Global | ||||||||||||||||||||||||
Services | BT Retail | BT Wholesale | Openreach | Other | Total | |||||||||||||||||||
Year ended 31 March 2009 | £m | £m | £m | £m | £m | £m | ||||||||||||||||||
Property, plant and equipment | 576 | 386 | 310 | 823 | 154 | 2,249 | ||||||||||||||||||
Intangible assets | 310 | 85 | 125 | 128 | 191 | 839 | ||||||||||||||||||
Capital expenditure | 886 | 471 | 435 | 951 | 345 | 3,088 | ||||||||||||||||||
Revenue by products and services | ||||||||||||||||||||||||
2010 | 2009 | 2008 | ||||||||||||||||||||||
Year ended 31 March | £m | £m | £m | |||||||||||||||||||||
Managed solutions | 6,581 | 6,390 | 5,293 | |||||||||||||||||||||
Broadband and convergence | 2,678 | 2,617 | 2,549 | |||||||||||||||||||||
Calls and lines | 6,293 | 6,862 | 7,405 | |||||||||||||||||||||
Transit, conveyance, interconnect services, WLR, global carrier and other wholesale products | 2,957 | 3,244 | 3,327 | |||||||||||||||||||||
Other products and services | 2,402 | 2,318 | 2,130 | |||||||||||||||||||||
Total adjusted revenue | 20,911 | 21,431 | 20,704 | |||||||||||||||||||||
Specific items | (52 | ) | – | – | ||||||||||||||||||||
Contract and financial review charges | – | (41 | ) | – | ||||||||||||||||||||
Total revenue | 20,859 | 21,390 | 20,704 | |||||||||||||||||||||
Geographic information | ||||||||||||||||||||||||
The UK is the group’s country of domicile and generates the majority of its revenue from external customers in the UK. The geographic analysis of revenue is on the basis of the country of origin in which the customer is invoiced. | ||||||||||||||||||||||||
Revenue from external customers | ||||||||||||||||||||||||
2010 | 2009 | 2008 | ||||||||||||||||||||||
Year ended 31 March | £m | £m | £m | |||||||||||||||||||||
UK | 16,064 | 16,736 | 17,186 | |||||||||||||||||||||
Europe, Middle East and Africa, excluding the UK | 3,250 | 3,247 | 2,510 | |||||||||||||||||||||
Americas | 1,235 | 1,119 | 847 | |||||||||||||||||||||
Asia Pacific | 310 | 288 | 161 | |||||||||||||||||||||
Total revenue | 20,859 | 21,390 | 20,704 | |||||||||||||||||||||
Non current assets | ||||||||||||||||||||||||
2010 | 2009 | |||||||||||||||||||||||
At 31 March | £m | £m | ||||||||||||||||||||||
UK | 15,583 | 16,110 | ||||||||||||||||||||||
Europe, Middle East and Africa, excluding the UK | 2,761 | 3,046 | ||||||||||||||||||||||
Americas | 653 | 421 | ||||||||||||||||||||||
Asia Pacific | 62 | 70 | ||||||||||||||||||||||
Total | 19,059 | 19,647 | ||||||||||||||||||||||
Table of Contents
2010 | 2009 | 2008 | ||||||||||
Year ended 31 March | £m | £m | £m | |||||||||
Profits on disposal of property, plant and equipment | 75 | 52 | 50 | |||||||||
Income from repayment works | 74 | 72 | 74 | |||||||||
Other operating income | 229 | 228 | 235 | |||||||||
Other operating income before specific items | 378 | 352 | 359 | |||||||||
Specific items (note 5) | 2 | (13 | ) | (10 | ) | |||||||
Other operating income | 380 | 339 | 349 | |||||||||
2010 | 2009 | a | 2008 | a | ||||||||||||
Year ended 31 March | Notes | £m | £m | £m | ||||||||||||
Costs by nature | ||||||||||||||||
Staff costs: | ||||||||||||||||
Wages and salaries | 4,182 | 4,499 | 4,242 | |||||||||||||
Social security costs | 447 | 432 | 417 | |||||||||||||
Pension costs | 29 | 304 | 544 | 626 | ||||||||||||
Share-based payment expense | 30 | 71 | 141 | 73 | ||||||||||||
Total staff costs | 5,004 | 5,616 | 5,358 | |||||||||||||
Own work capitalised | (575 | ) | (673 | ) | (724 | ) | ||||||||||
Net staff costs | 4,429 | 4,943 | 4,634 | |||||||||||||
Depreciation of property, plant and equipment: | ||||||||||||||||
Owned assets | 13 | 2,260 | 2,200 | 2,324 | ||||||||||||
Held under finance leases | 13 | 44 | 49 | 86 | ||||||||||||
Amortisation of intangible assets | 12 | 735 | 641 | 479 | ||||||||||||
Payments to telecommunications operators | 4,083 | 4,266 | 4,237 | |||||||||||||
Other operating costsb | 7,138 | 8,934 | 6,408 | |||||||||||||
Total operating costs before specific items | 18,689 | 21,033 | 18,168 | |||||||||||||
Specific items | 5 | 427 | 395 | 529 | ||||||||||||
Total operating costs | 19,116 | 21,428 | 18,697 | |||||||||||||
Operating costs before specific items include the following: | ||||||||||||||||
Contract and financial review chargese | – | 1,598 | – | |||||||||||||
Leaver costsc | 142 | 204 | 127 | |||||||||||||
Research and development expenditured | 1,177 | 1,021 | 857 | |||||||||||||
Rental costs relating to operating leases | 451 | 426 | 423 | |||||||||||||
Foreign currency losses | 7 | 30 | 8 | |||||||||||||
a | Restated for the adoption of the amendment to IFRS 2. See page 94. | |
b | Other operating costs also include a net charge of £1m (2009: £8m credit, 2008: £nil) relating to fair value movements on derivatives recycled from the cash flow reserve. | |
c | Leaver costs exclude leaver costs associated with the restructuring of BT Global Services during 2010 and 2009 and manager leaver costs associated with the group’s transformation and reorganisation activities during 2009 and 2008. These costs have been recorded as a specific item. Other leaver costs are included within wages and salaries and social security costs. | |
d | Research and development expenditure includes amortisation of £733m (2009: £431m, 2008: £325m) in respect of internally developed computer software. | |
e | In 2009, the group recognised contract and financial review charges of £1,639m, of which £1,598m was recognised within other operating costs and £41m was recognised as a reduction to revenue. The total charge of £1,639m was allocated against the following assets and liabilities: intangible assets £241m; non current trade and other receivables £913m; prepayments £52m; accrued income £41m; provisions £256m; £136m was allocated against a number of other balance sheet categories and the individual amounts were insignificant. |
Table of Contents
2010 | 2009 | 2008 | ||||||||||||||||||||||
Year end | Average | Year end | Average | Year end | Average | |||||||||||||||||||
000 | 000 | 000 | 000 | 000 | 000 | |||||||||||||||||||
Number of employees in the groupa: | ||||||||||||||||||||||||
UK | 79.8 | 82.9 | 86.5 | 89.5 | 91.3 | 93.0 | ||||||||||||||||||
Non UK | 18.0 | 18.8 | 20.5 | 21.1 | 20.6 | 15.5 | ||||||||||||||||||
Total employees | 97.8 | 101.7 | 107.0 | 110.6 | 111.9 | 108.5 | ||||||||||||||||||
2010 | 2009 | b | 2008 | b | ||||||||||||||||||||
Year end | Average | Year end | Average | Year end | Average | |||||||||||||||||||
000 | 000 | 000 | 000 | 000 | 000 | |||||||||||||||||||
Number of employees in the groupa: | ||||||||||||||||||||||||
BT Global Services | 24.3 | 26.1 | 28.2 | 28.4 | 29.7 | 26.8 | ||||||||||||||||||
BT Retail | 19.4 | 20.2 | 21.2 | 21.9 | 21.9 | 21.5 | ||||||||||||||||||
BT Wholesale | 2.4 | 2.4 | 2.4 | 2.5 | 2.8 | 3.1 | ||||||||||||||||||
Openreach | 30.8 | 31.4 | 32.3 | 33.1 | 33.6 | 33.8 | ||||||||||||||||||
Other | 20.9 | 21.6 | 22.9 | 24.7 | 23.9 | 23.3 | ||||||||||||||||||
Total employees | 97.8 | 101.7 | 107.0 | 110.6 | 111.9 | 108.5 | ||||||||||||||||||
a | The numbers disclosed include both full and part-time employees. | |
b | Restated for the impact of customer account moves and other internal trading model changes. See page 101. |
Table of Contents
2010 | 2009 | 2008 | ||||||||||
Year ended 31 March | £m | £m | £m | |||||||||
Revenue | ||||||||||||
Regulatory settlementa | 52 | – | – | |||||||||
Other operating income | ||||||||||||
(Profit) loss on disposal of a businessb | (2 | ) | 13 | 10 | ||||||||
Operating costs | ||||||||||||
BT Global Services restructuring charges: | ||||||||||||
– Networks, products and procurement channels rationalisationc | 142 | 183 | – | |||||||||
– People and propertyc | 132 | 51 | – | |||||||||
– Intangible asset impairments and other chargesc | 27 | 46 | – | |||||||||
301 | 280 | – | ||||||||||
Property rationalisation costsd | 121 | – | – | |||||||||
Costs associated with settlement of open tax yearse | 5 | – | – | |||||||||
Restructuring costs – group transformation and reorganisation activitiesf | – | 65 | 402 | |||||||||
21CN asset impairment and related chargesg | – | 50 | – | |||||||||
Creation of Openreach and delivery of the Undertakingsh | – | – | 53 | |||||||||
Write off of circuit inventory and other working capital balancesi | – | – | 74 | |||||||||
427 | 395 | 529 | ||||||||||
Finance income | ||||||||||||
Interest on settlement of open tax yearse | (11 | ) | – | – | ||||||||
Share of results of associates and joint ventures | ||||||||||||
Impact of renegotiated supply contracts on associatej | (29 | ) | – | – | ||||||||
Reassessment of carrying value of associatek | – | (36 | ) | – | ||||||||
Loss (profit) on disposal of associates and joint venturesl | 12 | – | (9 | ) | ||||||||
(17 | ) | (36 | ) | (9 | ) | |||||||
Net specific items charge before tax | 449 | 372 | 530 | |||||||||
Tax credit in respect of settlement of open tax yearse | (230 | ) | – | (40 | ) | |||||||
Tax credit on re-measurement of deferred taxm | – | – | (154 | ) | ||||||||
Tax credit on specific items above | (112 | ) | (43 | ) | (149 | ) | ||||||
Net specific items charge after tax | 107 | 329 | 187 | |||||||||
a | In 2010 a charge of £52m was recognised reflecting an Ofcom determination in relation to 2Mb/s partial private circuits. | |
b | In 2010 a profit of £2m arose on disposal of a business. In 2009 and 2008 respectively, a £13m and £10m loss on disposal arose from exiting businesses. | |
c | In 2010 and 2009 respectively, the group recognised BT Global Services restructuring charges of £301m and £280m. The main components of the charges are set out below: | |
– Networks, products and procurement channels rationalisation charges of £142m (2009: £183m and 2008: £nil). In 2010 this included a payment of £127m made to Tech Mahindra for the renegotiation of certain supply contracts as part of the rationalisation of procurement channels. | ||
– People and property charges of £132m (2009: £51m and 2008: £nil) principally comprising leaver costs and property exit costs. | ||
– Intangible asset impairments and other charges of £27m (2009: £46m and 2008: £nil) reflecting the costs associated with rationalising the services that are offered to customers and the brands under which customers are served. | ||
d | In 2010 £121m (2009 and 2008: £nil) of property rationalisation charges were recognised in relation to the rationalisation of the group’s UK property portfolio. The charge recognised relates to properties which have been vacated and as a result of which, the associated leases have become onerous. This programme is expected to continue over the next two years. Including the charge recognised in 2010, the total cost of the rationalisation programme is expected to be around £300m. | |
e | In 2010 the group agreed substantially all outstanding tax matters with HMRC relating to the 2006, 2007 and 2008 tax years. Specific items include a tax credit of £230m, associated interest of £11m and costs of £5m in connection with reaching the agreement. In 2008 the group agreed an outstanding tax matter relating to a business disposed of in 2001, the impact of which was a tax credit of £40m. | |
f | In 2009 and 2008 respectively, the group incurred costs of £65m and £402m in respect of the group’s transformation and reorganisation activities. The costs mainly comprised leaver costs, property exit and transformation programme costs. | |
g | In 2009 a £50m charge was recognised comprising £31m of asset impairments and £19m of associated costs, following the group’s review of its 21CN programme and associated voice strategy in the light of the move to a customer-led roll out strategy and focus on next generation voice service developments of fibre-based products. | |
h | In 2008 a charge of £53m was recognised in relation to further estimated costs to create Openreach and deliver the Undertakings agreed with Ofcom. | |
i | In 2008 a charge of £74m was recognised as a result of the completion of a review of circuit inventory and other working capital balances. | |
j | In 2010 the group recognised a specific item credit of £29m in connection with the £127m payment to its associate Tech Mahindra, as described above. | |
k | In 2009 a credit of £36m was recognised in respect of a reassessment of the value of the group’s share of the net assets of an associate. | |
l | In 2010 a £12m loss on disposal of an indirect interest in Tech Mahindra was recognised. In 2008, a £9m profit on the sale of an associate was recognised. | |
m | In 2008 a tax credit of £154m was recognised for the re-measurement of deferred tax balances as a result of the change in the UK statutory corporation tax rate from 30% to 28% effective in 2009. |
Table of Contents
2010 | 2009 | 2008 | ||||||||||
Year ended 31 March | £m | £m | £m | |||||||||
Finance expense | ||||||||||||
Interest on listed bonds, debentures and notesa,b | 806 | 777 | 629 | |||||||||
Interest on finance leasesa | 18 | 25 | 31 | |||||||||
Interest on other borrowingsa | 58 | 130 | 159 | |||||||||
Unwinding of discount on provisionsa | 4 | 3 | 3 | |||||||||
Fair value loss on derivatives not in a designated hedge relationshipe | 19 | 29 | 41 | |||||||||
Interest on pension scheme liabilities | 2,211 | 2,308 | 2,028 | |||||||||
Finance expensec,d | 3,116 | 3,272 | 2,891 | |||||||||
Less: amounts included in the cost of qualifying assetsf | (3 | ) | – | – | ||||||||
Total finance expense | 3,113 | 3,272 | 2,891 | |||||||||
a | Calculated using the effective interest rate method unless otherwise stated below. | |
b | Includes a net charge of £44m (2009: £25m, 2008: £77m) relating to fair value movements on derivatives recycled from the cash flow reserve. | |
c | Includes a net credit of £29m (2009: net charge of £39m, 2008: net credit of £6m) relating to fair value movements arising on hedged items and net charge of £29m (2009: net credit of £39m, 2008: net charge of £6m) relating to fair value movements arising on derivatives designated as fair value hedges. | |
d | Includes a net credit of £451m (2009: net charge of £2,161m, 2008: net charge of £373m) relating to foreign exchange movements on loans and borrowings and a net charge of £451m (2009: net credit of £2,161m, 2008: net credit of £373m) relating to fair value movements on derivatives recycled from the cash flow reserve. The items generating this foreign exchange are in designated hedge relationships. | |
e | Includes a loss of £nil (2009: £nil, 2008: £2m) recycled from the cash flow reserve arising on de-designation of derivatives from a hedge relationship and includes a charge of £9m arising from the negotiation of swap break dates on certain derivatives. | |
f | The weighted average capitalisation rate on general borrowings was 7.9% in 2010. |
2010 | 2009 | 2008 | ||||||||||
Year ended 31 March | £m | £m | £m | |||||||||
Finance income | ||||||||||||
Other interest and similar income | ||||||||||||
Interest on available-for-sale investments | 5 | 14 | 25 | |||||||||
Interest on loans and receivables | 7 | 17 | 40 | |||||||||
Other interest and similar incomea | 11 | – | – | |||||||||
Expected return on pension scheme assets | 1,932 | 2,621 | 2,448 | |||||||||
Total finance income | 1,955 | 2,652 | 2,513 | |||||||||
a | 2010 includes £11m relating to interest on settlement of tax matters disclosed as a specific item (see note 5). |
2010 | 2009 | 2008 | ||||||||||
Year ended 31 March | £m | £m | £m | |||||||||
Net finance expense before specific items and pensions | 890 | 933 | 798 | |||||||||
Net interest expense (income) on pensions | 279 | (313 | ) | (420 | ) | |||||||
Net finance expense before specific items | 1,169 | 620 | 378 | |||||||||
Specific items | (11 | ) | – | – | ||||||||
Net finance expense | 1,158 | 620 | 378 | |||||||||
2010 | 2009 | 2008 | ||||||||||||||||||||||
pence | pence | pence | ||||||||||||||||||||||
Year ended 31 March | per share | £m | per share | £m | per share | £m | ||||||||||||||||||
Final dividend paid in respect of the prior year | 1.10 | 85 | 10.40 | 804 | 10.00 | 810 | ||||||||||||||||||
Interim dividend paid in respect of the current year | 2.30 | 178 | 5.40 | 418 | 5.40 | 431 | ||||||||||||||||||
3.40 | 263 | 15.80 | 1,222 | 15.40 | 1,241 | |||||||||||||||||||
Table of Contents
2010 | 2009 | 2008 | ||||||||||
Year ended 31 March | £m | £m | £m | |||||||||
United Kingdom | ||||||||||||
Corporation tax at 28% (2009: 28%, 2008: 30%) | 161 | – | 214 | |||||||||
Adjustments in respect of prior periods | (204 | ) | (50 | ) | 18 | |||||||
Non UK taxation | ||||||||||||
Current | 31 | 48 | 42 | |||||||||
Adjustments in respect of prior periods | – | (10 | ) | (88 | ) | |||||||
Total current tax (credit) expense | (12 | ) | (12 | ) | 186 | |||||||
Deferred tax | ||||||||||||
Origination and reversal of temporary differences | 53 | (77 | ) | 78 | ||||||||
Adjustments in respect of prior periods | (63 | ) | 36 | (26 | ) | |||||||
Total deferred tax (credit) expense | (10 | ) | (41 | ) | 52 | |||||||
Total taxation (credit) expense | (22 | ) | (53 | ) | 238 | |||||||
2010 | 2009 | a | 2008 | a | ||||||||||||||||||||
Year ended 31 March | £m | % | £m | % | £m | % | ||||||||||||||||||
Profit (loss) before taxation | 1,007 | (244 | ) | 1,976 | ||||||||||||||||||||
Notional taxation expense (credit) at UK rate of 28% (2009: 28%, 2008: 30%) | 282 | 28.0 | (68 | ) | 28.0 | 592 | 30.0 | |||||||||||||||||
Effects of: | ||||||||||||||||||||||||
Non deductible depreciation and amortisation | 18 | 1.7 | 27 | (11.0 | ) | 23 | 1.1 | |||||||||||||||||
Non deductible (taxable) non UK losses (profits) | 26 | 2.6 | (24 | ) | 9.8 | (7 | ) | (0.3 | ) | |||||||||||||||
Overseas losses utilised | (35 | ) | (3.4 | ) | – | – | – | – | ||||||||||||||||
Higher (lower) taxes on non UK profits | 1 | 0.1 | (9 | ) | 3.7 | 7 | 0.3 | |||||||||||||||||
Higher (lower) taxes on gain on disposal of non current investments and group undertakings | – | – | 4 | (1.6 | ) | – | – | |||||||||||||||||
Other deferred tax assets not recognised | 17 | 1.6 | 5 | (2.0 | ) | (13 | ) | (0.6 | ) | |||||||||||||||
Associates and joint ventures | (11 | ) | (1.1 | ) | (21 | ) | 8.6 | (2 | ) | (0.1 | ) | |||||||||||||
Adjustments in respect of prior periods | (37 | ) | (3.7 | ) | (24 | ) | 9.8 | (56 | ) | (2.8 | ) | |||||||||||||
Tax credit settlement of open tax years | (230 | ) | (22.9 | ) | – | – | (40 | ) | (2.0 | ) | ||||||||||||||
Re-measurements of deferred tax balances at 28% | – | – | – | – | (154 | ) | (7.8 | ) | ||||||||||||||||
Adoption of the amendment to IFRS 2 | – | – | 30 | (12.3 | ) | – | – | |||||||||||||||||
Other | (53 | ) | (5.1 | ) | 27 | (11.1 | ) | (112 | ) | (5.8 | ) | |||||||||||||
Total taxation (credit) expense and effective tax rate | (22 | ) | (2.2 | ) | (53 | ) | 21.9 | 238 | 12.0 | |||||||||||||||
Specific items | 342 | 43 | 343 | |||||||||||||||||||||
Total taxation (credit) expense before specific items and effective rate on profit before specific items | 320 | 22.0 | (10 | ) | (7.8 | ) | 581 | 23.2 | ||||||||||||||||
a | Restated. See page 94. |
Table of Contents
2010 | 2009 | 2008 | ||||||||||||||||||||||||||||||||||
Tax | Tax | Tax | ||||||||||||||||||||||||||||||||||
Before | credit | After | Before | credit | After | Before | credit | After | ||||||||||||||||||||||||||||
Year ended 31 March | tax | (expense) | tax | tax | (expense) | tax | tax | (expense) | tax | |||||||||||||||||||||||||||
£m | £m | £m | £m | £m | £m | £m | £m | £m | ||||||||||||||||||||||||||||
Actuarial (losses) gains relating to retirement benefit obligations | (4,324 | ) | 1,211 | (3,113 | ) | (7,037 | ) | 1,959 | (5,078 | ) | 2,621 | (804 | ) | 1,817 | ||||||||||||||||||||||
Exchange differences on translation of foreign operations | (119 | ) | (20 | ) | (139 | ) | 692 | 64 | 756 | 213 | 1 | 214 | ||||||||||||||||||||||||
Fair value movements on available-for-sale assets | 7 | – | 7 | 5 | – | 5 | – | – | – | |||||||||||||||||||||||||||
Fair value movements on cash flow hedges | ||||||||||||||||||||||||||||||||||||
– fair value gains (losses) | (1,067 | ) | 297 | (770 | ) | 2,719 | (766 | ) | 1,953 | 446 | (108 | ) | 338 | |||||||||||||||||||||||
– reclassified and reported in net (loss) profit | 496 | (139 | ) | 357 | (2,144 | ) | 600 | (1,544 | ) | (294 | ) | 82 | (212 | ) | ||||||||||||||||||||||
– reclassified and reported in non current assets | (4 | ) | 1 | (3 | ) | (5 | ) | 2 | (3 | ) | 11 | (3 | ) | 8 | ||||||||||||||||||||||
(5,011 | ) | 1,350 | (3,661 | ) | (5,770 | ) | 1,859 | (3,911 | ) | 2,997 | (832 | ) | 2,165 | |||||||||||||||||||||||
Current tax (expense) credit | (2 | ) | – | 2 | ||||||||||||||||||||||||||||||||
Deferred tax credit (expense) | 1,352 | 1,859 | (834 | ) | ||||||||||||||||||||||||||||||||
1,350 | 1,859 | (832 | ) | |||||||||||||||||||||||||||||||||
2010 | 2009 | 2008 | ||||||||||
Year ended 31 March | £m | £m | £m | |||||||||
Current tax credit relating to share-based payments | – | – | 17 | |||||||||
Deferred tax credit (expense) relating to share-based payments | 19 | (12 | ) | (62 | ) | |||||||
Total taxation credit (expense) on items recognised directly in equity | 19 | (12 | ) | (45 | ) | |||||||
2010 | 2009 | a | 2008 | a | ||||||||
millions of | millions of | millions of | ||||||||||
Year ended 31 March | shares | shares | shares | |||||||||
Basic | 7,740 | 7,724 | 8,066 | |||||||||
Dilutive ordinary shares from share options | 174 | 5 | 106 | |||||||||
Dilutive ordinary shares held in trust | 74 | 42 | 51 | |||||||||
Diluted | 7,988 | 7,771 | 8,223 | |||||||||
Profit (loss) attributable to equity shareholders of the parent (£m) | 1,028 | (193 | ) | 1,737 | ||||||||
Basic earnings (loss) per share (p) | 13.3p | (2.5)p | 21.5p | |||||||||
Diluted earnings (loss) per share (p) | 12.9p | (2.5)p | 21.1p | |||||||||
a | Restated. See page 94. |
Table of Contents
2010 | 2009 | a | 2008 | a | ||||||||||||||||||||
pence | pence | pence | ||||||||||||||||||||||
Year ended 31 March | per share | £m | per share | £m | per share | £m | ||||||||||||||||||
Basic earnings (loss) per share/profit (loss)b | 13.3 | 1,028 | (2.5 | ) | (193 | ) | 21.5 | 1,737 | ||||||||||||||||
Net specific items charge after tax | 1.4 | 107 | 4.3 | 329 | 2.4 | 187 | ||||||||||||||||||
Net pension interest expense (income) after tax | 2.6 | 201 | (3.0 | ) | (225 | ) | (3.7 | ) | (294 | ) | ||||||||||||||
BT Global Services contract and financial review charges after tax | – | – | 15.3 | 1,178 | – | – | ||||||||||||||||||
Adjusted basic earnings (loss)per share/profit (loss) attributable to adjustmentsb | 4.0 | 308 | 16.6 | 1,282 | (1.3 | ) | (107 | ) | ||||||||||||||||
Adjusted basic earnings per share/profitb | 17.3 | 1,336 | 14.1 | 1,089 | 20.2 | 1,630 | ||||||||||||||||||
Diluted earnings (loss) per share/profit (loss)b | 12.9 | 1,028 | (2.5 | ) | (193 | ) | 21.1 | 1,737 | ||||||||||||||||
Adjusted diluted earnings (loss) per share/profit (loss)attributable to adjustmentsb | 3.9 | 308 | 16.5 | 1,282 | (1.3 | ) | (107 | ) | ||||||||||||||||
Adjusted diluted earnings per share/profitb | 16.8 | 1,336 | 14.0 | 1,089 | 19.8 | 1,630 | ||||||||||||||||||
a | Restated. See page 94. | |
b | The stated profit (loss) amounts are the component of the total profit (loss) which is attributable to equity shareholders excluding minority interests. |
2010 | 2009 | |||||||
At 31 March | £m | £m | ||||||
Cash at bank and in hand | 197 | 562 | ||||||
Cash equivalents | ||||||||
Available-for-sale | ||||||||
Listed | – | 7 | ||||||
Loans and receivables | ||||||||
UK deposits | 1,211 | 711 | ||||||
European deposits | 7 | 5 | ||||||
US deposits | 37 | 15 | ||||||
Total cash equivalents | 1,255 | 738 | ||||||
Total cash and cash equivalents | 1,452 | 1,300 | ||||||
Bank overdrafts | (8 | ) | (185 | ) | ||||
Cash and cash equivalents per the cash flow statement | 1,444 | 1,115 | ||||||
Table of Contents
2010 | 2009 | |||||||
At 31 March | £m | £m | ||||||
Moody’s/S&P credit ratinga | ||||||||
Aaa/AAA | 100 | 90 | ||||||
Aa2/AA | 609 | 124 | ||||||
Aa3/AA– | 202 | 271 | ||||||
A1/A+ | 341 | 251 | ||||||
A2/A | 3 | 2 | ||||||
Total cash equivalents | 1,255 | 738 | ||||||
a | Cash equivalent balances with counterparties have been classified at the lower of their Moody’s and S&P rating. |
2010 | 2009 | |||||||
Analysis of net debt | £m | £m | ||||||
Loans and other borrowings (current and non current) | 12,791 | 13,907 | ||||||
Less: | ||||||||
Cash and cash equivalents | (1,452 | ) | (1,300 | ) | ||||
Current asset investments | (406 | ) | (163 | ) | ||||
10,933 | 12,444 | |||||||
Adjustments: | ||||||||
To retranslate currency denominated balances at swapped rates where hedged | (1,326 | ) | (1,766 | ) | ||||
To remove fair value adjustments and accrued interest applied to reflect the effective interest method | (324 | ) | (317 | ) | ||||
Net debt at 31 March | 9,283 | 10,361 | ||||||
2010 | 2009 | |||||||
Reconciliation of movement in net debt | £m | £m | ||||||
At 1 April | 10,361 | 9,460 | ||||||
(Decrease) increase in net debt resulting from cash flows | (1,079 | ) | 921 | |||||
Net debt assumed or issued on acquisitions | – | (2 | ) | |||||
Currency movements | – | (36 | ) | |||||
Other non cash movements | 1 | 18 | ||||||
At 31 March | 9,283 | 10,361 | ||||||
Table of Contents
Brands, | ||||||||||||||||||||||||
Telecommunication | customer | Internally | ||||||||||||||||||||||
licences and | relationships | developed | Computer | |||||||||||||||||||||
Goodwill | other | and technology | software | software | Total | |||||||||||||||||||
£m | £m | £m | £m | £m | £m | |||||||||||||||||||
Cost | ||||||||||||||||||||||||
At 1 April 2008 | 1,088 | 266 | 248 | 1,896 | 1,281 | 4,779 | ||||||||||||||||||
Additions | – | – | – | 712 | 127 | 839 | ||||||||||||||||||
Acquisitions through business combinations | 131 | – | 46 | – | – | 177 | ||||||||||||||||||
Disposals and adjustments | 1 | (3 | ) | 20 | (225 | ) | (12 | ) | (219 | ) | ||||||||||||||
Impairmentsa | – | – | (26 | ) | (48 | ) | (261 | ) | (335 | ) | ||||||||||||||
Exchange differences | 269 | 44 | 88 | 13 | 69 | 483 | ||||||||||||||||||
At 1 April 2009 | 1,489 | 307 | 376 | 2,348 | 1,204 | 5,724 | ||||||||||||||||||
Additions | – | – | – | 585 | 44 | 629 | ||||||||||||||||||
Acquisitions through business combinationsc | 1 | – | – | – | – | 1 | ||||||||||||||||||
Interest on qualifying assetsb | – | – | – | 2 | – | 2 | ||||||||||||||||||
Disposals and adjustments | (2 | ) | (6 | ) | (3 | ) | (362 | ) | 9 | (364 | ) | |||||||||||||
Exchange differences | (56 | ) | (11 | ) | (16 | ) | (5 | ) | (16 | ) | (104 | ) | ||||||||||||
At 31 March 2010 | 1,432 | 290 | 357 | 2,568 | 1,241 | 5,888 | ||||||||||||||||||
Amortisation | ||||||||||||||||||||||||
At 1 April 2008 | 121 | 67 | 520 | 716 | 1,424 | |||||||||||||||||||
Charge for the year | 14 | 62 | 433 | 132 | 641 | |||||||||||||||||||
Disposals and adjustments | (1 | ) | – | (225 | ) | (9 | ) | (235 | ) | |||||||||||||||
Exchange differences | 22 | 24 | 11 | 49 | 106 | |||||||||||||||||||
At 1 April 2009 | 156 | 153 | 739 | 888 | 1,936 | |||||||||||||||||||
Charge for the year | 15 | 54 | 559 | 107 | 735 | |||||||||||||||||||
Disposals and adjustments | (4 | ) | (1 | ) | (366 | ) | (53 | ) | (424 | ) | ||||||||||||||
Exchange differences | (5 | ) | (9 | ) | (5 | ) | (12 | ) | (31 | ) | ||||||||||||||
At 31 March 2010 | 162 | 197 | 927 | 930 | 2,216 | |||||||||||||||||||
Carrying amount | ||||||||||||||||||||||||
At 31 March 2010 | 1,432 | 128 | 160 | 1,641 | 311 | 3,672 | ||||||||||||||||||
At 31 March 2009 | 1,489 | 151 | 223 | 1,609 | 316 | 3,788 | ||||||||||||||||||
a | Impairment charges of £335m were recognised in 2009, comprising BT Global Services restructuring charges of £81m, BT Global Services contract and financial review charges of £241m (see note 3) and £13m in relation to the review of the 21CN programme and associated voice strategy. All impairment losses were recognised in the income statement. The recoverable amount of the impaired assets was equal to their value in use. | |
b | Additions to internally generated software in 2010 includes interest capitalised at a weighted average borrowing rate of 7.9%. | |
c | Additional earnout payment in respect of investment in BT Leasing Limited. |
BT Global | BT Retail | |||||||||||||||||||||||
Services | BT Consumer | BT Business | BT Ireland | BT Enterprises | Total | |||||||||||||||||||
£m | £m | £m | £m | £m | £m | |||||||||||||||||||
At 1 April 2008 | 936 | 47 | 34 | 16 | 55 | 1,088 | ||||||||||||||||||
Acquisitions through business combinations | 37 | 10 | 10 | – | 74 | 131 | ||||||||||||||||||
Disposals, adjustments and reclassifications | 1 | – | – | – | – | 1 | ||||||||||||||||||
Exchange differences | 252 | – | – | – | 17 | 269 | ||||||||||||||||||
At 1 April 2009 | 1,226 | 57 | 44 | 16 | 146 | 1,489 | ||||||||||||||||||
Acquisitions through business combinations | 1 | – | – | – | – | 1 | ||||||||||||||||||
Disposals, adjustments and reclassifications | (3 | ) | 8 | 17 | 5 | (29 | ) | (2 | ) | |||||||||||||||
Exchange differences | (52 | ) | – | – | – | (4 | ) | (56 | ) | |||||||||||||||
At 31 March 2010 | 1,172 | 65 | 61 | 21 | 113 | 1,432 | ||||||||||||||||||
Table of Contents
BT Global | BT Retail | |||||||||||||||||||
Services | BT Consumer | BT Business | BT Ireland | BT Enterprises | ||||||||||||||||
Discount rate | 10.8% | 10.8% | 10.8% | 10.8% | 10.8% | |||||||||||||||
Perpetuity growth rate | 2.5% | 2.0% | 2.0% | 2.0% | 2.0% | |||||||||||||||
BT Global | BT Retail | |||||||||||||||||||
Services | BT Consumer | BT Business | BT Ireland | BT Enterprises | ||||||||||||||||
Discount rate | 11.1% | 11.1% | 11.1% | 11.1% | 11.1% | |||||||||||||||
Perpetuity growth rate | 2.5% | 2.0% | 2.0% | 2.0% | 2.0% | |||||||||||||||
4 | a reduction in the perpetuity growth rate from the 2.5% assumption applied to a revised assumption of 0.5% or less |
4 | an increase in the discount rate from the 10.8% assumption applied to a revised assumption of 12.2% or more |
4 | a reduction in the projected operating cash flows across five years by 15% or more. |
Table of Contents
Network | Assets in | |||||||||||||||||||
Land and | infrastructure | course of | ||||||||||||||||||
buildings | a,b | equipment | b | Other | c | construction | Total | |||||||||||||
£m | £m | £m | £m | £m | ||||||||||||||||
Cost | ||||||||||||||||||||
At 1 April 2008 | 1,209 | 39,117 | 2,194 | 1,240 | 43,760 | |||||||||||||||
Additions | 8 | 238 | 187 | 1,813 | 2,246 | |||||||||||||||
Acquisition through business combinations | – | – | 2 | – | 2 | |||||||||||||||
Transfers | 16 | 2,045 | 19 | (2,080 | ) | – | ||||||||||||||
Disposals and adjustments | 3 | (373 | ) | (169 | ) | (71 | ) | (610 | ) | |||||||||||
Impairmentsd | – | (121 | ) | (8 | ) | (18 | ) | (147 | ) | |||||||||||
Exchange differences | 58 | 652 | 149 | 26 | 885 | |||||||||||||||
At 1 April 2009 | 1,294 | 41,558 | 2,374 | 910 | 46,136 | |||||||||||||||
Additions | 22 | 254 | 144 | 1,441 | 1,861 | |||||||||||||||
Interest on qualifying assetse | – | – | – | 1 | 1 | |||||||||||||||
Transfers | 5 | 1,520 | 1 | (1,526 | ) | – | ||||||||||||||
Disposals and adjustments | 71 | (1,121 | ) | (346 | ) | (14 | ) | (1,410 | ) | |||||||||||
Exchange differences | (13 | ) | (131 | ) | (22 | ) | (5 | ) | (171 | ) | ||||||||||
At 31 March 2010 | 1,379 | 42,080 | 2,151 | 807 | 46,417 | |||||||||||||||
Accumulated depreciation | ||||||||||||||||||||
At 1 April 2008 | 500 | 26,404 | 1,574 | – | 28,478 | |||||||||||||||
Charge for the year | 56 | 1,928 | 265 | – | 2,249 | |||||||||||||||
Disposals and adjustments | 4 | (395 | ) | (209 | ) | – | (600 | ) | ||||||||||||
Exchange differences | 30 | 476 | 126 | – | 632 | |||||||||||||||
At 1 April 2009 | 590 | 28,413 | 1,756 | – | 30,759 | |||||||||||||||
Charge for the year | 70 | 2,015 | 219 | – | 2,304 | |||||||||||||||
Disposals and adjustments | 72 | (1,124 | ) | (255 | ) | – | (1,307 | ) | ||||||||||||
Exchange differences | (7 | ) | (103 | ) | (14 | ) | – | (124 | ) | |||||||||||
At 31 March 2010 | 725 | 29,201 | 1,706 | – | 31,632 | |||||||||||||||
Carrying amount | ||||||||||||||||||||
At 31 March 2010 | 654 | 12,879 | 445 | 807 | 14,785 | |||||||||||||||
Engineering stores | – | – | – | 71 | 71 | |||||||||||||||
Total at 31 March 2010 | 654 | 12,879 | 445 | 878 | 14,856 | |||||||||||||||
At 31 March 2009 | 704 | 13,145 | 618 | 910 | 15,377 | |||||||||||||||
Engineering stores | – | – | – | 28 | 28 | |||||||||||||||
Total at 31 March 2009 | 704 | 13,145 | 618 | 938 | 15,405 | |||||||||||||||
2010 | 2009 | |||||||
£m | £m | |||||||
a The carrying amount of land and buildings, including leasehold improvements, comprised: | ||||||||
Freehold | 431 | 451 | ||||||
Long leases (over 50 years unexpired) | 33 | 30 | ||||||
Short leases | 190 | 223 | ||||||
Total land and buildings | 654 | 704 | ||||||
b | The carrying amount of the group’s property, plant and equipment includes an amount of £183m (2009: £216m) in respect of assets held under finance leases, comprising land and buildings of £74m (2009: £76m) and network infrastructure and equipment of £109m (2009: £140m). The depreciation charge on those assets for 2010 was £44m (2009: £49m), comprising land and buildings of £3m (2009: £3m) and network infrastructure and equipment of £41m (2009: £46m). | |
c | Other mainly comprises motor vehicles and computers. | |
d | Impairment charges of £147m were recognised in 2009, comprising BT Global Services restructuring charges of £129m and £18m in relation to the review of the 21CN programme and associated voice strategy. All impairment losses were recognised in the income statement. The recoverable amount of the impaired assets was equal to their value in use. | |
e | Additions to assets in the course of construction in 2010 includes interest capitalised at a weighted average borrowing rate of 7.9%. |
Table of Contents
2010 | 2009 | |||||||
Year ended 31 March | £m | £m | ||||||
Additions to property, plant and equipment comprised: | ||||||||
Land and buildings | 29 | 23 | ||||||
Network infrastructure and equipment | ||||||||
Transmission equipment | 902 | 1,067 | ||||||
Exchange equipment | 29 | 44 | ||||||
Other network equipment | 753 | 899 | ||||||
Other | ||||||||
Computers and office equipment | 115 | 140 | ||||||
Motor vehicles and other | 33 | 73 | ||||||
Total additions to property, plant and equipment | 1,861 | 2,246 | ||||||
Increase in engineering stores | 43 | 3 | ||||||
Total additions | 1,904 | 2,249 | ||||||
2010 | 2009 | |||||||
At 31 March | £m | £m | ||||||
Non current assets | ||||||||
Available-for-sale | 32 | 23 | ||||||
Loans and receivables | 32 | 32 | ||||||
64 | 55 | |||||||
Current assets | ||||||||
Available-for-sale | 258 | 153 | ||||||
Loans and receivables | 148 | 10 | ||||||
406 | 163 | |||||||
2010 | 2009 | |||||||
At 31 March | £m | £m | ||||||
Moody’s/S&P credit ratinga | ||||||||
Aaa/AAA | 258 | 153 | ||||||
Aa3/AA- | 35 | – | ||||||
A1/A+ | 105 | 10 | ||||||
A2/A | 8 | – | ||||||
Total current asset investments | 406 | 163 | ||||||
a | Current asset investment balances with counterparties have been classified at the lower of their Moody’s and S&P rating. |
Table of Contents
2010 | 2009 | |||||||||||||||||||||||
Associates | Joint ventures | Total | Associates | Joint ventures | Total | |||||||||||||||||||
£m | £m | £m | £m | £m | £m | |||||||||||||||||||
Non current assets | 49 | 7 | 56 | 41 | 7 | 48 | ||||||||||||||||||
Current assets | 278 | 4 | 282 | 168 | 4 | 172 | ||||||||||||||||||
Current liabilities | (77 | ) | (2 | ) | (79 | ) | (86 | ) | (2 | ) | (88 | ) | ||||||||||||
Non current liabilities | (64 | ) | – | (64 | ) | – | – | – | ||||||||||||||||
Share of net assets at 31 March | 186 | 9 | 195 | 123 | 9 | 132 | ||||||||||||||||||
Revenue | 298 | 14 | 312 | 308 | 15 | 323 | ||||||||||||||||||
Expenses | (266 | ) | (14 | ) | (280 | ) | (262 | ) | (15 | ) | (277 | ) | ||||||||||||
Taxation | (7 | ) | – | (7 | ) | (7 | ) | – | (7 | ) | ||||||||||||||
Share of post tax results before specific items | 25 | – | 25 | 39 | – | 39 | ||||||||||||||||||
Specific items (note 5) | ||||||||||||||||||||||||
– impact of renegotiated supply contracts on associate | 29 | – | 29 | – | – | – | ||||||||||||||||||
– reassessment of carrying value of associate | – | – | – | 36 | – | 36 | ||||||||||||||||||
Share of post tax results | 54 | – | 54 | 75 | – | 75 | ||||||||||||||||||
Associates | Joint ventures | Total | ||||||||||
£m | £m | £m | ||||||||||
At 1 April 2008 | 79 | 6 | 85 | |||||||||
Share of post tax profit | 75 | – | 75 | |||||||||
Dividends received | (6 | ) | – | (6 | ) | |||||||
Exchange differences and other | (25 | ) | 3 | (22 | ) | |||||||
At 1 April 2009 | 123 | 9 | 132 | |||||||||
Share of post tax profit | 54 | – | 54 | |||||||||
Additions | 3 | – | 3 | |||||||||
Disposals (note 5) | (12 | ) | – | (12 | ) | |||||||
Dividends received | (3 | ) | – | (3 | ) | |||||||
Exchange differences and other | 21 | – | 21 | |||||||||
At 31 March 2010 | 186 | 9 | 195 | |||||||||
2010 | 2009 | |||||||
At 31 March | £m | £m | ||||||
Consumables | 30 | 23 | ||||||
Work in progress | 43 | 57 | ||||||
Finished goods | 34 | 41 | ||||||
107 | 121 | |||||||
Table of Contents
2010 | 2009 | |||||||
At 31 March | £m | £m | ||||||
Current | ||||||||
Trade receivables | 1,937 | 1,966 | ||||||
Prepayments | 549 | 825 | ||||||
Accrued income | 1,010 | 1,135 | ||||||
Other receivables | 200 | 259 | ||||||
3,696 | 4,185 | |||||||
2010 | 2009 | |||||||
£m | £m | |||||||
Non current | ||||||||
Other assetsa | 336 | 322 | ||||||
a | Other assets mainly represents costs relating to the initial set up, transition or transformation phase of long-term networked IT services contracts. At 31 March 2010 the balance was £294m (2009: £322m). Other assets also include prepayments of £42m (2009: £nil). |
2010 | 2009 | |||||||
£m | £m | |||||||
At 1 April | 246 | 209 | ||||||
Expense recognised in the income statement | 155 | 151 | ||||||
Utilised in the year | (183 | ) | (139 | ) | ||||
Acquisitions | – | 4 | ||||||
Exchange differences | 1 | 21 | ||||||
At 31 March | 219 | 246 | ||||||
Past due and not specifically impaired: | ||||||||||||||||||||||||||||
Trade | ||||||||||||||||||||||||||||
receivables | ||||||||||||||||||||||||||||
specifically | ||||||||||||||||||||||||||||
impaired net | Between 0 | Between 3 | Between 6 | Over 12 | ||||||||||||||||||||||||
Not past due | of provision | and 3 months | and 6 months | and 12 months | months | Total | ||||||||||||||||||||||
£m | £m | £m | £m | £m | £m | £m | ||||||||||||||||||||||
2010 | 1,257 | 51 | 426 | 98 | 60 | 45 | 1,937 | |||||||||||||||||||||
2009 | 1,263 | 1 | 474 | 90 | 65 | 73 | 1,966 | |||||||||||||||||||||
Table of Contents
2010 | 2009 | |||||||
At 31 March | £m | £m | ||||||
BT Global Services | 867 | 878 | ||||||
BT Retail | 228 | 308 | ||||||
BT Wholesale | 127 | 64 | ||||||
Openreach | 27 | 3 | ||||||
Other | 8 | 10 | ||||||
Total trade receivables not past due | 1,257 | 1,263 | ||||||
2010 | 2009 | |||||||
At 31 March | £m | £m | ||||||
BT Global Services | 633 | 635 | ||||||
BT Retail | 148 | 274 | ||||||
BT Wholesale | 182 | 195 | ||||||
Openreach | 44 | 26 | ||||||
Other | 3 | 5 | ||||||
Total accrued income | 1,010 | 1,135 | ||||||
Table of Contents
2010 | 2009 | |||||||
At 31 March | £m | £m | ||||||
Sterling 6.375% bonds June 2037b | 521 | 521 | ||||||
US Dollar 9.625% (2009: 9.125%) notes December 2030 (minimum 8.625%a)b | 1,811 | 1,914 | ||||||
Sterling 5.75% bonds December 2028c | 602 | 608 | ||||||
Sterling 3.5% indexed linked notes April 2025 | 325 | 330 | ||||||
Sterling 8.625% bonds March 2020 | 298 | 298 | ||||||
US Dollar 5.95% bonds January 2018b | 734 | 777 | ||||||
Sterling 6.625% bonds June 2017b | 525 | 524 | ||||||
Sterling 8.5% (2009: 8.0%) notes December 2016 (minimum 7.5%a) | 715 | 713 | ||||||
Euro 6.5% bonds July 2015b | 935 | 973 | ||||||
Euro 6.125% bonds July 2014b,f | 561 | – | ||||||
Euro 5.25% bonds June 2014b | 696 | 723 | ||||||
Euro 5.25% bonds January 2013b | 902 | 935 | ||||||
US Dollar 5.15% bonds January 2013b | 566 | 599 | ||||||
Euro 7.87% (2009: 7.375%) notes February 2011 (minimum 6.875%a)b | 1,015 | 1,051 | ||||||
US Dollar 9.125% (2009: 8.625%) notes December 2010 (minimum 8.125%a)b | 1,951 | 2,074 | ||||||
US Dollar 8.765% bonds August 2009d | – | 149 | ||||||
Total listed bonds, debentures and notes | 12,157 | 12,189 | ||||||
Finance leases | 304 | 332 | ||||||
Commercial paperb,e | – | 715 | ||||||
Sterling 6.35% bank loan due August 2012 | 312 | 312 | ||||||
Sterling 10.4% bank loan due September 2009 | – | 140 | ||||||
Sterling floating rate note 2009-2010 | – | 28 | ||||||
Other loans 2009-2012 | 10 | 6 | ||||||
Bank overdrafts (of which £nil (2009: £160m) had a legally enforceable right | ||||||||
of set off – see note 10) | 8 | 185 | ||||||
Total other loans and borrowings | 330 | 1,386 | ||||||
Total loans and other borrowings | 12,791 | 13,907 | ||||||
a | The interest rate payable on these notes will be subject to adjustment from time to time if either Moody’s or Standard and Poor’s (S&P) reduce the rating ascribed to the group’s senior unsecured debt below A3 in the case of Moody’s or below A– in the case of S&P. In this event, the interest rate payable on the notes and the spread applicable to the floating notes will be increased by 0.25% for each ratings category adjustment by each rating agency. In addition, if Moody’s or S&P subsequently increase the ratings ascribed to the group’s senior unsecured debt, then the interest rate then payable on notes and the spread applicable to the floating notes will be decreased by 0.25% for each rating category upgrade by each rating agency, but in no event will the interest rate be reduced below the minimum interest rate reflected in the above table. In February 2010, S&P downgraded BT’s credit rating by one ratings category to BBB– as detailed on page 138. At the next coupon date in the 2011 financial year, the rate payable on these bonds will therefore increase by 0.25 percentage points. | |
b | Hedged in a designated cash flow hedge. | |
c | Hedged in a designated fair value hedge. | |
d | Hedged in a designated cash flow and fair value hedge. | |
e | Commercial paper is denominated in Sterling of £nil (2009: £209m) and Euros of £nil (2009: £506m). | |
f | The group’s €600m bond issued in June 2009 would attract an additional 1.25 percentage points for a downgrade by one credit rating category by both Moody’s and S&P below Baa3/BBB– respectively. |
2010 | 2009 | |||||||||||||||||||||||
Effect of | Principal | Effect of | Principal | |||||||||||||||||||||
Carrying | hedging | repayments at | Carrying | hedging and | repayments at | |||||||||||||||||||
amount | and interest | a | hedged rates | amount | interest | a | hedged rates | |||||||||||||||||
At 31 March | £m | £m | £m | £m | £m | £m | ||||||||||||||||||
Repayments fall due as follows: | ||||||||||||||||||||||||
Within one year, or on demand | 3,269 | (737 | ) | 2,532 | 1,542 | (352 | ) | 1,190 | ||||||||||||||||
Between one and two years | 18 | – | 18 | 3,098 | (551 | ) | 2,547 | |||||||||||||||||
Between two and three years | 1,763 | (313 | ) | 1,450 | 10 | – | 10 | |||||||||||||||||
Between three and four years | 11 | – | 11 | 1,829 | (380 | ) | 1,449 | |||||||||||||||||
Between four and five years | 1,213 | (177 | ) | 1,036 | 14 | – | 14 | |||||||||||||||||
After five years | 6,523 | (431 | ) | 6,092 | 7,412 | (799 | ) | 6,613 | ||||||||||||||||
Total due for repayment after more than one year | 9,528 | (921 | ) | 8,607 | 12,363 | (1,730 | ) | 10,633 | ||||||||||||||||
Total repayments | 12,797 | (1,658 | ) | 11,139 | 13,905 | (2,082 | ) | 11,823 | ||||||||||||||||
Fair value adjustments for hedged risk | (6 | ) | 2 | |||||||||||||||||||||
Total loans and other borrowings | 12,791 | 13,907 | ||||||||||||||||||||||
a | Adjustments for hedging and interest reflect the impact of the currency element of derivatives and adjust the repayments to exclude interest recognised in the carrying amount. |
Table of Contents
2010 | 2009 | |||||||||||||||||||||||
Fixed rate | Floating rate | Fixed rate | Floating rate | |||||||||||||||||||||
interest | interest | Total | interest | interest | Total | |||||||||||||||||||
At 31 March | £m | £m | £m | £m | £m | £m | ||||||||||||||||||
Sterling | 10,110 | 835 | 10,945 | 10,239 | 1,373 | 11,612 | ||||||||||||||||||
Euro | – | 184 | 184 | – | 204 | 204 | ||||||||||||||||||
US Dollar | – | 3 | 3 | – | 2 | 2 | ||||||||||||||||||
Other | – | 7 | 7 | – | 5 | 5 | ||||||||||||||||||
Total | 10,110 | 1,029 | 11,139 | 10,239 | 1,584 | 11,823 | ||||||||||||||||||
Weighted average effective fixed interest rate Sterling | 8.0% | 8.1% | ||||||||||||||||||||||
The floating rate loans and borrowings bear interest rates fixed in advance for periods ranging from one day to one year, primarily by reference to LIBOR and EURIBOR quoted rates. | ||||||||||||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||||||||||
Repayment of outstanding | ||||||||||||||||||||||||
Minimum lease payments | lease obligations | |||||||||||||||||||||||
At 31 March | £m | £m | £m | £m | ||||||||||||||||||||
Amounts payable under finance leases: | ||||||||||||||||||||||||
Within one year | 33 | 32 | 16 | 14 | ||||||||||||||||||||
In the second to fifth years inclusive | 119 | 135 | 48 | 66 | ||||||||||||||||||||
After five years | 422 | 456 | 240 | 252 | ||||||||||||||||||||
574 | 623 | 304 | 332 | |||||||||||||||||||||
Less: future finance charges | (270 | ) | (291 | ) | – | – | ||||||||||||||||||
Total finance lease obligations | 304 | 332 | 304 | 332 | ||||||||||||||||||||
Assets held under finance leases mainly consist of buildings and network assets. The group’s obligations under finance leases are secured by the lessors’ title to the leased assets. | ||||||||||||||||||||||||
19. Derivative financial instruments | ||||||||||||||||||||||||
2010 | 2009 | a | 2008 | a | ||||||||||||||||||||
Assets | Liabilities | Assets | Liabilities | Assets | Liabilities | |||||||||||||||||||
At 31 March | £m | £m | £m | £m | £m | £m | ||||||||||||||||||
Interest rate swaps – cash flow hedge | – | 361 | – | 446 | 1 | 207 | ||||||||||||||||||
Interest rate swaps – fair value hedge | – | 6 | – | – | – | – | ||||||||||||||||||
Other interest rate swaps | 106 | 295 | 107 | 316 | 25 | 239 | ||||||||||||||||||
Cross currency swaps – cash flow hedge | 1,571 | 30 | 2,541 | 1 | 340 | 605 | ||||||||||||||||||
Cross currency swaps – fair value hedge | – | – | 18 | – | – | 20 | ||||||||||||||||||
Other cross currency swaps | – | 1 | – | – | – | – | ||||||||||||||||||
Forward foreign exchange contracts – cash flow hedge | 23 | 4 | 27 | 1 | 20 | 1 | ||||||||||||||||||
Other forward foreign exchange contracts | – | 2 | 7 | 2 | 1 | – | ||||||||||||||||||
Credit default swaps | – | – | – | 1 | – | – | ||||||||||||||||||
1,700 | 699 | 2,700 | 767 | 387 | 1,072 | |||||||||||||||||||
Analysed as: | ||||||||||||||||||||||||
Current | 624 | 166 | 158 | 56 | 71 | 58 | ||||||||||||||||||
Non current | 1,076 | 533 | 2,542 | 711 | 316 | 1,014 | ||||||||||||||||||
1,700 | 699 | 2,700 | 767 | 387 | 1,072 | |||||||||||||||||||
a | Restated. See page 94. |
Table of Contents
2010 | 2009 | |||||||
At 31 March | £m | £m | ||||||
Moody’s/S&P credit ratinga | ||||||||
Aa2/AA | 89 | 200 | ||||||
Aa3/AA– | 480 | 650 | ||||||
A1/A+ | 708 | 1,030 | ||||||
A2/A | 318 | 719 | ||||||
A3/A– | 105 | 101 | ||||||
1,700 | 2,700 | |||||||
a | Derivative financial instrument balances with counterparties have been classified at the lower of their Moody’s and S&P rating. |
2010 | 2009 | |||||||
At 31 March | £m | £m | ||||||
Current | ||||||||
Trade payables | 3,668 | 4,367 | ||||||
Other taxation and social security | 516 | 489 | ||||||
Other payables | 506 | 527 | ||||||
Accrued expenses | 498 | 460 | ||||||
Deferred income | 1,343 | 1,372 | ||||||
6,531 | 7,215 | |||||||
2010 | 2009 | |||||||
At 31 March | £m | £m | ||||||
Non current | ||||||||
Other payables | 734 | 718 | ||||||
Deferred income | 70 | 76 | ||||||
804 | 794 | |||||||
Table of Contents
BT Global | Property | Other | ||||||||||||||
Services provisions | a | provisions | b | provisions | c | Total | ||||||||||
£m | £m | £m | £m | |||||||||||||
At 1 April 2009 | 303 | 172 | 245 | 720 | ||||||||||||
Charged to the income statementd | 10 | 131 | 204 | 345 | ||||||||||||
Unwind of discount | – | 4 | – | 4 | ||||||||||||
Utilised in the year | (139 | ) | (35 | ) | (98 | ) | (272 | ) | ||||||||
Transfers | 16 | – | 31 | 47 | ||||||||||||
Exchange differences | (3 | ) | – | – | (3 | ) | ||||||||||
At 31 March 2010 | 187 | 272 | 382 | 841 | ||||||||||||
2010 | 2009 | |||||||
At 31 March | £m | £m | ||||||
Analysed as: | ||||||||
Current | 134 | 254 | ||||||
Non current | 707 | 466 | ||||||
841 | 720 | |||||||
a | Amounts provided in relation to the BT Global Services restructuring programme and the contract and the financial reviews in 2009. These will be utilised as the obligations are settled. | |
b | Property provisions mainly comprise onerous lease provisions arising from the rationalisation of the group’s property portfolio. The provisions will be utilised over the remaining lease periods, which range from one to 22 years. Financial liabilities comprise £255m (2009: £166m) of this balance. | |
c | Other provisions includes: – Amounts provided for incremental and directly attributable costs arising from the group’s obligation to deliver the Undertakings, which will be utilised within one year. – Amounts provided for legal or constructive obligations arising from insurance claims, litigation and regulatory risk, which will be utilised as the obligations are settled. | |
d | Includes specific items of £121m for property rationalisation costs and £10m relating to the BT Global Services restructuring programme. |
Retirement | ||||||||||||||||||||
Excess capital | benefit | Share-based | ||||||||||||||||||
allowances | obligations | a | payments | Other | Total | |||||||||||||||
£m | £m | £m | £m | £m | ||||||||||||||||
At 1 April 2008 | 1,969 | 778 | (51 | ) | (183 | ) | 2,513 | |||||||||||||
(Credit) expense recognised in the income statement | (158 | ) | 78 | 32 | 7 | (41 | ) | |||||||||||||
(Credit) expense recognised in equity | – | (1,959 | ) | 12 | 100 | (1,847 | ) | |||||||||||||
At 31 March 2009 | 1,811 | (1,103 | ) | (7 | ) | (76 | ) | 625 | ||||||||||||
Deferred tax asset | – | (1,103 | ) | – | – | (1,103 | ) | |||||||||||||
Deferred tax liability | 1,811 | – | (7 | ) | (76 | ) | 1,728 | |||||||||||||
At 1 April 2009 | 1,811 | (1,103 | ) | (7 | ) | (76 | ) | 625 | ||||||||||||
(Credit) expense recognised in the income statement | (115 | ) | 118 | (15 | ) | 2 | (10 | ) | ||||||||||||
(Credit) expense recognised in equity | – | (1,211 | ) | (19 | ) | (143 | ) | (1,373 | ) | |||||||||||
Transfer from current tax | – | – | – | 18 | 18 | |||||||||||||||
At 31 March 2010 | 1,696 | (2,196 | ) | (41 | ) | (199 | ) | (740 | ) | |||||||||||
Deferred tax asset | – | (2,196 | ) | – | – | (2,196 | ) | |||||||||||||
Deferred tax liability | 1,696 | – | (41 | ) | (199 | ) | 1,456 | |||||||||||||
At 31 March 2010 | 1,696 | (2,196 | ) | (41 | ) | (199 | ) | (740 | ) | |||||||||||
a | Includes a deferred tax asset of £3m (2009: £nil) arising on contributions payable to defined contribution schemes. |
Table of Contents
2010 | Expiry of | |||||||
At 31 March | £m | losses | ||||||
Restricted losses: | ||||||||
Americas | 284 | 2010-2029 | ||||||
Europe | 1,719 | 2010-2025 | ||||||
Total restricted losses | 2,003 | |||||||
Unrestricted losses: | ||||||||
Operating losses | 3,278 | No expiry | ||||||
Capital losses | 23,439 | No expiry | ||||||
Other | 775 | No expiry | ||||||
Total unrestricted losses | 27,492 | |||||||
Total | 29,495 | |||||||
2010 | 2009 | |||||||
£m | £m | |||||||
At 1 April | 27 | 23 | ||||||
Share of profits | 1 | 2 | ||||||
Disposals | (4 | ) | (9 | ) | ||||
Minority share of dividend paid | – | (1 | ) | |||||
Acquisitions through business combinations | – | 3 | ||||||
Exchange differences | – | 9 | ||||||
At 31 March | 24 | 27 | ||||||
Number | Share capital | a | Share premium | b | ||||||||
of shares | £m | £m | ||||||||||
At 1 April 2008 | 8,401,227,029 | 420 | 62 | |||||||||
Cancelledc | (250,000,000 | ) | (12 | ) | – | |||||||
At 1 April 2009 and 31 March 2010 | 8,151,227,029 | 408 | 62 | |||||||||
a | The authorised share capital of the company up to 1 October 2009 was £13,463m, representing 269,260,253,468 ordinary shares of 5p each. The allotted, called up and fully paid ordinary share capital of the company at 31 March 2010 and 31 March 2009 was £408m, representing 8,151,227,029 ordinary shares of 5p each. | |
b | The share premium account, representing the premium on allotment of shares, is not available for distribution. | |
c | In 2010 the group cancelled nil treasury shares (2009: 250,000,000) with a nominal value of £nil (2009: £12m). |
Table of Contents
Treasury | Cash flow | Available-for- | Translation | Merger | Total other | |||||||||||||||||||
shares | a | reserve | b | sale reserve | c | reserve | d | reserve | e | reserves | ||||||||||||||
£m | £m | £m | £m | £m | £m | |||||||||||||||||||
At 1 April 2007 | (884 | ) | 23 | – | (49 | ) | 998 | 88 | ||||||||||||||||
Exchange differences | – | – | – | 210 | – | 210 | ||||||||||||||||||
Net fair value gain on cash flow hedges | – | 446 | – | – | – | 446 | ||||||||||||||||||
Recognised in income and expense in the year | – | (294 | ) | – | – | – | (294 | ) | ||||||||||||||||
Reclassified and reported in non current assets | – | 11 | – | – | – | 11 | ||||||||||||||||||
Tax recognised in other comprehensive income | – | (29 | ) | – | – | – | (29 | ) | ||||||||||||||||
Net purchase of treasury shares | (1,529 | ) | – | – | – | – | (1,529 | ) | ||||||||||||||||
Cancellation of treasury shares | 570 | – | – | – | – | 570 | ||||||||||||||||||
At 1 April 2008 | (1,843 | ) | 157 | – | 161 | 998 | (527 | ) | ||||||||||||||||
Exchange differences | – | – | – | 683 | – | 683 | ||||||||||||||||||
Net fair value gain on cash flow hedges | – | 2,719 | – | – | – | 2,719 | ||||||||||||||||||
Recognised in income and expense in the year | – | (2,144 | ) | – | – | – | (2,144 | ) | ||||||||||||||||
Reclassified and reported in non current assets | – | (5 | ) | – | – | – | (5 | ) | ||||||||||||||||
Gains on available-for-sale investments | – | – | 5 | – | – | 5 | ||||||||||||||||||
Tax recognised in other comprehensive income | – | (164 | ) | – | – | – | (164 | ) | ||||||||||||||||
Net purchase of treasury shares | (63 | ) | – | – | – | – | (63 | ) | ||||||||||||||||
Cancellation of treasury shares | 797 | – | – | – | – | 797 | ||||||||||||||||||
At 1 April 2009 | (1,109 | ) | 563 | 5 | 844 | 998 | 1,301 | |||||||||||||||||
Exchange differences | – | – | – | (119 | ) | – | (119 | ) | ||||||||||||||||
Net fair value loss on cash flow hedges | – | (1,067 | ) | – | – | – | (1,067 | ) | ||||||||||||||||
Recognised in income and expense in the year | – | 496 | – | – | – | 496 | ||||||||||||||||||
Reclassified and reported in non current assets | – | (4 | ) | – | – | – | (4 | ) | ||||||||||||||||
Gains on available-for-sale investments | – | – | 7 | – | – | 7 | ||||||||||||||||||
Tax recognised in other comprehensive income | – | 159 | – | (20 | ) | – | 139 | |||||||||||||||||
Net issue of treasury shares | 4 | – | – | – | – | 4 | ||||||||||||||||||
At 31 March 2010 | (1,105 | ) | 147 | 12 | 705 | 998 | 757 | |||||||||||||||||
a | The treasury shares reserve is used to hold BT Group plc shares purchased by the group. During 2010 the company purchased nil (2009: 142,608,225, 2008: 539,657,691) of its own shares of 5p each, representing nil% (2009: 2%, 2008: 6%) of the called-up share capital, for consideration (including transaction costs) of £nil (2009: £189m, 2008: £1,626m). In addition, 8,320,766 shares (2009: 90,626,518, 2008: 53,250,144) were issued from treasury to satisfy obligations under employee share schemes and executive share awards at a cost of £4m (2009: £126m, 2008: £97m), and nil treasury shares (2009 and 2008: 250,000,000) were cancelled at a cost of £nil (2009: £797m, 2008: £570m). At 31 March 2010, 400,906,119 shares (2009: 409,226,885, 2008: 607,285,178) with an aggregate nominal value of £20m (2009: £20m, 2008: £30m) were held as treasury shares at cost. | |
b | The cash flow reserve is used to record the effective portion of the cumulative net change in the fair value of cash flow hedging instruments related to hedged transactions that have not yet occurred. | |
c | The available-for-sale reserve is used to record the cumulative fair value gains and losses on available-for-sale financial assets. The cumulative gains and losses are recycled to the income statement on disposal of the assets. The gross gain in the year amounted to £7m (2009: £5m, 2008: £nil). | |
d | The translation reserve is used to record cumulative translation differences on the assets and liabilities of foreign operations. The cumulative translation differences are recycled to the income statement on disposal of the foreign operation. | |
e | The merger reserve arose on the group reorganisation that occurred in November 2001 and represented the difference between the nominal value of shares in the new parent company, BT Group plc, and the aggregate of the share capital, share premium account and capital redemption reserve of the prior parent company, British Telecommunications plc. |
2010 | 2009 | a | 2008 | a | ||||||||
Year ended 31 March | £m | £m | £m | |||||||||
Salaries and short-term benefits | 10.3 | 8.4 | 8.3 | |||||||||
Termination benefits | 0.1 | 2.4 | – | |||||||||
Post employment benefits | 1.8 | 2.3 | 1.0 | |||||||||
Share-based payments | 2.6 | 3.6 | 5.0 | |||||||||
14.8 | 16.7 | 14.3 | ||||||||||
a | Restated to include the Chairman and non-executive directors. |
Table of Contents
2010 | 2009 | |||||||
Capital expenditure contracted for at the balance sheet date but not yet incurred was as follows: | £m | £m | ||||||
Property, plant and equipment | 368 | 414 | ||||||
Computer software | 15 | 37 | ||||||
Total | 383 | 451 | ||||||
2010 | 2009 | |||||||
Future minimum operating lease payments for the group were as follows: | £m | £m | ||||||
Payable in the year ending 31 March: | ||||||||
2010 | – | 484 | ||||||
2011 | 494 | 455 | ||||||
2012 | 460 | 430 | ||||||
2013 | 431 | 403 | ||||||
2014 | 400 | 377 | ||||||
2015 | 375 | 356 | ||||||
Thereafter | 5,527 | 5,499 | ||||||
Total future minimum operating lease payments | 7,687 | 8,004 | ||||||
Table of Contents
BT | ||||||||||||||||
Global Services | BT Retail | Other | Total | |||||||||||||
Year ended 31 March 2009 | £m | £m | £m | £m | ||||||||||||
Fair value of consideration | 13 | 98 | 75 | 186 | ||||||||||||
Less: fair value of net assets acquired | 3 | 24 | 28 | 55 | ||||||||||||
Goodwill arising | 10 | 74 | 47 | 131 | ||||||||||||
Consideration: | ||||||||||||||||
Cash | 13 | 98 | 65 | 176 | ||||||||||||
Deferred consideration | – | – | 10 | 10 | ||||||||||||
Total | 13 | 98 | 75 | 186 | ||||||||||||
The outflow of cash and cash equivalents was as follows: | ||||||||||||||||
Cash consideration | 13 | 98 | 65 | 176 | ||||||||||||
Less: cash acquired | 1 | 3 | 5 | 9 | ||||||||||||
12 | 95 | 60 | 167 | |||||||||||||
Fair value | ||||||||||||
Book value | adjustments | Fair value | ||||||||||
£m | £m | £m | ||||||||||
Receivables | 6 | – | 6 | |||||||||
Cash and cash equivalents | 1 | – | 1 | |||||||||
Payables | (4 | ) | – | (4 | ) | |||||||
Net assets acquired | 3 | – | 3 | |||||||||
Goodwill | 10 | |||||||||||
Total consideration | 13 | |||||||||||
Fair value | ||||||||||||
Book value | adjustments | Fair value | ||||||||||
£m | £m | £m | ||||||||||
Intangible assets | 2 | 21 | 23 | |||||||||
Property, plant and equipment | 2 | – | 2 | |||||||||
Receivables | 20 | (1 | ) | 19 | ||||||||
Cash and cash equivalents | 3 | – | 3 | |||||||||
Payables | (22 | ) | (1 | ) | (23 | ) | ||||||
Net assets acquired | 5 | 19 | 24 | |||||||||
Goodwill | 74 | |||||||||||
Total consideration | 98 | |||||||||||
Table of Contents
Fair value | ||||||||||||
Book value | adjustments | Fair value | ||||||||||
£m | £m | £m | ||||||||||
Intangible assets | – | 25 | 25 | |||||||||
Receivables | 2 | – | 2 | |||||||||
Cash and cash equivalents | 5 | – | 5 | |||||||||
Payables | (4 | ) | – | (4 | ) | |||||||
Net assets acquired | 3 | 25 | 28 | |||||||||
Goodwill | 47 | |||||||||||
Total consideration | 75 | |||||||||||
Table of Contents
Real rates (per annum) | Nominal rates (per annum) | |||||||||||||||||||||||
2010 | 2009 | 2008 | 2010 | 2009 | 2008 | |||||||||||||||||||
At 31 March | % | % | % | % | % | % | ||||||||||||||||||
Rate used to discount liabilities | 1.83 | 3.84 | 3.24 | 5.50 | 6.85 | 6.85 | ||||||||||||||||||
Average future increases in wages and salaries | – | – | 0.75 | a | 3.60 | 2.90 | 4.28 | a | ||||||||||||||||
Average increase in pensions in payment and deferred pensions | – | – | – | 3.60 | 2.90 | 3.50 | ||||||||||||||||||
Inflation – average increase in retail price index | n/a | n/a | n/a | 3.60 | 2.90 | 3.50 | ||||||||||||||||||
a | There is a short-term reduction in the real salary growth assumption to 0.5% for the first three years. |
2010 | 2009 | |||||||
Number of | Number of | |||||||
years | years | |||||||
Male in lower pay bracket | 25.2 | 24.8 | ||||||
Male in higher pay bracket | 27.4 | 27.1 | ||||||
Female | 28.1 | 27.7 | ||||||
Future improvement every 10 years | 1.1 | 1.0 | ||||||
2010 | 2009 | |||||||||||||||||||||||
Present | Present | |||||||||||||||||||||||
value | value | |||||||||||||||||||||||
Assets | of liabilities | Obligation | Assets | of liabilities | Obligation | |||||||||||||||||||
At 31 March | £m | £m | £m | £m | £m | £m | ||||||||||||||||||
BTPS | 35,278 | (43,018 | ) | (7,740 | ) | 29,227 | (33,070 | ) | (3,843 | ) | ||||||||||||||
Other schemesa | 151 | (275 | ) | (124 | ) | 126 | (256 | ) | (130 | ) | ||||||||||||||
35,429 | (43,293 | ) | (7,864 | ) | 29,353 | (33,326 | ) | (3,973 | ) | |||||||||||||||
Deferred tax asset | 2,193 | 1,103 | ||||||||||||||||||||||
Net pension obligation | (5,671 | ) | (2,870 | ) | ||||||||||||||||||||
a | Included in the present value of liabilities of other schemes is £54m (2009: £52m) related to unfunded schemes. |
2010 | 2009 | 2008 | ||||||||||
Year ended 31 March | £m | £m | £m | |||||||||
Current service cost (including defined contribution schemes) | 304 | 544 | 626 | |||||||||
Total operating charge | 304 | 544 | 626 | |||||||||
Expected return on pension scheme assets | (1,932 | ) | (2,621 | ) | (2,448 | ) | ||||||
Interest expense on pension scheme liabilities | 2,211 | 2,308 | 2,028 | |||||||||
Net finance expense (income) | 279 | (313 | ) | (420 | ) | |||||||
Total recognised in the income statement | 583 | 231 | 206 | |||||||||
Table of Contents
![(line chart)](https://capedge.com/proxy/20-F/0000950123-10-053013/u08916u0891667.jpg)
2010 | 2009 | 2008 | ||||||||||
Year ended 31 March | £m | £m | £m | |||||||||
Actuarial (loss) gain recognised in the year | (4,324 | ) | (7,037 | ) | 2,621 | |||||||
Cumulative actuarial (losses) gains | (4,915 | ) | (591 | ) | 6,446 | |||||||
Actual return on plan assets | 7,089 | (6,830 | ) | (124 | ) | |||||||
2010 | 2009 | |||||||
Year ended 31 March | £m | £m | ||||||
Opening defined benefit pension obligation | (33,326 | ) | (34,669 | ) | ||||
Current service cost | (206 | ) | (459 | ) | ||||
Interest expense | (2,211 | ) | (2,308 | ) | ||||
Contributions by employees | (15 | ) | (18 | ) | ||||
Actuarial (loss) gain | (9,481 | ) | 2,414 | |||||
Business combinations | – | (4 | ) | |||||
Benefits paid | 1,948 | 1,741 | ||||||
Exchange differences | (2 | ) | (23 | ) | ||||
Closing defined benefit pension obligation | (43,293 | ) | (33,326 | ) | ||||
2010 | 2009 | |||||||
Year ended 31 March | £m | £m | ||||||
Opening fair value of plan assets | 29,353 | 37,448 | ||||||
Expected return | 1,932 | 2,621 | ||||||
Actuarial gain (loss) | 5,157 | (9,451 | ) | |||||
Regular contributions by employer | 391 | 441 | ||||||
Deficiency contributions by employer | 525 | – | ||||||
Contributions by employees | 15 | 18 | ||||||
Benefits paid | (1,948 | ) | (1,741 | ) | ||||
Exchange differences | 4 | 17 | ||||||
Closing fair value of plan assets | 35,429 | 29,353 | ||||||
Table of Contents
At 31 March 2010 | At 31 March 2009 | |||||||||||||||||||||||||||||||
Expected | Expected | |||||||||||||||||||||||||||||||
long-term | long-term | |||||||||||||||||||||||||||||||
rate of return | rate of return | |||||||||||||||||||||||||||||||
(per annum) | Asset fair value | Target | (per annum) | Asset fair value | Target | |||||||||||||||||||||||||||
% | £bn | % | % | % | £bn | % | % | |||||||||||||||||||||||||
UK equities | 8.5 | 3.6 | 10 | 11 | 8.5 | 3.2 | 11 | 11 | ||||||||||||||||||||||||
Non-UK equities | 8.5 | 7.5 | 21 | 22 | 8.5 | 5.9 | 20 | 22 | ||||||||||||||||||||||||
Fixed-interest securities | 5.0 | 5.9 | 17 | 20 | 5.9 | 6.6 | 22 | 20 | ||||||||||||||||||||||||
Index-linked securities | 4.2 | 5.8 | 16 | 15 | 4.0 | 4.4 | 15 | 15 | ||||||||||||||||||||||||
Property | 7.7 | 3.8 | 11 | 12 | 7.0 | 3.2 | 11 | 12 | ||||||||||||||||||||||||
Alternative assets | 6.9 | 5.9 | 17 | 20 | 7.0 | 5.2 | 18 | 20 | ||||||||||||||||||||||||
Cash and other | 4.2 | 2.8 | 8 | – | 3.5 | 0.8 | 3 | – | ||||||||||||||||||||||||
6.5 | 35.3 | 100 | 100 | 6.7 | 29.3 | 100 | 100 | |||||||||||||||||||||||||
2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||
£m | £m | £m | £m | £m | ||||||||||||||||
Present value of defined benefit obligation | (43,293 | ) | (33,326 | ) | (34,669 | ) | (38,779 | ) | (38,187 | ) | ||||||||||
Fair value of plan assets | 35,429 | 29,353 | 37,448 | 38,390 | 35,640 | |||||||||||||||
Net pension (obligation) asset | (7,864 | ) | (3,973 | ) | 2,779 | (389 | ) | (2,547 | ) | |||||||||||
Experience adjustment on defined benefit obligation – gain (loss) | 1,632 | (238 | ) | (22 | ) | 190 | (527 | ) | ||||||||||||
Percentage of the present value of the defined benefit obligation | 3.8% | 0.7% | 0.1% | 0.5% | 1.4% | |||||||||||||||
Experience adjustment on plan assets – gain (loss) | 5,157 | (9,451 | ) | (2,572 | ) | 993 | 4,855 | |||||||||||||
Percentage of the plan assets | 14.6% | 32.2% | 6.9% | 2.6% | 13.6% | |||||||||||||||
130 BT GROUP PLC ANNUAL REPORT & FORM 20-F
Table of Contents
Decrease | Decrease | Decrease | ||||||||||
(increase) in | (increase) in | (increase) in net | ||||||||||
liability | service cost | finance expense | ||||||||||
£bn | £m | £m | ||||||||||
0.25 percentage point increase to: | ||||||||||||
– discount rate | 1.6 | 15 | (15 | ) | ||||||||
– salary increases | (0.2 | ) | – | (15 | ) | |||||||
Additional 1 year increase to life expectancy | (1.0 | ) | (10 | ) | (55 | ) | ||||||
0.1 percentage point increase in expected return on assets | – | – | 35 | |||||||||
4 | scheme assets are valued at market value at the valuation date; and | |
4 | scheme liabilities are measured using a projected unit credit method and discounted to their present value. |
Real rates (per annum) | Nominal rates (per annum) | |||||||||||||||
2008 | 2005 | 2008 | 2005 | |||||||||||||
valuation | valuation | valuation | valuation | |||||||||||||
% | % | % | % | |||||||||||||
Discount rate | ||||||||||||||||
Pre retirement liabilities | 3.65 | 3.06 | 6.76 | 5.84 | ||||||||||||
Post retirement liabilities | 2.15 | 1.79 | 5.21 | 4.54 | ||||||||||||
Average increase in retail price index | – | – | 3.00 | 2.70 | ||||||||||||
Average future increases in wages and salaries | – | 0.75 | 3.00 | 3.47 | ||||||||||||
Average increase in pensions | – | – | 3.00 | 2.70 | ||||||||||||
Table of Contents
4 | In the event that cumulative shareholder distributions exceed cumulative total pension contributions over the three year period to 31 December 2011, then BT will make additional matching contributions to the scheme. Total pension contributions (including regular contributions) are expected to be approximately £2.4bn over the three financial years. | |
4 | In the event that BT generates net cash proceeds greater than £1bn from disposals and acquisitions in any 12 month period to 31 December 2011 then BT will make additional contributions to the scheme equal to one third of those net cash proceeds. | |
4 | A negative pledge that provides comfort to the scheme that future creditors will not be granted superior security to the scheme in excess of a £1.5bn threshold. |
2010 | 2009 | a | 2008 | a | ||||||||
Year ended 31 March | £m | £m | £m | |||||||||
Employee Sharesave Plan | 25 | 107 | 29 | |||||||||
Allshare International | 2 | 2 | 2 | |||||||||
Employee Stock Purchase Plan | 1 | – | 1 | |||||||||
Incentive Share Plan | 29 | 18 | 26 | |||||||||
Deferred Bonus Plan | 13 | 12 | 12 | |||||||||
Retention Share Plan | 1 | 2 | 3 | |||||||||
71 | 141 | 73 | ||||||||||
a | Restated for the adoption of the amendment to IFRS 2 ‘Share-based payment – vesting conditions and cancellations’. See page 94. |
132 BT GROUP PLC ANNUAL REPORT & FORM 20-F
Table of Contents
Table of Contents
Employee Sharesave | GSOP and GLOP | |||||||||||||||||||||||
2010 | 2009 | 2008 | 2010 | 2009 | 2008 | |||||||||||||||||||
Movement in the number of share options: | millions | millions | millions | millions | millions | millions | ||||||||||||||||||
Outstanding at the beginning of the year | 136 | 281 | 272 | 42 | 46 | 103 | ||||||||||||||||||
Granted | 490 | 339 | 54 | – | – | – | ||||||||||||||||||
Forfeited | (44 | ) | (390 | ) | (15 | ) | (4 | ) | (3 | ) | (10 | ) | ||||||||||||
Exercised | (1 | ) | (80 | ) | (28 | ) | – | (1 | ) | (14 | ) | |||||||||||||
Expired | (47 | ) | (14 | ) | (2 | ) | – | – | (33 | ) | ||||||||||||||
Outstanding at the end of the year | 534 | 136 | 281 | 38 | 42 | 46 | ||||||||||||||||||
Exercisable at the end of the year | 1 | 1 | 2 | 38 | 42 | 46 | ||||||||||||||||||
Weighted average exercise price: | ||||||||||||||||||||||||
Outstanding at the beginning of the year | 160 | p | 180 | p | 165 | p | 256 | p | 257 | p | 227 | p | ||||||||||||
Granted | 63 | p | 135 | p | 269 | p | – | – | – | |||||||||||||||
Forfeited | 107 | p | 153 | p | 208 | p | 263 | p | 199 | p | 251 | p | ||||||||||||
Exercised | 125 | p | 155 | p | 188 | p | – | 196 | p | 198 | p | |||||||||||||
Expired | 150 | p | 178 | p | 179 | p | – | – | 199 | p | ||||||||||||||
Outstanding at the end of the year | 76 | p | 160 | p | 180 | p | 255 | p | 256 | p | 257 | p | ||||||||||||
Exercisable at the end of the year | 163 | p | 195 | p | 158 | p | 255 | p | 256 | p | 257 | p | ||||||||||||
Number of | Number of | |||||||||||
Exercise | outstanding | exercisable | ||||||||||
price | options | options | ||||||||||
Normal dates of vesting and exercise (based on calendar years) | per share | millions | millions | |||||||||
BT Group Employee Sharesave Plans | ||||||||||||
2010 | 171p–294 | p | 16 | 1 | ||||||||
2011 | 137p–208 | p | 12 | – | ||||||||
2012 | 68p–262 | p | 143 | – | ||||||||
2013 | 185 | p | 8 | – | ||||||||
2014 | 61p–111 | p | 355 | – | ||||||||
Total | 534 | 1 | ||||||||||
BT Group Legacy Option Plan | ||||||||||||
2001-2011 | 318p–648 | p | 8 | 8 | ||||||||
Total | 8 | 8 | ||||||||||
BT Group Global Share Option Plan | ||||||||||||
2004-2014 | 176p–199.5 | p | 24 | 24 | ||||||||
2005-2015 | 179p–263 | p | 6 | 6 | ||||||||
Total | 30 | 30 | ||||||||||
Total options | 572 | 39 | ||||||||||
134 BT GROUP PLC ANNUAL REPORT & FORM 20-F
Table of Contents
Employee Sharesave | GSOP and GLOP | |||||||||||||||||||||||||||
Weighted | Number of | Weighted | Weighted | Number of | Weighted | |||||||||||||||||||||||
average | outstanding | average | average | outstanding | average | |||||||||||||||||||||||
Range of exercise | exercise | options | contractual | Range of exercise | exercise | options | contractual | |||||||||||||||||||||
prices | price | millions | remaining life | prices | price | millions | remaining life | |||||||||||||||||||||
61p–68p | 63p | 465 | 48 months | – | – | – | – | |||||||||||||||||||||
100p – 199p | 143p | 57 | 32 months | 150p-317p | 198p | 30 | 52 months | |||||||||||||||||||||
200p – 300p | 242p | 12 | 26 months | 318p-650p | 424p | 8 | 8 months | |||||||||||||||||||||
Total | 534 | 38 | ||||||||||||||||||||||||||
Millions of shares | ||||||||||||||||
ISP | DBP | RSP | Total | |||||||||||||
At 1 April 2009 | 75.2 | 15.5 | 1.5 | 92.2 | ||||||||||||
Awards granted | 50.0 | 4.5 | 0.3 | 54.8 | ||||||||||||
Awards vested | – | (5.0 | ) | (0.6 | ) | (5.6 | ) | |||||||||
Awards lapsed | (28.4 | ) | (1.1 | ) | – | (29.5 | ) | |||||||||
Dividend shares reinvested | 2.4 | 0.4 | – | 2.8 | ||||||||||||
At 31 March 2010 | 99.2 | 14.3 | 1.2 | 114.7 | ||||||||||||
2010 | 2009 | 2008 | ||||||||||||||||||||||
Employee | Employee | Employee | ||||||||||||||||||||||
Year ended 31 March | Sharesave | ISP | Sharesave | ISP | Sharesave | ISP | ||||||||||||||||||
Weighted average fair value | 14p | 106p | 27p | 47p | 71p | 182p | ||||||||||||||||||
Weighted average share price | 80p | 131p | 152p | 199p | 329p | 306p | ||||||||||||||||||
Weighted average exercise price | 63p | – | 135p | – | 269p | – | ||||||||||||||||||
Expected dividend yield | 5.7%–6.4% | 6.5% | 4.6%–6.4% | 4.9% | 5.5% | 5.5% | ||||||||||||||||||
Risk free rates | 2.2%–2.8% | 2.5% | 2.1%–5.5% | 5.2% | 5.8% | 5.8% | ||||||||||||||||||
Expected volatility | 26.9%–30.7% | 38.5% | 20.7%–28.4% | 23.3% | 22.0% | 18.0% | ||||||||||||||||||
Table of Contents
2010 | 2009 | 2008 | ||||||||||
Year ended 31 March | £000 | £000 | £000 | |||||||||
Audit services | ||||||||||||
Fees payable to the company’s auditor and its associates for the audit of parent company and consolidated financial statements | 2,585 | 2,831 | 2,990 | |||||||||
Non-audit services | ||||||||||||
Fees payable to the company’s auditor and its associates for other services: | ||||||||||||
– The audit of the company’s subsidiaries pursuant to legislationa | 4,732 | 4,675 | 3,848 | |||||||||
– Other services pursuant to legislationa | 867 | 1,211 | 1,590 | |||||||||
– Tax services | 792 | 1,247 | 727 | |||||||||
– Services relating to corporate finance transactionsb | – | 32 | 549 | |||||||||
– All other services | 941 | 887 | 527 | |||||||||
9,917 | 10,883 | 10,231 | ||||||||||
a | These services are audit services as defined by the Public Company Accounting Oversight Board AU Section 550 (PCAOB AU Section 550). | |
b | These services are audit related services as defined by the PCAOB AU Section 550. |
136 BT GROUP PLC ANNUAL REPORT & FORM 20-F
Table of Contents
2010 | 2009 | 2008 | ||||||||||
At 31 March | £m | £m | £m | |||||||||
Total parent shareholders’ (deficit) equity (excluding cash flow reserve) | (2,797 | ) | (421 | ) | 5,252 | |||||||
Net debt | 9,283 | 10,361 | 9,460 | |||||||||
Committed facilities | 1,500 | 2,300 | 2,335 | |||||||||
Total capital | 7,986 | 12,240 | 17,047 | |||||||||
Table of Contents
2010 | 2009 | 2008 | ||||||||||
£m | £m | £m | ||||||||||
Charge | Charge | Charge | ||||||||||
At 31 March | (credit) | (credit) | (credit) | |||||||||
Sterling interest rates | 496 | 550 | 470 | |||||||||
US Dollar interest rates | (392 | ) | (538 | ) | (347 | ) | ||||||
Euro interest rates | (134 | ) | (149 | ) | (90 | ) | ||||||
138 BT GROUP PLC ANNUAL REPORT & FORM 20-F
Table of Contents
2010 | 2009 | 2008 | ||||||||||
At 31 March | £m | £m | £m | |||||||||
Derivative financial assets | 1,700 | 2,700 | 387 | |||||||||
Investments | 470 | 218 | 471 | |||||||||
Trade and other receivablesa | 2,947 | 3,101 | 3,193 | |||||||||
Cash and cash equivalents | 1,452 | 1,300 | 1,435 | |||||||||
Total | 6,569 | 7,319 | 5,486 | |||||||||
a | The carrying amount excludes £749m (2009: £1,084m, 2008: £1,256m) of current and £336m (2009: £322m, 2008: £854m) of non current trade and other receivables which relate to non financial assets. |
Impact of 100 basis | Impact of 100 basis | |||||||
point increase | point decrease | |||||||
At 31 March 2010 | £m | £m | ||||||
Moody’s/S&P credit rating | ||||||||
Aa2/AA | (3 | ) | 4 | |||||
Aa3/AA– | (26 | ) | 30 | |||||
A1/A+ | (89 | ) | 104 | |||||
A2/A | (102 | ) | 122 | |||||
(220 | ) | 260 | ||||||
Table of Contents
2010 | 2009 | 2008 | ||||||||||
At 31 March | £m | £m | £m | |||||||||
Net debt | 9,283 | 10,361 | 9,460 | |||||||||
140 BT GROUP PLC ANNUAL REPORT & FORM 20-F
Table of Contents
Within one | Between | Between | Between | Between | ||||||||||||||||||||||||
Carrying | year, or on | one and | two and | three and | four and | After | ||||||||||||||||||||||
amount | demand | two years | three years | four years | five years | five years | ||||||||||||||||||||||
Outflow (inflow)d | £m | £m | £m | £m | £m | £m | £m | |||||||||||||||||||||
At 31 March 2010 | ||||||||||||||||||||||||||||
Loans and borrowings | 12,791 | |||||||||||||||||||||||||||
Principal | 2,937 | 18 | 1,763 | 11 | 1,213 | 6,523 | ||||||||||||||||||||||
Interest | 833 | 581 | 581 | 484 | 484 | 4,016 | ||||||||||||||||||||||
Trade and other payablesa | 4,672 | 4,672 | – | – | – | – | – | |||||||||||||||||||||
Provisionsb | 255 | 61 | 37 | 30 | 26 | 45 | 143 | |||||||||||||||||||||
Derivative financial instrument liabilities analysed based on earliest payment datec | ||||||||||||||||||||||||||||
Net settled | 662 | 450 | 78 | 185 | 65 | (215 | ) | 745 | ||||||||||||||||||||
Gross settled | 37 | |||||||||||||||||||||||||||
Outflow | 1,081 | – | – | – | – | – | ||||||||||||||||||||||
Inflow | (1,074 | ) | – | – | – | – | – | |||||||||||||||||||||
Total | 8,960 | 714 | 2,559 | 586 | 1,527 | 11,427 | ||||||||||||||||||||||
Derivative financial instrument liabilities analysed based on holding instrument to maturity | ||||||||||||||||||||||||||||
Net settled | 662 | 193 | 92 | 93 | 92 | 93 | 745 | |||||||||||||||||||||
Gross settled | 37 | |||||||||||||||||||||||||||
Outflow | 424 | 20 | 20 | 20 | 20 | 577 | ||||||||||||||||||||||
Inflow | (413 | ) | (21 | ) | (21 | ) | (21 | ) | (21 | ) | (577 | ) | ||||||||||||||||
Within one | Between | Between | Between | Between | ||||||||||||||||||||||||
Carrying | year, or on | one and | two and | three and | four and | After | ||||||||||||||||||||||
amount | demand | two years | three years | four years | five years | five years | ||||||||||||||||||||||
Outflow (inflow)d | £m | £m | £m | £m | £m | £m | £m | |||||||||||||||||||||
At 31 March 2009 | ||||||||||||||||||||||||||||
Loans and borrowings | 13,907 | |||||||||||||||||||||||||||
Principal | 1,227 | 3,098 | 10 | 1,829 | 14 | 7,412 | ||||||||||||||||||||||
Interest | 906 | 900 | 649 | 650 | 550 | 5,333 | ||||||||||||||||||||||
Trade and other payablesa | 5,354 | 5,354 | – | – | – | – | – | |||||||||||||||||||||
Provisionsb | 166 | 59 | 17 | 15 | 13 | 8 | 119 | |||||||||||||||||||||
Derivative financial instrument liabilities analysed based on earliest payment datec | ||||||||||||||||||||||||||||
Net settled | 762 | 244 | 338 | 28 | 50 | 19 | 30 | |||||||||||||||||||||
Gross settled | 5 | |||||||||||||||||||||||||||
Outflow | 414 | 113 | – | – | – | – | ||||||||||||||||||||||
Inflow | (409 | ) | (113 | ) | – | – | – | – | ||||||||||||||||||||
Total | 7,795 | 4,353 | 702 | 2,542 | 591 | 12,894 | ||||||||||||||||||||||
Derivative financial instrument liabilities analysed based on holding instrument to maturity | ||||||||||||||||||||||||||||
Net settled | 762 | 117 | 117 | 60 | 60 | 60 | 634 | |||||||||||||||||||||
Gross settled | 5 | |||||||||||||||||||||||||||
Outflow | 414 | 113 | – | – | – | – | ||||||||||||||||||||||
Inflow | (409 | ) | (113 | ) | – | – | – | – | ||||||||||||||||||||
a | The carrying amount excludes £1,859m (2009: £1,861m) of current and £804m (2009: £794m) of non current trade and other payables which relate to non financial liabilities. | |
b | The carrying amount excludes £73m (2009: £195m) of current and £513m (2009: £359m) of non current provisions which relate to non financial liabilities. | |
c | Certain derivative financial instrument liabilities contain break clauses whereby either the group or bank counterparty can terminate the swap on certain dates and the mark to market position is settled in cash. | |
d | Foreign currency related cash flows were translated at the closing rate as at the relevant reporting date. Future variable interest rate cash flows were calculated using the most recent rate applied at the relevant balance sheet date. |
Table of Contents
Derivative fair valueb | ||||||||||||||||||||||||||||
Notional | Remaining term | Weighted average | Period over | |||||||||||||||||||||||||
principal | Asset | Liability | of hedging | interest rate on | which forecast | |||||||||||||||||||||||
Hedged item | Hedging instruments | Hedge type | £m | £m | £m | instruments | hedging instruments | transaction arises | ||||||||||||||||||||
Euro and US Dollar | Interest rate swaps | Cash flow | 2,913 | – | 361 | 9 months to 21 years | Sterling receivable at 0.8% | |||||||||||||||||||||
denominated borrowingsa | Sterling payable at 5.9% | |||||||||||||||||||||||||||
Cross currency swaps | Cash flow | 7,612 | 1,571 | 30 | 9 months to 21 years | Euro receivable at 6.1% | ||||||||||||||||||||||
US Dollar receivable at 7.6% | ||||||||||||||||||||||||||||
Sterling payable at 6.3% | ||||||||||||||||||||||||||||
Sterling denominated | Interest rate swaps | Fair value | 500 | – | 6 | 19 years | Sterling receivable at 5.8% | |||||||||||||||||||||
borrowingsa | Sterling payable at 2.2% | |||||||||||||||||||||||||||
Euro and US Dollar step up | Forward currency contracts | Cash flow | 247 | 16 | – | 3 to 9 months | 21 years | |||||||||||||||||||||
interest on currency | rolling basis | |||||||||||||||||||||||||||
denominated borrowingsa | ||||||||||||||||||||||||||||
Currency exposures on overseas | Forward currency contracts | Cash flow | 161 | – | 4 | 1 month | 12 months | |||||||||||||||||||||
purchases principally US Dollar | rolling basis | |||||||||||||||||||||||||||
and Asia Pacific currencies | ||||||||||||||||||||||||||||
Purchase of US Dollar | Forward currency contracts | Cash flow | 180 | 7 | – | 1 to 9 months | ||||||||||||||||||||||
denominated retail devices | ||||||||||||||||||||||||||||
a See note 18. b See note 19. | ||||||||||||||||||||||||||||
The group had outstanding hedging activities as at 31 March 2009 as follows: | ||||||||||||||||||||||||||||
Derivative fair valueb | ||||||||||||||||||||||||||||
Notional | Remaining term | Weighted average | Period over | |||||||||||||||||||||||||
principal | Asset | Liability | of hedging | interest rate on | which forecast | |||||||||||||||||||||||
Hedged item | Hedging instruments | Hedge type | £m | £m | £m | instruments | hedging instruments | transaction arises | ||||||||||||||||||||
Euro and US Dollar | Interest rate swaps | Cash flow | 2,913 | – | 446 | 2 to 22 years | Sterling receivable at 3.0% | |||||||||||||||||||||
denominated borrowingsa | Sterling payable at 5.9% | |||||||||||||||||||||||||||
Cross currency swaps | Cash flow and fair value | 7,227 | 2,559 | 1 | 5 months to 22 years | Euro receivable at 6.0% | ||||||||||||||||||||||
US Dollar receivable at 7.7% | ||||||||||||||||||||||||||||
Sterling payable at 7.2% | ||||||||||||||||||||||||||||
Euro and US Dollar step up | Forward currency contracts | Cash flow | 223 | 9 | – | 3 to 5 months | 22 years | |||||||||||||||||||||
interest on currency | rolling basis | |||||||||||||||||||||||||||
denominated borrowingsa | ||||||||||||||||||||||||||||
Euro and US Dollar | Forward currency contracts | Cash flow | 490 | 17 | – | Less than 3 months | ||||||||||||||||||||||
commercial papera | rolling basis | |||||||||||||||||||||||||||
Purchase of US Dollar | Forward currency contracts | Cash flow | 48 | – | 1 | Less than 1 month | 4 years | |||||||||||||||||||||
denominated fixed assets | ||||||||||||||||||||||||||||
Euro deferred consideration | Forward currency contracts | Cash flow | 50 | 1 | – | Less than 5 months | ||||||||||||||||||||||
on acquisition | ||||||||||||||||||||||||||||
a | See note 18. | |
b | See note 19. |
142 BT GROUP PLC ANNUAL REPORT & FORM 20-F
Table of Contents
Carrying amount | Fair value | |||||||||||||||||||||||
2010 | 2009 | 2008 | 2010 | 2009 | 2008 | |||||||||||||||||||
At 31 March | £m | £m | £m | £m | £m | £m | ||||||||||||||||||
Financial liabilities | ||||||||||||||||||||||||
Listed bonds, debentures and notes | 12,157 | 12,189 | 9,298 | 13,304 | 11,384 | 9,436 | ||||||||||||||||||
Finance leases | 304 | 332 | 320 | 343 | 366 | 347 | ||||||||||||||||||
Other loans and borrowings | 330 | 1,386 | 1,724 | 354 | 1,338 | 1,690 | ||||||||||||||||||
4 | Level 1 – uses quoted prices in active markets for identical assets or liabilities | |
4 | Level 2 – uses inputs for the asset or liability other than quoted prices, that are observable either directly or indirectly | |
4 | Level 3 – uses inputs for the asset or liability that are not based on observable market data such as internal models or other valuation methods. |
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
At 31 March 2010 | £m | £m | £m | £m | ||||||||||||
Financial assets at fair value | ||||||||||||||||
Non current and current derivative financial assets | ||||||||||||||||
Derivatives designated as accounting hedges | – | 1,594 | – | 1,594 | ||||||||||||
Other derivatives | – | 106 | – | 106 | ||||||||||||
Total current and non current derivative financial assets (note 19) | – | 1,700 | – | 1,700 | ||||||||||||
Available-for-sale financial assets | ||||||||||||||||
Non current and current investments | ||||||||||||||||
Liquid investments | – | 258 | – | 258 | ||||||||||||
Other investments | 20 | – | 12 | 32 | ||||||||||||
Total non current and current investments (note 14) | 20 | 258 | 12 | 290 | ||||||||||||
Total financial assets at fair value | 20 | 1,958 | 12 | 1,990 | ||||||||||||
Financial liabilities at fair value | ||||||||||||||||
Current and non current derivative financial liabilities | ||||||||||||||||
Derivatives designated as accounting hedges | – | 401 | – | 401 | ||||||||||||
Other derivatives | – | 298 | – | 298 | ||||||||||||
Total current and non current financial liabilities (note 19) | – | 699 | – | 699 | ||||||||||||
Total financial liabilities at fair value | – | 699 | – | 699 | ||||||||||||
Table of Contents
Other investments | ||||
£m | ||||
At 1 April 2009 | 11 | |||
Additions | 3 | |||
Disposals | (2 | ) | ||
At 31 March 2010 | 12 | |||
144 BT GROUP PLC ANNUAL REPORT & FORM 20-F
Table of Contents
4 | give a true and fair view of the state of the company’s affairs as at 31 March 2010; | |
4 | have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and | |
4 | have been prepared in accordance with the requirements of the Companies Act 2006. |
4 | the part of the Report on directors’ remuneration to be audited has been properly prepared in accordance with the Companies Act 2006; and | |
4 | the information given in the Report of the directors for the financial year for which the parent company financial statements are prepared is consistent with the parent company financial statements. |
4 | adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or | |
4 | the parent company financial statements and the part of the Report on directors’ remuneration to be audited are not in agreement with the accounting records and returns; or | |
4 | certain disclosures of directors’ remuneration specified by law are not made; or | |
4 | we have not received all the information and explanations we require for our audit. |
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London, United Kingdom
12 May 2010
Table of Contents
146 BT GROUP PLC ANNUAL REPORT & FORM 20-F
Table of Contents
2010 | 2009 | e | ||||||
At 31 March | £m | £m | ||||||
Fixed assets | ||||||||
Investments in subsidiary undertakingsa | 10,349 | 10,278 | ||||||
Total fixed assets | 10,349 | 10,278 | ||||||
Current assets | ||||||||
Debtorsb | – | 142 | ||||||
Cash at bank and in hand | 11 | 13 | ||||||
Total current assets | 11 | 155 | ||||||
Creditors: amounts falling due within one yearc | 186 | 65 | ||||||
Net current (liabilities) assets | (175 | ) | 90 | |||||
Total assets less current liabilities | 10,174 | 10,368 | ||||||
Capital and reserves | ||||||||
Called up share capital | 408 | 408 | ||||||
Share premium account | 62 | 62 | ||||||
Capital redemption reserve | 27 | 27 | ||||||
Treasury shares reserve | (1,105 | ) | (1,109 | ) | ||||
Profit and loss account | 10,782 | 10,980 | ||||||
Total equity shareholders’ fundsd | 10,174 | 10,368 | ||||||
a | Throughout 2010, the company held a 100% investment in BT Group Investments Limited, a company registered in England and Wales. The change to investments in subsidiary undertakings relates to additional capital contributions in respect of share-based payments of £71m in 2010 (2009: £141m). | |
b | Debtors consists of amounts owed by subsidiary undertakings of £nil (2009: £142m). | |
c | Creditors consists of amounts owed to subsidiary undertakings of £166m (2009: £15m) and other creditors of £20m (2009: £50m). | |
d | The movements in total equity shareholders’ funds shown on page 148. | |
e | Restated. See page 146. |
Chairman
Chief Executive
Group Finance Director
Table of Contents
Capital | Profit | |||||||||||||||||||||||
Share | Share premium | redemption | Treasury | and loss | ||||||||||||||||||||
capital | a | account | reserve | reserve | b | account | b,c | Total | ||||||||||||||||
£m | £m | £m | £m | £m | £m | |||||||||||||||||||
At 1 April 2008 | 420 | 62 | 15 | (1,843 | ) | 12,356 | 11,010 | |||||||||||||||||
Profit for the financial year | – | – | – | – | 502 | 502 | ||||||||||||||||||
Dividends paid | – | – | – | – | (1,222 | ) | (1,222 | ) | ||||||||||||||||
Change in accounting policy for adoption of the amendment to FRS 20 (see page 6) | – | – | – | – | 110 | 110 | ||||||||||||||||||
Capital contribution in respect of share-based payment | – | – | – | – | 31 | 31 | ||||||||||||||||||
Net purchase of treasury shares | – | – | – | (63 | ) | – | (63 | ) | ||||||||||||||||
Cancellation of shares | (12 | ) | – | 12 | 797 | (797 | ) | – | ||||||||||||||||
At 1 April 2009 | 408 | 62 | 27 | (1,109 | ) | 10,980 | 10,368 | |||||||||||||||||
Loss for the financial year | – | – | – | – | (6 | ) | (6 | ) | ||||||||||||||||
Dividends paid | – | – | – | – | (263 | ) | (263 | ) | ||||||||||||||||
Capital contribution in respect of share-based payment | – | – | – | – | 71 | 71 | ||||||||||||||||||
Net issue of treasury shares | – | – | – | 4 | – | 4 | ||||||||||||||||||
At 31 March 2010 | 408 | 62 | 27 | (1,105 | ) | 10,782 | 10,174 | |||||||||||||||||
a | The authorised share capital of the company up to 1 October 2009 was £13,463m, representing 269,260,253,468 ordinary shares of 5p each. The allotted, called up and fully paid ordinary share capital of the company at 31 March 2010 was £408m (2009: £408m), representing 8,151,227,027 ordinary shares of 5p each (2009: 8,151,227,029). | |
b | During 2010, the company repurchased nil (2009: 142,608,225) of its own shares of 5p each, nil % (2009: 2%) of the called-up share capital, for consideration (including transaction costs) of £nil (2009: £189m). In addition, 8,320,766 shares (2009: 90,626,518) were issued from treasury to satisfy obligations under employee share schemes and executive share awards at a cost of £4m (2009: £126m), and nil treasury shares (2009: 250,000,000) were cancelled at a cost of £nil (2009: £797m). At 31 March 2010, 400,906,119 shares (2009: 409,226,885) with an aggregate nominal value of £20m (2009: £20m) were held as treasury shares at cost. | |
c | The loss for the financial year, dealt with in the profit and loss account of the company after taking into account dividends received from subsidiary undertakings, was £6m (2009: profit of £502m). As permitted by Section 408(3) of the Companies Act 2006, no profit and loss account of the company is presented. |
148 BT GROUP PLC ANNUAL REPORT & FORM 20-F
Table of Contents
Group interest | Country | |||||||
Subsidiary undertakings | Activity | in allotted capitalc | of operation | d | ||||
British Telecommunications plc | Communications related services and products provider | 100% ordinary | UK | |||||
BT Americas Incd | Communications related services, systems integration and | 100% common | International | |||||
products provider | ||||||||
BT Australasia Pty Limited | Communications related services and products provider | 100% ordinary | Australia | |||||
100% preference | ||||||||
BT Centre Nominee 2 Limited | Property holding company | 100% ordinary | UK | |||||
BT Communications do Brasil Limitada | Communications related services, technology consulting | 100% ordinary | Brazil | |||||
and products provider | ||||||||
BT Communications Ireland Limited | Telecommunications service provider | 100% ordinary | Ireland | |||||
BT Conferencing Inc | Audio, video and web collaboration services provider | 100% common | US | |||||
BT Conferencing Video Inc | Audio, video and web collaboration services provider | 100% common | US | |||||
BT Convergent Solutions Limited | Communications related services and products provider | 100% ordinary | UK | |||||
BT Engage IT Limited | IT solutions provider | 100% ordinary | UK | |||||
BT ESPANA, Compania de Servicios Globales de | Communications related services and products provider | 100% ordinary | Spain | |||||
Telecommunicaciones, SA | ||||||||
BT Fleet Limited | Fleet management company | 100% ordinary | UK | |||||
BT France SA | Communications related services, systems integration and | 100% ordinary | France | |||||
products provider | ||||||||
BT Frontline Pte Ltd | Communications related services and products provider | 100% ordinary | Singapore | |||||
BT (Germany) GmbH & Co oHG | Communications related services and products provider | 100% ordinary | Germany | |||||
BT Global Communications India Private Limited | Communications related services | 100% ordinary | India | |||||
BT Global Services Limited | International telecommunications network systems provider | 100% ordinary | UK | |||||
BT Holdings Limited | Investment holding company | 100% ordinary | UK | |||||
BT Hong Kong Limited | Communications related services and products provider | 100% ordinary | Hong Kong | |||||
100% preference | ||||||||
BT INS Inc | Information telecommunications consulting and software | 100% common | US | |||||
solutions provider | ||||||||
BT Italia SpA | Communications related services and products provider | 98.6% ordinary | Italy | |||||
BT Limited | International telecommunications network systems provider | 100% ordinary | International | |||||
BT Nederland NV | Communications related services and products provider | 100% ordinary | Netherlands | |||||
BT Payment Services Limited | Payment services provider | 100% ordinary | UK | |||||
BT Professional Services Nederland BV | Systems integration and application development | 100% ordinary | Netherlands | |||||
BT Services SA | Technology consulting and engineering services | 100% ordinary | France | |||||
BT Singapore Pte Ltd | Communications related services and products provider | 100% ordinary | Singapore | |||||
BT US Investments Limitedb | Investment holding company | 100% ordinary | Jersey | |||||
Communications Global Network Services Limitedd | Communications related services and products provider | 100% ordinary | International | |||||
Communications Networking Services (UK) | Communications related services and products provider | 100% ordinary | UK | |||||
dabs.com plc | Technology equipment retailer | 100% ordinary | UK | |||||
Infonet Services Corporation | Global managed network service provider | 100% common | US | |||||
Infonet USA Corporation | Global managed network service provider | 100% common | US | |||||
Plusnet plc | Broadband service provider | 100% ordinary | UK | |||||
Radianz Americas Inc | Global managed network service provider | 100% preference | US | |||||
100% common | ||||||||
a | The group comprises a large number of entities and it is not practical to include all of them in this list. The list therefore includes only those entities that have a significant impact on the revenue, profit or assets of the group. A full list of subsidiaries, joint ventures and associates will be annexed to the company’s next annual return filed with the Registrar of Companies. | |
b | The principal operating subsidiaries (listed above) have a reporting date of 31 March, except for BT US Investments Limited which has a reporting date of 31 October in order to meet its corporate objectives. | |
c | The proportion of voting rights held corresponds to the aggregate interest percentage held by the holding company and subsidiary undertakings. | |
d | All overseas undertakings are incorporated in their country of operations. Subsidiary undertakings operating internationally are all incorporated in England and Wales, except BT Americas Inc and Communications Global Network Services Limited which are incorporated in the US and Bermuda, respectively. |
Share capital | ||||||||||||||
Percentage | Country | |||||||||||||
Associate | Activity | Issued | e | owned | f | of operation | g | |||||||
Tech Mahindra Limited | Global systems integrator and business | |||||||||||||
transformation consultancy provider | 122,320,114 | 30.9 | % | India | ||||||||||
e | Issued share capital comprises ordinary or common shares unless otherwise stated. | |
f | Held through an intermediate holding company. | |
g | Incorporated in the country of operation. |
Table of Contents
Unaudited | ||||||||||||||||||||||||
1st | 2nd | 3rd | 4th | Total | ||||||||||||||||||||
Year ended 31 March 2010 | Quarters | £m | £m | £m | £m | £m | ||||||||||||||||||
Revenue | 5,235 | 5,070 | 5,198 | 5,356 | 20,859 | |||||||||||||||||||
Other operating income | 79 | 93 | 80 | 128 | 380 | |||||||||||||||||||
Operating costs | (4,767 | ) | (4,613 | ) | (4,805 | ) | (4,931 | ) | (19,116 | ) | ||||||||||||||
Operating profit | 547 | 550 | 473 | 553 | 2,123 | |||||||||||||||||||
Net finance expense | (283 | ) | (284 | ) | (292 | ) | (299 | ) | (1,158 | ) | ||||||||||||||
Share of post tax profits of associates and joint ventures | 8 | 9 | 28 | 9 | 54 | |||||||||||||||||||
Loss on disposal of associate | – | – | – | (12 | ) | (12 | ) | |||||||||||||||||
Profit before taxation | 272 | 275 | 209 | 251 | 1,007 | |||||||||||||||||||
Taxation | (58 | ) | 153 | (31 | ) | (42 | ) | 22 | ||||||||||||||||
Profit for the period | 214 | 428 | 178 | 209 | 1,029 | |||||||||||||||||||
Basic earnings per share | 2.8p | 5.5p | 2.3p | 2.7p | 13.3p | |||||||||||||||||||
Diluted earnings per share | 2.7p | 5.4p | 2.2p | 2.6p | 12.9p | |||||||||||||||||||
Profit before specific items and taxation | 313 | 370 | 339 | 434 | 1,456 | |||||||||||||||||||
Adjusted basic earnings per sharea | 3.8p | 4.3p | 4.1p | 5.0p | 17.3p | |||||||||||||||||||
Unaudited | ||||||||||||||||||||||||
1st | 2nd | 3rd | 4th | Total | b | |||||||||||||||||||
Year ended 31 March 2009 | Quarters | £m | £m | £m | £m | £m | ||||||||||||||||||
Revenue | 5,177 | 5,303 | 5,437 | 5,473 | 21,390 | |||||||||||||||||||
Other operating income | 90 | 107 | 71 | 71 | 339 | |||||||||||||||||||
Operating costs | (4,641 | ) | (4,762 | ) | (5,299 | ) | (6,726 | ) | (21,428 | ) | ||||||||||||||
Operating profit (loss) | 626 | 648 | 209 | (1,182 | ) | 301 | ||||||||||||||||||
Net finance expense | (130 | ) | (159 | ) | (180 | ) | (151 | ) | (620 | ) | ||||||||||||||
Share of post tax profits of associates and joint ventures | 1 | 5 | 52 | 17 | 75 | |||||||||||||||||||
(Loss) profit before taxation | 497 | 494 | 81 | (1,316 | ) | (244 | ) | |||||||||||||||||
Taxation | (115 | ) | (116 | ) | (19 | ) | 303 | 53 | ||||||||||||||||
(Loss) profit for the period | 382 | 378 | 62 | (1,013 | ) | (191 | ) | |||||||||||||||||
Basic (loss) earnings per share | 4.9p | 4.9p | 0.8p | (13.1)p | (2.5)p | |||||||||||||||||||
Diluted (loss) earnings per share | 4.8p | 4.9p | 0.8p | (13.0)p | (2.5)p | |||||||||||||||||||
Profit (loss) before specific items and taxation | 524 | 532 | 45 | (973 | ) | 128 | ||||||||||||||||||
Adjusted basic earnings per sharea | 4.4p | 4.5p | 2.7p | 2.4p | 14.1p | |||||||||||||||||||
Unaudited | ||||||||||||||||||||||||
1st | 2nd | 3rd | 4th | Total | b | |||||||||||||||||||
Year ended 31 March 2008 | Quarters | £m | £m | £m | £m | £m | ||||||||||||||||||
Revenue | 5,033 | 5,095 | 5,154 | 5,422 | 20,704 | |||||||||||||||||||
Other operating income | 66 | 73 | 74 | 136 | 349 | |||||||||||||||||||
Operating costs | (4,441 | ) | (4,647 | ) | (4,646 | ) | (4,963 | ) | (18,697 | ) | ||||||||||||||
Operating profit | 658 | 521 | 582 | 595 | 2,356 | |||||||||||||||||||
Net finance expense | (55 | ) | (92 | ) | (134 | ) | (97 | ) | (378 | ) | ||||||||||||||
Share of post tax losses of associates and joint ventures | (3 | ) | (3 | ) | (2 | ) | (3 | ) | (11 | ) | ||||||||||||||
Profit (loss) on disposal of associate | – | 9 | 1 | (1 | ) | 9 | ||||||||||||||||||
Profit before taxation | 600 | 435 | 447 | 494 | 1,976 | |||||||||||||||||||
Taxation | 8 | (96 | ) | (82 | ) | (68 | ) | (238 | ) | |||||||||||||||
Profit for the period | 608 | 339 | 365 | 426 | 1,738 | |||||||||||||||||||
Basic earnings per share | 7.4p | 4.2p | 4.5p | 5.4p | 21.5p | |||||||||||||||||||
Diluted earnings per share | 7.2p | 4.1p | 4.4p | 5.3p | 21.1p | |||||||||||||||||||
Profit before specific items and taxation | 650 | 617 | 581 | 658 | 2,506 | |||||||||||||||||||
Adjusted basic earnings per sharea | 5.0p | 4.8p | 4.8p | 5.5p | 20.2p | |||||||||||||||||||
a | Adjusted results refer to the amounts before BT Global Services contract and financial review charges in 2009, specific items and net interest on pensions. | |
b | Restated. See page 94. |
Table of Contents
2010 | 2009 | a | 2008 | a | 2007 | a | 2006 | a | ||||||||||||
Year ended 31 March | £m | £m | £m | £m | £m | |||||||||||||||
Revenue | ||||||||||||||||||||
Adjustedb | 20,911 | 21,431 | 20,704 | 20,223 | 19,514 | |||||||||||||||
Specific items | (52 | ) | – | – | – | – | ||||||||||||||
Contract and financial review charges | – | (41 | ) | – | – | – | ||||||||||||||
20,859 | 21,390 | 20,704 | 20,223 | 19,514 | ||||||||||||||||
Other operating income | ||||||||||||||||||||
Adjustedb | 378 | 352 | 359 | 236 | 227 | |||||||||||||||
Specific items | 2 | (13 | ) | (10 | ) | (3 | ) | – | ||||||||||||
380 | 339 | 349 | 233 | 227 | ||||||||||||||||
Operating costs | ||||||||||||||||||||
Adjustedb | (18,689 | ) | (19,435 | ) | (18,168 | ) | (17,746 | ) | (17,108 | ) | ||||||||||
Specific items | (427 | ) | (395 | ) | (529 | ) | (169 | ) | (138 | ) | ||||||||||
Contract and financial review charges | – | (1,598 | ) | – | – | – | ||||||||||||||
(19,116 | ) | (21,428 | ) | (18,697 | ) | (17,915 | ) | (17,246 | ) | |||||||||||
Operating profit | ||||||||||||||||||||
Adjustedb | 2,600 | 2,348 | 2,895 | 2,713 | 2,633 | |||||||||||||||
Specific items | (477 | ) | (408 | ) | (539 | ) | (172 | ) | (138 | ) | ||||||||||
Contract and financial review charges | – | (1,639 | ) | – | – | – | ||||||||||||||
2,123 | 301 | 2,356 | 2,541 | 2,495 | ||||||||||||||||
Net finance expense | ||||||||||||||||||||
Adjustedb | (890 | ) | (933 | ) | (798 | ) | (653 | ) | (726 | ) | ||||||||||
Specific items | 11 | – | – | 139 | ||||||||||||||||
Net interest on pensions | (279 | ) | 313 | 420 | 420 | 254 | ||||||||||||||
(1,158 | ) | (620 | ) | (378 | ) | (94 | ) | (472 | ) | |||||||||||
Share of post tax profits (losses) of associates and joint ventures | ||||||||||||||||||||
Adjustedb | 25 | 39 | (11 | ) | 15 | 16 | ||||||||||||||
Specific items | 29 | 36 | – | – | – | |||||||||||||||
54 | 75 | (11 | ) | 15 | 16 | |||||||||||||||
(Loss) profit on disposal of associates and joint ventures - specific itemsa | (12 | ) | – | 9 | 22 | 1 | ||||||||||||||
Profit (loss) before taxation | ||||||||||||||||||||
Adjustedb | 1,735 | 1,454 | 2,086 | 2,075 | 1,923 | |||||||||||||||
Specific items | (449 | ) | (372 | ) | (530 | ) | (11 | ) | (137 | ) | ||||||||||
Contract and financial review charges | – | (1,639 | ) | – | – | – | ||||||||||||||
Net interest on pensions | (279 | ) | 313 | 420 | 420 | 254 | ||||||||||||||
1,007 | (244 | ) | 1,976 | 2,484 | 2,040 | |||||||||||||||
Taxation | ||||||||||||||||||||
Adjustedb | (398 | ) | (361 | ) | (455 | ) | (485 | ) | (457 | ) | ||||||||||
Specific items | 342 | 43 | 343 | 979 | 41 | |||||||||||||||
Contract and financial review charges | – | 459 | – | – | – | |||||||||||||||
Net interest on pensions | 78 | (88 | ) | (126 | ) | (126 | ) | (76 | ) | |||||||||||
22 | 53 | (238 | ) | 368 | (492 | ) | ||||||||||||||
Profit (loss) for the year | ||||||||||||||||||||
Adjustedb | 1,337 | 1,093 | 1,631 | 1,590 | 1,466 | |||||||||||||||
Specific items | (107 | ) | (329 | ) | (187 | ) | 968 | (96 | ) | |||||||||||
Contract and financial review charges | – | (1,180 | ) | – | – | – | ||||||||||||||
Net interest on pensions | (201 | ) | 225 | 294 | 294 | 178 | ||||||||||||||
1,029 | (191 | ) | 1,738 | 2,852 | 1,548 | |||||||||||||||
Basic earnings (loss) per share | ||||||||||||||||||||
Adjustedb | 17.3p | 14.1p | 20.2p | 19.1p | 17.4p | |||||||||||||||
Specific items | (1.4)p | (4.3)p | (2.4)p | 11.7p | (1.1)p | |||||||||||||||
Contract and financial review charges | – | (15.3)p | – | – | – | |||||||||||||||
Net interest on pensions | (2.6)p | 3.0p | 3.7p | 3.6p | 2.1p | |||||||||||||||
Total basic (loss) earnings per share | 13.3p | (2.5)p | 21.5p | 34.4p | 18.4p | |||||||||||||||
a | Restated. See page 94. | |
b | Adjusted revenue, adjusted other operating income, adjusted operating costs, adjusted operating profit, adjusted net finance expense, adjusted share of post tax profits (losses) of associates and joint ventures, adjusted (loss) profit on disposal of associates and joint ventures, adjusted profit (loss) before taxation, adjusted taxation credit (charge), adjusted profit (loss) for the year and adjusted basic earnings (loss) per share are non-GAAP measures provided in addition to the disclosure requirements defined under IFRS. The rationale for using non-GAAP measures is explained on pages 54 to 56. |
Table of Contents
Year ended 31 March | 2010 | 2009 | a | 2008 | a | 2007 | a | 2006 | a | |||||||||||
Average number of shares used in basic earnings per share (millions) | 7,740 | 7,724 | 8,066 | 8,293 | 8,422 | |||||||||||||||
Average number of shares used in diluted earnings per share (millions) | 7,988 | 7,771 | 8,223 | 8,479 | 8,537 | |||||||||||||||
Basic earnings (loss) per share | 13.3p | (2.5)p | 21.5p | 34.4p | 18.4p | |||||||||||||||
Diluted earnings (loss) per share | 12.9p | (2.5)p | 21.1p | 33.6p | 18.1p | |||||||||||||||
Dividends per shareb | 6.9p | 6.5p | 15.8p | 15.1p | 11.9p | |||||||||||||||
Dividends per share, centsb,c | 10.5c | 9.3c | 31.4c | 29.7c | 20.7c | |||||||||||||||
a | Restated. See page 94. | |
b | Dividends per share represents the dividend paid and proposed in respect of the relevant financial year. Under IFRS, dividends are recognised as a deduction from shareholders’ equity when they are paid. | |
c | Based on actual dividends paid and/or year end exchange rate on proposed dividends. |
2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||
Year ended 31 March | £m | £m | £m | £m | £m | |||||||||||||||
Net cash inflow from operating activities | 4,825 | 4,706 | 5,486 | 5,210 | 5,387 | |||||||||||||||
Net cash (outflow) inflow from investing activities | (2,775 | ) | (2,954 | ) | (3,664 | ) | (2,778 | ) | 214 | |||||||||||
Net cash used in financing activities | (1,714 | ) | (1,865 | ) | (1,430 | ) | (2,898 | ) | (5,278 | ) | ||||||||||
Effect of exchange rate changes on cash and cash equivalents | (7 | ) | 54 | 25 | (35 | ) | – | |||||||||||||
Net increase (decrease) in cash and cash equivalents | 329 | (59 | ) | 417 | (501 | ) | 323 | |||||||||||||
Cash and cash equivalents at the start of the year | 1,115 | 1,174 | 757 | 1,258 | 935 | |||||||||||||||
Cash and cash equivalents at the end of the year | 1,444 | 1,115 | 1,174 | 757 | 1,258 | |||||||||||||||
2010 | 2009 | a | 2008 | a | 2007 | a | 2006 | a | ||||||||||||
At 31 March | £m | £m | £m | £m | £m | |||||||||||||||
Intangible assets | 3,672 | 3,788 | 3,355 | 2,584 | 1,908 | |||||||||||||||
Property, plant and equipment | 14,856 | 15,405 | 15,307 | 14,997 | 15,222 | |||||||||||||||
Retirement benefit asset | – | – | 2,887 | – | – | |||||||||||||||
Other non current assets | 3,867 | 4,154 | 1,286 | 780 | 1,175 | |||||||||||||||
22,395 | 23,347 | 22,835 | 18,361 | 18,305 | ||||||||||||||||
Current assets less current liabilities | (4,135 | ) | (3,141 | ) | (2,978 | ) | (3,746 | ) | (3,052 | ) | ||||||||||
Total assets less current liabilities | 18,260 | 20,206 | 19,857 | 14,615 | 15,253 | |||||||||||||||
Non current loans and other borrowings | (9,522 | ) | (12,365 | ) | (9,818 | ) | (6,387 | ) | (7,995 | ) | ||||||||||
Retirement benefit obligations | (7,864 | ) | (3,973 | ) | (108 | ) | (389 | ) | (2,547 | ) | ||||||||||
Other non current liabilities | (3,500 | ) | (3,699 | ) | (4,499 | ) | (3,567 | ) | (3,104 | ) | ||||||||||
Total assets less liabilities | (2,626 | ) | 169 | 5,432 | 4,272 | 1,607 | ||||||||||||||
Called up share capital | 408 | 408 | 420 | 432 | 432 | |||||||||||||||
Share premium account | 62 | 62 | 62 | 31 | 7 | |||||||||||||||
Capital redemption reserve | 27 | 27 | 15 | 2 | 2 | |||||||||||||||
Other reserves | 757 | 1,301 | (527 | ) | 88 | 364 | ||||||||||||||
Retained (loss) earnings | (3,904 | ) | (1,656 | ) | 5,439 | 3,685 | 750 | |||||||||||||
Total parent shareholders’ (deficit) equity | (2,650 | ) | 142 | 5,409 | 4,238 | 1,555 | ||||||||||||||
Minority interests | 24 | 27 | 23 | 34 | 52 | |||||||||||||||
Total (deficit) equity | (2,626 | ) | 169 | 5,432 | 4,272 | 1,607 | ||||||||||||||
a | Restated. See page 94. |
2010 | 2009 | a | 2008 | a | 2007 | a | 2006 | a | ||||||||||||
£m | £m | £m | £m | £m | ||||||||||||||||
Adjusted EBITDAb | 5,639 | 5,238 | 5,784 | 5,633 | 5,517 | |||||||||||||||
Free cash flowc | 1,933 | 737 | 1,823 | 1,874 | 1,612 | |||||||||||||||
Net debtd | 9,283 | 10,361 | 9,460 | 7,914 | 7,534 | |||||||||||||||
a | Restated. See page 94. | |
b | Adjusted EBITDA is stated before specific items and BT Global Services contract and financial review charges in 2009 and is defined on page 55. | |
c | Free cash flow is defined on page 55. | |
d | Net debt is defined on page 56. |
Table of Contents
Year ended 31 March | 2010 | 2009 | a | 2008 | a | 2007 | a | 2006 | a | |||||||||||
Financial ratios | ||||||||||||||||||||
Adjusted basic earnings per shareb– pence | 17.3 | 14.1 | 20.2 | 19.1 | 17.4 | |||||||||||||||
Reported basic (loss) earnings per share – pence | 13.3 | (2.5 | ) | 21.5 | 34.4 | 18.4 | ||||||||||||||
Adjusted return on capital employedb, c(unaudited) | 16.0 | 14.5 | 17.7 | 17.6 | 18.1 | |||||||||||||||
Reported return on capital employedc (unaudited) | 13.3 | 2.3 | 14.4 | 16.5 | 17.1 | |||||||||||||||
Adjusted interest cover before net pension interestd – times (unaudited) | 2.9 | 2.5 | 3.6 | 4.2 | 3.6 | |||||||||||||||
Reported interest covere – times (unaudited) | 0.3 | 0.5 | 6.2 | 27.0 | 5.3 | |||||||||||||||
2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||
Year ended 31 March | £m | £m | £m | £m | £m | |||||||||||||||
Expenditure on research and development | ||||||||||||||||||||
Research and development expense | 444 | 590 | 532 | 378 | 326 | |||||||||||||||
Amortisation of internally developed computer software | 733 | 431 | 325 | 314 | 161 | |||||||||||||||
Total | 1,177 | 1,021 | 857 | 692 | 487 | |||||||||||||||
2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||
Year ended 31 March | £m | £m | £m | £m | £m | |||||||||||||||
Capital expenditure | ||||||||||||||||||||
Plant and equipment | ||||||||||||||||||||
Transmission equipment | 902 | 1,067 | 1,117 | 1,209 | 1,429 | |||||||||||||||
Exchange equipment | 29 | 44 | 83 | 118 | 80 | |||||||||||||||
Other network equipment | 753 | 899 | 1,060 | 854 | 727 | |||||||||||||||
Computers and office equipment | 115 | 140 | 181 | 149 | 138 | |||||||||||||||
Motor vehicles and other | 662 | 912 | 876 | 877 | 715 | |||||||||||||||
Land and buildings | 29 | 23 | 33 | 61 | 68 | |||||||||||||||
2,490 | 3,085 | 3,350 | 3,268 | 3,157 | ||||||||||||||||
Increase (decrease) in engineering stores | 43 | 3 | (11 | ) | (21 | ) | (15 | ) | ||||||||||||
Total capital expenditure | 2,553 | 3,088 | 3,339 | 3,247 | 3,142 | |||||||||||||||
(Decrease) increase in payables | (24 | ) | (6 | ) | (24 | ) | 51 | (202 | ) | |||||||||||
Cash outflow on capital expenditure | 2,509 | 3,082 | 3,315 | 3,298 | 2,940 | |||||||||||||||
a | Restated. See page 94. | |
b | Adjusted results refer to the results before specific items, the BT Global Services contract and financial review charges in 2009, and net interest on pensions. | |
c | The ratio is based on profit before taxation and net finance expense to average capital employed. Capital employed is represented by total assets less current liabilities (excluding corporation tax, current borrowings, derivative financial liabilities and finance lease creditors) less deferred tax assets, retirement benefit asset, cash and cash equivalents, derivative financial assets and investments. | |
d | The number of times net finance expense before net pension interest and specific items is covered by adjusted operating profit. | |
e | The number of times reported net finance expense is covered by reported operating profit. |
Table of Contents
All values (000) unless otherwise stated. | Unaudited | |||||||||||||||||||
Year ended 31 March | 2010 | 2009 | 2008 | 2007 | 2006 | |||||||||||||||
BT Global Services | ||||||||||||||||||||
12 month rollingaorder intake (£m) | 6,631 | 7,917a | 7,835a | 9,101a | 8,787a | |||||||||||||||
BT Retail | ||||||||||||||||||||
BT’s retail share of broadbandbinstalled base | 35% | 34% | 35% | 34% | 33% | |||||||||||||||
BT Vision installed base | 467 | 423 | 214 | – | – | |||||||||||||||
Call minutes (bn) | ||||||||||||||||||||
Non geographic | 11.86 | 14.73 | 19.18 | 25.03 | 34.66 | |||||||||||||||
Geographic | 37.31 | 42.06 | 46.84 | 51.92 | 58.35 | |||||||||||||||
Total | 49.17 | 56.79 | 66.02 | 76.95 | 93.01 | |||||||||||||||
Active consumer linesc | 11,113 | 11,789 | 12,600 | 13,634 | 14,587 | |||||||||||||||
Average annual revenue per consumer user (ARPU)d(£) | 309 | 287 | 274 | 262 | 251 | |||||||||||||||
BT Group | ||||||||||||||||||||
Total employeese | 97.8 | 107.0 | 111.9 | 106.2 | 104.4 | |||||||||||||||
Broadband lines (UK) | ||||||||||||||||||||
BT Retail | 5,132 | 4,757 | 4,402 | 3,659 | 2,668 | |||||||||||||||
BT Wholesale (external) | 2,926 | 3,305 | 3,983 | 5,168 | 5,092 | |||||||||||||||
Openreach | 6,620 | 5,750 | 4,300 | 1,910 | 356 | |||||||||||||||
Total broadband lines | 14,678 | 13,812 | 12,685 | 10,737 | 8,116 | |||||||||||||||
Exchange lines (UK) | ||||||||||||||||||||
Consumer | 13,051 | 14,514 | 15,793 | 16,636 | 17,912 | |||||||||||||||
Business | 5,367 | 5,992 | 6,750 | 7,264 | 7,797 | |||||||||||||||
External WLR lines | 6,028 | 5,647 | 4,666 | 4,227 | 2,874 | |||||||||||||||
Total exchange lines | 24,446 | 26,153 | 27,209 | 28,127 | 28,583 | |||||||||||||||
a | Restated for impact of customer account moves. See page 101. | |
b | DSL and LLU. | |
c | Active consumer lines represents the number of lines over which BT is the call provider (excluding Northern Ireland but including Plusnet in 2010). | |
d | Rolling 12 month consumer revenue, less mobile POLOs, divided by average number of primary lines. | |
e | The numbers disclosed include both full-time and part-time employees. |
Table of Contents
Table of Contents
Table of Contents
Pence per | US$ per | |||||||||||||||
ordinary share | ADS | |||||||||||||||
High | Low | High | Low | |||||||||||||
pence | pence | US$ | US$ | |||||||||||||
Financial years ended 31 March | ||||||||||||||||
2006 | 235.00 | 196.50 | 41.71 | 35.34 | ||||||||||||
2007 | 321.75 | 209.25 | 62.96 | 37.08 | ||||||||||||
2008 | 336.75 | 205.50 | 68.55 | 40.86 | ||||||||||||
2009 | 235.50 | 71.40 | 46.20 | 9.80 | ||||||||||||
2010 | 149.60 | 79.70 | 25.14 | 11.64 | ||||||||||||
Financial year ended 31 March 2009 | ||||||||||||||||
1 April – 30 June 2008 | 235.50 | 198.40 | 46.20 | 39.47 | ||||||||||||
1 July – 30 September 2008 | 217.50 | 158.90 | 42.60 | 27.67 | ||||||||||||
1 October – 31 December 2008 | 167.60 | 110.00 | 29.11 | 16.98 | ||||||||||||
1 January – 31 March 2009 | 143.30 | 71.40 | 21.31 | 9.80 | ||||||||||||
Financial year ended 31 March 2010 | ||||||||||||||||
1 April – 30 June 2009 | 105.60 | 79.70 | 17.27 | 11.64 | ||||||||||||
1 July – 30 September 2009 | 141.45 | 100.35 | 22.95 | 16.22 | ||||||||||||
1 October – 31 December 2009 | 149.60 | 128.50 | 25.14 | 20.47 | ||||||||||||
1 January – 31 March 2010 | 146.90 | 113.50 | 24.00 | 17.00 | ||||||||||||
Months | ||||||||||||||||
November 2009 | 149.60 | 131.30 | 25.14 | 21.35 | ||||||||||||
December 2009 | 144.60 | 135.00 | 23.94 | 21.74 | ||||||||||||
January 2010 | 146.90 | 135.00 | 24.00 | 21.74 | ||||||||||||
February 2010 | 136.50 | 114.90 | 21.85 | 17.53 | ||||||||||||
March 2010 | 126.40 | 113.50 | 19.15 | 17.00 | ||||||||||||
April 2010 | 134.20 | 122.30 | 20.58 | 18.65 | ||||||||||||
1 May – 7 May 2010 | 126.70 | 109.90 | 19.29 | 16.19 | ||||||||||||
Table of Contents
Ordinary shares of 5p each | ||||||||||||||||
Number of | Percentage | No. of | Percentage | |||||||||||||
holdings | of total | shares held | of total | |||||||||||||
Range | (%) | millions | (%) | |||||||||||||
1 – 399 | 438,089 | 38.54 | 92 | 1.13 | ||||||||||||
400 – 799 | 312,685 | 27.49 | 175 | 2.15 | ||||||||||||
800 – 1,599 | 223,916 | 19.70 | 250 | 3.07 | ||||||||||||
1,600 – 9,999 | 155,753 | 13.70 | 463 | 5.68 | ||||||||||||
10,000 – 99,999 | 5,367 | 0.47 | 97 | 1.19 | ||||||||||||
100,000 – 999,999 | 602 | 0.05 | 219 | 2.69 | ||||||||||||
1,000,000 – 4,999,999 | 287 | 0.03 | 646 | 7.92 | ||||||||||||
5,000,000 and abovea,b,c,d | 190 | 0.02 | 6,209 | 76.17 | ||||||||||||
Totale | 1,136,889 | 100.00 | 8,151 | 100.00 | ||||||||||||
a | 9m shares were held in trust by Ilford Trustees (Jersey) Limited for allocation to employees under the employee share plans. | |
b | Under the BT Group Employee Share Investment Plan, 79.2m shares were held in trust on behalf of 68,444 participants who were beneficially entitled to the shares. 236m shares were held in the corporate nominee BT Group EasyShare on behalf of 105,102 beneficial owners. | |
c | 134m shares were represented by ADSs. An analysis by size of holding is not available for this holding. | |
d | 398m shares were held as treasury shares. | |
e | 12.43% of the shares were in 1,120,540 individual holdings, of which 95,883 were joint holdings, and 87.57% of the shares were in 16,349 institutional holdings. |
per ordinary share | per ADS | per ADS | ||||||||||||||||||||||||||||||||||
Interim | Final | Total | Interim | Final | Total | Interim | Final | Total | ||||||||||||||||||||||||||||
Financial years ended 31 March | pence | pence | pence | £ | £ | £ | US$ | US$ | US$ | |||||||||||||||||||||||||||
2006 | 4.30 | 7.60 | 11.90 | 0.430 | 0.760 | 1.190 | 0.747 | 1.415 | 2.162 | |||||||||||||||||||||||||||
2007 | 5.10 | 10.00 | 15.10 | 0.510 | 1.000 | 1.510 | 0.991 | 1.972 | 2.963 | |||||||||||||||||||||||||||
2008 | 5.40 | 10.40 | 15.80 | 0.540 | 1.040 | 1.580 | 1.030 | 1.833 | 2.863 | |||||||||||||||||||||||||||
2009 | 5.40 | 1.10 | 6.50 | 0.540 | 0.110 | 0.650 | 0.765 | 0.161 | 0.926 | |||||||||||||||||||||||||||
2010 | 2.30 | 4.60 | 6.90 | 0.230 | 0.460 | 0.690 | 0.339 | – | a | – | a | |||||||||||||||||||||||||
a | Qualifying holders of ADSs on record as of 13 August 2010 are entitled to receive the final dividend which will be paid to ADS holders on 14 September 2010, subject to approval at the AGM. The US Dollar amount of the final dividend of 46.0 pence per ADS to be paid to holders of ADSs will be based on the exchange rate in effect on 6 September 2010, the date of payment to holders of ordinary shares. |
Table of Contents
Date paid | Price per share pence | |||||||
2006 interim | 13 February 2006 | 214.50 | ||||||
2006 final | 11 September 2006 | 250.98 | ||||||
2007 interim | 12 February 2007 | 320.54 | ||||||
2007 final | 17 September 2007 | 316.21 | ||||||
2008 interim | 11 February 2008 | 232.08 | ||||||
2008 final | 15 September 2008 | 174.38 | ||||||
2009 interim | 9 February 2009 | 107.04 | ||||||
2009 final | 7 September 2009 | 133.34 | ||||||
2010 interim | 8 February 2010 | 131.67 | ||||||
and FTSEurofirst 300 Telco Index
over the five financial years to 31 March 2010
![(LINE CHART)](https://capedge.com/proxy/20-F/0000950123-10-053013/u08916u0891664.jpg)
and FTSEurofirst 300 Telco Index
since demerger
![(LINE CHART)](https://capedge.com/proxy/20-F/0000950123-10-053013/u08916u0891665.jpg)
Table of Contents
Results for the 2011 financial year | Datea | |||
1st quarter | 29 July 2010 | |||
2nd quarter and half year | 11 November 2010 | |||
3rd quarter and nine months | February 2011 | |||
4th quarter and full year | May 2011 | |||
2011 Annual Report published | May 2011 | |||
a | Dates may be subject to change. |
Year ended 31 March | 2010 | 2009 | 2008 | 2007 | 2006 | |||||||||||||||
Period end | 1.52 | 1.43 | 1.99 | 1.97 | 1.74 | |||||||||||||||
Averagea | 1.55 | 1.70 | 2.01 | 1.91 | 1.78 | |||||||||||||||
High | 1.64 | 2.00 | 2.11 | 1.99 | 1.92 | |||||||||||||||
Low | 1.49 | 1.37 | 1.94 | 1.74 | 1.71 | |||||||||||||||
a | The average of the Noon Buying Rates in effect on the last day of each month during the relevant period. |
Month | ||||||||||||||||||||||||
April | March | February | January | December | November | |||||||||||||||||||
2010 | 2010 | 2010 | 2010 | 2009 | 2009 | |||||||||||||||||||
High | 1.55 | 1.53 | 1.60 | 1.64 | 1.66 | 1.68 | ||||||||||||||||||
Low | 1.52 | 1.49 | 1.52 | 1.59 | 1.59 | 1.64 | ||||||||||||||||||
Table of Contents
(i) | with the sanction of a special resolution passed at a separate meeting of the holders of the shares of that class; or | |
(ii) | with the consent in writing of the holders of at least 75% in nominal value of the issued shares of that class. |
(i) | divide all or any of its share capital into shares with a smaller nominal value; and | |
(ii) | consolidate and divide all or part of its share capital into shares of a larger nominal value. |
(i) | buy back its own shares; and | |
(ii) | by special resolution reduce its share capital, any capital redemption reserve and any share premium account. |
Table of Contents
(i) | which is in favour of more than four joint holders; or | |
(ii) | unless the transfer form to be registered is properly stamped to show payment of any applicable stamp duty and delivered to the company’s registered office or any other place the Board decide. The transfer must have with it the share certificate for the shares to be transferred; any other evidence which the Board ask for to prove that the person wanting to make the transfer is entitled to do this; and if the transfer form is executed by another person on behalf of the person making the transfer, evidence of the authority of that person to do so. |
Table of Contents
(i) | in which the director has an interest of which the director is not aware; or which cannot reasonably be regarded as likely to give rise to a conflict of interest; | |
(ii) | in which the director has an interest only because the director is a holder of shares, debentures or other securities of BT, or by reason of any other interest in or through BT; | |
(iii) | which involves the giving of any security, guarantee or indemnity to the director or any other person for money lent or obligations incurred by the director or by any other person at the request of or for the benefit of BT or the benefit of any of its subsidiary undertakings; or a debt or other obligation which is owed by BT or any of its subsidiary undertakings to that other person if the director has taken responsibility for all or any part of that debt or obligation by giving a guarantee, security or indemnity; | |
(iv) | where BT or any of its subsidiary undertakings is offering any shares, debentures or other securities for subscription or purchase to which the director is or may be entitled to participate as a holder of BT securities; or where the director will be involved in the underwriting or sub-underwriting; | |
(v) | relating to any other company in which the director has an interest, directly or indirectly (including holding a position in that company) or is a shareholder, creditor, employee or otherwise involved in that company. These rights do not apply if the director owns one per cent or more of that company or of the voting rights in that company; | |
(vi) | relating to an arrangement for the benefit of BT employees or former BT employees or any of BT’s subsidiary undertakings which only gives the directors the same benefits that are generally given to the employees or former employees to whom the arrangement relates; | |
(vii) | relating to BT buying or renewing insurance for any liability for the benefit of directors or for the benefit of persons who include directors; | |
(viii) | relating to the giving of indemnities in favour of directors; | |
(ix) | relating to the funding of expenditure by any director or directors: on defending criminal, civil or regulatory proceedings or actions against the director or the directors; in connection with an application to the court for relief; or on defending the director or the directors in any regulatory investigations; or which enables any director or directors to avoid incurring expenditure as described in this paragraph; and | |
(x) | in which the director’s interest, or the interest of directors generally, has been authorised by an ordinary resolution. |
Table of Contents
Table of Contents
Table of Contents
Document | Publication date | |||
Summary financial statement & Notice of Meeting | May | |||
Annual Report & Form 20-F | May | |||
Changing World: Sustained Values | May | |||
EAB Annual Report | May | |||
Quarterly results releases | July, November, February and May | |||
Current Cost Financial Statements | September | |||
Statement of Business Practice (The Way We Work) | January 2009 | |||
Table of Contents
Tel: Freefone0808 100 4141
Fax: 01903 833371
Textphone: Freefone0800 169 6907
From outside the UK:
Tel: +44 121 415 7178
Fax: +44 1903 833371
Textphone: +44 121 415 7028
e-mail:bt@equiniti.com
Website:www.shareview.co.uk
The Registrar | ADR Depositary: | |
Equiniti | JPMorgan Chase Bank, N.A. | |
Aspect House | PO Box 64504 | |
Spencer Road | St Paul, MN 55164-0504, US | |
Lancing | Tel:+1 800 990 1135(General) | |
West Sussex | or +1 651 453 2128 (from outside the US) | |
BN99 6DA | or +1 800 428 4237 (Global Invest Direct) | |
Website:www.equiniti.com | e-mail:jpmorgan.adr@wellsfargo.com | |
Website:www.adr.com |
BT Group plc
BT Centre
81 Newgate Street
London EC1A 7AJ
United Kingdom
Tel: 020 7356 5000
Fax: 020 7356 5520
From outside the UK:
Tel: +44 20 7356 5000
Fax: +44 20 7356 5520
Tel: 020 7356 4909
e-mail:investorrelations@bt.com
Tel: 020 7356 5631
Fax: 020 7356 6546
e-mail:industryenquiry@bt.com
Table of Contents
Required Item in Form 20-F Item | Where information can be found in this Annual Report Section | Page | ||||||
1 | Identity of directors, senior management and advisors | Not applicable | ||||||
2 | Offer statistics and expected timetable | Not applicable | ||||||
3 | Key information | |||||||
3A | Selected financial data | Financial summary | 2 | |||||
Selected financial data | 151 | |||||||
Information for shareholders | ||||||||
Exchange rates | 160 | |||||||
3B | Capitalisation and indebtedness | Not applicable | ||||||
3C | Reasons for the offer and use of proceeds | Not applicable | ||||||
3D | Risk factors | Our risks | 36 | |||||
4 | Information on the company | |||||||
4A | History and development of the company | Our business and strategy | ||||||
Who we are | 11 | |||||||
What we do | 11 | |||||||
How we are structured | 16 | |||||||
Information for shareholders | ||||||||
Background | 157 | |||||||
Other information | ||||||||
Acquisitions and disposals | 40 | |||||||
Financial review | ||||||||
Liquidity | ||||||||
Capital expenditure | 51 | |||||||
Acquisitions and disposals | 52 | |||||||
4B | Business overview | Our business and strategy | 11 | |||||
Our markets and customers | 15 | |||||||
Our resources | 18 | |||||||
Our lines of business | 22 | |||||||
Our corporate responsibility | 34 | |||||||
Consolidated financial statements | ||||||||
Notes to the consolidated financial statements | ||||||||
Segment information | 101 | |||||||
Operational statistics | 154 | |||||||
Information for shareholders | ||||||||
Cautionary statement regarding forward-looking statements | 156 | |||||||
4C | Organisational structure | Our business and strategy | ||||||
How we are structured | 16 | |||||||
Subsidiary undertakings and associate | 149 | |||||||
4D | Property, plants and equipment | Our resources | ||||||
Property portfolio | 21 | |||||||
Consolidated financial statements | ||||||||
Notes to the consolidated financial statements | ||||||||
Property, plant and equipment | 114 | |||||||
Financial statistics | 153 | |||||||
5 | Operating and financial review and prospects | |||||||
5A | Operating results | Our business and strategy | 11 | |||||
Our lines of business | 22 | |||||||
Financial review | 41 | |||||||
Information for shareholders | ||||||||
Cautionary statement regarding forward-looking statements | 156 | |||||||
5B | Liquidity and capital resources | Financial review | 41 | |||||
Information for shareholders | ||||||||
Cautionary statement regarding forward-looking statements | 156 | |||||||
Consolidated financial statements | ||||||||
Notes to the consolidated financial statements | ||||||||
Loans and other borrowings | 119 | |||||||
Financial commitments and contingent liabilities | 125 | |||||||
Financial instruments and risk management | 137 | |||||||
5C | Research and development, patents and licences | Our resources | ||||||
Global research capability | 20 | |||||||
Financial statistics | 153 |
Table of Contents
Required Item in Form 20-F Item | Where information can be found in this Annual Report Section | Page | ||||||
5D | Trend information | Financial review | 41 | |||||
Quarterly analysis of revenue and profit | 150 | |||||||
Selected Financial Data | 151 | |||||||
Information for shareholders | ||||||||
Cautionary statement regarding forward-looking statements | 156 | |||||||
5E | Off-balance sheet arrangements | Financial review | ||||||
Funding and capital management | ||||||||
Off-balance sheet arrangements | 54 | |||||||
5F | Tabular disclosure of contractual obligations | Financial review | ||||||
Funding and capital management | ||||||||
Contractual obligations and commitments | 54 | |||||||
6 | Directors, senior management and employees | |||||||
6A | Directors and senior management | Board of Directors and Operating Committee | 58 | |||||
6B | Compensation | Report on directors’ remuneration | 66 | |||||
Consolidated financial statements | ||||||||
Notes to the consolidated financial statements | ||||||||
Retirement benefit plans | 127 | |||||||
Share-based payments | 132 | |||||||
6C | Board practices | Board of Directors and Operating Committee | 58 | |||||
The Board | 60 | |||||||
Report on directors’ remuneration | 66 | |||||||
6D | Employees | Our resources | 18 | |||||
Financial review | ||||||||
Financial results | 43 | |||||||
Consolidated financial statements | ||||||||
Notes to the consolidated financial statements | ||||||||
Employees | 105 | |||||||
Operational statistics | 154 | |||||||
6E | Share ownership | Report on directors’ remuneration | 66 | |||||
Consolidated financial statements | ||||||||
Notes to the consolidated financial statements | ||||||||
Share-based payments | 132 | |||||||
7 | Major shareholders and related party transactions | |||||||
7A | Major shareholders | Shareholders and Annual General Meeting | ||||||
Substantial shareholdings | 82 | |||||||
Information for shareholders | ||||||||
Analysis of shareholdings at 31 March 2010 | 158 | |||||||
7B | Related party transactions | Directors’ information | ||||||
Interest of management in certain transactions | 78 | |||||||
Report on directors’ remuneration | 66 | |||||||
Consolidated financial statements | ||||||||
Notes to the consolidated financial statements | ||||||||
Related party transactions | 124 | |||||||
7C | Interests of experts and counsel | Not applicable | ||||||
8 | Financial information | |||||||
8A | Consolidated statements and other financial information | See Item 18 below | ||||||
Other information | ||||||||
Legal proceedings | 39 | |||||||
Financial review | ||||||||
Financial results | ||||||||
Dividends | 47 | |||||||
Consolidated financial statements | ||||||||
Notes to the consolidated financial statements | ||||||||
Financial commitments and contingent liabilities | 125 | |||||||
Information for shareholders | ||||||||
Dividends | 158 | |||||||
Articles of Association (‘Articles’) | ||||||||
Dividends | 161 | |||||||
8B | Significant changes | Financial review | ||||||
Funding and capital management | 52 | |||||||
Going concern | 54 |
Table of Contents
Required Item in Form 20-F Item | Where information can be found in this Annual Report Section | Page | ||||||
9 | The offer and listing | |||||||
9A | Offer and listing details | Information for shareholders | ||||||
Stock exchange listings | ||||||||
Share and ADS prices | 157 | |||||||
9B | Plan of distribution | Not applicable | ||||||
9C | Markets | Information for shareholders | ||||||
Stock exchange listings | 157 | |||||||
9D | Selling shareholders | Not applicable | ||||||
9E | Dilution | Not applicable | ||||||
9F | Expenses of the issue | Not applicable | ||||||
10 | Additional information | |||||||
10A | Share capital | Not applicable | ||||||
10B | Memorandum and articles of association | Information for shareholders | ||||||
Articles of Association (‘Articles’) | 161 | |||||||
10C | Material contracts | Information for shareholders | ||||||
Material contracts | 164 | |||||||
10D | Exchange controls | Information for shareholders | ||||||
Limitations affecting security holders | 166 | |||||||
10E | Taxation | Information for shareholders | ||||||
Taxation (US Holders) | 164 | |||||||
10F | Dividends and paying agents | Not applicable | ||||||
10G | Statement by experts | Not applicable | ||||||
10H | Documents on display | Information for shareholders | ||||||
Documents on display | 166 | |||||||
10I | Subsidiary information | Not applicable | ||||||
11 | Quantitative and qualitative | Consolidated financial statements | ||||||
disclosures about market risk | Accounting policies | |||||||
Financial instruments | 91 | |||||||
Notes to the consolidated financial statements | ||||||||
Financial instruments and risk management | 137 | |||||||
12 | Description of securities other than equity securities | Not applicable | ||||||
13 | Defaults, dividend arrearages and delinquencies | Not applicable | ||||||
14 | Material modifications to the rights of security holders | |||||||
and use of proceeds | Not applicable | |||||||
15 | Controls and procedures | Business policies | ||||||
US Sarbanes-Oxley Act of 2002 | 81 | |||||||
Disclosure controls and procedures | 81 | |||||||
Internal control over financial reporting | 81 | |||||||
16A | Audit committee financial expert | Business policies | ||||||
US Sarbanes-Oxley Act of 2002 | 81 | |||||||
16B | Code of ethics | Business policies | ||||||
US Sarbanes-Oxley Act of 2002 | 81 | |||||||
16C | Principal accountants’ fees and services | Consolidated financial statements | ||||||
Notes to the consolidated financial statements | ||||||||
Audit and non-audit services | 136 | |||||||
Report of the Audit Committee | 62 | |||||||
16E | Purchases of equity securities by the issuer and | Not applicable | ||||||
affiliated purchasers | ||||||||
16F | Change in registrant’s reporting accountant | Not applicable | ||||||
16G | Corporate Governance | The Board | ||||||
New York Stock Exchange | 61 | |||||||
17 | Financial statements | Not applicable | ||||||
18 | Financial statements | Report of the independent auditors – Consolidated financial statements | 85 | |||||
United States opinion | 86 | |||||||
Consolidated financial statements | 87 | |||||||
Quarterly analysis of revenue and profit | 150 |
Table of Contents
Table of Contents
Table of Contents
Table of Contents
Table of Contents
Net debt53, 56, 111 |
Nominating Committee, Report of the64 |
Non-executive directors59 |
Notes to the consolidated financial statements101-144 |
New York Stock Exchange61 |
Table of Contents
![(LOGO)](https://capedge.com/proxy/20-F/0000950123-10-053013/u08916u0891600.jpg)
Registered in England and Wales No. 4190816
Printed on Revive 50:50 Silk, which is produced using 50% recovered
waste fibre and 50% virgin wood fibre. All pulps used are elemental
chlorine free (ECF).
![(LOGO)](https://capedge.com/proxy/20-F/0000950123-10-053013/u08916u0891666.jpg)