FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16
of the Securities Exchange Act of 1934
18 May, 2005
O2 plc
Wellington Street
Slough, Berkshire SL1 1YP, England
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports
under cover Form 20-F or Form 40-F
Form 20-F..X... Form 40-F.....
Indicate by check mark whether the registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes ..... No ..X...
If "Yes" is marked, indicate below the file number assigned to the registrant
in connection with Rule 12g3-2(b): 82 ________
Enclosure:
Copy of announcement regarding Final Results sent to the
London Stock Exchange on 18 May 2005
press release
PR0513
PRELIMINARY RESULTS FOR THE 12 MONTHS ENDED 31 MARCH 2005
Released: 18 May 2005
- - Strong operating and financial performance delivered across the Group(1):
- Customer base grew by 3.26 million to 23.96 million (2004: 20.7 million);
- Group revenue grew by 18.4% to GBP6,683 million (2004: GBP5,646 million);
- EBITDA grew by 29.3% to GBP1,768 million (2004: GBP1,367 million);
- Operating profit(2) grew by 73.6% to GBP755 million (2004: GBP435
million).
- - Group reported pre-tax profit grew to GBP309 million (2004: GBP95 million).
- - Basic earnings per share of 3.5 pence (2004: 1.9 pence).
- - Underlying earnings per share(2) of 8.5 pence (2004: 5.2 pence).
- - Inaugural final dividend of 2.25 pence per share proposed.
- - Group net debt reduced by GBP288 million, to GBP78 million.
Comparative period is 12 months to 31 March 2004.
David Arculus, Chairman of O2 plc, commented:
"All of O2's businesses performed well during the year and the Group has
delivered another year of strong revenue and profit growth, with revenue up more
than 18%, and underlying earnings per share 63% ahead of last year. Following
our corporate re-organisation we are pleased to be able to propose an inaugural
final dividend of 2.25 pence per share, which on an annualised basis represents
40% of our underlying earnings. Our aim remains to grow the dividend towards our
medium-term target pay-out ratio of 50% of underlying earnings, reflecting our
confidence in the Company's ability to continue to grow revenue, earnings and
cash flow and improve our return on invested capital, as well as our commitment
to deliver attractive returns for shareholders."
Year ended Year ended
31 March 31 March
2005 2004
GBPm GBPm
- ------------------------------ --------- ----------
Turnover (1) 6,683 5,646
EBITDA (1) 1,768 1,367
Operating profit before goodwill, UMTS licence
amortisation and exceptionals (1) 755 435
Profit on ordinary activities before taxation 309 95
Underlying earnings per share (pence) (2) 8.5 5.2
Final dividend per share (pence) 2.25 -
Net debt 78 366
- ------------------------------ --------- ----------
(1) Continuing operations.
(2) Before goodwill, UMTS licence amortisation and exceptional items.
Peter Erskine, Chief Executive of O2 plc, commented:
"Last year our mobile businesses in the UK, Germany and Ireland all delivered
strong, profitable customer growth, and our Airwave business successfully
completed roll-out to all Britain's police forces of the largest public safety
mobile communications network of its kind in Europe. Against a background of
intense competition in all our mobile markets, and termination rate cuts in the
UK and Germany, we grew our customer base by 16% and delivered 29% EBITDA
growth. Revenue from mobile data increased to over GBP1.4 billion, of which
non-SMS services contributed more than 12%. Our joint-ventures with Tesco and
Tchibo both generated good customer growth.
In the UK we added more than a million new customers and generated higher ARPU,
using the power of the O2 brand and innovative marketing to grow voice, text and
new data services. Our focus now is to maintain our momentum by delivering an
enhanced customer experience and building loyalty, and we are deploying
significant additional resources into the customer-facing areas of our business,
to drive retention.
In Germany we stepped up customer acquisition and added almost 2 million new
customers, taking the total base to 8 million. We also committed substantial
additional capital to infrastructure investment, to support the position we have
built as a major player in Europe's largest mobile market. Going forward, we
will continue to focus on exploiting the strong O2 brand and our expanding range
of great customer propositions, to drive further rapid customer and service
revenue growth.
Building on the continuing underlying growth in voice and data ARPU in our
markets, our enhanced focus on the customer in the UK, and our accelerated
investment strategy in Germany, we are confident that in 2005/06 we can deliver
further strong revenue and profit growth."
PERFORMANCE HIGHLIGHTS (comparative period: 12 months to 31 March 2004)
O2 UK
- Total customer base grew by 8.4% to 14.38 million
- Service revenue grew by 13.9% to GBP3,627 million
- EBITDA grew by 13.6% to GBP1,183 million
- EBITDA margin 29.4% (2004: 30.2%)
O2 Germany
- Total customer base grew by 33% to 7.98 million
- At constant exchange rates, service revenue grew by 28%
- EBITDA grew by 52% to GBP341 million
- EBITDA margin increased to 18.3% (2004: 14.9%)
O2 Ireland
- Total customer base grew by 10.2% to 1.53 million
- At constant exchange rates, service revenue grew by 13.3%
- EBITDA grew by 7.2% to GBP223 million
- EBITDA margin 38.1% (2004: 39.3%)
O2 Airwave
- Revenue grew to GBP169 million (2004 : GBP89 million)
- EBITDA grew to GBP72 million (2004 : GBP1 million)
SUMMARY FINANCIAL DATA
1 Turnover
Year ended Year ended Six months ended
31 March 31 March 31 March
2005 2004 2005
Continuing operations GBPm GBPm GBPm
- -------------------------- -------- -------- --------
O2 UK 4,030 3,451 1,993
O2 Germany 1,865 1,508 988
O2 Ireland 585 529 305
O2 Airwave 169 89 93
Manx 53 50 28
O2 Online & Products O2 - 140 -
Eliminations (19) (121) (9)
- -------------------------- -------- -------- --------
Group total 6,683 5,646 3,398
- -------------------------- -------- -------- --------
2 EBITDA
Year ended Year ended Six months ended
31 March 31 March 31 March
2005 2004 2005
Continuing operations GBPm GBPm GBPm
- -------------------------- -------- -------- --------
O2 UK 1,183 1,041 602
O2 Germany 341 225 178
O2 Ireland 223 208 117
O2 Airwave 72 1 48
Manx 24 23 13
O2 Online & Products O2 - (43) -
Central resources (75) (88) (41)
- -------------------------- -------- -------- --------
Group total 1,768 1,367 917
- -------------------------- -------- -------- --------
3 Operating profit/(loss)
Year ended Year ended Six months ended
31 March 31 March 31 March
2005 2004 2005
GBPm GBPm GBPm
- -------------------------- -------- -------- --------
O2 UK 623 552 282
O2 Germany 20 (70) 4
O2 Ireland 158 140 84
O2 Airwave 19 (30) 17
Manx 16 17 8
O2 Online & Products O2 - (83) -
Central resources (81) (91) (41)
- -------------------------- -------- -------- --------
Operating profit before
goodwill, UMTS licence
amortisation and exceptional
items from continuing
operations 755 435 354
Operating loss from
discontinued operations - (1) -
Goodwill amortisation (200) (201) (100)
UMTS licence amortisation (169) - (119)
Exceptional items (45) (75) (45)
- -------------------------- -------- -------- --------
Group operating profit 341 158 90
Non-operating exceptional items (20) (5) (20)
Share of operating result of
joint ventures and associates (3) - 1
Net interest (9) (58) (1)
- -------------------------- -------- -------- --------
Profit on ordinary activities
before taxation 309 95 70
Tax (8) 71 (5)
- -------------------------- -------- -------- --------
Profit for the period 301 166 65
Dividends (196) - (196)
- -------------------------- -------- -------- --------
Retained profit for the
period 105 166 (131)
- -------------------------- -------- -------- --------
Basic earnings per share
(pence) 3.5 1.9 0.8
- -------------------------- -------- -------- --------
Underlying earnings
per share (pence) 8.5 5.2 4.0
- -------------------------- -------- -------- --------
Dividend per share (pence) 2.25 - 2.25
- -------------------------- -------- -------- --------
4 Capital expenditure
Year ended Year ended Six months ended
31 March 31 March 31 March
2005 2004 2005
Continuing operations GBPm GBPm GBPm
- -------------------------- -------- -------- --------
O2 UK 638 502 346
O2 Germany 388 308 258
O2 Ireland 100 52 58
O2 Airwave 218 243 90
Manx 10 9 6
O2 Online & Products O2 - 14 -
Central resources 4 2 1
- -------------------------- -------- -------- --------
Total excluding network
sharing payments 1,358 1,130 759
German network sharing
agreement 57 83 -
- -------------------------- -------- -------- --------
Group total 1,415 1,213 759
- -------------------------- -------- -------- --------
GROUP FINANCIAL RESULTS
Profit and loss account
Group revenue grew by 18.4% to GBP6,683 million, driven by strong customer
growth in the Group's three mobile businesses, and by higher Airwave revenues,
as the network roll-out was completed. EBITDA grew by 29.3% to GBP1,768 million,
and the Group EBITDA margin improved to 26.5%, from 24.2% last year.
Operating profit, before goodwill UMTS licences and exceptional items, grew by
74% to GBP755 million. UMTS licence amortisation of GBP169 million was charged,
reflecting the commercial launch of UMTS-based services during the year in
Germany and the UK.
O2 UK's planned reduction of up to 500 permanent positions in non-customer
facing areas in 2005/06, to fund deployment of significant additional resources
into customer-facing areas, gave rise to an exceptional charge of GBP45 million.
The transaction costs of the Court-approved scheme of arrangement undertaken
during the year gave rise to a non-operating exceptional charge of GBP20
million. (This excludes the GBP15 million cost of the five pence per share
premium paid in respect of the cash alternative offered under the scheme, which
was charged directly to reserves.)
The Group's share of the operating results of its joint-ventures and associates
was a net loss of GBP3 million, reflecting the costs of growing the Tesco Mobile
customer base and launching Tchibo Mobile. The net interest charge fell
substantially to GBP9 million, from GBP58 million in the previous year, due to
the fall in the Group's net debt, the narrowing of the spread between the
interest payable on the Group's gross debt and the interest receivable on its
cash balance, and foreign exchange hedging.
Profit before tax increased to GBP309 million, from GBP95 million in the
previous year. The tax charge was GBP8 million, and basic earnings for the
full-year grew to GBP301 million, from GBP166 million in the previous year.
Basic earnings per share was 3.5 pence.
Underlying earnings (before goodwill, UMTS licence amortisation and exceptional
items) was 8.5 pence per share, compared to 5.2 pence per share in the previous
year. The Board is proposing an inaugural final dividend of 2.25 pence per
share, to be paid in late August following approval by shareholders at the
Annual General Meeting in July.
Capital expenditure, cash flow and net debt
Capital expenditure, excluding network sharing agreement payments by O2 Germany,
increased by 20% to GBP1,358 million. The reduction in Airwave's capital
expenditure, due to completion of the network roll-out, was more than offset by
higher UMTS investment in the three mobile businesses. Total Group capital
expenditure in the full-year increased to GBP1,415 million, compared to GBP1,213
million in the previous year.
Group net debt at the year-end fell to GBP78 million, from GBP236 million at the
end of the first half, and GBP366 million at the same time last year. The
increase in capital spending and the exceptional costs were more than offset by
EBITDA growth during the year.
STRATEGIC AND OPERATIONAL HIGHLIGHTS
Corporate re-organisation implemented
In March the Court-approved scheme of arrangement and associated capital
reduction became effective, resulting in the creation of distributable reserves
and enabling the Company to implement its dividend policy. Under the scheme,
approved by shareholders in February, mmO2 plc was acquired by a new company, O2
plc, with shareholders receiving one new O2 plc share for every mmO2 plc share
held.
As a supplemetary part of the scheme a cash alternative was offered in respect
of some 300 million shares. The cash consideration was 130 pence, comprising the
price of 125 pence at which the shares were placed in the market, plus a premium
of five pence per share financed by the Company. This enabled approximately
833,000 shareholders, each owning up to 1,000 shares, to realise the value of
their shares and secure a premium without incurring dealing charges. At the same
time the Company obtained a long-term reduction in the costs of servicing its
shareholders.
The GBP15 million cost of the five pence per share premium paid in respect of
the cash alternative was charged directly to reserves. The GBP20 million
transaction costs of the scheme were charged as a non-operating exceptional
item.
Airwave network roll-out completed
In March O2 Airwave successfully completed the roll-out of service to all 51
regional police forces and the British Transport Police, on time and on budget.
Airwave is the largest public safety mobile communications network of its kind
in Europe, and its existing contracts with the police and other public safety
organisations mean that more than 150,000 users nationwide will have access to a
modern, secure, communications system. During the year Airwave also added 38 new
emergency service and civil contingencies customers, taking the total of these
to 78.
Airwave is awaiting the outcome of the tendering process to provide mobile
communications to Great Britain's ambulance and fire services. If awarded to O2
Airwave, these contracts will potentially give more than 30,000 additional
public safety users access to the network, and allow future emergency services
inter-operability, where all public safety organisations will be able to
communicate with each other when they need to do so. These contracts are
expected to be awarded later this year.
O2 Germany accelerates growth and network investment
In November O2 Germany implemented a strategy to deliver faster customer growth,
and to step up the level of investment in its UMTS network. Almost 2 million
customers were added during the year, without material dilution in the quality
of the customer base, which stood at just under 8 million at the year end. The
speed and quality of this growth has positioned O2 Germany as a major player in
Europe's largest mobile market, and increased confidence in its ability to
deliver higher long-term margins.
To sustain this rapid growth and attractive market position, O2 is now aiming to
deliver 3G network quality and long-term population coverage that is competitive
with the two market leaders. As announced in November, in the five-year period
from April 2004 the business is expected to incur total capital expenditure in
the range EUR3.0 to EUR3.5 billion, which is EUR1.0 to EUR1.5 billion higher
than had been planned previously. This increase will to a significant extent be
offset over this period by a reduction in operating costs, including lower
national roaming costs, and by faster revenue growth. Growing the business so
rapidly, and increasing the speed and scale of the 3G investment programme, will
further strengthen O2's position in the German market, and enable this business
to deliver attractive long-term returns.
O2 UK implements customer plan
In March O2 UK implemented a strategy to deliver an enhanced customer experience
and to strengthen customer loyalty. This will involve deployment of significant
additional resources into customer-facing areas, including opening a fourth
major UK customer service centre, and further expanding the O2 retail network.
O2 UK added more than 1.1 million net new customers during the year, and at the
same time succeeded in improving the quality of the customer base, achieving a
3% increase in the average revenue per customer despite the regulator's
imposition of a major cut in termination rates. As penetration slows and the
market becomes more crowded, there is a need to focus more on retention,
distribution, devices and customer service. These are the opportunities on which
O2's strategy will focus, prioritising what customers value most, and reducing
activities and costs everywhere else.
To support these initiatives O2 UK plans to hire approximately 2,000 new retail
and customer service staff over the next two years, offsetting the cost of this
expansion by targeting efficiencies across a wide range of managerial and
administrative functions. This will result in a reduction of up to 500 permanent
positions in non customer-facing areas in early 2005/06, and gave rise to an
exceptional charge of GBP45 million in the 2004/05 financial year.
Tesco Mobile continues to grow
O2 UK's 50/50 joint venture with Tesco PLC continued to drive growth, by
offering customers value, simplicity and choice, along with supermarket style
offers and the chance to earn Clubcard points when buying handsets and call
time. This successful joint-venture (whose customers are not included in O2's
base) provides O2 with efficient access to a significant market segment that has
not been well served by mobile operators in the past. The introduction in
September of an expanded range of handsets, extension of the popular "three
favourite numbers" tariff to cover any network, and an increase in store selling
space for Tesco Mobile, continued to drive customer growth through the second
half.
Tchibo Mobile joint venture launched
In October a new 50/50 joint venture between O2 Germany and Tchibo GmbH was
launched, offering a unique and attractively priced pre-paid mobile phone
service into the German market. The new company, Tchibo Mobile, combines the
marketing and sales distribution strengths of Tchibo with O2 Germany's high
quality network infrastructure and track record for innovation in the mobile
market.
Tchibo Mobile offers a simple, transparent, flat-rate call charge of 35 euro
cents per minute at any time of day or night, with customers able to choose from
a range of own-branded handsets, available from around 1,000 Tchibo retail
stores nationwide, as well as specialist dealer partners and over the Internet.
By the year-end Tchibo Mobile, whose customers form part of O2 Germany's
customer base, had connected more than 250,000 new pre-pay customers.
Commercial services launched on 3G
During the year O2 launched a range of 3G mobile data services in the UK and
Germany. As well as PC data-cards aimed mainly at the business market, O2
offered an attractive selection of new dual-mode handsets, including the
competitively priced O2 X4, the first own-branded 3G handset available in the
UK.
The successful O2 Active portal was re-launched for 3G, offering a personalised
menu and faster access to a wide range of innovative data content. At the
year-end, 34% of O2's customers had used a non-SMS data service during the
previous 90 days.
O2 UK introduced "Connection Manager", the UK's first integrated mobile business
solution to incorporate 3G, Wireless LAN and GPRS. This uses a simple, intuitive
interface to enable the customer to connect via O2's integrated data-card to the
fastest available wireless technology.
O2 Germany launched "Surf@Home", a unique mobile broadband product which
integrates 3G and Wireless LAN technologies to offer customers fast internet
access without a fixed line. Surf@Home complements O2's highly successful Genion
Homezone service, which gives customers the ability to make voice calls from
home at fixed line prices, without paying for a fixed phone line.
Across all its markets O2 is taking a measured, market-driven approach to the
introduction of new services for UMTS, rather than just selling new technology.
O2's goal is to deliver mobile data services that customers truly value, which
means offering compelling devices, a great customer experience, ease of use, and
value for money.
i-mode agreement signed
In November O2 signed a long-term strategic agreement with NTT DoCoMo, under
which O2 will launch the i-mode mobile internet service in the UK and Ireland
during the second half of 2005. O2 Germany will launch new mobile internet s
ervices based on this NTT DoCoMo technology under its own brand, early in 2006.
With close to 50 million active users, i-mode is the world's most popular mobile
internet service, and will give O2's customers access to easy-to-use, fast
services and rich content applications, across a wide range of advanced
multi-media handsets. i-mode offers a compelling end-to-end customer experience,
providing a breadth and depth of tailored internet content that takes mobile
data services to a new level for the customer.
i-mode is a proven business model that enables increased customer uptake of
mobile data services and higher data usage. It will give O2 a clearly
differentiated mobile internet proposition, and will build on O2's successful
track record in mobile data, to drive the next wave of data revenue growth.
New O2 devices launched
O2 continued its successful branded device strategy, including launching the O2
X3, a clamshell phone with mp3 player and 1.3 mega-pixel camera, as well as the
O2 X4, the first own-branded 3G device. In addition the O2 XDA range was
updated, with the launch of the XDA II-i, which includes W-LAN connectivity, and
the XDA II-s, which has a slide-out keyboard
Mobile broadband strategy set out
In December O2 announced deployment of Europe's first super-fast, 3G mobile data
network, incorporating HSDPA technology (high-speed downlink packet access) and
IMS (Internet Protocol Multimedia Sub-system). Going live initially on the Isle
of Man later in 2005, this mobile broadband network will subsequently be rolled
out across all O2's territories, allowing customers to experience
next-generation services on the move at speeds equivalent to those enjoyed by
fixed broadband networks, and three times faster than today's commercial 3G
networks.
BUSINESS REVIEW
O2 UK
Full-year results
In an increasingly competitive market, O2 UK continued to deliver robust growth,
with net service revenue in the full-year up 13.9% to GBP3,627 million. The rate
of growth slowed in the second half, mainly due to the approximately 30%
termination rate cut imposed by the regulator from September 2004, and second
half net service revenue growth was 8%, compared to 20% in the first half. Total
revenue was 17% higher at GBP4,030 million.
Revenue growth was driven both by acquisition of new customers and by higher
ARPU. O2 UK added 1.12 million net new customers during the year, taking the
total active base at the year-end to 14.384 million.
In the contract market O2's mix of brand, devices and propositions continued to
appeal to higher value customers. In the consumer segment, an expanded X-range
of own-branded devices and the popular "Double" proposition, offering double
minutes and texts for 6 months through O2 Retail, successfully drove connections
of high value customers. In the business market, propositions targeted at the
SME segment such as "Business Zones", offering discounted rates to two
fixed-line area codes, and the "Network Manager" service, allowing corporate
customers to measure the overall performance of O2's network, delivered
continued growth.
Overall, contract customers comprised 30% of the growth in subscribers during
the year, and accounted for 34.1% of the total base at the year-end. However,
the contract base was impacted by the loss of the BT own-use account, which led
to approximately 100,000 contract customers migrating off the base during the
second half.
O2 UK continued to develop its prepay proposition during the year, with the "3p
Text Bolt-on", "O2 Home", offering discounted rates on calls from a "homezone",
and the upgrade proposition "O2 Thanks", all helping to grow prepay net
additions to 785,000.
Underlying growth in voice ARPU of GBP7 was more than offset by the GBP11 impact
of the September termination rate cut, while data ARPU grew GBP13, to leave
total blended ARPU GBP9 higher than last year, at GBP281. Average voice minutes
of use per customer increased by 11% to 137 minutes per month. Data revenue was
driven by 34% year-on-year growth in SMS volumes, along with an increasing
contribution from non-SMS revenues, which accounted for 2.7% of service revenue
in the year.
Non-service revenue increased by GBP135 million to GBP403 million in the year,
driven by increased equipment sales, and by higher national roaming and
wholesale revenues.
Contract SAC for the full-year was GBP172, up from GBP160 in the previous year.
This increase reflected the general level of competition in the market, and the
higher proportion of high-end handsets sold. Contract churn in the year was 31%,
up from 26% last year, impacted by the loss of the BT employee contract which
increased churn by approximately 2%. Pre-pay SAC rose to GBP19, from GBP16 last
year, again reflecting the competitiveness of the UK market, which also pushed
pre-pay churn up to 37%, from 33% in the previous year.
EBITDA grew by 14% to GBP 1,183 million, and the reported EBITDA margin was
29.4%, down from 30.2% last year. On a like for like basis, the EBITDA margin
was slightly ahead, as the reported margin reflected the inclusion of the O2
Online/ Products O2 costs which had previously been reported separately. The
second-half EBITDA margin was 30.2%, up from 28.5% in the first half.
Depreciation of GBP558 million was GBP70 million higher than last year,
reflecting increased capital expenditure during the year, as well as the
commencement of depreciation of UMTS assets and a review of some asset lives,
mainly software. O2 UK's operating profit before goodwill, UMTS licence
amortisation and exceptionals increased by 13%, to GBP623 million.
Capital expenditure was GBP638 million in the year, compared to GBP502 million
in the previous year. The increase was mainly due to investment in the UMTS
network, which accounted for around 35% of O2 UK's total capital expenditure,
compared to around 20% in the previous year. A 3G data-card proposition aimed at
business customers was launched in October 2004, and UMTS licence amortisation
was charged from this date. A consumer 3G proposition followed in February 2005.
Roll-out of the UMTS network continues on track to achieve 50% population
coverage by June 2005.
Fourth quarter key performance indicators
A total of 168,000 net new customers were added in the quarter, comprising
37,000 contract customers and 131,000 prepay customers. Only purchases of a new
handset or new SIM card which resulted in genuine new active customers were
reflected in the reported number of prepay net connections. Over 50% of total
connections in the quarter were acquired through O2 UK's direct channels.
Before the GBP5 impact of the termination rate cut in the quarter, blended ARPU
improved by GBP3, driven by strong growth of data ARPU. However reported ARPU
was GBP2 lower, at GBP281, with contract ARPU falling to GBP542, from GBP545 in
the third quarter, and pre-pay ARPU falling to GBP143, from GBP145 in the
previous quarter.
The total number of text messages sent by O2 UK's customers increased by 9.3%
quarter-on-quarter, to 3.10 billion. Data as a proportion of service revenue
grew to 27.7%, from 25.0% in the third quarter and 22.3% in the same period last
year.
The number of non-SMS data users grew by 17% quarter-on-quarter to 5.728
million, 40% of the total base, driven by services such as picture-messaging,
ring-tone downloads and O2 Active browsing. Non-SMS data revenues accounted for
3.7% of service revenue in the quarter, compared to 2.8% in the third quarter.
O2 Germany
Full-year results
O2 Germany delivered further exceptional revenue and EBITDA growth during the
year. Service revenue grew by 28% at constant exchange rates, to EUR2,474
million (GBP1,687 million). Full-year total revenue was EUR2,736 million
(GBP1,865 million), compared to EUR2,172 million (GBP1,508 million) the previous
year.
The main driver was accelerated customer growth, with 1.994 million net
additions in the year, taking the total base at the year-end to 7.976 million.
Higher customer acquisition was fuelled by an expanding range of pre-pay and
contract propositions and extended distribution. In the contract market, O2's
"Active" bundles were launched in July and proved very successful with high
value customers, with around 40% of new contract customers in the second half
subscribing to an Active bundle. The popular Genion Homezone service accounted
for more than 50% of new contract customers. At 55%, the proportion of contract
customers in O2's base remains the highest in the German market. Towards the end
of the financial year O2 Germany signed the first of several agreements with
third-party service providers, which will further expand the range of O2's
channels into the contract market.
O2 Germany also increasingly targeted high value prepay customers, and 1.1
million net new prepay customers were added during the year. Of these, the new
Tchibo Mobile channel, launched at the start of October, contributed just over
250,000 new customers.
Blended ARPU fell by EUR3 in the year to EUR363, reflecting the approximately 3
months' impact of the 17% termination rate cut in December, and the higher
proportion of pre-pay customers in the mix. O2's blended ARPU remains
substantially the highest in the German market.
Contract ARPU in the year fell by around 2% to EUR531, mainly reflecting the
termination rate cut. Pre-pay ARPU of EUR140 was EUR2 higher than last year,
reflecting O2 Germany's focus on higher value prepay customers. The ARPU of the
customers acquired through the Tchibo Mobile channel is similar to the German
market average.
O2 Germany's average customer voice minutes of use remained broadly flat
year-on-year, at 118 minutes per month, well above the average for the German
market as a whole. The number of text messages sent in the year increased by
around a third, to just under 2.4 billion, driven by customer growth and strong
uptake of new SMS and general data packs. The success of the data pack
propositions also drove non-SMS data uptake and usage, and the number of
customers at the year-end who had used a non-SMS data service during the
previous 90 days was 1.9 million, 24% of the total base.
Subscriber acquisition costs for both pre-pay and contract customers increased
year-on-year, reflecting O2 Germany's accelerated growth strategy in prepay, and
the promotion of the new Active bundles on contract. However blended SAC fell by
EUR11 to EUR161, due to the increasing proportion of pre-pay customers in the
new connections mix. Despite the acceleration in customer growth, O2 Germany's
EBITDA margin before SAC and SRC increased to 40.2%, from 36.0% last year, due
to the operational leverage delivered by the growing scale of the business, with
8 million customers at year end.
EBITDA after SAC and SRC grew 54% year-on-year to EUR500 million (GBP341
million) and the full-year EBITDA margin was 18.3%, compared to 14.9% the
previous year. National roaming costs reduced the full-year EBITDA margin by
approximately 4%. Depreciation, including amortisation of GBP78 million in
respect of the T-Mobile network sharing agreement, increased by 8% year-on-year,
to GBP319 million. From a loss of GBP(70) million in the previous year,
operating profit before goodwill and UMTS licence amortisation and exceptionals
improved to GBP20 million. O2 Germany's capital expenditure in the year,
excluding the T-Mobile network sharing payment, increased by 26% to GBP388
million, due to increased investment in the UMTS network roll-out, which
accounted for around 35% of total investment in the year. In the first half a
payment of GBP57 million was incurred in respect of the network sharing
agreement, taking O2 Germany's total capital expenditure in the year to GBP445
million.
Fourth quarter key performance indicators
A total of 578,000 net new customers were added in the quarter, of which 211,000
were contract customers and just over 100,000 were Tchibo Mobile customers.
Blended ARPU fell to EUR363 from EUR370 in the third quarter, with over EUR4 of
this difference due to the 17% termination rate cut in December. Blended data
ARPU of EUR79 was EUR1 higher than in the third quarter. Pre-pay ARPU of EUR140
was EUR2 higher quarter-on-quarter, but contract ARPU fell by EUR8 to EUR531.
Data as a proportion of service revenue increased to 23.2%, from 22.3% in the
third quarter, and non-SMS data accounted for 4.4% of service revenue, compared
to 3.8% in the third quarter.
O2 Ireland
Full-year results
In the increasingly competitive and highly penetrated Irish market, O2 Ireland
continued to grow strongly. Full-year service revenue grew by 13.3% at constant
exchange rates, to EUR816 million (GBP556 million). Total revenue was EUR859
million (GBP585 million) for the full-year, compared to EUR762 million (GBP529
million) in the previous year.
Growth was driven by customer acquisitions and higher contract ARPU. O2 Ireland
grew its base by 10.2%, to end the year with 1.533 million customers. Customer
growth was particularly strong in the pre-pay market, where O2 Ireland added
120,000 customers, attracted by the strength of the O2 brand, a re-invigorated
retail network, including the launch of flagship "Experience" stores, and a
series of innovative and competitive propositions. O2 Ireland also performed
strongly in the corporate and SME sectors.
Blended ARPU for the year was EUR6 higher, at EUR565. O2 Ireland's average voice
minutes of use grew by 6%, to 209 minutes per customer per month, which is among
the highest in Europe. However, increased revenue from higher minutes of use was
partly offset by a lower rate per minute, due to the increased competitiveness
of the market. SMS usage remained high, and data ARPU of EUR120 was EUR10 higher
than last year.
O2 Ireland's EBITDA grew by 9% in the year to EUR327 million. The full-year
EBITDA margin fell to 38.1% from 39.3% last year, reflecting the higher level of
customer additions during the period. Operating profit before goodwill and
exceptionals increased by 13%, to GBP158 million. No UMTS licence amortisation
was charged during the year, as no UMTS services were launched commercially.
O2 Ireland's capital expenditure almost doubled, to GBP100 million, mainly due
to increased investment in the UMTS network roll-out, as well as continuing
investment in the 2G network.
Fourth quarter key performance indicators
A total of 17,000 net new customers were added in the quarter, of which 5,000
were contract customers. Fourth quarter blended ARPU was EUR565, with contract
ARPU up EUR12 in the quarter to EUR1,118, and pre-pay ARPU down EUR1, at EUR358.
The number of text messages grew 5.8% quarter on quarter, and data as a
proportion of service revenues grew to 23.2% from 20.9% in the third quarter. At
the end of the quarter 34% of customers had used a non-SMS data service in the
previous 90 days.
O2 Airwave
Revenue for the full year increased to GBP169 million, from GBP89 million last
year. EBITDA grew to GBP72 million, from GBP1 million in 2004. Airwave delivered
its first full year operating profit, GBP19 million, compared to a loss of
GBP(30) million last year.
Capital expenditure in the year was GBP218 million, compared to GBP243 million
last year, reflecting the completion of the police network roll-out, delays in
awarding the contracts for the Fire and Ambulance services, and improved network
planning and design, which allowed the same quality of coverage to be provided
with fewer base stations.
OUTLOOK
Year ending 31 March 2006:
- - O2 UK
The Group expects mid-single digit growth in net service revenue, reflecting the
remaining five months' impact of the September 2004 termination rate cut, and
continuing competition in what is now a highly penetrated mobile market.
The EBITDA margin is expected to remain broadly stable, reflecting the
competitiveness of the market, and O2 UK's programme to allocate substantial
resources to develop additional customer-facing capabilities, and achieve higher
long-term customer retention.
- - O2 Germany
The Group expects to deliver further strong service revenue growth, mainly
driven by continued rapid growth of the customer base. The EBITDA margin is
expected to improve further, to around 20%, reflecting O2 Germany's continuing
prioritisation of revenue growth, as well as the impact of UMTS network running
costs and the continued costs of national roaming.
- - Group capital expenditure
Capital expenditure is expected to be broadly in line with the total incurred in
2004/05 (excluding the network sharing agreement payments in Germany), with
higher UMTS network investment, particularly in Germany, offsetting the
reduction in Airwave capital expenditure due to completion of the police network
roll-out.
Cautionary statement Regarding Forward-Looking Statements
This document contains certain forward-looking statements. We may also make
written or oral forward-looking statements in:
- - our periodic reports to the US Securities and Exchange Commission, also
known as the SEC, on Forms 20-F and 6-K;
- - our annual report and accounts and half-yearly reports;
- - our press releases and other written materials; and
- - oral statements made by our officers, directors or employees to third
parties.
We have based these forward-looking statements on our current plans,
expectations and projections about future events. These forward-looking
statements are subject to risks, uncertainties and assumptions about us.
Forward-looking statements speak only as of the date they are made.
Statements that are not historical facts, including statements about our beliefs
and expectations are forward-looking statements. Words like "believe,"
"anticipate," "expect," "intend," "seek," "will," "plan," "could," "may,"
"might," "project," "goal," "target" and similar expressions often identify
forward-looking statements but are not the only ways we identify these
statements.
These statements may be found in this document generally. Our actual results
could differ materially from those anticipated in these forward-looking
statements as a result of various factors.
If any one or more of the foregoing assumptions are ultimately incorrect, our
actual results may differ from our expectations based on these assumptions.
Also, the sector and markets in which we operate may not grow over the next
several years as expected, or at all. The failure of these markets to grow as
expected may have a material adverse effect on our business, operating results
and financial condition and the market price of our ordinary shares.
The information on our website, any website mentioned in this document or any
website directly or indirectly linked to our or any other website mentioned in
this document is not incorporated by reference into this document and you should
not rely on it.
Preliminary announcement for the year ended 31 March 2005
Group profit and loss account
Year ended 31 March 2005
Note 2005 2004
GBPm GBPm
- ------------------------------- ---- ---------- -------
Turnover: group and share of joint ventures and
associates 6,890 5,859
Group's share of joint ventures and associates
turnover (207) (165)
- ------------------------------- ---- ---------- -------
Group turnover 2 6,683 5,694
Net operating expenses (including exceptional items) 3 (6,342) (5,536)
EBITDA1 1,768 1,367
Depreciation before exceptional items (931) (926)
Goodwill amortisation (200) (201)
UMTS licences amortisation (169) -
Other amortisation (82) (7)
- ------------------------------- ---- ---------- -------
Operating profit before exceptional items 386 233
Exceptional items 4 (45) (75)
- ------------------------------- ---- ---------- -------
Group operating profit 3 341 158
Group's share of operating result of joint ventures
and associates (3) -
- ------------------------------- ---- ---------- -------
Total operating profit 338 158
Costs of capital reorganisation 4 (20) -
Loss on sale of business - discontinued operation - (5)
Net interest payable and similar charges (9) (58)
- ------------------------------- ---- ---------- -------
Profit on ordinary activities before taxation 309 95
Tax on profit on ordinary activities 5 (8) 71
- ------------------------------- ---- ---------- -------
Profit for the financial year 10 301 166
Dividends 6,10 (196) -
- ------------------------------- ---- ---------- -------
Retained profit for the year 105 166
- ------------------------------- ---- ---------- -------
Basic earnings per share (pence) 7 3.5 1.9
- ------------------------------- ---- ---------- -------
Diluted earnings per share (pence) 7 3.4 1.9
- ------------------------------- ---- ---------- -------
Dividend per share (pence) 6 2.25 -
- ------------------------------- ---- ---------- -------
1EBITDA is our earnings before interest, tax, depreciation, amortisation and
exceptional items, excluding our share of operating profits and losses of our
joint ventures and associates. EBITDA is not a measure of financial performance
under UK GAAP and may not be comparable to similarly titled measures of other
companies, because EBITDA is not uniformly defined. EBITDA should not be
considered by investors as an alternative to Group operating profit or profit on
ordinary activities before taxation as an indication of operating performance,
or as an alternative to cash flow from operating activities as an indication of
cash flows. EBITDA is one of the key financial measures used by the Group for
evaluating financial performance.
Group statement of total recognised gains and losses
Year ended 31 March 2005
Note 2005 2004
GBPm GBPm
- ------------------------------ -------- -------- --------
Profit for the financial year 10 301 166
Currency translation differences arising on foreign
currency net investments less translation differences
on debt designated as a hedge of foreign currency net 10 68 (144)
investments
Premium paid to shareholders electing for cash
alternative in capital reorganisation (15) -
- ------------------------------ -------- -------- --------
Total recognised gains relating to the year 354 22
- ------------------------------ -------- -------- --------
Group balance sheet
As at 31 March 2005
Note 2005 2004
As
restated
GBPm GBPm
- -------------------------------- ------ --------- --------
Fixed assets
Intangible assets 7,045 7,354
Tangible assets 4,449 3,996
Investments 2 5
- -------------------------------- ------ --------- --------
11,496 11,355
- -------------------------------- ------ --------- --------
Current assets
Stocks 87 84
Debtors 1,060 943
Investments 1,285 993
Cash at bank and in hand 41 23
- -------------------------------- ------ --------- --------
2,473 2,043
Creditors: amounts falling due within one year (2,031) (1,678)
- -------------------------------- ------ --------- --------
Net current assets 442 365
- -------------------------------- ------ --------- --------
Total assets less current liabilities 11,938 11,720
- -------------------------------- ------ --------- --------
Creditors: amounts falling due after more than one (1,403) (1,375)
year
Provisions for liabilities and charges (254) (251)
- -------------------------------- ------ --------- --------
Net assets 10,281 10,094
- -------------------------------- ------ --------- --------
Capital and reserves
Called up share capital 10 9 9
Share premium 10 375 3
Other reserves 10 2,913 11,074
Profit and loss account 10 6,984 (992)
- -------------------------------- ------ --------- --------
Shareholders' funds 10,281 10,094
- -------------------------------- ------ --------- --------
Reconciliation of group operating profit to operating cash flows
Year ended 31 March 2005
2005 2004
GBPm GBPm
- -------------------- -------- -------
Group operating profit 341 158
Depreciation and amortisation charges 1,388 1,136
Loss on disposal of fixed assets 2 5
Increase in stocks (2) (17)
Increase in debtors (84) (88)
Increase in creditors 98 142
Increase in provisions 12 55
- -------------------- -------- -------
Net cash inflow from operating activities 1,755 1,391
- -------------------- -------- -------
Group cash flow statement
Year ended 31 March 2005
Note 2005 2004
GBPm GBPm
- -------------------------------------- ---- ------- --------
Net cash inflow from operating activities 1,755 1,391
Returns on investments and servicing of finance (43) (62)
Taxation (15) (13)
Capital expenditure and financial investment (1,348) (1,114)
Acquisitions and disposals (2004: net of GBP10 million
cash disposed of with O2 Netherlands) (2) (6)
- -------------------------------------- ---- ------- --------
Cash inflow before management of liquid resources and
financing 347 196
Management of liquid resources 8,9 (302) (191)
Financing (27) (50)
- -------------------------------------- ---- ------- --------
Increase/(decrease) in cash in the year 8,9 18 (45)
- -------------------------------------- ---- ------- --------
Group net debt
As at 31 March 2005
Note 2005 2004
GBPm GBPm
- ----------------------------- ----- -------- --------
Cash at bank and in hand 41 23
Current asset investments 1,285 993
- ----------------------------- ----- -------- --------
1,326 1,016
Euro medium-term notes (net of issue costs) (1,056) (1,012)
Loan notes (7) (8)
Obligations under finance leases and hire purchase
contracts (308) (325)
Other loans and borrowings (33) (37)
- ----------------------------- ----- -------- --------
Net debt 8,9 (78) (366)
- ----------------------------- ----- -------- --------
1. Basis of preparation
The financial statements for the year ended 31 March 2005 have been prepared in
accordance with the accounting policies set out in the Annual Report and
Financial Statements for the year ended 31 March 2004 with the exception of the
adoption of Urgent Issues Task Force Abstract 38 (UITF 38) "Accounting for ESOP
Trusts" as described below.
Certain amounts relating to the prior year have been reclassified to conform to
the current year presentation.
Merger accounting
O2 plc was incorporated on 10 December 2004 as part of the Group's capital
reorganisation undertaken during the year. The purpose of the capital
reorganisation was to create distributable reserves in O2 plc to allow the
implementation of the Group's distribution policy.
On 14 March 2005 O2 plc was introduced as the new holding company of the O2
Group pursuant to a Scheme of Arrangement (the Scheme) under section 425 of the
Companies Act 1985, whereby O2 plc issued shares in return for the existing
shares in mmO2 plc. Subsequently, O2 plc effected a reduction in its share
capital to create distributable reserves.
The Directors consider that in substance the Scheme constituted two distinct
transactions being firstly, the insertion of the new holding company, O2 plc,
and secondly, a placing of shares on behalf of certain shareholders who elected
to receive the consideration for their shares in mmO2 plc in cash. The insertion
of a new holding company constitutes a group reconstruction as defined by
Financial Reporting Standard (FRS) 6 "Acquisitions and mergers" and has been
accounted for using merger accounting principles. The premium paid to
shareholders who elected to receive their consideration in cash has been
recognised as a deduction from the Group profit and loss account reserve.
The consolidated financial statements for the year ended 31 March 2005 comprise
the results of O2 plc from incorporation to 31 March 2005 together with the
results of the O2 plc group from 14 March 2005 to the end of the financial year
and the results of the mmO2 plc group from 1 April 2004 to 13 March 2005. The
comparative information presented is as previously published for the mmO2 plc
group except where otherwise stated.
Change in accounting policy
The Group has adopted UITF 38 in the year ended 31 March 2005, which requires
that a company's own shares held through an ESOP trust be shown as deduction
from shareholders' funds until such time as the shares vest unconditionally.
Previously these shares were recorded at cost less amortisation charged to date
and shown as a fixed asset investment.
The comparative figures have been restated to reflect the adoption of UITF 38.
The aggregate impact on the previously reported figures is to reduce total
equity shareholders' funds at 1 April 2003 by GBP3 million (2004: increase by
GBP3 million). The adoption of UITF 38 has no effect on the profit and loss
account.
2. Segmental analysis
The segmental disclosures in respect of profit and loss account items are
presented below:
Group Depreciation and Total operating
turnover amortisation1 profit
GBPm GBPm GBPm
- ------------------------- ------ ------- --------
Year ended 31 March 2005
Continuing operations
Mobile telecommunications
UK 4,030 773 370
Germany 1,865 431 (92)
Ireland 585 117 106
- ------------------------- ------ ------- --------
Total mobile
telecommunications 6,480 1,321 384
Other businesses UK 222 61 35
Central overheads and
adjustments - 6 (81)
Inter-segment eliminations (19) - -
- ------------------------- ------ ------- --------
Group total 6,683 1,388 338
- ------------------------- ------ ------- --------
Year ended 31 March 2004
Continuing operations
Mobile telecommunications
UK 3,451 638 346
Germany 1,508 295 (72)
Ireland 529 120 87
- ------------------------- ------ ------- --------
Total mobile
telecommunications 5,488 1,053 361
Mobile internet services UK 140 42 (93)
Other businesses
UK 139 37 (13)
Central overheads and
adjustments - 3 (96)
Inter-segment eliminations (121) - -
- ------------------------- ------ ------- --------
5,646 1,135 159
Discontinued operation
Mobile telecommunications
The Netherlands 48 1 (1)
- ------------------------- ------ ------- --------
Group total 5,694 1,136 158
- ------------------------- ------ ------- --------
1In the years ended 31 March 2005 and 2004, depreciation includes a charge of
GBP6 million and GBP2 million respectively included within exceptional operating
cost as disclosed in note 4.
2. Segmental analysis continued
The segmental disclosures in respect of balance sheet items are presented below:
Capital Tangible fixed Net operating assets/
expenditure1 assets (liabilities) 2
GBPm GBPm GBPm
- ---------------------- -------- -------- --------
Year ended 31 March 2005
Continuing operations
Mobile telecommunications
UK 637 2,210 5,744
Germany 388 1,229 3,203
Ireland 100 273 1,078
- ---------------------- -------- -------- --------
Total mobile
telecommunications 1,125 3,712 10,025
Other businesses UK 228 735 656
Central assets and
adjustments 3 2 (190)
- ---------------------- -------- -------- --------
Group total 1,356 4,449 10,491
- ---------------------- -------- -------- --------
Year ended 31 March 2004
Continuing operations
Mobile telecommunications
UK 502 2,118 5,945
Germany 308 1,051 3,160
Ireland 52 233 1,086
- ---------------------- -------- -------- --------
Total mobile
telecommunications 862 3,402 10,191
Mobile internet services UK 12 22 13
Other businesses UK 252 568 450
Central assets and
adjustments 2 4 (62)
- ---------------------- -------- -------- --------
1,128 3,996 10,592
Discontinued operation
Mobile telecommunications
The Netherlands 5 - -
- ---------------------- -------- -------- --------
Group total 1,133 3,996 10,592
- ---------------------- -------- -------- --------
1Capital expenditure comprises tangible fixed asset additions.
2Net operating assets/(liabilities) comprise tangible and intangible fixed
assets (including goodwill), stocks, debtors, creditors (excluding debt) falling
due within and after one year and provisions (excluding deferred tax).
Definition of segments
In the year ended 31 March 2004, the Group undertook a restructuring of its
central functions and rationalised its property portfolio. In the year ended 31
March 2004, the activities of O2 Online and Products O2, which were previously
reported as the "mobile internet services" segment, are reported within the
segments in which they now reside. As the information is not readily available,
the comparatives have not been restated and these businesses are reported
separately in line with day-to-day managerial and budgetary control at that
time.
Joint ventures and associates
Total turnover for the year ended 31 March 2005 was GBP6,890 million (2004:
GBP5,859 million) and included GBP196 million (2004: GBP165 million)
representing the Group's share of the turnover of its joint ventures and
associates in the UK mobile telecommunications business and GBP11 million (2004:
nil) representing the Group's share of its joint ventures in the German mobile
telecommunications businesses. The Group's share of the operating loss of its
joint ventures and associates was GBP3 million (2004: nil). The Group's interest
in the aggregate liabilities of its joint ventures and associates is GBP1
million (2004: assets of GBP5 million).
3. Net operating expenses
Continuing Discontinued Total
operations operation
GBPm GBPm GBPm
- --------------------------- --------- --------- ----------
Year ended 31 March 2005
Group turnover 6,683 - 6,683
Costs of sales (3,799) - (3,799)
- --------------------------- --------- --------- ----------
Gross profit 2,884 - 2,884
Administrative expenses (2,543) - (2,543)
Administrative expenses before
exceptional items (2,498) - (2,498)
Exceptional items (45) - (45)
- --------------------------- --------- --------- ----------
Group operating profit 341 - 341
- --------------------------- --------- --------- ----------
Year ended 31 March 2004
Group turnover 5,646 48 5,694
Costs of sales (3,291) (23) (3,314)
- --------------------------- --------- --------- ----------
Gross profit 2,355 25 2,380
Administrative expenses (2,196) (26) (2,222)
Administrative expenses before
exceptional items (2,121) (26) (2,147)
Exceptional items (75) - (75)
- --------------------------- --------- --------- ----------
Group operating profit/(loss) 159 (10) 158
- --------------------------- --------- --------- ----------
Net operating expenses comprise cost of sales and administrative expenses
(including operating exceptional items) and total GBP6,342 million in 2005
(2004:GBP5,536 million).
4. Exceptional items
In the year ended 31 March 2005, the Group incurred an operating exceptional
charge of GBP45 million and a non-operating exceptional charge of GBP20 million.
The operating charge related to the redeployment of resources within O2 UK into
customer facing areas and away from non-customer facing areas. This is in line
with O2 UK's strategy of delivering an enhanced customer experience and
increasing customer loyalty. The charge comprises redundancy and property costs.
No cash was expended in the year ended 31 March 2005. The non-operating charge
related to the costs of the capital reorganisation. This charge gave rise to a
cash outflow of GBP15 million during the year.
In the year ended 31 March 2004, the Group incurred an exceptional charge of
GBP75 million in respect of the restructuring of central functions and the
resultant rationalisation of the Group's property portfolio. This arose on the
transfer of O2 Online, Products O2 and certain other central functions to the
Group's operating businesses in the UK, Germany and Ireland and includes
provisions relating to redundancies and the termination of property leases. This
charge gave rise to a cash outflow of GBP17 million in that year.
5. Tax on profit on ordinary activities
2005 2004
GBPm GBPm
- --------------------------------- -------- ----------
Current tax
Non-United Kingdom tax (14) (13)
Adjustments in respect of prior periods 1 1
Tax on Group's share of results of joint ventures and (1) (1)
associates -------- ----------
- ---------------------------------
Total current tax charge (14) (13)
- --------------------------------- -------- ----------
Deferred tax
Origination and reversal of timing differences 1 86
Adjustments in respect of prior periods 5 (2)
- --------------------------------- -------- ----------
Total deferred tax credit 6 84
- --------------------------------- -------- ----------
Tax (charge)/credit on profit on ordinary activities (8) 71
- --------------------------------- -------- ----------
6. Dividends
- --------------------------------- -------- ----------
pence 2005
per share GBPm
- --------------------------------- -------- ----------
Proposed final 2.25 196
- --------------------------------- -------- ----------
The final dividend of 2.25 pence per share will be paid on 26 August 2005 to
shareholders on the register at the close of business on 5 August 2005.
7. Earnings per share
Earnings per share has been calculated by dividing the profit for the year by
the weighted average number of ordinary shares in issue during that year, as
follows:
2005 2004
- --------------------------------- --------- ---------
Profit for the financial year (GBP million) 301 166
- --------------------------------- --------- ---------
Weighted average ordinary share capital (number of shares,
millions) 8,681 8,671
Dilutive potential ordinary shares (number of shares,
millions) 120 44
- --------------------------------- --------- ---------
Diluted weighted average ordinary share capital (number of
shares, millions) 8,801 8,715
- --------------------------------- --------- ---------
Basic earnings per share (pence) 3.5 1.9
- --------------------------------- --------- ---------
Diluted earnings per share (pence) 3.4 1.9
- --------------------------------- --------- ---------
Underlying earnings per share has been calculated by dividing the underlying
profit for the year by the weighted average number of ordinary shares in issue
during that year. Underlying profit is calculated as follows:
- --------------------------------- --------- ---------
2005 2004
GBPm GBPm
- --------------------------------- --------- ---------
Profit on ordinary activities after taxation 301 166
Goodwill amortisation 200 201
UMTS licences amortisation 169 -
Operating exceptional items 45 75
Non-operating exceptional items 20 5
- --------------------------------- --------- ---------
Underlying earnings 735 447
- --------------------------------- --------- ---------
Underlying earnings per share (pence) 8.5 5.2
- --------------------------------- --------- ---------
In accordance with the principles of merger accounting as applicable to group
reorganisations described in note 1, earnings per share have been calculated as
if O2 plc had in issue the share capital of mmO2 plc prior to 14 March 2005.
8. Analysis of net debt
At 1 April Cash Other non-cash At 31 March
2004 flow movements 2005
GBPm GBPm GBPm GBPm
- --------------------- -------- --------- --------- ---------
Cash at bank and in hand 23 18 - 41
Current asset investments 993 302 (10) 1,285
- --------------------- -------- --------- --------- ---------
1,016 320 (10) 1,326
Debt due after one year (1,043) - (37) (1,080)
Debt due within one year (14) 8 (10) (16)
Obligations under finance
leases and hire purchase
contracts (325) 13 4 (308)
- --------------------- -------- --------- --------- ---------
Group net debt (366) 341 (53) (78)
- --------------------- -------- --------- --------- ---------
9. Reconciliation of net cash flow to movement in net debt
2005 2004
GBPm GBPm
- ------------------------------------ ------ -------
Increase/(decrease) in cash in the year 18 (45)
Management of liquid resources 302 191
Cash outflow from decrease in net debt 21 53
- ------------------------------------ ------ -------
Decrease in net debt resulting from cash flows 341 199
Other non-cash movements (53) (16)
- ------------------------------------ ------ -------
Decrease in net debt in the year 288 183
Net debt at beginning of year (366) (549)
- ------------------------------------ ------ -------
Net debt at end of year (78) (366)
- ------------------------------------ ------ -------
10. Reconciliation of movements in shareholders' funds
Called up Share Other Profit Total
share premium reserves and loss shareholders'
capital account funds
GBPm GBPm GBPm GBPm GBPm
- -------------------- ------- ------- ------- ------- -------
At 1 April 2003 9 - 12,087 (2,030) 10,066
Prior period adjustment
relating to UITF 38 - - - (3) (3)
- -------------------- ------- ------- ------- ------- -------
At 1 April 2003 (as restated) 9 - 12,087 (2,033) 10,063
Retained profit for the year - - - 166 166
Shares issued on share scheme
exercise - 3 - - 3
Share scheme charge for the year - - - 6 6
Transfer from profit and loss
account - - (1,013) 1,013 -
Currency translation differences - - - (144) (144)
- -------------------- ------- ------- ------- ------- -------
At 31 March 2004 (as restated) 9 3 11,074 (992) 10,094
Profit for the financial year - - - 301 301
Dividends - - - (196) (196)
Purchase of mmO2 plc ordinary
shares - - - (1) (1)
Shares issued on share scheme
exercise - 24 - - 24
Share schemes charge for the year - - - 6 6
Issue of shares in exchange for
shares in mmO2 plc1 6,714 (26) (7,062) (15) (389)
Placing of O2 plc shares on
17 March 20051 - 374 - - 374
Court approved capital
reduction1 (6,714) - - 6,714 -
Transfer from profit and loss
account - - (1,099) 1,099 -
Currency translation differences - - - 68 68
- -------------------- ------- ------- ------- ------- -------
At 31 March 2005 9 375 2,913 6,984 10,281
- -------------------- ------- ------- ------- ------- -------
1 Transaction arising during the capital reorganisation described in note 1.
10. Reconciliation of movements in shareholders' funds continued
Hedging strategy
The overseas businesses of the Group, O2 Germany and O2 Ireland, conduct
substantially all their business in their domestic currency, Euros. As
anticipated in the 2004 Annual Report and Accounts, the cash flows of the
overseas businesses and the improved visibility of the future financial profile
of the Group has resulted in a decision to increase the level of hedging of our
overseas assets. This was achieved through the redenomination of the Group's
existing Euro borrowings and the use of EUR1,800 million forward foreign
exchange contracts, which commenced in June 2004.
The redenomination of existing debt realised a one-off cash inflow of GBP22
million which, when combined with the revaluation of the relevant Euro
denominated debt at that time, had no material impact on net debt. The ongoing
effect of the hedge implementation is that the Euro borrowings totalling
EUR1,000 million, which are a component of net debt, are exposed to foreign
exchange rate fluctuations and the net interest charge is impacted by the
forward foreign exchange contracts which has reduced the current year interest
charge by GBP24 million. Additionally, the foreign exchange gains or losses,
arising on the retranslation of the Euro borrowings and on the forward foreign
exchange contracts, are recognised in the statement of total recognised gains
and losses as they hedge certain assets of the overseas businesses.
Full disclosure is provided in the Group's 2005 Annual Report and Financial
Statements in accordance with FRS 13: "Derivatives and other financial
instruments: disclosures".
The financial information contained in this preliminary announcement does not
constitute the Group's statutory financial statements for the years ended 31
March 2005 or 31 March 2004. The financial information is derived from the
audited statutory consolidated financial statements of the Group for the year
ended 31 March 2005 which were approved by the Board of Directors on 17 May
2005. The auditors have reported on those financial statements; their report was
unqualified and did not contain a statement under either section 237(2) or (3)
of the Companies Act 1985. The 2005 financial statements will be delivered to
the Registrar of Companies following the Company's Annual General Meeting.
1. Customer numbers
Customers Customers Customers Customers Net Customers
at at at at additions at
31 March 30 June 30 September 31 December during 31 March
2004 2004 2004 2004 period 2005
000's 000's 000's 000's 000's 000's
- ----------- -------- -------- -------- -------- -------- --------
O2 UK
Pre-pay 8,687 8,799 9,003 9,341 131 9,472
Post-pay 4,577 4,726 4,853 4,875 37 4,912
- ----------- -------- -------- -------- -------- -------- --------
Total 13,264 13,525 13,856 14,216 168 14,384
- ----------- -------- -------- -------- -------- -------- --------
O2 Germany
Pre-pay 2,516 2,643 2,808 3,253 367 3,620
Post-pay 3,466 3,675 3,861 4,145 211 4,356
- ----------- -------- -------- -------- -------- -------- --------
Total 5,982 6,318 6,669 7,398 578 7,976
- ----------- -------- -------- -------- -------- -------- --------
O2 Ireland
Pre-pay 1,010 1,007 1,032 1,118 12 1,130
Post-pay 381 388 393 398 5 403
- ----------- -------- -------- -------- -------- -------- --------
Total 1,391 1,395 1,425 1,516 17 1,533
- ----------- -------- -------- -------- -------- -------- --------
Manx
Pre-pay 42 44 45 41 0 41
Post-pay 21 21 22 22 0 22
- ----------- -------- -------- -------- -------- -------- --------
Total 63 65 67 63 0 63
- ----------- -------- -------- -------- -------- -------- --------
O2 Group
Pre-pay 12,255 12,493 12,888 13,753 510 14,263
Post-pay 8,445 8,810 9,129 9,440 253 9,693
- ----------- -------- -------- -------- -------- -------- --------
Total 20,700 21,303 22,017 23,193 763 23,956
- ----------- -------- -------- -------- -------- -------- --------
Pre-pay
percentage 59.2% 58.6% 58.5% 59.3% 66.8% 59.5%
Post-pay
percentage 40.8% 41.4% 41.5% 40.7% 33.2% 40.5%
- ----------- -------- -------- -------- -------- -------- --------
2. Non-SMS data users (90 day active)
3 months ended: 30 30 31 31
June September December March
2004 2004 2004 2005
000's 000's 000's 000's
- ---------------------- -------- -------- -------- --------
O2 UK 3,516 3,758 4,901 5,728
O2 Germany 1,314 1,487 1,753 1,906
O2 Ireland 286 333 411 516
- ---------------------- -------- -------- -------- --------
O2 Group 5,116 5,578 7,065 8,150
- ---------------------- -------- -------- -------- --------
% total
customer base 24.0% 25.3% 30.5% 34.0%
- ---------------------- -------- -------- -------- --------
3. Average revenue per user(1) (ARPU) - GBP
3 months ended: 31 March 30 June 30 September 31 December 31 March
2004 2004 2004 2004 2005
GBP GBP GBP GBP GBP
- ---------------- -------- -------- -------- -------- --------
O2 UK (2)
12 month rolling
Pre-pay 141 143 145 145 143
Post-pay 525 537 541 545 542
Blended 272 279 282 283 281
Monthly average
Pre-pay 12 12 13 12 11
Post-pay 45 46 46 44 44
Blended 23 24 24 23 23
- ---------------- -------- -------- -------- -------- --------
O2 Germany
12 month rolling
Pre-pay 96 95 94 94 95
Post-pay 375 368 366 366 362
Blended 254 252 251 251 248
Monthly average
Pre-pay 8 8 8 8 8
Post-pay 30 30 31 31 29
Blended 20 20 21 21 20
- ---------------- -------- -------- -------- -------- --------
O2 Ireland
12 month rolling
Pre-pay 248 247 244 243 244
Post-pay 736 721 731 750 762
Blended 388 381 380 382 385
Monthly average
Pre-pay 20 20 21 21 20
Post-pay 61 59 66 66 63
Blended 32 31 33 33 31
- ---------------- -------- -------- -------- -------- --------
(1) ARPU in all businesses includes revenue from inbound roaming.
(2) O2 UK ARPU includes Mobile Number Portability (MNP) revenue.
4. Data ARPU (blended 12 month rolling) - GBP
31 March 30 June 30 September 31 December 31 March
2004 2004 2004 2004 2005
GBP GBP GBP GBP GBP
- ---------------- -------- -------- -------- -------- --------
O2 UK 55 59 62 65 68
O2 Germany 49 51 52 53 54
O2 Ireland 75 81 81 81 82
- ---------------- -------- -------- -------- -------- --------
5. Average revenue per user(1) (ARPU) - EURuro
3 months ended: 31 30 30 31 31
March June September December March
2004 2004 2004 2004 2005
EUR EUR EUR EUR EUR
- ---------------- -------- -------- -------- -------- -------
O2 Germany
12 month rolling
Pre-pay 138 138 138 138 140
Post-pay 540 537 540 539 531
Blended 366 367 371 370 363
Monthly average
Pre-pay 11 11 11 12 12
Post-pay 44 45 46 45 41
Blended 30 31 32 31 28
- ---------------- -------- -------- -------- -------- -------
O2 Ireland
12 month rolling
Pre-pay 357 361 360 359 358
Post-pay 1,061 1,053 1,078 1,106 1,118
Blended 559 556 560 564 565
Monthly average
Pre-pay 29 30 31 30 29
Post-pay 89 89 98 94 91
Blended 45 46 49 48 45
- ---------------- -------- -------- -------- -------- -------
Euro rates
Quarterly 1.4718 1.5007 1.4880 1.4384 1.4427
Annually 1.4405 1.4594 1.4736 1.4747 1.4669
- ---------------- -------- -------- -------- -------- -------
(1) ARPU in all businesses includes revenue from inbound roaming.
6. Data ARPU (blended 12 month rolling) - EURuro
31 March 30 June 30 September 31 December 31 March
2004 2004 2004 2004 2005
EUR EUR EUR EUR EUR
- ---------------- -------- -------- ------- ------- --------
O2 Germany 71 74 76 78 79
O2 Ireland 110 118 119 120 120
- ---------------- -------- -------- ------- ------- --------
7. Subscriber Acquisition Costs (SAC)
12 months ended: 31 March 31 March 31 March 31 March
2002 2003 2004 2005
GBP GBP GBP GBP
- ---------------- --------- --------- --------- ---------
O2 UK
Pre-pay 53 25 16 19
Post-pay 180 177 160 172
Blended 90 79 64 66
- ---------------- --------- --------- --------- ---------
O2 Germany - GBP
Pre-pay 44 16 17 22
Post-pay 160 161 175 190
Blended 95 107 119 110
O2 Germany - EURuro
Pre-pay 71 25 24 32
Post-pay 259 251 252 278
Blended 154 166 172 161
- ---------------- --------- --------- --------- ---------
8. Subscriber churn
12 months ended: 31 March 31 March 31 March 31 March
2002 2003 2004 2005
% % % %
- ---------------- --------- --------- --------- ---------
O2 UK
Pre-pay 32 31 33 37
Post-pay 31 28 26 31
Blended 32 30 30 35
- ---------------- --------- --------- --------- ---------
O2 Germany
Pre-pay 35 16 17 16
Post-pay 21 16 17 15
Blended 28 16 17 16
- ---------------- --------- --------- --------- ---------
9. Voice minutes of use (mou) - blended monthly average
- ---------------- -------- -------- -------- -------- --------
12 months ended: 31 30 September 31 30 31
March 2003 March September March
2003 2004 2004 2005
- ---------------- -------- -------- -------- -------- --------
O2 UK 107 115 123 131 137
O2 Germany 109 113 118 120 118
O2 Ireland 188 192 197 203 209
- ---------------- -------- -------- -------- -------- --------
(1) Includes total incoming and billable outgoing minutes.
10. SMS messages
3 months ended: 31 March 30 June 30 September 31 December 31 March
2004 2004 2004 2004 2005
million million million million million
- ---------------- -------- -------- -------- -------- -------
O2 UK 2,309 2,348 2,470 2,834 3,097
O2 Germany 507 532 556 628 674
O2 Ireland 339 321 323 343 363
Manx 19 19 10 11 11
- ---------------- -------- -------- -------- -------- -------
O2 Group 3,174 3,220 3,359 3,816 4,145
- ---------------- -------- -------- -------- -------- -------
11. Data as percentage of service revenues
3 months ended: 31 March 30 June 30 September 31 December 31 March
2004 2004 2004 2004 2005
% % % % %
- ---------------- -------- -------- -------- -------- -------
O2 UK 22.3 21.3 23.0 25.0 27.7
O2 Germany 20.7 20.9 20.4 22.3 23.2
O2 Ireland 23.6 21.8 19.0 20.9 23.2
- ---------------- -------- -------- -------- -------- -------
O2 Group 22.0 21.2 21.9 23.9 26.0
- ---------------- -------- -------- -------- -------- -------
12 months ended: 31 March 30 June 30 September 31 December 31 March
2003 2004 2004 2004 2005
% % % % %
- ---------------- -------- -------- -------- -------- -------
O2 Group 20.1 20.9 21.5 22.3 23.3
- ---------------- -------- -------- -------- -------- -------
12. Non-SMS data as percentage of service revenues
3 months ended: 30 June 30 September 31 December 31 March
2004 2004 2004 2005
% % % %
- ---------------------- -------- -------- -------- --------
O2 UK 2.0 2.4 2.8 3.7
O2 Germany 2.8 3.1 3.8 4.4
O2 Ireland 1.2 1.4 1.6 1.9
- ---------------------- -------- -------- -------- --------
O2 Group 2.1 2.5 3.0 3.7
- ---------------------- -------- -------- -------- --------
O2 plc contacts:
Richard Poston David Boyd
Director, Corporate Affairs Head of Investor Relations
O2 plc O2 plc
richard.poston@o2.com david.boyd@o2.com
t: +44 (0)1753 628039 t: +44 (0)1753 628230
David Nicholas John Crosse
Director of Communications Investor Relations Manager
O2 plc O2 plc
david.nicholas@o2.com john.crosse@o2.com
t: +44 (0) 771 575 9176 t: +44 (0)1753 628198
Simon Gordon
Head of Media Relations
O2 plc
simon.gordon@o2.com
t: +44 (0)771 007 0698
O2 press office: 01753 628402
All O2 Group news releases can be accessed at our web site: www.o2.com
(end)
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
O2 plc
Date: 18 May 2005 By:___/s/ Robert Harwood___
ROBERT HARWOOD
Assistant Secretary