4th Quarter & Final Results
British Telecommunications PLC
18 May 2000
PRELIMINARY RESULTS - YEAR TO MARCH 31, 2000
BT's results for the year ended March 31, 2000 are
summarised in the table below.
Sir Iain Vallance, Chairman of BT, said
'I am pleased that we have grown total turnover by
20 per cent whilst maintaining EBITDA in the year. This
is a good achievement against the background of
considerable change within the industry, the cost of
building new businesses and intense competitive
pressures. We remain focused on creating value for
shareholders.
Following a year of unprecedented turnover growth,
BT enters a new financial year having acquired a third
generation mobile licence in the UK, with an unparalleled
network of ventures worldwide, and ready to implement an
innovative and unique group structure which positions us
ahead of the next wave in communications.
The Board has recommended a final dividend of
13.2 pence per share, making a 7.4 per cent increase in
the total for the year.'
--------------------------------------------------------------
FOURTH QUARTER AND YEAR TO MARCH 31, 2000
Fourth Quarter Year
----------------- ------------------
2000 1999 2000 1999
£m £m £m £m
Total turnover 6,002 4,897 21,903 18,223
EBITDA, pre-
exceptional items 1,612 1,708 6,502 6,453
Total operating
profit 733 886 3,198 3,474
Profit before good-
will amortisation,
exceptional items
and taxation 742 871 3,100 3,274
Profit on sale of
fixed asset
investments 36 - 126 1,107
Profit before
taxation 629 836 2,942 4,295
Profit after
taxation 437 577 2,045 3,002
Earnings per share 6.8p 8.8p 31.7p 46.3p
Earnings per share
before exceptional
items and goodwill
amortisation 8.4p 9.2p 34.2p 35.0p
Dividends, net 21.9p 20.4p
-------------------------------------------------------------
Results
-------
Total turnover, including BT's proportionate share
of its ventures' turnover, grew by 20.2 per cent to
£21,903 million for the year. This growth was driven by
rapidly expanding internet and mobile phone usage and the
interests in ventures, recently acquired by BT. Earnings
per share for the year were 31.7 pence compared with
46.3 pence in the prior year, which included the
£1,133 million (12.7 pence per share) exceptional gain on
sale of BT's interest in MCI Communications Corporation
in September 1998. Before exceptional items and goodwill
amortisation, earnings were 34.2 pence for the year, a
decrease of 2.3 per cent on the prior year. Profit
before exceptional items, goodwill amortisation and tax
was £3,100 million for the year, a reduction of
5.3 per cent. Earnings before interest, tax,
depreciation and amortisation (EBITDA) before exceptional
items increased by 0.8 per cent to £6,502 million in the
year.
Total turnover grew by 22.6 per cent in the fourth
quarter. Earnings per share were 6.8 pence. Before
goodwill amortisation and exceptional items, earnings
were 8.4 pence, a reduction of 8.6 per cent on the
comparable period in 1999. EBITDA before exceptional
items declined by 5.6 per cent.
The reduction in earnings in the fourth quarter was
partly caused by the rise in the group's interest
expenditure as a result of the BT Cellnet minority
acquisition in November 1999 and significant investments
in Japan, Canada and the USA in August 1999. Additional
pressure on profitability over the year has arisen from
reduced UK call prices, increased lower margin wholesale
business with other operators and the cost of developing
new products.
Dividends
---------
The Board recommends a final dividend of 13.2 pence
per share to shareholders, giving a total dividend of
21.9 pence per share for the year. The total dividend
for the year represents a 7.4 per cent increase on last
year.
An interim dividend of 8.7 pence per share was paid
in February 2000. The proposed final dividend, if
approved at the annual general meeting, will be paid on
September 18, 2000 to those shareholders on the register
on August 18, 2000. The last date for lodging mandates
for the BT dividend investment plan is also
August 18, 2000.
Restructuring
-------------
In April 2000, we announced an innovative
restructuring whereby the group and its ventures would be
managed in four global businesses and two UK operating
divisions, together with the Concert global venture. The
four global businesses are BT Wireless covering the
group's global interests in mobile communications, Ignite
responsible for worldwide broadband and internet
networks, including ADSL in the UK, and meeting the needs
of business customers, BTopenworld covering the consumer
market for internet products around the world, and Yell
responsible for the classified directories and associated
e-commerce businesses. The two UK operating divisions
will be a wholesale division covering the UK fixed
network and a retail division responsible for marketing
UK fixed network products.
It is intended that financial information on the
four global businesses will be published once they are
established from July 2000. Illustrative financial
information for the years ended March 31, 1999 and 2000
is provided on page 23. The discussion of our results
which follows centres around the consideration of BT's
turnover and costs as a whole.
BT has stated that it intends to list Yell by the
end of the year.
Concert
-------
On January 5, 2000, Concert, the global
communications joint venture between BT and AT&T, began
operations as the leading global telecommunications
company serving multinational business customers,
international carriers and internet service providers
worldwide. Concurrently, BT transferred the majority of
its cross-border international network assets, its
international traffic, its business with selected
multinational customers and its international products
for business customers together with BT's existing
Concert Communications business into the global venture.
As a consequence of the activities transferred into
the Concert global venture, BT's group turnover has been
reduced overall by approximately £170 million in the
fourth quarter. Total turnover, including BT's
proportionate share of its ventures, has however,
increased by around £235 million in the quarter from the
establishment of Concert, reflecting the greater level of
AT&T's business introduced into the global venture.
After taking into account our share of Concert's
operating profit, total operating profit has not been
significantly affected by the establishment of Concert.
Turnover
--------
Total turnover, including BT's proportionate share
of its ventures' turnover, increased by 20.2 per cent to
£21,903 million for the year ended March 31, 2000.
Group turnover grew by 10.4 per cent to
£18,715 million in the year ended March 31, 2000.
Mobile communications represented nearly half of this
growth. Price reductions in the UK cost over
£550 million, about 3 per cent of turnover.
Mobile communications
---------------------
The group's turnover from mobile communications in
the UK was up by 55 per cent to £2,170 million in the
year, including the contribution from Lumina (formerly
Martin Dawes) and DX Communications which were acquired
in 1999. BT Cellnet's customer base grew by 64 per cent
to 7.4 million, of which over half are on post-pay
contracts. Excluding the effect of acquisitions, mobile
communications turnover in the UK increased by
31 per cent, reflecting the explosive growth in the
customer base offset in part by the impact of price
reductions, the greater proportion of pre-pay phones, and
intense competition.
Interconnect services
---------------------
Interconnect services grew by 39 per cent to
£1,974 million in the year. These receipts are mainly
from UK operators which use the BT network for transit
and call termination. Other turnover includes revenue
from international operators for incoming calls until
Concert was established in January 2000 and receipts from
Concert thereafter. Also included is BT's turnover for
providing fixed links to other UK operators. The growth
in turnover arises principally from the growth in
internet traffic and mobile calls.
Fixed network
-------------
Turnover from BT's fixed exchange lines increased by
5.2 per cent to £3,526 million in the year. The number
of ISDN business lines continued to grow strongly,
bringing the total business connections to 8.5 million an
increase of 5.9 per cent in the year. Residential lines
were virtually unchanged at 20 million with the demand
for second lines and win backs offsetting those lost to
the competition.
Fixed network call turnover, which comprises UK
domestic and international calls made from BT's customer
lines, declined by 2.0 per cent to £5,908 million. Price
reductions totalled over £500 million, principally due to
the 25 per cent cut in fixed to mobile call prices from
the end of April 1999 in response to the Competition
Commission enquiry. National call rates were also cut
and discounts improved.
These price reductions, equivalent to nearly
9 per cent of call turnover, exceeded the benefit from a
call volume growth rate of 7 per cent per annum. Fixed
to mobile and internet related call growth has been high.
The decline in fixed network call turnover of
6.8 per cent in the fourth quarter was due to the impact
of enhanced call discounts in the quarter as well as the
transfer of some of BT's larger customers to the Concert
global venture.
Yellow Pages
------------
Turnover from Yellow Pages and other directories'
grew by 31 per cent in the year to £642 million,
including the contribution from the Yellow Book USA
acquisition in August 1999.
Other sales and services
------------------------
Turnover for the year from BT's other sales and
services grew by 11.3 per cent to £2,513 million. The
decline of 1.1 per cent in the fourth quarter was due to
the impact of Concert Communications being transferred
into the Concert global venture. Syncordia Solutions and
Syntegra's combined third party turnover grew by
23 per cent in the year. Advanced services grew by
15.9 per cent and Broadcast Services rose by
9.5 per cent.
Associates and joint ventures turnover
--------------------------------------
BT's proportionate share of its ventures' turnover
grew from £1,270 million to £3,364 million. The ventures
principally contributing to this turnover are Cegetel in
France, the Concert global venture, Japan Telecom, Viag
Interkom in Germany, Airtel in Spain and LG Telecom in
the Republic of Korea. The turnover for the year ended
March 31, 2000 includes £1,228 million from new ventures
acquired or established in the year.
BT's 26 per cent share of Cegetel's turnover grew by
over 25 per cent to £727 million. Cegetel's mobile
operator, SFR, had a customer base of 7.9 million at
March 31, 2000. The Concert global venture was
established on January 5, 2000 and BT's 50 per cent share
of its turnover for the quarter was £583 million.
Elimination of trading between BT and Concert amounted to
£176 million. Concert now handles all BT and AT&T's
international call traffic, selected multinational
customers in certain industries as well as offering
communication services to corporate customers.
BT and AT&T acquired a joint 30 per cent interest in
Japan Telecom in August 1999. Currently Japan Telecom
primarily offers data services to its customers and is
increasing its involvement in the mobile communications
markets. BT's 45 per cent share of Viag Interkom's
turnover more than trebled in the year to £296 million.
Viag Interkom had more than 1.3 million mobile phone
subscribers at March 31, 2000.
BT's 18 per cent of Airtel's turnover was
£250 million in the year, an increase of 59 per cent.
Airtel has over 5.6 million mobile users. BT's
24 per cent of LG Telecom's turnover was £200 million for
the year, which is growing by over 50 per cent per annum.
Other operating income
----------------------
As part of the arrangements for establishing
Concert, BT has been seconding staff and providing some
administrative and other services from its launch in
early January 2000. The income from this totalled
£79 million to March 31, 2000. Concert will be taking
over many of these services during the course of 2000.
Operating costs
---------------
Group operating costs increased by 15.4 per cent to
£15,359 million in the year ended March 31, 2000. These
higher costs reflect the greater level of interconnect
with other operators, increased mobile communication
demand and the cost of developing BT's networks for
broadband capabilities.
Payments to other operators increased by over
45 per cent. The increase was principally due to the
growth in internet traffic and in mobile calls.
Staff costs, net of own work capitalised, increased
by 10 per cent. The number of people employed in the BT
group increased by 12,100 in the year to 136,800 at
March 31, 2000. This net increase included around 5,000
employed outside the UK mainly through acquisitions, some
2,500 former agency workers now employed directly by BT,
and around 4,500 people in the UK to meet increased
demand and to roll out the ADSL broadband product.
Other operating costs grew by 9.4 per cent mainly as
a result of increased mobile communications costs to meet
the demand by new customers and to service the growing
customer base, and the costs of maintaining the networks'
quality of service.
Costs for the fourth quarter include £47 million for
the exit of BT Cellnet's analogue network. All remaining
customers on the network will be invited to move to BT
Cellnet's GSM digital network.
Associates and joint ventures
-----------------------------
The group's proportionate share of its ventures' net
operating losses reduced by £9 million to £316 million in
the year, prior to goodwill amortisation of £84 million.
This improvement is, in part, due to a number of our
ventures now moving into profit. BT's share of Viag
Interkom's losses rose to £240 million in accordance with
its plans for developing its fixed and mobile phone
business in Germany. British Interactive Broadcasting's
new Open digital TV service in the UK was launched in
Autumn 1999 and BIB's start up costs caused BT's share of
its losses to increase to £89 million in the year.
Losses continue to be incurred by Telfort in the
Netherlands. The Concert global venture, Japan Telecom,
Airtel, Cegetel and Maxis Communications in Malaysia are
among BT's ventures contributing positively in the year
to the group's total operating profit before goodwill
amortisation.
Interest and taxation
---------------------
The net interest charge for the year increased by
£96 million to £382 million due to an increase in BT's
share of its ventures' interest costs and as a
consequence of increased debt to fund the BT Cellnet
minority acquisition in November 1999 and the group's
investments in Japan, Canada and the USA in August 1999.
BT's effective tax rate for the year was
30.5 per cent of profit.
Acquisitions
------------
During the year ended March 31, 2000, BT has
completed a number of acquisitions of businesses or
interests in ventures, located both within and outside
the UK.
As previously reported, in November 1999 BT acquired
the 40 per cent minority interest in BT Cellnet held by
Securicor. The total cost of this acquisition was
£3,173 million. In December 1999, BT Cellnet acquired
the outstanding minority interest in Martin Dawes
Telecommunications following its original acquisition in
March 1999.
On March 30, 2000, BT obtained control of the Esat
Telecom Group for approximately £1.5 billion. In
addition, BT has assumed about £550 million of debt.
Esat operates a fixed line telecommunications network in
Ireland. We have also gained control over Esat Digifone,
Ireland's second mobile operator, through Esat's
49.5 per cent interest in the company and an additional
1.0 per cent interest acquired by the BT group in January
2000.
On January 13, 2000 BT agreed to grant Telenor, the
owner of the remaining 49.5 per cent interest in Esat
Digifone, the right to exchange its interest in Esat
Digifone, subject to certain conditions, for a
33 per cent interest in Esat. If this right is
exercised, Telenor would have the additional right to
purchase, from BT, shares in Esat to give Telenor a 49.99
per cent interest in Esat for US$624 million plus
interest. In the event Telenor does not exercise its
right to exchange its interest in Esat Digifone, Telenor
has agreed to sell this interest to Esat for
approximately US$1,238 million.
As previously reported, in August 1999, BT jointly
acquired with AT&T a 30 per cent interest in Japan
Telecom for £1.25 billion. BT has an economic interest
of 20 per cent. Also in August 1999, BT sold its
Japanese subsidiary to Japan Telecom at a profit.
Additionally in August 1999, BT acquired an
effective 9 per cent economic interest in AT&T Canada
Corp and, in conjunction with AT&T, BT jointly purchased
33 per cent of Rogers Cantel Communications. Other
acquisitions in the first half of the financial year
included Yellow Book USA, Control Data Systems Inc,
DX Communications and Clear Communications.
During the year, BT has continued to share in
funding the development of its ventures, principally Viag
Interkom and Telfort, to a total of over £850 million.
Capital expenditure
-------------------
Capital expenditure on plant, equipment and property
totalled £3,680 million in the year, 12.6 per cent higher
than in the previous year. Work continues on enhancing
the fixed network to enable customers to benefit from the
new wave communications technologies, including ADSL. BT
Cellnet has continued enlarging its second generation
digital cellular networks and is investing in GPRS
technology prior to its launch of high speed mobile data
communications systems later in the year.
Cash flow and net debt
----------------------
Cash flow from operating activities amounted to
£5,849 million in the year. The net cash outflow on
acquisitions of £6,405 million consisted in the main of
the BT Cellnet minority acquisition and other interests
described above as well as further funding of Viag
Interkom and Telfort.
In May 1999, BT issued a £600 million Eurobond
repayable in 2028 at an interest rate of 5.75 per cent.
In August, a US $200 million Eurobond was repaid on
maturity and refinanced by a further 10 year
US $200 million Eurobond. In October 1999, BT issued a
US $1,000 million Eurobond repayable in 2004 at an
interest rate of 6.75 per cent. We have financed our
other requirements during the year by drawing on
commercial paper programmes under which approximately
£4.9 billion was outstanding at March 31, 2000.
Gearing at March 31, 2000 stood at 53 per cent with
net debt of £8,700 million.
UK third generation mobile licence
----------------------------------
On April 27, 2000, BT acquired a 3G licence in the
UK Government's auction, for £4.03 billion. BT paid the
fee in full on May 16, 2000 by drawing on its commercial
paper programme. This 20-year licence will enable BT,
coupled with its existing GSM spectrum, to deliver the
next generation mobile multimedia services to its
customers.
On May 9, 2000, we asked the High Court to rule on
the Government's ability and duty to ensure all licensees
pay for their 3G licences at the same time.
Telfort
-------
In April 2000, we announced that BT would be
acquiring for £1.2 billion, our partner's interest in
Telfort, the communications joint venture which BT
established in the Netherlands in 1997.
Year 2000
---------
The transition into the Year 2000 went smoothly with
no significant Year 2000 issues emerging. The estimated
cost of the Year 2000 exercise was about £300 million.
This includes approximately £30 million staff costs over
the New Year period, of which £20 million was incurred in
the fourth quarter.
Voluntary redundancy programme
------------------------------
As part of the continuing programme of reshaping the
group and as previously announced, we are implementing a
new voluntary redundancy programme covering approximately
10 per cent of managers and professionals, some 3,000
people, who we expect will leave over the next six
months. The total cost of this programme is estimated at
around £350 million, including the cost of incremental
pension benefits.
Pensions
--------
An actuarial valuation of the BT Pension Scheme is
being carried out at December 31, 1999. Preliminary
indications show that, using assumptions to be adopted
for calculating the company's pension cost in the year
ending March 31, 2001 and following financial years under
SSAP24, the assets of the scheme at December 31, 1999 of
over £29 billion, broadly match the actuarial liabilities
of members' past service to that date.
We expect the pension cost charged in the group's
accounts, which amounted to £167 million in the year
ended March 31, 2000, to approximately double in this
next financial year. This is, in part, because of the
general trend towards longer life expectancy. There
will also be a smaller amortisation in future of the
combined pension fund surplus and pension provision held
in the BT group balance sheet. We expect that the cash
contributions payable to the fund will rise in the next
financial year from the 9.5 per cent of pay that we have
paid in recent years to around 11.5 per cent.
Following a High Court judgement made in October
1999, the BTPS is liable to pay additional benefits to
certain former employees of the group who left under
voluntary redundancy terms. These were former employees,
in managerial grades, who had joined the group's business
prior to December 1, 1971. The value of the additional
benefits at March 31, 2000 is estimated at £300 million.
_________________________________________________________
The Annual Report and Form 20-F is expected to be
published on June 2, 2000.
The Annual General Meeting of British
Telecommunications plc will be held in Manchester on
July 12, 2000.
-------------------------------------------------------------
GROUP PROFIT AND LOSS ACCOUNT
for the three months and year ended March 31, 2000
--------------------------------------------------------------
Fourth quarter Year ended
ended March 31 March 31
2000 1999 2000 1999
Notes £m £m £m £m
-------------------------------------------------------------
TOTAL TURNOVER 2 6,002 4,897 21,903 18,223
Group's share of
associates and
joint ventures
turnover 2 (1,435) (418) (3,364) (1,270)
Trading between
group and principal
joint venture 176 - 176 -
----- ----- ------ ------
GROUP TURNOVER 4,743 4,479 18,715 16,953
Other operating
income 3 132 66 242 168
Operating costs (a) 4 (4,074) (3,552) (15,359) (13,305)
----- ----- ------ ------
Group operating profit 801 993 3,598 3,816
Group's share of
operating losses of
associates and
joint ventures 5 (68) (107) (400) (342)
----- ----- ----- -----
Total operating
profit 733 886 3,198 3,474
Profit on sale
of fixed asset
investments and
group
undertakings (b) 6 36 - 126 1,107
Interest receivable 50 57 193 165
Interest payable 8 (190) (107) (575) (451)
----- ----- ----- -----
PROFIT BEFORE TAXATION 629 836 2,942 4,295
-------- -------- -------- --------
PROFIT BEFORE GOODWILL
AMORTISATION,
EXCEPTIONAL ITEMS AND
TAXATION 9 742 871 3,100 3,274
-------- -------- -------- --------
TAXATION (192) (259) (897) (1,293)
----- ----- ----- -----
PROFIT AFTER TAXATION 437 577 2,045 3,002
Minority interests 6 (9) 10 (19)
----- ----- ----- -----
PROFIT ATTRIBUTABLE
TO SHAREHOLDERS 443 568 2,055 2,983
===== =====
DIVIDENDS 7 (1,426) (1,322)
----- -----
RETAINED PROFIT FOR
THE FINANCIAL YEAR 629 1,661
===== =====
EARNINGS PER SHARE 9
- BASIC 6.8p 8.8p 31.7p 46.3p
===== ===== ===== =====
- DILUTED 6.7p 8.6p 30.9p 45.3p
===== ===== ===== =====
EARNINGS PER SHARE
BEFORE GOODWILL
AMORTISATION AND
EXCEPTIONAL ITEMS 9
- BASIC 8.4p 9.2p 34.2p 35.0p
===== ===== ===== =====
- DILUTED 8.2p 9.0p 33.4p 34.2p
===== ===== ===== =====
--------------------------------------------------------------
(a) Including exceptional
costs (69) (27) (111) (69)
(b) Exceptional gain 36 - 126 1,107
--------------------------------------------------------------
GROUP CASH FLOW STATEMENT
for the three months and year ended March 31, 2000
-------------------------------------------------------------
Fourth quarter Year ended
ended March 31 March 31
2000 1999 2000 1999
£m £m £m £m
--------------------------------------------------------------
NET CASH INFLOW FROM
OPERATING ACTIVITIES
(note 10) 1,517 1,936 5,849 6,035
DIVIDENDS FROM ASSOCIATES
AND JOINT VENTURES 1 - 5 2
NET CASH INLOW (OUTFLOW)
FROM RETURNS ON
INVESTMENTS AND
SERVICING OF FINANCE 10 (74) (163) (328)
TAXATION PAID (898) (69) (1,311) (630)
Purchase of tangible -------- -------- -------- --------
fixed assets (920) (1,018) (3,568) (3,220)
Net sale (purchase)
of fixed asset
investments (165) 1 (327) 4,123
Sale of tangible fixed
assets 59 31 143 143
-------- -------- -------- -------
NET CASH INFLOW (OUTFLOW)
FOR CAPITAL EXPENDITURE
AND FINANCIAL INVESTMENT (1,026) (986) (3,752) 1,046
NET CASH INFLOW (OUTFLOW)
FOR ACQUISITIONS AND
DISPOSALS 33 (257) (6,405) (1,967)
EQUITY DIVIDENDS PAID (565) (486) (1,364) (1,186)
------ ------ ------ ------
CASH INFLOW (OUTFLOW)
BEFORE USE OF LIQUID
RESOURCES AND
FINANCING (928) 64 (7,141) 2,972
MANAGEMENT OF LIQUID
RESOURCES 463 392 1,236 (2,447)
Issue of ordinary share -------- -------- -------- -------
capital 3 7 127 161
Issue of shares to
minorities - - 432 13
New loans - 10 1,473 10
Repayment of loans (204) (306) (587) (457)
Net movement on short-
term borrowings 670 (168) 4,514 (185)
-------- -------- -------- --------
NET CASH INFLOW
(OUTFLOW) FROM
FINANCING 469 (457) 5,959 (458)
------ ------ ------ ------
INCREASE (DECREASE) IN
CASH 4 (1) 54 67
====== ====== ====== ======
DECREASE (INCREASE) IN
NET DEBT (note 13) (925) 71 (6,582) 3,146
====== ====== ====== ======
--------------------------------------------------------------
GROUP BALANCE SHEET at March 31, 2000
--------------------------------------------------------------
2000 1999
£m £m
--------------------------------------------------------------
FIXED ASSETS
Intangible assets (note 12) 5,777 742
Tangible assets 18,163 17,854
Investments 5,878 1,832
------ ------
29,818 20,428
CURRENT ASSETS -------- --------
Stocks 225 159
Debtors 5,241 3,995
Investments 2,051 3,278
Cash at bank and in hand 253 102
------ ------
7,770 7,534
------ ------
CREDITORS: AMOUNTS FALLING
DUE WITHIN ONE YEAR
Loans and other borrowings 5,650 947
Other creditors 9,235 7,082
------ ------
14,885 8,029
------ ------
-------- --------
NET CURRENT LIABILITIES (7,115) (495)
------ ------
TOTAL ASSETS LESS CURRENT
LIABILITIES 22,703 19,933
====== ======
CREDITORS: AMOUNTS FALLING
DUE AFTER MORE THAN ONE YEAR
Loans and other borrowings 5,354 3,386
PROVISIONS FOR LIABILITIES
AND CHARGES (note 14) 1,056 1,391
MINORITY INTERESTS 498 216
CAPITAL AND RESERVES -------- --------
Called up share capital 1,627 1,617
Reserves (note 15) 14,168 13,323
-------- --------
Total equity shareholders' funds 15,795 14,940
------ ------
22,703 19,933
====== ======
-----------------------------------------------------------
NOTES
-----------------------------------------------------------
1 Basis of preparation
--------------------
The preliminary results of the group, which are not
statutory accounts, have been prepared on the basis of the
accounting policies as set out in the report and accounts
for the year ended March 31, 1999. Figures for the year
ended March 31, 1999 are extracts from the group accounts
for that year.
The group accounts for the year ended March 31, 2000
have not yet been filed with the Registrar of Companies or
reported on by the auditors.
2 Turnover
--------
Fourth quarter Year ended
ended March 31 March 31
2000 1999 2000 1999
£m £m £m £m
Fixed network calls 1,440 1,545 5,908 6,026
Exchange lines 898 852 3,526 3,351
Mobile communications 557 398 2,170 1,400
Receipts from other
operators 572 428 1,974 1,417
Private services 256 274 1,135 1,140
Customer premises
equipment supply 197 212 847 870
Yellow Pages and other
directories 198 138 642 491
Other sales and services 625 632 2,513 2,258
------ ------ ------ ------
Group turnover 4,743 4,479 18,715 16,953
Share of associates and
joint ventures turnover 1,435 418 3,364 1,270
Group trading with
principal joint venture (176) - (176) -
------ ------ ------ ------
Total turnover 6,002 4,897 21,903 18,223
====== ====== ====== ======
On the establishment of the Concert global venture
with AT&T Corporation on January 5, 2000, certain
international activities and multinational customers have
been transferred to the global venture, the group's
principal joint venture. The above analysis of turnover
has been revised in consequence, with comparative figures
restated.
3 Other operating income
----------------------
Fourth quarter Year ended
ended March 31 March 31
2000 1999 2000 1999
£m £m £m £m
Provision of seconded staff
and administration and
other services to the
Concert global venture 79 - 79 -
Other 53 66 163 168
------ ------ ------ ------
Total 132 66 242 168
====== ====== ====== ======
4 Operating costs
---------------
Fourth quarter Year ended
ended March 31 March 31
2000 1999 2000 1999
£m £m £m £m
Staff costs 1,103 990 4,283 3,871
Own work capitalised (150) (101) (498) (428)
Depreciation 690 688 2,704 2,568
Amortisation of
goodwill 52 - 89 -
Payments to tele-
communication operators 833 611 3,068 2,106
Other operating costs (a) 1,477 1,337 5,602 5,119
------ ------ ------ ------
Total operating costs
before exceptional costs 4,005 3,525 15,248 13,236
Exceptional costs (c) 69 27 111 69
------ ------ ------ ------
Total operating costs 4,074 3,552 15,359 13,305
====== ====== ====== ======
(a) Includes redundancy costs of £59m (1999 - £124m) for
the year ended March 31, 2000 and £40m (1999 - £27m) for
the three months ended March 31, 2000.
(b) The exceptional costs relate to the group's
disengagement from MCI, and in the three months ended
March 31, 2000, £47m relating to the closure of BT
Cellnet's analogue cellular system.
5 Group's share of operating losses of associates and
----------------------------------------------------
joint ventures
--------------
The results include goodwill amortisation of £84m
(1999 - £17m) for the year ended March 31, 2000 and £28m
(1999 - £8m) for the three months ended March 31, 2000.
6 Profit on sale of fixed asset investments and group
---------------------------------------------------
undertakings
------------
The profit on sale in the year ended March 31, 2000
is mainly attributable to the sale of BT Communications
Services KK to Japan Telecom in August 1999. In
February 2000, BT disposed of BT's photonics research
facility at a profit of £35m. In September 1998, the
group completed the sale of its interest in MCI for
£4,159m at a pre-tax profit of £1,133m and the gain for
the year ended March 31, 1999 was mainly this item.
7 Dividends
---------
Year ended Year ended
March 31 March 31
2000 1999 2000 1999
pence per share £m £m
Interim dividend 8.70 8.10 565 523
Proposed final dividend 13.20 12.30 861 799
----- ----- ----- -----
21.90 20.40 1,426 1,322
===== ===== ===== =====
8 Interest payable
----------------
Fourth quarter Year ended
ended March 31 March 31
2000 1999 2000 1999
£m £m £m £m
Group 154 92 488 420
Joint ventures and
associates 36 15 87 31
----- ----- ----- -----
Total interest payable 190 107 575 451
===== ===== ===== =====
9 Earnings per share
------------------
The basic earnings per share are calculated by
dividing the profit attributable to shareholders by the
average number of shares in issue after deducting the
company's shares held by employee share ownership trusts.
In calculating the diluted earnings per share, share
options outstanding and other potential ordinary shares
have been taken into account.
The average number of shares in the periods were:
Fourth quarter Year ended
ended March 31 March 31
2000 1999 2000 1999
million of shares million of shares
Basic 6,496 6,460 6,488 6,442
Diluted 6,650 6,624 6,642 6,592
The items taken into account in the calculation of
the earnings per share before goodwill amortisation and
exceptional items in the three months and year ended
March 31, 2000 and 1999 are:
Fourth quarter Year ended
ended March 31 March 31
2000 1999 2000 1999
£m £m £m £m
Profit on sale of group
undertakings 36 - 126 -
Costs relating to the
closure of the analogue
cellular system (47) - (47) -
Costs relating to the
disengagement from MCI (22) (27) (64) (69)
Profit on sale of MCI
shares - - - 1,133
Provision against another
fixed asset investment - - - (26)
Goodwill amortisation (80) (8) (173) (17)
----- ----- ----- -----
(113) (35) (158) 1,021
Tax credit (charge)
attributable 10 9 (5) (291)
----- ----- ----- -----
Net credit (charge) (103) (26) (163) 730
===== ===== ===== =====
10 Reconciliation of operating profit to operating cash flow
---------------------------------------------------------
Fourth quarter Year ended
ended March 31 March 31
2000 1999 2000 1999
£m £m £m £m
Group operating profit 801 993 3,598 3,816
Depreciation and
amortisation 781 692 2,841 2,581
Changes in working capital 241 593 (241) (30)
Provision movements and
other (306) (342) (349) (332)
----- ----- ----- -----
Net cash flow from
operating activities 1,517 1,936 5,849 6,035
===== ===== ===== =====
11 Expenditure on tangible fixed assets
------------------------------------
Fourth quarter Year ended
ended March 31 March 31
2000 1999 2000 1999
£m £m £m £m
Plant and equipment:
Transmission equipment 464 535 1,563 1,416
Exchange equipment 113 136 413 411
Other network equipment 261 235 703 558
Computers and office
equipment 186 142 502 464
Motor vehicles and
other 73 64 257 230
Changes in engineering
stores 3 (15) 13 (15)
Land and buildings 60 75 229 205
------ ------ ------ ------
Total expenditure 1,160 1,172 3,680 3,269
====== ====== ====== ======
12 Intangible assets
-----------------
In November 1999, the group completed the acquisition of
Securicor's 40% interest in BT Cellnet for £3,173m, including
expenses. Goodwill of £2,997m arose on this transaction which
is being amortised over a period of 20 years.
In March 2000, the group gained control over Esat Telecom
Group and Esat Digifone for £1,520m. Esat Digifone is 49.5 per
cent owned by Telenor. Goodwill of £1,765m arose on this
transaction which will be amortised over a period of 20 years.
Goodwill arising on acquisitions of other subsidiary
undertakings in the year ended March 31, 2000 amounted to £937m
principally relating to Yellow Book and Control Data Systems.
Goodwill is being amortised over periods not exceeding 20 years.
In September 1998, the group acquired MCI's 24.9% interest
in Concert Communications Company for £607m. Goodwill of £568m
arose on this transaction. This goodwill was transferred into
the Concert global venture with AT&T on January 5, 2000.
13 Net debt
--------
(a) Analysis
At March 31
2000 1999
£m £m
Long-term loans and other borrowings
falling due after more than one year 5,354 3,386
Short-term borrowings and long-term
loans and other borrowings falling due
within one year 5,650 947
------ ------
Total debt 11,004 4,333
Short-term investments (2,051) (3,278)
Cash at bank (253) (102)
------ ------
Net debt at end of period 8,700 953
====== ======
(b) Reconciliation of net cash flow to movement in net debt
Fourth quarter Year ended
ended March 31 March 31
2000 1999 2000 1999
£m £m £m £m
Net debt at beginning
of period 6,987 937 953 3,977
Increase (decrease)
in net debt through
cash flows 925 (71) 6,582 (3,146)
Net debt assumed or
issued on acquisitions 732 94 971 94
Currency and other
movements 56 (7) 194 28
------ ------ ------ ------
Net debt at end of period 8,700 953 8,700 953
====== ====== ====== ======
14 Provisions for liabilities and charges
--------------------------------------
At March 31
2000 1999
£m £m
Pension provisions 629 953
Deferred taxation 354 350
Other provisions 73 88
------ ------
1,056 1,391
====== ======
15 Reserves
--------
£m
Balance at April 1, 1999 13,323
Retained profit for the financial year 629
Currency movements (a) (66)
Premium on allotment of ordinary shares 374
Movement relating to BT's employee share
ownership trust (257)
Unrealised gain on establishment of Concert global
venture 159
Goodwill, written off to reserves before
April 1, 1998, taken back to profit and
loss account 6
------
Balance at March 31, 2000 14,168
======
(a) Including £10m movement on the retranslation of
foreign borrowings and other hedging instruments.
16 Selected group activities
-------------------------
Fourth quarter Year ended
ended March 31 March 31
2000 1999 2000 1999
£m £m £m £m
TURNOVER (a)
BT Cellnet 644 406 2,435 1,431
Yellow Pages 197 138 642 491
Syntegra 156 125 500 418
OPERATING PROFIT BEFORE
GOODWILL AMORTISATION
AND EXCEPTIONAL ITEMS
BT Cellnet 94 50 154 166
Yellow Pages 59 47 198 171
Syntegra 11 11 31 25
(a) Turnover includes sales to other group companies or units.
17 Selected group ventures
-----------------------
Fourth quarter Year ended
ended March 31 March 31
2000 1999 2000 1999
£m £m £m £m
TOTAL RESULTS (a):
Turnover
Concert 1,166 n/a n/a n/a
Cegetel 739 624 2,796 2,222
Airtel Movil 359 270 1,405 925
LG Telecom 267 177 834 n/a
Viag Interkom 173 73 657 182
Telfort 61 37 240 116
Operating profit
(loss) before
goodwill
amortisation
Concert 138 n/a n/a n/a
Cegetel (5) 15 114 (6)
Airtel Movil 27 20 175 71
LG Telecom (60) (27) (59) n/a
Viag Interkom (120) (127) (533) (429)
Telfort (26) (34) (125) (130)
(a) Results are stated on BT's accounting policies.
n/a = not a BT investment throughout the reporting period
Fourth quarter Year ended
ended March 31 March 31
2000 1999 2000 1999
£m £m £m £m
GROUP'S SHARE OF
RESULTS (a):
Turnover
Concert (50%) 583 n/a n/a n/a
Cegetel (26%) 192 162 727 578
Airtel Movil (18%) 64 48 250 157
LG Telecom (24%) 65 42 200 n/a
Viag Interkom (45%) 78 33 296 82
Telfort (50%) 31 18 120 58
Operating profit
(loss) before goodwill
amortisation
Concert (50%) 69 n/a n/a n/a
Cegetel (26%) (1) 4 30 (2)
Airtel Movil (18%) 5 4 31 12
LG Telecom (24%) (15) (7) (14) n/a
Viag Interkom (45%) (54) (57) (240) (193)
Telfort (50%) (13) (17) (63) (65)
(a) Results are stated on BT's accounting policies.
n/a = not a BT investment in the reporting period.
18 Earnings before interest, taxation, depreciation and
----------------------------------------------------
amortisation (EBITDA)
---------------------
Fourth quarter Year ended
ended March 31 March 31
2000 1999 2000 1999
£m £m £m £m
Group operating profit 801 993 3,598 3,816
Depreciation 729 692 2,752 2,581
Amortisation 52 - 89 -
----- ----- ----- -----
EBITDA 1,582 1,685 6,439 6,397
Exceptional items,
excluding depreciation 30 23 63 56
----- ----- ----- -----
EBITDA before exceptional
items 1,612 1,708 6,502 6,453
===== ===== ===== =====
19 New divisional structure to be implemented in the
------------------------------------------------------
year ending March 31, 2001 - financial information
--------------------------------------------------
The table below shows for illustrative purposes a
proforma of the results of BT's new business
organisation, to be implemented during the year ending
March 31, 2001, for the years ended March 31, 2000 and
1999. It is a restatement of the actual results for
those years showing the businesses had they traded
throughout that year. The information includes
allocations and apportionments of turnover and costs.
Total operating profit
(loss) before goodwill
amortisation and
Total turnover exceptional items
Year ended Year ended
March 31 March 31
2000 1999 2000 1999
£bn £bn £bn £bn
UK Wholesale and
Retail 12.6 11.7 3.4 3.4
Ignite 3.2 2.1 (0.5) (0.2)
BTopenworld (a) 0.1 0.0 (0.3) (0.1)
BT Wireless 4.5 2.7 0.2 0.1
Yell 0.6 0.5 0.2 0.2
Concert(b) 1.9 1.9 0.3 0.3
Eliminations and
other (c) (1.0) (0.7) 0.2 (0.1)
------ ------ ------ ------
Total 21.9 18.2 3.5 3.6
====== ====== ====== ======
(a) Total turnover for 1999 - approximately £50 million.
(b) Comprises the results up to January 5, 2000 of those
elements of BT's business which were transferred to the
Concert global venture, and, for the period from
January 5, 2000, BT's proportionate interest in the
global venture's results.
(c) Elimination of turnover between businesses which is
included in total turnover of the originating business.
Other includes group redundancy costs.
20 United States Generally Accepted Accounting
-------------------------------------------
Principles
----------
The results set out above have been prepared in
accordance with accounting principles generally accepted
in the United Kingdom. The table below sets out the
results calculated in accordance with United States
Generally Accepted Accounting Principles.
Fourth quarter Year ended
ended March 31 March 31
2000 1999 2000 1999
£m £m £m £m
Net income attributable
to shareholders 8 452 1,393 2,589
Earnings per ADS(£) 0.01 0.70 2.15 4.02
Earnings per ADS before
exceptional items (£) 0.39 0.73 2.48 2.88
Each American Depositary Share (ADS) represents 10
ordinary shares of 25p each.
Shareholders' equity, calculated in accordance with
United States Generally Accepted Accounting Principles,
is £13,634m at March 31, 2000 (1999 - £13,674m).
---------------------------------------------------------------
Forward-looking statements - caution advised
---------------------------------------------
Certain statements in this results release are
forward-looking and are made in reliance on the safe
harbour provisions of the US Private Securities
Litigation Reform Act of 1995. These statements include,
without limitation, those concerning: expectations
regarding turnover, costs, growth and the communications
industry; the expansion of networks; the possible or
assumed future results of operations of BT and/or its
associates and joint ventures; the impact on BT of
Concert, the global venture with AT&T, and Concert's
turnover and capital expenditure requirements; the
positioning of BT ahead of the next wave in
communications as a result of the planned restructuring
of the group; expectations regarding the listing of Yell;
expectations regarding the delivery of new services,
bidding for licences and investment plans; the proposed
redundancy programme; and expectations regarding
valuation of the BT Pension Scheme, pension cost, and the
valuation of additional pension benefits to be paid.
Although BT believes that the expectations reflected
in these forward-looking statements are reasonable, it
can give no assurance that these expectations will prove
to have been correct. Because these statements involve
risks and uncertainties, actual results may differ
materially from those expressed or implied by these
forward-looking statements.
Factors that could cause differences between actual
results and those implied by the forward-looking
statements include, but are not limited to: material
adverse changes in economic conditions in the markets
served by BT; future regulatory actions and conditions
in BT's operating areas, including competition from
others in the UK and other international
telecommunications markets; technological innovations,
including the cost of developing new products and the
need to increase expenditure improving the quality of
service; prolonged adverse weather conditions resulting
in a material increase in overtime, staff or other costs;
convergence of technologies; the timing of entry and
profitability of BT and Concert in certain national and
international markets and fluctuations in foreign
currency exchange rates.