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.

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