Interim Results

British Telecommunications PLC 9 November 2000 HALF YEAR RESULTS TO SEPTEMBER 30, 2000 BT's results for the half year and second quarter to September 30, 2000 are summarised in the table below. Sir Iain Vallance, Chairman of BT, said: 'The marked turnover growth in the half year reflects BT's success in implementing its strategy, which is delivering rapid growth in Europe and Japan. In the half year we finalised our purchase of Esat in Ireland, gained full control of Telfort in Holland and reached an agreement which will allow us to take control of Viag Interkom in Germany. Total operating profit, before goodwill amortisation and exceptional items, in the half year was £1,779 million compared with £1,768 million last year. Earnings per share declined from 17.9 pence to 9.1 pence reflecting higher interest and goodwill charges as a result of acquisition of businesses and the payments for third generation mobile licences. As anticipated, our net debt has risen to £18.7 billion. The interim dividend of 8.7 pence per share has been maintained, reflecting the company's overall performance and pending its restructuring.' SECOND QUARTER AND HALF YEAR TO SEPTEMBER 30, 2000 Second Quarter Half Year 2000 1999 2000 1999 £m £m £m £m 7,603 5,329 14,394 10,316 Total turnover EBITDA 1,573 1,686 3,091 3,276 Total operating profit before goodwill amortisation and exceptional items 903 901 1,779 1,768 314 69 553 132 Net interest payable Profit before taxation 471 890 1,032 1,662 Profit after taxation 295 618 663 1,155 Earnings per share 4.2p 9.6p 9.1p 17.9p Earnings per share before 5.9p 9.1p 12.6p 17.8p goodwill amortisation and exceptional items Interim dividend per share 8.7p 8.7p Results BT's total turnover increased to £14,394 million in the six months to September 30, 2000. Total operating profit before goodwill amortisation and exceptional items grew by 0.6 per cent to £1,779 million. Earnings before interest, tax, depreciation and amortisation (EBITDA) declined by 5.6 per cent to £3,091 million in the six months, with a major part of this decline being accounted for by the transfer of operations to the Concert global venture in January 2000. BT's net interest charge rose by £421 million to £553 million as a consequence of the acquisitions made over the past year and the payment for the third generation mobile licences. Profit before goodwill amortisation, exceptional items and tax amounted to £1,226 million for the six months, compared with £1,636 million in the first half of last year. Earnings per share were 12.6 pence before goodwill amortisation and exceptional items and 9.1 pence after charging these items, compared with 17.8 pence and 17.9 pence in the prior period, respectively. There remains intense competition both in the UK and elsewhere. In the second quarter to September 30, 2000, BT's total turnover grew to £7,603 million. Total operating profit before goodwill amortisation and exceptional items was virtually unchanged at £903 million. Profit before goodwill amortisation, exceptional items and tax amounted to £589 million, compared with £832 million in the second quarter of last year. Earnings per share were 5.9 pence before goodwill amortisation and exceptional items and 4.2 pence after charging these items, compared with 9.1 pence and 9.6 pence in the prior period, respectively. Dividend The Board has declared an interim dividend of 8.7 pence per ordinary share payable on February 12, 2001 to BT shareholders on the register on January 3, 2001. This dividend, absorbing £571 million, is unchanged from last year's interim dividend, reflecting the overall performance of BT and pending the restructuring of the group. Restructuring In April 2000, we announced a restructuring whereby the group and its ventures would be managed through four global businesses together with the UK operations and the Concert global venture. The four global businesses, BT Wireless, BT Ignite, BTopenworld and Yell began operations on July 1, 2000, as planned. Financial information on the four global businesses is published in this release for the second quarter and six month periods ended September 30, 2000. Concert In January 2000, Concert, the global communications joint venture between BT and AT&T, began operations and BT transferred 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 group turnover has been reduced overall by approximately £470 million in the six months. Total turnover, including BT's proportionate share of its ventures, has however, increased by around £550 million in the six months as a result of the establishment of Concert, reflecting the greater level of AT&T's business introduced into the global venture. The transfer will have adversely affected group operating profit and group EBITDA by approximately £90 million and £130 million in the six months, respectively. Turnover BT's total turnover grew by £4,078 million to £14,394 million in the six months. Of this growth, around £2 billion arises from BT's investment in Japan Telecom and our joint interest in the J-Phone mobile companies. A further £ 550 million of the growth in turnover stems from our Concert global venture with AT&T established in January 2000. Acquisition of our interests in Esat, Telfort and other companies has added another £420 million to the total turnover in the six months. Fixed network call volume growth at 5 per cent on a twelve-month moving average to September 30, 2000 compares with 7 per cent for the year to March 31, 2000. We are continuing to experience strong growth in fixed to mobile calls and internet related calls but this is being offset by a decline in traditional geographic call volumes due to mobile phone substitution and intense competition from other UK operators. Significant price reductions on national calls introduced in October 1999 and enhanced call allowances included in residential customers' line rentals had an adverse effect on call turnover. Fixed network call turnover in the UK declined by 4.9 per cent to £ 2,849 million in the six months, 2 per cent of which was due to the transfer of multinational customers to the Concert global venture. Business line connections grew by 5.5 per cent over the year to September 30, 2000 while residential lines continued to show a small decline in numbers. Overall, BT's system size grew by 1.8 per cent in the twelve months. Turnover from exchange lines in the UK grew by 2.5 per cent to £1,777 million in the six months; the transfer of multinational customers to the Concert global venture had a 3 per cent negative effect on this increase. Mobile communications turnover rose by 21 per cent to £1,265 million. The increase was mainly due to the growth in outgoing calls made by BT Cellnet's customers and the acquisition of Esat Digifone in March 2000. Turnover from sales to other operators has risen by £345 million to £1,270 million in the six months mainly through an increased level of UK transit traffic handled by BT. The other sales and services category of turnover includes Syncordia Solutions, Syntegra and broadcast, conference and other advanced services. It also includes our non-mobile communication services outside the UK. The growth of 9.2 per cent in turnover to £1,363 million in the six months is mainly due to underlying growth in these services and the acquisitions of control in Esat, Telfort and Clear Communications, offset by the effect of the transfer of BT's Concert services into the global venture last January. Underlying growth of other sales and services is around 20 per cent. Other operating income BT provides administrative and other services to Concert drawing on BT people and resources. The income from this totalled £89 million in the six months to September 30, 2000. Operating costs BT's operating costs increased by 13.7 per cent in the six months to September 30, 2000. Excluding goodwill amortisation, operating costs rose by 11.6 per cent. Approximately two thirds of this increase was accounted for by the acquisition of businesses. Payments to other telecommunication operators increased by 27 per cent mainly due to higher transit traffic between UK operators passing through BT's network and the strong growth in fixed to mobile calls as well as the consequences of the acquisitions. Goodwill amortisation rose to £167 million in the six months mainly reflecting BT's acquisitions of the BT Cellnet minority interest in November 1999, Esat in March 2000 and Telfort in June 2000. Other operating costs increased by 10.9 per cent primarily as a result of the Esat and Telfort acquisitions. Redundancy direct costs were £64 million higher due to over 2,800 managers leaving BT under the plan announced in February 2000. In addition, the leavers caused approximately £370 million of incremental liabilities in the BT Pension Scheme. These costs are not charged in the group profit and loss account in the period, in accordance with UK accounting standards. Including the managers who left in the fourth quarter of the last financial year, BT has successfully accomplished its target for a 3,000 reduction. Ventures BT's share of its ventures' operating results before goodwill amortisation improved to a profit of £104 million in the six months from a loss of £199 million in the first half of last year. This improvement is largely due to the acquisition of interests in Japan Telecom and the J-Phone mobile companies and the establishment of the Concert global venture. Viag Interkom's operating losses included in these results amounted to £134 million for the six months and are running at about the same level as in the previous year. Goodwill amortisation attributable to the ventures rose to £92 million in the six months. Interest Net interest, including BT's share of its ventures' interest charge, rose by £421 million to £553 million in the six months. Of the total charge, £113 million relates to ventures and £440 million arose in the BT group. Group operating profit before goodwill amortisation in the six months provided interest cover of 3.8 times. This cover reduced to 3.3 times in the second quarter and is expected to reduce further in the second half of the year. The increase in the group's interest charge is a consequence of the debt incurred by the group to finance its recent acquisitions and the third generation mobile licences. Taxation and minority interests The tax charge of £369 million represents an effective rate of 28.5 per cent of profit before tax and goodwill amortisation. The minority interests in the results of the six months of £71 million are primarily attributable to outside interests in the J-Phone mobile companies and I.Net. Acquisitions During the six months ended September 30, 2000, BT completed the acquisition of a significant indirect interest in regional Japanese wireless companies (the J-Phone companies), acquired the 50 per cent interest in Telfort owned by its venture partner, and gained a further 17 per cent interest in Telenordia. We have also announced the proposed acquisition of a further 45 per cent controlling interest in Viag Interkom. BT's indirect interests in the J-Phone cellular companies are mainly through J-Phone Communications Co Limited which holds more than 50 per cent of the equity in these companies following a share issue in early May 2000. BT and Japan Telecom together own 74 per cent of J-Phone Communications Co Limited. BT's overall economic interest in its Japanese investments is around 20 per cent. In June 2000, BT acquired the 50 per cent of Telfort it did not already own for £1.2 billion from the Dutch railways. The consideration was paid on July 5, 2000. In September 2000, BT increased its existing 33 per cent interest in Telenordia to 50 per cent for Euro 154 million (£96 million). Telenor similarly increased its stake to 50 per cent. BT and Telenor are considering the listing of Telenordia which is based in Sweden. In April 2000, BT won a third generation mobile licence in the UK auction. The payment of £4.03 billion for the licence was made in May 2000. A third generation licence in the Netherlands was awarded to Telfort in July 2000 for £267 million. In August, Viag Interkom won a third generation licence in Germany. During the six months, BT has continued to share in funding the development of Viag Interkom to a total of £2,566 million, principally for our 45 per cent share of its third generation licence. Capital expenditure Capital expenditure on plant, equipment and property totalled £2,045 million in the six months. Work continues on enhancing the UK fixed network to enable customers to benefit from new wave communications technologies. We are also investing heavily in BT Cellnet's mobile network. Cash flow and net debt Cash flow from operating activities amounted to £2,763 million in the six months. The net cash outflow on acquisitions of £5,207 million consisted mainly of the further funding of Viag Interkom, including its third generation licence, and the Esat and Telfort acquisitions. In April 2000, BT issued a £250 million index-linked Eurobond repayable in 2025. We have financed the majority of our requirements during the six months by drawing on commercial paper and medium-term note programmes under which approximately £15.1 billion was outstanding at September 30, 2000, an increase of £10.2 billion since March 31, 2000. Gearing at September 30, 2000 stood at 113 per cent with net debt of £ 18,739 million compared with £8,700 million at March 31, 2000. BT's business rates BT is to receive a refund of approximately £250 million following a five-year legal action to reduce its Cumulo rating assessment in England and Wales. The refund will be recognised in the financial statements when it is received. BT reached agreement with the UK Government after challenging the rateable valuations on which it was charged rates for its network assets, such as its ducts, poles and cables in the access and core networks. The agreement also covers future rates. In the 2002 financial year, BT will pay around £100 million less than the current financial year's £310 million rates expenses for its network assets in England and Wales. BT is appealing against similar assessments in Scotland and Northern Ireland. Viag Interkom On August 17, 2000, BT announced that it had reached an agreement which will enable it to take control of Viag Interkom in 2001. This agreement allows BT to buy from E.ON its 45 per cent interest in Viag Interkom by means of a call option priced at Euro 7.25 billion (£4.3 billion) payable in the middle of 2001. E.ON has a put option priced slightly lower for exercise in early 2001. BT currently owns 45 per cent of Viag Interkom and Telenor owns the remaining 10 per cent interest. A separate agreement has been reached with Telenor under which it may decide to sell its interest in Viag Interkom, or BT may decide to buy it in due course. Viag Interkom was awarded a third generation mobile licence in Germany for DM 16.5 billion (£5.13 billion). The licence is for two 10 MHz blocks of spectrum. The UMTS network is due to become operational in 2002. BT funded its current 45 per cent share of the licence fee, amounting to £2,324 million, in early September 2000. We shall be funding a second 45 per cent share when we acquire control of Viag Interkom in 2001. Airtel Under an agreement announced in June 2000, BT has agreed to support Vodafone in acquiring further shares in Airtel and, should Vodafone's holding exceed 55 per cent, then BT has the option to acquire the excess. Vodafone announced on July 17, 2000 that, subject to regulatory approval, it had agreed to acquire further shares in Airtel which would increase its holding to 65.2 per cent. BT Retail and Wholesale BT Retail and Wholesale achieved an operating profit of £1,759 million in the six months on turnover of £7,084 million. BT Retail's turnover is mainly derived from BT's UK fixed network customers through the provision of fixed network call services, exchange lines and private services. BT Wholesale's external turnover is derived from other operators inter-connecting with BT's UK fixed network, including Concert. BT Retail is benefiting from growing internet and fixed to mobile non-geographic call volumes. BT's Surftime internet products launched on June 1, 2000 are proving to be popular with average durations more than double pay as you go calls. The demand for second residential lines remains strong. Subject to regulatory approval, BT Retail will be offering new call packages to its 20 million residential customers from December 1, 2000. These 'BT Together' call packages include those providing customers with unlimited local evening and weekend phone calls of up to one hour in length per call or unlimited evening and weekend internet calls for a fee inclusive of the line rental. Capital expenditure of £1,087 million focussed mainly on developing our state of the art fixed network in the UK and included a tranche of Next Generation Switches to enhance the fixed network's switching capacity. Work is progressing on the ADSL rollout programme with over 600 local exchanges enabled to deliver the new broadband internet product. BT is also ahead of similar large European operators in scale deployment of leading edge, high capacity, Synchronous Digital Hierarchy and Wavelength Division Multiplexing technology. BT Ignite Turnover in BT Ignite was £2,130 million for the half year with an operating loss before goodwill amortisation of £269 million. A major component of BT Ignite's turnover is derived from its systems integration (Syntegra) and outsourcing (Syncordia) businesses. Together these are growing at more than 20 per cent per annum and contributed operating profits of £12 million and £25 million, respectively, before goodwill amortisation. The remainder of BT Ignite's activity is principally in the fast growing new wave data product area within the UK, Ireland and continental Europe. It also includes BT's share of Japan Telecom's fixed network activities. BT Ignite has opened 20 content hosting centres in the UK and elsewhere in Europe. Occupancy levels have already reached 64 per cent. BT Ignite's application service provider service is one of the largest in Europe and its integrated broadband enabled IP network covering nine European countries gives it unparalleled reach. BTopenworld BTopenworld incurred an operating loss of £188 million on turnover of £ 127 million in the six months. Its turnover is derived principally from its UK and continental European narrowband internet access products. A new broadband internet portal and Genie (BTopenworld's global mobile internet portal), two major new lines of business, made a small contribution to turnover. A significant proportion of BTopenworld's losses were incurred in the development and launch of its UK broadband product range and the continuing international roll out of Genie. The total number of equity internet service provider customers of BTopenworld at September 30, 2000 was approximately 2.1 million, representing growth of over 30 per cent since April 1, 2000. With over 440,000 customers on unmetered packages at October 31, 2000, BTopenworld is the UK's largest unmetered internet access provider. At September 30, 2000, Genie had over 1.2 million registrations, nearly doubling its registrations since April 1, 2000. BT Wireless BT Wireless achieved an operating profit of £283 million before goodwill amortisation on turnover of £4,424 million in the six months. BT Wireless has 17.9 million proportional mobile subscribers of which 8.7 million are BT Cellnet's. BT Wireless is a leader in selling the new WAP (Wireless Application Protocol) data phones with currently approximately 1.6 million proportional equity customers in total, of which 570,000 are in the UK. BT Wireless has been successful in gaining third generation licences in the UK, Germany, Holland, Spain and Japan. The profits, principally contributed by BT Cellnet, the Japanese companies and Airtel are partially offset by losses incurred mainly by Viag Interkom, Telfort and Blu. BT Cellnet, the Japanese companies and Cegetel are the prime contributors to BT Wireless' turnover. BT Cellnet's customer base increased by 47 per cent over the year to September 30, 2000. Its turnover grew by 18 per cent to £1,345 million for the six months. BT Cellnet's operating profit was £163 million and its EBITDA was £288 million in the six months to September 30, 2000. BT Cellnet has become the UK's leading network on international roaming coverage with agreements with operators in 118 countries. At the same time, Viag Interkom's turnover has grown by over 50 per cent and its operating losses have remained the same as last year. It had a 2.4 million mobile customer base at September 30, 2000, with 1.1 million net additions in the six months. Yell Yell contributed an operating profit before goodwill amortisation of £117 million on turnover of £364 million in the six months. The proposed listing of Yell's shares is on course to be completed by the end of the current financial year. Concert Concert achieved an operating profit before goodwill amortisation of £212 million on turnover of £2,861 million. BT has a 50 per cent equity interest in the global venture with AT&T. ______________________________________________________________________ The half-year report, which contains the independent review report of the auditors, will be advertised in the Financial Times on November 10, 2000. The company's interim dividend for the year ending March 31, 2001 is payable on February 12, 2001 to those shareholders on the register on January 3, 2001. The last date for lodging mandates for the BT dividend investment plan is also January 3, 2001. The third quarter and nine months' results are expected to be announced on February 8, 2001. GROUP PROFIT AND LOSS ACCOUNT for the three months and six months ended September 30, 2000 Second quarter Half year 3 months ended 6 months ended September 30 September 30 2000 1999 2000 1999 (unaudited) Notes £m £m £m £m Total turnover 2 7,603 5,329 14,394 10,316 Group's share of associates (2,761) (627) (4,983) (1,084) and 2 joint ventures turnover Trading between group and 178 - 341 - principal joint venture Group turnover 5,020 4,702 9,752 9,232 Other operating income 3 65 46 153 79 Operating costs (a) (b) 4 (4,332) (3,750) (8,397) (7,383) Group operating profit 753 998 1,508 1,928 Group's share of operating profits (losses) of associates and joint ventures 5 8 (129) 12 (224) Total operating profit 761 869 1,520 1,704 Total operating profit before goodwill amortisation and exceptional items 9 903 901 1,779 1,768 Profit on sale of fixed asset 7 24 90 65 90 investments and group undertakings (c) Net interest payable 8 (314) (69) (553) (132) Profit before taxation 471 890 1,032 1,662 Taxation (176) (272) (369) (507) Profit after taxation 295 618 663 1,155 Minority interests (24) 7 (71) 4 Profit attributable to 271 625 592 1,159 shareholders Earnings per share 9 - basic 4.2p 9.6p 9.1p 17.9p - diluted 4.1p 9.4p 8.9p 17.5p Earnings per share before exceptional items and goodwill amortisation 9 - basic 5.9p 9.1p 12.6p 17.8p - diluted 5.9p 8.9p 12.4p 17.4p Interim dividend per share 10 8.7p 8.7p (a) Includes exceptional costs - (11) - (28) (b) Includes goodwill amortisation 91 7 167 11 (c) Exceptional gain 24 90 65 90 GROUP CASH FLOW STATEMENT for the three months and six months ended September 30, 2000 Second quarter Half year 3 months ended 6 months ended September 30 September 30 2000 1999 2000 1999 £m £m £m £m (unaudited) Net cash inflow from operating activities (note 1,336 1,561 2,763 2,852 11) Dividends from associates and joint ventures - 2 5 2 Net cash outflow for returns on investments and (191) (76) (410) (186) servicing of finance Taxation paid (1) (140) (250) (21) Purchase of intangible fixed (267) - (4,196) - assets Purchase of tangible fixed (1,026) (1,008) (2,064) (1,774) assets Net purchase of fixed asset (24) (38) (22) (142) investments Sale of tangible fixed assets 14 33 37 57 Net cash outflow for (1,303) (1,013) (6,245) (1,859) capital expenditure and financial investment Net cash outflow for (2,972) (2,626) (5,207) (3,156) acquisitions and disposals Equity dividends paid (863) (799) (863) (799) Cash outflow before use of (4,014) (2,952) (10,097) (3,396) liquid resources and financing Management of liquid resources 516 1,367 (5) 1,364 Issue of ordinary share capital 29 31 138 119 Issue of shares to minorities 19 417 19 432 New loans 231 233 1,627 868 Repayment of loans (4) (180) (215) (354) Net movement on short-term 3,367 1,074 8,707 1,140 borrowings Net cash inflow from 3,642 1,575 10,276 2,205 financing Increase (decrease) in cash 144 (10) 174 173 Increase in net debt (note 14) (3,966) (2,504) (9,940) (2,845) GROUP BALANCE SHEET at September 30, 2000 September 30 March 31 2000 1999 2000 (unaudited) (note 1) £m £m £m Fixed assets Intangible assets (note 13) 11,106 1,390 5,777 Tangible assets 19,057 18,224 18,163 Investments 8,520 4,258 5,878 38,683 23,872 29,818 Current assets Stocks 331 203 225 Debtors 5,624 4,368 5,241 Investments 2,091 2,071 2,051 Cash at bank and in hand 369 159 253 8,415 6,801 7,770 Creditors: amounts falling due within one year Loans and other borrowings 14,800 1,883 5,650 Other creditors 8,068 6,816 9,235 22,868 8,699 14,885 Net current liabilities (14,453) (1,898) (7,115) Total assets less current liabilities 24,230 21,974 22,703 Creditors: amounts falling due after more than one year Loans and other borrowings 6,399 4,188 5,354 1,176 1,550 1,056 Provisions for liabilities and charges (note 15) Minority interests 590 636 498 Capital and reserves Called up share capital 1,639 1,626 1,627 Reserves (note 16) 14,426 13,974 14,168 Total equity shareholders' funds 16,065 15,600 15,795 24,230 21,974 22,703 NOTES 1 Basis of preparation The unaudited interim 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, 2000, except that loans and other borrowings are now stated net of the effect of currency swaps acting as hedges. The comparative figures have not been restated as the impact is not material. Figures for the year ended March 31, 2000 are extracts from the group accounts for that year. The group accounts for the year ended March 31, 2000, on which the auditors made an unqualified report which did not contain a statement under Section 237(2) or (3) of the Companies Act 1985, have been delivered to the Registrar of Companies. 2 Turnover Second quarter Half year ended September 30 ended September 30 2000 1999 2000 1999 £m £m £m £m Fixed network calls 1,438 1,505 2,849 2,996 Exchange lines 891 876 1,777 1,734 Receipts from other operators 679 474 1,270 925 Mobile communications 645 535 1,265 1,043 Private services 268 295 531 582 Customer premises equipment supply 183 217 362 426 Yellow Pages and other directories 169 157 335 278 Other sales and services 747 643 1,363 1,248 Group turnover 5,020 4,702 9,752 9,232 Share of associates and joint 2,761 627 4,983 1,084 ventures turnover Group trading with principal (178) - (341) - joint venture Total turnover 7,603 5,329 14,394 10,316 3 Other operating income Second quarter Half year ended September ended 30 September 30 2000 1999 2000 1999 £m £m £m £m Provision of administration services to 30 - 89 - the Concert global venture Other 35 46 64 79 Total 65 46 153 79 4 Operating costs Second quarter Half year ended September 30 ended September 30 2000 1999 2000 1999 £m £m £m £m Staff costs 1,136 1,051 2,269 2,060 Own work capitalised (171) (121) (339) (223) Depreciation 725 681 1,412 1,337 Amortisation of goodwill and 95 7 171 11 other intangibles (a) Payments to telecommunication 957 723 1,803 1,420 operators Other operating costs (b) 1,590 1,409 3,081 2,778 Total operating costs (c) 4,332 3,750 8,397 7,383 (a) Includes goodwill amortisation of £91m (1999 - £7m) for the three months and £167m (1999 - £11m) for the six months ended September 30, 2000. (b) Includes redundancy costs of £49m (1999 - £5m) for the three months and £77m (1999 - £13m) for the six months ended September 30, 2000. (c) Includes exceptional costs of £11m in the three months and £28m in the six months ended September 30, 1999 relating to the group's disengagement from MCI. 5 Group's share of operating profits (losses) of associates and joint ventures The results include goodwill amortisation of £51m (1999 - £14m) for the three months and £92m (1999 - £25m) for the six months ended September 30, 2000. 6 Results of businesses The tables below show the results of BT's new business organisation, which is being implemented during the year ending March 31, 2001, for the quarter and six months ended September 30, 2000. Elements of the information are a restatement of the actual results and net assets of the group to show the businesses as if they had traded as separate units throughout the relevant period. The information includes allocations and apportionments of turnover and costs. These allocations and apportionments in some cases are estimated and, as such, are subject to review and may change. There is extensive trading between many of the business units and profitability is dependent on the transfer price levels. These intra-group trading arrangements are also subject to review and may change. (a) Operating results Total operating profit (loss) before goodwill amortisation and Total EBITDA exceptional items turnover (ii) £m £m £m Second quarter ended September 30, 2000 UK Retail and Wholesale 3,664 1,408 949 BT Wireless 2,414 454 153 BT Ignite 1,110 (31) (159) Concert 836 58 46 Yell 207 76 72 BTopenworld 77 (95) (108) Eliminations and other (i) (705) 38 (50) Total 7,603 1,908 903 Half year ended September 30, 2000 UK Retail and Wholesale 7,084 2,758 1,759 BT Wireless 4,424 724 283 BT Ignite 2,130 (61) (269) Concert 1,430 168 106 Yell 364 123 117 BTopenworld 127 (175) (188) Eliminations and other (i) (1,165) 91 (29) Total 14,394 3,628 1,779 (i) Includes elimination of turnover between businesses which is included in total turnover of the originating business. (ii) Includes proportionate EBITDA of associates and joint ventures. 6 Results of businesses (continued) (b) Capital expenditure on plant, equipment and property Half year ended September 30, 2000 £m UK Retail and Wholesale 1,087 BT Wireless 354 BT Ignite 335 Yell 9 BTopenworld 53 Other 207 Total 2,045 (c) Net assets Net operating Associates and joint ventures assets (i) £m £m At September 30, 2000 UK Retail and Wholesale 13,441 - BT Wireless 10,448 5,087 BT Ignite 3,022 1,016 Concert - 1,339 Yell 610 3 BTopenworld 97 47 Other (321) 7 Total 27,297 7,499 (i) Net operating assets comprise tangible and intangible fixed assets, stocks, debtors less creditors, excluding loans and other borrowings, and provisions for liabilities and charges, excluding deferred tax. 7 Profit on sale of fixed asset investments and group undertakings The profit in the six months ended September 30, 2000 is mainly attributable to the profit realised in the initial public offering of I.Net SpA in April 2000. The profit on sale in the three and six months ended September 30, 1999 was mainly attributable to the sale of BT Communications Services KK to Japan Telecom in August 1999. 8 Net interest payable Second quarter Half year ended September 30 ended September 30 2000 1999 2000 1999 £m £m £m £m Group 312 103 558 197 Joint ventures and associates 66 13 122 28 Total interest payable 378 116 680 225 Interest receivable (64) (47) (127) (93) Net interest payable 314 69 553 132 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: Second quarter Half year ended September 30 ended September 30 2000 1999 2000 1999 millions of millions of shares shares Basic 6,530 6,491 6,512 6,479 Diluted 6,627 6,640 6,628 6,636 The items in the calculation of earnings per share before goodwill amortisation and exceptional items are: Second quarter Half year ended September 30 ended September 30 2000 1999 2000 1999 £m £m £m £m Profit on sale of group 24 90 65 90 undertakings Costs relating to the - (11) - (28) disengagement from MCI Goodwill amortisation (142) (21) (259) (36) (118) 58 (194) 26 Tax charge attributable - (24) (12) (19) Minority interests attributable 1 - (21) - Net credit (charge) (117) 34 (227) 7 10 Interim dividend per share The interim dividend of 8.7p per share (1999 - 8.7p) is payable on February 12, 2001 to shareholders registered at the close of business on January 3, 2001 and will absorb £571m (1999 - £565m). 11 Reconciliation of operating profit to operating cash flow Second quarter Half year ended September 30 ended September 30 2000 1999 2000 1999 £m £m £m £m 753 998 1,508 1,928 Group operating profit Depreciation and amortisation 820 688 1,583 1,348 Changes in working capital (277) (91) (352) (375) Provision movements and other 40 (34) 24 (49) Net cash inflow from operating 1,336 1,561 2,763 2,852 activities 12 Expenditure on tangible fixed assets Second quarter Half year ended September 30 ended September 30 2000 1999 2000 1999 £m £m £m £m Plant and equipment: Transmission equipment 507 410 977 702 Exchange equipment 120 87 200 173 Other network equipment 254 191 441 299 Computers and office equipment 133 149 232 229 Motor vehicles and other 38 88 109 152 Land and buildings 43 55 86 119 Total expenditure 1,095 980 2,045 1,674 13 Intangible assets At September 30 At March 31 2000 1999 2000 £m £m £m Goodwill 6,650 1,390 5,775 Mobile licences and other 4,456 - 2 11,106 1,390 5,777 13 Intangible assets (continued) In June 2000, the group completed the acquisition of the Dutch railways' 50% interest in Telfort for £1,207m, including expenses. Goodwill of £975m arose on this transaction which is being amortised over a period of 20 years. In April 2000, the group won a third generation mobile licence in the UK government's auction. The licence, which cost £4,030 million, will be amortised over its remaining 20-year term from the date of launch of services using the licensed radio spectrum. 14 Net debt (a) Analysis At At September March 30 31 2000 1999 2000 £m £m £m 6,399 4,188 5,354 Long-term loans and other borrowings falling due after more than one year Short-term borrowings and long-term loans and other borrowings falling due within one year 14,800 1,883 5,650 Total debt 21,199 6,071 11,004 Short-term investments (2,091)(2,071) (2,051) Cash at bank (369) (159) (253) Net debt at end of period 18,739 3,841 8,700 (b) Reconciliation of net cash flow to movement in net debt Second quarter Half year ended September 30 ended September 30 2000 1999 2000 1999 £m £m £m £m Net debt at beginning of period 15,354 1,391 8,700 953 Increase in net debt resulting 3,966 2,504 9,940 2,845 from cash flows Net debt assumed or issued on 11 31 46 79 acquisitions Currency movements (591) (96) (30) (56) Other non-cash movements (1) 11 83 20 Net debt at end of period 18,739 3,841 18,739 3,841 15 Provisions for liabilities and charges At September 30 At March 31 2000 1999 2000 £m £m £m Pension provisions 679 927 629 Deferred taxation 424 538 354 Other provisions 73 85 73 1,176 1,550 1,056 16 Reserves £m Balance at April 1, 2000 14,168 Profit for the six months ended September 30, 2000 592 Interim dividend - payable February 12, 2001 (571) Currency movements (a) 65 Premium on allotment of ordinary shares 434 Movement relating to BT's employee share ownership trust (256) Other movements (6) Balance at September 30, 2000 14,426 (a) Net of £70m movement on the retranslation of foreign borrowings and other hedging instruments. 17 Esat Telecom Group On March 30, 2000, BT obtained control of the Esat Telecom Group for approximately £1.5 billion. Esat operates a fixed line telecommunications network in Ireland. BT 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. The majority of the consideration for the Esat Telecom Group was paid in April 2000. In January 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. 18 Earnings before interest, taxation, depreciation and amortisation (EBITDA) Second quarter Half year ended September 30 ended September 30 2000 1999 2000 1999 £m £m £m £m Group operating profit 753 998 1,508 1,928 Depreciation 725 681 1,412 1,337 Amortisation 95 7 171 11 EBITDA 1,573 1,686 3,091 3,276 19 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. Second quarter Half year ended September 30 ended September 30 2000 1999 2000 1999 £m £m £m £m Net income (loss) attributable to (70) 542 170 990 shareholders Earnings (loss) per ADS (£) (0.11) 0.84 0.26 1.53 Each American Depositary Share (ADS) represents 10 ordinary shares of 25p each. Shareholders' equity, calculated in accordance with United States Generally Accepted Accounting Principles, was £13,170m at September 30, 2000 (September 30, 1999 -£13,865m, March 31, 2000 - £13,634m). ________________________________________________________________ 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 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; expectations regarding the listing of some of BT's businesses and investment plans. 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 and its new businesses; future regulatory actions and conditions in BT's operating areas, including competition from others in the UK and other international communications 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; developments in the convergence of technologies; the timing of entry and profitability of BT, its new businesses and Concert in certain national and international markets and fluctuations in foreign currency exchange rates and interest rates.

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