Half Year Results to September 30 1999
British Telecommunications PLC
11 November 1999
HALF YEAR RESULTS TO SEPTEMBER 30, 1999
BT's results for the half year and second quarter to
September 30, 1999 are summarised in the table below.
Sir Iain Vallance, Chairman of BT, said:
'The global communications industry is going through a
period of unprecedented structural and technological change.
Against this background we have achieved good growth in many
areas of our business including mobile communications, data
traffic and our international ventures.
We have also grown earnings per share before exceptional
items and goodwill amortisation by 8.6 per cent in the half
year despite the short-term cost of developing new businesses
and acquiring new mobile customers.
Over £3 billion has been invested in the half year in our
international ventures and new businesses. The cost of
achieving full control of BT Cellnet is a further
£3.15 billion.
Growth prospects in the UK and internationally remain
good but we face increasing competition as the globalisation
of our industry continues.
The interim dividend of 8.7 pence per share represents an
increase of 7.4 per cent.'
--------------------------------------------------------------
SECOND QUARTER AND HALF YEAR TO SEPTEMBER 30, 1999
--------------------------------------------------------------
Second Quarter Half Year
1999 1998 1999 1998
£m £m £m £m
Total turnover 5,329 4,403 10,316 8,642
EBITDA 1,686 1,543 3,276 3,053
Total operating profit 869 857 1,704 1,677
Profit on sale of
fixed asset investments 90 1,107 90 1,107
Profit before taxation 890 1,878 1,662 2,601
Profit after taxation 618 1,334 1,155 1,833
Earnings per share 9.6p 20.7p 17.9p 28.3p
Earnings per share before
exceptional items and
goodwill amortisation 9.1p 8.8p 17.8p 16.4p
Interim dividend
per share 8.7p 8.1p
--------------------------------------------------------------
Results
-------
Earnings per share for the six months to
September 30, 1999 were 17.9 pence based on a profit before
tax of £1,662 million. Earnings for the second quarter were
9.6 pence per share. The results for the comparable periods
of the prior year included the exceptional gain of
£1,133 million on BT's sale of its interest in MCI
Communications in September 1998. Excluding this and other
minor exceptional items, together with the impact of goodwill
amortisation, BT's earnings for the six months were
8.6 per cent ahead of last year and 3.9 per cent higher for
the second quarter.
As anticipated, the second quarter's results include
increased losses incurred by some of BT's ventures. BT has
achieved a strong growth in turnover and as a result mobile
communications costs and payments to UK operators have
increased.
Dividend
--------
The Board has declared an interim dividend of 8.7 pence
per ordinary share payable on February 14, 2000 to BT
shareholders on the register on January 6, 2000. This
dividend, absorbing £565 million, represents a 7.4 per cent
increase on last year's interim dividend.
Turnover
--------
Total turnover for the six months ended
September 30, 1999, including BT's share of its ventures'
turnover, grew by 19.4 per cent to £10,316 million. This
growth has been driven by the explosive demand for mobile
communications, our rapidly growing ventures in Europe and
Internet related data traffic. Additionally, our
acquisitions of interests in ventures in Asia-Pacific and
Canada and our purchase of mobile service providers in the UK
has contributed a quarter of the growth in total turnover.
Excluding the ventures, group turnover grew by
12.6 per cent in the six months. Mobile communications
turnover in the UK rose by 63 per cent to £1,043 million. In
the six months BT Cellnet's customer base grew by 1,425,000
which was more than any of its competitors in UK cellular.
In the second quarter, 924,000 customers were added, a market
share of almost 34 per cent, which was 8 per cent more than
any other operator. At the end of September BT Cellnet's
customer base of 5.95 million was 76 per cent higher than a
year earlier, and included more than 3.8 million contract
(post pay) customers, making BT Cellnet the market leader in
this higher-value customer category. BT Cellnet's turnover
in the six months grew by £473 million (71 per cent)
including £185 million from the acquisitions of Martin Dawes
and DX Communications.
Receipts from other UK operators increased by
£189 million in the six months mainly due to the greater
number of calls terminating on BT's network.
Turnover from exchange lines rose by 5.2 per cent as a
result of the strong demand for business ISDN lines. The
number of these lines increased by 300,000 in the half year
which, together with a stable number of residential lines,
increased BT's fixed network system size to 28.2 million at
September 30, 1999, 1.5 per cent higher than a year earlier.
Inland and international call volume growth continued at
a high level in the six months fuelled by calls from BT's
fixed network to mobile networks, Internet traffic and
international transit calls. Inland call growth at
11 per cent and international call growth at 14 per cent over
the twelve months to September 30, 1999 has been the
strongest this decade. Price reductions continue to have an
adverse effect on turnover growth with the result that inland
call turnover advanced by 2.4 per cent in the six months and
international call turnover rose by 5.5 per cent. The price
reductions include the 25 per cent average cut in prices for
calls from a BT line made to mobile networks from April 1999.
Growth in BT's other sales and services was driven
mainly by BT's solutions business and Concert which is
shortly to become a major part of our proposed joint venture
with AT&T.
BT's share of its ventures' turnover grew to
£1,084 million in the six months. Our 26 per cent share of
Cegetel's turnover increased by 55 per cent to £374 million
as a result of strong mobile growth. Cegetel had 5.9 million
mobile customers in France at September 1999. BT's
18 per cent interest in Airtel's turnover nearly doubled to
£121 million. Airtel has 4.0 million mobile subscribers in
Spain. BT's 45 per cent interest in Viag Interkom's turnover
in Germany quadrupled to £98 million. LG Telecom in the
Republic of Korea has contributed £93 million to BT's share
of its ventures turnover in the six months, reflecting BT's
24 per cent interest which was acquired in October 1998.
Our indicative analysis of the total turnover by service
type shows rapid growth in the newer products. These are
mobility which grew by 82 per cent, data up 20 per cent,
solutions businesses up 25 per cent, and Internet and multi-
media up by 99 per cent in the six months compared with the
first half of the 1999 financial year.
Operating costs
---------------
Operating costs grew by 14.3 per cent in the six months
to September 30, 1999, primarily through the costs incurred
by the fast growing mobile and Internet related activities.
Approximately half of this increase is due to payments to
telecommunications operators which grew by 48 per cent as a
result of the rising number of fixed to mobile phone and
Internet related calls terminating on their networks. The
6.5 per cent increase in staff costs reflects the greater
numbers of people employed in the group, mainly through
acquisitions, together with the effect of the annual pay
award.
Depreciation costs have risen by 8 per cent reflecting
the group's higher levels of capital spend. The increase in
other operating costs was associated with the cost of winning
BT Cellnet's new customers in the six months and supporting
its high growth. As a result of this increase in costs, BT
Cellnet's operating profit before goodwill amortisation was
£67 million lower in the six months than last year.
Associates and joint ventures
-----------------------------
The group's proportionate share of its ventures' net
operating losses increased by £68 million to £199 million in
the six months, prior to goodwill amortisation. Of this
total, £135 million was incurred by Viag Interkom which is
incurring planned losses as it develops its new integrated
mobile phone business in Germany. Losses continue to be
incurred by Telfort in the Netherlands and by British
Interactive Broadcasting in launching its 'Open' digital TV
service in the UK. Cegetel, Airtel and Maxis Communications
in Malaysia are among BT's ventures contributing positively
to the group's profits.
Interest and taxation
---------------------
Net interest for the six months of £132 million was
reduced by £51 million compared with the corresponding period
of the prior year. The reduction was mainly due to the
interest earned on the proceeds of the MCI shares sold in
September 1998.
The group's interest charge will rise substantially
following recent purchases and completion of the
£3.15 billion acquisition of the Securicor minority interest
in BT Cellnet which took place on November 10, 1999.
BT's effective tax rate for the half year has been
estimated at 30.5 per cent of profit. In October, BT made
its first quarterly payment of corporation tax of
£120 million on its profit for the year under the new UK
arrangements.
Acquisitions
------------
During the six months ended September 30, 1999, BT has
completed a number of acquisitions of businesses or interests
in ventures, located mainly outside the UK.
The principal transaction has been the completion on
August 31, 1999 of the joint acquisition with AT&T of a
30 per cent interest in Japan Telecom for £1.25 billion. BT
has an economic interest of 20 per cent. AT&T's economic
interest is reflected in the minority interest figures in the
accompanying financial statements. Concurrent with this
transaction, BT sold its Japanese subsidiary (BTCS) to Japan
Telecom at a profit.
In Canada, BT acquired an effective 9 per cent economic
interest in AT&T Canada Corp. In conjunction with AT&T, BT
jointly purchased 33 per cent of Rogers Cantel Communications,
a leading mobile operator, leaving BT with an effective
16.5 per cent interest. The consideration paid by BT for
these two investments totalled £658 million and was made on
August 16, 1999.
Also in August 1999, BT completed the acquisition of the
Yellow Book classified directory advertising business based
in New York, USA for a total consideration of £415 million.
In the same month, BT acquired Control Data Systems Inc, a US
based e-commerce and systems integration company for
£210 million.
In September, BT Cellnet acquired the whole of the
retail service provider DX Communications, having previously
held 26 per cent.
As previously reported, in the first quarter BT acquired
a 20 per cent interest in Impsat, a Latin American
telecommunications company, a 20 per cent interest in
SmarTone of Hong Kong and 75 per cent of the shares in Clear
Communications of New Zealand bringing our shareholding to
100 per cent.
Capital expenditure
-------------------
Capital expenditure on plant, equipment and property
totalled £1,674 million in the half year, £324 million higher
than in the first half of last year. Work continues on
enhancing the fixed network to enable customers to benefit
from the new wave communications technologies. BT Cellnet
has continued enlarging its digital cellular GSM network and
is investing in GPRS technology to introduce high-speed
mobile data communications.
Cash flow and net debt
----------------------
Cash flow from operating activities amounted to
£2,852 million in the six months. The cash outflow on
acquisitions of £3,156 million consisted in the main of the
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. We
have financed our other requirements by drawing on a
commercial paper programme under which approximately
£1.5 billion was outstanding at September 30, 1999.
Gearing at September 30, 1999 stood at 24 per cent with
net debt of £3,841 million.
On October 28, 1999, BT issued a $1,000 million Eurobond
repayable in 2004 at an interest rate of 6.75 per cent.
Net debt will increase during the third quarter
following the completion of the £3.15 billion acquisition of
the BT Cellnet minority.
Proposed global venture with AT&T
---------------------------------
Good progress continues to be made on the formation of
the 50:50 global venture with AT&T for our trans-border
telecommunication activities. The global venture will be
named Concert. BT will be transferring 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 the existing Concert business into the global venture.
The European Union regulatory clearance was received in
March 1999, the US Department of Justice gave its anti-trust
clearance in June and the global venture received regulatory
clearance from the US Federal Communications Commission on
October 22, 1999. All regulatory clearances have now been
received.
BT Cellnet
----------
BT's acquisition of Securicor's 40 per cent shareholding
in BT Cellnet, announced on July 27, 1999, was completed on
November 10, 1999. The consideration is to be in cash or loan
notes at the option of Securicor's shareholders. The cash
required of about £3.0 billion will be provided from BT's own
resources.
_____________________________________________________________
The half-year report, which contains the independent
review report, will be advertised in the Financial Times on
November 12, 1999.
The company's interim dividend for the year ending
March 31, 2000 is payable on February 14, 2000 to those
shareholders on the register on January 6, 2000. The last
date for lodging mandates for the BT dividend investment plan
is also January 6, 2000.
The third quarter and nine months' results are expected
to be announced on February 10, 2000.
GROUP PROFIT AND LOSS ACCOUNT
for the three months and six months ended September 30, 1999
--------------------------------------------------------------
Second quarter Half year
3 months ended 6 months ended
September 30 September 30
1999 1998 1999 1998
(unaudited) Notes £m £m £m £m
-------------------------------------------------------------
TOTAL TURNOVER 2 5,329 4,403 10,316 8,642
Group's share of
associates and
joint ventures
turnover 2 (627) (246) (1,084) (442)
----- ----- ----- -----
GROUP TURNOVER 4,702 4,157 9,232 8,200
Other operating
income 46 34 79 71
Operating costs (a) 3 (3,750) (3,278) (7,383) (6,460)
----- ----- ----- -----
Group operating profit 998 913 1,928 1,811
Group's share of
operating losses of
associates and
joint ventures 4 (129) (56) (224) (134)
----- ----- ----- -----
Total operating
profit 869 857 1,704 1,677
Profit on sale
of fixed asset
investments and
group
undertakings (b) 5 90 1,107 90 1,107
Interest receivable 47 28 93 50
Interest payable 6 (116) (114) (225) (233)
----- ----- ----- -----
PROFIT BEFORE TAXATION 890 1,878 1,662 2,601
TAXATION (272) (544) (507) (768)
----- ----- ----- -----
PROFIT AFTER TAXATION 618 1,334 1,155 1,833
Minority interests 7 - 4 (13)
----- ----- ----- -----
PROFIT ATTRIBUTABLE
TO SHAREHOLDERS 625 1,334 1,159 1,820
===== ===== ===== =====
EARNINGS PER SHARE 7
- BASIC 9.6p 20.7p 17.9p 28.3p
===== ===== ===== =====
- DILUTED 9.4p 20.2p 17.5p 27.7p
===== ===== ===== =====
EARNINGS PER SHARE
BEFORE EXCEPTIONAL
ITEMS AND GOODWILL
AMORTISATION 7
- BASIC 9.1p 8.8p 17.8p 16.4p
===== ===== ===== =====
- DILUTED 8.9p 8.6p 17.4p 16.0p
===== ===== ===== =====
INTERIM DIVIDEND
PER SHARE 8 8.7p 8.1p
===== =====
--------------------------------------------------------------
(a) Including exceptional
costs relating to
disengaging from MCI (11) (34) (28) (34)
(b) Exceptional gain 90 1,107 90 1,107
--------------------------------------------------------------
GROUP CASH FLOW STATEMENT
for the three months and six months ended September 30, 1999
--------------------------------------------------------------
Second quarter Half year
3 months ended 6 months ended
September 30 September 30
1999 1998 1999 1998
(unaudited) £m £m £m £m
----------------------------------------------------------------
NET CASH INFLOW FROM
OPERATING ACTIVITIES
(note 9) 1,561 1,521 2,852 2,786
DIVIDENDS FROM
ASSOCIATES AND JOINT
VENTURES 2 1 2 1
NET CASH OUTFLOW FOR
RETURNS ON INVESTMENTS
AND SERVICING OF FINANCE (76) (121) (186) (288)
TAXATION PAID (1) (6) (250) (198)
-------- -------- -------- --------
Purchase of tangible
fixed assets (1,008) (699) (1,774) (1,481)
Net sale (purchase) of
fixed asset
investments (38) 4,131 (142) 4,125
Sale of tangible fixed
assets 33 33 57 65
-------- -------- -------- --------
NET CASH INFLOW (OUTFLOW)
FOR CAPITAL EXPENDITURE
AND FINANCIAL INVESTMENT (1,013) 3,465 (1,859) 2,709
NET CASH OUTFLOW FOR
ACQUISITIONS AND
DISPOSALS (2,626) (807) (3,156) (973)
EQUITY DIVIDENDS PAID (799) (700) (799) (700)
------ ------ ------ ------
CASH INFLOW (OUTFLOW)
BEFORE USE OF LIQUID
RESOURCES AND FINANCING (2,952) 3,353 (3,396) 3,337
MANAGEMENT OF LIQUID
RESOURCES 1,367 (2,967) 1,364 (3,095)
-------- -------- -------- --------
Issue of ordinary share
capital 31 20 119 144
Issue of shares to
minorities 417 13 432 13
New loans 233 - 868 -
Repayment of loans (180) - (354) (4)
Net movement on short-
term borrowings 1,074 (355) 1,140 (316)
-------- -------- -------- --------
NET CASH INFLOW
(OUTFLOW)FROM
FINANCING 1,575 (322) 2,205 (163)
------ ------ ------ ------
INCREASE (DECREASE) IN
CASH (10) 64 173 79
====== ====== ====== ======
DECREASE (INCREASE)
IN NET DEBT (note 12) (2,504) 3,386 (2,845) 3,494
====== ====== ====== ======
-------------------------------------------------------------
GROUP BALANCE SHEET
at September 30, 1999
-------------------------------------------------------------
September 30 March 31
1999 1998 1999
(unaudited) (note 1)
£m £m £m
-------------------------------------------------------------
FIXED ASSETS
Intangible assets (note 11) 1,390 570 742
Tangible assets 18,224 17,309 17,854
Investments 4,258 1,171 1,832
------ ------ ------
23,872 19,050 20,428
CURRENT ASSETS -------- -------- --------
Stocks 203 181 159
Debtors 4,368 3,728 3,995
Investments 2,071 3,777 3,278
Cash at bank and in hand 159 125 102
----- ----- -----
6,801 7,811 7,534
----- ----- -----
CREDITORS: AMOUNTS FALLING
DUE WITHIN ONE YEAR
Loans and other borrowings 1,883 820 947
Other creditors 6,816 5,660 7,082
----- ----- -----
8,699 6,480 8,029
----- ----- -----
-------- -------- --------
NET CURRENT ASSETS
(LIABILITIES) (1,898) 1,331 (495)
------ ------ ------
TOTAL ASSETS LESS CURRENT
LIABILITIES 21,974 20,381 19,933
====== ====== ======
CREDITORS: AMOUNTS FALLING
DUE AFTER MORE THAN ONE YEAR
Loans and other borrowings 4,188 3,608 3,386
PROVISIONS FOR LIABILITIES
AND CHARGES (note 13) 1,550 2,053 1,391
MINORITY INTERESTS 636 210 216
CAPITAL AND RESERVES -------- -------- --------
Called up share capital 1,626 1,615 1,617
Reserves (note 14) 13,974 12,895 13,323
-------- -------- --------
TOTAL EQUITY
SHAREHOLDERS' FUNDS 15,600 14,510 14,940
------ ------ ------
21,974 20,381 19,933
====== ====== ======
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, 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, 1999, 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
1999 1998 1999 1998
£m £m £m £m
Inland calls 1,307 1,286 2,597 2,536
Exchange lines 871 829 1,726 1,640
Mobile communications 535 330 1,043 639
International calls 383 373 773 733
Private circuits 316 292 614 581
Receipts from UK
operators 245 140 469 280
Customer premises equip-
ment supply 217 223 426 443
Yellow Pages and other
directories 157 125 278 249
Other UK sales and
services 456 413 928 812
Other non-UK operations 215 146 378 287
------ ------ ------ ------
Group turnover 4,702 4,157 9,232 8,200
Share of associates and
joint ventures
turnover 627 246 1,084 442
------ ------ ------ ------
Total turnover 5,329 4,403 10,316 8,642
====== ====== ====== ======
3 Operating costs
---------------
Second quarter Half year
ended September 30 ended September 30
1999 1998 1999 1998
£m £m £m £m
Staff costs 1,047 977 2,052 1,926
Own work capitalised (121) (110) (223) (218)
Depreciation and
amortisation (a) 686 621 1,343 1,233
Payments to tele-
communication operators 723 495 1,420 961
Other operating
costs (b) 1,404 1,261 2,763 2,524
----- ----- ----- -----
Total operating costs
before exceptional
costs 3,739 3,244 7,355 6,426
Exceptional costs (c) 11 34 28 34
----- ----- ----- -----
Total operating costs 3,750 3,278 7,383 6,460
===== ===== ===== =====
(a) Includes goodwill amortisation of £7m for the three
months and £11m for the six months ended September 30, 1999.
(b) Includes redundancy costs.
(c) The exceptional costs relate to the group's
disengagement from MCI.
4 Group's share of losses of associates and joint ventures
--------------------------------------------------------
The results include goodwill amortisation of £14m for
the three months ended September 30, 1999 (1998 - £2m) and
£25m (1998 - £3m) for the six months ended September 30,
1999.
5 Profit on sale of fixed asset investments and group
---------------------------------------------------
undertakings
------------
The profit on sale in the three and six months ended
September 30, 1999 is mainly attributable to the sale of BT
Communications Services KK to Japan Telecom in August 1999.
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 three and six months ended
September 30, 1998 was mainly this item.
6 Interest payable
----------------
Second quarter Half year
ended September 30 ended September 30
1999 1998 1999 1998
£m £m £m £m
Group 103 108 197 221
Joint ventures and
associates 13 6 28 12
----- ----- ----- -----
Total interest payable 116 114 225 233
===== ===== ===== =====
7 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
1999 1998 1999 1998
£m £m £m £m
million shares million shares
Basic 6,491 6,446 6,479 6,427
Diluted 6,640 6,598 6,636 6,571
The items in the calculation of the earnings per share
before exceptional items and goodwill amortisation are:
Second quarter Half year
ended September 30 ended September 30
1999 1998 1999 1998
£m £m £m £m
Profit on sale of group
undertakings 90 - 90 -
Costs relating to the
disengagement from
MCI (11) (34) (28) (34)
Profit on sale of
MCI shares - 1,133 - 1,133
Provision against
another fixed asset
investment - (26) - (26)
Goodwill amortisation (21) (2) (36) (3)
----- ----- ----- -----
58 1,071 26 1,070
Tax charge attributable (24) (302) (19) (302)
----- ----- ----- -----
Net credit 34 769 7 768
===== ===== ===== =====
8 Interim dividend per share
--------------------------
The interim dividend of 8.7p per share (1998 - 8.1p) is
payable on February 14, 2000 to shareholders registered at
the close of business on January 6, 2000 and will absorb
£565m (1998 - £523m).
9 Reconciliation of operating profit to operating cash flow
---------------------------------------------------------
Second quarter Half year
ended September 30 ended September 30
1999 1998 1999 1998
£m £m £m £m
Operating profit 998 913 1,928 1,811
Depreciation 688 630 1,348 1,242
Changes in working
capital (91) (26) (375) (278)
Provision movements and
other (34) 4 (49) 11
----- ----- ----- -----
Net cash flow from
operating activities 1,561 1,521 2,852 2,786
===== ===== ===== =====
10 Expenditure on tangible fixed assets
------------------------------------
Second quarter Half year
ended September 30 ended September 30
1999 1998 1999 1998
£m £m £m £m
Plant and equipment:
Transmission equipment 410 306 702 580
Exchange equipment 87 93 173 177
Other network equipment 191 116 299 217
Computers and office
equipment 149 83 229 164
Motor vehicles and
other 88 75 152 121
Land and buildings 55 48 119 91
----- ----- ----- -----
Total expenditure 980 721 1,674 1,350
===== ===== ===== =====
11 Intangible assets
-----------------
Goodwill arising on acquisitions of subsidiary
undertakings in the six months ended September 30, 1999
amounted to £682m 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
is not being amortised and Concert is to be transferred into
the proposed global venture with AT&T in the foreseeable
future at a value higher than its current book value
including this goodwill. Amortisation for the period would
not be material.
12 Net debt
--------
(a) Analysis
At September 30 At March 31
1999 1998 1999
£m £m £m
Long-term loans and other
borrowings falling due
after more than one year 4,188 3,608 3,386
Short-term borrowings and
long-term loans and other
borrowings falling due
within one year 1,883 820 947
----- ----- -----
Total debt 6,071 4,428 4,333
Short-term investments (2,071) (3,777) (3,278)
Cash at bank (159) (125) (102)
----- ----- -----
Net debt at end of period 3,841 526 953
===== ===== =====
(b) Reconciliation of net cash flow to movement in net debt
Second quarter Half year
ended September 30 ended September 30
1999 1998 1999 1998
£m £m £m £m
Net debt at beginning of
period 1,391 3,909 953 3,977
Increase (decrease) in
net debt through cash
flow 2,504 (3,386) 2,845 (3,494)
Currency and other
movements (54) 3 43 43
----- ----- ----- -----
Net debt at end of
period 3,841 526 3,841 526
===== ===== ===== =====
13 Provisions for liabilities and charges
--------------------------------------
At September 30 At March 31
1999 1998 1999
£m £m £m
Pension provisions 927 1,207 953
Deferred taxation 538 733 350
Other provisions 85 113 88
----- ----- -----
1,550 2,053 1,391
===== ===== =====
14 Reserves
--------
£m
Balance at April 1, 1999 13,323
Profit attributable to shareholders for the
six months ended September 30, 1999 1,159
Interim dividend - payable February 14, 2000 (565)
Currency movements (a) (59)
Premium on allotment of ordinary shares 354
Movement relating to BT's employee share
ownership trust (244)
Goodwill, written off to reserves before
April 1, 1998, taken back to the profit and
loss account 6
------
Balance at September 30, 1999 13,974
======
(a) Including £14m movement on the retranslation of foreign
borrowings and other hedging instruments.
15 Analysis of turnover by service type
------------------------------------
Second quarter Half year
ended ended
September 30 September 30
1999 1998 Increase 1999 1998 Increase
£m £m % £m £m %
Fixed voice 2,741 2,679 2 5,428 5,282 3
Mobility 981 532 84 1,848 1,013 82
Data 563 453 24 1,106 918 20
Solutions 287 237 21 531 426 25
Internet and
multi-media 168 83 102 323 162 99
Customer
premises equip-
ment, Yellow
pages and other 589 419 41 1,080 841 28
----- ----- ------ -----
Total turnover 5,329 4,403 21 10,316 8,642 19
===== ===== ====== =====
This analysis involves the use of apportionments and
allocations and should be taken as indicative.
16 Selected group activities
-------------------------
Second quarter Half year
ended September 30 ended September 30
1999 1998 1999 1998
£m £m £m £m
TURNOVER (a)
BT Cellnet 604 334 1,139 666
Yellow Pages 159 125 278 249
Syntegra 123 100 220 189
OPERATING PROFIT BEFORE
GOODWILL AMORTISATION
BT Cellnet 5 41 31 98
Yellow Pages 58 52 94 99
Syntegra 7 4 10 6
(a) Turnover includes sales to other group companies or units.
17 Selected group ventures
-----------------------
Second quarter Half year
ended September 30 ended September 30
1999 1998 1999 1998
£m £m £m £m
TOTAL RESULTS (a)
Turnover
Cegetel 775 501 1,437 926
Airtel Movil 378 212 677 394
LG Telecom 236 n/a 391 n/a
Viag Interkom 123 30 218 54
Telfort 64 22 112 38
Operating profit
(loss) before
goodwill
amortisation
Cegetel 64 10 105 (8)
Airtel Movil 67 38 111 56
LG Telecom (47) n/a (38) n/a
Viag Interkom 151 (98) (301) (196)
Telfort (35) (22) (63) (57)
GROUP'S SHARE OF ASSOCIATES
AND JOINT VENTURES' RESULTS (a):
Turnover
Cegetel (26%) 202 130 374 241
Airtel Movil (18%) 68 33 121 62
LG Telecom (24%) 57 n/a 93 n/a
Viag Interkom (45%) 55 13 98 24
Telfort (50%) 32 11 56 19
Operating profit (loss)
before goodwill
amortisation
Cegetel (26%) 16 2 27 (2)
Airtel Movil (18%) 12 6 20 9
LG Telecom (24%) (11) n/a (9) n/a
Viag Interkom (45%) (67) (44) (135) (88)
Telfort (50%) (17) (11) (31) (28)
(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)
---------------------
Second quarter Half year
ended September 30 ended September 30
1999 1998 1999 1998
£m £m £m £m
Group operating profit 998 913 1,928 1,811
Depreciation and
amortisation 688 630 1,348 1,242
----- ----- ----- -----
EBITDA 1,686 1,543 3,276 3,053
Exceptional items,
excluding depreciation 9 25 23 25
----- ----- ----- -----
EBITDA before
exceptional items 1,695 1,568 3,299 3,078
===== ===== ===== =====
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
1999 1998 1999 1998
£m £m £m £m
Net income
attributable to
shareholders 542 1,293 990 1,607
Earnings per
ADS (£) 0.84 2.01 1.53 2.50
Earnings per ADS before
exceptional items (£) 0.75 0.83 1.46 1.32
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
£13,865m at September 30, 1999 (September 30, 1998 -£13,128m,
March 31, 1999 - £13,674m).
-----------------------------------------------------------------
ADDITIONAL INFORMATION
Year 2000
---------
The London Stock Exchange requires companies to summarise
their preparedness for the Year 2000 in their 1999 results
statements. BT's current position is described in the
following paragraphs.
The Year 2000 problem arises from the inability of many
computer-based systems to handle correctly the century date
change and other significant dates such as February 29, 2000.
BT has recognised this issue for some time and, in
December 1995, established a programme to tackle the problem.
Working to guidelines defined by the British Standards
Institution, we set out to deploy conformant systems,
including those, which support billing and finance, into our
computer and telecommunications networks by December 31, 1998.
BT has now substantially completed its technical work and
subject to the risks identified below, we plan to offer
customers normal levels of service during the transition into
the year 2000 and beyond.
The programme is now in its final phase where the focus
is on the continuity of our business and on providing
information on our products and services during the century
date change period. This includes maintaining conformance and
regular reviews of our contingency plans to manage the risks
of the Year 2000 transition.
BT is working closely with other UK operators, Oftel,
the utilities and HM Government (including Action 2000, the
Government appointed body dealing with Year 2000) to ensure
that not only is BT ready but also that its risks and
dependencies are fully understood.
Progress on global services is complicated by the group's
dependency on non-UK operators at the national and local
level. BT is part of the International Telecommunications
Union Taskforce and is involved in a number of activities
which include information sharing, workshops in high-risk
regions, and testing between operators. We believe much
progress has been made around the world but concern exists for
a minority of international operators where information is
sparse.
The total cost of the Year 2000 programme is expected to
be around £300 million, which is being funded by displacement
of other activities. We believe that costs will be held
within this forecast as much of the spending had been
completed by September 30, 1999.
All Year 2000 related investigation, remedial work and
testing costs have been written off as incurred as these
relate to making existing computer software Year 2000
conformant.
As the technical work is now substantially complete, the
risk of an internal failure arising from a date related
problem has been reduced. We believe the greatest risks are
external to the group and they include:
- The failure of suppliers or other third parties to meet
their obligations to BT or the failure of parts of the
services or systems of another operator could result in
liability or loss of revenue for BT;
- Unusual demand on the network. BT expects demand for
telecommunications services to exceed its normal peak at the
beginning of 2000. In particular, the long holiday means that
demands on the return to work will be unusually high;
- Many small failures, inside or outside BT, could occur
simultaneously and multiply;
- Failure in the supply chain causing stock shortages and
disruption in the transport network;
- Extreme bad weather at the turn of the year could add a
further burden.
Contingency plans are in place to mitigate these risks,
which have been built upon existing incident management and
emergency plans. These plans have then been enhanced and
developed to include a transition operating plan to deal with
the special needs of this particular new year. BT has
invested in additional equipment to manage congestion and
protect the 999 emergency service.
Where there remains a risk, additional contingency plans
are in place and a special remuneration package has been
arranged for employees to ensure that key areas of the
business are properly resourced over the New Year period.
Contingency plans will be reviewed throughout the remainder of
1999 as the requirements of our customers become clearer.
Several rehearsals of our plans have been held. We shall be
providing information on the performance of our key products
and services over the New Year period via our Year 2000
Internet site.
The activities of BT's Year 2000 programme focus on
achieving a significant reduction of the Year 2000 risk.
However, due to various unknowns, mainly relating to
insufficient information regarding the readiness of non-UK
carriers and other third parties, the effect of this issue on
BT will not be known until January 2000. There can be no
assurance or guarantee that the Year 2000 problem will not
have a material adverse effect on our business, financial
condition or results of BT's operations. A Year 2000 failure
could result in BT being unable to continue to provide its
services to its customers, loss of network capability,
inaccurate billing, loss of revenue and reputation, legal and
regulatory exposure and failure of management controls. BT
believes, however, that its Year 2000 programme is reducing
the level of uncertainty and, together with its continuity
planning, will reduce the risks it faces.
The above disclosure is a Year 2000 readiness disclosure
within the meaning of the US Year 2000 Information and
Readiness Disclosure Act of 1998 to the extent that the
disclosure relates to Year 2000 processing by BT or products
or services offered by BT.
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: prospects in the UK and internationally; the
positioning of BT, expectations regarding competition, prices,
costs, growth and the communications industry; the impact and
the consequences of the Year 2000 issue; the possible or
assumed future results of operations of BT and/or its
associates and joint ventures; the impact on BT of Concert,
the proposed global venture with AT&T; and increased interest
charges and net debt.
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 such differences 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;
convergence of technologies; the timing of entry and
profitability of BT in certain national and international
markets; the risks, costs and uncertainties (including the
lack of available information) in addressing Year 2000 issues;
and fluctuations in foreign currency exchange rates.