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BT Group plc Results for the Third Quarter to 31 December 2008

Posted on: Thursday, 12 February 2009, 07:30 CST

LONDON, Feb. 12 /PRNewswire-FirstCall/ --

Third quarter to 31 December 2008 2007 Change pounds m pounds m % Revenue 5,437 5,154 5 EBITDA(1) before one-off charges(2) 1,336 1,469 (9) EBITDA(1) 1,000 1,469 (32) Operating profit(1) 277 737 (62) Profit before tax(1) 113 601 (81) Free cash flow (32) (221) n/m Earnings per share(1) 1.1p 5.9p (81)

Key points:

• Revenue growth of 5% driven by acquisitions and foreign exchange
• EBITDA(1) decline due to poor performance in BT Global Services and one-off charges
• Rest of the business performed ahead of expectations, with EBITDA(1) growth of 5% being the best year on year performance for five years
• Total one-off charges of pounds 336m as a result of the financial and contract reviews in BT Global Services
• Completion of the ongoing contract and operational reviews may result in further substantial one-off charges in the fourth quarter
• Decisive action to improve performance in BT Global Services
• Free cash flow improved due to lower working capital outflow and lower capital expenditure
• Total labour resource reduction of 9,500 in the nine months to 31 December
• BT's retail share of the DSL and LLU installed base remained steady at 34% (28% share of net additions in the quarter)
• BT Global Services order intake remained steady at pounds 1.8bn in the quarter and pounds 8.3bn over the past 12 months

Ian Livingston, Chief Executive, commenting on the third quarter results, said:

"Three of our businesses performed ahead of expectations in the quarter and the group, excluding Global Services, delivered the best year on year profit growth for five years. However, as previously announced, the group results have been severely impacted by the performance of our Global Services division.

"We need to build a solid base in Global Services from which we can deliver positive cash flows. We have already announced changes in management and are making significant financial and operational changes to the business. We are also trying to change the division's cash flow profile to ensure it's less concentrated towards the fourth quarter and, as a result, fourth quarter cash inflow in Global Services will be significantly lower than last year's exceptionally high figure.

"With our focus on improving the performance of Global Services, continued cost savings and control on capex across the group, we expect group free cash flow, before any pension deficit payments, to be over pounds 1bn next year."

BT Group plc

RESULTS FOR THE THIRD QUARTER TO 31 DECEMBER 2008

Group results

Line of business results

Notes:

FULL VERSION OF RELEASE IS AVAILABLE BY CONTACTING BT PUBLIC RELATIONS.

Unless otherwise stated, any reference to earnings before interest, tax, depreciation and amortisation (EBITDA), operating profit, profit before tax and earnings per share (EPS) and operating costs is measured before specific items and leaver costs. Unless otherwise stated, the change in results is year on year. Underlying revenue, underlying operating costs and underlying EBITDA refer to the amount excluding contribution from acquisitions and exchange rate movements.

The commentary focuses on the results before specific items and leaver costs. This is consistent with the way that financial performance is measured by management and we believe allows a meaningful analysis to be made of the trading results of the group. Specific items are defined in note 4 on page 21. Leaver costs are shown in note 3 on page 20.

The income statement, cash flow statement and balance sheet are provided on pages 12 to 16. A reconciliation of EBITDA to group operating profit is provided on page 24. A definition and reconciliation of free cash flow and net debt are provided on pages 22 to 24.

Contact: Eileen Connolly Diane Noe 908 410 1419 703 622 3143

The fourth quarter and full year results are expected to be announced on 14 May 2009.

About BT

BT is one of the world's leading providers of communications solutions and services operating in 170 countries. Its principal activities include the provision of networked IT services globally; local, national and international telecommunications services to our customers for use at home, at work and on the move; broadband and internet products and services and converged fixed/mobile products and services. BT consists principally of four lines of business: BT Global Services, Openreach, BT Retail and BT Wholesale.

British Telecommunications plc (BT) is a wholly-owned subsidiary of BT Group plc and encompasses virtually all businesses and assets of the BT Group. BT Group plc is listed on stock exchanges in London and New York.

For more information, visit www.bt.com/aboutbt

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: revenue growth, EBITDA growth, cash generation and group cash flow; driving cost savings initiatives and control on capital expenditure; ability to deliver positive cash flow and excellent customer service in BT Global Services; one-off charges in BT Global Services; roll out of, and demand for, 21CN supported next generation, and Ethernet services; and BT's entry into new markets.

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; selection by BT and its lines of business of the appropriate trading and marketing models for its products and services; fluctuations in foreign currency exchange rates and interest rates; technological innovations, including the cost of developing new products, networks and solutions and the need to increase expenditures for 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 anticipated benefits and advantages of new technologies, products and services not being realised; the results of management's ongoing review of BT Global Services and its major contracts; and general financial market conditions affecting BT's performance and ability to raise finance. BT undertakes no obligation to update any forward-looking statements whether as a result of new information, future events or otherwise.

SOURCE BT

Source: PR Newswire

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