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BT Group plc Preliminary Results for the Fourth Quarter and Year to 31 March 2009

Posted on: Thursday, 14 May 2009, 07:21 CDT

LONDON, May 14 /PRNewswire-FirstCall/ --

Fourth quarter to 31 March Year to 31 March 2009 2008 Change 2009 2008 Change pounds m pounds m % pounds m pounds m % Revenue 5,473 5,422 1 21,390 20,704 3 EBITDA - adjusted(1) 1,354 1,569 (14) 5,552 5,911 (6) - reported (354) 1,350 n/m 3,301 5,245 (37) Profit (loss) before tax - adjusted(1) 429 714 (40) 2,081 2,633 (21) - reported (1,279) 494 n/m (134) 1,976 n/m Earnings (loss) per share - adjusted(1) 4.2p 7.0p (40) 20.3p 25.0p (19) - reported (12.6)p 5.4p n/m (1.1)p 21.5p n/m Free cash flow 1,134 1,705 (33) 737 1,503 (51) Full year proposed dividend - - - 6.5p 15.8p (59)

Key points - fourth quarter:

• Revenue growth of 1%
• EBITDA(1) decline due to an unacceptable performance in BT Global Services
• Rest of the business delivered good performance with EBITDA(2) growth of 4%, driven by 9% reduction in operating costs
• Total charges of 1.3bn pounds as a result of the completion of contract and financial reviews in BT Global Services
• Specific item charge of 280m pounds relating to the restructuring of BT Global Services, further restructuring charges of approximately 420m pounds in total over the next two financial years
• BT's retail share of the DSL and LLU net additions at 42% in the quarter - best for four years
• BT Global Services orders of 2.6bn pounds in the quarter and 8.0bn pounds over the past 12 months
• Free cash flow of 1,134m pounds in the quarter

Key points - full year:

• Revenue growth of 3%
• Free cash flow of 737m pounds in the year
• Pension deficit contributions of 525m pounds before tax relief agreed for each of next three financial years
• Final dividend of 1.1p, giving total for year of 6.5p

(1) Adjusted for contract and financial review charges, specific items and leaver costs

(2) Before specific items and leaver costs

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

"Three out of four of BT's lines of business have performed well in spite of fierce competition and the global economic downturn. However this achievement has been overshadowed by the unacceptable performance of BT Global Services and the resulting charges we have taken. During the year we have changed the leadership of BT Global Services and started to turn the division around.

"With a recovery programme for BT Global Services in place and our heightened focus on costs and customer service, we now want to accelerate our plans for our future networks. We will examine doubling the pace of the roll out of super fast broadband next year within existing capital expenditure plans, bringing fibre based services within the reach of more than a million homes and businesses and securing the jobs of a thousand BT people.

"In the coming year we will extend the record of operational delivery already demonstrated in three out of our four divisions right across the group. We expect to deliver a net reduction in operating costs and capital expenditure of well over 1 billion pounds in 2009/10. This will enable us to generate free cash flow, before any pension deficit payments, in excess of 1 billion pounds in 2009/10 and beyond.

"I believe BT will emerge from the recession a stronger company to the benefit of our customers and shareholders."

Sir Mike Rake, Chairman, commenting on the results, said:

"This has been a challenging year in which BT has had to tackle some significant issues. I am confident that decisive action by management has addressed the underlying problems within BT Global Services and has laid the foundation for the group to deliver a significant improvement in performance in 2009/10 and the years to come.

"We have agreed with the trustees of the BT Pension Scheme the pension contributions for the next three years enabling the Board to announce a sustainable dividend policy.

"The proposed final dividend of 1.1p gives a full year dividend of 6.5p which rebases dividend payments to a level which we are confident is sustainable. The Board is committed to delivering attractive returns for shareholders and believes that the operational improvements in the business will generate sufficient cash flow to allow the dividend to grow at the same time as investing in the business, reducing debt and supporting the pension scheme."

BT Group plc

RESULTS FOR THE FOURTH QUARTER AND YEAR TO 31 MARCH 2009

Group results

Fourth quarter to 31 March Year to 31 March 2009 2008 Change 2009 2008 Change pounds m pounds m % pounds m pounds m % Revenue 5,473 5,422 1 21,390 20,704 3 EBITDA - before contract and financial review charges(3), specific items and leaver costs 1,354 1,569 (14) 5,552 5,911 (6) - reported (354) 1,350 n/m 3,301 5,245 (37) Operating profit (loss) - before contract and financial review charges(3), specific items and leaver costs 563 814 (31) 2,662 3,022 (12) - reported (1,145) 595 n/m 411 2,356 (83) Profit (loss) before taxation - before contract and financial review charges(3), specific items and leaver costs 429 714 (40) 2,081 2,633 (21) - reported (1,279) 494 n/m (134) 1,976 n/m Earnings (loss) per share - before contract and financial review charges(3), specific items and leaver costs 4.2p 7.0p (40) 20.3p 25.0p (19) - reported (12.6)p 5.4p n/m (1.1)p 21.5p n/m Full year proposed dividend 6.5p 15.8p (59) Capital expenditure 758 774 (2) 3,088 3,339 (8) Free cash flow 1,134 1,705 (33) 737 1,503(4) (51) Net debt 10,361 9,460 10

Line of business results

Operating Fourth profit quarter Revenue Change EBITDA(1) Change (loss)(1) Change to 31 March pounds m % pounds m % pounds m % BT Global Services 2,366 6 43 (86) (198) n/m BT Retail 2,101 (3) 435 11 324 19 BT Wholesale 1,151 (2) 311 (3) 145 107 Openreach 1,293 (2) 512 3 296 (9) Other 13 n/m 53 (9) (4) n/m Intra-group items (1,451) 1 - - - - Total 5,473 1 1,354 (14) 563 (31)

Notes:

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 measure excluding contribution from foreign exchange rate movements and acquisitions.

The commentary for the fourth quarter focuses on the results before contract and financial review charges, 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 25. Leaver costs are shown in note 3(b) on page 24.

The income statement, cash flow statement and balance sheet are provided on pages 16 to 20. A reconciliation of EBITDA to group operating profit is provided on page 28. A definition and reconciliation of free cash flow and net debt are provided on pages 26 to 28.

(1) Adjusted for contract and financial review charges, specific items and leaver costs

(2) Before specific items and leaver costs

(3) Contract and financial review charges of 1.3bn pounds in Q4 2008/09 (1.6bn pounds in FY 2008/09) relate to BT Global Services

(4) Includes payment of pension deficiency contributions of 320m pounds and tax receipts of 504m pounds

A presentation for analysts and investors will be held in London at 9.00 a.m. today.

The Annual Report and Form 20-F is expected to be published on 27 May 2009.

The Annual General Meeting of BT Group plc will be held at the Barbican Centre, London on 15 July 2009.

The first quarter results for 2009/10 are expected to be announced on 30 July 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, BT Retail, BT Wholesale and Openreach.

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, operating cost and capital expenditure reduction, and free cash flow; plans for future networks and roll out of super fast broadband; dividend sustainability and growth; expected pension net finance expense, and pension funding; debt reduction and future cash generation; Global Services' revised operating model and restructuring plan; and group re-financing requirements.

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 underlying assumptions and estimates made in respect of major customer contracts proving unreliable; the aims of the Global Services' revised operating model and restructuring plan not being achieved; completion of the pension fund actuarial valuation; 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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