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12 February 2009 
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BT GROUP PLC

RESULTS FOR THE THIRD QUARTER TO 31 DECEMBER 2008

Table of summary of financial summary

 

Key points:

  • Revenue growth of 5% driven by acquisitions and foreign exchange
  • EBITDA1 decline due to poor performance in BT Global Services and one-off charges
  • Rest of the business performed ahead of expectations, with EBITDA1 growth of 5% being the best year on year performance for five years
  • Total one-off charges of £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 £1.8bn in the quarter and £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 £1bn next year.”

 

Group results

Table of Group financial figures

Line of business results

Table of Line of business financial figures

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 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 of the attachments. Leaver costs are shown in note 3 on page 20 of the attachments.

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


GROUP RESULTS

Results overview
Revenue of £5,437m was 5% higher in the quarter, benefiting from favourable foreign exchange movements of £198m and the impact of acquisitions of £153m. EBITDA before one-off charges decreased by 9% to £1,336m due to the poor performance within BT Global Services. The rest of the group has performed well and delivered results ahead of expectations with EBITDA growth of 5% being the best year on year performance for five years. Both BT Retail and Openreach delivered growth in EBITDA and in BT Wholesale the rate of year on year EBITDA decline has slowed compared with recent quarters. This good performance is primarily due to the effective delivery of cost savings within each of these lines of business. Foreign exchange movements have negatively impacted EBITDA by £17m and the impact of acquisitions increased EBITDA by £12m. As a result of the impact of BT Global Services’ results, EPS decreased by 81% to 1.1p.

EBITDA before one-off charges in BT Global Services of £17m is disappointing and is primarily due high costs and the slower delivery of cost savings, the continued decline in higher margin UK business, changes in assumptions and estimates on some major contracts and the negative effect of foreign exchange movements. The new management team in this division and the new group finance director are reviewing the financial position of BT Global Services and its major contracts. The financial review covers the financial performance of the business and balance sheet position as at 31 December 2008. The contract reviews involve a reassessment of the estimates and assumptions associated with certain major contracts and have been conducted jointly with external advisers. The reviews cover the largest and most complex contracts and take into account a more cautious view of the recognition of cost efficiencies and other changes in assumptions and estimates, particularly in light of the current economic outlook. Substantial one-off charges of £336m have been recorded in the quarter as a result of these financial and contract reviews. After the impact of these one-off charges, group EBITDA decreased by 32% to £1,000m.

The remaining contract reviews, together with ongoing commercial discussions in respect of two of our largest contracts, are likely to be completed during the fourth quarter. These may result in further substantial one-off charges in the current financial year, the need for and size of which will be highly dependent on the outcome of the ongoing discussions.

We have also initiated a review of BT Global Services’ operations which will help us drive our cost savings initiatives and further enhance our ability to serve customers. We remain committed to the success of this division and believe these changes will create a stronger business that can deliver positive cash flow in the future and excellent customer service. The operational review we are conducting may also result in additional substantial one-off charges in respect of the reorganisation of the division, rationalisation of networks and other measures to reduce the future cost base of BT Global Services. The business continues to offer a compelling customer proposition and order intake in BT Global Services remains steady, with contract wins of £1.8bn in the third quarter and £8.3bn achieved over the past 12 months.

We had 13.6m wholesale broadband connections (DSL and LLU) at 31 December 2008, including 5.5m LLU lines. There were 296,000 net additional broadband connections in the quarter. Our retail share of those net additions was 28%. In the maturing broadband market, we remain the UK’s number one retail broadband provider with a customer base of 4.7m and a retail market share of the DSL and LLU installed base of 34% at 31 December 2008.

Outlook
While we expect to continue to deliver revenue growth for the full year, group EBITDA and EPS will be affected by the poor performance and one-off charges in BT Global Services. In BT Retail, we expect to see continued EBITDA growth in the fourth quarter. In BT Wholesale, the trends seen in prior quarters are expected to improve in the fourth quarter and we expect Openreach to be broadly flat. We expect that, in aggregate, the group excluding BT Global Services will deliver EBITDA growth of around 3% in the fourth quarter. In BT Global Services, the ongoing contract and operational reviews may result in further substantial one-off charges in the fourth quarter.

We need to build a solid base in BT 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 that it is more predictable throughout the year and less concentrated towards the fourth quarter. As a result, the fourth quarter cash inflow in BT Global Services will be significantly lower than last year's exceptionally high figure.

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


OPERATING REVIEW

BT Global Services

Table of BT Global Services financial figures

Revenue
Revenue from our BT Global Services division increased by 15% to £2,253m, due to the impact of foreign exchange rate movements which contributed 9% and acquisitions which contributed 6%. Underlying revenue was broadly flat at £1,957m. We saw a continued strong performance outside the UK, with revenue growth of 40%, including the impact of foreign exchange and recent acquisitions, which offset a UK revenue decline of 3%.

Total order intake in the quarter remained steady at £1.8bn, leading to a 12 month rolling order intake of £8.3bn compared with £8.6bn last year. In the current economic environment we expect customers to take longer to make decisions which may lead to a slowdown in the conversion of prospects into customer orders. Our products and services are well placed to help our global customers reduce costs and streamline their businesses in a challenging market environment. We are seeing continued interest in network operational efficiency, workforce management, unified communications (especially telepresence and conferencing) and global hosted contact centre solutions as our customers respond to current market conditions. This is evidenced in the contracts signed in the quarter, which include Swift, which provides the communications platform, products and services to connect over 8,600 banking organisations, securities institutions and corporate customers in more than 208 countries, for the provision of BT's Unified Communications Video solution, connecting offices across Europe, the US and Asia. We also signed a contract with Munich Re, the world's biggest re-insurer, covering locations across 33 countries for security and network services.

We have strengthened our position in the public sector with contract wins with central and local government in the UK, including an extension to our existing arrangement with Liverpool City Council and a new contract with Sandwell Metropolitan Borough Council. Outside the UK, government contracts include a contract with Barcelona City Council for 500 connections across the city that will provide free internet access and a contract with the Colombian government supporting digital inclusion, through which BT will convert 755 public schools into telecentres. BT is also part of the Match consortium that won a €30m contract for the housing and hosting of the national IT infrastructure of the Dutch Ministry of Home Affairs.

Operating results
EBITDA before one-off charges decreased to £17m, primarily due to high costs and the slower delivery of cost savings, the continued decline in higher margin UK business, changes in assumptions and estimates on some major contracts and the negative effect of foreign exchange movements. Depreciation and amortisation decreased by 6% to £182m due to lower depreciation in respect of UK assets supporting customer contracts, which has been partially offset by the adverse impact of foreign exchange movements. One-off charges of £336m were recorded as a result of the financial and contract reviews within BT Global Services, resulting in an EBITDA loss of £319m. The remaining contract reviews, together with ongoing commercial discussions in respect of two of our largest contracts are likely to be completed in the fourth quarter. These may result in further substantial one-off charges in the current financial year.

The operational review currently underway in BT Global Services will help us drive cost savings and create a stronger business that can deliver positive cash flow in the future and excellent customer service. The review may result in additional substantial one-off charges in respect of the reorganisation of BT Global Services, rationalisation of networks and other measures to reduce the future cost base. We have a number of cost saving initiatives in place around external procurement, access costs and the workforce. To date BT Global Services has reduced total labour resource by some 1,500 and further reductions are expected by the end of the current financial year. We do not expect to see the impact of these and other cost savings programmes until the 2009/10 financial year.

BT Retail

Table of BT Retail financial figures

BT Retail’s revenue decreased by 0.6% to £2,134m as a result of a 7% decline in calls and lines revenue, which was partially offset by 8% growth in networked IT services revenue and 10% growth in broadband and convergence revenue. Excluding the impact of foreign exchange movements and acquisitions, revenue declined by 3%.

Gross margin was held flat in the quarter at 37.4% despite the challenging economic environment and competitive pressures. A strong focus on cost control resulted in a net reduction of 7% in SG&A costs, after absorbing the costs associated with recent acquisitions. After adjusting for the impact of foreign exchange movements and acquisitions, SG&A costs reduced by 10%.

These savings have been delivered through focused cost transformation programmes in all BT Retail businesses. The contact centres have improved the quality of service delivered to customers, while also reducing overall costs by 16%. This was achieved by improving the business processes under the ‘right first time’ initiative which is already delivering benefits to customers, having reduced repair call volumes by 10%. The billing unit has achieved 12% savings with a focus on improved bad debt management, labour productivity, systems rationalisation and supplier management. Ireland has also delivered savings through labour efficiencies, property rationalisation and optimisation of marketing spend. All of these actions have contributed to a 6% increase in EBITDA to £428m.

Consumer
In the Consumer division, revenue declined by 6%. Revenue from calls and lines continued to decline with an increased rate of decline in consumer lines, partly offset by an increase in broadband revenue. The BT Vision customer base has now reached more than 398,000 customers. An increasing number of new BT Vision customers are subscribing to one or more of the on-demand programming packages that are available.

Broadband revenue grew by 9% with net additions of 83,000 in the quarter, taking total customers to 4.7m and retaining BT’s status as the UK’s most popular broadband supplier. BT’s retail market share of the DSL and LLU installed base remained steady at 34% at 31 December 2008.

During the quarter, use of BT’s high speed wireless broadband (Wi-Fi) network continued to increase, and more commercial and residential locations have been added. BT Openzone minutes almost doubled in the quarter compared with the prior year and usage is up 13% on the previous quarter. Further UK hotspots have been added, and new agreements signed with international operators Swisscom Hospitality Services and SFR in France. BT Openzone is now also available at more than 50,000 worldwide locations through roaming partners. BT FON membership continued to climb and members now total 163,000, up 9% on the previous quarter. BT customers can now go online at over 120,000 locations in the UK and Ireland with extensive coverage across 12 major city centres.

BT continues to drive value propositions for BT customers, with the launch of the BT Mobile Saver plan which significantly cuts the cost of making a call to a mobile phone from a landline, and calls to 0845 and 0870 numbers are now free in call packages. BT is the first UK phone company to make these calls free for customers. In the quarter an increased number of customers have switched to higher value call packages, recognising the value these packages offer.

Business
The BT Business division achieved 0.4% revenue growth in the quarter, with growth in mobility and convergence and networked IT services revenue being partly offset by a decline in calls and lines revenue. BT Business has a strong commitment to delivering IT and communications services to meet the requirements of small and medium enterprises (SMEs), which has generated good growth in networked IT services revenue over the last year. BT Business now provides IT services to more than 50,000 small and medium businesses across the UK. The number of customers registered on BT Tradespace, the online community and marketplace for UK SMEs, has now grown to over 319,000 customers. BT Business also launched the first broadband package to offer mobile broadband as part of an all-inclusive option that enables SMEs to connect on the move for free.

Enterprises
The Enterprises division delivered revenue growth of 18%, largely driven by growth in BT Conferencing with the acquisition of Wire One Communications, and by BT Directories following the acquisition of Ufindus. After adjusting for foreign exchange and acquisitions, Enterprises revenue was broadly flat. BT Conferencing held its position as the number one video conferencing provider in the world and also secured several significant contracts during the quarter.

BT Ireland
BT Ireland’s revenue increased by 5% due to the impact of foreign exchange movements and delivered growth in EBITDA due to good cost efficiencies. Key contracts secured in the quarter include Danske Bank, EMC and the Police Service of Northern Ireland.

BT Wholesale

Table of BT Wholesale financial figures

Revenue
BT Wholesale’s revenue declined by 2% to £1,183m, continuing the slowdown in the rate of decline during the financial year. The year on year revenue decline continues to reflect the reduction in low margin transit revenue (£36m), conveyance revenue (£28m) and broadband revenue (£31m) as a result of continued migrations to LLU. We expect to see further declines in our transit revenue going forward from both the price effect of the reduction in mobile termination rates and volumes as customers connect directly to each other. This decline was partially offset by continued good performance in our managed network solutions business where revenue increased by 118% to £166m, with the new MBNL mobile access deal and Post Office contract being key contributors. Managed network solutions revenue now represents 19% of external revenue (Q3 07/08: 9%). BT Wholesale has now signed long term managed services contracts with more than half of its 15 largest wholesale customers by revenue.

Operating results
Gross profit decreased by 10% to £358m, principally reflecting the impact of LLU migrations. The gross margin impact of the revenue decline was partially offset through cost efficiency initiatives. Our headcount driven cost efficiency programmes contributed to reductions in SG&A costs of 29%. In addition, continued improvements in operational performance and our focus on getting processes ‘right first time’ is helping to eliminate costs through improved quality of service. We expect to benefit from further improvements in this area during the remainder of the year.

EBITDA decreased by 7% to £319m, a slowdown in the rate of decline since the second quarter. Depreciation and amortisation reduced by 21% to £178m as a result of lower depreciation on legacy assets, contributing to an operating profit of £141m.

3.7m UK homes and businesses were receiving services through our wholesale white label platforms at 31 December 2008, an increase of around 300,000 in the quarter.

We continued the roll out of our 21st Century Network (21CN) supported next generation broadband and Ethernet services during the quarter. Progress on rolling out Ethernet to date means that BT Wholesale now has the largest Ethernet footprint in the UK market and, by the end of this financial year, we will be twice as large as BT’s nearest wholesale competitor.

Openreach

Table of Openreach financial figures

Revenue
Openreach’s external revenue increased by 18% to £257m, driven by the increase in the provision of Ethernet backhaul services and the migration of lines to LLU and WLR by external communication providers (CPs). At 31 December 2008 we had 5.5m external LLU lines (net additions of 0.4m in the quarter) and 5.3m WLR lines and channels (net additions of 0.2m in the quarter).

Revenue from other BT lines of business decreased by 3% to £1,072m, primarily due to the impact of the continued migration to LLU and WLR by external CPs and lower connections as a result of external factors such as the downturn in the housing market. At 31 December 2008 we had 8.1m LLU lines, and 20.4m WLR lines and channels with other BT lines of business which are down 0.1m and 0.7m, respectively, in the quarter due to the volume shift from wholesale broadband to LLU. Total revenue at £1,329m has increased by 0.8%.

Operating results
Operating costs were reduced by £33m to £796m in the quarter. The health of our network continues to improve with the number of access faults falling by 21%. We are also continuing to improve our performance on ‘right first time’, such as significant reductions in MPF early life failures of 37%. These improvements and the lower levels of connection and migration activity have enabled us to significantly reduce the amount of third party resource and overtime and also to focus on proactive capital investment. The benefits from this and a number of other cost reduction activities such as cable recovery have more than offset the effects of inflation, resulting in an overall 4% reduction in operating costs.

This has contributed to the increase in EBITDA of 9% to £533m. Depreciation and amortisation costs increased by £23m to £189m due to increased depreciation across all asset classes, reflecting the high level of capital investment expenditure in prior periods on equivalent systems, provisioning activity and on improving the health of the network. Operating profit increased by 7% to £344m.

We have now concluded an extensive CP consultation around another product in our Next Generation Access (NGA) portfolio, Generic Ethernet Access over Fibre to the Cabinet. Five CPs have signed up to support a pilot of the service in the Summer. The product will initially support speeds of up to 40Mbps.

A number of price changes have recently taken effect. There have been major reductions in our Ethernet portfolio in both connection and rental prices with effect from 1 February 2009. This will support and improve the access and backhaul markets in the UK at lower costs and support the growth of data intensive applications.

OFCOM has issued its FFR consultation document ‘New Pricing Framework for Openreach’ which recognises that unbundled line prices will rise and the final decision is expected to allow the price to increase from 1 April 2009.

 

GROUP FINANCIAL REVIEW

Group revenue
Revenue in the quarter was £5,437m, an increase of 5%. Foreign exchange movements and the impact of acquisitions contributed £198m and £153m, respectively, to revenue growth. Underlying revenue decreased by 1%.

Product revenue
Managed solutions revenue, including MPLS and networked IT services, increased by 23% to £1,662m, and broadband and convergence revenue increased by 6% to £679m. This was partially offset by an 8% decline in revenue from calls and lines to £1,558m, a continuation of the recent trend. Revenue from transit, conveyance, interconnect circuits, WLR, global carrier and other wholesale products increased by 4% to £1,538m.

Customer segment revenue
Revenue from our Major corporate customer segment increased by 15% to £2,166m, primarily reflecting the favourable impact of foreign exchange movements and recent acquisitions. Excluding these, Major corporate revenue was held flat despite the challenging economic conditions.

Revenue from our Business customer segment (comprising smaller and medium sized UK businesses) increased by 2% to £659m, due to growth in mobility and convergence and networked IT services revenues.

Revenue from our Consumer customer segment decreased by 6% to £1,218m, with the impact of lower calls and lines revenue being partially offset by growth in broadband revenue. The 12 month rolling average revenue per consumer household increased by £2 in the quarter to £285, reflecting the increasing number of customers buying multiple services from BT, particularly the take up of broadband in our existing customer base, together with the successful retention of higher value customers.

Wholesale (UK and global carrier) customer revenue increased by 4% to £1,383m, reversing the trend seen in recent quarters. The increase is the result of higher revenues from LLU, managed network solutions and our global carrier business, which were partially offset by the decline in low margin transit revenue, conveyance volumes and revenue from DSL broadband.

Operating results
Other operating income decreased by £12m to £71m and includes income from the sale of scrap materials and cable recoveries, together with income from the sale of intellectual property.

Group operating costs before depreciation and amortisation and leaver costs, excluding BT Global Services, decreased by 4% to £1,930m, or 7% on an underlying basis excluding foreign exchange rate movements of £31m and acquisitions of £32m. The reduction reflects the success of our cost savings initiatives, which delivered gross savings of £141m in the quarter. As part of our cost savings initiatives we have reduced our total labour resource by around 9,500 in the nine months to 31 December and we expect to achieve a reduction of more than 10,000 by the end of the financial year. Most of the reductions will be in the area of indirect labour, including agency, contractors, subcontractors and offshore workers.

Total group operating costs before leaver costs increased by 16% to £5,231m, largely due to the impact of one-off charges in BT Global Services of £336m, foreign exchange rate movements of £215m and acquisitions of £141m. Underlying operating costs before leaver costs, excluding the impact of one-off charges in BT Global Services, increased by 1%. Staff costs increased by 3% to £1,317m, largely due to acquisitions made in the past 12 months, with the impact of pay inflation being more than offset by cost savings. Leaver costs were £33m (Q3 07/08: £20m). Payments to other telecommunication operators increased by 7% to £1,094m as a result of foreign exchange movements. Other operating costs before specific items of £2,289m increased by 39%, largely reflecting the impact of the one-off charges within BT Global Services, the adverse impact of foreign exchange, the impact of acquisitions and the slower delivery of cost efficiency savings within BT Global Services.

Group EBITDA before one-off charges decreased by 9% to £1,336m due to the poor performance within BT Global Services, which was partially offset by the strong performance in the other lines of business. Depreciation and amortisation decreased by 1% to £723m. Group operating profit before specific items and leaver costs decreased by 62% to £277m.

Net finance expense
Net finance expense before specific items was £180m, an increase of £46m. The increase primarily reflects the higher average net debt, due mainly to the share buyback programme which was suspended at the end of July 2008 and the cost of acquisitions, together with a £26m reduction in net finance income associated with our defined benefit pension scheme to £79m. In addition, the fair value movements on economic hedges that do not qualify for hedge accounting under IAS 39 reduced by £15m. In the prior year the fair value movements included a charge of £26m on a low cost borrowing transaction which was marginally earnings positive after tax in the period.

Taxation
The effective tax rate on the profit before specific items was 22.8% in the nine months to 31 December (Q3 07/08: 20.7%) compared with the UK statutory rate of 28% (FY 07/08: 30%), reflecting the lower effective tax rate on our overseas profits and the continued focus on tax efficiency within the group.

Specific items
Specific items are defined in note 4 on page 21 of the attachments.

The specific item credit of £36m relates to the reassessment of the value of our share of the net assets of an associated undertaking.

Specific items in the prior period included restructuring costs of £76m relating to the group’s transformation and reorganisation activities, a charge of £50m as a result of the completion of the review of circuit inventory and other working capital balances and losses on business disposals of £9m.

Earnings per share
Earnings per share before specific items and leaver costs decreased by 81% to 1.1p. This is based on average shares in issue of 7,733m (Q3 07/08: 8,037m) with the reduction being due to the shares repurchased under the buyback programme.

Cash flow and liquidity
Net cash inflow from our operating activities in the third quarter was £1,060m (Q3 07/08: £1,000m). Free cash flow was an outflow of £32m, an improvement of £189m over the prior year. The lower free cash outflow reflects the impact of the lower working capital outflow, lower capital expenditure, lower restructuring costs and the timing of interest payments. Free cash flow is defined and reconciled in note 7 on page 22 of the attachments.

Net cash outflow for the purchase of property, plant and equipment and software was £789m (Q3 07/08: £877m). The net cash outflow on acquisition of subsidiaries in the quarter was £29m (Q3 07/08: £42m) and related to deferred consideration in respect of acquisitions completed in prior periods.

In advance of the difficult credit market conditions, we have raised long term funds of £4.3bn in the period since June 2007. Our total term debt and committed facilities of £13.3bn provide us with a strong liquidity and funding position and, based on current expectations, the group has no significant re-financing requirements until December 2010. Cash collection from our customers remains strong, in spite of the current economic conditions.

Capital expenditure
Capital expenditure decreased by 12% to £762m due to a reduction in expenditure on legacy transmission and exchange assets, reduced provisioning volumes in Openreach reflecting a lower level of house moves and lower LLU volumes from other CPs. This has been partly offset by increased expenditure on 21CN as we move towards our 40% availability of ADSL 2+ for the addressable market by April 2009.

Net debt
Net debt was £11,060m at 31 December 2008 (31 December 2007: £10,175m; 31 March 2008: £9,460m). This increase mainly reflects £0.7bn invested in the share buyback programme and acquisitions over the past 12 months. Net debt is defined and reconciled in note 8 on page 23 of the attachments.

Pensions
The IAS 19 net pension position at 31 December 2008 was a deficit of £1.7bn net of tax (£2.4bn gross of tax), compared with a surplus of £2.0bn at 31 March 2008 (£2.8bn gross of tax), being a decrease of £3.7bn net of tax (£5.2bn gross of tax). The market value of the BT Pension Scheme assets was £31.5bn at 31 December 2008 (31 March 2008: £37.3bn). The value of the BT Pension Scheme liabilities was £33.8bn (31 March 2008: £34.4bn). The IAS 19 position is based on an AA bond rate of 6.45% (31 March 2008: 6.85%) and an inflation rate of 2.70% (31 March 2008: 3.50%).

Pension review
In November 2008 we announced a review of our UK pension arrangements. We concluded the consultation with employees in January and will be implementing the proposed changes in the BT Pension Scheme with effect from 1 April 2009.

1 Before specific items and leaver costs
2 One-off charges of £336m relate to BT Global Services
3 Includes payment of pension deficiency contributions of £320m and tax receipts of £504m


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

   The full release and financial accounts are available to download as a PDF documentsPDF documents.

Full financial release
Group income statement
Group statement of recognised income and expense
Group cash flow statement
Group balance sheet
Notes
Independent review report to BT Group plc on the interim financial information
Forward-looking statements - caution advised