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8 May 2014

BT Group plc
Results for the fourth quarter and year to
31 March 2014

BT Group plc (BT.L) today announced its results for the fourth quarter and year to 31 March 2014.

Fourth quarter and full year results:

Fourth quarter and full year results

Gavin Patterson, Chief Executive, commenting on the results, said:

“We have made strong progress this year. Underlying revenue, adjusted profit before tax and normalised free cash flow have all grown and beaten market expectations.

“Our investment in fibre is delivering with 1.3 million more premises taking fibre this year, almost doubling the number of homes and businesses now connected. Our rollout is ahead of schedule with our fibre network passing more than 19 million premises, around two thirds of the UK. But we are not stopping there. All of our BDUK projects are underway and will help take the coverage of all fibre networks to at least 90% of the UK, bringing significant benefits to communities across the nation.

“BT Sport has proved very popular and we are delighted the service is now in around five million homes. For BT Consumer it underpinned a record 9% growth in revenue in the fourth quarter and the lowest line losses in over five years. We achieved an excellent 79% share of broadband5 market net additions in the quarter.

“BT Global Services delivered a 9% increase in its order intake this year and continued to see double-digit revenue increases in the high-growth regions of the world. BT Business and BT Wholesale have also delivered decent order intakes. Our cost transformation programmes are helping to drive the strong cash flow of the group.

“These results provide a strong platform for growth and from which to achieve our outlook for the years ahead. Our performance in the year means that we are growing our full year dividend by 15% to 10.9p and we now expect to increase our dividend by 10%-15% for each of the next two years. We continue to focus on improving the service we provide to our customers and delivering on our investments.”

1 Certain results for the fourth quarter and year to 31 March 2013 have been restated. See Note 1 to the condensed consolidated financial statements
2 Before specific items
3 Excludes specific items, foreign exchange movements and the effect of acquisitions and disposals
4 Before specific items, purchases of telecommunications licences, pension deficit payments and the cash tax benefit of pension deficit payments
5 DSL and fibre


Key points for the fourth quarter:

  • Underlying revenue excluding transit up 1.2%
  • EBITDA1 up 2% and earnings per share1 up 10%
  • Underlying operating costs2 excluding transit up 0.5%; down 5% excluding our investments in BT Sport and the non-cash increase in the pensions operating charge
  • 347,000 net fibre connections, up 28%, of which 249,000 are BT retail customers
  • BT Global Services order intake of £2.2bn, up 13%

Key points for the year:

  • Underlying revenue excluding transit up 0.5%, reversing decline of 3.1% in prior year and achieving our outlook of an improved trend
  • EBITDA1 flat at £6,116m compared with our outlook of £6.0bn-£6.1bn
  • Normalised free cash flow3 of £2,450m, up £150m, ahead of our outlook of around £2.3bn
  • Underlying operating costs2 down 3% excluding transit, our investments in BT Sport and the non-cash increase in the pensions operating charge
  • Earnings per share1 up 7%
  • Net debt at £7,028m, down £769m
  • Proposed final dividend of 7.5p, up 15%, giving full year dividend of 10.9p, also up 15%

Future outlook:

We are confident we will achieve our goal of sustainable, profitable revenue growth and we have updated our outlook as set out below: Future outlook

  • 2014/15 underlying revenue excluding transit expected to be broadly level with 2013/14 despite an expected negative year on year impact of around £100m in UK local government revenues
  • 2014/15 normalised free cash flow3 outlook above our previous expectations reflecting capital expenditure efficiencies. Cash flow growth to continue in 2015/16
  • Dividend and share buyback policy extended by one year to 2015/16

1 Before specific items

2 Excludes specific items, foreign exchange movements and the effect of acquisitions and disposals and is before depreciation and amortisation

3 Before specific items, purchases of telecommunications licences, pension deficit payments and the cash tax benefit of pension deficit payments

GROUP RESULTS FOR THE FOURTH QUARTER AND YEAR TO 31 MARCH 2014

GROUP RESULTS FOR THE FOURTH QUARTER AND YEAR TO 31 MARCH 2014

Note: Reported revenue and EBITDA in the year to 31 March 2013 included a specific item charge of £151m and £36m, respectively, relating to Ofcom’s determinations on historic Ethernet pricing as well as a specific item charge of £85m and £58m, respectively, relating to the retrospective regulatory impact of the Court of Appeal decision on ladder pricing.

Line of business results

1 Certain results for the fourth quarter and year to 31 March 2013 have been restated. See Note 1 to the condensed consolidated financial statements

2 Before specific items.  Specific items are defined on page 4 and analysed in Note 4 to the condensed consolidated financial statements

3 Before purchases of telecommunications licences

4 Before specific items, purchases of telecommunications licences, pension deficit payments and the cash tax benefit of pension deficit payments

Notes: 

1.    The commentary focuses on the trading results on an adjusted basis, which is a non-GAAP measure, being before specific items.  Unless otherwise stated, revenue, operating costs, earnings before interest, tax, depreciation and amortisation (EBITDA), operating profit, profit before tax, net finance expense, earnings per share (EPS) and normalised free cash flow are measured before specific items.  This is consistent with the way that financial performance is measured by management and reported to the Board and the Operating Committee and assists in providing a meaningful analysis of the trading results of the group.  The directors believe that presentation of the group’s results in this way is relevant to the understanding of the group’s financial performance as specific items are those that in management’s judgement need to be disclosed by virtue of their size, nature or incidence.  In determining whether an event or transaction is specific, management considers quantitative as well as qualitative factors such as the frequency or predictability of occurrence.  Specific items may not be comparable to similarly titled measures used by other companies. Reported revenue, reported operating costs, reported EBITDA, reported operating profit, reported profit before tax, reported net finance expense, reported EPS and reported free cash flow are the equivalent unadjusted or statutory measures.  Reconciliations of revenue, operating costs and operating profit are set out in the Group income statement.  Specific items are set out in Note 4.  Reconciliations of EBITDA, adjusted profit before tax and adjusted EPS to the nearest measures prepared in accordance with IFRS are provided in Notes 7, 8 and 9 respectively.   

  2.   Trends in underlying revenue, trends in underlying operating costs, and underlying EBITDA are non-GAAP measures which seek to reflect the underlying performance of the group that will contribute to long-term profitable growth and as such exclude the impact of acquisitions and disposals, foreign exchange movements and any specific items.  We focus on the trends in underlying revenue and underlying operating costs excluding transit as transit traffic is low-margin and is significantly affected by reductions in mobile termination rates.

BT Group plc
GROUP RESULTS FOR THE YEAR TO 31 MARCH 2014

Overview
Our results for the year were in line with or ahead of the outlook that we announced at the start of the year. They show that we are making good progress towards our goal of sustainable, profitable revenue growth. Underlying revenue excluding transit was up 0.5% for the year and 1.2% for the quarter - our investments are delivering and more than offset the regulatory pressures on our business.

During the fourth quarter we successfully completed the separation of BT Retail into two new businesses: BT Business and BT Consumer. We did this to allow us to better serve our SME and consumer customers and better deliver against our strategic priorities. We now have five customer-facing lines of business.

BT Global Services’ investments in the high-growth regions of the world are delivering positive results. These continue to help offset revenue declines elsewhere within the division including in the UK public sector. BT Business reported an improved revenue trend, supported by IT services and growth in BT Ireland. BT Consumer generated strong revenue growth driven primarily by higher broadband and TV revenue reflecting the benefit of BT Sport. BT Wholesale’s revenue was impacted by Ofcom’s Narrowband Market Review and the migration of services off a previously terminated contract. The small decline in Openreach revenue reflects the impact of regulation which offset strong growth in fibre take-up.

All of our lines of business made good progress in transforming their costs. In BT Global Services, we are rolling out learnings from our UK cost transformation programmes to our operations worldwide. The progress it has made on costs underpinned its strong cash flow growth for the year. Cost transformation and an improved revenue performance also helped BT Consumer achieve EBITDA growth in the fourth quarter. Across the group we have focused on improving end-to-end processes which span our lines of business.

BT Global Services generated a good order intake of £6.9bn, up 9% for the year. BT Business also grew its orders, which were up 3% to £2.0bn. BT Wholesale achieved £1.9bn of orders - slightly down on last year, which included a number of major contract re-signs, but significantly higher than previous years. BT Consumer successfully launched BT Sport in August. We now have around 3m direct BT Sport customers and, including our wholesale deals, the service is in around 5m homes.

We have invested in customer service by introducing diagnostic tools and providing our engineers with new equipment to help identify and locate faults more quickly. Our customer service improved this year, but not by enough. This was partly because the widespread flooding across the UK led to record fault volumes and because the demand for BT Sport stretched our contact centre resources. We are making further investments to improve our customer service by enhancing the resilience of our network and training contact centre agents so they will have a wider range of skills.

Openreach is ahead of its original schedule with rolling out fibre having passed more than 19m premises, around two thirds of the UK. We are making good progress with extending the reach of fibre even further with all of our BDUK contracts now in build phase. In terms of take-up, Openreach achieved 1.3m net fibre additions, 45% more than last year and over 2.7m homes and businesses are now connected. We added 869,000 retail fibre broadband customers, and now have more than 2.1m customers. The UK broadband market1 grew by 826,000 for the year, of which our share of net additions was 572,000, or 69%. Our share of net additions was 50% in the first quarter, prior to the launch of BT Sport, and 75% on average thereafter.

Income statement
Reported revenue was up 1%. Adjusted revenue, which excludes specific items, was flat at £18,287m. We had a £2m positive impact from foreign exchange movements, a £19m positive net impact from acquisitions and disposals and a £176m reduction in transit revenue.

Excluding these, our key measure of the group’s revenue trend, underlying revenue excluding transit, was up 0.5% compared with a 3.1% decline last year. This reflects improved performances from BT Global Services, BT Consumer and BT Business whilst regulatory price reductions impacted revenue by £150m-£200m in the year.

Operating costs2 decreased by £25m to £12,171m. Underlying operating costs2 excluding transit were up 1%. Excluding the investment of around £450m in BT Sport and a £64m non-cash increase in the pensions operating charge, underlying operating costs2 excluding transit decreased 3%.

1 DSL and fibre
2 Excludes specific items, foreign exchange movements and the effect of acquisitions and disposals and is before depreciation and amortisation

In aggregate, operating costs1 and capital expenditure2 have reduced by around £5bn over the last five years despite significant investment across the business.

Net labour costs decreased 2% as improved productivity and better systems and processes offset recruitment to support our investment programmes. Our cost transformation activities have enabled us to absorb the impact of wage inflation, higher pension costs and the insourcing of roles into BT. We have insourced around 10,000 jobs over the past five years, improving our processes and reducing our overall costs.

Payments to telecommunications operators were down 8% primarily reflecting lower transit volumes in BT Wholesale and lower call volumes in BT Consumer. Property and energy costs were 6% lower as a rate rebate and a 3% reduction in energy usage more than offset higher energy prices. BT Sport programme rights charges were £203m (2012/13: £nil). Other costs increased by £145m or 4% principally reflecting our investment in BT Sport.

Adjusted EBITDA of £6,116m was flat as our strong cost control offset our investment in BT Sport. Depreciation and amortisation decreased 5% to £2,695m largely due to more efficient delivery of our capital investment programmes in recent years.

Adjusted net finance expense was £591m, down £62m due to debt reduction and a lower average cost of debt.

Reported profit before tax (which includes specific items) was £2,312m, broadly level with the prior year. Adjusted profit before tax was £2,827m, up 6% reflecting the benefit of our focus on capital expenditure efficiencies and debt reduction. The effective tax rate on the profit before specific items for the year was 21.7% (2012/13: 22.5%).

Adjusted EPS of 28.2p was up 7%. Reported EPS (which includes specific items) was 25.7p, up 4%. These are based on a weighted average number of shares in issue of 7,857m (2012/13: 7,832m). A reconciliation of reported EPS to adjusted EPS is provided in Note 9.

Specific items
Specific items resulted in a net charge after tax of £196m (2012/13: £111m). Details are provided in Note 4 and the principal components are described below.

Restructuring charges of £276m (2012/13: £204m) were incurred as part of our group-wide restructuring programme and relate primarily to leavers, and property and network rationalisation. We expect further restructuring costs of around £200m in 2014/15. No further restructuring programmes are assumed within our financial outlook.

Net interest expense on pensions was £235m (2012/13: £117m). A specific item tax credit of £208m (2012/13: £103m) has also been recognised for the re-measurement of deferred tax balances due to the change in the UK corporation tax rate to 21% from 1 April 2014 and 20% from 1 April 2015.

Capital expenditure
Capital expenditure2 was £2,346m. This was 4% lower than last year as efficiencies offset our ongoing fibre programme and continuing investments in systems and networks to transform our cost base.

Free cash flow
Normalised free cash flow3 was up £150m or 7% at £2,450m. The increase reflects a strong performance within BT Global Services, which includes around £60m of early customer receipts for services to be delivered in 2014/15. It also reflects lower tax, interest payments and capital expenditure, offset by our investment in BT Sport and a working capital outflow partly reflecting the timing of programme rights payments.

The cash cost of specific items was £356m (2012/13: £366m) mainly comprising restructuring costs of £267m (2012/13: £147m), property rationalisation costs of £55m (2012/13: £55m) and payments relating to provisions for claims of £16m (2012/13: £nil). Reported free cash flow, which includes specific items and a £77m (2012/13: £560m) tax benefit from pension deficit payments, was £2,171m (2012/13: £2,292m).

A reconciliation of cash generated from operations to free cash flow is provided in Note 5.

1 Before depreciation and amortisation
2 Before purchases of telecommunications licences
3 Before specific items, purchases of telecommunications licences, pension deficit payments and the cash tax benefit of pension deficit payments

Net debt and liquidity
Net debt was £7,028m at 31 March 2014, a reduction of £769m in the year reflecting the strong cash generation of the business. This reduction was after making £325m of pension deficit payments, the share buyback cost of £302m for 86m shares and dividend payments of £778m. At 31 March 2014 the group had cash and current investment balances of £2.5bn and available facilities of a further £1.5bn providing us with a strong liquidity and funding position.

Out of total gross debt of £9.5bn, £1.7bn is repayable in 2014/15. During the year we issued three US dollar bonds amounting to £1.2bn and repaid maturing term debt of £0.3bn.

Pensions
The IAS 19 net pension position at 31 March 2014 was a deficit of £5.6bn net of tax (£7.0bn gross of tax), compared with £5.8bn (£7.3bn gross of tax) at 31 December 2013 and £4.5bn (£5.9bn gross of tax) at 31 March 2013. The decline in the deficit over the quarter mainly reflects the £325m deficit payment that was made in March. We estimate that on a median valuation basis, which reflects the expected returns from the assets held and likely liabilities, the BT Pension Scheme (BTPS) surplus was around £0.5bn.

The pensions operating charge in the income statement was £463m and we expect the 2014/15 charge to be broadly similar. The 2014/15 net pension interest expense within specific items is expected to be around £290m with the increase from £235m this year mainly reflecting the higher IAS 19 deficit at 31 March 2014 compared with the prior year. The next BTPS triennial actuarial funding valuation will be conducted as at 30 June 2014.

Regulation
A number of regulatory and legal decisions affected us during the year and will impact us in the future. The WLR, LLU and ISDN30 charge controls, the Leased Lines Charge Control and the Narrowband Market Review impacted revenue and EBITDA by £150m - £200m in the year.

We are awaiting a decision from the Supreme Court on our appeal against a previous Court of Appeal ruling on ladder pricing. This had determined that the ladder termination pricing policy that we previously had in place (for 0800, 0845 and 0870 calls from mobile phones terminating on our network) should not have been applied. There would be no further financial impact if our appeal is unsuccessful.

We are also awaiting the decision of the Competition Appeal Tribunal on appeals against Ofcom’s December 2012 determinations on the level of Ethernet prices that we set from April 2006 to March 2011. We are seeking a reduction of up to £85m in the determined repayments while other parties have sought additional repayments of up to £125m.

Dividends
The Board is proposing a final dividend of 7.5p, up 15%, giving a full year dividend of 10.9p, also up 15% (2012/13: 14%). Subject to shareholder approval, this will be paid on 8 September 2014 to shareholders on the register at 15 August 2014. The ex-dividend date is 13 August 2014. The final dividend, amounting to approximately £611m (2012/13: £512m), will be recognised as an appropriation of retained earnings in the quarter to 30 September 2014.

Principal risks and uncertainties
The group’s principal risks and uncertainties are disclosed in Note 11.

Outlook
Our investments are delivering for the business and we expect them to support our goal of sustainable, profitable revenue growth. We are also confident there are significant opportunities for further cost transformation across the group. Together, these will drive long-term cash flow growth. We will continue with our prudent financial policy of investing in our business, reducing net debt (targeting a BBB+/Baa1 credit rating over the medium term), supporting the pension fund and paying progressive dividends.

In 2014/15, lower levels of expenditure in the UK local government sector, and our focus on only pursuing business in this sector that generates economic value, are expected to impact revenue by around £100m. We therefore expect underlying revenue excluding transit to be broadly level with 2013/14. We expect growth in 2015/16.

We continue to expect adjusted EBITDA of £6.2bn-£6.3bn in 2014/15 with further growth in 2015/16. As a result of capital expenditure efficiencies, we now expect normalised free cash flow to be above £2.6bn in 2014/15. We continue to expect normalised free cash flow to grow in 2015/16.

We have extended our dividend policy by one year and now expect to grow our dividend by 10%-15% in both 2014/15 and 2015/16. We have also extended our £300m annual share buyback to the 2015/16 financial year. This will partly counteract the dilutive effect of all-employee share option plans maturing over this period.  
 

GROUP RESULTS FOR THE FOURTH QUARTER
TO 31 MARCH 2014


Income statement
Revenue of £4,748m was down 1% in the quarter with a reduction of £56m in transit revenue and a £70m negative impact from foreign exchange movements.

Underlying revenue excluding transit increased 1.2%, above the rate of increase for the year as a whole reflecting stronger performances from BT Global Services and BT Consumer.

Operating costs1 decreased by £108m, or 3%. Underlying operating costs2 excluding transit were up 0.5%. Excluding our investment of around £130m in BT Sport and the non-cash increase in the pensions operating charge, underlying operating costs2 excluding transit reduced 5%.

Adjusted EBITDA increased 2% to £1,705m.

Depreciation and amortisation decreased 6% to £651m largely due to more efficient delivery of our capital investment programmes in recent years. Adjusted net finance expense was £153m, an increase of 3%.

Adjusted profit before tax was £901m, up 9%. Reported profit before tax (which includes specific items) was £747m, up 17%.

The effective tax rate on the profit before specific items for the quarter was 21.2% (Q4 2012/13: 22.0%).

Adjusted EPS of 9.0p was up 10%. Reported EPS (which includes specific items) was 7.2p, up 1%. These are based on a weighted average number of shares in issue of 7,858m (Q4 2012/13: 7,838m).

Specific items
Specific items in the quarter resulted in a net charge after tax of £144m (Q4 2012/13: £88m). Restructuring charges of £94m (Q4 2012/13: £151m) were incurred as part of our group-wide restructuring programme. Net interest expense on pensions was £59m (Q4 2012/13: £32m) and we recognised a tax charge on re-measurement of deferred tax balances of £23m (Q4 2012/13: credit of £27m).

Capital expenditure
Capital expenditure3 was £574m, down 11% primarily reflecting efficiencies. We received grant funding of £55m in the quarter relating to our activity on the BDUK programme.

Free cash flow
Normalised free cash flow was £1,346m, up 3%. This increase primarily reflects around £60m of early customer receipts for services to be delivered in 2014/15 and the higher EBITDA, partly offset by higher tax payments. The second bi-annual payment of around £120m for the Premier League rights was also made in the quarter.

The cash cost of specific items, reflecting restructuring costs, was £92m (Q4 2012/13: £147m). Reported free cash flow, which includes specific items and a £19m (Q4 2012/13: £79m) tax benefit from pension deficit payments, was £1,273m (Q4 2012/13: £1,031m).

Fibre and broadband
Openreach achieved 347,000 net fibre connections in the quarter, an increase of 28%. We added 249,000 BT retail fibre customers, our best ever quarter. Overall DSL and fibre broadband market net additions were 217,000, 24% down on last year partly reflecting the increased focus on repair activity rather than provision following the adverse weather. We added 170,000 retail broadband customers representing 79% of the DSL and fibre broadband market net additions.

1 Before depreciation and amortisation
2 Excludes specific items, foreign exchange movements and the effect of acquisitions and disposals and is before depreciation and amortisation
3 Before purchases of telecommunications licences

 

OPERATING REVIEW

 

BT Global Services

BT Global Services results

1 Certain results for the fourth quarter and year to 31 March 2013 have been restated. See Note 1 to the condensed consolidated financial statements


Revenue

Revenue was down 4% in the quarter reflecting an £11m decrease in transit revenue and a £64m negative impact from foreign exchange movements. Underlying revenue excluding transit was flat. For the year, revenue was down 2% with underlying revenue excluding transit down 1%.

In the quarter, we again generated double-digit underlying revenue growth in the high-growth regions of Asia Pacific, Latin America, Turkey, the Middle East and Africa. This was offset by declines across our other regions, with lower public sector revenue in the UK.

Total order intake was £2.2bn in the quarter, up 13%, and £6.9bn in the year, up 9%. In the quarter, we signed contracts across all of our key geographies. We agreed with the Department of Health and the Health and Social Care Information Centre to continue to deliver N3, which provides secure national broadband services to the NHS. We agreed a contract with Jabil Circuit for the outsourcing of managed network services in Asia Pacific, Europe and the Americas.

We extended our global networked IT services contract with Syngenta, one of the world’s largest agriculture companies. We signed an agreement with VIVA Bahrain to build a wholesale hub interconnecting fixed and mobile legacy and next generation networks. We agreed a contract for network and VoIP services covering Banco Santander branches across Germany and a contract for a range of network services with La Poste.

Operating results
Operating costs declined 6% in the quarter and 4% in the year. Underlying operating costs excluding transit declined 2% in the quarter and 3% in the year reflecting the benefit of our cost transformation programmes.

Improved utilisation and the rationalisation of our networks, as well as replicating the forensic approach we use to improve process efficiency in our UK business, are reducing costs across Europe, Latin America and the US. We are also focused on improving supplier value-for-money.

EBITDA in the quarter increased 8%. This was below the growth rate in the third quarter which benefited from the timing of contract milestones. EBITDA for the year was up 12%. Excluding foreign exchange movements, underlying EBITDA increased 10% in the quarter and 14% for the year. Depreciation and amortisation reduced 4% in the quarter as a result of lower capital expenditure in recent years and operating profit improved by £29m.

Capital expenditure declined 17% in the quarter due to the timing of spend on our networks, systems and product portfolios, lower spend on overseas properties and the timing of customer contract commitments.

Operating cash flow was an inflow of £517m in the quarter, an improvement of £63m compared with the prior year. This includes around £60m of early customer receipts for services to be delivered in 2014/15. Operating cash flow for the year was £389m, an improvement of £177m reflecting the higher EBITDA, the early customer receipts and lower capital expenditure.


BT Business

BT Business results

1 Certain results for the fourth quarter and year to 31 March 2013 have been restated. See Note 1 to the condensed consolidated financial statements


Revenue

Revenue was down 3% in the quarter and flat for the year. Excluding a £6m negative impact from foreign exchange movements, underlying revenue excluding transit was down 2% for the quarter. Underlying revenue excluding transit was down 1% for the year.

SME & Corporate voice revenue was down 2% in the quarter. Call and line volumes have continued to decline partly reflecting the migration of customers to VoIP services. The number of business lines has declined 8%. The effect on our revenue was partly offset by an increase in average spend per customer.

SME & Corporate data and networking revenue was up 2% in the quarter driven by growth in broadband revenue, with more customers choosing to take fibre services.

IT services underlying revenue was down 7% in the quarter but grew 1% in the year. The decline in the quarter reflects a particularly strong performance in the prior year, as well as lower hardware sales.

BT Conferencing underlying revenue was down 2% in the quarter and the year as continued lower hardware sales and lower audio prices were partly offset by growth in usage. Underlying revenue excluding transit in BT Ireland was up 2% in the quarter.

Other BT Business revenue was down £14m in the quarter with declines in our legacy businesses – BT Directories, BT Redcare and BT Payphones – partly offset by growth in BT Fleet.

Order intake was up 12% for the quarter at £516m and up 3% for the year at £2.0bn.

Operating results
Operating costs were down 5% in the quarter and 2% in the year, primarily reflecting the impact of our cost transformation programmes. We have realised cost synergies by combining BT Enterprises, the non-consumer parts of BT Ireland and the previous Business unit together into one organisation. This has enabled us to reduce total labour resource by 7%.

EBITDA grew 1% in the quarter and 5% for the year. Excluding foreign exchange movements and our acquisition of Tikit Group last year, underlying EBITDA grew 2% in the quarter and 4% for the year. Depreciation and amortisation was 22% lower in the quarter, partly due to a one-off adjustment. This contributed to operating profit growing 7% in the quarter.

Capital expenditure increased £5m in the quarter due to the phasing of expenditure in the prior year. Operating cash flow decreased 8% in the quarter and 2% in the year, mainly driven by the timing of working capital movements.

BT Consumer

1 Certain results for the fourth quarter and year to 31 March 2013 have been restated. See Note 1 to the condensed consolidated financial statements


Revenue

Revenue increased 9% in the quarter, a strong performance, driven by 24% growth in broadband and TV revenue reflecting the impact of BT Sport. This growth contributed to a year on year increase in ARPU of 7% to £391. We have also seen an improved trend in calls and lines revenue which increased 1% in the quarter. Revenue was up 4% for the year.

Consumer line losses of 49,000 in the quarter (Q4 2012/13: 154,000) were the lowest for more than five years. Strong consumer broadband subscriber growth contributed to BT adding 170,000 retail broadband customers, 79% of the DSL and fibre broadband market net additions. Plusnet has continued to perform well, growing its broadband customer base by more than 15% in the year.

We achieved our best ever quarter in fibre with 249,000 BT retail fibre broadband net additions, taking the customer base now to over 2.1m. We added 46,000 TV customers bringing the total to 1m. BT Wi-fi usage continued to grow with over 10.2bn minutes carried in the quarter, more than double last year.

In the quarter we launched a smaller, sleeker and more power efficient version of the YouView set-top box. We also added five new high definition channels to our line-up, bringing the total on our YouView service to 27. We will be closing our first generation TV service in the first quarter of 2014/15. We will exchange legacy set-top boxes for new YouView boxes and anticipate some impact on TV customer churn during this period.

We now have around 3m direct BT Sport customers, which include those watching via satellite, BT TV, online or via the app. Including our wholesale deals, BT Sport is now in around 5m homes. During the quarter we further strengthened our BT Sport proposition: we extended our exclusive live German Bundesliga football rights for the UK and Republic of Ireland until 2017 and started to broadcast Moto GP and coverage of the World Rally Championship.

Operating results
Operating costs increased 10% in the quarter. This reflects our investment of around £130m in BT Sport and costs associated with the increased revenue, which were partly offset by our cost transformation activities. EBITDA was up 5%. This was an improvement on recent quarters reflecting the better revenue performance. For the year, operating costs were up 11% and EBITDA was down 14% reflecting our investment of around £450m in BT Sport.

Depreciation and amortisation was down 8% in the quarter due to lower capital expenditure in recent years. Operating profit was up 9%.

Capital expenditure was down 31% in the quarter due to the BT Sport capital investment profile in the prior year. Operating cash flow decreased 1%. For the year, operating cash flow was 28% lower primarily reflecting the lower EBITDA and the deposit of around £60m for the UEFA Champions League and UEFA Europa League broadcast rights.

BT Wholesale

BT Wholesale results

1 Certain results for the fourth quarter and year to 31 March 2013 have been restated.  See Note 1 to the condensed consolidated financial statements


Revenue

Revenue decreased 15% in the quarter and 7% in the year. This included a decline in transit revenue of £44m in the quarter and £119m in the year, driven by lower volumes and mobile termination rate reductions.

Underlying revenue excluding transit decreased 9% for the quarter and 3% for the year. The reduction in the quarter was primarily due to a 24% decline in traditional calls and lines revenue, in part due to lower fixed termination rates following Ofcom’s Narrowband Market Review.

Managed solutions revenue for the quarter recovered from a low third quarter but was still down on last year. The decline reflects the ongoing impact of the Post Office contract termination which was partly offset by some contract renewals in the quarter. Broadband revenue declined 17% as lines continue to migrate to LLU. The declines in managed solutions and broadband revenues were partially offset by strong growth in IP services of 38%.

Order intake was £525m taking the total to £1.9bn. This was slightly down on last year’s £2.0bn intake, which included a number of major contract re-signs, but significantly higher than in previous years. This quarter we signed a contract with Telefonica (O2) UK for a data centre service to support their 4G rollout plans, as well as new connectivity and ICT business services. We also agreed a three year contract with them for a managed engineering service for their ICT customers. We re-signed a contract with Claranet to provide a range of products including Ethernet, broadband, voice and equipment. We also re-signed contracts with a number of customers for multi-year private circuit and Ethernet services.

Operating results
Operating costs decreased 18% in the quarter. Underlying operating costs excluding transit reduced 11% reflecting lower cost of sales, due to the lower revenue, and the benefit of our cost transformation activities. We reduced selling and general administration costs 22% in the quarter. We also continued to remove redundant exchange equipment from our legacy broadband network. This project is expected to reduce annualised energy costs by around £10m.

EBITDA decreased 6% in the quarter and 1% for the year. Depreciation and amortisation decreased 8% in the quarter. Operating profit decreased 4% in the quarter but increased 1% for the year.

Capital expenditure increased £4m or 8% in the quarter. Operating cash flow was an inflow of £219m, up 23% due to the timing of customer receipts. Operating cash inflow increased by 7% for the year.

Openreach

Openreach results

1 Certain results for the fourth quarter and year to 31 March 2013 have been restated.  See Note 1 to the condensed consolidated financial statements


Revenue

Revenue was flat in the quarter and down 1% in the year. Regulatory price changes had a negative impact of around £70m in the quarter and around £260m in the year, the equivalent of around 5%. In the quarter this was mostly offset by 63% growth in fibre broadband revenue and a 3% increase in Ethernet revenue.

The physical line base grew by 6,000 in the quarter. It grew 83,000 over the year compared with a 54,000 increase last year.

We have passed over 19m premises with our fibre rollout, around two thirds of UK premises. As a result, the UK now boasts the widest fibre broadband coverage of the five largest Western European countries. We continue to make progress with extending the reach of fibre beyond our commercial footprint. We have now started the build phase in all 44 areas of the BDUK contracts we have won. We passed around 315,000 premises in these areas in the quarter, and have now passed more than 630,000 in total.

We achieved 347,000 net fibre connections in the quarter, an increase of 28%, and 1.3m net connections in the year, an increase of 45%. This almost doubled the number of homes and businesses now connected to over 2.7m. Overall broadband market net additions were 217,000, 24% down on last year partly reflecting the increased focus on repair activity rather than provision following the adverse weather.

Operating results
Operating costs reduced 3% in the quarter. Cost efficiencies and some one-off benefits more than offset pay inflation and the additional work to help people whose service was affected by the adverse weather. EBITDA increased 2%, and with depreciation and amortisation down 5%, operating profit was up 9%. EBITDA was down 2% for the year.

Capital expenditure decreased 14% in the quarter. While our commercial fibre build is nearing completion, we have maintained the same intensity of overall fibre rollout through the BDUK programme. We received £55m of grant funding in the quarter relating to this. Operating cash flow increased 12%, largely reflecting lower capital expenditure. Operating cash flow increased 1% in the year.


The fourth quarter and full year 2013/14 results presentation for analysts and investors will be held in London at 9.00am today and a simultaneous webcast will be available at www.bt.com/results  

The BT Group plc Annual Report & Form 20-F 2014 is expected to be published on 22 May 2014. The Annual General Meeting of BT Group plc will be held at Old Billingsgate, 1 Old Billingsgate Walk, London, EC3R 6DX, on Wednesday 16 July 2014 at 11am.

Results for the first quarter to 30 June 2014 are expected to be announced on Thursday 31 July 2014.

The full financial statements are available to download as PDF documents Download

Full results release 
Group income statement
Group statement of comprehensive income
Group statement of changes in equity
Group cash flow statement 
Group balance sheet 
Notes to the condensed consolidated financial statements 
Forward-looking statements – caution advised









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Runtime Error

Description: An application error occurred on the server. The current custom error settings for this application prevent the details of the application error from being viewed remotely (for security reasons). It could, however, be viewed by browsers running on the local server machine.

Details: To enable the details of this specific error message to be viewable on remote machines, please create a <customErrors> tag within a "web.config" configuration file located in the root directory of the current web application. This <customErrors> tag should then have its "mode" attribute set to "Off".


<!-- Web.Config Configuration File -->

<configuration>
    <system.web>
        <customErrors mode="Off"/>
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</configuration>

Notes: The current error page you are seeing can be replaced by a custom error page by modifying the "defaultRedirect" attribute of the application's <customErrors> configuration tag to point to a custom error page URL.


<!-- Web.Config Configuration File -->

<configuration>
    <system.web>
        <customErrors mode="RemoteOnly" defaultRedirect="mycustompage.htm"/>
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</configuration>