The 2007 financial year
was a very good one for your company – our results once
again were excellent. Revenue grew by 4% and earnings
per share before specific items grew by 16% to 22.7
pence. We continued to invest in technologies, networks
and systems that will, we believe, transform our customers’
lives and businesses, along with their experience of
dealing with BT.
I am delighted to report that our proposed full year
dividend is 15.1 pence per share, 27% higher than last
year, moving to a two-thirds pay out ratio a year earlier
than we had previously announced. We expect to increase
the dividend, taking into account our earnings growth,
cash generation and our ongoing investment needs. In
addition, because of the financial strength of the company
we are introducing a new £2.5 billion share buy back
programme which we expect to be completed by 31 March
We continued to implement our strategy for profitable growth. New wave revenue now accounts for 36% of our total business. We are a major player in the global networked IT services market, meeting the needs of our customers around the world. In the UK, we have around 11 million broadband lines over which we are able to offer all our customers – consumer, SME, corporate and wholesale – a more accessible, faster and richer broadband experience.
Our wider responsibilities
extremely proud of the fact that, for the sixth
consecutive year, BT was the highest placed
telecommunications company in the Dow Jones
Sustainability Index. We are committed to operating in
an ethical, sustainable and socially responsible way,
and to having a positive impact on all those communities
whose lives we touch.
the corporate social responsibility agenda evolves,
so does our strategy. We are, for example, increasingly
emphasising three new priorities:
climate change. We
are committed to cutting our CO2 emissions by 80% from
by 2016 and to helping customers and suppliers
cut theirs through the more effective use
of communications technology. The fact
that our Chief Executive, Ben Verwaayen, is chairing the CBl’s climate change task force
how seriously we take this issue.
||enabling sustainable economic growth. We are increasingly integrating sustainability in all our business processes.
to build a more inclusive society. We
are looking at the ways in which communications
technology can help to build a fairer, more inclusive
Investment performance on assets in the BT Pension Scheme (BTPS) was very good, with year end value at a record £38 billion. During the year, BT and the trustees of BTPS agreed the triennial funding of the scheme. Under a new and more conservative actuarial methodology, the deficit at 31 December 2005 was calculated as £3.4 billion.
BT has agreed to make deficit payments equivalent to £280 million a year for ten years, with the first three years’ instalments paid up front – £840 million was paid into the scheme by 30 April 2007. I believe this is a fair and prudent deal for pensioners and shareholders, and demonstrates that your company stands fully behind its pension obligations.
I will be stepping down as Chairman in the autumn after more than six challenging and fascinating years with BT. Sir Mike Rake will take over as your next Chairman in September. Mike is currently chairman of KPMG International; he has demonstrated outstanding leadership of this major global organisation during a time of turbulence and change. He will bring extensive international experience to BT as it continues to position itself as a truly global company.
A number of changes to the Board have occurred since I
last wrote to you. Sir Anthony Greener stepped down
as Deputy Chairman and from the Board on 30 September
2006 after six years and I would like to thank him for
his very significant contribution to the development
of our strategy. His successor is Maarten van den Bergh,
who has been a non-executive director since September
2000. Maarten, who prior to his retirement was president
of the Royal Dutch Petroleum Company, also chairs the
Remuneration Committee and is our senior independent
director. And I’d like to welcome two new directors,
Deborah Lathen and François Barrault. Deborah, who is
president of Washington-based Lathen Consulting, joined
the Board as a non-executive director in February 2007.
She brings strong US business and policy experience
to BT, including as a previous chief of the Cable Services
Bureau at the US Federal Communications Commission.
François joined the Board on 24 April 2007 as Chief
Executive BT Global Services (in which role he succeeds
Andy Green who became CEO of Group Strategy and Operations).
As President of BT International, François established
a record of exceptional growth in BT’s operations outside
Delivering our plan
I would like to thank
shareholders and customers for their confidence in our
strategy and the loyalty they have shown in the past
I’d also like to
thank our Chief Executive, Ben Verwaayen, the other
members of the Board – both executive and non-executive
– and all BT people for their efforts and unwavering
support. If I cannot entirely resist the temptation
to look back over the past six years, it is because
that is the best way of acknowledging what they have
Back in 2001 your
company’s net debt had risen to nearly £30 billion.
In response, in May 2001, your Board put in place an
action plan to reduce debt, manage costs and enhance
our abilities to serve our customers even more effectively.
That plan has been delivered.
Debt was brought
under control by a combination of the largest ever rights
issue in UK corporate history and the disposal of a
number of businesses including Yell (our international
directories and e-commerce business) and our interests
in Japan and Spain. 02 (previously Cellnet) was demerged
and Concert (our international joint venture with AT&T)
was unwound. These structural changes have provided
commercial and financial flexibility for the group and
our debt in recent years has reduced to sustainable
We have rigorously managed our costs, taking a disciplined approach to eliminating waste and duplication, wherever possible using our own technology to become more cost effective.
During that period, new technologies have given customers access to a range of services – high-speed broadband, fixed-mobile convergence and next-generation TV – that have transformed their idea of what is possible. Our efforts in UK broadband and in global networked IT services have been very successful.
Looking ahead, your company is positioned for success. With a new Chairman and an experienced CEO at the helm, and a workforce experienced in the business of transformation, the signs are very positive. It has been a privilege to be involved with BT’s journey to this point; I shall, of course, continue to follow its future progress with great interest and pleasure.
Notice of meeting
To give as many shareholders
as possible the opportunity to attend the AGM, we hold
the meeting in a different region of the UK each year.
We also broadcast my speech and the presentation by
our Chief Executive, Ben Verwaayen, live over the internet
(see Notice of meeting).
Of the directors proposed
for re-election this year, one is an independent non-executive
director, John Nelson. I am pleased to confirm to shareholders
that, following formal performance evaluation, we continue
to regard John as an effective non-executive director.
He makes a valuable contribution to the Board and has
demonstrated a high level of commitment to the role.
Deborah Lathen and François Barrault, who have recently
joined the Board, are also retiring automatically and
are proposed for election. The Board recommend Deborah
and François for election.
Even if you are
not able to come to the meeting in person, your vote
is still important. I would urge you, regardless of
the number of shares you own, to vote.
You may vote by
completing and returning the enclosed Proxy Card. Alternatively,
you may cast your vote online or by telephone or fax.
I look forward to
seeing you at The Sage Gateshead.
Sir Christopher Bland
16 May 2007