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In
the 2003 financial year, the total net interest charge,
including BT’s share of its ventures’ charges,
at £1,439 million was £183 million lower
than in the preceding year, which in turn was £308
million higher than in the 2001 financial year. Of the
total net charge, £1,420 million arises in the
BT group for the 2003 financial year, compared with
£1,540 million and £1,044 million in the
2002 and 2001 financial years, respectively.
The
reduction in the net interest charge in the 2003 financial
year reflects the reduction in the level of net debt
and is partly offset by the £293 million exceptional
cost of terminating fixed interest rate swaps as a consequence
of the receipt of the Cegetel sale proceeds.
The
substantially higher charge in the 2002 and 2001 financial
years is mainly due to the cost of funding the acquisition
of mmO2’s third-generation mobile licences, principally
in the UK and Germany, and the cost of acquisitions
in the 2001 and 2000 financial years. In the 2002 financial
year, the group’s net interest charge was further
increased by the £162 million exceptional cost
of novating interest swaps as a consequence of the property
sale and leaseback transaction. In the 2001 financial
year, there was also a one-off £194 million increase
in BT’s share of its ventures’ interest charges
principally through the Japanese investments and Viag
Interkom which was partly offset by an exceptional interest
receipt of £25 million relating to the rates refund
from the UK Government, noted above.
Interest
cover for continuing activities in the 2003 financial
year represented 2.6 times total operating profit before
goodwill amortisation and exceptional items, and compares
with interest cover of 1.9 in the 2002 financial year
and 2.4 in the 2001 financial year. The improvement
in cover in the 2003 financial year is due to the reduction
in the interest charge and improvement in the operating
profit before goodwill amortisation and exceptional
items. We expect the net interest charge to decrease
and interest cover to continue to improve in the 2004
financial year following the continued reduction in
net debt during the 2003 financial year.
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