has continued to make good progress this year delivering strong financial
results while continuing to transform the business. New wave revenues grew by
30% to £3,387 million.
Earnings per share, before goodwill amortisation and exceptional
items, grew by 19% to 16.9 pence almost doubling in two years. While continuing to invest for the future, we generated free cash flow of over
£2 billion and reduced net debt to £8.4 billion a reduction
of two thirds on the level of three years ago.
company continues to make progress by innovating in our traditional markets
and by growing revenues in all the new wave markets ICT (information
and communications technology), broadband, mobility and managed services in
which we operate. We continue to invest where we believe it will make the greatest
difference, while achieving rigorous standards of cost efficiency and smarter
Returns to shareholders
Although long-term shareholder return remains the key measure of our success, our share price performance this year has not been strong. Earnings per share before goodwill amortisation and exceptional items have risen
well, but this has yet to be reflected in our share price.
However, total shareholder return also includes the dividend, and here the news for shareholders is positive.
are recommending a full year dividend of 8.5 pence per share. Reflecting BTs
commitment to a progressive dividend policy, the dividend pay out ratio for the
2004 financial year was around 50% of earnings before goodwill amortisation and
exceptional items. The full year dividend is 31% up on last year, and over four
times higher than two years ago. We are targeting a 60% pay out ratio in 2005/06.
strong cash flow generated by the group also enabled us to begin a share buy
back programme in the 2004 financial year. This is being funded from cash generated
over and above that
required to meet our debt target of £7 billion in 2006/07, after paying
dividends and taking into account any acquisitions or disposals.
The recently announced strategic review of telecommunications by the UK regulator, Ofcom, is important and welcome to BT.
The review will cover, within the 21 key strategic questions to be addressed, the possibility of the structural separation of BT. Your company believes this is not in the interests of
shareholders, customers or employees, and will argue in favour of a strong and integrated BT.
is important that companies such as BT live up to their responsibilities
in the wider communities in which we operate. Im proud to report that
in the 2004 financial year, we were the highest placed telecommunications
company in the Dow Jones Sustainability Index for the third year in a row.
Our goal is to help everyone benefit from improved communications and to spread the benefits of new technology as widely as possible. This is demonstrated, for example, by our wide
deployment of broadband technology throughout the UK, and by the BT Education Programme, which has enabled more than two million young people to participate in a drama-based campaign designed to help them improve their communications skills.
Strategic progress and outlook
The strong growth in new wave turnover, our ICT order book and broadband shows that our strategy is working. We remain committed to that strategy and are confident in our ability to deliver our key strategic
Weve come a long way since May 2001, when your Board announced a radical plan to reduce debts, manage costs and improve customer satisfaction. Weve
established a solid platform
for future growth and success.
None of this could have happened without the loyalty and support of our shareholders, customers, suppliers and employees. Given the continued support of all our stakeholders, we will build
on this success and accelerate the transformation of our business.
Sir Christopher Bland
19 May 2004