BT Global Services

In 2008, BT Global Services revenue increased by 8% to £7,889 million (2007: £7,312 million, 2006: £7,013 million), compared with growth of 4% in 2007. The acceleration in growth is due to strong performance outside of the UK where revenue grew by 21%. Through organic and inorganic growth, we are able to provide complementary services worldwide and benefit from additional scale within our emerging markets. Revenue from outside the UK has increased to 40% of BT Global Services total revenue (2007: 36%, 2006: 35%) through growth with our existing customers, winning new customers and acquisitions.

BT Global Services revenue – UK and non UK
(£m)
				Non UK
				UK

     Our strategy of getting closer and becoming more important to our customers by offering high value propositions and services that can directly improve their business performance has delivered good growth in revenue. Revenue from networked IT services contracts grew by 9% to £4,385 million in 2008. This compares with an increase of 8% to £4,025 million in 2007 (2006: £3,713 million). During the year, we won new networked IT services contracts worth £5.0 billion (2007: £5.2 billion, 2006: £5.4 billion). These networked IT services contracts represent over 60% of our total order value of £8.0 billion (2007: £9.3 billion, 2006: £9.0 billion).
     By focusing on enhancing the quality of our flagship global MPLS network service, revenue from MPLS has grown by 25% to £815 million in 2008 (2007: £651 million, 2006: £423 million), with on average over 3,100 customer sites installed per month. Our MPLS coverage and support in 172 countries further demonstrates our aim to be where our customers need us to be.
     Gross profit increased by 3% to £2,839 million in 2008 (2007: £2,759 million, 2006: £2,707 million), compared with an increase of 2% in 2007. This improvement was driven by the maturity of some of our large long-term contracts and an improving cost base, together with the impact of recent acquisitions. Gross profit is revenue less costs directly attributable to the provision of products and services reflected in revenue in the period. Selling, general and administrative costs (S,G&A) are those costs that are ancilliary to the business processes of providing products and services and are the general business operating costs.
     S,G&A costs decreased by 2% to £1,978 million in 2008 (2007: £2,024 million, 2006: £2,007 million). Excluding leaver costs of £22 million (2007: £41 million, 2006: £38 million), S,G&A costs were £1,956 million (2007: £1,983 million, 2006: £1,969 million). This compares with an increase in S,G&A costs of 1% in 2007. The reduction in S,G&A has resulted from our transformational cost savings initiatives, including the formation of captive operational centres in low cost economies, global sourcing, network transformation and the de-layering of our management structures, partly offset by the impact of recent acquisitions. Overall S,G&A excluding leaver costs represented 25% of revenue in 2008 compared with 27% in 2007.

     The increase in gross profit together with lower SG&A costs, has resulted in an increase in EBITDA of 17% to £861 million (2007: £735 million, 2006: £700 million). Excluding leaver costs of £22 million (2007: £41 million, 2006: £38 million), EBITDA was £883 million in 2008 (2007: £776 million, 2006: £737 million), resulting in an EBITDA margin before specific items and leaver costs of 11.2% . This represents an increase of 0.6 percentage points compared with 2007, when the EBITDA margin before specific items and leaver costs was 10.6% (2006: 10.5%) . BT Global Services is targeting an EBITDA margin before specific items and leaver costs of 15% in the medium term. The EBITDA margin after leaver costs was 10.9% (2007: 10.1%, 2006: 10.0%) . The improvement in EBITDA was driven by the maturity of some of our long-term contracts and benefits from the transformation of our operational cost base through global sourcing and process improvements.
     Depreciation and amortisation was £744 million in 2008 (2007: £665 million, 2006: £615 million), an increase of 12% compared with 2007. This reflects the increased investment in our global infrastructure, customer related capital expenditure and expansion of our business through acquisitions. The increase in depreciation and amortisation in 2008 is consistent with prior years; in 2007 depreciation and amortisation increased by 8% to £665 million from £615 million in 2006.
     Growth in operating profit of 67% to £117 million is the result of strong organic growth, together with ongoing improvements in our operational cost base and strategic business acquisitions. This compares with a decline of 18% in 2007.

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