results for the 2005 financial year were strong. New wave
revenues grew by 32% to £4.5 billion, and now represent nearly
a quarter of our business. Earnings per share have more than
doubled over the past three years and net debt is more than £20
billion lower than in 2001.
Earnings per share in the 2005
financial year, before goodwill amortisation and exceptional
items, grew by 7% to 18.1 pence. While continuing to invest for
the future, we generated free cash flow of £2.3 billion, up
The news on dividends is positive.
We are recommending a full-year dividend of 10.4 pence per
share, a pay out ratio of 57% of earnings before goodwill
amortisation and exceptional items, compared to 50% last year.
We continue with our progressive dividend policy. The dividend for the 2006 financial
year will be at least 60% of underlying earnings: subject to the
group’s overall financial position, we expect our pay out
ratio to rise to around two-thirds of underlying earnings by the
2008 financial year.
We continued with our share buy
back programme in the 2005 financial year. This is being funded
from cash generated over and above that required for servicing
our debt. We have reduced net debt to below £8 billion, a level
with which we are comfortable.
In support of our strategy for
transformation and growth, your Board gave backing during the
year for a targeted series of acquisitions that will help to
build our capabilities as one of the world’s foremost global
networked IT services companies. These acquisitions offered
value for money, had a compelling strategic fit and brought
capabilities to strengthen BT globally. In addition, passing the
five million mark for broadband connections in the UK in early
April was a key moment in the history of your company.
BT welcomed the Strategic Review of
Telecommunications by Ofcom. During the year we have worked to
help influence and shape their thinking and made a radical
proposal for a new regulatory landscape in the UK. We continued
to argue strongly that structural separation was not in
shareholders’ or customers’ interests. We look forward to
the published outcome. Our position remains that a strategic and
flexible regulatory regime, together with rapid deregulation
wherever possible, is vital to meeting customers’ developing
needs and creating the conditions in which we, and others, can
continue to invest with confidence.
There were a number of changes to
your Board during the 2005 financial year. I would like to
welcome Hanif Lalani as our new Group Finance Director. Ian
Livingston, who had occupied the finance role with distinction
for three years, was appointed Chief Executive BT Retail with
effect from February 2005. It is a testament to the strength of
BT’s management team generally that we were able to appoint
people from inside the company to such key roles. I would also
like to thank Pierre Danon, who left the Board in February, for
his significant contribution as Chief Executive of BT Retail for
the last four years.
It is increasingly important that
companies such as BT continue to be good corporate citizens,
living up to our responsibilities to the communities in which we
operate and to the environment. I’m proud to be able to report
that, for the fourth year in a row, BT was the highest placed
telecommunications company in the Dow Jones Sustainability
Index. Our community programmes focus on those issues where
communications really can make the difference; we have provided
long-term support, for example, for a drama-based education
programme to help develop young people’s communications
skills, and for the work of the children’s charity ChildLine.
Like so many other companies and
individuals, we wanted to respond to the devastating Asian
tsunami in December 2004. We made a donation of £500,000 to the
Disasters Emergency Committee (DEC) and we provided a live call
centre for the unprecedented number of calls coming into the
DEC. I’m particularly proud of the fact that so many of our
employees were involved in fundraising activities and that 16 of
our engineers travelled to the affected area to help
The process of transformation on
which your company embarked in 2001 is accelerating. That
process is increasingly reflected in your company’s results.
We are well set for further success in the years ahead.
I’d like to thank shareholders
for the loyalty they’ve shown. Your continued confidence –
coupled with the loyalty of our customers and suppliers and the
imagination and commitment of our employees – is fundamental
to our transformation for growth.
Sir Christopher Bland
18 May 2005