|BT is one
of the worlds leading providers of communications solutions and
services operating in 170 countries. Our principal activities include
networked IT services, local, national and international telecommunications
services, and higher-value broadband and internet products and services.
of £19,514 million, up 6%
wave revenue of £6,282 million, up 38%
before taxation and specific items of £2,177 million, up 5%
||Earnings per share before specific items of 19.5 pence, up 8%
debt reduced from £7.9 billion to £7.5 billion
||Full-year dividend of 11.9 pence, up 14%
||Broadband end users of 7.9 million, up 58%
Welcome to our new
format Annual Review which, this year, includes the Notice of Meeting. I very
much hope you will be able to join us at the AGM at Londons Barbican Centre on 12 July 2006. If you do not plan to attend I hope you will send us a completed proxy form so you are able to vote at the Meeting. You will also find enclosed a copy of our shareholder magazine Forward which contains an update on the many exciting things happening in BTs
fast changing world.
Our results for
the 2006 financial year were excellent. Earnings per share before specific items
grew by 8% to 19.5 pence. We continued to invest significantly in technologies
and systems designed to transform our customers experience, at the same time as generating free cash flow of £1.6
news on dividends is again positive. Your Board is recommending a full-year dividend
of 11.9 pence
per share a pay out ratio of 61% of earnings before specific items, compared
with 57% last year. We continue our progressive dividend policy and expect our
pay out ratio to rise to around two-thirds of earnings in the 2008 financial
operated our share buy back programme again in the 2006 financial year. This
is being funded from cash generated over and above that required for servicing
our debt, which remains below £8 billion.
We continued to
implement our strategy of growth through business transformation. Your
Board has given its backing to targeted acquisitions that will help us confirm
our status as a leading player in the global networked IT services market.
2006 financial year, we acquired Atlanet in Italy (as part of a major deal
with Fiat), Cara Group in Ireland and Total Network Solutions in the UK.
And in the
UK, we now have almost eight million broadband lines over which we are
to offer customers exciting, next-generation voice and entertainment services.
wave revenue grew by 38% to £6.3 billion, and accounted for around
one-third of our total business.
We believe that
a fair and flexible regulatory regime is vital for our industry, for ensuring
that we can meet customers growing needs and for encouraging investment.
We were pleased that, following its strategic review of telecommunications,
Ofcom accepted the set of legally-binding Undertakings that BT proposed
in order to
transform the regulatory landscape in the UK. We believe that the impact
of these Undertakings will be to focus regulation where it remains necessary
time as stimulating de-regulation wherever possible.
BT stands fully
behind its pension promise to pensioners and members of the BT Pension
Scheme (BTPS). The scheme is well-managed and its assets have grown very
in recent years, from £23 billion at the end of 2002 to more than £35
billion currently. The accounting deficit has almost halved in the last
year alone. With the Trustees of the BTPS, we are continuing discussions
triennial funding valuation of the scheme. In particular, we aim to review
legislation and guidelines, and examine the implications and extent of
the Crown Guarantee given on privatisation in 1984. The Crown Guarantee,
to liabilities assumed by BT in 1984 and only in the event of insolvency,
is an extra layer of security for BT pensioners.
There were a number
of changes to your Board during the year. I would like to welcome Matti
Alahuhta and Phil Hodkinson as non-executive directors. Matti has been President
Kone Corporation since January 2005 and was previously at Nokia; Phil is
Director of HBOS. Both bring a wide range of commercial and senior management
experience to your company. I would also like to thank Lou Hughes who stepped
down as a non-executive director on 31 March 2006 for his excellent contribution
over more than six years. Im pleased that his experience is not lost
to us: he has joined our Americas Advisory Board.
OUR WIDER RESPONSIBILITIES
Our aim as a communications
company is to operate in a socially responsible and sustainable way and
to ensure that we help everyone benefit from improved communications and
Im very proud of the fact that, for the fifth year in a row, BT was
the highest placed telecommunications company in the Dow Jones Sustainability
Climate change has been moving inexorably up the social and corporate agendas for a number of years now. Although telecommunications technology is environmentally friendly, BT is one of the largest companies in the UK and one of the largest consumers of electricity. Our operations inevitably have an impact on the environment and we take the job of managing that impact seriously. We are now, for example, meeting almost all our UK electricity needs from environmentally friendly sources, including wind generation, solar, wave and hydroelectric schemes.
I am very grateful
to our shareholders and our customers for their continued loyalty and the
confidence that they have shown in BTs programme of transformation. Id
like to thank our employees for making that programme happen.
Your company is well set for continued success in the years ahead. Our performance underpins our confidence that we can continue to grow revenue, EBITDA1, earnings per share and dividends over the coming year, and accelerate the strategic transformation of the business.
NOTICE OF MEETING
To give as many shareholders as possible the opportunity to attend the AGM, we hold the meeting in a different city in 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).
The directors proposed
for re-election this year are Sir Anthony
Greener, Maarten van den Bergh and Clay Brendish who are independent
non-executive directors. I am pleased to confirm to shareholders
that, following formal performance evaluation, we continue to
regard Sir Anthony, Maarten and Clay as effective non-executive
directors. They make a valuable contribution to the Board and
have demonstrated a high level of commitment to the role. Matti
Alahuhta and Phil Hodkinson, who joined the Board during the year,
are also retiring automatically and are proposed for election.
The Board recommend Matti and Phil 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.
you intend coming to this years meeting, please either return the
enclosed AGM Intention to Attend card or indicate your intention to attend
internet or by phone.
I look forward to seeing you at the Barbican.
Sir Christopher Bland
17 May 2006
Before Interest, Tax, Depreciation and Amortisation represents group operating
profit (loss) before depreciation and amortisation.