BT 2009 Annual Report Download - page 14

ADDITIONAL INFORMATION FINANCIAL STATEMENTS REPORT OF THE DIRECTORS BUSINESS AND FINANCIAL REVIEWS OVERVIEW
BUSINESS AND FINANCIAL REVIEWS BUSINESS REVIEW
12 BT GROUP PLC ANNUAL REPORT & FORM 20-F
a three-year contract extension with Manpower to provide fully
managed global wide area network (WAN) infrastructure and
managed services
a five-year contract with Carillion worth £32m for voice/hosted
voice, IP data, conferencing and private automated branch
exchange (PABX) maintenance.
Outside the UK
BT Global Services signed orders with 529 new customers outside
the UK in 2009 and we continued to strengthen our business with
large multinational corporations.
We signed a number of major deals in 2009, including:
a five-year, US$526m contract with Procter & Gamble to provide
and manage local area network (LAN) and WAN infrastructure in
more than 80 countries
a contract with BMW to manage a large part of its
communications infrastructure, including voice over IP (VoIP),
contact centres, email services and videoconferencing
a three-year managed services contract with SWIFT to connect
strategic offices across Europe, the US and Asia with BT’s unified
communications video solution
a three-year contract with Munich Re to provide security and
network services in 33 countries
a contract with the Emirates airline to consolidate and manage its
worldwide contact centres
a seven-year, €118m extension of current services provided to
Syngenta for data and voice services plus deployment of IP
telephony, managed LAN and BT OneVoice to 112 sites and the
deployment of BT managed mobile services to 13 countries.
Successes in the public sector outside the UK included a contract
with Barcelona City Council for 500 wireless broadband hot spots,
providing free internet access across the city, and a contract with
the Colombian government supporting digital inclusion – under
which BT will convert 755 public schools into telecentres and
provide additional bandwidth to a further 1,150 schools.
We are also part of the Match consortium that won a €30m
contract with the Dutch Ministry of Home Affairs for the housing
and hosting of the national government’s IT infrastructure.
Financial performance
2009 2008 2007
£m £m £m
Revenue 8,828 7,889 7,312
Adjusted gross profita2,576 2,839 2,759
Adjusted SG&A costsa2,267 1,978 2,024
Adjusted EBITDAa309 861 735
Contract and financial
review charges 1,639 – –
EBITDAb(1,330) 861 735
Operating (loss) profitb(2,106) 117 70
aAdjusted items are before contract and financial review charges and specific items.
bBefore specific items.
In 2009, BT Global Services revenue increased by 12% to £8,828m
(2008: £7,889m, 2007: £7,312m), compared with growth of 8%
in 2008. Revenue in 2009 includes the impact of foreign exchange
rate movements of £588m and acquisitions of £368m. Excluding
these, underlying revenue was £7,872m, compared with reported
revenue of £7,889m in 2008. Revenue from outside the UK has
increased to 47% of BT Global Services total revenue (2008: 40%,
2007: 36%), reflecting the impact of organic growth as well as the
impact of foreign exchange rate movements and overseas
acquisitions.
Revenue from managed network solutions increased by 17% to
£5,328m, compared with growth of 10% in 2008. The increase was
driven by growth in revenue from both networked IT services and
MPLS and reflects the impact of foreign exchange rate movements
and acquisitions, together with substitution of UK calls and lines.
Revenue from calls and lines decreased by 8% to £1,095m,
compared with a decline of 6% in 2008. The decrease was due to
the gradual decline in this revenue stream as customers switch to
more email, IP network and conferencing products as shown by the
growth in managed network solutions. Other revenue increased by
12% to £2,049m, compared with a growth of 11% in 2008. The
increase was mainly driven by growth in revenue from the global
carrier business and reflects the impact of foreign exchange rate
movements and acquisitions. During the year, we won new
networked IT services contracts worth £5.5bn (2008: £5.0bn,
2007: £5.2bn). Networked IT services contracts represent 68% of
our total order value of £8.0bn (2008: £8.0bn, 2007: £9.3bn).
Adjusted gross profit decreased by 9% to £2,576m in 2009
(2008: £2,839m, 2007: £2,759m), compared with an increase of
3% in 2008, primarily due to high costs and the continued decline
in higher margin UK business. Including the impact of the contract
and financial review charges of £1.6bn, gross profit in 2009
decreased by 66% to £965m.
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 (SG&A) costs are those
costs that are ancilliary to the business processes of providing
products and services and are the general business operating costs.
Adjusted SG&A costs increased by 15% to £2,267m in 2009
(2008: £1,978m, 2007: £2,024m), compared with a decrease of
2% in 2008. SG&A costs include the impact of foreign exchange
rate movements of £221m and acquisitions of £170m. Excluding
these, underlying adjusted SG&A costs decreased by 5% to
£1,876m, reflecting the renewed focus from the new management
team on total labour resource, supplier negotiation and
discretionary and general overhead expenditure in the second half
of 2009. Including the impact of the contract and financial review
charges of £28m included within SG&A costs, SG&A costs increased
by 16% to £2,295m.
The decrease in gross profit together with the impact of higher
SG&A costs resulted in adjusted EBITDA of £309m, a reduction of
£552m compared with 2008. In 2008, EBITDA increased by 17% to
£861m. Depreciation and amortisation increased by 4% to £776m
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
64% 60%
40%
47%
53%
36%
UK
Non UK
2007 2008 2009
BT Global Services UK/Non UK revenue (£m)
BUSINESS AND FINANCIAL REVIEWS