BT 2009 Annual Report Download - page 38

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ADDITIONAL INFORMATION FINANCIAL STATEMENTS REPORT OF THE DIRECTORS BUSINESS AND FINANCIAL REVIEWS OVERVIEW
36 BT GROUP PLC ANNUAL REPORT & FORM 20-F
BUSINESS AND FINANCIAL REVIEWS FINANCIAL REVIEW
2009 2008 2007
£m £m £m
Staff costs
Wages and salaries 4,499 4,242 4,099
Social security costs 432 417 388
Pensions costs 544 626 643
Share based payments 31 73 93
5,506 5,358 5,223
Staff costs increased by 3% to £5,506m (2008: 3%), largely due to
recent acquisitions and the impact of pay inflation partly offset by
cost savings. Leaver costs were £204m (2008: £127m, 2007:
£147m). The pension charge for 2009 was £544m, compared with
£626m in 2008 and £643m in 2007. This included £451m in
respect of the BTPS, the group’s main defined benefit pension
scheme (2008: £561m, 2007: £594m). The decrease in pension
costs in the year reflects the impact of the higher discount rate
(6.85%) compared with 2008 (5.35%) on the defined benefit
service cost, which was partially offset by an increase in costs
associated with the group’s defined contribution schemes as the
membership of these schemes grows. The decrease in pension costs
in 2008 reflected the impact of leavers from the BTPS, also offset
by higher costs on the group’s defined contribution schemes. Share
based payment costs decreased by 58% to £31m, compared with a
decrease of 22% in 2008, reflecting the lower fair value of new
grants in 2009 and the significant number of UK Sharesave
forfeitures in the year.
Depreciation and amortisation was broadly flat in 2009,
compared with a decrease of 1% in 2008. This reflects higher
depreciation and amortisation on 21CN assets as they are brought
into use, offset by lower depreciation on legacy assets. The
reduction in 2008 was largely as a result of certain legacy assets
becoming fully depreciated and the useful lives of other assets
being extended, which was only partially offset by higher
depreciation on 21CN assets.
Payments to other telecommunication operators increased by 1%
to £4,266m, compared with an increase of 2% in 2008, reflecting
the impact of foreign exchange rate movements, partially offset by
the impact of lower volumes. The increase in 2008 was due to
higher volumes in the year. Other operating costs before specific
items increased by 39% to £8,934m, largely reflecting the impact
of contract and financial review charges within BT Global Services
of £1.6bn, the adverse impact of foreign exchange movements, the
impact of acquisitions and the slow delivery of cost efficiency
savings within BT Global Services. In 2008, other operating costs
increased by 4%, reflecting the impact of acquisitions, the cost of
supporting networked IT services contracts and increased levels of
activity in the network. Other operating costs include the
maintenance and support of the networks, accommodation, sales
and marketing costs, research and development and general
overheads.
EBITDA
In 2009, adjusted EBITDA was £5,348m, compared with £5,784m
in 2008 and £5,633m in 2007. The decline in 2009 reflects the
unacceptable performance in BT Global Services and continued
EBITDA decline in BT Wholesale, partially offset by a good
performance in BT Retail and Openreach. The increase in adjusted
EBITDA in 2008 reflected growth in the business and additional
other operating income generated in the year. Including the impact
of contract and financial review charges and specific items EBITDA
was £3,301m in 2009, compared with £5,245m in 2008 and
£5,461m in 2007.
Operating profit
In 2009, adjusted operating profit was £2,458m (2008: £2,895m,
2007: £2,713m), 15% lower than 2008, which in turn was 7%
higher than 2007. The reduction in the current year reflects the
unacceptable performance in BT Global Services, partially offset by
good performance in the other lines of business. The increase in
2008 reflected the revenue growth of the business and the
additional other operating income generated in the year. Reported
operating profit was £411m in 2009, compared with £2,356m in
2008 and £2,541m in 2007.
Other group items
Specific items
Specific items for 2009, 2008 and 2007 are shown in the table on
page 37, and are defined on page 33.
BUSINESS AND FINANCIAL REVIEWS