BT 2009 Annual Report Download - page 41

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ADDITIONAL INFORMATION FINANCIAL STATEMENTS REPORT OF THE DIRECTORS BUSINESS AND FINANCIAL REVIEWS OVERVIEW
BUSINESS AND FINANCIAL REVIEWS
39BT GROUP PLC ANNUAL REPORT & FORM 20-F
BUSINESS AND FINANCIAL REVIEWS FINANCIAL REVIEW
Interest income arising from listed investments and other interest
and similar income was £31m in 2009 compared with £65m in 2008
reflecting lower levels of investments held by the group and lower
average interest rates on deposits. In 2008, the reduction in
interest income of £14m reflects the lower level of investment
holdings following their utilisation to fund bond maturities.
Adjusted operating profit represented 2.6 times net finance
expense before specific items and the net finance income
associated with the group’s defined benefit pension obligation,
which compares with interest cover of 3.6 times in 2008 and
4.2 times in 2007. The reduction in cover was largely due to lower
operating profits in the year and higher borrowing costs. Interest
cover of reported operating profit represented 0.7 times net
finance expense in 2009 (2008: 6.2 times, 2007: 27.0 times).
Associates and joint ventures
The results of associates and joint ventures before specific items are
shown below:
2009 2008 2007
£m £m £m
Share of post tax profit (loss)
of associates and
joint ventures 39 (11) 15
Our share of the post tax profit (loss) from associates and joint
ventures was a profit of £39m in 2009 (2008: £11m loss, 2007:
£15m profit). Our most significant associate is Tech Mahindra
Limited, which contributed £33m of post tax profit in 2009
(2008: £11m loss, 2007: £21m profit). The profits in 2009 reflect a
focus on efficiency and costs. The loss in 2008 reflects Tech
Mahindra’s investment in the expansion of its global capabilities
during the year.
Profit before taxation
Adjusted profit before taxation was £1,877m in 2009, compared
with £2,506m in 2008 and £2,495m in 2007. The reduction in
2009 is primarily due to the unacceptable performance in BT Global
Services, partially offset by good performance in the other lines of
business. In 2008, adjusted profit before taxation was broadly flat
year on year, with the increase in operating profit being largely
offset by the increase in net finance expense.
Reported loss before taxation was £134m in 2009, compared with
profit before taxation of £1,976m in 2008 and £2,484m in 2007.
Taxation
The tax credit for 2009 was £53m and comprised a tax credit of
£10m on the profit before taxation and specific items and a credit
of £43m on specific items. The effective rate of the tax credit on the
profit before taxation and specific items was (4.2)%, reflecting the
tax credit arising on the contract and financial review charges of
£1.6bn (see page 10) recorded in the year.
The net tax charge in 2008 was £238m and comprised a charge
of £581m on profit before taxation and specific items, offset by a
tax credit of £343m on certain specific items. The net tax credit in
2007 was £368m and comprised a charge of £611m on profit
before taxation and specific items, offset by a tax credit of £41m on
certain specific items and a further specific tax credit of £938m
arising on settlement of substantially all open UK tax matters
relating to ten tax years up to and including the 2004/05 year.
Earnings per share
Adjusted basic earnings per share were 18.4p in 2009, compared
with 23.9p in 2008 and 22.7p in 2007, reflecting the reduced
profitability. In 2009, the reported basic loss per share was 1.1p
(2008: earnings per share 21.5p, 2007: earnings per share 34.4p).
The table below reconciles adjusted to reported earnings per share.
2009 2008 2007
pence pence pence
Adjusted basic earnings
per sharea18.4 23.9 22.7
Contract and financial review
charges and specific items (19.5) (2.4) 11.7
Reported basic (loss)
earnings per share (1.1) 21.5 34.4
aAdjusted amounts refer to the amounts before contract and financial review charges recorded
within BT Global Services and specific items.
Reported diluted (loss) earnings per share were not materially
different from reported basic (loss) earnings per share in any year
under review.
Dividends
The Board recommends a final dividend of 1.1p per share (2008:
10.4p per share, 2007: 10.0p per share) to shareholders, amounting
to approximately £85m (2008: £805m, 2007: £825m). This will be
paid, subject to shareholder approval, on 7 September 2009 to
shareholders on the register on 14 August 2009. When combined
with the 2009 interim dividend of 5.4p per share, the total dividend
proposed for 2009 is 6.5p per share, totalling £503m (2008:
£1,236m, 2007: £1,247m). This compares with 15.8 pence in 2008
and 15.1 pence in 2007, a decrease of 59% following the increase in
2008 of 5%.
Dividends paid in 2009 were £1,222m (2008: £1,241m, 2007:
£1,053m) and have been presented as a deduction to shareholders’
equity.
Financing
In 2009, cash generated from operations was £4,934m (2008:
£5,187m, 2007: £5,245m), a reduction of 5% compared with
2008. In 2008, cash generated from operations included pension
deficiency payments of £320m.
In 2009, the group paid net tax of £228m, compared with a net tax
refund of £299m received in 2008. The net refund received in 2008
included a receipt of £521m in relation to the settlement of open tax
years up to and including 2004/05, together with tax paid of £222m.
In 2007, the group paid net tax of £35m, which included the initial
cash receipt of £376m in relation to the settlement with HMRC. In
2009, net cash inflow from operating activities was £4,706m (2008:
£5,486m, 2007: £5,210m).
6.5p
full year proposed dividend