BT 2013 Annual Report Download - page 47

Performance 45
Performance
14,000
13,000
13,500
12,500
12,000
11,500
11,000
Foreign exchange
& acquisitions/
disposals
Transit/POLOs
Network
operating
& IT costs
Net labour
costs
Property &
energy costs
Other costs
2012/13 2011/12
Operating costs before depreciation, amortisation and
specific items
£m
12,464
13,630
183
145
44
43
306
445
Labour costs, both direct and indirect, make up the largest category
within our cost base. Net labour costs decreased by 4% (2011/12:
broadly flat) to £4,626m, as improved productivity and better systems
and processes offset our investment programmes, the recruitment
of around 1,600 engineers and the insourcing of around 4,000 jobs.
Leaver costs were £58m (2011/12: £97m).
Payments to telecommunications operators (POLOs) were down 15%
(2011/12: 16%) reflecting lower mobile termination rates and reduced
transit and wholesale call volumes. We spent 4% less on property and
energy (2011/12: 7% less) as we drove better space utilisation but lower
energy usage was more than offset by higher energy prices. Network
operating and IT costs were down 7% (2011/12: 11%) as we rationalise
our networks and systems. Other operating costs, which include cost of
sales, marketing and transport costs, decreased by 11% (2011/12: 3%)
due to the decline in revenue and the benefit of our cost transformation
programmes.
2012/13 cost basea
Net labour costs 37%
POLOs 21%
Property & energy
costs 8%
Network operating
& IT costs 5%
Other 29%
a Excluding depreciation, amortisation and specific items.
A detailed breakdown of our operating costs is set out in note 6 to the
consolidated financial statements.
EBITDA
Adjusted EBITDA increased by 2% (2011/12: 3%) to £6,181m,
reflecting further progress in transforming our cost base.
Underlying EBITDA, which excludes a £10m negative impact from
foreign exchange movements and an £11m negative net impact from
acquisitions and disposals, also increased by 2% (2011/12: 3%).
An analysis of EBITDA by line of business is set out in note 4 to the
consolidated financial statements. Commentary on line of business
results is provided in the line of business performance section on
page 53.
Depreciation and amortisation
Depreciation and amortisation of £2,843m decreased by 4% (2011/12:
flat). This is due to more efficient delivery of our capital investment
programmes over the last four years.
Net finance expense
Net finance expense before specific items of £653m decreased by £28m
(2011/12: £164m) due to the lower average cost of net debt.
Year ended 31 March
2013
£m
2012
£m
2011
£m
Interest on borrowings 660 672 852
Capitalised interest (5) (9) (6)
Fair value movements on
derivatives 11 29 34
Total finance expense 666 692 880
Total finance income (13) (11) (35)
Net finance expense 653 681 845
The table below provides an overview of average gross debt,
investments and cash balances, net debt and the related weighted
average interest rates over the past three years.
Year ended 31 March
2013
£m
2012
£m
2011
£m
Average gross debt 10,599 9,295 10,808
Weighted average interest
rate on gross debt 6.1% 7.3% 7.8%
Average investments and
cash balances 1,611 1,148 2,192
Weighted average interest
rate on investments 0.5% 0.6% 0.6%
Average net debt 8,988 8,147 8,616
Weighted average interest
rate on net debt 7.3% 8.3% 9.8%
Interest on our borrowings decreased by £12m (2011/12: £180m).
Although the weighted average interest rate has reduced, its effect
was largely offset by an increase in our average gross debt due to the
£2bn pension deficit payment in March 2012. Fair value movements
on derivatives include £5m (2011/12: £16m, 2010/11: £28m) of
swap restructuring costs on certain derivatives. They also include £6m
(2011/12: £13m, 2010/11: £6m) of fair value movements on derivatives
not in a designated hedge relationship.
Finance income increased by £2m (2011/12: £24m decrease) mainly
dueto higher average cash and investment balances.