BT 2014 Annual Report Download - page 188

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Additional information
Additional information
EBITDA
In addition to measuring nancial performance of the group and lines of business based on operating prot, we also measure performance based on
EBITDA and adjusted EBITDA. EBITDA is dened as the group prot before depreciation, amortisation, net nance expense and taxation. Adjusted
EBITDA is dened as EBITDA before specic items. EBITDA is a common measure used by investors and analysts to evaluate the operating nancial
performance of companies, particularly in the telecommunications sector.
We consider EBITDA and adjusted EBITDA to be useful measures of our operating performance because they approximate the underlying operating
cash ow by eliminating depreciation and amortisation. EBITDA and adjusted EBITDA are not direct measures of our liquidity, which is shown by our
cash ow statement, and need to be considered in the context of our nancial commitments.
Within the lines of business we may also consider our performance using an underlying EBITDA measure, which additionally excludes the impact of
acquisitions and disposals and foreign exchange.
A reconciliation from group operating prot, the most directly comparable IFRS measure, to reported and adjusted group EBITDA, is set out below.
Areconciliation between operating prot and adjusted EBITDA for our lines of business is set out in note 4 to the consolidated nancial statements.
Year ended 31 March
2014
£m
2013
Restated
£m
2012
a Restated
£m
a
Operating proƬt3,145 2,948 2,889
Depreciation and amortisation 2,695 2,843 2,972
Reported EBITDA 5,840 5,791 5,861
Specic items 276 352 173
Adjusted EBITDA 6,116 6,143 6,034
a Restated, see note 1 to the consolidated Ƭnancial statements.
Earnings per share
We also measure nancial performance based on adjusted earnings per share, which excludes specic items. Basic and adjusted earnings per share,
and the per share impact of specic items, are as follows
2014
2013
Restated
2012
a Restated a
Year ended 31 March
Pence
per share £m
Pence
per share £m
Pence
per share £m
Basic earnings per share/proƬtb25.7 2,016 24.8 1,946 22.6 1,755
Specic itemsc2.5 196 1.5 111 0.8 59
Adjusted basic earnings per share/proƬt28.2 2,212 26.3 2,057 23.4 1,814
a Restated, see note 1 to the consolidated Ƭnancial statements.
b The stated proƬt amounts are the components of the total proƬt which are attributable to eTuity shareholders excluding non-controlling interests.
c SpeciƬc items are set out in note 8 to the consolidated Ƭnancial statements.
We disclose reported earnings per share, both basic and diluted, in note 10 to the consolidated nancial statements.
Free cash Ʈow
Normalised free cash ow is one of the group’s key performance indicators by which our nancial performance is measured. Normalised free
cash ow is dened as the net increase in cash and cash equivalents less cash ows from nancing activities (except net interest paid) the
acquisition or disposal of group undertakings the net sale of short-term investments and excluding the cash impact of specic items purchases
oftelecommunications licences and the cash tax benet of pension decit payments. For non-tax related items the adjustments are made on a
pre-tax basis.
Normalised free cash ow is primarily a liquidity measure. However, we also believe it is an important indicator of our overall operational performance
as it reects the cash we generate from operations after capital expenditure and nancing costs, both of which are signicant ongoing cash outows
associated with investing in our infrastructure and nancing our operations. In addition, normalised free cash ow excludes cash ows that are
determined at a corporate level independently of ongoing trading operations such as dividends, share buybacks, acquisitions and disposals and
repayment and raising of debt. Normalised free cash ow is not a measure of the funds that are available for distribution to shareholders.
Our key free cash ow measure changed from adjusted free cash ow to normalised free cash ow in 2012/13 following the £2.0bn lump sum
pension decit payment made in March 2012. The £520m tax credit relating to this decit payment would have distorted our free cash ow
measure in 2012/13, as would the £202m payment for the 4G spectrum licence. Certain historical incentive share awards still use adjusted free
cash ow as one of the performance criteria for vesting. Adjusted free cash ow does not exclude purchases of telecommunications licences and
the cash tax benet of pension decit payments.