BT 2014 Annual Report Download - page 63

60 The Strategic Report
Group performance
Market context
The results for the year were in line with or ahead
ofthe outlook that we announced at the start of the
year. We have made progress towards our goal of
delivering sustainable, protable revenue growth.
The UK telecommunications sector is one of the most competitive
markets in the world. We are aected by the regulatory environment,
which has led to price reductions for some of our products and services.
Economic conditions have also restricted our growth ambitions in
recentyears.
Demand for bandwidth and faster broadband speeds has grown,
frombusinesses and consumers alike. Products and markets are
converging. Consumers increasingly want to buy xed-voice, broadband
and TV as a bundle from one provider. Customers are changing their
preferences, moving towards interactive broadband, data and IP
services as well as seeking higher speeds and connectivity wherever
they are. Their expectations around service quality have also risen.
In the business market, xed, mobile and IT services are converging.
Andlargemultinationals are expanding overseas, including in the
high-growth regions of the world.
We have made investments to enable us to respond to these
developments, and to changing customer demands and expectations
around service quality. We have continued to focus on reducing our cost
base this has allowed us to make strategically important investments
for the future of BT, whether that be in rolling out our bre broadband
network, TV or in 4G spectrum and mobility.
Over the last few years our focus on improving customer service and
eciency has generated substantial cost savings, enabling us to grow
our prots and cash ow despite the revenue pressures. The group-wide
restructuring programme we started last year is further improving our
cost base and will also enhance customer service.
Underlying revenue excluding transit was up 0.5%, reversing declines in
recent years. EBITDA was at, reecting our ability to reduce costs while
making long-term investments, which are delivering.
The groups results for the year demonstrate further progress towards
our goal of delivering sustainable, protable revenue growth.
Our progress against our KPIs
We have made good progress on our three nancial
KPIs this year. But our customer service KPI needs
to improve further.
We measure overall performance against our strategy using four key
performance indicators (KPIs). Over the past few years our KPIs have
been adjusted earnings per share, normalised free cash ow and
customer service improvement. These are consistent with metrics used
in assessing variable elements of executive remuneration. This year,
reecting our goal to deliver sustainable, protable revenue growth,
and to align with executive remuneration measures, we have elevated
our measure of the trend in underlying revenue excluding transit to be
afourth KPI.
We have outlined our performance against each of our KPIs below,
together with the denition of the measure, set out in italics. We have
provided reconciliations of the nancial measures to the closest IFRS
measure in the Additional information section on pages 184 to 186.
Trend in underlying revenue excluding transit
Underlying revenue excluding transit was up 0.5% compared with a
decline of 3.1% in the prior year. This was in line with our outlook at the
start of the year for an improved trend.
%
2011 20122010 2013 2014
Trend in underlying revenue excluding transit
Year ended 31 March
(1.9) (3.0) (2.9)
0.5
(3.1)
(3.5)
(3.0)
(2.5)
(2.0)
(1.5)
(1.0)
(0.5)
0.0
0.5
1.0
The trend reects improved performances from BT Global Services,
BTConsumer and BT Business whilst regulatory price reductions
impacted group revenue by £150m£200m.
Underlying revenue is a measure that reects the underlying
performance of the group that will contribute to long-term protable
revenue growth. It excludes the impact of acquisitions and disposals,
foreign exchange movements and specic items. We focus particularly
on the trend in underlying revenue excluding transit because transit
trac is low margin and signicantly aected by reductions in mobile
termination rates, which are outside our control.
Group performance