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2015
BT Group plc
Annual Report & Form 20-F 2015
Investing for the future
building on a history of
1961 198419381915189218691846

Table of contents

  • Page 1
    BT Group plc Annual Report & Form 20-F 2015 Investing for the future building on a history of 1846 1869 1892 1915 1938 1961 1984 2015

  • Page 2
    ...realise new possibilities. Inventing a smarter future 1984>2013 2014>15 eadin the wa in developin innovative products and services for our custo ers is a bi priorit for us. e showcase a nu ber of current pro ects with the potential to a e life easier for those we serve. Read more on page 14 2015...

  • Page 3
    ... to BT Group plc's Annual Report & Form 20-F 2015 his is the nnual eport for the ear ended 1 arch 01 . t co plies with UK re ulations and co prises part of the nnual eport and or 0- for the U ecurities and chan e o ission to eet U re ulations. his is our first inte rated nnual eport. e want to...

  • Page 4
    2 BT Group plc Annual Report 2015 Chairman's introduction e will a e sure UK households. port re ains reat value and widel available to e have invested further in our custo er service. e recruited 00 new en ineers and ore than 00 new people into our contact centres. nd we are seein the benefi...

  • Page 5
    ... The Strategic Report Purpose and strategy 3 Delivering our strategy 0ur lines of business Group performance Governance Financial statements Additional information Overview elco e to s first inte rated nnual eport which we have su arised in the ne t seven pa es. ere we outline our purpose our...

  • Page 6
    4 BT Group plc Annual Report 2015 Our purpose ur purpose is to use the power of co unications to a e a better world. brin in to ether our networ s our technolo and the hard wor and e pertise of our people we develop services that our custo ers value. We use the power of communications to make a ...

  • Page 7
    ... customer service Inputs Value creation Transform our costs Invest for growth Outputs & Outcomes Fibre TV and content Mobility DQGIXWXUH{ voice UK business markets Leading global companies Our culture Our values A healthy organisation Customer e are here for our customers Team e help...

  • Page 8
    ... 10 5 2011 2012 2013 2014 2015 0 2011 20.7 20 2012 23.4 2013 26.3 25 2014 28.2 0.0 2015 a Financial outlook which was given at the start of the year. utloo a roadl level Result own 0. 1RUPDOLVHGIUHHFDVKƮRZ Year ended 31 March £m 2,900 2,700 2,500 Customer service improvement...

  • Page 9
    ... 2014 2014 2015 2015 2013 2014 2015d reported normalisedc 5% 7% 28% 16% Proposed full year dividend ear ended 1 arch Adjusted revenue by line of business Year ended 31 March 2015 11% Openreach 28% Openreach (including internal) 38% BT Global Services a Adjusted EBITDA by line of business...

  • Page 10
    8 BT Group plc Annual Report 2015 How our lines of business performed BT Global Services e have consolidated our position as a lobal ar et leader for ana ed networ ed services. e help around 00 lar e corporate and public sector custo ers in ore than 1 0 countries worldwide to e brace the di ital a...

  • Page 11
    ... 30 25 20 2011 2012 2013 fibre fibre cable BT Wholesale 12-month rolling order intake Year ended 31 March 39% 40% £m 2,500 2,000 37% 38% 29% 30% 31% 32% 32% 1,500 1,000 2014 2015 500 0 ar et share of broadband lines ar et share of broadband lines Source: BT and market data. Q1 Q2 Q3...

  • Page 12
    ... fibre revenue rowth. ur operatin costs were lower which eant was at. ost e ciencies o set increased volu es pa increases and the additional en ineerin resource we recruited to support our provision and repair perfor ance. BT Technology, Service & Operations (BT TSO) is our internal service unit...

  • Page 13
    11 Developing and investing in new technologies, attracting and keeping the best people, leading markets and competing freely: innovation drives everything we do and has VLQFHZHVWDUWHGLQ7KHQH[W pages highlight some of our more recent achievements following RXU{VWRFN{PDUNHWOLVWLQJ...

  • Page 14
    12 BT Group plc Annual Report 2015 \HDUVRILQQRYDWLRQ ƬQGLQJDEHWWHUZD\RIGRLQJWKLQJV Open for business. Three billion British Telecom shares went on sale 3 December he first stoc ar et otation of a a or utilit helped to create a new t pe of share ownership one where an one could oin ...

  • Page 15
    ...athletes contactin ho e. round four ti es the data needs of the ei in a es in 00 . ut unli e those a es 01 was run fro one inte rated networ . ith 0 000 connections 1 00 phone lines and 1 000 cable outlets in 9 locations. hat was our innovative and resilient solution for the ulti ate ri ht first ti...

  • Page 16
    14 BT Group plc Annual Report 2015 Speeding up WKH{UHDOZRUOG ettin the record for the fastest data trans ission speed over an operational optical fibre lin . his ear and uawei achieved a super channel speed of erabits per second. n incredible feat ade even ore i pressive b bein set over an e ...

  • Page 17
    15 Q A Q A What's changed most during your time at BT? e ve alwa s done reall cool research. he ai of this has shifted so that we re a in sure we develop ideas and solutions that can appl to our networ .

  • Page 18
    16 BT Group plc Annual Report 2015 2014>15 Click on happiness e re wor in with oca- ola to brin free internet access to i poverished co unities in outh frica. i e all ood ideas it s si ple. oca- ola s dispensin achines are ever where so where better to find web access than alon side our cold drin...

  • Page 19
    ...hi h-end sport and entertainment at great value prices. Delia Bushell ana in irector of and port Extraordinary TV IRU{HYHU\RQH ou iew co bines the power of hi hspeed broadband with the world of choosin watchin and recordin content. Brilliant settop boxes ur ou iew bo lets customers pause live and...

  • Page 20
    18 BT Group plc Annual Report 2015 We never stand still o in up with new ideas and developin new technolo ies is core to what we do at . his pa e ives ou an idea of the ran e of those ideas desi ned to push technolo further than before. ll intended to i prove people s lives in welco e relevant and...

  • Page 21
    Overview The Strategic Report Purpose and strategy 19 Delivering our strategy 0ur lines of business Group performance Governance Financial statements Additional information Purpose and strategy his section is about our purpose and the strate we are followin to achieve it. t e plains how i provin ...

  • Page 22
    ... olb which enables outstandin sound clarit . "It's been a ground-breaking year for BT. We've announced some major investments and launched a number of innovative new services." t our purpose is to use the power of co unications to a e a better world. e re proud our technolo ies have chan ed what...

  • Page 23
    ... 0ur lines of business Group performance Governance Financial statements Additional information Our purpose s purpose is to use the power of co a e a better world. unications to Our goal ur oal is to deliver sustainable profitable revenue rowth. reviousl we had to depend on cost transfor...

  • Page 24
    ... systems RFT improvement Year ended 31 March 2015 % 9 8 7 6 5 4 3 2 1 0 BT Global Services BT Business BT BT Openreach BT Group Consumer Wholesale Working better across our organisation Supporting our people usto er service is one of the factors used in deter inin the annual bonus of e ecutives...

  • Page 25
    ... strategy 0ur lines of business Group performance Governance Financial statements Additional information Transform our costs e run lar e and co ple cost transfor ation pro ra es which are led b a tea of internal consultants. he are people. his a es sense because the now our business better than an...

  • Page 26
    ... row our share of the UK business ar et and increase the revenue we et fro each custo er. o we have i proved our product portfolio and are focusin on selected areas of services where we can row such as data centres cloud ana ed hostin and securit see pa e 1 . Leading global companies e are investin...

  • Page 27
    ... and co unit roups. 30 32 Our global reach e o er services in ore than 1 0 countries. ur fibre broadband networ in the UK is a e asset. 55 73 Our research activities e invest e tensivel in to find better wa s of doin thin s and to o er new services. nnovation is an i portant part of our...

  • Page 28
    26 BT Group plc Annual Report 2015 Operating Committee he e ana e ent co ittee which eets wee l and is chaired b the hief ecutive. rief details of its e bers are set out on these pa es. he peratin o ittee has collective responsibilit for runnin our business end to end and deliverin our strate . t...

  • Page 29
    Overview The Strategic Report Purpose and strategy 27 Delivering our strategy 0ur lines of business Group performance Governance Financial statements Additional information Clive Selley CEO, BT Technology, Service & Operations and Group CIO ppointed echnolo ervice perations when it was for ed in ...

  • Page 30
    ...BT Group plc Annual Report 2015 Our business model ur business creates value for shareholders b deliverin for custo ers societ and our people. e invest to build and aintain co unications networ s in the UK and overseas we develop products and services that run over those networ s and then we sell...

  • Page 31
    ... 0ur lines of business Group performance Governance Financial statements Additional information External environment Governance To use the power of communications to make a better world $JURZLQJ%7WRGHOLYHUVXVWDLQDEOHSURƬWDEOHUHYHQXHJURZWK Broaden and deepen our customer relationships...

  • Page 32
    ... and products and services for our custo ers we use the power of co unications to a e a better world. ivin up to our values in ever thin we do will help build the ind of business our people are proud to be part of. ur values are Our people Team e help each other achieve more Change e all a e chan...

  • Page 33
    ... The Strategic Report Purpose and strategy 31 Delivering our strategy 0ur lines of business Group performance Governance Financial statements Additional information A global workforce t 1 arch 01 we had 00 full-ti e e uivalent e plo ees in 0 countries with 0 900 of the based in the UK. e are...

  • Page 34
    ... s bench ar of .90 the hi hest level since we started the surve in 00 . Employee engagement index As at 31 March 3.9 3.8 3.7 3.6 3.5 2011 2012 2013 2014 2015 ic ness absence rates have increased b to . . here are di erences between the lines of business with a stead reduction in ost of the but...

  • Page 35
    Overview The Strategic Report Purpose and strategy 33 Delivering our strategy 0ur lines of business Group performance Governance Financial statements Additional information ur networ s service platfor s and s ste s are the foundations of the products our custo ers rel on around the world. 1HWZRUN...

  • Page 36
    ... than 000 sub issions. s a result we have identified ore than 0 of benefit throu h new revenues and lower costs and it is helpin us provide a better service to our custo ers. e run innovation showcases for our a or custo ers where the can discuss applications and solutions with our e perts. nd we...

  • Page 37
    Overview The Strategic Report Purpose and strategy 35 Delivering our strategy 0ur lines of business Group performance Governance Financial statements Additional information artnerships continue to be an i portant part of the wa we build our reputation and show our support for ood causes. e were ...

  • Page 38
    ... investor meetings and events Year ended 31 March 500 421 400 300 he upporters lub is our collaboration with our lon -standin charit partner o ic elief. t ai s to build a better world b brin in people to ether throu h sport. e provide rants to support charities and co unit sport foundations to use...

  • Page 39
    ... 0ur lines of business Group performance Governance Financial statements Additional information his ear we introduced our urchase rder intercept pro ra e. his involves reviewin all purchase orders to a e sure that we are opti isin our spend across . he new entral usiness ervices centre see pa e is...

  • Page 40
    38 BT Group plc Annual Report 2015 e are the lar est supplier of networ ed services to the UK public sector. e wor with ore than 1 00 or anisations across central local and devolved overn ent healthcare police and defence to provide so e of the UK s ost vital services. or e a ple we run the ...

  • Page 41
    Overview The Strategic Report Purpose and strategy 39 Delivering our strategy 0ur lines of business Group performance Governance Financial statements Additional information Impact of regulation Fixed Access and Wholesale Broadband Access Market Reviews here were a nu ber of re ulator decisions ...

  • Page 42
    ... we have achieved a reduction and ta es the total savin s calculated on this basis to 1 . BT's worldwide energy usea Year ended 31 March Gwh 2,800 2,700 2,675 2,600 2,500 2,400 2,300 2,200 2,100 2,000 2011 2012 2013 2014 2015 2,756 Total gross emissions Total net emissions Scope 1: combustion of...

  • Page 43
    ...The Strategic Report Purpose and strategy 41 Delivering our strategy 0ur lines of business Group performance Governance Financial statements Additional information Our risks How we manage risk i e all businesses we are a ected b a nu ber of ris s and uncertainties. hese a be i pacted b internal...

  • Page 44
    42 BT Group plc Annual Report 2015 Our principal risks Risk description Impact Link to strategy Security and resilience The resilience of our IT systems, networks and associated infrastructure, including our core data centres and exchanges, is essential to our short and long-term commercial ...

  • Page 45
    Overview The Strategic Report Purpose and strategy 43 Delivering our strategy 0ur lines of business Group performance Governance Financial statements Additional information Changes over the last year Risk mitigation n the past ear we have had to deal with an unprecedented increase in the volu e...

  • Page 46
    ... to invest pa dividends or repa debt as it atures. Transform our costs Growth in a competitive market We operate in markets which are characterised by: high levels of change; strong and new competition; declining prices and, in some markets, declining revenues; technology substitution; market and...

  • Page 47
    Overview The Strategic Report Purpose and strategy 45 Delivering our strategy 0ur lines of business Group performance Governance Financial statements Additional information Changes over the last year Risk mitigation he actuarial valuation of the che e as at 0 une 01 was announced on 0 anuar 01 ...

  • Page 48
    46 BT Group plc Annual Report 2015 Risk description Impact Link to strategy Communications industry regulation Regulation impacts our activities across all jurisdictions. n the UK fco can re uire us to provide specific wholesale services on specified ter s followin ar et reviews. he scope and...

  • Page 49
    Overview The Strategic Report Purpose and strategy 47 Delivering our strategy 0ur lines of business Group performance Governance Financial statements Additional information Changes over the last year Risk mitigation ver the last ear we have seen re ulator activit in a nu ber of areas which are ...

  • Page 50
    48 BT Group plc Annual Report 2015 Risk description Impact Link to strategy Supply chain We operate in a global supply market. This enables us to procure third-party products and services that help us deliver to our customers wherever they are. There are often several links in the 'chain' of ...

  • Page 51
    Overview The Strategic Report Purpose and strategy 49 Delivering our strategy 0ur lines of business Group performance Governance Financial statements Additional information Changes over the last year Risk mitigation e have increased our focus on cate or ana e ent of suppliers. ate or ana e ent ...

  • Page 52
    50 BT Group plc Annual Report 2015 Risk case-studies Raising standards in major contracts e describe the ris s associated with our a or contracts on pa e . i h- ualit ana e ent of lar e contracts includin the thorou h handlin of ris s benefits us and our custo ers. proved contract ana e ent ...

  • Page 53
    ... 51 Delivering our strategy 0ur lines of business Group performance Governance Financial statements Additional information EE acquisition: risks ur proposed ac uisition of creates additional ris s for be ond those captured in our principal ris s and uncertainties. n the section below we hi hli ht...

  • Page 54
    ... ed roups business and operations. andset and networ develop ent e ulators includin fco set annual licence fees for spectru bands used b for voice calls and services and is a part to an on oin consultation with fco in relation to this. n si nificant increases in spectru pricin applicable to the...

  • Page 55
    ...The Strategic Report Purpose and strategy 53 Delivering our strategy 0ur lines of business Group performance Governance Financial statements Additional information Our lines of business his section e plains ore about our lines of business. e provide infor ation on the products and services we sell...

  • Page 56
    ... or 9% BT Global Services BT Business BT Consumer BT Wholesale Openreach BT Business 6,200 or 7% BT Consumer 32,700 or 37% Openreach b Full-time equivalent of full and part-time employees. BT Technology, Service & Operations lobal ervices is our lar est line of business b revenue eneratin of...

  • Page 57
    ...The Strategic Report Purpose and strategy 55 Delivering our strategy 0ur lines of business Group performance Governance Financial statements Additional information BT Global Services e are a lobal ar et leader for ana ed networ ed services. e help around 00 lar e corporate and public sector custo...

  • Page 58
    56 BT Group plc Annual Report 2015 his ear we launched an innovative lobal ca pai n the rt of onnectin to help our custo ers address business challen es in areas such as cloud obilit and securit . o i prove the wa we provide inte rated solutions to our lobal custo ers ecurit and onferencin oved ...

  • Page 59
    ... fro so e lar e contract re-si ns. n line with our strate to row our share of wallet we increased our new business order inta e with our top priorit custo ers. BT Global Services 12-month rolling order intake Year ended 31 March £bn 7.5 7.0 6.5 6.0 5.5 5.0 4.5 4.0 Q1 Q2 2014 Q3 Q4 Q1 Q2 2015 Q3 Q4...

  • Page 60
    ... to enhance our lobal capabilities in line with the plans we shared last ear. or e a ple we have invested in our global account management capabilities and made our products and services ore e ible and better at wor in to ether. e have also invested in the high-growth regions. e have e tended the...

  • Page 61
    ... ets for specialist services UK Corporate ar er businesses and corporate id- ar et BT Ireland s public sector in ublic sector corporates and wholesale in RoI BT Business Solutions UK s corporates some public sector organisations o e holesale and BT Global ervices customers UK SME Key priorities...

  • Page 62
    60 BT Group plc Annual Report 2015 BT Business Solutions e have four specialist Business BT IT Services services businesses rovidin e uip ent and networ ed solutions ana ed and support services and consultin services. and co unications hardware and software includin co putin and networ in e uip ...

  • Page 63
    Overview The Strategic Report Purpose and strategy 61 Delivering our strategy 0ur lines of business Group performance Governance Financial statements Additional information his ar et is rowin in i portance for us. usto ers increasin l want to brin their fi ed and obile services to ether for ore ...

  • Page 64
    ...increased 1 and we have launched a new ran e of voice products. nd we have i proved our custo er service. Performance in the year BT Business 12-month rolling order intake Year ended 31 March £m 2,300 2,200 2,100 Key facts: EBITDA up 4% Order intake broadly level at £2.1bn Fibre broadband lines...

  • Page 65
    Overview The Strategic Report Purpose and strategy 63 Delivering our strategy 0ur lines of business Group performance Governance Financial statements Additional information peratin costs were down . Underl in operatin costs e cludin transit were down due to savin s fro our cost transfor ation ...

  • Page 66
    64 BT Group plc Annual Report 2015 BT Consumer e are the lar est provider of consu er fi ed-voice and broadband services in the UK. e are focused on top and bottom-line rowth throu h sellin broadband sports channels and obile services to our custo ers. e suppl -branded services directl to UK ho ...

  • Page 67
    ... Controls to help eep our custo ers and their fa ilies safe online. n u ust 01 we introduced a broadband pac a e specificall for asic custo ers providin the with low-cost internet access. ur business consists of our channels port . service and our live sports obile o ers -onl plans to UK consu ers...

  • Page 68
    ... ers includin business lines a increase fro last ear. 9 of our retail broadband custo ers are now on fibre co pared with 9 last ear. BT's retail broadband market share At 31 March % 40 36% 35 30 25 20 2011 2012 2013 fibre fibre cable 37% 38% 39% 40% 29% 30% 31% 32% 32% 2014 2015 ar et...

  • Page 69
    ...our strategy 0ur lines of business Group performance Governance Financial statements Additional information Transform our costs peratin costs increased re ectin the first full financial ear of port pro ra e ri hts char es. reducin the nu ber of en ineer visits to install fibre broadband for our...

  • Page 70
    ... to invest in their own assets and capabilities. e o er connectivit voice and hosted co unications services and a ran e of bespo e ana ed solutions. e also o er industr -specific services to edia co panies and broadcasters. Revenue market share of European wholesale telecoms providers 2013: $46...

  • Page 71
    Overview The Strategic Report Purpose and strategy 69 Delivering our strategy 0ur lines of business Group performance Governance Financial statements Additional information e provide a wide ran e of wholesale voice products. he ost basic ransit carries calls across our networ fro one s networ to ...

  • Page 72
    .... Based on responses from a monthly random sample of BT Wholesale customers. hese i prove ents were driven b three areas of innovation in particular Business Zone. e launched a self-service portal throu h which s can ana e their orders and an faults. usto ers who used this portal were a lot ore...

  • Page 73
    Overview The Strategic Report Purpose and strategy 71 Delivering our strategy 0ur lines of business Group performance Governance Financial statements Additional information he reatl reduced the price that s can char e each other to deliver calls ade to their fi ed-line custo ers. his eant we had...

  • Page 74
    ... BT Group plc Annual Report 2015 e do not sell our products directl to the public. e wor on behalf of co unications providers. ur networ and services are available to all of the and in turn the co pete to provide phone and internet services to consu ers and businesses. recent uropean Union report...

  • Page 75
    ... 0ur lines of business Group performance Governance Financial statements Additional information ur thernet products o er dedicated fibre connections with speeds of up to 100 bps. s use the in their own networ s and to provide hi hualit hi h-bandwidth services to businesses and the public sector...

  • Page 76
    74 BT Group plc Annual Report 2015 e are providin ore infor ation on our service and perfor ance to both our custo ers and their end custo ers. e have launched a website where custo ers can see detailed perfor ance infor ation for each UK re ion. e have also introduced an incident chec er to help ...

  • Page 77
    Overview The Strategic Report Purpose and strategy 75 Delivering our strategy 0ur lines of business Group performance Governance Financial statements Additional information Transform our costs peratin costs reduced 01 1 1 as cost e ciencies o set an increase in volu es pa in ation and the ...

  • Page 78
    76 BT Group plc Annual Report 2015 BT Technology, Service & Operations (BT TSO) is our internal service unit that is responsible for deliverin and operatin our networ s platfor s and s ste s. wor s closel with each of our custo er-facin lines of business. e create new products for the and a e ...

  • Page 79
    Overview The Strategic Report Purpose and strategy 77 Delivering our strategy 0ur lines of business Group performance Governance Financial statements Additional information Group performance n this section we e plain how we have done this ear a ainst our e perfor ance indicators. e set out the ...

  • Page 80
    ... increase our capacit for future invest ent and product innovation and is an e citin prospect. ur financial ob ectives are to reduce net debt while investin in the business supportin the pension fund and pa in pro ressive dividends. 2014/15 performance against our outlook Outlook Underlying revenue...

  • Page 81
    Overview The Strategic Report Purpose and strategy 79 Delivering our strategy 0ur lines of business Group performance Governance Financial statements Additional information *URXSƬQDQFLDOUHVXOWV e have ade ood pro ress and a ain delivered stron financial results for the ear. e have ade e ...

  • Page 82
    80 BT Group plc Annual Report 2015 Group performance Our progress against our KPIs e have a ain delivered on our three financial K s with stron rowth in ad usted and cash ow. ur custo er service perfor ance is up . but we still want to do better. e use four e perfor ance indicators K s to easure ...

  • Page 83
    ... (2.0) (2.5) (3.0) (3.5) 2011 2012 2013 2014 2015 0.5 0.5 onsu er revenue was up with stron rowth in the broadband and custo er bases helped b port. his rowth was o set b declines in our other lines of business ainl re ectin re ulator price chan es and lower UK public sector revenues. e e plain...

  • Page 84
    ... and line volu es re ectin the i ration of custo ers to broadband and services. holesale underl in revenue e cludin transit was down . he i pact of re ulator price chan es and a lar e contract ter ination were partl o set b the reco nition of ladder pricin revenue. n lobal ervices UK public sector...

  • Page 85
    ...0ur lines of business Group performance Governance Financial statements Additional information a ents to teleco unications operators s were down 1 pri aril re ectin lower transit volu es a ne ative forei n e chan e ove ent and lower call volu es in onsu er. et labour costs were down as we increased...

  • Page 86
    84 BT Group plc Annual Report 2015 Dividends he oard is proposin a final dividend to shareholders of . p up 1 . his brin s the full ear dividend to 1 . p up 1 and co pares with an increase in the 01 1 full ear dividend of 1 . his ear s dividend is at the upper end of our outloo ran e re ectin ...

  • Page 87
    Overview The Strategic Report Purpose and strategy 85 Delivering our strategy 0ur lines of business Group performance Governance Financial statements Additional information eported free cash ow which includes specific ite s and a 10 01 1 ta benefit fro pension deficit pa ents was 01 1 1 1 . e ...

  • Page 88
    86 BT Group plc Annual Report 2015 he aturit profile of our ter debt and the applicable avera e coupon rate is shown in the raph below. 0DWXULW\SURƬOHRIJURVVGHEW H[FOXGLQJOHDVLQJ DQGDYHUDJHFRXSRQUDWH At 31 March £m 1,800 9.5% 6.9% 4.3% 2.8% 1,500 5.5% 1,200 900 ...

  • Page 89
    ... Strategic Report Purpose and strategy 87 Delivering our strategy 0ur lines of business Group performance Governance Financial statements Additional information Taxation Tax expense ur e ective corporation ta rate was 19.9 co pared with 1. in 01 1 . his is sli htl lower in both ears than the UK...

  • Page 90
    ... capital with which we ana e our business da b da . t also re ects the lon er-ter fundin strate with which we finance our invest ents and our obli ation to the pension fund. 2015 t 1 arch ropert plant e uip ent software and teleco s licences oodwill other ac uisition related intangible assets ther...

  • Page 91
    Overview The Strategic Report Purpose and strategy 89 Delivering our strategy 0ur lines of business Group performance Governance Financial statements Additional information Pensions Overview e provide a nu ber of retire ent plans for our e plo ees. he lar est of these plans is the ension che e a ...

  • Page 92
    ... investment in society Year ended 31 March 2015 £m Supporting charities and communities 40 30 1.9% 1.5% 31.9 1.12% 1.01% 27.2 1.15% 32.5 2015 27.6 20 10 0 27.1 2011 2012 2013 2014 ercenta e of previous ear s ad usted profit before ta ation Investment - time, cash and in-kind support

  • Page 93
    ...to help children b 0 0. Developing a culture of tech literacy So far we have helped 30,000 people take part in courses and gain confidence and competence in using the internet Research by Just Economics for BT We measure the social value of someone going online in the UK at £1,064 a year e are...

  • Page 94
    ... awareness and training Our suppliers Ethical trading: a measure of our supply chain review with specific focus on u an i hts 2013/14 performance 1.01 of invested 2014/15 performance 1.1 of invested Status Target for 2015/16 aintain 1 invested of Page 90 Our customers 1. i prove ent . i prove...

  • Page 95
    ... The Strategic Report Purpose and strategy 93 Delivering our strategy 0ur lines of business Group performance Governance Financial statements Additional information Governance n this section we ive details of our overnance structure. e e plain who sits on the oard how it operates and the areas it...

  • Page 96
    94 BT Group plc Annual Report 2015 Chairman's governance report his has been a ver full ear for with a nu ber of a or develop ents and decisions. t has therefore been a ver bus ear for oard e bers who have ade the selves available to support and en a e with the ana e ent tea as and when needed. ...

  • Page 97
    Overview The Strategic Report Purpose and strategy 95 Delivering our strategy 0ur lines of business Group performance Governance Financial statements Additional information How we govern the group Our governance structure The Board he oard is ulti atel responsible for the ana e ent of the roup ...

  • Page 98
    96 BT Group plc Annual Report 2015 Board of Directors Key to membership of Board committees Operating udit is Remuneration o inatin overnance ustainable and esponsible usiness BT Pensions ualit of ccess oard h echnolo Sir Michael Rake Chairman ppointed to the oard as hair an in epte ber 00 . ...

  • Page 99
    Overview The Strategic Report Purpose and strategy 97 Delivering our strategy 0ur lines of business Group performance Governance Financial statements Additional information 1RQH[HFXWLYHGLUHFWRU ppointed to the oard in ebruar Warren East h 01 . ritish national a e . 1RQH[HFXWLYHGLUHFWRU ...

  • Page 100
    ... ht and control rowin shareholder value and corporate overnance. he chart below shows how the oard allocated its ti e. nu ber of these areas are also considered b the oard co ittees. Allocation of time 3% Other 3% People, health & safety 14% Governance, risk & audit 26% Business & CEO updates he...

  • Page 101
    ... s of reference. 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Calendar year e include details of all directors contracts letters of appoint ent in the Report on Directors' Remuneration. Attendance at Board meetings he followin table shows each director s attendance at eetin s of the oard...

  • Page 102
    100 BT Group plc Annual Report 2015 Board induction he table below shows pro ress a ainst the ain actions Areas of focus Actions n appoint ent directors ta e part in an induction pro ra e to increase their nowled e and understandin of the business. he receive infor ation about includin fi...

  • Page 103
    Overview The Strategic Report Purpose and strategy 101 Delivering our strategy 0ur lines of business Group performance Governance Financial statements Additional information Reports of the Board committees Audit & Risk Committee Chairman's report Committee members eetin s e ber ic ose chair an ...

  • Page 104
    ... ents for the ear ended 1 arch 01 are set out below. e discussed these issues as well as the areas of particular audit focus as described in the Independent auditors' report on pa es 1 to 1 with the e ternal auditors durin the ear. Group accounting policies, critical accounting estimates and key...

  • Page 105
    Overview The Strategic Report Purpose and strategy 103 Delivering our strategy 0ur lines of business Group performance Governance Financial statements Additional information e ternal audit considered and approved the auditors roup audit plan this followed discussion with the auditors on the ...

  • Page 106
    104 BT Group plc Annual Report 2015 has in place an internal control environ ent to protect the business fro aterial ris s which have been identified within the roup. ana e ent is responsible for establishin and aintainin ade uate internal controls over financial reportin and we have ...

  • Page 107
    Overview The Strategic Report Purpose and strategy 105 Delivering our strategy 0ur lines of business Group performance Governance Financial statements Additional information 1RPLQDWLQJ *RYHUQDQFH&RPPLWWHH Chairman's report 1RPLQDWLQJ oard e bership and succession t each eetin we considered ...

  • Page 108
    106 BT Group plc Annual Report 2015 ur polic for the co position of the oard is to support diversit in its widest sense. e want to attract oard e bers with a diverse ran e of bac rounds who will contribute a wealth of nowled e understandin and e perience of the co unities to who provide services. ...

  • Page 109
    ...Delivering our strategy 0ur lines of business Group performance Governance Financial statements Additional information Key areas Actions n6SHDN8Sos%7oVZKLVWOHEORZLQJFRQƬGHQWLDOKRWOLQH Keep under review the e ectiveness of pea Up s roup director of ethics and co pliance reported at each of...

  • Page 110
    ...BT Group plc Annual Report 2015 Our Regional Governance Committee (RGC) structure from 1 April 2015 Audit & Risk Committee UK & Republic RI{,UHODQG{5*& Europe RGC Asia & Middle East {$IULFD5*&a South East Asia Sub-Committee India RGC US & Canada RGC Latin America RGC aH[FOXGLQJ,QGLD operates...

  • Page 111
    ... The Strategic Report Purpose and strategy 109 Delivering our strategy 0ur lines of business Group performance Governance Financial statements Additional information BT Pensions Committee Chairman's report Allocation of time 3.5% BTPS administration 6% Other 7% Risk management 24% 2014 Triennial...

  • Page 112
    ... the insi hts fro the foru in an online report. Allocation of time 9% Engagement 37.5% Strategy & Governance 16% Supporting charities and communities 12.5% Creating a connected society "BT's purpose is to use the power of communications to make a better world. The committee's role focuses on...

  • Page 113
    Overview The Strategic Report Purpose and strategy 111 Delivering our strategy 0ur lines of business Group performance Governance Financial statements Additional information Report on Directors' Remuneration otal hareholder eturn of 1 . placed in the upper uartile of its co parator roup over the...

  • Page 114
    112 BT Group plc Annual Report 2015 Annual Remuneration Report his part of the eport su arises e ele ents of the directors re uneration in 01 1 . 6LQJOHƬJXUHUHPXQHUDWLRQ he followin sets out the full review of directors e olu ents includin bonus and deferred bonus and lon -ter incentive plans ...

  • Page 115
    ...Strategic Report Purpose and strategy 113 Delivering our strategy 0ur lines of business Group performance Governance Financial statements Additional information he wei htin of the annual bonus structure is set out below. Chief Executive and Group Finance Director % Weighting 10% Purposeful company...

  • Page 116
    114 BT Group plc Annual Report 2015 he is a conditional share award. he awards ranted in 01 vest in a 01 . he perfor ance conditions are based 0 on relative 0 on nor alised free cash ow and 0 on rowth in underl in revenue e cludin transit over a three- ear perfor ance period. TSR he ele ent is ...

  • Page 117
    Overview The Strategic Report Purpose and strategy 115 Delivering our strategy 0ur lines of business Group performance Governance Financial statements Additional information he table below shows on han u a s pension benefits at 1 arch 01 . here was no pension accrued over the financial ear and ...

  • Page 118
    ... BT Group plc Annual Report 2015 Directors' share ownership he co ittee believes that the interests of the e ecutive directors should be closel ali ned with those of shareholders. he deferred shares and incentive shares provide considerable ali n ent. o increase the ali n ent between shareholders...

  • Page 119
    Overview The Strategic Report Purpose and strategy 117 Delivering our strategy 0ur lines of business Group performance Governance Financial statements Additional information he followin awards have been ranted to the directors. hese shares will nor all be transferred to participants at the end of...

  • Page 120
    ... BT Group plc Annual Report 2015 Share awards under long-term incentive schemes held at 31 March 2015 (audited) etails of the co pan s ordinar shares provisionall awarded to directors as participants under the Total number of award shares 1 arch 2015 are as follows onetar value of vested award...

  • Page 121
    Overview The Strategic Report Purpose and strategy 119 Delivering our strategy 0ur lines of business Group performance Governance Financial statements Additional information Comparison of Chief Executive remuneration to Total Shareholder Return his raph illustrates the perfor ance of roup plc ...

  • Page 122
    ... culture and rowth easures. % of share award vesting he three financial tar ets for the annual bonus ad usted earnin s per share nor alised free cash ow and rowth in underl in revenue e cludin transit have a direct i pact on shareholder value. usto er service easured throu h our i ht irst...

  • Page 123
    Overview The Strategic Report Purpose and strategy 121 Delivering our strategy 0ur lines of business Group performance Governance Financial statements Additional information Chairman and non-executive director remuneration he fees for non-e ecutive directors and the fees for the hair an were ...

  • Page 124
    122 BT Group plc Annual Report 2015 Dilution or a nu ber of ears we enerall used treasur shares to satisf the e ercise of share options and the vestin of share awards under our e plo ee share plans. e intend to use both treasur shares and shares purchased b the roup plo ee hare wnership rust the ...

  • Page 125
    Overview The Strategic Report Purpose and strategy 123 Delivering our strategy 0ur lines of business Group performance Governance Financial statements Additional information Directors' service agreements and letters of appointment hair an and e ecutive directors ir ichael a e o ence ent date epte...

  • Page 126
    ... the arran e ents for the directors as described in the olic for re ulator e chan e control ta or ad inistrative purposes or to ta e account of a chan e in le islation. Under this power the co ittee will introduce clawbac provisions for annual bonus pa ents relatin to 01 1 and awards ade in 01 1 and...

  • Page 127
    Overview The Strategic Report Purpose and strategy 125 Delivering our strategy 0ur lines of business Group performance Governance Financial statements Additional information Executive Directors and Chairman Policy Element Base salary urpose a core ele ent of re uneration used to attract and ...

  • Page 128
    ... a direct and focused measure of co pan success and for e a ple a include free cash ow and revenue easures. e set tar ets to be appropriatel stretchin with re ard to a nu ber of internal and e ternal reference points includin our business plan and consensus ar et e pectations and share price perfor...

  • Page 129
    Overview The Strategic Report Purpose and strategy 127 Delivering our strategy 0ur lines of business Group performance Governance Financial statements Additional information Remuneration arrangements throughout the company operates in a nu ber of di erent environ ents and has an e plo ees who ...

  • Page 130
    ... ance related. Performance Assumptions Fixed pay All scenarios onsists of total fi ed pa base salar benefits and pension ase salar salar e ective as at une 01 enefits a ount received b each director in 01 1 ension cash supple ent in lieu of pension provision for 01 1 o pa out under the annual...

  • Page 131
    ... The Strategic Report Purpose and strategy 129 Delivering our strategy 0ur lines of business Group performance Governance Financial statements Additional information awards have been shown at face value with no share price rowth or discount rate assu ptions. ll-e plo ee share plans saveshare...

  • Page 132
    130 BT Group plc Annual Report 2015 Directors' information Statement of directors' responsibilities he directors are responsible for preparin the Annual Report the Report on Directors' Remuneration and the Financial statements in accordance with applicable law and re ulations. o pan law re uires ...

  • Page 133
    Overview The Strategic Report Purpose and strategy 131 Delivering our strategy 0ur lines of business Group performance Governance Financial statements Additional information or so e ears has purchased insurance to cover the directors o cers and e plo ees in positions of ana erial supervision of ...

  • Page 134
    ... while investin in the business supportin the pension fund and pa in pro ressive dividends. he oard reviews the roups capital structure re ularl . ana e ent proposes actions which re ect the roups invest ent plans and ris characteristics as well as the acro-econo ic conditions in which we operate.

  • Page 135
    ... The Strategic Report Purpose and strategy 133 Delivering our strategy 0ur lines of business Group performance Governance Financial statements Additional information ur fundin polic is to raise and invest funds centrall to eet the roups anticipated re uire ents. e use a co bination of capital ar...

  • Page 136
    134 BT Group plc Annual Report 2015 Other statutory information - Companies Act 2006 ertain provisions of the 00 ct re uire us to a e additional disclosures. nu ber of these disclosures can be found elsewhere in this nnual eport as set out below Information tructure of s share capital includin ...

  • Page 137
    Overview The Strategic Report Purpose and strategy 135 Delivering our strategy 0ur lines of business Group performance Governance Financial statements Additional information Shareholders and Annual General Meeting Relations with shareholders he hief ecutive and roup inance irector as well as ...

  • Page 138
    136 BT Group plc Annual Report 2015 e set out the 1 resolutions to be proposed at the 01 on 1 ul to ether with e planator notes in the separate 1RWLFH of meeting 2015 which we send to all shareholders who have re uested shareholder docu ents b post. e notif all shareholders of the publication of ...

  • Page 139
    ... 155 Segment information 159 Operating costs 160 Employees 160 Audit, audit related and other non-audit services 161 pecific ite s 162 Taxation 165 Earnings per share 165 Dividends 166 Intangible assets 168 Property, plant and equipment 169 Business combinations 169 Programme rights 169 Trade and...

  • Page 140
    ... which are listed below: Major contracts in BT Global Services and BT Wholesale Accuracy of revenue due to complex billing systems Pension scheme obligations and unquoted investments in the BT Pension Scheme Regulatory and other provisions Capitalisation practices and asset lives for property, plant...

  • Page 141
    ... and read the relevant sections of the contracts agreed between BT and the customer, tested a sample of revenue and cost transactions to supporting evidence of delivery and acceptance and assessed the revenue recognised in the period by comparing it with the contractual terms and actual pattern of...

  • Page 142
    ... eport pa e 150 ote 2 - Critical accounting estimates and key judgements) and page 168 ote 1 ropert plant and equipment) Capitalisation of costs and the useful lives assigned to assets are areas of si nificant ud e ent b the directors. There are two main risks that we addressed in our audit: the...

  • Page 143
    ... is o ittee eport pa e 150 ote 2 - Critical accounting estimates and key judgements) and page 166 ote 1 ntan ible assets As at 31 March 2015, goodwill relating to the BT Global Services cash eneratin unit U a ounted to 1 09 out of a total oodwill balance of £1,396m. The directors have prepared an...

  • Page 144
    ... directors on page 130, in accordance with provision C.1.1 of the UK orporate overnance ode 'the Code'), that they consider the Annual Report taken as a whole to be fair, balanced and understandable and provides the information necessary for members to assess the group's performance, business model...

  • Page 145
    ... Governance Financial statements Additional information United States opinion eport of independent re istered public accountin fir to the Board of directors and shareholders of BT Group plc the co pan In our opinion, the accompanying group balance sheets and the related group income statements...

  • Page 146
    144 BT Group plc Annual Report 2015 *URXSLQFRPHVWDWHPHQW Year ended 31 March 2015 5HYHQXH Operating costs 2SHUDWLQJSURƬW ORVV Finance expense Finance income 1HWƬQDQFHH[SHQVH Share of post tax loss of associates and joint ventures rofit on disposal of interest in associates and oint ...

  • Page 147
    Overview The Strategic Report Purpose and strategy 145 Delivering our strategy Group performance Governance Financial statements Additional information *URXSLQFRPHVWDWHPHQW Year ended 31 March 2013 5HYHQXH Operating costs 2SHUDWLQJSURƬW ORVV Finance expense Finance income 1HWƬQDQFHH[...

  • Page 148
    146 BT Group plc Annual Report 2015 *URXSEDODQFHVKHHW At 31 March Non-current assets Intangible assets Property, plant and equipment erivative financial instru ents Investments Associates and joint ventures Trade and other receivables Deferred tax assets Notes 12 13 26 22 16 9 2015 £m 3,170 ...

  • Page 149
    ... before ta a on other co prehensive ain loss Transferred to the income statement Total comprehensive income for the year Issue of new sharese Dividends to shareholders Share-based payments Tax on share-based payments Net buyback of own shares Other movements $W0DUFK S{HDFK 9 11 21 9 20...

  • Page 150
    ... bank loans and bonds ash ows fro derivatives related to net debt Proceeds from issue of own shares Repurchase of ordinary share capital 1HWFDVKXVHGLQƬQDQFLQJDFWLYLWLHV 1HW GHFUHDVH LQFUHDVHLQFDVKDQGFDVKHTXLYDOHQWV Opening cash and cash equivalents et decrease increase in cash and cash...

  • Page 151
    ... our central group functions within Other into BT Global Services. Security is of increasing importance to our customers, and we believe that this move helps us better compete in the market and take full advantage of global opportunities. In order to present historical information on a consistent...

  • Page 152
    ... The carrying value of the group's deferred tax assets and liabilities is disclosed in note 9. Goodwill Useful lives for property, plant and equipment and software The plant and equipment in our networks is long lived with cables and switching equipment operating for over ten years and underground...

  • Page 153
    ..., BT Wholesale and Openreach. The customer-facing lines of business are supported by an internal service unit: BT Technology, ervice perations . The customer-facing lines of business are the group's reportable segments and generate substantially all the group's revenue. The remaining operations of...

  • Page 154
    ...-financial assets set out on pa e 153. elated cash out ows are classified as operatin cash ows in the cash ow state ent. ssets held under finance leases are depreciated over the shorter of the lease term or their useful economic life. Residual values and useful lives are reassessed annually and...

  • Page 155
    ...costs in the income statement. Government grants received relating to future expenditure are recognised as payments received in advance within Other payables. Share-based payments The group operates a number of equity settled share-based payment arrangements, under which the group receives services...

  • Page 156
    ... and ad usted for the e ect of non ar et-based vestin conditions. Fair value is measured using either the Binomial options pricing model or Monte Carlo simulations, whichever is most appropriate to the share-based payment arrangement. Service and performance conditions are vesting conditions. Any...

  • Page 157
    ... Governance Financial statements Additional information 6HJPHQWLQIRUPDWLRQ he definition of the roups operatin and reportable se ents is provided on pa e 151. From 1 April 2014 BT Conferencing and BT Security have moved into BT Global Services, from BT Business and our central group...

  • Page 158
    ... pricing levels. BT Wholesale does not generate internal revenue from the other lines of business. The majority of internal trading relates to Openreach and arises on rentals, and any associated connection or migration charges, of the UK access lines and other network products to the customer...

  • Page 159
    ...Year ended 31 March 2013 ,QWHUQDOUHYHQXHUHFRUGHGE\ BT Global Servicesa BT Businessa BT Consumer BT Wholesale Openreach Othera 7RWDO a5HVWDWHGVHHDERYH Revenue by products and services Year ended 31 March ICT and managed networks Broadband, TV and convergence Calls and lines and connectivity...

  • Page 160
    158 BT Group plc Annual Report 2015 6HJPHQWLQIRUPDWLRQFRQWLQXHG Geographic information The UK is the group's country of domicile and the group generates the majority of its revenue from external customers in the UK. The geographic analysis of revenue is on the basis of the country of origin ...

  • Page 161
    ...The Strategic Report Purpose and strategy 159 Delivering our strategy Group performance Governance Financial statements Additional information 2SHUDWLQJFRVWV Year ended 31 March 2SHUDWLQJFRVWVE\QDWXUH ta costs Wages and salaries Social security costs Other pension costs Share-based payment...

  • Page 162
    ....6 87.8 2014 Average 000 72.7 15.1 87.8 2014b Average 000 22.1 8.9 6.2 1.8 31.5 17.3 87.8 Year end 000 73.2 14.7 87.9 2013 Average 000 74.1 15.0 89.1 2013b Average 000 22.0 8.4 6.4 1.4 30.4 20.5 89.1 Number of employees in the groupa BT Global Services BT Business BT Consumer BT Wholesale Openreach...

  • Page 163
    ... The Strategic Report Purpose and strategy 161 Delivering our strategy Group performance Governance Financial statements Additional information 6SHFLƬFLWHPV Year ended 31 March 5HYHQXH Retrospective regulatory rulings 2SHUDWLQJFRVWV Restructuring charges Property rationalisation costs ro...

  • Page 164
    ... 2015 £m 2014 £m 9 10 2013 £m 277 1 1  158 1 103 40  3  239 4 208 451  0 01 1 he ta ation e pense on the profit for the ear di ers fro the a ount co puted b appl in the UK corporation ta rate to the profit before taxation as a result of the following factors: Year ended...

  • Page 165
    ...cash ow hed es - net fair value gains or losses - recognised in income and expense 2014 Tax credit e pense £m 16 2013 Tax credit e pense £m 762 10 6 - 20 130 110 20 39 786 133 653 786 Tax credit recognised directly in equity Year ended 31 March Tax credit relating to share-based payments 2015...

  • Page 166
    ... rate of UK corporation tax changed from 21% to 20% on 1 April 2015. As deferred tax assets and liabilities are measured at the rates that are expected to apply in the periods of the reversal, deferred tax balances at 31 March 2014 were calculated using a rate of 20%. This resulted in a tax credit...

  • Page 167
    ... The Strategic Report Purpose and strategy 165 Delivering our strategy Group performance Governance Financial statements Additional information asic earnin s per share is calculated b dividin the profit after ta attributable to e uit shareholders b the wei hted avera e nu ber of shares in...

  • Page 168
    166 BT Group plc Annual Report 2015 ,QWDQJLEOHDVVHWV Customer relationships and brands £m 358 - 20 - 27 11 394 - - - - 5 399 Telecoms licences and other £m 481 1 - - Internally developed software £m  433 - 1 0  488 2 35 2 468 Purchased software £m  73 - - 1 1  72 - 9 ...

  • Page 169
    ... The Strategic Report Purpose and strategy 167 Delivering our strategy Group performance Governance Financial statements Additional information ,QWDQJLEOHDVVHWVFRQWLQXHG Goodwill impairment review he roup perfor s an annual oodwill i pair ent review based on its cash eneratin units Us...

  • Page 170
    168 BT Group plc Annual Report 2015 3URSHUW\SODQWDQGHTXLSPHQW Land and Network buildingsa infrastructurea £m £m Cost At 1 April 2013 Additionsc Transfers Disposals and adjustmentsd chan e di erences $W0DUFK Additionsc Transfers Disposals and adjustmentsd chan e di erences $W...

  • Page 171
    Overview The Strategic Report Purpose and strategy 169 Delivering our strategy Group performance Governance Financial statements Additional information %XVLQHVVFRPELQDWLRQV On 1 August 2013 the group acquired 100% of the issued share capital of ESPN Global Limited, together with certain ...

  • Page 172
    ... March BT Global Services BT Business BT Consumer BT Wholesale Openreach Other 7RWDO a &HUWDLQEDODQFHVKDYHEHHQUHVWDWHGVHHQRWH Given the broad and varied nature of the group's customer base, the analysis of trade receivables not past due and accrued income by line of business is considered...

  • Page 173
    ... Strategic Report Purpose and strategy 171 Delivering our strategy Group performance Governance Financial statements Additional information 3URYLVLRQV Restructuringa £m At 1 April 2013 Income statement expense Unwind of discount Utilised or released chan e di erences $W0DUFK Income...

  • Page 174
    ... ent deter ined b the plan rules dependent on factors such as age, years of service and pensionable pay and is not dependent upon actual contributions made by the company or e bers. he inco e state ent service cost in respect of defined benefit plans represents the increase in the defined bene...

  • Page 175
    ...ected in the financial state ents. Assets £m At 1 April 2013 Current service cost nterest on pension deficit Settlements Administration expenses and PPF levy  ,QFOXGHGLQWKHJURXSLQFRPHVWDWHPHQW Return on plan assets below the amount included in the group income statementa ctuarial ain arisin...

  • Page 176
    ...- - - - 19 plan assets ust be valued at the bid ar et value at the balance sheet date. or the ain asset cate ories securities listed on recognised stock exchanges are valued at closing bid prices properties are valued on the basis of open market value unlisted e uities are valued in accordance with...

  • Page 177
    ... form part of the Scheme's investment portfolio and will provide income to the Scheme in the event that pensions are paid out for longer than expected under the terms of the contract. To facilitate the transaction, the Trustee set up a wholly owned insurance company. The Scheme transferred...

  • Page 178
    ... Female in lower pay bracket Female in higher pay bracket Average improvement for a member retiring at age 60 in 10 years' time 2015 Number of years 26.0 27.3 28.7 28.7 29.0 1.0 2014 Number of years 26.0 27.7 28.5 1.0 The assumptions about life expectancy have regard to information published by the...

  • Page 179
    Overview The Strategic Report Purpose and strategy 177 Delivering our strategy Group performance Governance Financial statements Additional information 5HWLUHPHQWEHQHƬWSODQVFRQWLQXHG Decrease Decrease Decrease increase in increase in increase in liability deficit service cost £bn £bn ...

  • Page 180
    178 BT Group plc Annual Report 2015 5HWLUHPHQWEHQHƬWSODQVFRQWLQXHG The average life expectancy assumptions at the 2014 valuation date, for members 60 years of age, are as follows. June June 2014 2011 assumptions assumptions 26.1 27.5 29.0 28.9 29.2 1.3 26.3 28.1 28.7 1.2 Number of years ...

  • Page 181
    Overview The Strategic Report Purpose and strategy 179 Delivering our strategy Group performance Governance Financial statements Additional information 5HWLUHPHQWEHQHƬWSODQVFRQWLQXHG Feature Detail n the unli el event that the roup were to beco e insolvent there are additional ...

  • Page 182
    ...of the savings contract, otherwise they lapse. Similar plans operate for BT's overseas employees. ,QFHQWLYH6KDUH3ODQ ,63 Under the ISP, participants are only entitled to these shares in full at the end of a three-year period if the company has met the relevant predeter ined corporate perfor ance...

  • Page 183
    ... options pricing model. Awards under the ISP are valued using Monte Carlo simulations. TSRs are generated for BT and the comparator group at the end of the three-year performance period, using each company's volatility and dividend yield, as well as the cross correlation between pairs of stocks...

  • Page 184
    ... quoted prices, that are observable either directly or indirectly Level 3 - uses inputs for the asset or liability that are not based on observable market data, such as internal models or other valuation method. evel balances classified as available-for-sale consist of invest ents in li uidit funds...

  • Page 185
    ... Capital management policy The objective of the group's capital management policy is to reduce net debt over time whilst investing in the business, supporting the pension scheme and paying progressive dividends. In order to meet this objective, the group may issue or repay debt, issue new shares...

  • Page 186
    184 BT Group plc Annual Report 2015 /RDQVDQGRWKHUERUURZLQJVFRQWLQXHG Net debt et debt consists of loans and other borrowin s both current and non-current less current asset invest ents and cash and cash e uivalents. Loans and other borrowings are measured at the net proceeds raised, ...

  • Page 187
    Overview The Strategic Report Purpose and strategy 185 Delivering our strategy Group performance Governance Financial statements Additional information /RDQVDQGRWKHUERUURZLQJVFRQWLQXHG The carrying amount of commercial paper, other loans and bank overdrafts equates to fair value due to ...

  • Page 188
    ...ber of ears in the income statement. Year ended 31 March et finance e pense i in di erences - Derivative restructuring costs - Timing of coupon payments on bonds - Deferred income pecific ite note 1HWLQWHUHVWFDVKRXWƮRZ 2015 £m 560 - 4 9 7 580 2014 £m 591 14 8 - 608 2013 £m 653 16 15 8 - 692

  • Page 189
    ...performance Governance Financial statements Additional information he roup issues or holds financial instru ents ainl to finance its operations to finance corporate transactions such as dividends share bu bac s and acquisitions; for the temporary investment of short-term funds; and to manage the...

  • Page 190
    ... of 1. bn in 01 1 . Short and medium-term requirements are regularly reviewed and managed by the treasury operation within the parameters of the policies set by the oard. The group holds cash, cash equivalents and current investments in order to manage short-term liquidity requirements. At 31 March...

  • Page 191
    ...The Strategic Report Purpose and strategy 189 Delivering our strategy Group performance Governance Financial statements Additional information )LQDQFLDOLQVWUXPHQWVDQGULVNPDQDJHPHQWFRQWLQXHG 0DWXULW\DQDO\VLV he followin table provides an anal sis of the re ainin contractuall a reed cash...

  • Page 192
    ... balance sheet date. Credit risk management 0DQDJHPHQWSROLF\ he roup s e posure to credit ris arises fro financial assets transacted b the treasur operation pri aril derivatives invest ents cash and cash equivalents) and from its trading-related receivables. or treasur -related balances the...

  • Page 193
    Overview The Strategic Report Purpose and strategy 191 Delivering our strategy Group performance Governance Financial statements Additional information )LQDQFLDOLQVWUXPHQWVDQGULVNPDQDJHPHQWFRQWLQXHG he credit ualit and credit concentration of cash e uivalents current asset invest ents ...

  • Page 194
    ... Group plc Annual Report 2015 )LQDQFLDOLQVWUXPHQWVDQGULVNPDQDJHPHQWFRQWLQXHG Derivatives ll of the roups derivative financial instru ents are held at fair value on the roups balance sheet. he fair values of outstandin swaps and forei n e chan e contracts are esti ated usin discounted cash...

  • Page 195
    Overview The Strategic Report Purpose and strategy 193 Delivering our strategy Group performance Governance Financial statements Additional information 2WKHUUHVHUYHV Capital Merger redemption reservea reserve £m £m At 1 April 2012 chan e di erences Recycled foreign exchange on disposal of ...

  • Page 196
    ... to completion, Deutsche Telekom and Orange have the right to terminate the sale and purchase agreement and BT would pay a break fee of £250m, in aggregate, to them. Under the Broadband Delivery UK programme, grants received by the group may be subject to re-investment or repayment to the customer...

  • Page 197
    ...:KDWZHKDYHDXGLWHG roup plc s financial state ents co prise the BT Group plc company balance sheet as at 31 March 2015; the BT Group plc company reconciliation of movement in equity shareholders' funds for the year then ended; and the notes to the financial state ents which include a su ar of si...

  • Page 198
    ... the publication of FRS 100 'Application of Financial Reporting Requirements' by the Financial Reporting Council, BT Group plc is required to change its accounting framework for its entity financial state ents which is currentl UK for its financial ear commencing 1 April 2015. The purpose of...

  • Page 199
    Overview The Strategic Report Purpose and strategy 197 Delivering our strategy Group performance Governance Financial statements Additional information %7*URXSSOFFRPSDQ\EDODQFHVKHHW At 31 March )L[HGDVVHWV Investments in subsidiary undertakingsa 7RWDOƬ[HGDVVHWV Current assets Amounts ...

  • Page 200
    ... BT Group plc Annual Report 2015 %7*URXSSOFFRPSDQ\UHFRQFLOLDWLRQRIPRYHPHQWLQHTXLW\VKDUHKROGHUVoIXQGV Called up share capitala £m At 1 April 2013 rofit for the financial ear Dividends paid Capital contribution in respect of share-based payments Net buyback of own shares At 1 April 2014...

  • Page 201
    Overview The Strategic Report Purpose and strategy 199 Delivering our strategy Group performance Governance Financial statements Additional information 6XEVLGLDU\XQGHUWDNLQJV The table below gives brief details of the group's principala operating subsidiariesb at 31 March 2015. All ...

  • Page 202
    200 BT Group plc Annual Report 2015

  • Page 203
    ... for shareholders on subjects such as dividends and location. We have also included certain information relating to our planned acquisition of EE, as well as a glossary of terms we use in this report. 202 $OWHUQDWLYHSHUIRUPDQFHPHDVXUHV 205 6HOHFWHGƬQDQFLDOGDWD 207 Financial and operational...

  • Page 204
    ... in obile ter ination rates. A reconciliation from the decrease in reported revenue and in reported operating costs, the most directly comparable IFRS measures, to the decrease in underlying revenue and underlying operating costs excluding transit, is set out below. Year ended 31 March 'HFUHDVH...

  • Page 205
    ...The Strategic Report Purpose and strategy 203 Delivering our strategy Group performance Governance Financial statements Additional information (%,7'$ n addition to easurin financial perfor ance of the roup and lines of business based on operatin profit we also easure perfor ance based on and ad...

  • Page 206
    ... BT Group plc Annual Report 2015 reconciliation fro net cash in ow fro operatin activities the ost directl co parable cash ow is set out below. Year ended 31 March 1HWFDVKLQƮRZIURPRSHUDWLQJDFWLYLWLHV dd bac pension deficit pa ents ,QFOXGHGLQFDVKƮRZVIURPLQYHVWLQJDFWLYLWLHV Net capital...

  • Page 207
    Overview The Strategic Report Purpose and strategy 205 Delivering our strategy Group performance Governance Financial statements Additional information 6HOHFWHGƬQDQFLDOGDWD Year ended 31 March 5HYHQXH Adjusted pecific ite s 2SHUDWLQJFRVWV Adjusted pecific ite s 2SHUDWLQJSURƬW Adjusted ...

  • Page 208
    206 BT Group plc Annual Report 2015 6XPPDU\JURXSEDODQFHVKHHW At 31 March Intangible assets Property, plant and equipment Other non-current assets 7RWDOQRQFXUUHQWDVVHWV Current assets less current liabilities 7RWDODVVHWVOHVVFXUUHQWOLDELOLWLHV Non-current loans and other borrowings etire ...

  • Page 209
    Overview The Strategic Report Purpose and strategy 207 Delivering our strategy Group performance Governance Financial statements Additional information Financial and operational statistics Financial statistics Year ended 31 March DHFUHDVH increase LQXQGHUO\LQJUHYHQXHH[FOXGLQJWUDQVLWaE $...

  • Page 210
    ...LQYHVWPHQWV Operational statisticsa All values in thousands unless otherwise stated. Year ended 31 March %7*OREDO6HUYLFHV rder inta e %7%XVLQHVV rder inta e %7&RQVXPHU vera e revenue per user Active lines BT TV customers %7:KROHVDOH rder inta e 2SHQUHDFK Physical lines Internal External Fully...

  • Page 211
    ... plans and restructuring costs; investment in and roll out of our fibre networ and its reach innovations increased speeds and speed availability; our broadband-based service and strategy; our investment in TV, enhancing our TV service and BT Sport; the BT Pension Scheme recovery plan, operating...

  • Page 212
    ... on the ondon toc chan e and as a result are li el to a ect the ar et price of the s on the ew or toc chan e. %DFNJURXQG BT Group plc is a public limited company registered in England and Wales and listed on the London and New York Stock Exchanges. It was incorporated in England and Wales on 30...

  • Page 213
    ... 1.65% of the total number of ordinary shares outstanding on that date) were outstanding and were held by 1,615 record holders of ADRs. At 31 March 2015, there were 3,661 shareholders with a US address on the register of shareholders who in total hold 0.03% of the ordinary shares of the company.

  • Page 214
    ...on the date the ordinary dividends were paid. Per ordinary share Final Total pence pence 5.00 5.70 6.50 7.50 8.50 7.40 8.30 9.50 10.90 12.40 Per ADS Total £ 0.740 0.830 0.950 1.090 1.240 Per ADS Total US$ 1.143 1.275 1.445 1.721 -a Financial years ended 31 March 2011 2012 2013 2014 2015 a Interim...

  • Page 215
    Overview The Strategic Report Purpose and strategy 213 Delivering our strategy Group performance Governance Financial statements Additional information Under the Dividend investment plan, cash from participants' dividends is used to buy further BT shares in the market. Shareholders could elect to...

  • Page 216
    ... 2013 1.52 1.58 1.63 1.49 2012 1.60 1.61 1.67 1.53 2011 1.60 1.56 1.64 1.43 April 2015 High Low 1.55 1.47 March 2015 1.54 1.47 February 2015 1.55 1.50 January 2015 1.56 1.50 Month December 2014 1.57 1.55 On 1 May 2015, the latest practicable date for this Annual Report, the Noon Buying Rate...

  • Page 217
    ... of shares on the dates stated for the payments of those dividends. he directors can o er ordinar shareholders the ri ht to choose to receive new ordinary shares, which are credited as fully paid, instead of some or all of their cash dividend. Before they can do this, the company's shareholders must...

  • Page 218
    216 BT Group plc Annual Report 2015 shareholder or any person entitled to the dividends by transmission. The net sale proceeds belong to BT, but it must pay those proceeds to the former shareholder or the person entitled to them by transmission if that shareholder, or that other person, asks for ...

  • Page 219
    ...: the DT CP Contract and Orange CP Contract Company: BT Group plc Completion: completion of the Acquisition pursuant to the terms of the Share Purchase Agreement Conditions: the conditions to Completion as set out in the Share Purchase Agreement Consideration Shares: the Ordinary Shares to be issued...

  • Page 220
    ... any right to subscribe for any other securities or equity interests convertible into rdinar hares or share capital save in connection with an existing BT employee share plans); not announce authorise declare a e or pa an dividend other than ordinary course dividends payable in cash in accordance...

  • Page 221
    ... regulate aspects of the ongoing relationship between BT, Deutsche Telekom AG and the Deutsche Telekom Group. he elationship ree ent will ter inate if a the rdinar hares are no lon er listed on the pre iu listin se ent of the cial ist and traded on the London Stock Exchange's main market for listed...

  • Page 222
    ...months of the delivery of the notice to BT at any price. The DT CP Contract will terminate 18 months from Completion. The notice from the selling entity may be issued to BT during a close period or prohibited period as such ter s are defined in the odel Code of Chapter 9 of the Listing Rules) of BT...

  • Page 223
    ... the delivery of the notice to BT at any price. The Orange CP Contract will terminate 12 months from Completion. The notice from the selling entity may be issued to BT during a close period or prohibited period as such ter s are defined in the odel Code of Chapter 9 of the Listing Rules) of BT. If...

  • Page 224
    ...by the International Accounting Standards Board, and are expected to be applicable for the years to 31 March 2015 and 2016. he directors prepared the 01 1 profit esti ate based upon the unaudited published results for the nine months ended 31 December 2014, the unaudited management accounts for the...

  • Page 225
    ... who elect a mark-to-market method of accounting; persons subject to alternative minimum tax; investors that directly, indirectly or by attribution own 10% or more of the outstanding share capital or voting power of BT; persons holding their ordinary shares or ADSs as part of a straddle, hedging...

  • Page 226
    ... services to embassies and diplomatic missions of US-allied governments, other CPs, news organisations, multinational corporations and other customers that require global communications connectivity, are insi nificant to the roups financial condition and results of operations. Under Section...

  • Page 227
    ...and social and environmental performance. Document Notice of meeting Annual Report & Form 20-F Delivering our purpose report EAB Annual Report Expected quarterly results releases Current Cost Financial Statements The Way We Work, a statement of business practice Publication date May May May May July...

  • Page 228
    ... Research and development Brand and reputation Our lines of business Stakeholders and relationships Our suppliers Human Rights Our relationship with HM Government Regulation onsolidated financial state ents otes to the consolidated financial state ents Segment information Financial and operational...

  • Page 229
    ...management Financial commitments and contingent liabilities Research and development Financial and operational statistics Financial statistics Group performanceb elected financial data Information for shareholders Cautionary statement regarding forward-looking statements eneral infor ation -balance...

  • Page 230
    ... Material contracts Exchange controls Taxation Dividends and paying agents Statement by experts Documents on display Subsidiary information 4XDQWLWDWLYHDQGTXDOLWDWLYH GLVFORVXUHVDERXWPDUNHWULVN nfor ation for shareholders Stock exchange listings Share and ADS prices Not applicable Information...

  • Page 231
    ...The Strategic Report Purpose and strategy 229 Delivering our strategy Group performance Governance Financial statements Additional information Required Item in Form 20-F Item 15 Controls and procedures Where information can be found in this Annual Report Section General information US Regulation...

  • Page 232
    ... voice and data on the same lines. C &3communications provider - a provider of communications services - telephony, broadband, video on demand and other services. L /DGGHUSULFLQJ Ladder pricing links the amounts that BT charges mobile operators for mobile calls to 0800, 0845 and 08700 numbers...

  • Page 233
    Overview The Strategic Report Purpose and strategy 231 Delivering our strategy Group performance Governance Financial statements Additional information R 5)7 'Right First Time' - the internal measure of whether we are keeping our promises to our customers and meeting or exceeding their ...

  • Page 234
    232 BT Group plc Annual Report 2015

  • Page 235
    ... plc which includes the activities of ritish eleco unications plc and its subsidiaries and lines of business internal service unit or an of the as the conte t a re uire. reference to a ear e pressed as 01 1 is to the financial ear ended 1 arch 01 and a reference to a ear e pressed as 01 is to the...

  • Page 236
    ... office 1 ew ate treet ondon e istered in n land and ales o. 190 1 Produced by BT Group 1 PHME 73823 rinted in n land b indar carborou h td esi n b sl roup.co.u Typeset by RR Donnelley rinted on adeus 0 il which is ade fro 0 de-...