BT 2002 Annual Report Download - page 41

£464 million received principally on the disposal of sunrise
communications. The net cash out¯ow on acquisitions of
£6,405 million in the 2000 ®nancial year was principally
£3,014 million on the acquisition of the minority interest in
BT Cellnet, £1,254 million invested jointly with AT&T in
Japan Telecom and £659 million in Canadian interests,
jointly owned with AT&T.
There were no equity dividends paid in the 2002 ®nancial
year, as explained above. Equity dividends paid in the 2001
®nancial year totalled £1,432 million, compared with £1,364
million in the 2000 ®nancial year. Subject to shareholder
approval, we will resume paying equity dividends in
September 2002 with the payment of the ®nal dividend for
the 2002 ®nancial year which will amount to £173 million.
The resulting cash in¯ow for the 2002 ®nancial year,
before management of liquid resources and ®nancing,
of £7,433 million was mainly applied in repaying short-term
borrowings and investing in short-term investments, with
total borrowings of £12,006 million being repaid. In the
2001 ®nancial year, the signi®cant cash out¯ow of £19,127
million was funded by issuing substantial amounts of long-
term debt instruments and drawing on medium-term notes
programmes. In December 2000, £6,909 million was raised
through the issue of four series of US dollar notes totalling
$10 billion, with maturities between three and thirty years.
In February 2001, £6,038 million was received through the
issue of six series of euro and sterling notes totalling
e9.7 billion, with maturities between two and sixteen years.
In April 2000, a twenty-®ve year £250 million index-linked
Eurobond was issued.
In the 2000 ®nancial year, there was a net cash out¯ow
of £7,141 million which was partly funded by the issue of
new long-term ®nancial instruments, principally two US dollar
Eurobonds totalling US$1.2 billion and a £600 million
Eurobond. In that year, we also drew on commercial paper
programmes under which approximately £4.9 billion was
outstanding at 31 March 2000 and used the group's
existing short-term investments.
The cash in¯ow for the 2002 ®nancial year resulted in
net debt reducing to £13,701 million whilst in the 2001
®nancial year the cash out¯ow resulted in net debt
increasing to £27,942 million at 31 March 2001. In the
previous ®nancial year, the cash out¯ow for the year
resulted in net debt increasing to £8,700 million at 31 March
2000.
In the 2002 ®nancial year, the group repaid borrowings
totalling £12,006 million and no new long-term debt was
raised. This was in part due to the success of the
company's rights issue which closed in June 2001. We
issued 1,976 million new shares for a total consideration of
£5,876 million, net of expenses. As part of the demerger
arrangements, £440 million was received from mmO2;
additionally mmO2 assumed £60 million of the group's
external net debt.
In the 2001 ®nancial year, the group borrowed
£14,552 million in long-term loans and repaid £225 million
in long-term debt. This was in accordance with our
intention, expressed at the end of the 2000 ®nancial year, to
re®nance a signi®cant part of our commercial paper
borrowings with medium or longer-term debt when market
conditions allowed and also to raise further signi®cant
®nance in the 2001 ®nancial year to meet the ®nancing
needs of the UK third-generation mobile licence, won in
April 2000, increased capital expenditure and acquisitions of
interests in subsidiaries, joint ventures and associates and
their additional funding requirements.
In April 2000, BT issued a £250 million 3.5%
index-linked Eurobond repayable in 2025. In December
2000, we issued four series of notes comprising
US$2.8 billion 8.625% thirty-year notes, US$3.0 billion
8.125% ten-year notes, US$3.1 billion 7.625% ®ve-year
notes and US$1.1 billion three-year ¯oating rate notes. In
February 2001, we issued six series of notes comprising
£700 million 7.5% sixteen-year notes, e2.25 billion 6.875%
ten-year notes, e3.0 billion 6.125% six-year notes,
£400 million 7.125% six-year notes, e1.75 billion 5.625%
three-year notes and e1.0 billion two-year ¯oating rate
notes. Loans repaid during the year totalling £225 million
were mainly in respect of the Esat Telecom acquisition.
In the 2000 ®nancial year, the group borrowed
£1,473 million in long-term loans and repaid £587 million in
long-term debt. In May 1999, BT issued a £600 million
5.75% Eurobond repayable in 2028 and, in October 1999, a
US$1.0 billion 6.75% ®ve-year Eurobond. In August 1999,
BT repaid a US$200 million Eurobond on maturity which
was re®nanced by a further ten-year US$200 million
Eurobond. On the acquisition of Esat, BT assumed
approximately £550 million of debt, based on Esat's
31 December 1999 balance sheet.
In the 2003 ®nancial year, £2,195 million of debt falls
due which we anticipate we will fund out of our existing
short-term investments. We expect that the short-term
investments and cash balance of £4,739 million will fall
during the 2003 ®nancial year as debt matures and
seasonal cash out¯ows occur.
We expect to see a continued improvement in the
®nancial position of BT and are seeking to obtain a single A
rating from all the major rating agencies.
Treasury policy
The group has a centralised treasury operation which has
remained following the progressive devolution of the group's
operations. Its primary role is to manage liquidity, funding,
investment and the group's ®nancial risk, including risk from
volatility in currency and interest rates and counterparty
credit risk. The treasury operation is not a pro®t centre and
the objective is to manage risk at optimum cost.
The Board sets the treasury department's policy and its
activities are subject to a set of controls commensurate with
the magnitude of the borrowings and investments under its
management. Counterparty credit risk is closely monitored
and managed within controls set by the Board. Derivative
instruments, including forward foreign exchange contracts,
are entered into for hedging purposes only.
Financial review
40 BT Group Annual Report and Form 20-F 2002