BT 2005 Annual Report Download - page 4

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Our results for the 2005 financial year were strong. New wave
revenues grew by 32% to £4.5 billion, and now represent
nearly a quarter of our business. Earnings per share have more
than doubled over the past three years and net debt is more
than £20 billion lower than in 2001.
Chairman’s message
BT Group plc Annual Report and Form 20-F 2005 3
Earnings per share in the 2005 financial year, before
goodwill amortisation and exceptional items, grew by 7%
to 18.1 pence. While continuing to invest for the future,
we generated free cash flow of £2.3 billion, up 10%.
The news on dividends is positive. We are
recommending a full-year dividend of 10.4 pence per
share, a pay out ratio of 57% of earnings before goodwill
amortisation and exceptional items, compared to 50%
last year. We continue with our progressive dividend
policy. The dividend for the 2006 financial year will be at
least 60% of underlying earnings: subject to the group’s
overall financial position, we expect our pay out ratio to
rise to around two-thirds of underlying earnings by the
2008 financial year.
We continued with our share buy back programme in
the 2005 financial year. This is being funded from cash
generated over and above that required for servicing our
debt. We have reduced net debt to below £8 billion, a
level with which we are comfortable.
Business progress
In support of our strategy for transformation and growth,
your Board gave backing during the year for a targeted
series of acquisitions that will help to build our capabilities
as one of the world’s foremost global networked IT
services companies. These acquisitions offered value for
money, had a compelling strategic fit and brought
capabilities to strengthen BT globally. In addition, passing
the five million mark for broadband connections in the UK
in early April was a key moment in the history of your
company.
Regulation
BT welcomed the Strategic Review of Telecommunications
by Ofcom. During the year we have worked to help influence
and shape their thinking and made a radical proposal for a
new regulatory landscape in the UK. We continued to argue
strongly that structural separation was not in shareholders’
or customers’ interests. We look forward to the published
outcome. Our position remains that a strategic and flexible
regulatory regime, together with rapid deregulation
wherever possible, is vital to meeting customers’ developing
needs and creating the conditions in which we, and others,
can continue to invest with confidence.
Board membership
There were a number of changes to your Board during the
2005 financial year. I would like to welcome Hanif Lalani as
our new Group Finance Director. Ian Livingston, who had
occupied the finance role with distinction for three years,
was appointed Chief Executive BT Retail with effect from
February 2005. It is a testament to the strength of BT’s
management team generally that we were able to appoint
people from inside the company to such key roles. I would
also like to thank Pierre Danon, who left the Board in
February, for his significant contribution as Chief Executive
of BT Retail for the last four years.
Wider responsibilities
It is increasingly important that companies such as BT
continue to be good corporate citizens, living up to our
responsibilities to the communities in which we operate
and to the environment. I’m proud to be able to report
that, for the fourth year in a row, BT was the highest
placed telecommunications company in the Dow Jones
Sustainability Index. Our community programmes focus
on those issues where communications really can make
the difference; we have provided long-term support, for
example, for a drama-based education programme to help
develop young people’s communications skills, and for the
work of the children’s charity ChildLine.
Like so many other companies and individuals, we
wanted to respond to the devastating Asian tsunami in
December 2004. We made a donation of £500,000 to
the Disasters Emergency Committee (DEC) and we
provided a live call centre for the unprecedented number
of calls coming into the DEC. I’m particularly proud of the
fact that so many of our employees were involved in
fundraising activities and that 16 of our engineers
travelled to the affected area to help re-establish
communications.
Outlook
The process of transformation on which your company
embarked in 2001 is accelerating. That process is
increasingly reflected in your company’s results. We are well
set for further success in the years ahead.
I’d like to thank shareholders for the loyalty they’ve
shown. Your continued confidence – coupled with the
loyalty of our customers and suppliers and the
imagination and commitment of our employees – is
fundamental to our transformation for growth.
Sir Christopher Bland
Chairman
18 May 2005