BT 2007 Annual Report Download - page 33

GROUP RESULTS
Whilst driving the transformation of the business, the group has
continued to make progress in growing earnings per share
before specific items, which at 22.7 pence, was 16% higher than
the 2006 financial year and 25% higher than the 2005 financial
year.
Strong growth in new wave revenue continued, and at
£7,374 million new wave revenue was 17% higher than the
2006 financial year. New wave revenue in the 2006 financial
year was £6,282 million, 38% higher than the 2005 financial
year. Excluding the impact of the acquisitions of Albacom and
Infonet in the 2005 financial year, organic growth in new wave
revenue was 26% in the 2006 financial year. New wave revenue
represented 36% of revenue in the 2007 financial year
compared to 32% and 25% in the 2006 and 2005 financial
years, respectively. New wave revenue is mainly generated from
networked IT services, broadband and mobility.
New wave
Traditional
Revenue (£m) year ended 31 March
20072006
68%
75% 64%
36%
20,223
32%
19,514
25%
18,429
2005
In the 2007 financial year, the growth in new wave revenue of
17% more than offset the 3% decline in traditional revenue to
£12,849 million. The continued decline in traditional revenue
reflects regulatory intervention, competition and also
technological changes that we are using to drive customers from
traditional services to new wave services, such as broadband and
IPVPN. In the 2006 financial year, the growth in new wave
revenue of 38% more than offset the 5% decline in traditional
revenue.
Given the nature of our new wave activities and their relative
immaturity, the profit margins generated from these activities
are currently lower than those from the group’s mature
traditional products and service offerings. The adverse impact on
the group’s overall profitability has been mitigated by the overall
growth in revenues and our cost efficiency programmes which
achieved savings of over £500 million in the 2007 financial year.
We expect to continue to pursue profitable growth in new wave
markets, defend our traditional business and generate
sustainable cost savings.
The table below analyses revenue by customer segment.
Major corporate includes the external revenue of BT Global
Services’ major corporate customers. Business includes the
external revenue of BT Retail from small and medium sized
enterprises (SME) customers. Consumer includes the external
revenue of BT Retail from consumer customers. Wholesale
includes the external revenue of Openreach, BT Wholesale and
BT Global Services’ global carrier business.
2007
£m
2006
£m
2005
£m
Revenue by customer segment
Major corporate 7,244 6,880 5,936
Business 2,353 2,324 2,442
Consumer 5,124 5,296 5,599
Wholesale 5,485 4,996 4,427
Other 17 18 25
20,223 19,514 18,429
Major corporate (UK and international) revenue increased by 5%
to £7,244 million in the 2007 financial year driven by the
growth in new wave revenue. This reflects the continued
migration from traditional voice only services to networked IT
services contracts and broadband. New wave revenue increased
by 9% to £4,433 million and represented 61% of all major
corporate revenue compared to 59% and 51% in the 2006 and
2005 financial years, respectively. Networked IT services contract
wins in the 2007 financial year were £5.2 billion. We believe
these wins in the 2007 financial year, combined with the
£5.4 billion of contracts won in the 2006 financial year and the
£7.2 billion of contracts won in the 2005 financial year, are
building the foundation for future revenue growth as we
increase the level of networked IT services provided to major
corporate customers.
Revenue from Business (smaller and medium sized enterprise)
customers in the 2007 financial year increased by 1% to
£2,353 million, which compares with a decline of 5% in the
2006 financial year. This improvement reflects the continued
focus on innovative pricing plans and propositions that are
designed to deliver value to our customer base by bringing
together IT, broadband and communication services. New wave
revenue in this segment increased by 24% to £677 million
driven mainly by the 20% growth during the year in the number
of BT Business Broadband customers to 579,000 at 31 March
2007. The expansion of the BT Business Plan portfolio continued
during the year with the number of locations increasing by 16%
to 598,000, offsetting some of the decline in traditional
revenue.
Consumer revenue in the 2007 financial year was 3% lower at
£5,124 million, which compares with a 5% decline in the 2006
financial year. New wave consumer revenue increased by 34% to
£858 million, driven primarily by growth in broadband.
Residential broadband connections increased by 32% to
2,758,000 at 31 March 2007. Traditional consumer revenue
declined by 8% in the year, reflecting the shift towards new
wave products.
After a period of sustained growth the proportion of
consumer revenue under contract was 68% (2006 – 67% and
2005 – 64%) as a result of the reductions in package prices
made during the year. There are now 15.1 million BT Together
customers, with more than 3 million customers choosing higher
value packages, BT Together Options 2 and 3. The underlying 12
months rolling average revenue per customer household (net of
mobile termination charges) of £262 in the 2007 financial year
was 4% higher than the 2006 financial year and 3% higher than
the 2005 financial year. Increased penetration of broadband and
the growth of value added propositions have more than offset
the lower call revenues.
Wholesale (UK and global carrier) revenue in the 2007
financial year increased by 10% to £5,485 million driven by WLR
and LLU. New wave revenue increased by 36% driven by the
Report of the Directors Financial review
32 BT Group plc Annual Report & Form 20-F