BT 2011 Annual Report Download

Download and view the complete annual report

Please find the complete 2011 BT annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 189

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146
  • 147
  • 148
  • 149
  • 150
  • 151
  • 152
  • 153
  • 154
  • 155
  • 156
  • 157
  • 158
  • 159
  • 160
  • 161
  • 162
  • 163
  • 164
  • 165
  • 166
  • 167
  • 168
  • 169
  • 170
  • 171
  • 172
  • 173
  • 174
  • 175
  • 176
  • 177
  • 178
  • 179
  • 180
  • 181
  • 182
  • 183
  • 184
  • 185
  • 186
  • 187
  • 188
  • 189

BT ANNUAL REPORT AND FORM 20-F 2011
USER GUIDE
Welcome to the BT Annual Report and Form 20– F
2011. In this interactive pdf you can do many things
to help you easily access the information that you
want, whether that’s printing, searching for a
section or website. These are explained below.
1. Document controls
Use the document controls located in the top right corner
to help you navigate through this report.
2. Links within this document
Throughout this report there are links to pages, other
sections and web addresses for additional information.
3. Navigating with tabs
Use the tabs to quickly go to the start of a different section.
Search Print Back/forward
one page
Fast link to
previous page
viewed
Go to
contents
Examples
For further discussion of these items see pages 33 and 47 to 48.
by line of business, and for the group, is provided in the table at
the foot of pages 34 to 35.
OVERVIEWREVIEW OF THE YEARFINANCIAL REVIEW
OVERVIEWBUSINESS REVIEWFINANCIAL REVIEWREPORT OF THE DIRECTORSFINANCIAL STATEMENTSADDITIONAL INFORMATION

Table of contents

  • Page 1
    ... 48. by line of business, and for the group, is provided in the table at the foot of pages 34 to 35. 3. Navigating with tabs Use the tabs to quickly go to the start of a different section. REPORT OF THE DIRECTORS ADDITIONAL INFORMATION FINANCIAL STATEMENTS OVERVIEW FINANCIAL REVIEW REVIEW OF THE...

  • Page 2
    BT Group plc ANNUAL REPORT & FORM 20-F 2011 ADDITIONAL INFORMATION FINANCIAL STATEMENTS REPORT OF THE DIRECTORS FINANCIAL REVIEW BUSINESS REVIEW OVERVIEW

  • Page 3
    ADDITIONAL INFORMATION FINANCIAL STATEMENTS REPORT OF THE DIRECTORS FINANCIAL REVIEW BUSINESS REVIEW OVERVIEW

  • Page 4
    ...THE DIRECTORS FINANCIAL REVIEW Welcome to BT Group plc's Annual Report & Form 20-F 2011 45 46 50 52 54 56 Introduction from the Group Finance Director Financial performance Liquidity Funding and capital management Financial position and resources Alternative performance measures BUSINESS REVIEW...

  • Page 5
    ...at in 2012 and to grow by up to 2% in 2013 • Adjusted EBITDA to grow in 2012 and to be above £6.0bn in 2013 • Adjusted free cash ï¬,ow to be above the 2011 level in both 2012 and 2013 FINANCIAL STATEMENTS REPORT OF THE DIRECTORS FINANCIAL REVIEW BUSINESS REVIEW 2011 2010 Change OVERVIEW

  • Page 6
    ... Communications Commission has launched an investigation on access. In the EU, measures have been adopted that will offer greater regulatory consistency for fibre networks and internet policy. I was Sir Michael Rake Chairman 11 May 2011 BT GROUP PLC ANNUAL REPORT & FORM 20-F 2011 3 OVERVIEW

  • Page 7
    ... lines and calls, broadband, mobile and TV products and services as well as managed networked IT services. In the UK we are a leading communications services provider, selling products and services to consumers, small and mediumsized enterprises and the public sector. We also sell wholesale products...

  • Page 8
    ... on page 35 BT GROUP PLC ANNUAL REPORT & FORM 20-F 2011 5 ADDITIONAL INFORMATION FINANCIAL STATEMENTS Networked IT services Ethernet Fixed calls and lines Audio & videoconferencing Wi-fi & mobility Professional services Wholesale network capacity Fixed lines and calls Broadband TV services Wi...

  • Page 9
    ...free cash ï¬,ow is a non-GAAP measure. See page 58 for further details. c Cumulative improvement from 1 April 2007. 6 ADDITIONAL INFORMATION FINANCIAL STATEMENTS REPORT OF THE DIRECTORS FINANCIAL REVIEW CUSTOMER SERVICE DELIVERY COST TRANSFORMATION INVESTING FOR THE FUTURE A BETTER BUSINESS...

  • Page 10
    ...More on page 13 World Communication Awards 2010 Best Wholesale Carrier -100 -150 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2010 2011 BT GROUP PLC ANNUAL REPORT & FORM 20-F 2011 7 ADDITIONAL INFORMATION BT Wholesale -50 FINANCIAL STATEMENTS REPORT OF THE DIRECTORS FINANCIAL REVIEW BUSINESS REVIEW OVERVIEW

  • Page 11
    ...Our corporate responsibility risks Further information OUR RISKS Our approach to managing risk Principal risks and uncertainties Our risks 8 ADDITIONAL INFORMATION FINANCIAL STATEMENTS Our lines of business Our customer-facing lines of business are BT Global Services, BT Retail, BT Wholesale and...

  • Page 12
    ... spring 2011 BT's retail share of DSL and LLU broadband market BT GROUP PLC ANNUAL REPORT & FORM 20-F 2011 9 ADDITIONAL INFORMATION £2.2bn 5m 36% FINANCIAL STATEMENTS REPORT OF THE DIRECTORS FINANCIAL REVIEW Communication is ever more at the centre of our customers' lives and businesses...

  • Page 13
    ...in our future. By investing in our strategic priorities we expect to deliver growth in 2013. FINANCIAL REVIEW ADDITIONAL INFORMATION FINANCIAL STATEMENTS REPORT OF THE DIRECTORS Improvement in customer service delivery measure £1.1bn Operating costa savings £2.5bn Customer service delivery Our...

  • Page 14
    ... in BT Business compared with prior years, with revenue only marginally down in 2011 IT services and mobility revenue grew by 17% and 14%, respectively. FINANCIAL STATEMENTS Being the 'Brand for Business' for UK SMEs REPORT OF THE DIRECTORS FINANCIAL REVIEW we grew our retail broadband customer...

  • Page 15
    ... and access to Government funds. our managed network services (MNS) revenue grew by 8% 40% of BT Wholesale's external revenue is now underpinned by long-term contracts our second generation copper broadband service is available to over 65% of UK premises 12 BUSINESS REVIEW increasing the number...

  • Page 16
    ... per share, reported free cash ï¬,ow and customer service improvement (see Our strategy - Key performance indicators on page 6). BT GROUP PLC ANNUAL REPORT & FORM 20-F 2011 13 ADDITIONAL INFORMATION FINANCIAL STATEMENTS building stronger communities through the power of our technology and...

  • Page 17
    ...spend on IT and communications services a Value of global IT services market 22% 22% a IDC Global IT services Market size. Source Worldwide Black Book Q1, 2011. 14 ADDITIONAL INFORMATION FINANCIAL STATEMENTS REPORT OF THE DIRECTORS US$584bn FINANCIAL REVIEW c.£5.7bn BUSINESS REVIEW UK...

  • Page 18
    .... BT GROUP PLC ANNUAL REPORT & FORM 20-F 2011 15 ADDITIONAL INFORMATION FINANCIAL STATEMENTS REPORT OF THE DIRECTORS FINANCIAL REVIEW 4.8 BUSINESS BUSINESS REVIEW REVIEW The recession has had an impact on SMEs' spending levels with the markets for fixed-line voice and data, mobile services...

  • Page 19
    ...ADDITIONAL INFORMATION FINANCIAL STATEMENTS REPORT OF THE DIRECTORS April 2006 April 2007 April 2008 April 2009 April 2010 April 2011 FINANCIAL REVIEW BUSINESS REVIEW Demand for network based IT services continues to evolve with customers increasingly seeking to unify their communications...

  • Page 20
    ... Unbundled Local Access (VULA) product and an obligation to share our ducts and poles for fibre-based broadband purposes. FINANCIAL REVIEW In the UK local access market, the roll-out of BT's super-fast broadband network will improve the services available to customers. Other companies have also...

  • Page 21
    ... to serve our customers. Competition law In addition to communications industry-specific regulation, BT is subject to the Competition Act 1998 in the UK and to EU competition law. 18 ADDITIONAL INFORMATION FINANCIAL STATEMENTS REPORT OF THE DIRECTORS FINANCIAL REVIEW BUSINESS REVIEW OVERVIEW

  • Page 22
    ... equivalent to 75,660 full-time employees in the UK, and around 16,940 outside the UK. BT GROUP PLC ANNUAL REPORT & FORM 20-F 2011 19 ADDITIONAL INFORMATION FINANCIAL STATEMENTS REPORT OF THE DIRECTORS 16,700 • trustworthy: we do what we say we will helpful: we work as one team inspiring: we...

  • Page 23
    ...information see the Report on directors' remuneration on page 69. Different arrangements apply to the most senior managers in Openreach but remain entirely related to business performance. We also provide savings-related share option plans in 25 countries. Under the BT employee share investment plan...

  • Page 24
    ... countries including BT GROUP PLC ANNUAL REPORT & FORM 20-F 2011 21 ADDITIONAL INFORMATION FINANCIAL STATEMENTS REPORT OF THE DIRECTORS FINANCIAL REVIEW BT's deployment of FTTC and FTTP will underpin the communications infrastructure for the future UK economy. In so doing, the enhanced internet...

  • Page 25
    ... value spend, various customer-specified requirements and rates are paid in shorter timescales. In 2011 the average number of days between the invoice date and the date of the payment run for the invoice was 64. In the UK, BT provides access to a supplier financing scheme which offers contracted...

  • Page 26
    ...OF THE DIRECTORS ADDITIONAL INFORMATION FINANCIAL STATEMENTS 23 24% £119m Operating cash ï¬,ow £7.3bn Order intake World Communication Awards 2010 BT Global Services Best Global Operator BT GROUP PLC ANNUAL REPORT & FORM 20-F 2011 FINANCIAL REVIEW £8,047m We operate domestic businesses in...

  • Page 27
    ... times and pricing pressure all having an impact. FINANCIAL STATEMENTS REPORT OF THE DIRECTORS DigitPA (Agency for the A seven-year contract to connect Digital Public Administration), 340 offices in 125 countries, Italy providing communication services and managing a global network. FINANCIAL...

  • Page 28
    ... in 2010 and 2009, respectively. REPORT OF THE DIRECTORS ADDITIONAL INFORMATION FINANCIAL STATEMENTS BT GROUP PLC ANNUAL REPORT & FORM 20-F 2011 25 Financial performance 2011 £m Revenue Net operating costs EBITDA Depreciation and amortisation Operating loss Capital expenditure Operating cash ï¬,ow...

  • Page 29
    ... services • BT Business Direct: an online store providing IT, computing and networking equipment plus associated installation and support services for SMEs. 5.7m Broadband customers 1m SME customers 26 ADDITIONAL INFORMATION FINANCIAL STATEMENTS REPORT OF THE DIRECTORS 51% FINANCIAL REVIEW...

  • Page 30
    ... to increased average annual revenue per consumer user (ARPU) up to £326 as consumers take more products from us. BT GROUP PLC ANNUAL REPORT & FORM 20-F 2011 27 ADDITIONAL INFORMATION FINANCIAL STATEMENTS REPORT OF THE DIRECTORS BT Ireland 10 FINANCIAL REVIEW In the broadband market, BT...

  • Page 31
    ... in 2010. 28 ADDITIONAL INFORMATION FINANCIAL STATEMENTS 7,748 5,964 1,784 443 1,341 434 1,382 REPORT OF THE DIRECTORS FINANCIAL REVIEW BUSINESS REVIEW Our television service, BT Vision, had 575,000 customers at 31 March 2011 (2010: 467,000). Following the Ofcom pay TV market investigation...

  • Page 32
    ... broadband strategy, together with increased revenue from services such as mobility. ICT and managed networks revenue decreased by 5% in 2011 (2010: 2% decrease). BT GROUP PLC ANNUAL REPORT & FORM 20-F 2011 29 ADDITIONAL INFORMATION FINANCIAL STATEMENTS REPORT OF THE DIRECTORS FINANCIAL REVIEW...

  • Page 33
    ... ADDITIONAL INFORMATION FINANCIAL STATEMENTS REPORT OF THE DIRECTORS BUSINESS REVIEW £4,210m Revenue £1,316m EBITDA BT Wholesale external revenue by customer segment 3% 14% 28% Transit Mobile Fixed We manage and support the network and services requirements of a number of national operators...

  • Page 34
    ... over the last year. BT GROUP PLC ANNUAL REPORT & FORM 20-F 2011 31 ADDITIONAL INFORMATION 4,210 980 3,230 2,894 1,316 619 697 329 911 FINANCIAL STATEMENTS 1,000 REPORT OF THE DIRECTORS Operating review FINANCIAL REVIEW Date Customer Details BUSINESS BUSINESS REVIEW REVIEW Capacity and...

  • Page 35
    ... as customers seek alternative products and services such as Ethernet. Other products and services revenue increased by 15% (2010: 17% increase) partly driven by growth in IP-based Ethernet services. BUSINESS REVIEW ADDITIONAL INFORMATION FINANCIAL STATEMENTS REPORT OF THE DIRECTORS FINANCIAL REVIEW...

  • Page 36
    ... visit homes to improve broadband services. BT GROUP PLC ANNUAL REPORT & FORM 20-F 2011 33 REPORT OF THE DIRECTORS FINANCIAL REVIEW £2,132m BUSINESS BUSINESS REVIEW REVIEW Openreach is responsible for the 'last mile' of the UK access network - the copper wires and fibre connecting homes and...

  • Page 37
    ... INFORMATION FINANCIAL STATEMENTS Operating profit increased by 14% in 2011 (2010: 9% decrease). REPORT OF THE DIRECTORS FINANCIAL REVIEW In 2011 revenue decreased by 5% (2010: 1% decrease). After reï¬,ecting changes in the internal trading model in 2011, which impacted internal revenue...

  • Page 38
    ... have also been achieved by replacing energy-inefficient equipment, and decommissioning and rationalising our estate. BT GROUP PLC ANNUAL REPORT & FORM 20-F 2011 35 ADDITIONAL INFORMATION FINANCIAL STATEMENTS REPORT OF THE DIRECTORS FINANCIAL REVIEW BUSINESS BUSINESS REVIEW REVIEW OVERVIEW

  • Page 39
    ... our impact on the environment through our operations and products behaving responsibly towards our customers, people and suppliers. DELIVERY Business units Group corporate responsibility team CR STRATEGY Building stronger communities We are using our technology and the skills and creativity of...

  • Page 40
    ...buy. Such a system has worked successfully in BT GROUP PLC ANNUAL REPORT & FORM 20-F 2011 37 ADDITIONAL INFORMATION FINANCIAL STATEMENTS 0.20 0.18 0.16 0.14 0.12 0.10 0.08 0.06 0.04 0.02 0.00 Net emissions Carbon intensity REPORT OF THE DIRECTORS FINANCIAL REVIEW Reducing carbon emissions and...

  • Page 41
    ... of BT's employee awareness and training. Non financial performance Target 2012 Maintain or improve our 2011 index score Financial performance Revenue support Customer bids with a sustainability element £2.1bn £2.1bn £1.5 bn 2011 4.16 2010 2009 4.10 New in 2010 Further information More...

  • Page 42
    ...long-term strategic aims. Our risk management processes are operated within BT lines of business (LoB), internal service units, group functions, contracts, projects and programmes and are aggregated at group level. The approach is defined in our group-wide risk management policies. OVERVIEW REVIEW

  • Page 43
    ... requirements. Risk mitigation We operate well established policies addressing the security and resilience requirements of our operations, our systems and systems operated by us for our customers. We have a corporate resilience strategy and business continuity plans in place designed to deal with...

  • Page 44
    ... which has from a profitability perspective mitigated the revenue declines and helped ensure a competitive cost base. BT GROUP PLC ANNUAL REPORT & FORM 20-F 2011 41 ADDITIONAL INFORMATION FINANCIAL STATEMENTS REPORT OF THE DIRECTORS FINANCIAL REVIEW BUSINESS BUSINESS REVIEW REVIEW OVERVIEW

  • Page 45
    ... to terminate calls on their network. There will be a stepped reduction in prices over four years starting from April 2011. This regulatory action will have a significant impact on future transit revenues in the UK and Europe. We may be required to provide new services to wholesale customers on...

  • Page 46
    ...that the goods and services that we buy are made, delivered and disposed of in a socially and environmentally responsible manner. BT GROUP PLC ANNUAL REPORT & FORM 20-F 2011 43 ADDITIONAL INFORMATION FINANCIAL STATEMENTS REPORT OF THE DIRECTORS FINANCIAL REVIEW BUSINESS BUSINESS REVIEW REVIEW...

  • Page 47
    ... 54 54 INTRODUCTION FROM THE GROUP FINANCE DIRECTOR FINANCIAL PERFORMANCE Summarised income statement Group results Outlook Revenue Other operating income Transforming our cost base Adjusted EBITDA Operating profit Net finance expense Associates and joint ventures Profit before taxation Taxation...

  • Page 48
    ... May 2010 Revenue c.£20bn c.£900m in line with 2010b a,c Our financial objectives Result £20.1bn £1.1bn £5.9bn £2.2bn £8.8bn INVEST IN BUSINESS REDUCE NET DEBT SUPPORT PENSION FUND PROGRESSIVE DIVIDENDS 2011 IMPROVING REVENUE TRENDS GROW EBITDA GROW FREE CASH FLOW 2013 Operating cost...

  • Page 49
    ... the 2011 level in 2012 and 2013, with BT Global Services generating operating cash ï¬,ow of around £200m in 2012. Revenue REPORT OF THE DIRECTORS ADDITIONAL INFORMATION FINANCIAL STATEMENTS In 2011 revenue decreased by 4% (2010: 2% decrease). Excluding the negative impact of foreign exchange...

  • Page 50
    ...) Our products and services are sold separately or as part of solutions whereby they work together as a unified offering. An analysis of revenue by major product and service category is set out below: 2011 £m Products and services ICT and managed networks Broadband and convergence Calls and lines...

  • Page 51
    ... existing permanent staff to protect jobs where possible. BUSINESS REVIEW ADDITIONAL INFORMATION FINANCIAL STATEMENTS REPORT OF THE DIRECTORS FINANCIAL REVIEW Revenue related £1,087m reduction 14,563 13,600 12,800 12,000 2009 POLOs Other operating costs Otherb 2010 POLOs Other operating costs...

  • Page 52
    ...details. b Other includes interest, tax and share of post tax profits of associates and joint ventures. Adjusted earnings (loss) per share for last five financial years are included in Selected financial data on page 158. BT GROUP PLC ANNUAL REPORT & FORM 20-F 2011 49 BUSINESS REVIEW OVERVIEW

  • Page 53
    FINANCIAL REVIEW FINANCIAL PERFORMANCE/LIQUIDITY Dividends The Board is committed to progressive dividends, while balancing the need to invest in the business, reduce our net debt and support the pension fund. The total dividend proposed for 2011 is 7.4p per share, an increase of 7% (2010: 6%) and...

  • Page 54
    ...and tax authorities and where this occurs we will engage in proactive discussion to bring matters to as rapid a conclusion as possible. BT GROUP PLC ANNUAL REPORT & FORM 20-F 2011 51 ADDITIONAL INFORMATION FINANCIAL STATEMENTS REPORT OF THE DIRECTORS FINANCIAL REVIEW BUSINESS REVIEW OVERVIEW

  • Page 55
    ... strategy. Details of the group's treasury management policies are included in note 29 to the consolidated financial statements. BUSINESS REVIEW ADDITIONAL INFORMATION FINANCIAL STATEMENTS REPORT OF THE DIRECTORS FINANCIAL REVIEW Capital management and funding policy Tax accounting and cash...

  • Page 56
    ... rates where hedged. BT GROUP PLC ANNUAL REPORT & FORM 20-F 2011 53 ADDITIONAL INFORMATION FINANCIAL STATEMENTS REPORT OF THE DIRECTORS The group had two significant term debt maturities during 2011 totalling £2.5bn. In December 2010 an 8.125% (9.37% including step-up coupons) US Dollar...

  • Page 57
    ... funding and capital management and our financial position and resources. Notes 15, 16, 20, 21 and 29 of the consolidated financial statements include information on the group's investments, cash and cash equivalents, borrowings, derivatives, financial risk management objectives, hedging policies...

  • Page 58
    ...of BT Group plc are prepared in accordance with UK GAAP. BT GROUP PLC ANNUAL REPORT & FORM 20-F 2011 55 ADDITIONAL INFORMATION FINANCIAL STATEMENTS Equity A summary of the movements in equity is set out below: REPORT OF THE DIRECTORS In 2011 platforms and networks expenditure was £1,145m (2010...

  • Page 59
    ... BT Global Services contract and financial review charges, of which £41m was recognised as a reduction in revenue. In 2009 a £13m loss on disposal arose from exiting a business and was recognised as a reduction in other operating income. 56 ADDITIONAL INFORMATION FINANCIAL STATEMENTS REPORT...

  • Page 60
    ...1,336 BT GROUP PLC ANNUAL REPORT & FORM 20-F 2011 57 ADDITIONAL INFORMATION • Tax credit of £72m (2010: £190m; 2009: £414m) on the specific items detailed above. Tax credit of £172m (2010 and 2009: £nil) for the re-measurement of deferred tax balances as a result of the change in the UK...

  • Page 61
    ... tax matters with HMRC relating to the 2008, 2007 and 2006 tax years. The net cash outï¬,ow of £35m in 2009 principally comprised BT Global Services restructuring costs and group transformation costs. FINANCIAL STATEMENTS REPORT OF THE DIRECTORS FINANCIAL REVIEW BUSINESS REVIEW OVERVIEW

  • Page 62
    ... AND ANNUAL GENERAL MEETING Relations with shareholders Substantial shareholdings AGM resolutions Authority to purchase shares BT GROUP PLC ANNUAL REPORT & FORM 20-F 2011 59 ADDITIONAL INFORMATION FINANCIAL STATEMENTS REPORT OF THE DIRECTORS FINANCIAL REVIEW BUSINESS REVIEW OVERVIEW

  • Page 63
    ... a Operating b Audit & Risk c Remuneration d Nominating & Governance e Sustainable & Responsible Business f Pension Scheme Performance Review Group g Equality of Access Board ADDITIONAL INFORMATION FINANCIAL STATEMENTS REPORT OF THE DIRECTORS FINANCIAL REVIEW Gavin Patterson Chief Executive, BT...

  • Page 64
    ... and prior to this served as a managing director of Thomson Financial based in the US. A British and Swiss dual national, she is aged 47. FINANCIAL REVIEW 61 BT GROUP PLC ANNUAL REPORT & FORM 20-F 2011 ADDITIONAL INFORMATION FINANCIAL STATEMENTS REPORT OF THE DIRECTORS BUSINESS REVIEW OVERVIEW

  • Page 65
    ...Main Board committees New York Stock Exchange The directors submit their report and the audited financial statements of the company, BT Group plc, and the group, which includes its subsidiary undertakings, for the 2011 financial year. The Business review on pages 8 to 43 forms part of this report...

  • Page 66
    ...-listed candidates meet members of the Committee, which then recommends candidates to the Board for appointment. This year, following this process, the BT GROUP PLC ANNUAL REPORT & FORM 20-F 2011 63 FINANCIAL STATEMENTS REPORT OF THE DIRECTORS The Company Secretary manages the provision of timely...

  • Page 67
    ... of information and BT's share dealing code. The Board also has a Pension Scheme Performance Review Group, which reviews the position of the BT Pension Scheme and issues affecting its ongoing funding. New York Stock Exchange BT, as a foreign issuer with American Depositary Shares listed on the New...

  • Page 68
    ... and accounting, and the management of risk. Following the review of the Committee's terms of reference, each Line of Business and internal service unit Chief Executive will attend meetings to discuss the key risks in their part of the business and BT GROUP PLC ANNUAL REPORT & FORM 20-F 2011 65...

  • Page 69
    ... Annual Report & Form 20-F 2010, full year July January 66 ADDITIONAL INFORMATION FINANCIAL STATEMENTS September November results, announcement and related formal statements • Corporation tax provisions • Review of the internal control requirements under Sarbanes-Oxley • Annual report...

  • Page 70
    ... Whitbread as a non-executive director to bring valuable experience to the Board on corporate responsibility, an area where she has held senior positions both in the UK and globally FINANCIAL STATEMENTS REPORT OF THE DIRECTORS Committee activities FINANCIAL REVIEW BUSINESS REVIEW OVERVIEW

  • Page 71
    ... the business, minimising any CR risks to BT's operations and reputation and maximising the opportunities to help create a better future. It encourages innovation and the development of new communications services to help create a more sustainable future for customers, employees and communities - in...

  • Page 72
    ...around median levels in comparable companies. In making these decisions, we took account of the position of all BT's employees who will benefit from pay increases and annual bonuses based on the company's performance in 2011. BT's executive share plans reach the end of their 10-year life in October...

  • Page 73
    ... Executive, the Group HR Director, the Director Reward and Employee Relations, and the Company Secretary. The chair of the Committee meets major shareholders, the Association of British Insurers, Risk Metrics (RREV) and Pensions Investment Research Consultants Limited (PIRC) to discuss remuneration...

  • Page 74
    ... share awards for previous years for Ian Livingston, Tony Chanmugam and Gavin Patterson at the end of 2011 are contained in the table on page 81. BT GROUP PLC ANNUAL REPORT & FORM 20-F 2011 71 ADDITIONAL INFORMATION FINANCIAL STATEMENTS REPORT OF THE DIRECTORS FINANCIAL REVIEW BUSINESS REVIEW...

  • Page 75
    ..., mid-market levels in comparable companies. In making these decisions, the Committee took account of the position of all BT's employees who will benefit from pay increases and annual bonuses based on the company's performance in 2011. The structure of the annual bonus (cash and deferred shares) is...

  • Page 76
    ..., the BT Group Deferred Bonus Plan, the BT Group Retention Share Average annual vesting No share options have been granted since 2004. BT GROUP PLC ANNUAL REPORT & FORM 20-F 2011 73 ADDITIONAL INFORMATION FINANCIAL STATEMENTS REPORT OF THE DIRECTORS FINANCIAL REVIEW BUSINESS REVIEW OVERVIEW

  • Page 77
    ... the remaining directors 1.5x salary. Progress towards meeting these targets has been made in 2011. Current shareholdings are set out on page 76. Pensions The BT Pension Scheme (BTPS) closed to new entrants on 31 March 2001. None of the executive directors participates in future service accrual in...

  • Page 78
    ... the Board. This policy is not mandatory. Current shareholdings are shown on page 76. No element of non-executive remuneration is performancerelated. Non-executive directors do not participate in BT's bonus or employee share plans and are not members of any of the company pension schemes. Patricia...

  • Page 79
    ... 0 2006 31 March 2006 = 100 Source: Datastream The graph shows the relative TSR performance of BT and the FTSE 100 over the past five years. 2007 2008 2009 2010 2011 76 ADDITIONAL INFORMATION FINANCIAL STATEMENTS REPORT OF THE DIRECTORS FTSE 100 BT FINANCIAL REVIEW BUSINESS REVIEW OVERVIEW

  • Page 80
    ...352 1,917 BT GROUP PLC ANNUAL REPORT & FORM 20-F 2011 77 ADDITIONAL INFORMATION FINANCIAL STATEMENTS REPORT OF THE DIRECTORS a Pension allowance paid in cash for 2011 - see 'Pensions' on page 78. b Deferred annual bonuses payable in shares in three years' time, subject to continued employment...

  • Page 81
    ... is not a member of any of the company pension schemes, and the company made no payments towards retirement provision. BT provides him with a lump sum death in service benefit of £1m. BUSINESS REVIEW ADDITIONAL INFORMATION FINANCIAL STATEMENTS REPORT OF THE DIRECTORS Transfer value of accrued bene...

  • Page 82
    ... March 2011. The market price of BT shares at 31 March 2011 was 185.6p (2010: 123.9p) and the range during 2011 was 109.9p to 191.1p (2010: 79.7p - 149.6p). BT GROUP PLC ANNUAL REPORT & FORM 20-F 2011 79 ADDITIONAL INFORMATION FINANCIAL STATEMENTS REPORT OF THE DIRECTORS FINANCIAL REVIEW All...

  • Page 83
    ... to meeting the two performance conditions on 31 March 2013. Note: For awards granted in 2009 and 2010, the vesting level is the anticipated level based on performance to date. 80 ADDITIONAL INFORMATION FINANCIAL STATEMENTS REPORT OF THE DIRECTORS Free cash Percentage of ï¬,ow position shares...

  • Page 84
    ... conditions. By order of the Board Rt Hon Patricia Hewitt Chair of Remuneration Committee 11 May 2011 FINANCIAL STATEMENTS BT GROUP PLC ANNUAL REPORT & FORM 20-F 2011 81 ADDITIONAL INFORMATION REPORT OF THE DIRECTORS Details of awards of deferred shares in respect of the 2011 financial year...

  • Page 85
    ...insurance and indemnity For some years, BT has purchased insurance to cover the directors and officers of BT Group plc and its subsidiaries (and the BT nominated directors of associated companies and joint ventures) against defence costs and civil damages awarded following an action brought against...

  • Page 86
    ...) • significant direct or indirect shareholdings (refer to page 86) • appointment and replacement of directors (refer to page 169). BT GROUP PLC ANNUAL REPORT & FORM 20-F 2011 83 ADDITIONAL INFORMATION FINANCIAL STATEMENTS REPORT OF THE DIRECTORS FINANCIAL REVIEW BUSINESS REVIEW OVERVIEW

  • Page 87
    ... place as an integral part of BT's annual strategic planning cycle. We have a detailed risk management process, culminating in a Board review, which identifies the key risks facing the group and each business unit. This information is reviewed by senior management as part of the strategic review...

  • Page 88
    ... of the SEC. The Chief Executive and Group Finance Director have also provided the certifications required by the Sarbanes-Oxley Act. BT GROUP PLC ANNUAL REPORT & FORM 20-F 2011 85 ADDITIONAL INFORMATION FINANCIAL STATEMENTS REPORT OF THE DIRECTORS FINANCIAL REVIEW BUSINESS REVIEW OVERVIEW

  • Page 89
    ...give them the opportunity at the AGM to ask questions about BT's activities and prospects. We also give shareholders the opportunity to vote on every substantially 86 ADDITIONAL INFORMATION FINANCIAL STATEMENTS AGM resolutions REPORT OF THE DIRECTORS FINANCIAL REVIEW BUSINESS REVIEW OVERVIEW

  • Page 90
    ... CHANGES IN EQUITY 103 GROUP CASH FLOW STATEMENT 104 GROUP BALANCE SHEET 105 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 1. Segment information 2. Other operating income 3. Operating costs 4. Employees 5. Related party transactions 6. Share-based payments 7. Audit and non-audit services 8. Speci...

  • Page 91
    ...INFORMATION FINANCIAL STATEMENTS REPORT OF THE DIRECTORS FINANCIAL REVIEW the consolidated financial statements, which have been prepared in accordance with IFRSs as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and profit of the group...

  • Page 92
    ... the members of BT Group plc (the 'company') We have audited the consolidated financial statements of BT Group plc for the year ended 31 March 2011 which comprise the Group income statement, the Group statement of comprehensive income, the Group statement of changes in equity, the Group cash ï¬,ow...

  • Page 93
    ... - CONSOLIDATED FINANCIAL STATEMENTS United States opinion Report of Independent Registered Public Accounting Firm to the Board of Directors and Shareholders of BT Group plc (the 'company') In our opinion, the accompanying Group income statements, Group statements of comprehensive income, Group...

  • Page 94
    ... REPORT OF THE DIRECTORS FINANCIAL REVIEW The group financial statements consolidate the financial statements of BT Group plc ('the company') and its subsidiaries, and they incorporate its share of the results of associated and joint ventures using the equity method of accounting. Accounting...

  • Page 95
    FINANCIAL STATEMENTS CONSOLIDATED FINANCIAL STATEMENTS of post acquisition reserves, less any impairment in the value of individual assets. The income statement reï¬,ects the group's share of the results of operations after tax of the associate or joint venture. When a group entity transacts with ...

  • Page 96
    ... businesses. BT GROUP PLC ANNUAL REPORT & FORM 20-F 2011 93 (viii) Foreign currencies Items included in the financial statements of each of the group's subsidiaries are measured using the currency of the primary economic environment in which the entity operates (the functional FINANCIAL REVIEW...

  • Page 97
    ...the construction phase as part of the cost of that asset. BUSINESS REVIEW ADDITIONAL INFORMATION FINANCIAL STATEMENTS REPORT OF THE DIRECTORS FINANCIAL REVIEW (xiii) Asset impairment (non financial assets) Intangible assets with finite useful lives and property, plant and equipment are tested for...

  • Page 98
    ... joint ventures operate and generate taxable income. The group periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation, and the BT GROUP PLC ANNUAL REPORT & FORM 20-F 2011 95 FINANCIAL REVIEW BUSINESS REVIEW...

  • Page 99
    ... value of estimated future cash ï¬,ows discounted at the current market rate of return for a similar financial asset. BUSINESS REVIEW Financial assets Financial assets at fair value through income statement A financial asset is classified in this category if acquired principally for the purpose...

  • Page 100
    ... relations with customers and the implication for future revenue and cost projections; and FINANCIAL STATEMENTS REPORT OF THE DIRECTORS FINANCIAL REVIEW Under a cash ï¬,ow hedge, the cumulative gain or loss at that point remains in equity and is recognised in accordance with the above policy...

  • Page 101
    ... FINANCIAL STATEMENTS The carrying value of assets comprising the costs of the initial set up, transition or transformation phase of long-term networked IT services contracts are disclosed in note 19. Interconnect income and payments to other telecommunications operators In certain instances, BT...

  • Page 102
    ... the period. BUSINESS REVIEW ADDITIONAL INFORMATION FINANCIAL STATEMENTS BT GROUP PLC ANNUAL REPORT & FORM 20-F 2011 99 IFRS 3 (Revised) 'Business Combinations'; IAS 27 (Revised) 'Consolidated and Separate Financial Statements'; IFRIC 17 'Distributions of Non-cash Assets to Owners'; Amendment...

  • Page 103
    ... CONSOLIDATED FINANCIAL STATEMENTS GROUP INCOME STATEMENT Before specific items £m 20,076 373 (17,542) 2,907 (880) 35 (845) 21 - 2,083 (452) 1,631 Specific itemsa £m - - (329) (329) (2,323) 2,244 (79) - 42 (366) 239 (127) Year ended 31 March 2011 Revenue Other operating income Operating costs...

  • Page 104
    ...) (2,632) 2009 £m (191) (7,037) 692 5 2,719 (2,144) (5) 1,859 (3,911) (4,102) 4,951 2 4,953 (2,633) 1 (2,632) (4,113) 11 (4,102) BT GROUP PLC ANNUAL REPORT & FORM 20-F 2011 101 ADDITIONAL INFORMATION FINANCIAL STATEMENTS REPORT OF THE DIRECTORS FINANCIAL REVIEW BUSINESS REVIEW OVERVIEW

  • Page 105
    ...the year Other comprehensive income - before tax Other comprehensive income - tax Transferred to the income statement Comprehensive income (loss) Dividends to shareholders Share-based payments Tax on share-based payments Net issuance of treasury shares At 31 March 2011 a For details of share capital...

  • Page 106
    ... liquidity funds. d In 2011 the repayment of borrowings includes the impact of hedging. See page 144 for further details. BT GROUP PLC ANNUAL REPORT & FORM 20-F 2011 103 ADDITIONAL INFORMATION FINANCIAL STATEMENTS (59) 1,174 REPORT OF THE DIRECTORS FINANCIAL REVIEW BUSINESS REVIEW OVERVIEW

  • Page 107
    FINANCIAL STATEMENTS CONSOLIDATED FINANCIAL STATEMENTS GROUP BALANCE SHEET 2011 £m 2010 £m At 31 March Non-current assets Intangible assets Property, plant and equipment Derivative financial instruments Investments Associates and joint ventures Trade and other receivables Deferred tax assets ...

  • Page 108
    ... manages the overall net debt position of the group. BT GROUP PLC ANNUAL REPORT & FORM 20-F 2011 105 ADDITIONAL INFORMATION FINANCIAL STATEMENTS REPORT OF THE DIRECTORS BT Innovate & Design and BT Operate are internal service units which support the four customer-facing lines of business. BT...

  • Page 109
    FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 1. Segment information continued Segment revenue and profit BUSINESS REVIEW ADDITIONAL INFORMATION FINANCIAL STATEMENTS REPORT OF THE DIRECTORS FINANCIAL REVIEW Year ended 31 March 2011 Segment revenue Internal revenue Revenue ...

  • Page 110
    ...533 BT GROUP PLC ANNUAL REPORT & FORM 20-F 2011 107 ADDITIONAL INFORMATION FINANCIAL STATEMENTS 2,090 500 REPORT OF THE DIRECTORS Year ended 31 March 2009 FINANCIAL REVIEW BUSINESS REVIEW BT Global Services £m BT Retail £m BT Wholesale £m Openreach £m Other £m Total £m OVERVIEW

  • Page 111
    ... FINANCIAL STATEMENTS 1. Segment information continued Revenue by products and services Year ended 31 March ICT and managed networks Broadband and convergence Calls and lines Transit Conveyance, interconnect circuits, WLR, global carrier and other wholesale Other products and services Revenueb 2011...

  • Page 112
    ...: £491m, 2009: £431m) in respect of internally developed computer software. BT GROUP PLC ANNUAL REPORT & FORM 20-F 2011 109 ADDITIONAL INFORMATION FINANCIAL STATEMENTS REPORT OF THE DIRECTORS FINANCIAL REVIEW 3,947 456 416 68 4,182 447 304 71 4,499 432 544 141 BUSINESS REVIEW OVERVIEW

  • Page 113
    ...based payments 2011 £m 11.4 - 1.4 5.3 18.1 2010 £m 10.3 0.1 1.8 2.6 14.8 2009 £m 8.4 2.4 2.3 3.6 16.7 More detailed information concerning directors' remuneration, shareholdings, pension entitlements, share options and other long-term incentive plans is shown in the audited part of the Report on...

  • Page 114
    ... of 19,392 (2010: 20,120) allshare and directshare employee participants. At 31 March 2011, 79.3m shares (2010: 79.2m shares) were held in trust on behalf of 64,643 participants (2010: 68,444). BT GROUP PLC ANNUAL REPORT & FORM 20-F 2011 111 BUSINESS REVIEW 2011 £m 2010 £m 2009 £m OVERVIEW

  • Page 115
    FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 6. Share-based payments continued Share option plans Movements in share options during 2011, 2010 and 2009 are shown below. Employee Sharesave Movement in the number of share options Outstanding at the beginning of the year Granted...

  • Page 116
    ... 2011 was 163p (2010: 104p, 2009: 151p). The weighted average share price for DBP awards granted in 2011 was 131p (2010: 131p, 2009: 203p). BT GROUP PLC ANNUAL REPORT & FORM 20-F 2011 113 ADDITIONAL INFORMATION FINANCIAL STATEMENTS REPORT OF THE DIRECTORS Fair value FINANCIAL REVIEW BUSINESS...

  • Page 117
    ...18% of the total fees in 2011 (2010: 17%, 2009: 20%). 114 ADDITIONAL INFORMATION FINANCIAL STATEMENTS REPORT OF THE DIRECTORS FINANCIAL REVIEW Audit services - represent fees payable for services in relation to the audit of the parent company and the consolidated financial statements and also...

  • Page 118
    ...results of the group. A definition of specific items is provided on page 91. 2011 £m 2010a £m 2009a £m Year ended 31 March Revenue Regulatory settlementb BT Global Services contract and financial review charges Other operating income (Profit) loss on disposal of a business Operating costs BT...

  • Page 119
    ...note 8) Net finance expense 2011 £m 845 79 924 2010 £m 890 268 1,158 2009 £m 933 (313) 620 116 ADDITIONAL INFORMATION FINANCIAL STATEMENTS REPORT OF THE DIRECTORS FINANCIAL REVIEW In 2011 the group amended its definition of specific items to include net interest on pensions due to its...

  • Page 120
    ...to share-based payments Total taxation credit (expense) recognised directly in equity 2011 £m 91 91 2010 £m 19 19 2009 £m (12) (12) BT GROUP PLC ANNUAL REPORT & FORM 20-F 2011 117 ADDITIONAL INFORMATION FINANCIAL STATEMENTS REPORT OF THE DIRECTORS FINANCIAL REVIEW BUSINESS REVIEW OVERVIEW

  • Page 121
    ...fit or loss attributable to equity shareholders by the weighted average number of shares in issue after deducting the group's shares held by employee share ownership trusts and treasury shares. REPORT OF THE DIRECTORS ADDITIONAL INFORMATION FINANCIAL STATEMENTS In calculating the diluted earnings...

  • Page 122
    ...goodwill impairment charges recognised in 2011 mainly relate to an operational restructuring of a business acquired several years ago. BT GROUP PLC ANNUAL REPORT & FORM 20-F 2011 119 ADDITIONAL INFORMATION FINANCIAL STATEMENTS REPORT OF THE DIRECTORS FINANCIAL REVIEW BUSINESS REVIEW OVERVIEW

  • Page 123
    ... INFORMATION FINANCIAL STATEMENTS REPORT OF THE DIRECTORS The value in use of each CGU is determined using cash ï¬,ow projections derived from financial plans approved by the Board covering a threeyear period and a further two years approved by the line of business and group senior management...

  • Page 124
    ... rate of 7.8% (2010: 7.9%). BT GROUP PLC ANNUAL REPORT & FORM 20-F 2011 121 ADDITIONAL INFORMATION FINANCIAL STATEMENTS a The carrying amount of land and buildings, including leasehold improvements, comprised: REPORT OF THE DIRECTORS FINANCIAL REVIEW 46,999 BUSINESS REVIEW OVERVIEW

  • Page 125
    ... realisable value. Loans and receivables Loans and receivables mainly consist of term deposits denominated in Sterling with a fixed interest rate. FINANCIAL STATEMENTS 122 ADDITIONAL INFORMATION REPORT OF THE DIRECTORS FINANCIAL REVIEW At 31 March 2011 £m 2010 £m BUSINESS REVIEW OVERVIEW

  • Page 126
    ... £m 49 278 (77) (64) 186 298 (266) (7) 25 29 54 Joint ventures £m 7 4 (2) - 9 14 (14) - - - - 2010 Total £m 56 282 (79) (64) 195 312 (280) (7) BT GROUP PLC ANNUAL REPORT & FORM 20-F 2011 123 ADDITIONAL INFORMATION FINANCIAL STATEMENTS REPORT OF THE DIRECTORS BUSINESS REVIEW OVERVIEW

  • Page 127
    ...ADDITIONAL INFORMATION FINANCIAL STATEMENTS REPORT OF THE DIRECTORS 19. Trade and other receivables FINANCIAL REVIEW At 31 March 2011 the fair value of the group's investments in associates and joint ventures for which published price quotations are available was £279m (2010: £473m). Details...

  • Page 128
    ...8 967 At 31 March BT Global Services BT Retail BT Wholesale Openreach Other Total accrued income 2011 £m 422 138 176 47 5 788 BT GROUP PLC ANNUAL REPORT & FORM 20-F 2011 ADDITIONAL INFORMATION FINANCIAL STATEMENTS Given the broad and varied nature of the group's customer base, the analysis of...

  • Page 129
    ... ADDITIONAL INFORMATION FINANCIAL STATEMENTS Carrying amount £m Carrying amount £m REPORT OF THE DIRECTORS a The interest rate payable on these bonds will be subject to adjustment from time to time if either Moody's or Standard & Poor's (S&P) reduce the rating ascribed to the group's senior...

  • Page 130
    ... a further description of the group's derivative financial instruments and hedge designations, see note 29. BT GROUP PLC ANNUAL REPORT & FORM 20-F 2011 127 ADDITIONAL INFORMATION FINANCIAL STATEMENTS REPORT OF THE DIRECTORS 304 FINANCIAL REVIEW The ï¬,oating rate loans and borrowings bear...

  • Page 131
    ... income a Non-current payables mainly relate to operating lease liabilities and deferred gains on a prior period sale and finance leaseback transaction. 762 69 831 734 70 804 128 ADDITIONAL INFORMATION FINANCIAL STATEMENTS REPORT OF THE DIRECTORS FINANCIAL REVIEW BUSINESS REVIEW OVERVIEW

  • Page 132
    ... of the group's pension plans 2011 £m 2010 £m 2009 £m Year ended 31 March Recognised in the income statement before specific items Current service cost - defined benefit plans - defined contribution plans Total operating charge Specific items (note 8) Expected return on pension plan assets...

  • Page 133
    ... asset classes are based on a combination of an estimate of the risk premium above yields on government bonds, consensus economic forecasts of future returns and historical returns. 130 ADDITIONAL INFORMATION FINANCIAL STATEMENTS REPORT OF THE DIRECTORS 2011 2010 FINANCIAL REVIEW OVERVIEW

  • Page 134
    ... they are active members of the scheme for whom benefits accrue on a CARE basis that is linked to RPI. BT GROUP PLC ANNUAL REPORT & FORM 20-F 2011 131 ADDITIONAL INFORMATION FINANCIAL STATEMENTS 2012 2035 2058 2081 2104 REPORT OF THE DIRECTORS FINANCIAL REVIEW BUSINESS REVIEW OVERVIEW

  • Page 135
    ... in expected return on assets Decrease (increase) in service cost £m (Decrease) increase in net finance income £m 132 ADDITIONAL INFORMATION 1.4 (0.5) (0.2) (1.0) - 15 (15) (5) (5) - - 45 (15) (55) 35 FINANCIAL STATEMENTS REPORT OF THE DIRECTORS FINANCIAL REVIEW BUSINESS REVIEW OVERVIEW

  • Page 136
    ..., which are based on market conditions at the year end, and non-financial assumptions such as life expectancy. BT GROUP PLC ANNUAL REPORT & FORM 20-F 2011 133 ADDITIONAL INFORMATION FINANCIAL STATEMENTS REPORT OF THE DIRECTORS Year ended 31 March FINANCIAL REVIEW BUSINESS REVIEW OVERVIEW

  • Page 137
    ... plan to make good the £9.0bn funding deficit over 17 years. The agreement also determined that the ordinary contributions rate required to meet the benefits of current employed members for service after the valuation date reduce to 13.6% of pensionable salaries (including employee contributions...

  • Page 138
    ... of ordinary contributions paid in 2010 before the reduced rate of regular contributions was announced in February 2010. REPORT OF THE DIRECTORS ADDITIONAL INFORMATION FINANCIAL STATEMENTS BT GROUP PLC ANNUAL REPORT & FORM 20-F 2011 135 Other protection of BTPS member benefits If the group were...

  • Page 139
    ... rate of UK corporation tax to 23% by 1 April 2014. The future annual corporation tax reductions of 1% are expected to affect the group's financial statements. The actual impact will depend on the group's deferred tax position at that time. At 31 March 2011 the group had operating losses, capital...

  • Page 140
    ... b The share premium account, representing the premium on allotment of shares, is not available for distribution. BT GROUP PLC ANNUAL REPORT & FORM 20-F 2011 137 ADDITIONAL INFORMATION FINANCIAL STATEMENTS REPORT OF THE DIRECTORS 26. Non-controlling interests FINANCIAL REVIEW BUSINESS REVIEW...

  • Page 141
    ...FINANCIAL STATEMENTS REPORT OF THE DIRECTORS a The treasury shares reserve is used to hold BT Group plc shares purchased by the group. During 2011 the company purchased nil (2010: nil, 2009: 142,608,225) of its own shares of 5p each, representing nil% (2010: nil%, 2009: 2%) of the called-up share...

  • Page 142
    ...other non-current payables of £831m (2010: £804m). c Excludes provisions of £676m (2010: £586m). BT GROUP PLC ANNUAL REPORT & FORM 20-F 2011 139 ADDITIONAL INFORMATION FINANCIAL STATEMENTS Derivatives used for hedging £m REPORT OF THE DIRECTORS FINANCIAL REVIEW BUSINESS REVIEW OVERVIEW

  • Page 143
    ... statements. REPORT OF THE DIRECTORS ADDITIONAL INFORMATION FINANCIAL STATEMENTS BUSINESS REVIEW FINANCIAL REVIEW Interest rate risk management Management policy The group has interest bearing financial assets and liabilities which may expose the group to either cash ï¬,ow or fair value volatility...

  • Page 144
    ...Treasury, Tax and Risk Management to take positions of up to £100m and for the Group Finance Director to take positions of up to £1bn. FINANCIAL STATEMENTS ADDITIONAL INFORMATION BT GROUP PLC ANNUAL REPORT & FORM 20-F 2011 141 REPORT OF THE DIRECTORS FINANCIAL REVIEW BUSINESS REVIEW OVERVIEW

  • Page 145
    ...336m) of non-current trade and other receivables which relate to non financial assets, and £774m (2010: £749m) of prepayments and other receivables. 142 ADDITIONAL INFORMATION 6,569 FINANCIAL STATEMENTS REPORT OF THE DIRECTORS FINANCIAL REVIEW BUSINESS REVIEW 2011 £m 2010 £m OVERVIEW

  • Page 146
    ...group. The Board regularly reviews the capital structure. No changes were made to these objectives and processes during 2011 and 2010. BT GROUP PLC ANNUAL REPORT & FORM 20-F 2011 143 ADDITIONAL INFORMATION FINANCIAL STATEMENTS REPORT OF THE DIRECTORS FINANCIAL REVIEW BUSINESS REVIEW OVERVIEW

  • Page 147
    ... reviewed and managed by the treasury operation within the parameters of the policies set by the Board. During 2011 and 2010 the group issued commercial paper and held cash, cash equivalents and current investments in order to manage short-term liquidity requirements. In March 2011 the group...

  • Page 148
    ...financial instruments contain break clauses whereby either the group or bank counterparty can terminate the swap on certain dates and the mark to market position is settled in cash. Price risk The group has limited exposure to price risk. BT GROUP PLC ANNUAL REPORT & FORM 20-F 2011 145 OVERVIEW

  • Page 149
    ... equity and recognised in the income statement as the income or expense is recognised on the hedged asset or liability. Forward foreign currency contracts are used to hedge anticipated and committed future currency cash ï¬,ows. Where these contracts qualify for hedge accounting they are designated...

  • Page 150
    ... Dollar receivable at 8.1% Sterling payable at 8.7% BT GROUP PLC ANNUAL REPORT & FORM 20-F 2011 147 ADDITIONAL INFORMATION FINANCIAL STATEMENTS Derivative fair valuea Asset Liability £m £m Remaining term of derivatives Weighted average % REPORT OF THE DIRECTORS At 31 March 2011 the group...

  • Page 151
    ... foreign exchange contracts were the estimated amounts, calculated using discounted cash ï¬,ow models taking into account market rates of interest and foreign exchange at the balance sheet date. 2011 £m Carrying amount 2010 £m 2011 £m Fair value 2010 £m At 31 March Financial liabilities Listed...

  • Page 152
    ... the income statement in respect of Level 3 assets held at 31 March 2011. BT GROUP PLC ANNUAL REPORT & FORM 20-F 2011 149 ADDITIONAL INFORMATION FINANCIAL STATEMENTS REPORT OF THE DIRECTORS FINANCIAL REVIEW - - 401 298 - - 401 298 BUSINESS REVIEW - - 1,594 106 - - 1,594 106 OVERVIEW

  • Page 153
    ... contracted for at the balance sheet date but not yet incurred was as follows: 2011 £m Property, plant and equipment Computer software Total 467 - 467 2010 £m 383 Future minimum operating lease payments for the group were as follows: 2011 £m Payable in the year ending 31 March: 2011 2012 2013...

  • Page 154
    ... prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and have been prepared in accordance with the requirements of the Companies Act 2006. BT GROUP PLC ANNUAL REPORT & FORM 20-F 2011 ADDITIONAL INFORMATION FINANCIAL STATEMENTS FINANCIAL REVIEW Matters on which we...

  • Page 155
    ... LLP for non-audit services to the company are not required to be disclosed as they are included within note 7 to the consolidated financial statements of BT Group plc. 152 ADDITIONAL INFORMATION FINANCIAL STATEMENTS REPORT OF THE DIRECTORS FINANCIAL REVIEW BUSINESS REVIEW OVERVIEW

  • Page 156
    ... 2011 and were signed on its behalf by Sir Michael Rake Chairman Ian Livingston Chief Executive Tony Chanmugam Group Finance Director BT GROUP PLC ANNUAL REPORT & FORM 20-F 2011 153 ADDITIONAL INFORMATION FINANCIAL STATEMENTS REPORT OF THE DIRECTORS FINANCIAL REVIEW BUSINESS REVIEW OVERVIEW

  • Page 157
    FINANCIAL STATEMENTS FINANCIAL STATEMENTS OF BT GROUP PLC BT Group plc company reconciliation of movement in equity shareholders' funds Share Share premium capitala account £m £m At 1 April 2009 Loss for the financial year Dividends paid Capital contribution in respect of share-based payment ...

  • Page 158
    ...Held through an intermediate holding company. g Incorporated in the country of operation. BT GROUP PLC ANNUAL REPORT & FORM 20-F 2011 155 ADDITIONAL INFORMATION Share capital Percentage ownedf FINANCIAL STATEMENTS REPORT OF THE DIRECTORS FINANCIAL REVIEW 100% ordinary Republic of Ireland 100...

  • Page 159
    ... DATA 160 FINANCIAL STATISTICS BUSINESS REVIEW ADDITIONAL INFORMATION FINANCIAL STATEMENTS 156 161 OPERATIONAL STATISTICS 162 INFORMATION FOR SHAREHOLDERS 174 CROSS REFERENCE TO FORM 20-F 177 GLOSSARY OF TERMS 180 INDEX REPORT OF THE DIRECTORS FINANCIAL REVIEW OVERVIEW ADDITIONAL INFORMATION

  • Page 160
    ... and taxation Quarters BT GROUP PLC ANNUAL REPORT & FORM 20-F 2011 157 ADDITIONAL INFORMATION a Adjusted results refer to the amounts before specific items as defined on page 91. FINANCIAL STATEMENTS REPORT OF THE DIRECTORS FINANCIAL REVIEW BUSINESS REVIEW 2,578 (924) 21 42 OVERVIEW

  • Page 161
    ... recognised as a deduction from shareholders' equity when they are paid. c Based on actual dividends paid and/or year end exchange rate on proposed dividends. 158 ADDITIONAL INFORMATION FINANCIAL STATEMENTS 19.1p 15.3p REPORT OF THE DIRECTORS FINANCIAL REVIEW BUSINESS REVIEW 20,076 - 20,911...

  • Page 162
    ... 58. 2010 £m 5,639 1,933 9,283 2009 £m 5,238 737 10,361 2008 £m 5,784 1,823 9,460 2007 £m 5,633 1,874 7,914 5,886 2,011 8,816 BT GROUP PLC ANNUAL REPORT & FORM 20-F 2011 159 ADDITIONAL INFORMATION FINANCIAL STATEMENTS REPORT OF THE DIRECTORS FINANCIAL REVIEW BUSINESS REVIEW OVERVIEW

  • Page 163
    ... on capital employedb - % Adjusted interest cover before net pension interestc - times Reported interest coverd - times 2011 2010 2009 2008 2007 Year ended 31 March Expenditure on research and development Research and development expense Amortisation of internally developed computer software Total...

  • Page 164
    .... DSL and LLU. Exchange lines include analogue lines and digital channels sold through BT Global Services, BT Retail and BT Wholesale. BT GROUP PLC ANNUAL REPORT & FORM 20-F 2011 161 ADDITIONAL INFORMATION FINANCIAL STATEMENTS REPORT OF THE DIRECTORS FINANCIAL REVIEW BUSINESS REVIEW OVERVIEW

  • Page 165
    ... statements include, without limitation, those concerning: revenue; EBITDA; free cash ï¬,ow; net debt; operating cost reductions; investment in and roll out of our fibre network; our broadband service and strategy; charges, interest and cash contributions to the BT Pension Scheme; enhancing our TV...

  • Page 166
    ... on the effects of the rights issue on the CGT position relating to BT shareholdings is available from the Shareholder Helpline (see page 173). BT GROUP PLC ANNUAL REPORT & FORM 20-F 2011 163 FINANCIAL STATEMENTS Background REPORT OF THE DIRECTORS FINANCIAL REVIEW BUSINESS REVIEW OVERVIEW

  • Page 167
    ...US Dollars using exchange rates prevailing on the date the ordinary dividends were paid. Per ordinary share Final Total pence pence 10.00 10.40 1.10 4.60 5.00 15.10 15.80 6.50 6.90 7.40 Per ADS Total £ 1.510 1.580 0.650 0.690 0.740 Per ADS Total US$ 2.963 2.863 0.926 1.023 -a Financial years ended...

  • Page 168
    ... Automated Clearing System (BACS). BUSINESS REVIEW ADDITIONAL INFORMATION FINANCIAL STATEMENTS 2007 2008 2009 2010 2011 Dividend investment plan Under the Dividend investment plan, cash from participants' dividends is used to buy further BT shares in the market. Shareholders could elect to receive...

  • Page 169
    ...as shareholdings and dividends. UAR provides members of the public with a search device to trace lost assets. For further information visit www.uar.co.uk or telephone 0870 241 1713. Exchange rates BT publishes its consolidated financial statements expressed in sterling. The following tables detail...

  • Page 170
    ...'s shareholders must have passed an ordinary resolution authorising the directors to make this offer. Any dividend which has not been claimed for ten years after it was declared or became due for payment will be forfeited and will belong to the company. BT GROUP PLC ANNUAL REPORT & FORM 20-F 2011...

  • Page 171
    ...or executive position in the company or any of its subsidiary undertakings, or to relations or dependants of, or people connected to, those directors or former directors, if the shareholders approve this by passing an ordinary resolution. 168 ADDITIONAL INFORMATION FINANCIAL STATEMENTS REPORT OF...

  • Page 172
    ...; FINANCIAL REVIEW ADDITIONAL INFORMATION FINANCIAL STATEMENTS REPORT OF THE DIRECTORS BUSINESS REVIEW (v) relating to any other company in which the director has an interest, directly or indirectly (including holding a position in that company) or is a shareholder, creditor, employee or...

  • Page 173
    ... be no right to any UK tax credit or to any payment from HMRC in respect of any tax credit on dividends paid on ordinary shares or ADSs. 170 REPORT OF THE DIRECTORS FINANCIAL REVIEW BUSINESS REVIEW (l) Disclosure of interests in shares Under the Financial Services and Markets Act 2000 and the...

  • Page 174
    ... information. BT GROUP PLC ANNUAL REPORT & FORM 20-F 2011 171 ADDITIONAL INFORMATION FINANCIAL STATEMENTS REPORT OF THE DIRECTORS FINANCIAL REVIEW BUSINESS REVIEW Certain US Holders (including individuals) are eligible for reduced rates of US federal income tax (currently at a maximum rate...

  • Page 175
    ....bt.com/sustainabilityreport Document Summary financial statement & Notice of Meeting Annual Report & Form 20-F Better future: our annual sustainability report EAB Annual Report Quarterly results releases Current Cost Financial Statements Statement of Business Practice (The Way We Work) Publication...

  • Page 176
    ...: [email protected] Industry analysts may contact: Tel: 020 7356 5631 e-mail: [email protected] A full list of BT contacts and an electronic feedback facility is available at www.bt.com/talk BT GROUP PLC ANNUAL REPORT & FORM 20-F 2011 REPORT OF THE DIRECTORS FINANCIAL REVIEW OVERVIEW

  • Page 177
    ...we do Information for shareholders Background Financial position and resources Acquisitions and disposals Liquidity Net capital expenditure Our business and strategy Our markets and customers Our resources Our lines of business Our corporate responsibility Consolidated financial statements Notes to...

  • Page 178
    ... Consolidated statements and other financial information 56 50 150 164 167 54 8B Significant changes BT GROUP PLC ANNUAL REPORT & FORM 20-F 2011 175 ADDITIONAL INFORMATION FINANCIAL STATEMENTS REPORT OF THE DIRECTORS FINANCIAL REVIEW 111 129 60 62 69 19 BUSINESS REVIEW OVERVIEW

  • Page 179
    ... reporting accountant Corporate Governance Financial statements Financial statements 64 89 90 91 157 176 ADDITIONAL INFORMATION FINANCIAL STATEMENTS REPORT OF THE DIRECTORS 12 Description of securities other than equity securities FINANCIAL REVIEW Not applicable Information for shareholders...

  • Page 180
    ...Investment Plan - a plan under which BT can provide free shares to employees, and employees can buy shares in BT from pre-tax salaries BT GROUP PLC ANNUAL REPORT & FORM 20-F 2011 177 ADDITIONAL INFORMATION FINANCIAL STATEMENTS REPORT OF THE DIRECTORS FINANCIAL REVIEW BUSINESS REVIEW OVERVIEW

  • Page 181
    ... to homes and businesses. Its role is to provide services to all communications providers - including other BT lines of business - on a fair, equal and open basis H HMRC: HM Revenue & Customs I IASB: International Accounting Standards Board - the board which sets International Financial Reporting...

  • Page 182
    ... networks WLR: wholesale line rental - enables communications providers to offer their own-branded telephony services over the BT network FINANCIAL REVIEW BT GROUP PLC ANNUAL REPORT & FORM 20-F 2011 179 Y REPORT OF THE DIRECTORS ADDITIONAL INFORMATION FINANCIAL STATEMENTS YouView: a joint venture...

  • Page 183
    ... BT Operate 35 BT Retail 26 - 29 BT Wholesale 12, 30 - 32 Business 4 Business and strategy 10 Business model 5 Business policies 83 E Earnings per share 2, 6, 45, 57, 118 EBITDA 2, 45, 48, 57, 105 Electronic communication 172 Equity, Group statement of changes in 102 Exchange rates 166 F Financial...

  • Page 184
    ...117 - 118, 152 Taxation (US Holders) 170 Total shareholder return 111, 165, 178 Trade and other payables 55, 96, 128 Trade and other receivables 55, 96, 124 - 125 U Unclaimed Assets Register 166 US Sarbanes-Oxley Act of 2002 85 BT GROUP PLC ANNUAL REPORT & FORM 20-F 2011 BUSINESS REVIEW OVERVIEW

  • Page 185
    ADDITIONAL INFORMATION 182 NOTES FINANCIAL STATEMENTS REPORT OF THE DIRECTORS FINANCIAL REVIEW BUSINESS REVIEW OVERVIEW

  • Page 186
    NOTES ADDITIONAL INFORMATION BT GROUP PLC ANNUAL REPORT & FORM 20-F 2011 183 FINANCIAL STATEMENTS REPORT OF THE DIRECTORS FINANCIAL REVIEW BUSINESS REVIEW OVERVIEW

  • Page 187
    ADDITIONAL INFORMATION 184 NOTES FINANCIAL STATEMENTS REPORT OF THE DIRECTORS FINANCIAL REVIEW BUSINESS REVIEW OVERVIEW

  • Page 188
    ADDITIONAL INFORMATION FINANCIAL STATEMENTS REPORT OF THE DIRECTORS FINANCIAL REVIEW BUSINESS REVIEW OVERVIEW

  • Page 189
    ... PLC Typeset by RR Donnelley Printed on Amadeus 50% Recycled Offset which is made from 50% de-inked, post consumer waste and 50% virgin fibre. PHME 61899 Please recycle ADDITIONAL INFORMATION www.bt.com FINANCIAL STATEMENTS REPORT OF THE DIRECTORS FINANCIAL REVIEW BUSINESS REVIEW OVERVIEW