BT 2011 Annual Report Download - page 28

25BT GROUP PLC ANNUAL REPORT & FORM 20-F 2011
BUSINESS REVIEW OUR LINES OF BUSINESS
We have also launched a range of products and services which
help our customers reduce their environmental footprint including:
•our sustainability practice and carbon impact assessment offer
•a professional services smart grid offering in the US.
In May 2010 we announced a strategic investment plan to
strengthen our business in the Asia Pacific region. We are recruiting
up to 300 additional people in the key customer markets of
Australia, China, Hong Kong, India, Japan and Singapore, in order
to build up our sales and professional services teams, bid and
project management, and service operations teams. This will allow
BT to provide enhanced service delivery capabilities as customers
invest throughout the region. Our continued commitment to the
region and our customers was recognised through us winning the
Telecom Asia – Best Managed Services Provider award for the
second consecutive year.
During the year we made steady improvements in managing
customer service – we had fewer abandoned calls, order accuracy
improved and we reduced customer faults by 11%.
We were pleased to see our achievements recognised by external
industry commentators, for example at the World Communication
Awards where we won ‘Best Global Operator’ and in our
placements in key reports such as the March 2011 Gartner Magic
Quadrant for Pan-European Network Servicesa, and IDC
MarketScape: Asia/Pacific Next-Generation Telecom Services 2010.
Financial performance
2011 2010 2009
£m £m £m
Revenue 8,047 8,513 8,628
Net operating costs 7,454 8,056 8,367
EBITDA 593 457 261
Depreciation and amortisation 734 815 776
Operating loss (141) (358) (515)
Capital expenditure 498 599 886
Operating cash flow 119 (482) (912)
In 2011 revenue decreased by 5% (2010: 1% decrease). Excluding
the negative impact of foreign exchange movements and the
reduction in low-margin transit revenue, underlying revenue
excluding transit decreased by 4%, reflecting reduced UK calls and
lines revenue. In addition, last year included revenue of around
£100m from the early delivery of contract milesetones.
2011 2010 2009
£m £m £m
Products and services
ICT and managed networks 5,310 5,281 5,273
Calls and lines 822 956 1,055
Transit 623 782 869
Broadband and convergence 318 334 321
Other global carrier 206 229 237
Other products and services 768 931 873
Total 8,047 8,513 8,628
Revenue from networked IT services remained broadly flat (2010:
broadly flat). Excluding the impact of around £100m in the prior
year from the early delivery of contract milestones, revenue
increased by 2%.
Calls and lines revenue decreased by 14% (2010: 9% decrease)
reflecting the impact of the continuing trend of customers
migrating to alternative IP based services.
Transit revenue decreased by 20% (2010: 10% decrease) largely
due to the impact of mobile termination rate reductions in
Continental Europe and the continuing trend of lower wholesale
call volumes. Other global carrier revenue decreased by 10%
(2010: 3% decrease) due to lower volumes.
Broadband and convergence revenue decreased by 5% (2010: 4%
increase). Other revenue, principally comprising global product
revenues, decreased by 18% (2010: 7% increase) partially due to
foreign exchange movements and lower global demand.
Net operating costs decreased by 7% (2010: 4% decrease) or 6%
excluding transit. This improvement reflects further progress with
our cost efficiency initiatives during 2011 as set out on page 24.
Our progress in addressing the cost base is demonstrated by the
30% increase in EBITDA (2010: 75% increase) to £593m.
Depreciation and amortisation decreased by 10% (2010: 5%
increase) reflecting the reduction in capital expenditure over the
last two years.
The operating loss was £141m, a significant improvement
compared with losses of £358m and £515m in 2010 and 2009,
respectively.
Capital expenditure reduced by 17% (2010: 32% decrease) due to
the timing of capital expenditure across certain of our large
customer contracts, the application of more stringent investment
return criteria and improved procurement and programme delivery.
Operating cash was an inflow of £119m, a significant improvement
from an outflow of £482m in 2010 and £912m in 2009. The
improvement was achieved through higher EBITDA, improved
working capital and lower capital expenditure. We expect to
generate around £200m of operating cash flow in 2012.
aThe Magic Quadrant is copyrighted 2011 by Gartner, Inc. and is reused with permission. The
Magic Quadrant is a graphical representation of a marketplace at and for a specific time period. It
depicts Gartner’s analysis of how certain vendors measure against criteria for that marketplace,
as defined by Gartner. Gartner does not endorse any vendor, product or service depicted in the
Magic Quadrant, and does not advise technology users to select only those vendors placed in the
“Leaders” quadrant. The Magic Quadrant is intended solely as a research tool, and is not meant
to be a specific guide to action. Gartner disclaims all warranties, express or implied, with respect
to this research, including any warranties of merchantability or fitness for a particular purpose.
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