BT 2011 Annual Report Download - page 49

46
FINANCIAL REVIEW
FINANCIAL PERFORMANCE
Summarised income statement
Year ended 31 March 2011
Before
specific items Specific items Total
£m £m £m
Revenue 20,076 – 20,076
Other operating income 373 – 373
Operating costs excluding depreciation and amortisation (14,563) (329) (14,892)
EBITDA 5,886 (329) 5,557
Depreciation and amortisation (2,979) – (2,979)
Operating profit 2,907 (329) 2,578
Net finance expense (845) (79) (924)
Share of post tax profits of associates and joint ventures 21 – 21
Profit (loss) on disposal of interest in associate – 42 42
Profit (loss) before taxation 2,083 (366) 1,717
Taxation (expense) credit (452) 239 (213)
Profit (loss) for the year 1,631 (127) 1,504
Group results
In this Financial review we discuss the financial results of the group
for 2011, 2010 and 2009. We explain financial performance using
a variety of measures. In particular, in this Financial review, we
principally discuss the group’s results on an ‘adjusted’ basis being
before specific items. The rationale for using adjusted measures is
explained on page 56. A definition of specific items is set out on
page 56. Specific items for 2011, 2010 and 2009 are disclosed in
note 8 to the consolidated financial statements and summarised on
pages 56 to 57 of this Financial review. In 2011 net interest on
pensions has been included in specific items because of its volatile
nature, and also the BT Global Services contract and financial
review charges in 2009 by virtue of their size and nature.
Accordingly, specific items for comparative periods have been re-
presented to reflect this reclassification.
We also explain financial performance using measures that are not
defined under IFRS and are therefore termed non-GAAP measures.
The non-GAAP measures we use in this Financial review are
adjusted and reported EBITDA, adjusted and reported free cash
flow and net debt. Each of these measures is discussed in more
detail on pages 56 to 58.
In this Financial review, references to ‘2011’, ‘2010’ and ‘2009’
are to the financial years ended 31 March 2011, 2010 and 2009,
respectively. References to ‘the year’ and ‘the current year’ are to
the year ended 31 March 2011.
Outlook
We are focusing on long-term profitable revenue growth.
Underlying revenue excludes the impact of foreign exchange
movements, acquisitions and disposals and specific items. As transit
traffic is low-margin and significantly impacted by regulatory
reductions in mobile termination rates, with no impact on the
group’s profitability, we have excluded transit from our key measure
of the underlying revenue performance of the group. Transit
revenue declined by £214m in 2011, and we expect it to decline by
around a further £400m in 2012 and £200m in 2013, largely due to
mobile termination rate reductions. Underlying revenue, excluding
transit was down 3% in 2011 and we expect it to be in the range
down 2% to flat in 2012 and to grow by up to 2% in 2013.
Adjusted EBITDA is expected to show further growth in 2012 and
to be above £6.0bn in 2013. We expect adjusted free cash flow to
be above the 2011 level in 2012 and 2013, with BT Global Services
generating operating cash flow of around £200m in 2012.
Revenue
In 2011 revenue decreased by 4% (2010: 2% decrease). Excluding
the negative impact of foreign exchange movements and the
reduction in low-margin transit revenue, underlying revenue
excluding transit was down 3%.
Products and services revenue
Our products and services include telecommunications services
provided in the UK and also a wide range of products and services
provided globally. These are designed to meet the demand for IT
infrastructure and solutions and satisfy the expansion of broadband.
Revenue movement
£m
2010 Transit
revenue
reduction
Underlying
revenue
decrease
Foreign
exchange
2011
44
214
577
20,076
328
20,911
3%
19,400
19,600
19,800
20, 000
20,200
20,400
20,600
20,800
21,000
21,200
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