BT 2011 Annual Report Download - page 51

48
FINANCIAL REVIEW
Indirect labour costs
Indirect labour costs decreased by 13% to £629m (2010: 35%
decrease) as the group continued to reduce agency and contractor
resource and redeploy existing permanent staff to protect jobs
where possible.
Payments to telecommunications operators
Payments to telecommunications operators decreased by 8% to
£3,740m (2010: 4% decrease). The decrease in 2011 and 2010
reflects the impact of mobile termination rate reductions and lower
volumes, with the decrease in 2010 partly offset by unfavourable
foreign exchange movements.
Property and energy costs
Property and energy costs decreased by 11% to £1,149m (2010:
1% decrease) mainly reflecting efficiency savings and lower energy
prices.
Network maintenance and IT costs
Network maintenance and IT costs decreased by 10% to £706m
(2010: 5% increase). The decrease in 2011 is mainly due to vendor
savings and lower volumes as a result of lower revenue, whilst the
increase in 2010 was mainly due to higher volumes, partly offset by
vendor and efficiency savings.
Other operating costs
Other operating costs decreased by 5% to £2,786m (2010: 8%
increase). This reduction is mainly due to lower revenue related
costs as well as efficiency and vendor savings. The 2010 increase
was largely due to unfavourable foreign exchange movements and
the impact of acquisitions.
General and administrative costs
General and administrative costs decreased by 3% to £1,384m
(2010: 4% decrease). The decrease in 2011 and 2010 reflects tight
control of discretionary expenditure, lower consultancy costs, bad
debts and foreign exchange.
Depreciation and amortisation
Depreciation and amortisation decreased by 2% to £2,979m
(2010: 5% increase), reflecting lower levels of capital expenditure
over the last two years, partly offset by increased expenditure on
shorter lived assets.
Adjusted EBITDA
In 2011 adjusted EBITDA was £5,886m, an increase of 4% (2010:
8%). The increase in 2011 and 2010 reflects the benefits of the
group-wide cost transformation activities and the improvement in
the performance of BT Global Services.
Adjusted EBITDA for the last five financial years is included in
Selected financial data on page 159.
Adjusted EBITDA
£m
2009 2010 2011
5,238
5,886
5,639
4,800
5,000
5,200
5,400
5,600
5,800
6,000
£5,886m 4%
Operating costs
Operating costs before specific items are shown below:
2011 2010 2009
Year ended 31 March £m £m £m
Staff costs
Wages and salaries 3,947 4,182 4,499
Social security costs 456 447 432
Pension costs 416 304 544
Share-based payments 68 71 141
Total staff costs 4,887 5,004 5,616
Own work capitalised (718) (575) (673)
Net staff costs 4,169 4,429 4,943
Indirect labour costs 629 722 1,114
Net labour costs 4,798 5,151 6,057
Payments to telecommunications
operators 3,740 4,083 4,266
Property and energy costs 1,149 1,284 1,292
Network maintenance and IT costs 706 781 742
Other operating costs 2,786 2,927 2,710
General and administrative costs 1,384 1,424 1,478
Operating costs before
depreciation and amortisation 14,563 15,650 16,545
Depreciation 2,288 2,304 2,249
Amortisation 691 735 641
Operating costs 17,542 18,689 19,435
Staff costs
Wages and salaries decreased by 6% to £3,947m (2010: 7%
decrease), largely due to the impact of labour resource reductions
and efficiencies and lower leaver costs, partly offset by pay
inflation and increased overtime. Leaver costs, included within
wages and salaries, were £57m (2010: £142m, 2009: £204m).
The pension charge for 2011 was £416m, compared with £304m in
2010 and £544m in 2009. The increase in the pension cost in 2011
reflects the lower discount rate and higher inflation assumptions at
the start of the year. The decrease in the pension cost in 2010
reflects the impact of the changes to benefit accruals in BTPS with
effect from 1 April 2009, partly offset by an increase in social security
costs as BTPS ceased to contract out of the State Second Pension.
Share-based payment costs remained broadly flat at £68m (2010:
£71m) in 2011. In 2010 share-based payment costs decreased by
50% reflecting the significant forfeiture cost associated with the
high number of the Sharesave cancellations which took place in
2009.
2009 Other
operating
costs
Other
b
2010 POLOs Other
operating
costs
Other
b
POLOs 2011
Revenue related
Revenue related
15,650 343
141 603
14,563
16,545 183 217 929
£1,087m reduction
£895m reduction
a Operating cost reductions exclude specific items and depreciation and amortisation.
b Includes net labour costs, property and energy costs, network maintenance and IT costs and
general and administrative costs.
12,000
12,800
13,600
14,400
15,200
16,000
16,800
Operating costa reductions
£m £1,087m 7%
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