BT 2016 Annual Report Download - page 93

98 BT Group plc
Annual Report 2016
Our acquisition of EE
EE being a part of the BT family is already having a big eect
on what we can oer our customers (for more about EE’s
operations, see page 76).
EE contributed revenue and EBITDA of £1,038m and £261m
respectively to the group’s results in 2015/16.
And our balance sheet reects the assets we’ve acquired.
Consideration of £11.0bn paid on acquisition was made up
of £3.5bn cash and 1,595m shares valued at £7.5bn. After
a provisional fair value exercise, we’ve allocated this between
goodwill of £6.4bn and net assets with a fair value of £4.6bn.
You can find out more about the goodwill and purchase price
allocation later in the balance sheet section, and in note 14
to the consolidated financial statements.
We’re making good progress on integrating EE into the group
and have identified further synergy opportunities. We now
expect operating cost and capital expenditure savings to reach
around £400m in the fourth full year (previously £360m)
of which we expect to realise around £100m in 2016/17.
We also expect the cost of integrating EE to be lower than
previously planned, at around £550m (previously around
£600m). The capital expenditure part of this, including around
£100m in each of 2016/17 and 2017/18, will not be
treated as a specific item and will therefore be reected in our
normalised free cash ow in these years.
The financial measures we’ve used throughout the next sections
include the impact of EE, unless we’ve specifically indicated
otherwise. But our ‘underlying’ measures by definition exclude
EE; as we’ve set out on page 240, we exclude the impact
of acquisitions, disposals and foreign exchange from these.
Income statement
Summarised income statement
Year ended 31 March 2016 2015 2014
Before specific items £m £m £m
Revenue 18,909 17,851 18,287
Operating costsa(12,329) (11,580)(12,171)
EBITDA 6,580 6,271 6,116
Depreciation and amortisation (2,630) (2,538) (2,695)
Operating prot 3,950 3,733 3,421
Net finance expense (483) (560) (591)
Associates and joint ventures 6(1) (3)
Prot before taxation 3,473 3,172 2,827
Taxation (607)(631) (613)
Prot for the year 2,866 2,541 2,214
a
Excluding depreciation and amortisation.
Revenue
Our key revenue measure of underlying revenue excluding
transit (which excludes EE), was up 2.0%, at the top
end of our outlook range of 1% to 2%. And it’s our best
growth in more than seven years.
Reported revenue, which includes specific items, was up 6%.
Adjusted revenue was also up 6% at £18,909m. EE contributed
£1,038m to adjusted revenue in the two months since we
acquired it.
We had a £127m negative impact from foreign exchange
movements, a £109m reduction in transit revenue and a £6m
negative impact from disposals. Excluding these, underlying
revenue excluding transit was up 2.0% (2014/15: down 0.4%).
BT Consumer revenue was up 7% with a 17% increase in
broadband and TV revenue and a 2% increase in calls and lines.
And the market‑wide demand for fibre broadband led to a 2%
increase in Openreach revenue. This was despite regulatory price
impacts of around £130m.
Underlying revenue excluding transit was up 1% in BT Wholesale
and down 2% in BT Global Services, whilst BT Business remained
broadly at.
You can see a full breakdown of reported revenue by major product
and service category in note 4 to the consolidated financial statements.
Operating costs
Operating costs before depreciation and amortisation
increased 6%, mainly because of EE.
Our total operating costs before depreciation and amortisation
were £12,329m, up £749m (2014/15: down £591m). Of this
£725m relates to EE with a large proportion within Other costs.
For the group Other costs were up £406m or 12%, primarily
reecting EE’s subscriber acquisition and retention costs, oset
by favourable foreign exchange movements.
Underlying operating costs excluding transit were up 2%. This year
we no longer benefited from the sale of redundant copper and our
costs were impacted by higher leaver charges (as last year most were
included within specific items), a higher pensions operating charge and
our investment in BT Sport Europe. Without these eects, underlying
operating costs excluding transit would have been down 2%.
Property & energy
Other a
Programme
rights charges
2015
POLOs
2016
£m
11,0
00
11,7
50
12,5
00
Operating costs before depreciation, amortisation and specic items
Year ended 31 March
12,329
11,580
42
72
214
421
a Includes all other movements in costs.