BT 2016 Annual Report Download - page 94

Overview The Strategic Report Governance Financial statements Additional information
99
Programme rights charges increased £214m to £544m, primarily
reecting our investment in BT Sport Europe. Property and energy
costs were up 7%, payments to telecommunications operators
(POLOs) were up 2% and network, operating and IT costs were
up 1%, with these again being impacted by EE. Net labour costs
were at despite leaver costs of £109m (2014/15: £8m), the
additional EE employees joining the group and a £27m increase
in the pensions operating charge.
a
Excluding depreciation, amortisation and specific items.
2015/16
operating costsa
34%
Net labour costs
18%
8
%
POLOs
31
%
Other
4
%
Property & energy
Programme
rights charges
5
%
Network & IT
You can see a detailed breakdown of our operating costs in note 5
to the consolidated financial statements.
EBITDA
Adjusted EBITDA, which is before specific items, was
£6,580m. Adjusted EBITDA for the group excluding EE’s
contribution of £261m was £6,319m, up 1% and in line
with our outlook for the year of modest growth.
Adjusted EBITDA of £6,580m was up 5%. This reects
revenue growth, the results of EE since 29 January and our
cost transformation activities and is despite the headwinds we
mentioned above (see operating costs on page 98).
Adjusted EBITDA was up in Openreach, BT Business and BT
Consumer. BT Global Services adjusted EBITDA was at, but was
up 1% excluding foreign exchange movements. Adjusted EBITDA
was down 3% in BT Wholesale reecting the higher ladder pricing
revenues recognised last year as well as continuing migration to
lower‑margin IP services.
Specic items
As we’ve explained on page 93, in this performance review
we primarily explain our results before specific items.
That’s because this is how we measure the sustainable
performance of our business.
The table below outlines items we’ve treated as specific items:
Year ended 31 March 2016 2015 2014 £m £m £m
Specic revenue
Retrospective regulatory matters (203) (128) –
Fair value adjustment to deferred
revenue on acquisition of EE 70 – –
(133) (128) –
Specic operating costs
Retrospective regulatory matters 203 75 –
EE acquisition-related costs 99 19 –
Integration costs 17 – –
Property rationalisation costs 29 45 –
Restructuring charges –315 276
Profit on disposal of property –(67) –
Profit on disposal of businesses –(6) –
Specic operating costs 348 381 276
EBITDA impact 215 253 276
Specic net nance expense 229 299 235
(Prot) loss on disposal of interest
in associates and joint ventures
–(25) 4
Tax credit (166)(121) (319)
Net specic items charge after tax 278 406 196
This year, specific items resulted in a net charge after tax of
£278m (2014/15: £406m). The impact on EBITDA was £215m
(2014/15: £253).
We recognised £203m of both transit revenue and costs with no
EBITDA impact, being the eect of ladder pricing agreements with
the UK mobile operators relating to prior years following a Supreme
Court judgment in 2014. Last year, we recognised £128m of
revenue and EBITDA in relation to this.
We recognised a fair value adjustment as part of the acquisition
of EE which reduced the amount of deferred income by £70m in
relation to its mobile subscriber base. This non‑cash item has been
charged against revenue in February and March, being the period
in which the related services were delivered.
Specific items charged to operating costs include £99m of
transaction costs we incurred to buy EE (2014/15: £19m). These
were primarily adviser fees and stamp duty. We incurred a further
£8m (2014/15: £7m) in financing costs. An additional £3m was
directly related to the shares we issued to EE’s shareholders in
January 2016 as part of the purchase consideration, so we have
recognised this amount in equity. We’ve incurred £17m of costs
this year in relation to the integration. In addition to this, £5m
of integration activity has been included in capital expenditure.