BT, the UK's largest fixed-line network operator, reported profits of £1bn on sales down 2% at £20.9bn for the year ended 30 March 2010.
CEO Ian Livingston said the result was ahead of expectations and was largely due to the early delivery of about £100m of revenue form its outsourcing arm, BT Global Services, without which revenue was down 3%. But for favourable currency movements, sales would have been down 4%, he said.
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Cost-cutting reduced operating costs and capital expenditure was reduced by £1.8bn, a reduction of 9%, more than the expected £1.5bn.
Total labour costs decreased by 16%, reflecting a loss of 20,000 jobs, mainly from agency workers and third parties. However, the pension gap widened from £2.9bn to £5.7bn net of tax.
Capital expenditure was down by £555m to £2.5bn, despite big investments in fibre and other programmes.
Depreciation and amortisation increased by 5% to £3bn as a result of higher value equipment and shorter-lived software, Ethernet and ADSL2+ assets being brought into use during the year.
Livingston said the costs of restructuring Global Services would be higher than expected. The restructure cost £310m this year and would cost a further £175m, he said, bring the total to £485m, rather than the original estimate of £420m.
The job cull has left BT holding leases to redundant properties that cost it £121m last year. A property rationalisation programme now under way is expected to cost a further £180m.
Other key elements influencing the company's finances included:
- An Ofcom decision in relation to 2Mbps partial private circuits in October 2009 cost BT £52m
- BT paid £230m to settle outstanding tax matters with HMRC
- Free cash-flow rose to £1.9bn against £737m last year, reflecting better profitability and working capital and lower capital expenditure
- Net cash inflow from operations was £4.8bn (FY 2008-09: £4.7bn)
- Net cash outflow for the purchase of property, plant and equipment, and software was £2.5bn (FY 2008-09: £3bn)
- Net debt was down £1.1bn to £9.3bn.
- Reported earnings per share were 13.3p, against a loss of 2.5p the previous year
- The proposed final dividend of 4.6p gives a full-year dividend of 6.9p, an increase of 6% compared with the estimated 5%.
Turning to the future, Livingston said BT had five priorities:
- Driving broadband-based consumer services
- Being the "brand for business" for UK small and medium enterprises
- Developing Global Services as a global leader in networked IT services
- Being the wholesaler of choice
- Being the best network provider in the UK.
He said BT would spend an extra £200m mainly to enhance BT Vision, its TV offering. It would also introduce new consumer products, install more fibre and expand Global Services in the Asia Pacific region.
"We are also announcing that, if investment conditions are favourable, we see the potential to extend our current fibre roll-out to around two-thirds of UK premises by 2015 for an incremental cost of around £1bn, while maintaining our annual capital expenditure levels at around £2.6bn," he said.
Livingston also said BT had bought a 2.6% share, worth £500,000 in OnLive, a Silicon Valley-based cloud gaming business. OnLive will provide online video games in the UK, giving BT access to a market that was worth more than £3bn last year.
Livingston expected 2010-11 to show flat revenues at about £20bn, operating cost savings of around £900m, leaving earnings before interest, tax, depreciation and amortisation at around £1.3bn.
|Year to 31 March 2010|
|External revenue||Internal revenue||Group revenue||EBITDA||Group profit|
|BT Global Services||8513||8513||457||-358|