SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
09 November, 2006
BT Group plc
(Translation of registrant's name into English)
BT Centre
81 Newgate Street
London
EC1A 7AJ
England
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual
reports under cover Form 20-F or Form 40-F.
Form 20-F..X... Form 40-F.....
Indicate by check mark whether the registrant by furnishing the
information contained in this Form is also thereby furnishing the
information to the Commission pursuant to Rule 12g3-2(b) under the
Securities Exchange Act of 1934.
Yes ..... No ..X..
If "Yes" is marked, indicate below the file number assigned to the
registrant in connection with Rule 12g3-2(b): 82- ________
Enclosures: 1. Interim Results announcement made on 09 November, 2006
November 9, 2006
SECOND QUARTER AND HALF YEAR RESULTS TO SEPTEMBER 30, 2006
SECOND QUARTER HIGHLIGHTS
- Revenue of GBP4,941 million, up 4 per cent
- New wave revenue of GBP1,736 million, up 21 per cent, representing 35 per
cent of total revenue compared with 30 per cent last year
- EBITDA before specific items(1) and leaver costs of GBP1,418 million, up
2 per cent
- Profit before taxation, specific items(1) and leaver costs of GBP665 million,
up 12 per cent
- Earnings per share before specific items(1) and leaver costs of 6.0 pence, up
13 per cent
- Continued strong broadband net additions(2) of 626,000 of which BT Retail's
share was 25 per cent
HALF YEAR HIGHLIGHTS
- Revenue of GBP9,805 million, up 3 per cent
- New wave revenue of GBP3,377 million, up 20 per cent
- EBITDA before specific items(1) of GBP2,747 million, up 2 per cent
- Profit before taxation and specific items(1) of GBP1,247 million, up
17 per cent
- Earnings per share before specific items(1) of 11.3 pence, up 19 per cent
- Interim dividend of 5.1 pence per share, up 19 per cent
- Broadband end users(2) of 9.3 million at September 30, 2006 of which BT
Retail now has 3 million customers
The income statement, cash flow statement and balance sheet from which this
information is extracted are set out on pages 16 to 22.
(1) Before specific items which are material one off or unusual items as
defined in note 4 on page 26.
(2) DSL and LLU connections.
Chairman's statement
Sir Christopher Bland, Chairman, commenting on the half year results said:
"These strong half year results show sustained momentum across the business with
revenues up 3 per cent and earnings per share before specific items up 19 per
cent.
"I am pleased to report that we will be paying an interim dividend of 5.1 pence,
up 19 per cent on last year, showing our continued commitment to improving
shareholder returns and our confidence for the future."
Chief Executive's statement
Ben Verwaayen, Chief Executive, commenting on the second quarter results, said:
"These second quarter results show another strong team performance with every
part of the business playing its part. We have announced today that BT Retail
has passed 3 million broadband connections in a fast growing market. We have now
reached 1 million LLU connections. 21CN is going live in the Cardiff area this
month. The business continues to win major transformational contracts, including
PepsiCo and Vodafone.
"Revenue has increased for eleven consecutive quarters and earnings per share(1)
were up 13 per cent, the eighteenth consecutive quarter of growth. EBITDA(1)
continues to grow and was up 2.4 per cent.
"These results underpin our confidence in our ability to grow our revenue,
EBITDA, earnings per share and dividends this year."
(1)Before specific items and leaver costs.
RESULTS FOR THE SECOND QUARTER AND HALF YEAR
TO SEPTEMBER 30, 2006
Second quarter Half year
___________________________ ___________________________
Better Better
2006 2005 (worse) 2006 2005 (worse)
GBPm GBPm % GBPm GBPm %
Revenue 4,941 4,767 4 9,805 9,498 3
EBITDA
- before specific
items and leaver
costs 1,418 1,385 2 2,804 2,748 2
- before specific
items 1,385 1,348 3 2,747 2,705 2
Profit before
taxation
- before specific
items and leaver
costs 665 596 12 1,304 1,113 17
- before specific
items 632 559 13 1,247 1,070 17
- after specific
items 629 489 29 1,244 988 26
Earnings per share
- before specific
items and leaver
costs 6.0p 5.3p 13 11.8p 9.8p 20
- before specific
items 5.7p 5.0p 14 11.3p 9.5p 19
- after specific
items 5.7p 4.4p 30 11.3p 8.8p 28
Capital expenditure 812 694 (17) 1,527 1,410 (8)
Free cash flow 338 503 (33) 321 377 (15)
Interim dividend 5.1p 4.3p 19
Net debt 8,079 8,133 1
The commentary focuses on the results before specific items and leaver costs.
This is consistent with the way that financial performance is measured by
management and we believe allows a meaningful analysis to be made of the trading
results of the group. Specific items are defined in note 4 on page 26.
The income statement, cash flow statement and balance sheet are provided on
pages 16 to 22. A reconciliation of EBITDA before specific items to group
operating profit is provided on page 31. A definition and reconciliation of free
cash flow and net debt are provided on pages 28 to 30.
GROUP RESULTS
Revenue was 4 per cent higher at GBP4,941 million in the quarter with continued
strong growth in new wave revenue more than offsetting the decline in
traditional revenue. EBITDA before specific items and leaver costs grew by 2.4
per cent. This is the third quarter of growth and builds on the 1.7 per cent
growth reported last quarter. Earnings per share before specific items and
leaver costs increased by 13 per cent to 6.0 pence, the eighteenth consecutive
quarter of year on year growth.
The strong growth in new wave revenue continued and at GBP1,736 million was 21
per cent higher than last year. New wave revenue accounted for 35 per cent of
the group's revenue compared to 30 per cent in the second quarter of last year.
New wave revenue is mainly generated from networked IT services, broadband and
mobility. Networked IT services revenue grew by 10 per cent to GBP1,001 million,
broadband revenue increased by 39 per cent to GBP486 million and mobility
revenue increased by 4 per cent to GBP72 million.
Networked IT services contract wins were GBP0.7 billion in the second quarter,
with GBP4.0 billion achieved over the last twelve months.
BT had 9.3 million wholesale broadband connections at September 30, 2006,
including 838,000 local loop unbundled lines, an increase of 2.8 million
connections year on year and 626,000 connections in the quarter. Over 46 per
cent of all UK homes now subscribe to broadband services, comprising both DSL
and cable services (Source: Informa, Telecoms Market, September 2006).
Revenue
Revenue from the group's traditional businesses declined by 4 per cent
continuing recent trends. This reflects regulatory intervention, competition,
price reductions and also technological changes that we are using to drive
customers from traditional services to new wave services.
Major corporate (UK and international) revenue showed growth of 5 per cent, with
11 per cent growth in new wave revenue more than offsetting the decline in
traditional services. Migration from traditional voice only services to
networked IT services continued with new wave revenue representing 60 per cent
of all major corporate revenue.
Revenue from smaller and medium sized (SME) UK businesses grew by 2 per cent
year on year. New wave revenue grew by 23 per cent driven by continued growth in
broadband and other new wave services. In the declining UK calls market, BT has
gained market share in the SME sector through innovative pricing plans and a
focus on propositions that bring together IT, broadband and communications to
allow business people to concentrate on running their business.
Consumer revenue in the second quarter was 6 per cent lower, primarily due to
wholesale line rental (WLR) substitution. Growth in new wave revenue of 44 per
cent continues to reduce our dependence on traditional revenue which has
declined by 12 per cent with the strategic shift towards new wave products and
services. New wave revenue now represents 17 per cent of the total consumer
revenue.
The 12 month rolling average revenue per consumer household (net of mobile
termination charges) of GBP254 increased by GBP1 compared to last quarter, the
third successive quarter of growth. Improvements in the proportion of customers
upgrading from the basic broadband package and more new customers subscribing
for higher value packages has more than offset the lower call revenues. BT Total
Broadband reflects our strategy to drive value into the broadband market and we
reached 3 million BT Retail broadband connections in October. Contracted
revenues increased by 1 percentage point to 69 per cent compared to last
quarter, 3 percentage points higher than last year.
Wholesale (UK and Global Carrier) revenue increased by 14 per cent driven by WLR
and LLU. UK Wholesale new wave revenue increased by 41 per cent to GBP339
million, mainly driven by broadband.
Operating results
Group operating costs before specific items increased by 4 per cent year on year
to GBP4,311 million. Staff costs before leaver costs increased by GBP64 million
to GBP1,274 million due mainly to the additional staff needed to support
networked IT services contracts, increased levels of activity in the network and
21CN activities (including capital work) as well as cost inflation. Leaver costs
were GBP33 million in the quarter (GBP37 million last year). Payments to other
telecommunication operators increased by GBP45 million to GBP1,034 million.
Other operating costs before specific items of GBP1,442 million increased by
GBP47 million mainly due to increased costs of sales from growth in networked IT
and other new wave services which were partly offset by cost savings from our
efficiency programmes. Depreciation and amortisation increased by 2 per cent
year on year to GBP703 million.
Group operating profit before specific items and leaver costs increased by 3 per
cent to GBP715 million. Operating profit margin before specific items remained
flat year on year at 14 per cent.
Earnings
Net finance costs were GBP55 million, an improvement of GBP45 million against
last year. This includes net finance income associated with the group's defined
benefit pension scheme which was GBP105 million in the second quarter, GBP41
million higher than last year. Repayment of maturing debt last year, fair value
movements on derivatives that are economic hedges but are not fully effective
hedges under the IAS 39 definitions and lower average net debt have also
contributed to the reduction in net finance costs. This reduction was offset by
a GBP31 million net gain last year on the early redemption of the US dollar 2008
LG Telecom convertible bond.
Profit before taxation, specific items and leaver costs of GBP665 million
increased by 12 per cent.
The effective tax rate on the profit before specific items was 24.5 per cent
(24.9 per cent last year) reflecting the continued focus on tax efficiency
within the group.
Earnings per share before specific items and leaver costs increased by
13 per cent to 6.0 pence.
Specific items
Specific items are defined in note 4 on page 26. There was a net charge before
taxation of GBP3 million in the quarter (GBP70 million charge last year). Costs
of GBP23 million relating to the further rationalisation of the group's office
portfolio were incurred in the quarter (GBPnil last year). This was partly
offset by a profit of GBP20 million arising from the group's disposal of 6 per
cent of its equity interest in Tech Mahindra Limited, an associated undertaking,
reducing the group's holding to 36 per cent. In the prior year, a provision of
GBP70 million was recognised relating to the incremental and directly
attributable costs in connection with creating the Openreach line of business.
Earnings per share after specific items were 5.7 pence in the quarter (4.4 pence
last year).
Cash flow and net debt
Net cash inflows from operating activities in the second quarter amounted to
GBP1,191 million compared to GBP1,263 million last year, largely due to higher
working capital outflows.
Free cash flow was a net inflow of GBP338 million in the second quarter compared
to GBP503 million last year mainly reflecting the higher working capital
outflows and increased capital expenditure. The year on year deterioration
reflects the timing of receipts and payments and is expected to reverse in the
second half of the year. The share buyback programme continued with the
repurchase of 48 million shares for GBP102 million during the quarter. Net debt
was GBP8,079 million at September 30, 2006, GBP54 million below the level at
September 30, 2005. Free cash flow and net debt are defined and reconciled in
notes 8 and 9 on pages 28 to 30.
Pensions
The IAS 19 net pension obligation at September 30, 2006 was a deficit of GBP2.0
billion, net of tax, being GBP0.6 billion lower than the level at September 30,
2005. The BT Pension Scheme had assets of GBP35.9 billion at September 30, 2006.
The triennial funding valuation as at December 31, 2005 is currently being
performed and we expect this exercise to conclude by December 31, 2006.
21st Century Network
BT's 21st Century Network programme made significant progress during the
quarter. The construction of 10 per cent of the UK's core communications
infrastructure is in place and fully operational. Site planning and preparation
has been completed in all core and metro nodes in South Wales, and at a further
100 sites across the country. Nine new fibre rings, totalling 2,100 kilometres,
have been installed in South Wales and 1,500 man years of IT systems development
work has been carried out. All of this preparatory work is required to support
the migration of the first end user customers to 21CN. This is scheduled to take
place near Cardiff at the end of November.
Readiness testing of the network, systems, services and customer premises
equipment (CPE) is well advanced. A test facility in Swansea, where other
communications providers can test their services, was opened on October 25,
2006. Live voice calls have already been carried over the new 21CN network,
built using 21CN hardware and software, in South Wales.
BT and representatives from across industry have agreed a single end user
communications programme to help consumers and single site small and medium
enterprises understand better what next generation networks are and to provide a
single source of detail and further information. The programme, which launched
in October, operates under a single independent brand - "Switched-On".
Shareholder distributions
An interim dividend of 5.1 pence per share, an increase of 19 per cent on last
year, will be paid on February 12, 2007 to shareholders on the register on
December 29, 2006. The ex dividend date is December 27, 2006. During the first
half year 69 million shares were repurchased for GBP167 million under the
group's share buyback programme.
Prospects
Our performance underpins our confidence that we will continue to grow revenue,
EBITDA, earnings per share and dividends this financial year. Revenue growth
will continue to be fuelled by new wave services; the EBITDA improvement will be
driven by the continued growth in BT Retail's profitability and an acceleration
through the year of the EBITDA growth in BT Global Services.
We are confident in our ability to improve shareholder returns and accelerate
the strategic transformation of the business.
_____________________________________________________________________________
The half year report, which contains the independent review report of the
auditors, will be published in The Times on November 10, 2006.
The third quarter results are expected to be announced on February 8, 2007.
LINE OF BUSINESS RESULTS
Openreach, a new line of business created in accordance with the regulatory
framework agreed with Ofcom (the Undertakings), was launched on January 21,
2006. It is responsible for ensuring that all communications providers have
transparent and equivalent access to the BT local network, and comprises a work
force of approximately 30,000 people. Its primary products are wholesale line
rental (WLR) and local loop unbundling (LLU).
In order to assist readers in understanding the year on year performance, we
have restated the comparative line of business results. These restatements also
reflect the impact of the new internal trading arrangements that have been
implemented due to the creation of Openreach. There is no change to the overall
group reported results.
BT Global Services
Half year
Second quarter ended September 30 ended September 30
2006 2005* Better (worse) 2006 2005*
GBPm GBPm GBPm % GBPm GBPm
Revenue 2,157 2,102 55 3 4,312 4,169
Gross profit 638 612 26 4 1,266 1,224
SG&A before leaver
costs 409 392 (17) (4) 809 783
_____ _____ _____ _____
EBITDA before leaver
costs 229 220 9 4 457 441
Leaver costs 5 22 17 77 22 24
_____ _____ _____ _____
EBITDA 224 198 26 13 435 417
Depreciation and
amortisation 157 158 1 1 305 310
_____ _____ _____ _____
Operating profit 67 40 27 68 130 107
===== ===== ===== =====
Capital expenditure 176 171 (5) (3) 325 313
===== ===== ===== =====
*Restated to reflect changes in intra-group trading arrangements.
BT Global Services revenue grew in the second quarter by 3 per cent to GBP2,157
million. New wave and non UK revenue was GBP1,661 million, an increase of 6 per
cent year on year. UK traditional revenues decreased 8 per cent year on year,
with continuing falls experienced in voice related and dial IP revenues. MPLS
revenue rose by 33 per cent to GBP134 million, with the growth split evenly
between the UK and overseas. Our IP network infrastructure currently extends to
128 countries.
Order intake remained firm with networked IT services contract orders of GBP0.7
billion, which included a 7 year agreement with PepsiCo to provide and manage an
integrated portfolio of services for their international division. Total orders
in the quarter amounted to GBP1.6 billion, GBP0.1 billion higher than last year,
taking the value of total orders achieved over the last twelve months to GBP8.1
billion. Over 40 per cent of the total order intake was generated outside the
UK. During the quarter 223 new customers were signed, bringing the total for the
year to 453.
EBITDA before leaver costs increased year on year by GBP9 million to GBP229
million, growth of 4 per cent year on year. Gross profit improved by GBP26
million to GBP638 million, an increase of 4 per cent, while gross profit margin
improved by 0.5 percentage points to 30 per cent. SG&A costs rose 4 per cent
reflecting pay inflation, increased IP networking costs and also transformation
costs incurred in creating a single global services organisation. Depreciation
charges fell by GBP1 million compared with the previous year to GBP157 million
while leaver costs were GBP17 million lower at GBP5 million. Overall, this
contributed to operating profit of GBP67 million, 68 per cent higher than last
year.
BT continues to make good progress on its NHS National Programme for Information
Technology contracts. For N3, the broadband network that underpins the
programme, we have installed more than 15,500 connections and are on schedule to
complete the 18,000 rollout by March 2007. BT now has more than 287,000
registered users on Spine, one of the world's largest transactional database and
messaging services. In London, where we are the Local Service Provider, BT has
delivered capability to 40 per cent of trusts.
BT Retail
Half year
Second quarter ended September 30 ended September 30
2006 2005* Better (worse) 2006 2005*
GBPm GBPm GBPm % GBPm GBPm
______________________________________ ___________________
Revenue 2,077 2,136 (59) (3) 4,145 4,256
_____ _____ _____ _____
Gross profit 592 555 37 7 1,152 1,091
SG&A before leaver
costs 357 364 7 2 735 742
_____ _____ _____ _____
EBITDA before leaver
costs 235 191 44 23 417 349
Leaver costs 7 2 (5) n/m 9 5
_____ _____ _____ _____
EBITDA 228 189 39 21 408 344
Depreciation and
amortisation 39 39 - - 79 73
_____ _____ _____ _____
Operating profit 189 150 39 26 329 271
===== ===== ===== =====
Capital expenditure 40 33 (7) (21) 80 68
===== ===== ===== =====
*Restated to reflect changes in intra-group trading arrangements.
BT Retail's EBITDA before leaver costs was 23 per cent higher than last year,
continuing our recent trend of growth. Gross profit increased by 7 percentage
points reflecting the improved consumer broadband margins, the impact of cost
efficiency programmes, lower input costs and an improved product mix. This more
than compensated for the 3 per cent decline in revenues. SG&A costs before
leaver costs fell by 2 per cent driven by the increased effectiveness in serving
our customers. Operating profit improved by 26 per cent to GBP189 million.
Traditional revenue declined by 9 per cent whilst new wave revenue grew by 34
per cent, driven primarily by broadband and other new wave services. New wave
revenue was 21 per cent of total revenue in the quarter, up from 15 per cent
last year.
During the quarter, following the relaxation of the regulatory environment, we
introduced the biggest ever cuts to our inclusive call packages, maximising
value to our customers. In the consumer market, BT Together Options 2 and 3 have
reduced prices by almost one third and we have seen a significant increase in
the proportion of customers moving up to higher value packages.
In the SME market, BT Business Plan is now available with mobile and BT
Assurance Plus bringing SMEs a high level of care, attention and quick response
and includes calls answered 24/7, access to a qualified team of experts and
immediate diagnosis of faults at no extra cost. In line with our strategy to
simplify the customer experience and eliminate the hassle for SMEs, in October
we launched Business Manager and Business One Plan. With Business Manager, an
SME can choose from a range of options to get the level of service that suits
their business and Business One Plan combines landline, mobile and broadband
services into one package, giving customers a wide range of benefits by
delivering cost and time savings.
Broadband revenue grew by 28 per cent to GBP229 million with BT Retail
connections at September 30, 2006 growing to 2,980,000 an increase of 5 per cent
in the quarter, and in October we exceeded 3 million connections. BT Retail's
share of broadband net additions (DSL and LLU) was 25 per cent in the quarter
and BT Retail's share of the installed base was 32 per cent at September 30,
2006.
BT Total Broadband, launched towards the end of the first quarter, reflects our
strategy to drive value into the Broadband market. The proportion of customers
opting for higher value Options 2 and 3 packages increased by 29 per cent in the
quarter and almost 60 per cent of orders are for these higher value packages.
These customers benefit from increased security, wireless hubs and inclusive IP
calls. The BT Home Hub brings together the BT Total Broadband experience and at
September 30, 2006 over 250,000 Hubs had been installed, providing the platform
for a range of new services.
Our strategy of adding value in the broadband arena continues with the
announcement made in September of our partnership with US media entrepreneurs
Podshow to launch BT Podshow. This enables UK internet users and independent
media producers to create and share their content with an audience of millions
in the UK and around the world.
In October we launched BT Digital Vault, an innovative new online storage
service which enables BT Total Broadband customers to securely store online,
back-up, share and remotely access their digital content such as photos, music
and video via broadband.
Enjoying the broadband revolution is now easier than ever with the launch in
August of the competitively priced BT Home IT Visit and BT Total Broadband
installation services. Specially trained engineers can set up customers'
broadband, a wireless home network or help resolve IT problems including PC
viruses. This follows the pilot in March of BT Home IT Advisor, offering remote
helpdesk support for a range of home IT issues, which was being purchased by one
in ten new broadband customers, via our call centres, at the end of the quarter.
The advanced VoIP service with high-definition sound is reflected in the
increased net additions and installed base. At the end of the quarter the
installed base was about 400,000 customers reflecting strong growth of Broadband
Talk customers.
BT Vision remains on track for launch this autumn. This service will offer a
compelling line-up of entertainment programming as well as interactive services,
all available on-demand and with no compulsory subscription. To date a wide
range of content deals have been announced with partners including NBC
Universal, Paramount, Dream Works, BBC Worldwide, MTV, History Channel,
Nickelodeon, Sony BMG and many others.
BT Wholesale
Half year
Second quarter ended September 30 ended September 30
2006 2005* Better (worse) 2006 2005*
GBPm GBPm GBPm % GBPm GBPm
______________________________________ ___________________
External revenue 1,030 964 66 7 2,027 1,932
Internal revenue 855 849 6 1 1,705 1,695
_____ _____ _____ _____
Revenue 1,885 1,813 72 4 3,732 3,627
Variable cost of
sales 963 901 (62) (7) 1,883 1,832
_____ _____ _____ _____
Gross variable
profit 922 912 10 1 1,849 1,795
Network and SG&A
before leaver costs 438 442 4 1 887 857
_____ _____ _____ _____
EBITDA before leaver
costs 484 470 14 3 962 938
Leaver costs 15 6 (9) n/m 16 6
_____ _____ _____ _____
EBITDA 469 464 5 1 946 932
Depreciation and
amortisation 291 274 (17) (6) 576 545
_____ _____ _____ _____
Operating profit 178 190 (12) (6) 370 387
===== ===== ===== =====
Capital expenditure 266 198 (68) (34) 466 428
===== ===== ===== =====
*Restated to reflect changes in intra-group trading arrangements.
BT Wholesale external revenue in the second quarter of GBP1,030 million
increased by 7 per cent reflecting strong growth in broadband, transit and other
traditional revenue. External revenue from new wave services increased to GBP268
million and now accounts for 26 per cent of external revenue.
Internal revenue increased marginally to GBP855 million due to strong growth in
internal broadband revenue more than offsetting the impact of lower call volumes
and lower regulatory prices being reflected in internal charges.
Gross variable profit increased GBP10 million although gross variable profit
margin decreased by 1 percentage point to 49 per cent due to a changing sales
mix. Despite greater 21CN expenditure, network and SG&A costs have decreased as
a result of savings through network efficiencies. These efficiencies have
yielded headcount reductions of over 1,100 employees since the prior year and
these reductions are partly reflected in leaver costs of GBP15 million in the
quarter.
Overall, EBITDA before leaver costs has increased 3 per cent to GBP484 million.
Higher depreciation due to the shortening of the useful economic lives of legacy
transmission assets to be replaced by 21CN and higher leaver costs has resulted
in a 6 per cent decline in operating profit.
Capital expenditure in the quarter was 34 per cent higher than last year due to
increased investment in 21CN whilst BT Wholesale has been successful in managing
its legacy infrastructure on a lower level of capital investment.
In September, Vodafone UK announced it had signed Heads of Terms with BT
Wholesale to provide its UK customers with Vodafone branded, consumer fixed-line
broadband services. BT Wholesale and Vodafone UK have been making excellent
progress and details of the service will be announced shortly.
In September, BT Wholesale also launched the UK's first broadcast mobile TV
service, BT Movio, with Virgin Mobile as the initial customer. BT Movio's
service line-up includes live versions of TV channels from the BBC, ITV and
Channel 4, as well as all the UK's DAB Digital Radio stations, a 7 day programme
guide and 'red button' interactivity. BT Movio also announced an agreement with
ZTE, a leading global provider of telecommunications equipment and network
solutions, to develop the world's first 3G mobile handset compatible with the BT
Movio service. When available, the new handset will enable 3G operators to offer
the Movio service.
Openreach
Half year
Second quarter ended September 30 ended September 30
2006 2005* Better (worse) 2006 2005*
GBPm GBPm GBPm % GBPm GBPm
______________________________________ ___________________
External revenue 162 60 102 170 292 113
Revenue from other
BT lines
of business 1,117 1,211 (94) (8) 2,246 2,452
_____ _____ _____ _____
Revenue 1,279 1,271 8 1 2,538 2,565
Operating costs
before leaver costs 819 789 (30) (4) 1,606 1,576
_____ _____ _____ _____
EBITDA before leaver
costs 460 482 (22) (5) 932 989
Leaver costs - - - - 2 -
_____ _____ _____ _____
EBITDA 460 482 (22) (5) 930 989
Depreciation and
amortisation 178 188 10 5 353 374
_____ _____ _____ _____
Operating profit 282 294 (12) (4) 577 615
===== ===== ===== =====
Capital expenditure 279 246 (33) (13) 550 503
===== ===== ===== =====
*Restated to reflect changes in intra-group trading arrangements.
Openreach's revenue in the second quarter was GBP1,279 million, a 1 per cent
increase from the prior year driven by market volume growth. External revenue
has increased by GBP102 million predominantly due to WLR and LLU volume growth
which has more than offset the price reductions. Revenues from other BT lines of
business decreased by 8 per cent to GBP1,117 million reflecting the volume shift
to external revenues and also the regulatory LLU and WLR prices reductions in
prior periods.
At September 30, 2006 Openreach had over 838,000 external LLU lines and 4.0
million external WLR lines. These have grown significantly from June 30, 2006
with net additions being 258,000 LLU connections and 446,000 WLR connections in
the quarter.
During the quarter, Openreach launched a number of products to enhance the fully
unbundled Metallic Path Facilities (MPF), the most significant being the Mass
Migration product which enables Openreach to project manage multiple migrations
of a Communications Provider's customer base on to MPF.
On September 30, 2006, a key milestone in the Undertakings was achieved as
Openreach successfully started to provide Wholesale Extension Services (WES) and
Backhaul Extension Services (BES) on an equivalent basis. At the same time, a
number of new Ethernet products were launched. These include Wholesale End to
End Ethernet Services (WEES) which are high speed, permanently connected,
point-to-point data circuits that are available 24 hours a day, 365 days per
year.
Operating costs increased by 4 per cent to GBP819 million due to increased
volumes, inflationary pressures and focus on service levels. However these have
been partially offset by cost savings from efficiency programmes across the
business.
Overall this has resulted in a GBP22 million decrease in EBITDA before leaver
costs.
The decrease in depreciation and amortisation costs of GBP10 million is due to
the lengthening of the useful economic life of copper, consistent with Ofcom's
review, which is partially offset by higher systems depreciation.
Capital expenditure in the quarter was 13 per cent higher than last year
reflecting increased investment in new systems to ensure compliance with the
Undertakings and increased network infrastructure spend to meet LLU demand.
GROUP INCOME STATEMENT
for the three months ended September 30, 2006
______________________________________________________________________________
Before specific Specific items
items (note 4) Total
(unaudited) Notes GBPm GBPm GBPm
______________________________________________________________________________
Revenue 2 4,941 - 4,941
Other operating income 52 - 52
Operating costs 3 (4,311) (23) (4,334)
_______ _______ _______
Operating profit 2 682 (23) 659
Finance costs (651) - (651)
Finance income 596 - 596
_______ _______ _______
Net finance costs 5 (55) - (55)
Share of post tax profits
of associates and joint
ventures 5 - 5
Profit on disposal of
associate - 20 20
_______ _______ _______
Profit before taxation 632 (3) 629
Taxation (155) 1 (154)
_______ _______ _______
Profit for the period
attributable to equity
shareholders 477 (2) 475
======= ======= =======
Earnings per share 7
- basic 5.7p 5.7p
- diluted 5.6p 5.6p
======= =======
GROUP INCOME STATEMENT
for the three months ended September 30, 2005
______________________________________________________________________________
Before specific Specific
items items
(note 4) Total
(unaudited) Notes GBPm GBPm GBPm
______________________________________________________________________________
Revenue 2 4,767 - 4,767
Other operating income 53 - 53
Operating costs 3 (4,164) (70) (4,234)
_______ _______ _______
Operating profit 2 656 (70) 586
Finance costs (676) - (676)
Finance income 576 - 576
_______ _______ _______
Net finance costs 5 (100) - (100)
Share of post tax profits
of associates and joint
ventures 3 - 3
_______ _______ _______
Profit before taxation 559 (70) 489
Taxation (139) 21 (118)
_______ _______ _______
Profit for the period
attributable to equity
shareholders 420 (49) 371
======= ======= =======
Earnings per share 7
- basic 5.0p 4.4p
- diluted 4.9p 4.3p
======= =======
GROUP INCOME STATEMENT
for the six months ended September 30, 2006
____________________________________________________________________________
Before specific Specific
items items
(note 4) Total
(unaudited) Notes GBPm GBPm GBPm
____________________________________________________________________________
Revenue 2 9,805 - 9,805
Other operating income 102 - 102
Operating costs 3 (8,566) (23) (8,589)
_______ _______ _______
Operating profit 2 1,341 (23) 1,318
Finance costs (1,293) - (1,293)
Finance income 1,192 - 1,192
_______ _______ _______
Net finance costs 5 (101) - (101)
Share of post tax profits
of associates and joint
ventures 7 - 7
Profit on disposal of
associate - 20 20
_______ _______ _______
Profit before taxation 1,247 (3) 1,244
Taxation (306) 1 (305)
_______ _______ _______
Profit for the period
attributable to equity
shareholders 941 (2) 939
======= ======= =======
Earnings per share 7
- basic 11.3p 11.3p
- diluted 11.1p 11.1p
======= =======
GROUP INCOME STATEMENT
for the six months ended September 30, 2005
____________________________________________________________________________
Before specific Specific
items items
(note 4) Total
(unaudited) Notes GBPm GBPm GBPm
____________________________________________________________________________
Revenue 2 9,498 - 9,498
Other operating income 95 - 95
Operating costs 3 (8,289) (82) (8,371)
_______ _______ _______
Operating profit 2 1,304 (82) 1,222
Finance costs (1,392) - (1,392)
Finance income 1,150 - 1,150
_______ _______ _______
Net finance costs 5 (242) - (242)
Share of post tax profits
of associates and joint
ventures 8 - 8
_______ _______ _______
Profit before taxation 1,070 (82) 988
Taxation (268) 25 (243)
_______ _______ _______
Profit for the period
attributable to equity
shareholders 802 (57) 745
======= ======= =======
Earnings per share 7
- basic 9.5p 8.8p
- diluted 9.3p 8.7p
======= ======= =======
GROUP STATEMENT OF RECOGNISED INCOME AND EXPENSE
for the six months ended September 30, 2006
_____________________________________________________________________________
Half year
ended September 30
2006 2005
(unaudited) GBPm GBPm
_____________________________________________________________________________
Profit for the period 939 745
===== =====
Actuarial (losses) gains on defined benefit
pension schemes (369) 1,090
Net gains on revaluation of available-for-sale
investments - 1
Net gains (losses) on cash flow hedges 61 (5)
Exchange differences on translation of foreign
operations (72) (4)
Tax on items taken directly to equity 82 (327)
_____ _____
Net (losses) gains recognised directly in equity (298) 755
_____ _____
Total recognised income for the period
attributable to equity shareholders 641 1,500
===== =====
GROUP CASH FLOW STATEMENT
for the three months and six months ended September 30, 2006
______________________________________________________________________________
Second quarter Half year
ended September 30 ended September 30
2006 2005 2006 2005
(unaudited) GBPm GBPm GBPm GBPm
______________________________________________________________________________
Cash flow from operating
activities
Cash generated from
operations (note 8 (a)) 1,281 1,374 2,373 2,346
Income taxes paid (90) (111) (180) (242)
______ ______ ______ ______
Net cash inflow from
operating activities 1,191 1,263 2,193 2,104
Cash flow from investing
activities
Net sale (acquisition) of
subsidiaries, associates
and joint ventures 13 - (25) (88)
Net purchase of property,
plant, equipment
and software (794) (671) (1,596) (1,357)
Interest received 22 59 37 96
Dividends received from
associates and joint
ventures 2 - 5 -
Net sale (purchase) of
short term investments and
non current asset
investments 249 732 (480) 582
______ ______ ______ ______
Net cash (used) received
in investing activities (508) 120 (2,059) (767)
Cash flows from financing
activities
Repurchase of ordinary
share capital (52) (88) (114) (109)
Net repayments of
borrowings (140) (10) (162) (24)
Net movement on commercial
paper (77) - 227 -
Interest paid (83) (147) (318) (465)
Equity dividends paid (625) (540) (630) (540)
______ ______ ______ ______
Net cash used in financing
activities (977) (785) (997) (1,138)
Effects of exchange rate
changes - (6) - 23
______ ______ ______ ______
Net (decrease) increase in
cash and cash equivalents (294) 592 (863) 222
====== ====== ====== ======
Cash and cash equivalents
at beginning of period 1,215 940 1,784 1,310
Cash and cash equivalents,
net of bank overdrafts,
at end of period
(note 8 (c)) 921 1,532 921 1,532
====== ====== ====== ======
Free cash flow (note 8 (b)) 338 503 321 377
====== ====== ====== ======
Increase in net debt from
cash flows (note 9 (b)) 326 125 448 360
====== ====== ====== ======
GROUP BALANCE SHEET
at September 30, 2006
_____________________________________________________________________________
September 30 September 30 March 31
2006 2005 2006
(unaudited) GBPm GBPm GBPm
_____________________________________________________________________________
Non current assets
Goodwill and other intangible assets 1,861 1,385 1,641
Property, plant and equipment 15,350 15,386 15,489
Other non current assets 100 101 84
Deferred tax assets 853 1,105 764
_______ _______ _______
18,164 17,977 17,978
_______ _______ _______
Current assets
Inventories 131 126 124
Trade and other receivables 4,684 4,060 4,199
Other financial assets 778 3,217 434
Cash and cash equivalents 993 1,727 1,965
_______ _______ _______
6,586 9,130 6,722
_______ _______ _______
Total assets 24,750 27,107 24,700
Current liabilities
Loans and other borrowings 2,729 4,667 1,940
Trade and other payables 6,343 5,552 6,540
Other current liabilities 981 1,377 1,000
_______ _______ _______
10,053 11,596 9,480
_______ _______ _______
Total assets less current liabilities 14,697 15,511 15,220
======= ======= =======
Non current liabilities
Loans and other borrowings 6,948 8,171 7,995
Deferred tax liabilities 1,547 1,453 1,505
Retirement benefit obligations 2,842 3,682 2,547
Other non current liabilities 1,819 1,449 1,566
_______ _______ _______
13,156 14,755 13,613
_______ _______ _______
Capital and reserves
Called up share capital 432 432 432
Reserves 1,062 275 1,123
_______ _______ _______
Total equity shareholders' funds 1,494 707 1,555
Minority interest 47 49 52
_______ _______ _______
Total equity 1,541 756 1,607
_______ _______ _______
14,697 15,511 15,220
======= ======= =======
NOTES (unaudited)
1 Basis of preparation and accounting policies
These primary statements and selected notes comprise the unaudited interim
consolidated financial results of BT Group plc for the quarters and half years
ended September 30, 2006 and 2005, together with the audited results for the
year ended March 31, 2006. These interim financial results do not comprise
statutory accounts within the meaning of Section 240 of the Companies Act 1985.
Statutory accounts for the year ended March 31, 2006 were approved by the Board
of Directors on May 17, 2006, published on May 31, 2006 and delivered to the
Registrar of Companies. The report of the auditors on those accounts was
unqualified and did not contain any statement under Section 237 of the Companies
Act 1985.
The financial information set out in these interim financial results has been
prepared in accordance with the Listing Rules of the Financial Services
Authority. The accounting policies which have been applied to prepare the
interim financial results are the same as those used for the preparation of the
consolidated financial statements for the year ended March 31, 2006.
In order to assist readers in understanding the year on year performance, we
have restated the comparative line of business results to reflect the creation
of Openreach which is now reported as a separate line of business. These
restatements also reflect the impact of the new internal trading arrangements
that have been implemented. There is no change to the overall group reported
results.
2 Results of businesses
(a) Operating results
External Internal Group EBITDA Group operating
revenue revenue revenue (ii) profit (loss) (ii)
GBPm GBPm GBPm GBPm GBPm
Second quarter ended
September 30, 2006
BT Global Services 1,763 394 2,157 224 67
BT Retail 1,982 95 2,077 228 189
BT Wholesale 1,030 855 1,885 469 178
Openreach 162 1,117 1,279 460 282
Other 4 - 4 4 (34)
Intra-group items (i) - (2,461) (2,461) - -
______ ______ ______ ______ ______
Total 4,941 - 4,941 1,385 682
====== ====== ====== ====== ======
Second quarter ended
September 30, 2005
(restated - note 1)
BT Global Services 1,703 399 2,102 198 40
BT Retail 2,036 100 2,136 189 150
BT Wholesale 964 849 1,813 464 190
Openreach 60 1,211 1,271 482 294
Other 4 - 4 15 (18)
Intra-group items (i) - (2,559) (2,559) - -
______ ______ ______ ______ ______
Total 4,767 - 4,767 1,348 656
====== ====== ====== ====== ======
Half year ended
September 30, 2006
BT Global Services 3,517 795 4,312 435 130
BT Retail 3,959 186 4,145 408 329
BT Wholesale 2,027 1,705 3,732 946 370
Openreach 292 2,246 2,538 930 577
Other 10 - 10 28 (65)
Intra-group items (i) - (4,932) (4,932) - -
______ ______ ______ ______ ______
Total 9,805 - 9,805 2,747 1,341
====== ====== ====== ====== ======
Half year ended
September 30, 2005
(restated - see note 1)
BT Global Services 3,384 785 4,169 417 107
BT Retail 4,059 197 4,256 344 271
BT Wholesale 1,932 1,695 3,627 932 387
Openreach 113 2,452 2,565 989 615
Other 10 - 10 23 (76)
Intra-group items (i) - (5,129) (5,129) - -
______ ______ ______ ______ ______
Total 9,498 - 9,498 2,705 1,304
====== ====== ====== ====== ======
(i) Elimination of intra-group revenue between businesses,
which is included in the total revenue of the originating business.
(ii) Before specific items.
There is extensive trading between BT's lines of business and the line of
business profitability is dependent on the transfer price levels. For regulated
products and services those transfer prices are market based whilst for other
products and services the transfer prices are agreed between the relevant lines
of business. These intra-group trading arrangements are subject to periodic
review.
2 Results of businesses continued
(b) Revenue analysis
Second quarter ended Half year ended
September 30 September 30
__________________________________ _________________________
2006 2005 Better (worse) 2006 2005
GBPm GBPm GBPm % GBPm GBPm
Traditional 3,205 3,328 (123) (4) 6,428 6,674
New wave 1,736 1,439 297 21 3,377 2,824
______ ______ ______ ______
4,941 4,767 174 4 9,805 9,498
====== ====== ====== ======
Major corporate 1,703 1,629 74 5 3,402 3,226
Business 593 583 10 2 1,181 1,169
Consumer 1,257 1,336 (79) (6) 2,509 2,660
Wholesale/
Carrier 1,384 1,215 169 14 2,703 2,433
Other 4 4 - - 10 10
______ ______ ______ ______
4,941 4,767 174 4 9,805 9,498
====== ====== ====== ======
(c) New wave revenue analysis
Second quarter ended Half year ended
September 30 September 30
__________________________________ _________________________
2006 2005 Better (worse) 2006 2005
GBPm GBPm GBPm % GBPm GBPm
Networked IT 1,001 914 87 10 1,982 1,813
services
Broadband 486 350 136 39 940 664
Mobility 72 69 3 4 143 135
Other 177 106 71 67 312 212
______ ______ ______ ______
1,736 1,439 297 21 3,377 2,824
====== ====== ====== ======
(d) Capital expenditure on property, plant, equipment, software and motor
vehicles
Second quarter ended Half year ended
September 30 September 30
__________________________________ _________________________
2006 2005 Better (worse) 2006 2005
GBPm GBPm GBPm % GBPm GBPm
BT Global Services 176 171 (5) (3) 325 313
BT Retail 40 33 (7) (21) 80 68
BT Wholesale 266 198 (68) (34) 466 428
Openreach 279 246 (33) (13) 550 503
Other (including
fleet vehicles
and property) 51 46 (5) (11) 106 98
______ ______ ______ ______
812 694 (118) (17) 1,527 1,410
====== ====== ====== ======
Transmission
equipment 297 347 50 14 594 720
Exchange equipment 39 18 (21) n/m 53 36
Other network
equipment 229 148 (81) (55) 389 310
Computers and
office equipment 60 54 (6) (11) 134 110
Software 164 101 (63) (62) 298 166
Motor vehicles and
other 13 14 1 7 27 45
Land and buildings 10 12 2 17 32 23
______ ______ ______ ______
812 694 (118) (17) 1,527 1,410
====== ====== ====== ======
3 (a) Operating costs
Second quarter ended Half year ended
September 30 September 30
2006 2005 2006 2005
GBPm GBPm GBPm GBPm
Staff costs before leaver costs 1,274 1,210 2,530 2,366
Leaver costs 33 37 57 43
______ ______ ______ ______
Staff costs 1,307 1,247 2,587 2,409
Own work capitalised(1) (175) (159) (346) (320)
______ ______ ______ ______
Net staff costs 1,132 1,088 2,241 2,089
Depreciation and amortisation 703 692 1,406 1,401
Payments to telecommunication
operators 1,034 989 2,040 1,998
Other operating costs 1,442 1,395 2,879 2,801
______ ______ ______ ______
Total before specific items 4,311 4,164 8,566 8,289
Specific items (note 4) 23 70 23 82
______ ______ ______ ______
Total 4,334 4,234 8,589 8,371
====== ====== ====== ======
(1) Own work capitalised has been restated to exclude third party costs. This
has no effect on the total costs.
(b) Leaver costs
Second quarter ended Half year ended
September 30 September 30
2006 2005 2006 2005
GBPm GBPm GBPm GBPm
BT Global Services 5 22 22 24
BT Retail 7 2 9 5
BT Wholesale 15 6 16 6
Openreach - - 2 -
Other 6 7 8 8
______ ______ ______ ______
Total 33 37 57 43
______ ______ ______ ______
4 Specific items
BT separately identifies and discloses any significant one off or unusual items
(termed "specific items"). This is consistent with the way that financial
performance is measured by management and we believe assists in providing a
meaningful analysis of the trading results of the group. Specific items may not
be comparable to similarly titled measures used by other companies. Specific
items were previously referred to as exceptional items under UK GAAP.
Second quarter ended Half year ended
September 30 September 30
2006 2005 2006 2005
GBPm GBPm GBPm GBPm
Operating costs
Creation of Openreach - 70 - 70
Property rationalisation costs 23 - 23 12
______ ______ ______ ______
Specific operating costs 23 70 23 82
Profit on partial disposal of
associate (20) - (20) -
______ ______ ______ ______
Total specific items 3 70 3 82
====== ====== ====== ======
5 Net finance costs
Second quarter ended Half year ended
September 30 September 30
2006 2005 2006 2005
GBPm GBPm GBPm GBPm
Finance costs1 before pension
interest 182 222 357 484
Interest on pension scheme
liabilities 469 454 936 908
______ ______ ______ ______
Finance costs 651 676 1,293 1,392
______ ______ ______ ______
Finance income before pension
income (22) (58) (46) (115)
Expected return on pension scheme
assets (574) (518) (1,146) (1,035)
______ ______ ______ ______
Finance income (596) (576) (1,192) (1,150)
______ ______ ______ ______
Net finance costs 55 100 101 242
====== ====== ====== ======
Net finance costs before pensions 160 164 311 369
Interest associated with pensions (105) (64) (210) (127)
______ ______ ______ ______
Net finance costs 55 100 101 242
====== ====== ====== ======
1Finance costs in the second quarter and half year ended September 30, 2006
include a GBP4 million and GBP1 million net charge, respectively, arising from
the re-measurement of financial instruments which under IAS 39 are not in
hedging relationships on a fair value basis. Finance costs in the second quarter
and half year ended September 30, 2005 included a GBP19 million and GBP7 million
net credit respectively, arising from the re-measurement of financial
instruments which were not in hedging relationships on a fair value basis. A
component of these net credits was the fair value movement in, and realised gain
arising from, the early redemption of the US dollar 2008 LG Telecom convertible
bond amounting to GBP31 million for the second quarter and GBP27 million for the
half year.
6 Dividends
Half year Half year
ended September 30 ended September 30
2006 2005 2006 2005
Pence per share GBPm GBPm
Amounts recognised as
distributions to equity holders
in the period 7.6 6.5 633 551
==== ==== ==== ====
The directors have declared an interim dividend of 5.1 pence per share (4.3
pence last year), payable on February 12, 2007 to the shareholders on the
register at the close of business on December 29, 2006. This interim dividend,
amounting to GBP423 million, has not been included as a liability as at
September 30, 2006 (GBP361 million as at September 30, 2005). The final dividend
for the year ended March 31, 2006 of 7.6 pence per share was approved at the
Annual General Meeting on July 12, 2006.
7 Earnings per share
The basic earnings per share are calculated by dividing the profit attributable
to shareholders by the average number of shares in issue after deducting the
company's shares held by employee
share ownership trusts and treasury shares. In calculating the diluted earnings
per share, share options outstanding and other potential ordinary shares have
been taken into account.
The average number of shares in the periods were:
Second quarter Half year
ended September 30 ended September 30
2006 2005 2006 2005
millions of shares millions of shares
Basic 8,308 8,456 8,311 8,463
Diluted 8,483 8,589 8,466 8,579
8 (a) Reconciliation of profit before tax to cash generated from operations
Second quarter Half year
ended September 30 ended September 30
2006 2005 2006 2005
GBPm GBPm GBPm GBPm
Profit before tax 629 489 1,244 988
Depreciation and amortisation 703 692 1,406 1,401
Associates and joint ventures (5) (3) (7) (8)
Employee share scheme costs 27 25 47 37
Net finance costs 55 100 101 242
Profit on disposal of property
assets and non current
asset investments (20) - (20) -
Changes in working capital (196) (8) (553) (461)
Provisions movements, pensions
and other 88 79 155 147
______ ______ ______ ______
Cash generated from operations 1,281 1,374 2,373 2,346
====== ====== ====== ======
(b) Free cash flow
Second quarter Half year
ended September 30 ended September 30
2006 2005 2006 2005
GBPm GBPm GBPm GBPm
Cash generated from operations 1,281 1,374 2,373 2,346
Income taxes paid (90) (111) (180) (242)
______ ______ ______ ______
Net cash inflow from operating
activities 1,191 1,263 2,193 2,104
Included in cash flows from investing
activities
Net purchase of property, plant,
equipment and software (794) (671) (1,596) (1,357)
Net sale of non current asset
investments - (1) - (1)
Dividends received from associates 2 - 5 -
Interest received 22 59 37 96
Included in cash flows from financing
activities
Interest paid (83) (147) (318) (465)
______ ______ ______ ______
Free cash flow 338 503 321 377
====== ====== ====== ======
8 (b) Free cash flow continued
Free cash flow is defined as the net increase in cash and cash equivalents less
cash flows from financing activities (except interest paid), less the
acquisition or disposal of group undertakings and less the net sale of short
term investments. It is not a measure recognised under IFRS but is a key
indicator used by management in order to assess operational performance.
(c) Cash and cash equivalents
At September 30 At March 31
2006 2005 2006
GBPm GBPm GBPm
Cash at bank and in hand 397 475 511
Short term deposits 596 1,252 1,454
_____ _____ _____
Cash and cash equivalents 993 1,727 1,965
Bank overdrafts (72) (195) (181)
_____ _____ _____
921 1,532 1,784
===== ===== =====
9 Net debt
Net debt at September 30, 2006 was GBP8,079 million (September 30, 2005 -
GBP8,133 million, March 31, 2006 - GBP7,534 million).
Net debt consists of loans and other borrowings less current asset investments
and cash and cash equivalents. Loans and other borrowings are measured at the
net proceeds raised, adjusted to amortise any discount over the term of the
debt. For the purpose of this analysis current asset investments, cash and cash
equivalents are measured at the lower of cost and net realisable value. Currency
denominated balances within net debt are translated to sterling at swapped rates
where hedged.
This definition of net debt measures balances at the future cash flows due to
arise on maturity of financial instruments and removes the balance sheet
adjustments made for the re-measurement of hedged risks under fair value hedges
and the use of the amortised cost method as required by IAS 39. In addition, the
gross balances are adjusted to take account of netting arrangements amounting to
GBP67 million. Net debt is a non GAAP measure since it is not defined in IFRS
but it is a key indicator used by management in order to assess operational
performance.
9 (a) Analysis
At September 30 At March 31
2006 2005 2006
GBPm GBPm GBPm
Loans and other borrowings 9,677 12,838 9,935
Cash and cash equivalents (993) (1,727) (1,965)
Other current financial assets(1) (768) (2,996) (365)
______ ______ ______
7,916 8,115 7,605
Adjustments:
To retranslate currency denominated balances
at swapped rates where hedged 437 399 121
To recognise borrowings at net proceeds and
unamortised discount (274) (383) (192)
Other - 2 -
______ ______ ______
Net debt 8,079 8,133 7,534
====== ====== ======
After allocating the element of the adjustments which impact loans and other
borrowings, gross debt at September 30, 2006 was GBP9,760 million (September 30,
2005 - GBP12,586 million, March 31, 2006 - GBP9,686 million).
(1) Excluding derivative financial instruments of GBP10 million, GBP221 million
and GBP69 million at September 30, 2006 and 2005 and March 31, 2006,
respectively.
(b) Reconciliation of net cash flow to movement in net debt
Second quarter ended Half year
September 30 ended September 30
2006 2005 2006 2005
GBPm GBPm GBPm GBPm
Net debt at beginning of period 7,727 8,121 7,534 7,893
Increase in net debt resulting from
cash flows 326 125 448 360
Net debt assumed or issued on
acquisitions - - 9 1
Currency movements 36 (10) 99 (24)
Other non-cash movements (10) (103) (11) (97)
______ ______ ______ ______
Net debt at end of period 8,079 8,133 8,079 8,133
====== ====== ====== ======
10 Statement of changes in equity
Year ended
Half year ended September 30 March 31
2006 2005 2006
GBPm GBPm GBPm
Shareholders' funds 1,555 45 45
Minority interest 52 50 50
______ ______ ______
1,607 95 95
Effect of adoption of IAS 32 and IAS
39 - (209) (209)
______ ______ ______
Fund (deficit) at beginning of period 1,607 (114) (114)
Total recognised income for the
period 641 1,500 2,906
Share based payment 27 26 65
Issues of shares 12 4 4
Net purchase of treasury shares (108) (108) (344)
Dividends on ordinary shares (633) (551) (912)
Minority interest (5) (1) 2
______ ______ ______
Net changes in equity for the
financial period (66) 870 1,721
Equity at end of period
Shareholders' funds 1,494 707 1,555
Minority interest 47 49 52
______ ______ ______
1,541 756 1,607
====== ====== ======
11 Earnings before interest, taxation, depreciation and amortisation (EBITDA)
Second quarter ended Half year
September 30 ended September 30
2006 2005 2006 2005
GBPm GBPm GBPm GBPm
Operating profit 659 586 1,318 1,222
Specific items (note 4) 23 70 23 82
Depreciation and amortisation
(note 3) 703 692 1,406 1,401
______ ______ ______ ______
EBITDA before specific items 1,385 1,348 2,747 2,705
====== ====== ====== ======
Earnings before interest, taxation, depreciation and amortisation (EBITDA)
before specific items is not a measure recognised under IFRS, but it is a key
indicator used by management in order to assess operational performance.
12 United States Generally Accepted Accounting Principles (US GAAP)
The results set out above have been prepared in accordance with the basis of
preparation as set out in note 1. The table below sets out the results
calculated in accordance with US GAAP.
Second quarter ended Half year
September 30 ended September 30
2006 2005 2006 2005
Net income attributable to 509 191 923 583
shareholders (GBPm)
Earnings per ADS (GBP)
- basic 0.61 0.23 1.11 0.69
- diluted 0.60 0.22 1.09 0.68
Each American Depositary Share (ADS) represents 10 ordinary shares of BT Group
plc.
Shareholders' equity, calculated in accordance with US GAAP, is a GBP52 million
deficit at September 30, 2006 (September 30, 2005 - GBP615 million deficit,
March 31, 2006 - GBP158 million deficit).
Forward-looking statements - caution advised
Certain statements in this results release are forward-looking and are made in
reliance on the safe harbour provisions of the US Private Securities Litigation
Reform Act of 1995. These statements include, without limitation, those
concerning: continued growth in revenue, EBITDA, earnings per share and
dividends; growth in new wave revenue, mainly from networked IT services,
broadband and mobility growth; implementation of BT's 21st Century Network; the
introduction of next generation services: and improving shareholder returns.
Although BT believes that the expectations reflected in these forward-looking
statements are reasonable, it can give no assurance that these expectations will
prove to have been correct. Because these statements involve risks and
uncertainties, actual results may differ materially from those expressed or
implied by these forward-looking statements.
Factors that could cause differences between actual results and those implied by
the forward-looking statements include, but are not limited to: material adverse
changes in economic conditions in the markets served by BT; future regulatory
actions and conditions in BT's operating areas, including competition from
others; selection by BT and its lines of business of the appropriate trading and
marketing models for its products and services; fluctuations in foreign currency
exchange rates and interest rates; technological innovations, including the cost
of developing new products, networks and solutions and the need to increase
expenditures for improving the quality of service; prolonged adverse weather
conditions resulting in a material increase in overtime, staff or other costs;
developments in the convergence of technologies; the anticipated benefits and
advantages of new technologies, products and services, including broadband and
other new wave initiatives, not being realised; and general financial market
conditions affecting BT's performance. BT undertakes no obligation to update any
forward-looking statements whether as a result of new information, future events
or otherwise.
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
BT Group PLC
(Registrant)
By: /s/ Patricia Day
--------------------
Patricia Day, Assistant Secretary.
Date 09 November, 2006