BT Group plc Results For The Third Quarter And Nine Months To 31 December 2012

Fri Feb 1, 2013 8:05am EST

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LONDON,  Feb. 1, 2013  /PRNewswire/ -- BT Group plc (BT.L) today announced its
results for the third quarter and nine months to 31 December 2012.  

Ian Livingston, Chief Executive, commenting on the results, said:

"Our fibre plans are helping to make the UK a broadband leader in  Europe. More
than 13 million premises can access our fibre broadband and we are passing
around 100,000 additional premises every week. Take-up is growing strongly with
around 1.25 million homes and businesses now enjoying the benefits of faster
speeds. This gives us an excellent platform for our push into TV and Sport later
this year. Our pre-season training is going well. We have secured attractive new
content and world class production facilities at the Olympic Park and are
building a strong team.

"Our engineers have worked tirelessly following some of the wettest weather on
record. Not only did they complete a record number of field visits in the
quarter, they also connected a further 281,000 homes and businesses to broadband
and helped us grow the number of landlines. BT Global Services has also done
well securing £1.9bn of new orders, up 17%.

"We have made progress in a number of areas and delivered solid financial
results. These are in line with our expectations for the year, which remain
unchanged."

Third quarter and nine months results:

                                                   Third quarter to         Nine months to         
                                                   
31 December 2012        
31 December 2012      
                                                   £m          Change      £m         Change     
 Revenue1                                          4,510       (6)%        13,468     (7)%       
 Underlying revenue excluding transit                           (3)%                   (4)%       
 EBITDA1                                           1,548       2%          4,508      1%         
 Profit before tax1                                675         7%          1,861      8%         
 Earnings per share           - adjusted1          6.6p        8%          18.4p      9%         
                              - reported           6.2p        (2)%        19.1p      8%         
 Normalised2  free cash flow                       807         £173m       999        £(399)m    
 Net debt                                                                  8,140      £404m      


1 Before specific items
2 Before specific items, pension deficit payments and the cash tax benefit of
pension deficit payments

RESULTS FOR THE THIRD QUARTER AND NINE MONTHS TO  31 DECEMBER 2012

Group results

                              Third quarter to 31 December                Nine months to 31 December         
                              2012              2011        Change      2012       2011       Change     
                              £m                £m          %           £m         £m         %          
 Revenue                                                                                                 
 - adjusted1                  4,510             4,774       (6)         13,468     14,432     (7)        
 - reported (see Note below)  4,359             4,774       (9)         13,232     14,022     (6)        
 - underlying excluding transit2                             (3)                               (4)        
 EBITDA                                                                                                  
 - adjusted1                  1,548             1,524       2           4,508      4,455      1          
 - reported (see Note below)  1,484             1,498       (1)         4,307      4,296      0          
 Operating profit                                                                                        
 - adjusted1                  842               790         7           2,357      2,229      6          
 - reported                   778               764         2           2,156      2,070      4          
 Profit before tax                                                                                       
 - adjusted1                  675               628         7           1,861      1,731      8          
 - reported                   628               652         (4)         1,814      1,721      5          
 Earnings per share                                                                                      
 - adjusted1                  6.6p              6.1p        8           18.4p      16.9p      9          
 - reported                   6.2p              6.3p        (2)         19.1p      17.7p      8          
 Capital expenditure          572               665         (14)        1,790      1,899      (6)        
 Free cash flow                                                                                          
 - normalised3                807               634         27          999        1,398      (29)       
 - adjusted1                  964               634         52          1,480      1,613      (8)        
 Net debt                                                               8,140      7,736      5          


Note: Reported revenue and EBITDA include a specific item charge of £151m and
£36m, respectively, in the third quarter and nine months to  31 December 2012 
relating to Ofcom's determinations on historic Ethernet pricing. See Group
results - Specific items for more details.

Line of business results1

                              Revenue                     EBITDA                  Operating cash flow          
 Third quarter to             2012     2011     Change  2012   2011   Change  2012     2011     Change   
 31 December                  £m       £m       %       £m     £m     %       £m       £m       %        
 BT Global Services           1,746    1,894    (8)     163    144    13      88       134      (34)     
 BT Retail                    1,793    1,849    (3)     474    453    5       450      284      58       
 BT Wholesale                 890      979      (9)     289    303    (5)     251      145      73       
 Openreach                    1,274    1,300    (2)     579    591    (2)     365      304      20       
 Other and intra-group items  (1,193)  (1,248)  4       43     33     30      (190)    (233)    18       
 Total                        4,510    4,774    (6)     1,548  1,524  2       964      634      52       


1 Before specific items. Specific items are defined below
2 Underlying revenue excluding transit is defined below
3 Before specific items, pension deficit payments and the cash tax benefit of
pension deficit payments

Notes:

1)     Unless otherwise stated, any reference to revenue, operating costs,
earnings before interest, tax, depreciation and amortisation (EBITDA), operating
profit, profit before tax, earnings per share (EPS) and free cash flow are
measured before specific items. The commentary focuses on the trading results on
an adjusted basis being before specific items. This is consistent with the way
that financial performance is measured by management and is reported to the
Board and the Operating Committee and assists in providing a meaningful analysis
of the trading results of the group. The directors believe that presentation of
the group's results in this way is relevant to the understanding of the group's
financial performance as specific items are those that in management's judgement
need to be disclosed by virtue of their size, nature or incidence. In
determining whether an event or transaction is specific, management considers
quantitative as well as qualitative factors such as the frequency or
predictability of occurrence. Specific items may not be comparable to similarly
titled measures used by other companies. Reported revenue, reported EBITDA,
reported operating profit, reported profit before tax, reported EPS and reported
free cash flow are the equivalent unadjusted or statutory measures.

2)     Underlying revenue, underlying costs and underlying EBITDA are measures
which seek to reflect the underlying performance of the group that will
contribute to long-term profitable growth and as such exclude the impact of
acquisitions and disposals, foreign exchange movements and any specific items.
We are focusing on the trends in underlying revenue excluding transit revenue as
transit traffic is low-margin and is significantly affected by reductions in
mobile termination rates.

3)     Unless otherwise stated, the references 2013 and 2014 are the financial
years to  31 March 2013  and 2014, respectively.

A conference call for analysts and investors will be held at  9.00am  today and
a simultaneous webcast will be available at  www.bt.com/results

The fourth quarter and full year results for 2013 are expected to be announced
on Friday  10 May 2013.

About BT

BT is one of the world's leading providers of communications services and
solutions, serving customers in more than 170 countries. Its principal
activities include the provision of networked IT services globally; local,
national and international telecommunications services to its customers for use
at home, at work and on the move; broadband and internet products and services
and converged fixed/mobile products and services. BT consists principally of
four lines of business: BT Global Services, BT Retail, BT Wholesale and
Openreach.

In the year ended  31 March 2012, BT Group's revenue was £18,897m with profit
before taxation of £2,445m.

British Telecommunications plc (BT) is a wholly-owned subsidiary of BT Group plc
and encompasses virtually all businesses and assets of the BT Group. BT Group
plc is listed on stock exchanges in  London  and New York. 

For more information, visit  www.btplc.com




BT Group plc

RESULTS FOR THE THIRD QUARTER TO  31 DECEMBER 2012

GROUP RESULTS

Operating results overview
Our key measure of the underlying revenue trend, underlying revenue excluding
transit, was down 3.1%, an improvement compared with recent quarters reflecting
better performances from BT Global Services and BT Wholesale. Whilst improving,
our underlying revenue trend continues to be impacted by the tough conditions in
 Europe  and the financial services sector, regulatory price reductions and
lower revenue from calls and lines.  

Reported revenue of £4,359m was down 9% which includes the impact of certain
regulatory decisions which have been treated as a specific item (see Specific
items below). Excluding specific items, revenue was down 6% at £4,510m. This
decline includes a £66m reduction in transit revenue (including mobile
termination rate reductions of £37m), a £50m negative impact from foreign
exchange movements, and an £8m impact from disposals.

Underlying operating costs before depreciation and amortisation were down 7%, or
5% excluding transit, reflecting the impact of our cost transformation
programmes and reduced cost of sales due to the decline in revenue. Total
operating costs before depreciation and amortisation and specific items
decreased by £274m, or 8%, to £3,069m, and have reduced by over £1bn for the
nine months.

Adjusted EBITDA increased by 2% to £1,548m. Foreign exchange movements and
disposals had no significant impact on EBITDA.

Depreciation and amortisation decreased by 4% to £706m largely due to lower
overall capital expenditure over the last three financial years. Capital
expenditure decreased by 14% to £572m primarily reflecting the higher spend last
year on Wholesale Broadband Connect.

Profit before tax
Adjusted profit before tax was £675m, up 7%, reflecting the higher EBITDA and
lower depreciation and amortisation. Reported profit before tax (which includes
specific items) was £628m, down 4%.

Tax
The effective tax rate on the profit before specific items was 22.7% (Q3 2012:
24.1%) and is in line with our outlook of around 23% for the full year.

Fibre and broadband
We have passed more than 13m premises with our fibre broadband, an increase of
around 1.3m in the quarter. Take-up is growing strongly and we achieved around
250,000 connections in the quarter, with around 1.25m homes and businesses now
taking a fibre based service.  

Total broadband market net additions1  grew 7% to 281,000 of which we added
122,000 retail broadband customers, a 44% share.

Regulation
In the quarter Ofcom issued its final determinations on disputes over historic
Ethernet pricing (see Specific items below). We disagree with the determinations
and are likely to appeal against them. These determinations cover the period
from  April 2006  to  March 2011  and do not impact Openreach's current pricing
for Ethernet products.

The charge controls for WLR, LLU and ISDN30 products which became effective in 
April 2012  impacted revenue in the quarter. We continue to expect these to have
a negative impact of around £100m-£200m on group revenue in the 2013 financial
year with a further similar year on year impact in the 2014 financial year. The 
July 2012  Court of Appeal decision against wholesale ladder termination pricing
also impacted the third quarter year on year EBITDA trend by £12m.  

Ofcom's final determination on the Business Connectivity Market Review and the
associated Leased Lines Charge Control is expected to be issued in the next few
months. We also expect the consultation on the Wholesale Narrowband Market
Review in the next few weeks.

1 DSL and fibre, excluding cable

Specific items
Specific items resulted in a net charge after tax of £38m (Q3 2012: £15m net
credit).  

Charges of £151m and £36m were recognised against revenue and EBITDA,
respectively, following Ofcom's determinations on historic Ethernet pricing.  

Restructuring charges of £28m (Q3 2012: £8m) were incurred. In the quarter we
started the next phase of our group-wide restructuring programme which is
expected to generate future cost savings and further improve customer service
delivery. As part of this programme, we commenced the reorganisation of BT
Innovate & Design and BT Operate, our two internal service units, to form BT
Technology, Service and Operations (BT TSO). This new unit is responsible for
the innovation, design, test, build and running of our global networks and
systems on an end to end basis. We are also further rationalising and
transforming our resources, processes, networks and systems within BT Global
Services. We expect additional group restructuring costs to be incurred over the
remainder of this year and next.

A profit of £9m was recognised on the disposal of our remaining 9.1% interest in
Tech Mahindra. Our total investment in Tech Mahindra has in aggregate generated
returns of around £350m. Net interest income on pensions was £8m (Q3 2012:
£50m).  

Earnings per share
Adjusted EPS was 6.6p, up 8%, reflecting the growth in profit before tax.
Reported EPS (which includes specific items) was 6.2p, down 2%. These are based
on a weighted average number of shares in issue of 7,865m (Q3 2012: 7,766m).

Free cash flow
Normalised free cash flow was an inflow of £807m, an increase of £173m compared
with the prior year principally reflecting the timing of customer receipts and
lower capital expenditure.

Adjusted free cash flow, which includes a £157m tax benefit from pension deficit
payments (Q3 2012: nil), was an inflow of £964m (Q3 2012: £634m).  

The cash cost of specific items was £96m (Q3 2012: £48m) including £44m
following the regulatory decision on historic Ethernet pricing, restructuring
costs of £29m (Q3 2012: £27m) and property rationalisation costs of £17m (Q3
2012: £21m).

Net debt and liquidity
Net debt was £8,140m at  31 December 2012, a reduction of £897m in the quarter
largely reflecting the adjusted free cash inflow of £964m and Tech Mahindra
disposal proceeds of £113m. These inflows were partly offset by an outflow of
£96m for specific items and £75m for the purchase of 32m shares under our share
buyback programme.

At 31 December 2012 the group had cash and current investment balances of £2.2bn
and available facilities of £1.5bn providing us with a strong liquidity and
funding position. In  January 2013  £1.4bn of term debt matured and was funded
from these cash and investment balances.  

Pensions
The IAS 19 net pension position at  31 December 2012  was a deficit of £4.3bn
net of tax (£5.5bn gross of tax), compared with a deficit of £1.9bn (£2.4bn
gross of tax) at  31 March 2012  and £3.1bn (£4.0bn gross of tax) at  30
September 2012. The higher deficit over the nine months principally reflects the
lower discount rate, with asset values up £0.3bn. The IAS 19 accounting position
and key assumptions for the liability valuation are:

                               31 December 2012                                                31 March 2012                                                   
                               £bn                                                             £bn                                                             
 IAS 19 liabilities - BTPS     (43.9)                                                          (40.6)                                                          
 Assets - BTPS                 38.6                                                            38.3                                                            
 Other schemes                 (0.2)                                                           (0.1)                                                           
 IAS 19 deficit, gross of tax  (5.5)                                                           (2.4)                                                           
 IAS 19 deficit, net of tax    (4.3)                                                           (1.9)                                                           
                                                                                                                                                               
 Discount rate (nominal)       4.25%                                                           4.95%                                                           
 Discount rate (real)          1.51%                                                           1.84%                                                           
 RPI inflation                 2.70%                                                           3.05%                                                           
 CPI inflation                 0.75% below RPI for three years and 1.00% below RPI thereafter  0.75% below RPI for three years and 1.20% below RPI thereafter  


OPERATING REVIEW

BT Global Services

                                    Third quarter to 31 December               Nine months to 31 December             
                                    2012      2011      Change               2012     2011     Change             
                                    £m        £m        £m        %         £m       £m       £m       %        
 Revenue                            1,746     1,894     (148)     (8)       5,233    5,813    (580)    (10)     
 -    underlying excluding transit                                (5)                                  (6)      
 Net operating costs1               1,583     1,750     (167)     (10)      4,821    5,372    (551)    (10)     
 EBITDA                             163       144       19        13        412      441      (29)     (7)      
 Depreciation & amortisation        156       169       (13)      (8)       464      534      (70)     (13)     
 Operating profit (loss)            7         (25)      32        n/m       (52)     (93)     41       44       
                                                                                                                
 Capital expenditure                121       139       (18)      (13)      374      411      (37)     (9)      
 Operating cash flow                88        134       (46)      (34)      (398)    19       (417)    n/m      


1  Net of other operating income
n/m = not meaningful

Revenue
Underlying revenue excluding transit decreased by 5%, reflecting the continued
tough conditions in  Europe  and the financial services sector. Revenue was down
8%, including a £44m negative impact from foreign exchange movements and an £8m
impact from disposals.  

Order intake was strong at £1.9bn in the quarter (Q2 2013: £1.3bn; Q3 2012:
£1.6bn). We signed contracts with leading organisations around the world
including: Novartis, for new collaboration services and to connect additional
global locations; Visa Europe, to provide managed solutions for its payments
processing and corporate services; KPMG, for the provision of managed network,
voice and conferencing services; HTC, for a global customer contact management
solution covering 60 countries; the  City of Edinburgh, for a technology refresh
of the council's education service; Clarins Group, to transform its global IT
infrastructure and improve the management of its critical applications; and the
Public Employment Agency of  Spain, to provide cloud-based IP telephony and
contact centre services for 800 branches.  

Operating results
Net operating costs decreased by 10% reflecting the reduction in revenue and the
impact of our cost transformation programmes. Underlying net operating costs
excluding transit costs declined by 7%. In the quarter we continued our network
optimisation programme, adding new points of presence in  Europe  and  Asia  to
enhance service delivery to customers and to reduce third party network costs.
We have also improved commercial terms with some of our suppliers, which reduced
contract delivery costs, and we opened a new centre for contract management
services, which will provide better customer service and lead to more efficient
processes.

EBITDA increased by 13%, or 17% excluding foreign exchange movements and
disposals, partly reflecting the timing of costs during the year. For the nine
months, EBITDA was down 7%, or 1% excluding foreign exchange movements and
disposals. Operating profit increased by £32m to £7m reflecting the improved
EBITDA and an 8% reduction in depreciation and amortisation.  

Capital expenditure reduced by 13% as the prior year included additional
customer contract-related spend. This contributed to EBITDA less capital
expenditure increasing by £37m to £42m. Operating cash flow of £88m was below
the prior year partly reflecting the timing of customer receipts.

BT Retail

                              Third quarter to 31 December               Nine months to 31 December             
                              2012      2011      Change               2012     2011     Change             
                              £m        £m        £m        %         £m       £m       £m       %        
 Revenue                      1,793     1,849     (56)      (3)       5,360    5,532    (172)    (3)      
 Net operating costs1         1,319     1,396     (77)      (6)       3,936    4,188    (252)    (6)      
 EBITDA                       474       453       21        5         1,424    1,344    80       6        
 Depreciation & amortisation  99        101       (2)       (2)       292      305      (13)     (4)      
 Operating profit             375       352       23        7         1,132    1,039    93       9        
                                                                                                          
 Capital expenditure          86        108       (22)      (20)      280      311      (31)     (10)     
 Operating cash flow          450       284       166       58        1,014    922      92       10       


1  Net of other operating income

Revenue
Revenue decreased by 3%, in line with the previous quarter.

Consumer revenue decreased by 3% with lower calls and lines revenue partially
offset by growth in broadband, driven by an increasing contribution from fibre. 


In the quarter we added 122,000 retail broadband customers, representing 44% of
the DSL and fibre broadband market net additions. We added 200,000 retail fibre
broadband customers and have more than 1m customers, representing 16% of our
retail broadband customer base. We added 21,000 BT Vision customers in the
quarter and now have over 60,000 customers with a YouView box. BT Wi-fi minutes
trebled year on year for the second quarter running and reached 3.9bn minutes,
with the number of hotspots increasing by around 40% to 4.8m.

Business revenue decreased by 3% with lower calls and lines revenue partially
offset by growth in IT services. We provided our first major customer with BT
Managed Compute, a cloud-based IT infrastructure platform.  

BT Enterprises revenue was flat, excluding the impact of foreign exchange
movements, with growth in BT Expedite offset by decline in the other divisions. 


BT Ireland revenue increased by 5%, excluding the impact of foreign exchange
movements, with growth across all areas of the business. Half of our retail
broadband customers in  Northern Ireland  are now taking fibre which is helping
to drive revenue growth. In the quarter, we were selected as the NI Direct
strategic partner to develop and improve access to  Northern Ireland  government
services.  

Operating results
Net operating costs decreased by 6% primarily as a result of our cost
transformation initiatives and reduced cost of sales associated with the lower
revenue. EBITDA increased by 5% and with depreciation and amortisation
decreasing by 2%, operating profit was up 7%.

Capital expenditure decreased by 20%. Operating cash flow increased by 58%
largely reflecting the timing of working capital including customer receipts.

BT Wholesale

                                    Third quarter to 31 December               Nine months to 31 December             
                                    2012      2011      Change               2012     2011     Change             
                                    £m        £m        £m        %         £m       £m       £m       %        
 Revenue                            890       979       (89)      (9)       2,674    2,965    (291)    (10)     
 -    underlying excluding transit                                (3)                                  (3)      
 Net operating costs1               601       676       (75)      (11)      1,805    2,050    (245)    (12)     
 EBITDA                             289       303       (14)      (5)       869      915      (46)     (5)      
 Depreciation & amortisation        149       149       -         -         444      450      (6)      (1)      
 Operating profit                   140       154       (14)      (9)       425      465      (40)     (9)      
                                                                                                                
 Capital expenditure                52        82        (30)      (37)      181      245      (64)     (26)     
 Operating cash flow                251       145       106       73        580      486      94       19       


1  Net of other operating income

Revenue
Underlying revenue excluding transit decreased by 3%, or 1% excluding ladder
pricing, with growth in managed network services offset by the ongoing impact of
broadband lines migrating to LLU. Revenue decreased by 9%, or 7% excluding
ladder pricing, including a £67m decline in transit revenue driven by both lower
volumes and mobile termination rate reductions.  

IP Exchange continues to grow with voice minutes in the quarter increasing by
over 80%. We expect revenue from IP Exchange in BT Wholesale and BT Global
Services to be around £100m this year. This quarter we have supported the launch
of 4G services in the UK through increased backhaul capacity at key base station
sites.  

Total order intake was around £400m compared with around £340m last year and has
more than doubled in the nine months. We signed a new five-year contract with
BSkyB to continue to provide wholesale voice services for their off-network
fixed-line customers, in addition to a number of new contract wins.

Operating results
Net operating costs decreased by 11%, or 2% excluding transit costs primarily
due to a reduction in labour costs. EBITDA decreased by 5%, or 1% excluding
ladder pricing, and with depreciation and amortisation flat, operating profit
declined by 9%, or 1% excluding ladder pricing.

Capital expenditure decreased by 37% primarily due to lower spend on Ethernet,
as a result of improvements in capacity management, and on Wholesale Broadband
Connect. Operating cash flow increased by 73% principally due to the timing of
customer receipts and lower capital expenditure.  

Openreach

                              Third quarter to 31 December               Nine months to 31 December             
                              2012      2011      Change               2012     2011     Change             
                              £m        £m        £m        %         £m       £m       £m       %        
 Revenue                      1,274     1,300     (26)      (2)       3,800    3,835    (35)     (1)      
 Net operating costs1         695       709       (14)      (2)       2,086    2,139    (53)     (2)      
 EBITDA                       579       591       (12)      (2)       1,714    1,696    18       1        
 Depreciation & amortisation  244       236       8         3         731      700      31       4        
 Operating profit             335       355       (20)      (6)       983      996      (13)     (1)      
                                                                                                          
 Capital expenditure          287       292       (5)       (2)       851      796      55       7        
 Operating cash flow          365       304       61        20        820      831      (11)     (1)      


1  Net of other operating income

Revenue
The continued impact of regulatory price changes reduced revenue by around £50m.
This was partially offset by growth in Ethernet and fibre resulting in a revenue
decline of 2%.

The physical line base grew by 48,000. The additional engineering resource we
have recruited has helped to address the increase in provision lead times and
repair activity resulting from one of the wettest years on record.

Our fibre broadband is available to over 13m premises, an increase of around
1.3m in the quarter. We achieved around 250,000 fibre connections in the
quarter, with around 1.25m homes and businesses now connected. Total DSL and
fibre broadband net additions of 281,000 were 7% higher.

In the quarter we won the Broadband Delivery UK (BDUK) regional bids to deploy
fibre broadband in  Cumbria, Herefordshire & Gloucestershire,  Norfolk  and 
Suffolk. We were also awarded preferred bidder status in Devon & Somerset and
Wiltshire & South Gloucestershire, which we have since won. We connected the
first BDUK customers in  North Yorkshire, less than six months after signing the
contract.

Operating results
Net operating costs reduced by 2%. This was a smaller decline than in the second
quarter, reflecting the impact of the additional engineering resource we have
recruited. EBITDA declined by 2% and with depreciation and amortisation
increasing by 3%, reflecting the investment in fibre broadband and Ethernet,
operating profit was down 6%.  

Capital expenditure was 2% lower in the quarter. Operating cash flow increased
by 20% due to the timing of customer receipts.  

FINANCIAL STATEMENTS

Group income statement
For the third quarter to  31 December 2012

                                    Before          Specific           
                                    specific items  items     Total    
                                    £m              £m        £m       
 Revenue                            4,510           (151)     4,359    
 Other operating income             107             -         107      
 Operating costs                    (3,775)         87        (3,688)  
 Operating profit                   842             (64)      778      
 Finance expense                    (169)           (493)     (662)    
 Finance income                     2               501       503      
 Net finance expense                (167)           8         (159)    
 Profit on disposal of associate    -               9         9        
 Profit before tax                  675             (47)      628      
 Tax                                (153)           9         (144)    
 Profit for the period              522             (38)      484      
 Attributable to:                                                      
 Equity shareholders                522             (38)      484      
 Non-controlling interests          -               -         -        
 Earnings per share                                                    
 - basic                            6.6p                      6.2p     
 - diluted                          6.3p                      5.9p     


Group income statement
For the third quarter to  31 December 2011

                                                               Before          Specific           
                                                               specific items  items     Total    
                                                               £m              £m        £m       
 Revenue                                                       4,774           -         4,774    
 Other operating income                                        93              -         93       
 Operating costs                                               (4,077)         (26)      (4,103)  
 Operating profit                                              790             (26)      764      
 Finance expense                                               (169)           (522)     (691)    
 Finance income                                                3               572       575      
 Net finance expense                                           (166)           50        (116)    
 Share of post tax profits of associates and joint ventures    4               -         4        
 Profit before tax                                             628             24        652      
 Tax                                                           (151)           (9)       (160)    
 Profit for the period                                         477             15        492      
 Attributable to:                                                                                 
 Equity shareholders                                           476             15        491      
 Non-controlling interests                                     1               -         1        
 Earnings per share                                                                               
 - basic                                                       6.1p                      6.3p     
 - diluted                                                     5.8p                      6.0p     


Group income statement
For the nine months to  31 December 2012

                                                               Before          Specific            
                                                               specific items  items     Total     
                                                               £m              £m        £m        
 Revenue                                                       13,468          (236)     13,232    
 Other operating income                                        281             7         288       
 Operating costs                                               (11,392)        28        (11,364)  
 Operating profit                                              2,357           (201)     2,156     
 Finance expense                                               (515)           (1,480)   (1,995)   
 Finance income                                                10              1,504     1,514     
 Net finance expense                                           (505)           24        (481)     
 Share of post tax profits of associates and joint ventures    9               -         9         
 Profit on disposal of associate                               -               130       130       
 Profit before tax                                             1,861           (47)      1,814     
 Tax                                                           (422)           108       (314)     
 Profit for the period                                         1,439           61        1,500     
 Attributable to:                                                                                  
 Equity shareholders                                           1,438           61        1,499     
 Non-controlling interests                                     1               -         1         
 Earnings per share                                                                                
 - basic                                                       18.4p                     19.1p     
 - diluted                                                     17.5p                     18.3p     


Group income statement
For the nine months to  31 December 2011

                                                               Before          Specific            
                                                               specific items  items     Total     
                                                               £m              £m        £m        
 Revenue                                                       14,432          (410)     14,022    
 Other operating income                                        290             (19)      271       
 Operating costs                                               (12,493)        270       (12,223)  
 Operating profit                                              2,229           (159)     2,070     
 Finance expense                                               (515)           (1,568)   (2,083)   
 Finance income                                                7               1,717     1,724     
 Net finance expense                                           (508)           149       (359)     
 Share of post tax profits of associates and joint ventures    10              -         10        
 Profit before tax                                             1,731           (10)      1,721     
 Tax                                                           (418)           69        (349)     
 Profit for the period                                         1,313           59        1,372     
 Attributable to:                                                                                  
 Equity shareholders                                           1,311           59        1,370     
 Non-controlling interests                                     2               -         2         
 Earnings per share                                                                                
 - basic                                                       16.9p                     17.7p     
 - diluted                                                     16.0p                     16.7p     


Group cash flow statement  
For the third quarter and nine months to 31 December

                                                                            Third quarter        Nine months          
                                                                            
to 31 December      
to 31 December      
                                                                            2012      2011      2012      2011      
                                                                            £m        £m        £m        £m        
 Profit before tax                                                          628       652       1,814     1,721     
 Depreciation and amortisation                                              706       734       2,151     2,226     
 Net finance expense                                                        159       116       481       359       
 Investments impairment charge                                              -         -         17        -         
 (Profit) loss on disposal of subsidiary                                    -         -         (7)       19        
 Associates and joint ventures                                              -         (4)       (9)       (10)      
 Profit on disposal of associate                                            (9)       -         (130)     -         
 Share-based payments                                                       16        18        55        58        
 Decrease (increase) in working capital                                     320       88        (535)     (374)     
 Provisions, pensions and other non-cash movements                          (145)     (17)      (121)     106       
 Cash generated from operations                                             1,675     1,587     3,716     4,105     
 Tax paid                                                                   (11)      (163)     (39)      (228)     
 Net cash inflow from operating activities                                  1,664     1,424     3,677     3,877     
 Cash flow from investing activities                                                                                
 Interest received                                                          3         1         8         3         
 Dividends received from associates and joint ventures                      -         -         1         4         
 Proceeds on disposal of property, plant and equipment                      6         3         14        13        
 Acquisition of subsidiaries, net of cash acquired                          -         -         (6)       (5)       
 Sale of subsidiaries, net of bank overdrafts                               -         -         17        13        
 Acquisition of joint ventures                                              -         -         (5)       -         
 Disposal of associates and joint ventures                                  113       -         270       7         
 Purchases of property, plant and equipment and software                    (592)     (642)     (1,880)   (1,888)   
 Sale of non-current asset investments                                      -         1         1         1         
 Purchase of current financial assets                                       (1,968)   (2,609)   (6,675)   (6,327)   
 Sale of current financial assets                                           1,557     1,948     5,513     4,984     
 Net cash used in investing activities                                      (881)     (1,298)   (2,742)   (3,195)   
 Cash flow from financing activities                                                                                
 Interest paid                                                              (213)     (201)     (560)     (548)     
 Equity dividends paid                                                      (4)       (3)       (449)     (388)     
 New borrowings                                                             -         -         796       -         
 Repayment of borrowings                                                    (3)       (8)       (308)     (22)      
 Repayment of finance lease liabilities                                     -         -         (11)      (2)       
 Cash flows from derivatives related to net debt                            (6)       15        (6)       286       
 Net repayment of commercial paper                                          (265)     -         (46)      (69)      
 Proceeds on issue of treasury shares                                       12        3         97        11        
 Repurchase of ordinary share capital                                       (75)      -         (229)     -         
 Net cash used in financing activities                                      (554)     (194)     (716)     (732)     
 Effect of exchange rate movements                                          (2)       (1)       (9)       -         
 Net increase (decrease) in cash and cash equivalents                       227       (69)      210       (50)      
 Cash and cash equivalents, net of bank overdrafts, at beginning of period  306       344       323       325       
 Cash and cash equivalents, net of bank overdrafts, at end of period        533       275       533       275       


Group balance sheet

                                              31 December  31 December  31 March  
                                              2012         2011         2012      
                                              £m           £m           £m        
 Non-current assets                                                               
 Intangible assets                            2,926        3,189        3,127     
 Property, plant and equipment                14,158       14,426       14,388    
 Derivative financial instruments             861          1,112        886       
 Investments                                  46           63           68        
 Associates and joint ventures                29           151          153       
 Trade and other receivables                  184          220          169       
 Deferred tax assets                          1,255        1,382        626       
                                              19,459       20,543       19,417    
                                                                                  
 Current assets                                                                   
 Inventories                                  117          116          104       
 Trade and other receivables                  2,946        3,655        3,307     
 Current tax receivable                       -            -            139       
 Derivative financial instruments             76           77           137       
 Investments                                  1,675        1,342        513       
 Cash and cash equivalents                    540          283          331       
                                              5,354        5,473        4,531     
                                                                                  
 Current liabilities                                                              
 Loans and other borrowings                   2,731        912          2,887     
 Derivative financial instruments             93           46           89        
 Trade and other payables                     5,010        5,997        5,962     
 Current tax liabilities                      277          423          66        
 Provisions                                   144          86           251       
                                              8,255        7,464        9,255     
                                                                                  
 Total assets less current liabilities        16,558       18,552       14,693    
                                                                                  
 Non-current liabilities                                                          
 Loans and other borrowings                   7,999        9,075        7,599     
 Derivative financial instruments             917          819          757       
 Retirement benefit obligations               5,492        5,435        2,448     
 Other payables                               871          881          875       
 Deferred tax liabilities                     1,000        1,167        1,100     
 Provisions                                   507          852          606       
                                              16,786       18,229       13,385    
                                                                                  
 Equity                                                                           
 Ordinary shares                              408          408          408       
 (Deficit) reserves                           (646)        (95)         889       
 Total parent shareholders' (deficit) equity  (238)        313          1,297     
 Non-controlling interests                    10           10           11        
 Total (deficit) equity                       (228)        323          1,308     
                                              16,558       18,552       14,693    


NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1  Basis of preparation and accounting policies

These condensed consolidated financial statements ('the financial statements')
comprise the financial results of BT Group plc for the quarters and nine months
to  31 December 2012  and  31 December 2011  together with the audited balance
sheet at  31 March 2012.

Except as described below, the financial statements have been prepared in
accordance with the accounting policies as set out in the financial statements
for the year to  31 March 2012  and have been prepared under the historical cost
convention as modified by the revaluation of financial assets and liabilities
(including derivative financial instruments) at fair value.  

These financial statements do not constitute statutory accounts within the
meaning of Section 434 of the Companies Act 2006 and have not been audited or
reviewed by the independent auditors. Statutory accounts for the year to  31
March 2012  were approved by the Board of Directors on  9 May 2012, published on
 25 May 2012  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 498 of the Companies Act 2006. These financial statements should
be read in conjunction with the annual financial statements for the year to  31
March 2012.

Government grants
Our policy for the recognition of government grants was changed from  1 April
2012. Under the new policy, capital expenditure and operating costs are
recognised 'net' of government grants receivable. The net presentation is
considered a more appropriate policy than the previous 'gross' presentation as
it better presents the incremental costs to the business. The new policy has
been applied prospectively and comparative financial information has not been
restated on the basis of the immaterial impact of grant funding on prior period
financial information.

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: current and future years' outlook, including revenue trends, EBITDA
and normalised free cash flow; the impact of regulation and regulatory
decisions; our fibre roll-out programme; our group-wide restructuring;
continuing cost transformation and efficiencies in our BT Global Services
business; IP Exchange revenue; effective tax rate; and liquidity and funding.

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 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, and demand for bundled services, not being
realised; the timing of entry and profitability of BT in certain communications
markets; significant changes in market shares for BT and its principal products
and services; the underlying assumptions and estimates made in respect of major
customer contracts proving unreliable; the aims of the group-wide, and BT Global
Services restructuring programmes not being achieved; and general financial
market conditions affecting BT's performance and ability to raise finance. BT
undertakes no obligation to update any forward-looking statements whether as a
result of new information, future events or otherwise.

SOURCE  BT Group plc


Press office: Ross Cook, 020 7356 5369; or Investor relations: Damien Maltarp,
020 7356 4909

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