Preliminary results for the Fourth Quarter and Year to 31 March 2009

(PresseBox) (München, ) Key points - fourth quarter:

- Revenue growth of 1%
- EBITDA(1) decline due to an unacceptable performance in BT Global Services
- Rest of the business delivered good performance with EBITDA(2) growth of 4%, driven by 9% reduction in operating costs
- Total charges of £1.3bn as a result of the completion of contract and financial reviews in BT Global Services
- Specific item charge of £280m relating to the restructuring of BT Global Services, further restructuring charges of approximately £420m in total over the next two financial years
- BT's retail share of the DSL and LLU net additions at 42% in the quarter - best for four years
- BT Global Services orders of £2.6bn in the quarter and £8.0bn over the past 12 months
- Free cash flow of £1,134m in the quarter

Key points - full year:

- Revenue growth of 3%
- Free cash flow of £737m in the year
- Pension deficit contributions of £525m before tax relief agreed for each of next three financial years
- Final dividend of 1.1p, giving total for year of 6.5p

(1) Adjusted for contract and financial review charges, specific items and leaver costs
(2) Before specific items and leaver costs

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

"Three out of four of BT's lines of business have performed well in spite of fierce competition and the global economic downturn. However this achievement has been overshadowed by the unacceptable performance of BT Global Services and the resulting charges we have taken. During the year we have changed the leadership of BT Global Services and started to turn the division around.

"With a recovery programme for BT Global Services in place and our heightened focus on costs and customer service, we now want to accelerate our plans for our future networks. We will examine doubling the pace of the roll out of super fast broadband next year within existing capital expenditure plans, bringing fibre based services within the reach of more than a million homes and businesses and securing the jobs of a thousand BT people.

"In the coming year we will extend the record of operational delivery already demonstrated in three out of our four divisions right across the group. We expect to deliver a net reduction in operating costs and capital expenditure of well over £1 billion in 2009/10. This will enable us to generate free cash flow, before any pension deficit payments, in excess of £1 billion in 2009/10 and beyond.

"I believe BT will emerge from the recession a stronger company to the benefit of our customers and shareholders."

Sir Mike Rake, Chairman, commenting on the results, said:

"This has been a challenging year in which BT has had to tackle some significant issues. I am confident that decisive action by management has addressed the underlying problems within BT Global Services and has laid the foundation for the group to deliver a significant improvement in performance in 2009/10 and the years to come.

"We have agreed with the trustees of the BT Pension Scheme the pension contributions for the next three years enabling the Board to announce a sustainable dividend policy.

"The proposed final dividend of 1.1p gives a full year dividend of 6.5p which rebases dividend payments to a level which we are confident is sustainable. The Board is committed to delivering attractive returns for shareholders and believes that the operational improvements in the business will generate sufficient cash flow to allow the dividend to grow at the same time as investing in the business, reducing debt and supporting the pension scheme."

Notes:

Unless otherwise stated, any reference to earnings before interest, tax, depreciation and amortisation (EBITDA), operating profit, profit before tax and earnings per share (EPS) and operating costs is measured before specific items and leaver costs. Unless otherwise stated, the change in results is year on year.

Underlying revenue, underlying operating costs and underlying EBITDA refer to the measure excluding contribution from foreign exchange rate movements and acquisitions.

The commentary for the fourth quarter focuses on the results before contract and financial review charges, 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 25 of the attachments. Leaver costs are shown in note 3(b) on page 24 of the attachments.

The income statement, cash flow statement and balance sheet are provided on pages 16 to 20 of the attachments. A reconciliation of EBITDA to group operating profit is provided on page 28 of the attachments. A definition and reconciliation of free cash flow and net debt are provided on pages 26 to 28 of the attachments.
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