Annual Report & Form 20-F 2012
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2 Overview User guide Overview Welcome to the BT Annual Report and Form 20– F 2012. In this interactive pdf you can do many things to help you easily access the information that you want, whether that’s printing, searching for a specific item or going directly to Business Business Business another page, section or website. These are explained below. Business 1. Document controls Use the document controls located in the top right corner to help you navigate through this report. Search Print Go to Back/forward Fast line too contents one page previous page Strategy Strategy Examples 2. Links within this document Examples ThroughoutThroughout this this report report there there are are links links to to pages, pages, other other For further discussion of these items see pages 33 and 47 to sectionssections and and web web addresses addresses for for additional additional information. information. 48. A reconciliation of adjusted EBITDA to group operating profit (loss) by line of business, and for the group, is provided in the table at the foot of pages 34 ttoo 353 . Performance Performance Performance 3. Navigation with tabsent Performance 3. Navigation with tabs Use the tabs to quickly go to the start of a different section. Overview Governance Governance Overview Governance Governance Business Business Strategy Financial statements Financial statements Financial statements Financial statements Strategy Additional information Additional information Additional information Additional information Annual Report & Form 20-F 2012 20-F &Form Report Annual plc BT Group Additional information Financial statements Governance Performance Strategy Business Overview Overview Welcome to BT Group plc’s Overview Annual Report & Form 20-F 2012 In this report you will find information on who we are and what we do; our strategy; how we put our strategy into action; how we measure our Business Business progress, and how we govern our business. We believe we have a sustainable business model that can deliver value for our shareholders and benefit all our stakeholders. Strategy Strategy Performance Performance Online Annual Report Online Better Future Report www.bt.com/annualreport www.bt.com/betterfuture Governance Governance Financial statements This is the BT Annual Report for the year ended 31 March 2012. It complies with UK regulations and comprises part of the Annual Report Financial statements on Form 20-F for the US Securities and Exchange Commission to meet US regulations. This annual report has been sent to shareholders who have elected to receive a copy. A separate Summary financial statement & notice of meeting 2012 has been issued to shareholders who have elected to receive a shorter document. Please see cautionary statement regarding forward-looking statements on page 175. In this document, references to ‘BT Group’, ‘BT’, ‘the group’, ‘the company’, ‘we’ or ‘our’ are to BT Group plc (which includes the activities of British Telecommunications plc) and its subsidiaries and lines of business, internal service units, or any of them as the context may require. References to ‘2014’, ‘2013’, ‘2012’, ‘2011’ and ‘2010’ are to the financial years ending 31 March 2014, 2013, 2012, 2011 and 2010, respectively. References to ‘the year’ and ‘the current year’ are to the year ended 31 March 2012 except in relation to our fibre roll-out plans, which are based on calendar years, not financial years. Additional information Additional information Overview Overview 2 Chairman’s introduction Overview 3 Who we are and what we do We put our customers at the heart 3 Financial highlights 4 Our strategy of everything we do 5 Our business model 5 Our risks 6 Key facts and figures Business Business 10 How we are organised Business 12 Customers, markets and products 18 Regulation Strategy 22 Chief Executive’s introduction 23 Our strategy Driving broadband-based Being the ‘Brand for 8 20 24 Our business model Strategy consumer services 72 Business’ for UK SMEs 24 Our strategic priorities Strategy 28 How we measure our progress 28 Our resources 32 Our risks Performance 40 Group Finance Director’s introduction 41 Line of business performance 48 Our responsible and sustainable business performance Performance 50 Group financial performance Performance BT Global Services – The wholesaler 38 60 a global leader 2181 of choice 72 Governance 62 Chairman’s governance report 63 Board of Directors 65 How we govern the company 70 Reports of the Board Committees Governance 89 Directors’ information Governance 90 General information 93 Shareholders and Annual General Meeting Financial statements 96 Report of the independent auditors Consolidated financial statements The best network A responsible and 94 164 98 Consolidated financial statements provider 72 sustainable business leader 103 Notes to the consolidated financial statements 159 Report of the independent auditors Parent company financial statements Financial statements 160 Financial statements of BT Group plc Financial statements Look out for… 163 Subsidiary undertakings and associate Additional information Page number icons Further reading online 17 166 Alternative performance measures 170 Quarterly analysis of revenue and profit 171 Selected financial data Video content online Indicates corporate responsibility 173 Financial and operational statistics material in our report 175 Information for shareholders 189 Cross reference to Form 20-F 193 Glossary of terms Additional information Additional information 2 Overview Overview Overview Chairman’s introduction Business Business Our contribution to the UK Our pension fund We contribute to the UK directly and indirectly One of our biggest responsibilities is to our in many ways. We look after the critical copper pension fund and I am pleased that we have access network, employ over 73,000 people, agreed the 2011 triennial funding valuation contribute around £3bn a year in taxes, and are and recovery plan with the Trustee. Because of Strategy major investors in research and development. our improved financial performance we were Strategy able to make a lump sum payment of £2bn The roll-out of our fibre network is one of the into the fund, giving greater certainty to our fastest privately funded programmes in the pensioners and helping to reduce the size of world. We are bringing fibre broadband to future deficit payments we would otherwise cities, towns and rural areas across the UK and have to make. aim to pass around two-thirds of UK premises by the end of 2014. This will dramatically Watch my video online at change consumers’ online experience and Our people and the Board www.bt.com/annualreport enhance the way businesses can operate, As a result of our progress over the last bringing significant economic benefits to three years, around 20,000 of our people our country. stand to benefit from their employee share plans in 2013. We are also recognising the Performance As official communications services partner Performance of the London 2012 Olympic and Paralympic achievements in our UK business by paying We have made Games we are contributing vital infrastructure, each of our UK team members a £250 bonus in delivering a single communications network addition to their normal pay increase. significant progress across 94 locations to make this the most Since I joined BT I have worked to streamline connected Games ever. And we are delivering and refresh the Board, to make sure we have for all our stakeholders the project on schedule. the right team to deliver our objectives. You can read about the changes in the Governance this year. Our global presence section of this report. We serve some of the largest companies in Governance the world, but the regulatory backdrop often Our future Governance means we can’t serve customers as efficiently While our aim remains to drive profitable Our shareholders as we want to. So internationally we continue revenue growth, the challenging environment to press for policy and regulatory change, we are facing makes this more difficult, but we We have delivered a very strong performance with the aim of achieving a competitive believe our strategy will continue to deliver over the last three years. This means we have level playing field – in particular, open and long-term value for our shareholders. been able to pay sustainable and progressive fair wholesale access to communications dividends. For 2012 the Board is proposing a networks. We only seek across the world final dividend of 5.7p, up 14%, giving a full similar conditions to those in the UK. There has year dividend of 8.3p, up 12% over last year. been progress, but we want to see this move We continue to pursue a prudent financial faster as it is vital to innovation, growth and strategy, to make sure we can invest in the jobs worldwide. Sir Michael Rake business, support our pension scheme, reduce Chairman net debt and reward you, our shareholders. By 9 May 2012 Financial statements following this approach we expect to be able Our communities Financial statements to grow dividends by 10% – 15% per year for We believe we have a responsibility to give the next three years. something back to the communities in which we operate – through contributions of over £30m in time, cash and in-kind support, through some 50,000 days of employee volunteering, through our environmental and energy savings programmes, and through support for charities such as Sport Relief and digital inclusion initiatives, we contribute to making a better future for our communities. Additional information Additional information Overview 3 Overview