Annual Report & Form 20-F 2000
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Annual report and Form 20-F BT has set itself an ambitious vision: to be the most successful worldwide communications group. To achieve this, we intend to build shareholder value by: ■ seizing the many opportunities open to us in the global market ■ building our current business, focusing on high-growth areas ■ operating to the highest standards of integrity ■ fulfilling our responsibilities to the communities in which we operate. We aim to do this by: ■ moving rapidly to enable our customers to make the most of the unprecedented opportunities which arise as communications technologies converge and the markets in which we operate are transformed ■ reshaping the company so that an increasing proportion of our revenues comes from new-wave activities – internet, multimedia, mobility, data and solutions ■ expanding our current interests in growth markets around the world ■ continuing to work with local partners outside the UK, and increasing our equity investments as opportunities arise ■ developing and growing our business in the UK, with a new organisational structure that should enable greater management focus ■ structuring the group to allow separate listings of parts of the business when this is judged to be in our shareholders’ best long-term interests. British Telecommunications plc is a public limited company registered in England, which has listings on the London, New York and Tokyo stock exchanges. This is the annual report for the year ended 31 March 2000. It complies with UK regulations and is the annual report on Form 20-F for the Securities and Exchange Commission to meet US regulations. This annual report has been sent only to shareholders who have elected to receive a copy. A separate annual review and summary financial statement for the year ended 31 March 2000 has been issued to all shareholders. Contents 3 Financial highlights 5 Chairman's message 6 Chief Executive's statement 8 Business review 23 Our commitment to society 25 Five-year ®nancial summary 27 Financial review 42 Board of directors 44 Report of the directors 45 Corporate governance 48 Report on directors' remuneration 57 Statement of directors' responsibility 58 Report of the auditors 59 Accounting policies 62 Consolidated ®nancial statements 103 United States generally accepted accounting principles 109 Subsidiary undertakings, joint ventures and associates 111 Quarterly analysis of turnover and pro®t 113 New divisional structure 114 Financial statistics 115 Operational statistics and regulatory information 116 Additional information for shareholders 125 Glossary of terms and US equivalents 126 Cross reference to Form 20-F 127 Index In this annual report, references to the ``®nancial year'' are to the year ended 31 March of each year, e.g. the ``2000 ®nancial year'' refers to the year ended 31 March 2000. Unless otherwise stated, all non-®nancial statistics are at 31 March 2000. References to the ``company'' are to British Telecommunications public limited company, and references to ``BT'' or the ``group'' are to the company and its subsidiaries, or any of them as the context may require. Please see cautionary statement regarding forward-looking statements on page 116 02 Annual report and Form 20-F Financial highlights Years ended 31 March 2000 1999 1998 Total turnover ± ongoing activities £21,903m £18,223m £16,039m Exceptional operating income (costs) £(111)m £(69)m £238m Total operating pro®t £3,198m £3,474m £3,461m Pro®t on sale of ®xed asset investments ± £1,107m ± Pro®t before taxation £2,942m £4,295m £3,214m Windfall tax charge ± ± £510m Pro®t after taxation £2,045m £3,002m £1,727m Basic earnings per share 31.7p 46.3p 26.6p Dividends per share 21.9p 20.4p 19.0p Pro®t before goodwill amortisation, exceptional items and taxation £3,100m £3,274m £2,976m Basic earnings per share before goodwill amortisation and exceptional items 34.2p 35.0p 31.7p Net cash ¯ow from operating activities £5,849m £6,035m £6,071m Capital expenditure £3,680m £3,269m £3,030m Investment in associates and joint ventures £3,100m £1,326m £1,380m & Innovative restructuring to position BT ahead of the new wave in communications ± announced in April 2000 & 20 per cent growth in total turnover & BT Cellnet's customer connections up by 2.9 million to 7.4 million & £3.1 billion invested in strategic alliances and joint ventures in Europe, North America and Asia Paci®c & Concert, BT's global venture with AT&T, launched & Successful bid in April 2000 for a UK third generation mobile licence & 7.4 per cent increase in dividends per share Annual report and Form 20-F 03 Chairman's message The past ¢nancial year has seen rapid change in the record here my thanks to them for all that they achieved communications industry around the world, presenting BT during the year. with many outstanding opportunities and challenges. I would also like to welcome the two new The opportunities have arisen from the remarkable non-executive directors who joined the Board during the pace of development in new-wave areas such as the year ^ Lou Hughes and June de Moller. internet, data and mobile services. These are now part of BT is a company that has the potential to change everyday life in many of the markets in which we operate. people's lives and we take our responsibilities to the We are sure to see even more change and growth in the communities in which we operate very seriously. near future, as these previously separate technologies We run one of the UK's largest community partnership continue to converge. programmes and take special care to ensure that our BT's progress and development over the year has been business activities are conducted in an environmentally encouraging. It con¢rms the soundness of our vision ^ to friendly way. be the most successful worldwide communications group ^ I am delighted that, during the past year, our and positions us well to take advantage of the achievements in these areas have been widely recognised. opportunities that the future will present. In the UK, we won the Business in the Community During the year: Company of the Year Award and the Impact on Society & we increased total turnover by 20 per cent; Award for our community activities, and we came top & Concert, our global venture with AT&T, was launched of all FT-SE 100 companies in the Business in the to serve the needs of global customers; and Environment index of environmental engagement. We also & our alliance with Japan Telecom went from strength achieved certi¢cation in ISO 14001, the international to strength. environmental management system, for our UK operations. Events in the early days of the new ¢nancial year have You will ¢nd a fuller description of our activities in ensured that we maintain this momentum. In April 2000, this area starting at page 23 of this report. we announced the regrouping of our activities into new, The past year has, of course, seen the beginning of a self-contained business units, and we were successful in new millennium. I am delighted that BT has played a our bid for a UMTS licence to operate the next generation major role in marking this event, both at the Greenwich of mobile services in the UK. Dome, where our Talk zone has proved immensely popular, Total turnover for 1999/2000 increased by 20 per cent and throughout the rest of the UK with our FutureTalk to »21,903 million, including our proportionate share of our programme, which has highlighted the importance of ventures' revenues. Our share of our ventures' turnover communication as a key skill for the new millennium. grew to more than »3 billion, mainly because of the launch BT has achieved a great deal over the past year. of Concert, and from our stakes in Japan Telecom and our We have shown that we have the vision, determination mainland European ventures. and £exibility to succeed in what is proving to be the However, pre-tax pro¢t (excluding exceptional items world's most exciting and competitive industry. I look and before the charge for goodwill) declined by 5.3 per cent forward to further progress in the year ahead. against the 1998/99 results, on a comparable basis, caused partly by a reduction in UK call prices, and a rise in interest costs as a consequence of investment in non-UK ventures, many of which are still in start-up mode. Your Board is pleased to recommend a ¢nal dividend of 13.2 pence per share. This gives a total dividend for the year of 21.9 pence ^ an increase of 7.4 per cent on 1998/99. Your company's performance is the culmination of the Sir Iain Vallance Chairman e¡orts of BT people throughout the world. I would like to 24 May 2000 Annual report and Form 20-F 05 Chief Executive's statement The communications industry is changing faster than ever It is in response to these challenges that we are before and, if BT is to stay ahead of the wave, it has to radically restructuring BT by creating a number of new continue to change ^ in quite fundamental ways. international businesses, each with its own character and Developments in information and communications priorities but working together to meet customers' needs. technology ^ the internet, mobility and multimedia ^ are These new businesses are: transforming all our lives ^ at work, at home and & Ignite our international broadband network business, in between. focused primarily on corporate and wholesale markets; And it's only just begun. & BTopenworld our international, mass-market It's rapidly becoming a broadband world. New types internet business; of network and new methods of access, via cable, ¢bre, & BT Wireless our international mobile business, with satellite and wireless, will bring information, a particular emphasis on mobile data; and communications and entertainment to customers, wherever & Yell our international directories and associated they are, faster than ever before.