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Financial statements
138 Auditors’ reports – consolidated
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138 United Kingdom opinion
143 United States opinion
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148 *URXSFDVKƮRZVWDWHPHQW
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149 Basis of preparation
149 Critical accounting estimates
and key judgements
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155 Segment information
159 Operating costs
160 Employees
160 Audit, audit related and other
non-audit services
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162 Taxation
165 Earnings per share
165 Dividends
166 Intangible assets
168 Property, plant and equipment
169 Business combinations
169 Programme rights
169 Trade and other receivables
170 Trade and other payables
171 Provisions
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179 Own shares
180 Share-based payments
182 Investments
183 Cash and cash equivalents
183 Loans and other borrowings
186 Finance expense
187 Financial instruments and
risk management
193 Other reserves
193 Related party transactions
194 Financial commitments and
contingent liabilities
194 Subsequent events
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financials.indb 137
15/05/2015 01:51
138
BT Group plc
Annual Report 2015
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Independent auditors’ report to the members of
BT Group plc
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Our opinion
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statements’):
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at 31{0DUFKDQGRILWVSURƬWDQGFDVKƮRZVIRUWKH\HDU
then{ended;
r have been properly prepared in accordance with International
)LQDQFLDO5HSRUWLQJ6WDQGDUGV‘IFRS’) as adopted by the European
Union; and
r have been prepared in accordance with the requirements of the
Companies Act 2006 and Article 4 of the IAS Regulation.
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to applying IFRS as adopted by the European Union, has also applied
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issued by the IASB.
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r the group balance sheet as at 31 March 2015;
r the group income statement and group statement of comprehensive
income for the year then ended;
r WKHJURXSFDVKƮRZVWDWHPHQWIRUWKH\HDUWKHQHQGHG
r the group statement of changes in equity for the year then ended; and
r WKHQRWHVWRWKHƬQDQFLDOVWDWHPHQWVZKLFKLQFOXGHDVXPPDU\RI
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Certain required disclosures have been presented elsewhere in the
$QQXDO5HSRUW)RUP)WKH‘Annual Report’), rather than in
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as adopted by the European Union.
financials.indb 138
2XUDXGLWDSSURDFK
Overview
r Overall group materiality: £120m, which represents 5% of the
DYHUDJHRISURƬWEHIRUHWD[IRUWKHFXUUHQW\HDUDQGWKHSUHYLRXV
three years.
r We conducted full scope audit work at three reporting units – the UK,
Italy and Germany.
r 6SHFLƬFDXGLWSURFHGXUHVZHUHSHUIRUPHGLQIRXUUHSRUWLQJXQLWV
based on our risk assessment in France, Ireland, the Netherlands
and Spain.
r The reporting units within our audit scope accounted for over 80%
RIWKHJURXSoVUHYHQXHDQGSURƬWEHIRUHWD[
Our assessment of the risk of material misstatement also informed
our views on the areas of particular focus for our work which are
listed below:
r Major contracts in BT Global Services and BT Wholesale
r Accuracy of revenue due to complex billing systems
r Pension scheme obligations and unquoted investments in the
BT{Pension Scheme
r Regulatory and other provisions
r Capitalisation practices and asset lives for property, plant and
equipment and software intangible assets
r Recognition and measurement of potential tax exposures and
tax assets
r Assessment of the carrying value of goodwill in BT Global Services
The scope of our audit and our areas of focus
We conducted our audit in accordance with International Standards
RQ$XGLWLQJ8.DQG,UHODQG‘,6$V8.,UHODQG’).
We designed our audit by determining materiality and assessing the
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we looked at where the directors made subjective judgements, for
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making assumptions and considering future events that are inherently
uncertain. As in all of our audits, we also addressed the risk of
management override of internal controls, including evaluating whether
there was evidence of bias by the directors that represented a risk of
material misstatement due to fraud.
7KHULVNVRIPDWHULDOPLVVWDWHPHQWWKDWKDGWKHJUHDWHVWHƪHFWRQRXU
DXGLWLQFOXGLQJWKHDOORFDWLRQRIRXUUHVRXUFHVDQGHƪRUWDUHLGHQWLƬHG
as ‘areas of focus’ in the table below. We have also set out how we
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make on the results of our procedures should be read in this context.
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15/05/2015 01:51
Overview
The Strategic Report
Purpose and strategy
Delivering our strategy
Group performance
Governance
Financial statements
Additional information
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2 – Critical accounting estimates and key judgements) and page 151
1RWHs6LJQLƬFDQWDFFRXQWLQJSROLFLHV
We tested a sample of major contracts through the year, focusing
our work on those which are material by size or which we otherwise
regarded as higher risk because of the nature of the contract or
its stage of delivery. In performing this testing we assessed the
appropriateness of the assumptions and judgements underpinning the
accounting for these major contracts as follows:
:HIRFXVHGRQWKLVDUHDDVLWLQYROYHVVLJQLƬFDQWMXGJHPHQWVLQUHVSHFW
of:
r WKHGHWHUPLQDWLRQDQGWLPLQJRIUHFRJQLWLRQRIFRQWUDFWSURƬWVDQG
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the contracts;
r completeness and adequacy of provisions against contracts
projected to be loss making; and
r WKHUHFRYHUDELOLW\RIFRQWUDFWVSHFLƬFDVVHWVLQFOXGLQJGHIHUUHG
costs and property, plant and equipment.
Our work focused on the contracts in BT Global Services and BT
Wholesale.
139
r :HHYDOXDWHGWKHGHVLJQDQGWHVWHGWKHRSHUDWLQJHƪHFWLYHQHVVRI
controls in respect of the accounting for major contracts.
r We obtained and read the relevant sections of the contracts agreed
between BT and the customer, tested a sample of revenue and cost
transactions to supporting evidence of delivery and acceptance and
assessed the revenue recognised in the period by comparing it with
the contractual terms and actual pattern of delivery of services.
r We compared the forecast results of each contract to the actual
results to assess the performance of the contract and the historical
accuracy of forecasting.
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analysing historical contract performance relative to overall contractual
commitments. We challenged directors’ assumptions on the future
costs including any forecast savings by assessing the actions required
to achieve these forecasts. In determining whether the provisions for
loss making contracts are adequate, we considered the results of the
above procedures.
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to the sampled contracts by examining contractual cover or assessing
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We considered the accounting adopted to be in line with the group’s
accounting policies.
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The accuracy of revenue amounts recorded is an inherent industry risk.
This is because telecoms billing systems are complex and process large
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SULFHFKDQJHVLQWKH\HDUWKURXJKDQXPEHURIGLƪHUHQWV\VWHPV
We evaluated the relevant IT systems and the design of controls, and
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r capture and recording of revenue transactions;
r authorisation of rate changes and the input of this information
to the billing systems; and
r calculation of amounts billed to customers.
We also tested a sample of customer bills and checked these to cash
received from customers. Our testing included customer bills for
consumers, corporate and wholesale customers.
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material misstatements in our substantive testing.
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2 – Critical accounting estimates and key judgements) and page 172
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We focused on this area because the valuation of the BT Pension
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statements.
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in respect of the determination of the pension scheme obligations.
We assessed and challenged the reasonableness of actuarial
assumptions used in valuing the pension scheme obligations.
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our internally developed benchmarks. We tested underlying inputs
used in determining the obligations.
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investments. We tested the existence of the unquoted investments
and we tested the valuation of these investments on a sample basis.
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r For property assets, we tested internal controls at the property fund
manager and obtained valuation reports prepared by third party
specialist valuers. We assessed the methods and assumptions used
by the valuers.
r For direct investments, the valuations of the investments are derived
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used in the valuations by checking that the assumptions used were
consistent with our internally developed range of discount rates, by
FRPSDULQJWKHFDVKƮRZVWRKLVWRUical results and considering the
impact of other external information. We tested the accuracy of the
calculations and assessed whether the assumptions used were in line
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the investment shareholding.
r )RURWKHUXQTXRWHGLQYHVWPHQWVZHREWDLQHGFRQƬUPDWLRQVIURP
the custodians and the investment managers.
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financials.indb 139
15/05/2015 01:51
140
BT Group plc
Annual Report 2015
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For regulatory provisions, we read correspondence and
pronouncements from Ofcom and the Competition Appeal Tribunal.
We held discussions with management to understand the risk
associated with historical transactions where there is not yet a formal
dispute but there is a known risk of dispute.
The group has provisions of £564m relating to restructuring, property
DQGRWKHUFRPSULVLQJOLWLJDWLRQUHJXODWRU\ULVNVDQGLQVXUDQFHFODLPV
Provisions are based on judgements and estimates made by the
directors. In particular, the current telecoms regulatory environment
has seen an increased frequency and magnitude of matters brought to
Ofcom and the Competition Appeal Tribunal in the UK in recent years.
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For legal provisions, we held discussions with the group’s general
counsel and head of litigation, read the summary of litigation
matters provided by management and discussed each of the material
cases noted in the report to determine the group’s assessment of
the likelihood and magnitude of any liability that may arise. Where
appropriate and relevant, we examined correspondence connected
with the cases, including external legal advice.
For all provisions we tested the calculation of the provisions, assessed
the assumptions including with third party data where available), and
assessed the judgements against historical trends. From the evidence
obtained, we considered the directors’ judgements on the level of
provisioning to be appropriate in the context of materiality.
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2 – Critical accounting estimates and key judgements) and page 168
1RWHs3URSHUW\plant and equipment)
Capitalisation of costs and the useful lives assigned to assets are areas
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There are two main risks that we addressed in our audit:
r the risk that amounts being capitalised do not meet capitalisation
criteria; and
r the risk that the useful economic lives assigned to assets are
inappropriate.
Our work also focused on the capitalisation of costs for broadband
deployment under the BDUK programme and the recognition of the
associated capital grants.
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of controls around the property, plant and equipment cycle and
software intangible assets cycle, including the controls over whether
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us with audit evidence in respect of the capitalisation practices.
We assessed the nature of costs incurred in capital projects through
testing of amounts recorded and assessing whether the description
of the expenditure met capitalisation criteria. We found no material
misstatements from our testing.
We tested the controls over the annual review of asset lives.
In addition, we tested whether the directors’ decisions on asset lives
are appropriate by considering our knowledge of the business and
practice in the wider telecoms industry. We also tested whether
approved asset life changes were appropriately applied prospectively
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consistent with those commonly used in the industry and appropriately
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users) applied by the directors to calculate the level of capital grants
attributable to superfast broadband deployment in rural areas and we
tested the calculation of the accrual based on these assumptions and
the current level of capital investment. From the evidence obtained,
we considered the level of grant recognition, to be appropriate in the
context of materiality.
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assets
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We focused on this area due to the judgements required in determining
the gURXSoVHƪHFWLYHWD[UDWHVSHFLƬFDOO\LQUHODWLRQWRWKHUHFRJQLWLRQ
of tax exposures and potential deferred tax assets.
We assessed and evaluated management’s rationale in relation to the
level of tax provisions. We considered the status of recent and current
tax audits and enquiries, the results of previous claims and changes
to the tax environments. We utilised our specialist tax knowledge and
experience of similar situations elsewhere to examine tax planning
arrangements and assess management’s judgements.
In the calculation of deferred tax assets, we evaluated the amount of
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relevant subsidiary companies.
From the evidence obtained, we considered the level of provisioning
and the deferred tax recognition to be appropriate in the context
of{materiality.
financials.indb 140
15/05/2015 01:51
Overview
The Strategic Report
Purpose and strategy
Delivering our strategy
Group performance
Governance
Financial statements
Additional information
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Board approved forecasts. We considered the directors’ expectations
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contract renewals) and planned operational improvements and
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As at 31 March 2015, goodwill relating to the BT Global Services cash
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balance of £1,396m. The directors have prepared an impairment
assessment that is based on a value in use calculation of the
BT Global Services CGU.
We focused on the impairment assessment for BT Global Services as
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the long term growth rate, the discount rate and the assumptions
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141
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Services CGU with previous forecasts and determined whether any
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We independently calculated a weighted average cost of capital by
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rate to market data.
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the{directors and performed further sensitivity analyses, primarily
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and assessed them as appropriate.
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough
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whole, taking into account the geographical structure of the group, the
accounting processes and controls, and the industry in which the group
operates.
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in each of the reporting units. These are responsible for their own
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team in London through an integrated consolidation system.
In establishing the overall approach to the group audit, we determined
the type of work that needed to be performed at reporting units by
us, as the group engagement team, or component auditors from other
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was performed by component auditors, we determined the level of
involvement we needed to have in the audit work at those reporting
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evidence had been obtained as a basis for our opinion on the group
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purchases and payables, cash and provisions were performed.
This,{together with additional procedures performed on centralised
functions and at the group level, gave us the evidence we needed for our
RSLQLRQRQWKHFRQVROLGDWHGƬQDQFLDOVWDWHPHQWVDVDZKROH
The group engagement team performed the audit of the UK reporting
unit. The group team visited Italy and Germany and conference calls
were held with these teams on a regular basis. The group engagement
team was also involved in the audits of the four reporting units for
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of visits and conference calls.
The reporting units within the scope of our group audit procedures
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Materiality
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We set certain quantitative thresholds for materiality. These, together
with qualitative considerations, helped us to determine the scope of
our audit and the nature, timing and extent of our audit procedures and
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Based on our professional judgement, we determined materiality for the
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Overall group materiality
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How we determined it
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the current year and the previous three
years.
Rationale for benchmark
applied
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for the current year and previous three
years to reduce volatility in the measure
year on year.
We agreed with the Audit & Risk Committee that we would report to
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£5m) as well as misstatements below that amount that, in our view,
warranted reporting for qualitative reasons.
Going concern
Under the Listing Rules we are required to review the directors’
statement, set out on page 130, in relation to going concern.
We have nothing to report having performed our review.
As noted in the directors’ statement, the directors have concluded
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going concern basis of accounting. The going concern basis presumes
that the group has adequate resources to remain in operation, and
that the directors intend it to do so, for at least one year from the
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have concluded that the directors’ use of the going concern basis
is{appropriate.
However, because not all future events or conditions can be predicted,
these statements are not a guarantee as to the group’s ability to
continue as a going concern.
financials.indb 141
15/05/2015 01:51
142
BT Group plc
Annual Report 2015
Other required reporting
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Companies Act 2006 opinion
In our opinion, the information given in the 6WUDWHJLF5HSRUW and the 5HSRUWRIWKH'LUHFWRUVIRUWKHƬQDQFLDO\HDUIRUZKLFKWKHƬQDQFLDOVWDWHPHQWV
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,6$V8.,UHODQGUHSRUWLQJ
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r information in the Annual Report is:
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– apparently materially incorrect based on, or materially inconsistent with, our knowledge
of the group acquired in the course of performing our audit; or
– otherwise misleading.
We have no exceptions to report arising
from this responsibility.
r the statement given by the directors on page 130, in accordance with provision C.1.1 of the UK
&RUSRUDWH*RYHUQDQFH&RGH‘the Code’), that they consider the Annual Report taken as a whole
to be fair, balanced and understandable and provides the information necessary for members to
assess the group’s performance, business model and strategy is materially inconsistent with our
knowledge of the group acquired in the course of performing our audit.
We have no exceptions to report arising
from this responsibility.
r the section of the Annual Report on page 101, as required by provision C.3.8 of the Code,
describing the work of the Audit & Risk Committee does not appropriately address matters
communicated by us to the Audit & Risk Committee.
We have no exceptions to report arising
from this responsibility.
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Under the Companies Act 2006 we are required to report to you if, in
our opinion, we have not received all the information and explanations
we require for our audit. We have no exceptions to report arising from
this responsibility.
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An audit involves obtaining evidence about the amounts and disclosures
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caused by fraud or error. This includes an assessment of:
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by{law are not made. We have no exceptions to report arising from
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circumstances and have been consistently applied and adequately
disclosed;
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directors; and
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Under the Listing Rules we are required to review the part of the
Corporate Governance Statement relating to the company’s compliance
with ten provisions of the UK Corporate Governance Code. We have
nothing to report having performed our review.
5HVSRQVLELOLWLHVIRUWKHƬQDQFLDOVWDWHPHQWVDQGWKHDXGLW
2XUUHVSRQVLELOLWLHVDQGWKRVHRIWKHGLUHFWRUV
As explained more fully in the Statement of directors’ responsibilities
set out on page 130, the directors are responsible for the preparation of
the{ƬQDQFLDOVWDWHPHQWVDQGIRUEHLQJVDWLVƬHGWKDWWKH\JLYHDWUXHDQG
fair{view.
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Those standards require us to comply with the Auditing Practices Board’s
Ethical Standards for Auditors.
This report, including the opinions, has been prepared for and only for
the company’s members as a body in accordance with Chapter 3 of Part
16 of the Companies Act 2006 and for no other purpose. We do not,
in giving these opinions, accept or assume responsibility for any other
purpose or to any other person to whom this report is shown or into
whose hands it may come save where expressly agreed by our prior
consent in writing.
We primarily focus our work in these areas by assessing the directors’
judgements against available evidence, forming our own judgements,
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We test and examine information, using sampling and other auditing
techniques, to the extent we consider necessary to provide a reasonable
basis for us to draw conclusions. We obtain audit evidence through
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combination of both.
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in the Annual Report to identify material inconsistencies with the
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apparently materially incorrect based on, or materially inconsistent
with, the knowledge acquired by us in the course of performing the
audit. If we become aware of any apparent material misstatements or
inconsistencies we consider the implications for our report.
Other matter
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BT{Group plc for the year ended 31 March 2015 and on the information
in the 5HSRUWRQ'LUHFWRUVo5HPXQHUDWLRQ that is described as having
been{audited.
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IRUDQGRQEHKDOIRI3ULFHZDWHUKRXVH&RRSHUV//3
Chartered Accountants and Statutory Auditors
London
6 May 2015
financials.indb 142
15/05/2015 01:51
Overview
The Strategic Report
Purpose and strategy
Delivering our strategy
Group performance
United States opinion
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to the Board of directors and shareholders of BT Group plc
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In our opinion, the accompanying group balance sheets and the
related group income statements, group statements of comprehensive
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of BT Group plc and its subsidiaries at 31 March 2015 and 31 March
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of the three years in the period ended 31 March 2015 in conformity
with International Financial Reporting Standards as issued by the
International Accounting Standards Board. Also in our opinion, the
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established in the Turnbull Guidance.
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VWDWHPHQWVIRUPDLQWDLQLQJHƪHFWLYHLQWHUQDOFRQWURORYHUƬQDQFLDO
UHSRUWLQJDQGIRULWVDVVHVVPHQWRIWKHHƪHFWLYHQHVVRILQWHUQDOFRQWURO
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WKHƬUVWWZRSDUDJUDSKVRI,QWHUQDOFRQWURORYHUƬQDQFLDOUHSRUWLQJLQ
the 5HSRUWRIWKHDirectors, *HQHUDOLQIRUPDWLRQ, of the BT Group plc
Annual Report & Form 20-F 2015.
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and on the cRPSDQ\oVLQWHUQDOFRQWURORYHUƬQDQFLDOUHSRUWLQJEDVHGRQ
our integrated audits. We conducted our audits in accordance with the
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States). Those standards require that we plan and perform the audits
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DUHIUHHRIPDWHULDOPLVVWDWHPHQWDQGZKHWKHUHƪHFWLYHLQWHUQDOFRQWURO
RYHUƬQDQFLDOUHSRUWLQJZDVPDLQWDLQHGLQDOOPDWHULDOUHVSHFWV
Governance
Financial statements
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143
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designed to provide reasonable assurance regarding the reliability of
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external purposes in accordance with generally accepted accounting
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WKRVHSROLFLHVDQGSURFHGXUHVWKDWL{SHUWDLQWRWKHPDLQWHQDQFHRI
UHFRUGVWKDWLQUHDVRQDEOHGHWDLODFFXUDWHO\DQGIDLUO\UHƮHFWWKH
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reasonable assurance that transactions are recorded as necessary to
SHUPLWSUHSDUDWLRQRIƬQDQFLDOVWDWHPHQWVLQDFFRUGDQFHZLWKJHQHUDOO\
accepted accounting principles, and that receipts and expenditures of
the company are being made only in accordance with authorisations of
PDQDJHPHQWDQGGLUHFWRUVRIWKHFRPSDQ\DQGLLL{SURYLGHUHDVRQDEOH
assurance regarding prevention or timely detection of unauthorised
acquisition, use, or disposition of the company’s assets that could have
a{PDWHULDOHƪHFWRQWKHƬQDQFLDOVWDWHPHQWV
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reporting may not prevent or detect misstatements. Also, projections of
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that controls may become inadequate because of changes in conditions,
or that the degree of compliance with the policies or procedures
may{deteriorate.
3ULFHZDWHUKRXVH&RRSHUV//3
London, United Kingdom
6 May 2015
2XUDXGLWVRIWKHƬQDQFLDOVWDWHPHQWVLQFOXGHGH[DPLQLQJRQDWHVW
EDVLVHYLGHQFHVXSSRUWLQJWKHDPRXQWVDQGGLVFORVXUHVLQWKHƬQDQFLDO
VWDWHPHQWVDVVHVVLQJWKHDFFRXQWLQJSULQFLSOHVXVHGDQGVLJQLƬFDQW
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reporting included obtaining an understanding of internal control over
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internal control based on the assessed risk. Our audits also included
performing such other procedures as we considered necessary in the
circumstances. We believe that our audits provide a reasonable basis
for{our opinions.
financials.indb 143
15/05/2015 01:51
144
BT Group plc
Annual Report 2015
*URXSLQFRPHVWDWHPHQW
Year ended 31 March 2015
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financials.indb 144
15/05/2015 01:51
Overview
The Strategic Report
Purpose and strategy
Delivering our strategy
Group performance
Governance
Financial statements
Additional information
145
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financials.indb 145
2015
£m
2014
£m
2013
£m
19
9
208
16
762
27
27
5
7
59
14
207
37
384
4
105
24
27
27
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512
15/05/2015 01:51
146
BT Group plc
Annual Report 2015
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At 31 March
Non-current assets
Intangible assets
Property, plant and equipment
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Investments
Associates and joint ventures
Trade and other receivables
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12
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26
22
16
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15
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23
24
26
17
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24
26
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£m
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£m
3,170
13,505
1,232
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26
184
1,559
3,087
13,840
539
34
18
214
1,460
118
94
3,140
65
97
3,523
434
108
82
2,907
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114
1,774
695
1,900
168
5,276
222
142
1,873
139
5,261
315
99
7,868
927
7,583
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948
422
7,941
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7,022
898
829
434
419
1,051
1,485
408
62
1,447
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7KHFRQVROLGDWHGƬQDQFLDOVWDWHPHQWVRQSDJHV144 to 194 and 199 were approved by the Board of Directors on 6 May 2015 and were signed on its
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Chairman
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Chief Executive
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Group Finance Director
financials.indb 146
15/05/2015 01:51
Overview
The Strategic Report
Purpose and strategy
Delivering our strategy
Group performance
Governance
Financial statements
Additional information
147
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9
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408
62
100
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178
24
1,948
762
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1,948
786
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–
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186
34
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64
68
64
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408
62
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106
512
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219
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2,135
208
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989
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financials.indb 147
15/05/2015 01:51
148
BT Group plc
Annual Report 2015
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10
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financials.indb 148
15/05/2015 01:51
Overview
The Strategic Report
Purpose and strategy
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accordance with the Companies Act 2006, Article 4 of the IAS
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interpretations, as adopted by the European Union. The consolidated
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,QWHUQDWLRQDO$FFRXQWLQJ6WDQGDUGV%RDUGWKH,$6%7KHFRQVROLGDWHG
ƬQDQFLDOVWDWHPHQWVDUHSUHSDUHGRQDJRLQJFRQFHUQEDVLV
7KHFRQVROLGDWHGƬQDQFLDOVWDWHPHQWVDUHSUHSDUHGRQWKHKLVWRULFDO
FRVWEDVLVH[FHSWIRUFHUWDLQƬQDQFLDODQGHTXLW\LQVWUXPHQWVWKDW
KDYHEHHQPHDVXUHGDWIDLUYDOXH7KHFRQVROLGDWHGƬQDQFLDOVWDWHPHQWV
are presented in Sterling, the functional currency of BT Group plc,
the parent company.
Reorganisation
From 1 April 2014 BT Conferencing has moved from BT Business
into BT Global Services. This VLPSOLƬHV the way we provide integrated
collaboration solutions to our global customers. BT Security has moved
from our central group functions within Other into BT Global Services.
Security is of increasing importance to our customers, and we believe
that this move helps us better compete in the market and take full
advantage of global opportunities.
In order to present historical information on a consistent basis, we have
revised comparatives for the years ended 31 March 2014 and 31 March
2013 in BT Global Services, BT Business and Other. There is no impact
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EHHQUHDOORFDWHGWRWKHDSSURSULDWHFDVKJHQHUDWLQJXQLWVWRUHƮHFWWKLV
UHRUJDQLVDWLRQVHHQRWH7KHRYHUDOOLPSDFWRQWKHOLQHVRIEXVLQHVV
is disclosed in note 4.
New and amended accounting standards adopted with no
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The following new and amended accounting standards adopted during
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– ,$6n)LQDQFLDO,QVWUXPHQWV3UHVHQWDWLRQ2ƪVHWWLQJ)LQDQFLDO
Assets and Financial Liabilities – Amendments to IAS 32’
– IAS 39 ‘Novation of Derivatives and Continuation of Hedge
Accounting’
– ,$6n5HFRYHUDEOH$PRXQW'LVFORVXUHVIRU1RQƬQDQFLDO$VVHWVs
Amendments to IAS 36’.
New and amended accounting standards that have been
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7KHIROORZLQJVWDQGDUGVKDYHEHHQLVVXHGDQGDUHHƪHFWLYHIRU
accounting periods ending on or after 1 January 2015 and are expected
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,)56n5HYHQXHIURP&RQWUDFWVZLWK&XVWRPHUVo
In May 2014, IFRS 15 ‘Revenue from Contracts with Customers’ was
LVVXHGDQGLVH[SHFWHGWREHHƪHFWLYHIRUSHULRGVEHJLQQLQJRQRUDIWHU
{-DQXDU\VXEMHFWWRFRQVXOWDWLRQRQSRWHQWLDOGHIHUUDOE\RQH
year and endorsement by the EU.
IFRS 15 sets out the requirements for recognising revenue from contracts
with customers. The standard requires entities to apportion revenue
earned from contracts to individual promises, or performance obligations,
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The group is in the process of quantifying the impact of this standard.
,)56n)LQDQFLDO,QVWUXPHQWVo
,)56ZDVSXEOLVKHGLQ-XO\DQGZLOOEHHƪHFWLYHIRUSHULRGV
beginning on or after 1 January 2018 subject to endorsement by the
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WKHFODVVLƬFDWLRQPHDVXUHPHQWLPSDLUPHQWDQGGHUHFRJQLWLRQRI
ƬQDQFLDODVVHWVDQGƬQDQFLDOOLDELOLWLHVWRJHWKHUZLWKDQHZKHGJH
accounting model.
The group is in the process of quantifying the impact of the
new standard.
financials.indb 149
Governance
Financial statements
Additional information
149
There are no other standards or interpretations issued but not yet
HƪHFWLYHZHH[SHFWWRKDYHDPDWHULDOLPSDFWRQWKHJURXS
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The group’s income statement and segmental analysis separately
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that presentation of the group’s results in this way is relevant to an
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LGHQWLƬHGE\YLUWXHRIWKHLUVL]HQDWXUHRULQFLGHQFH7KLVSUHVHQWDWLRQ
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management and reported to the Board and the Operating Committee
and assists in providing a meaningful analysis of the trading results of
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management considers quantitative as well as qualitative factors such
as the frequency or predictability of occurrence.
Furthermore, the group considers a columnar presentation to be
appropriate, as it improves the clarity of the presentation and is
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management and reported to the Board and the Operating Committee.
6SHFLƬFLWHPVPD\QRWEHFRPSDUDEOHWRVLPLODUO\WLWOHGPHDVXUHVXVHG
by other companies. Examples of charges or credits meeting the above
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regulatory settlements, historic insurance or litigation claims, business
restructuring programmes, asset impairment charges, property
rationalisation programmes, net interest on pensions and the settlement
of multiple tax years. In the event that other items meet the criteria,
which are applied consistently from year to year, they are also treated
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the use of accounting estimates and assumptions. It also requires
management to exercise its judgement in the process of applying the
group’s accounting policies. We continually evaluate our estimates,
assumptions and judgements based on available information and
H[SHULHQFH$VWKHXVHRIHVWLPDWHVLVLQKHUHQWLQƬQDQFLDOUHSRUWLQJ
DFWXDOUHVXOWVFRXOGGLƪHUIURPWKHVHHVWLPDWHV0DQDJHPHQWKDV
discussed its critical accounting estimates and associated disclosures
with the Audit & Risk Committee. The areas involving a higher degree
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Long-term customer contracts
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\HDUV'XULQJWKHFRQWUDFWXDOSHULRGUHFRJQLWLRQRIFRVWVDQGSURƬWV
PD\EHLPSDFWHGE\HVWLPDWHVRIWKHXOWLPDWHSURƬWDELOLW\RIHDFK
contract. If, at any time, these estimates indicate that any contract will
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immediately. If these estimates indicate that any contract will be less
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written down to the extent they are no longer considered to be fully
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contracts in order to determine whether the latest estimates
are appropriate.
Key factors reviewed include:
– 7UDQVDFWLRQYROXPHVRURWKHULQSXWVDƪHFWLQJIXWXUHUHYHQXHVZKLFK
can vary depending on customer requirements, plans, market position
and other factors such as general economic conditions.
– Our ability to achieve key contract milestones connected with the
transition, development, transformation and deployment phases for
customer contracts.
– The status of commercial relations with customers and the implication
for future revenue and cost projections.
– 2XUHVWLPDWHVRIIXWXUHVWDƪDQGWKLUGSDUW\FRVWVDQGWKHGHJUHHWR
ZKLFKFRVWVDYLQJVDQGHƯFLHQFLHVDUHGHOLYHUDEOH
The carrying value of assets comprising the costs of the initial set up,
transition or transformation phase of long-term networked IT services
contracts is disclosed in note 16.
15/05/2015 01:51
150
BT Group plc
Annual Report 2015
&ULWLFDODFFRXQWLQJHVWLPDWHVDQGNH\MXGJHPHQWV
continued
Pension obligations
BT has a commitment, mainly through the BTPS, to pay pension
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{\HDUV7KHDFFRXQWLQJFRVWRIWKHVHEHQHƬWVDQGWKHSUHVHQWYDOXH
of our pension liabilities depend on such factors as the life expectancy
of the members, the salary progression of our current employees, price
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the future pension payments. We use estimates for all of these factors in
GHWHUPLQLQJWKHSHQVLRQFRVWVDQGOLDELOLWLHVLQFRUSRUDWHGLQRXUƬQDQFLDO
VWDWHPHQWV7KHDVVXPSWLRQVUHƮHFWKLVWRULFDOH[SHULHQFHDQGRXU
judgement regarding future expectations.
The value of the net pension obligation at 31 March 2015, the key
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of the IAS 19 pension liability at 31 March 2015, and of the income
VWDWHPHQWRSHUDWLQJFKDUJHLQWRFKDQJHVLQWKHVH
assumptions are disclosed in note 19.
Useful lives for property, plant and equipment and software
The plant and equipment in our networks is long lived with cables and
switching equipment operating for over ten years and underground
ducts being used for decades. We also develop software for use in IT
systems and platforms that supports the products and services provided
to our customers and that is also used within the group.
The annual depreciation and amortisation charge is sensitive to the
estimated service lives allocated to each type of asset. Asset lives are
DVVHVVHGDQQXDOO\DQGFKDQJHGZKHQQHFHVVDU\WRUHƮHFWFXUUHQW
thinking on the remaining lives in light of technological change, network
LQYHVWPHQWSODQVLQFOXGLQJWKHJURXSoVƬEUHUROORXWSURJUDPPH
prospective economic utilisation and physical condition of the assets
concerned. Changes to the service lives of assets implemented from
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the year ended 31 March 2015.
The carrying values of software and property, plant and equipment are
disclosed in notes 12 and 13. The useful lives applied to the principal
categories of assets are disclosed on page 152.
Provisions and contingent liabilities
As disclosed in note 18, the group’s provisions principally relate
to obligations arising from property rationalisation programmes,
restructuring programmes, claims, litigation and regulatory risks.
8QGHURXUSURSHUW\UDWLRQDOLVDWLRQSURJUDPPHVZHKDYHLGHQWLƬHGD
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sub-let this space, this is not always possible. Estimates have been made
of the cost of vacant possession and of any shortfall arising from any
sub-lease income being lower than the lease costs. Any such shortfall
is recognised as a provision.
In respect of claims, litigation and regulatory risks, the group provides
IRUDQWLFLSDWHGFRVWVZKHUHDQRXWƮRZRIUHVRXUFHVLVFRQVLGHUHG
probable and a reasonable estimate can be made of the likely outcome.
The prices at which certain services are charged are regulated and may
be subject to retrospective adjustment by regulators. Estimates are
used in assessing the likely value of the regulatory risk. For all risks,
the ultimate liability may vary from the amounts provided and will be
dependent upon the eventual outcome of any settlement.
Management exercise judgement in measuring the exposures to
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that a potential claim or liability will arise and in quantifying the
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Current and deferred income tax
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WD[ODZVDQGUHJXODWLRQV:KHUHWKHHƪHFWRIWKHVHODZVDQGUHJXODWLRQV
is unclear, we use estimates in determining the liability for the tax to be
SDLGRQRXUSDVWSURƬWVZKLFKZHUHFRJQLVHLQRXUƬQDQFLDOVWDWHPHQWV
We believe the estimates, assumptions and judgements are reasonable
but this can involve complex issues which may take a number of years
financials.indb 150
WRUHVROYH7KHƬQDOGHWHUPLQDWLRQRISULRU\HDUWD[OLDELOLWLHVFRXOGEH
GLƪHUHQWIURPWKHHVWLPDWHVUHƮHFWHGLQWKHƬQDQFLDOVWDWHPHQWVDQG
may result in the recognition of an additional tax expense or tax credit
in the income statement.
Deferred tax assets and liabilities require management judgement
in determining the amounts to be recognised. The group uses
management’s expectations of future revenue growth, operating costs,
DQGSURƬWPDUJLQVWRGHWHUPLQHWKHH[WHQWWRZKLFKIXWXUHWD[DEOH
SURƬWVZLOOEHJHQHUDWHGDJDLQVWZKLFKWRFRQVXPHWKHGHIHUUHGWD[
assets.
The value of the group’s income tax assets and liabilities is disclosed
on the balance sheet on page 146. The carrying value of the group’s
deferred tax assets and liabilities is disclosed in note 9.
Goodwill
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determined based on value-in-use calculations. These calculations
require the use of estimates, including management’s expectations of
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FDVKƮRZVIRUHDFK&*8
The carrying value of goodwill and the key assumptions used in
performing the annual impairment assessment are disclosed in note 12.
Providing for doubtful debts
BT provides services to consumer and business customers, mainly
on credit terms. We know that certain debts due to us will not be
paid through the default of a small number of our customers.
Estimates, based on our historical experience, are used in determining
the level of debts that we believe will not be collected. These estimates
include such factors as the current state of the economy and particular
industry issues.
The value of the provision for doubtful debts is disclosed in note 16.
6LJQLƬFDQWDFFRXQWLQJSROLFLHV
7KHVLJQLƬFDQWDFFRXQWLQJSROLFLHVDSSOLHGLQSUHSDUDWLRQRIWKHVH
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have been consistently applied to all the years presented, unless
otherwise stated.
Revenue
Revenue represents the fair value of the consideration received or
receivable for communications services and equipment sales, net of
discounts and sales taxes. Revenue is recognised when it is probable
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to the group and the amount of revenue and associated costs can be
measured reliably. Where the group acts as an agent in a transaction,
it recognises revenue net of directly attributable costs.
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Revenue arising from separable installation and connection services
is recognised when it is earned, upon activation. Revenue from the
rental of analogue and digital lines and private circuits is recognised on
a straight-line basis over the period to which it relates. Revenue from
calls is recognised at the time the call is made over the group’s network.
Subscription fees, consisting primarily of monthly charges for access to
broadband and other internet access or voice services, are recognised as
revenue as the service is provided. Revenue from the interconnection of
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recognised at the time of transit across the group’s network.
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Revenue from the sale of equipment is recognised when all the
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customer, which is normally the date the equipment is delivered and
accepted by the customer.
15/05/2015 01:51
Overview
The Strategic Report
Purpose and strategy
Delivering our strategy
Group performance
6LJQLƬFDQWDFFRXQWLQJSROLFLHVFRQWLQXHG
/RQJWHUPFRQWUDFWXDODUUDQJHPHQWV
5HYHQXHIURPORQJWHUPFRQWUDFWXDODUUDQJHPHQWVLQFOXGLQJƬ[HGSULFH
contracts to design and build software solutions, is recognised based
on the percentage of completion method. The stage of completion is
estimated using an appropriate measure according to the nature of
the contract such as the proportion of costs incurred relative to the
estimated total contract costs, or other measures of completion such
as the achievement of contract milestones and customer acceptance.
In the case of time and materials contracts, revenue is recognised as
the service is rendered.
Costs related to delivering services under long-term contractual
arrangements are expensed as incurred except for an element of
costs incurred in the initial contract set up, transition or transformation
phase, which is deferred and recorded within non-current assets. These
costs are then recognised in the income statement on a straight line
basis over the remaining contract term, unless the pattern of service
GHOLYHU\LQGLFDWHVDGLƪHUHQWSURƬOHLVDSSURSULDWH7KHVHFRVWVDUH
GLUHFWO\DWWULEXWDEOHWRVSHFLƬFFRQWUDFWVUHODWHWRIXWXUHDFWLYLW\ZLOO
JHQHUDWHIXWXUHHFRQRPLFEHQHƬWVDQGDUHDVVHVVHGIRUUHFRYHUDELOLW\
on a regular basis.
The percentage of completion method relies on estimates of total
expected contract revenues and costs, as well as reliable measurement
RIWKHSURJUHVVPDGHWRZDUGVFRPSOHWLRQ8QOHVVWKHƬQDQFLDORXWFRPH
of a contract can be estimated with reasonable certainty, no attributable
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equal to the costs incurred to date, to the extent that such revenue is
expected to be recoverable, or costs are accrued to bring the margin to
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contract if the assumptions regarding the overall contract outcome are
changed. The cumulative impact of a revision in estimates is recorded in
the period in which such revisions become likely and can be estimated.
Where the actual and estimated costs to completion exceed the
estimated revenue for a contract, the full contract life loss is
recognised immediately.
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Where a contractual arrangement consists of two or more separate
elements that have value to a customer on a standalone basis, revenue is
recognised for each element as if it were an individual contract. The total
contract consideration is allocated between the separate elements on
the basis of relative fair value and the appropriate revenue recognition
criteria are applied to each element as described above.
Operating and reportable segments
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information provided to the Operating Committee, as detailed on
SDJH{26, which is the key management committee and represents
the ‘chief operating decision maker’.
7KHJURXSoVRUJDQLVDWLRQDOVWUXFWXUHUHƮHFWVWKHGLƪHUHQWFXVWRPHU
groups to which it provides communications products and services via
its customer-facing lines of business: BT Global Services, BT Business,
BT Consumer, BT Wholesale and Openreach. The customer-facing lines
of business are supported by an internal service unit: BT Technology,
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The customer-facing lines of business are the group’s reportable
segments and generate substantially all the group’s revenue.
The remaining operations of the group are aggregated and included
within the ‘Other’ category to reconcile to the consolidated results
of the group. The ‘Other’ category includes BT TSO and the group’s
centralised functions including procurement, supply chain and
property management.
3URYLVLRQVIRUWKHVHWWOHPHQWRIVLJQLƬFDQWOHJDOFRPPHUFLDODQG
regulatory disputes, which are negotiated at a group level, are initially
recorded in the ‘Other’ segment. On resolution of the dispute, the full
LPSDFWLVUHFRJQLVHGLQWKHUHOHYDQWOLQHRIEXVLQHVVoUHVXOWVDQGRƪVHW
in the group results through the utilisation of the provision previously
charged to the ‘Other’ segment. Settlements which are particularly
VLJQLƬFDQWRUFRYHUPRUHWKDQRQHƬQDQFLDO\HDUPD\IDOOZLWKLQWKH
GHƬQLWLRQRIVSHFLƬFLWHPVDVGHWDLOHGRQSDJH149.
financials.indb 151
Governance
Financial statements
Additional information
151
The costs incurred by BT TSO are recharged to the customer-facing
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and amortisation incurred by BT TSO in relation to the networks and
systems it manages and operates on behalf of the customer-facing
lines of business is allocated to the lines of business based on their
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projects undertaken on behalf of the customer-facing lines of business
is allocated based on the value of the directly attributable expenditure
incurred. Where projects are not directly attributable to a particular line
of business, capital expenditure is allocated between them based
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and the group’s centralised functions are not reportable segments as
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‘Operating Segments’ for any of the years presented.
Performance of each reportable segment is measured based on
DGMXVWHG(%,7'$GHƬQHGDV(%,7'$EHIRUHVSHFLƬFLWHPVDVLQFOXGHG
LQWKHLQWHUQDOƬQDQFLDOUHSRUWVUHYLHZHGE\WKHOperating Committee.
(%,7'$LVGHƬQHGDVWKHRSHUDWLQJSURƬWRUORVVEHIRUHGHSUHFLDWLRQ
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considered to be a useful measure of the operating performance of the
lines of business because it approximates to the underlying operating
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DPHDQLQJIXODQDO\VLVRIWUDGLQJSHUIRUPDQFHE\H[FOXGLQJVSHFLƬF
items, which are disclosed separately by virtue of their size, nature or
LQFLGHQFH6SHFLƬFLWHPVDUHGHWDLOHGLQQRWH{DQGDUHQRWDOORFDWHGWR
WKHUHSRUWDEOHVHJPHQWVDVWKLVUHƮHFWVKRZWKH\DUHUHSRUWHGWRWKH
Operating Committee. Finance expense and income are not allocated to
the reportable segments, as the central treasury function manages this
activity, together with the overall net debt position of the group.
5HWLUHPHQWEHQHƬWV
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LV{WKHSUHVHQWYDOXHRIWKHGHƬQHGEHQHƬWREOLJDWLRQOHVVWKHIDLUYDOXH
of the plan assets.
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using the projected unit credit method and key actuarial assumptions
at the balance sheet date.
The income statement expense is allocated between an operating
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WKHLQFUHDVHLQWKHGHƬQHGEHQHƬWREOLJDWLRQUHVXOWLQJIURPWKHSHQVLRQ
EHQHƬWHDUQHGE\DFWLYHHPSOR\HHVLQWKHFXUUHQWSHULRGWKHFRVWV
RIDGPLQLVWHULQJWKHSODQVDQGDQ\SDVWVHUYLFHFRVWVFUHGLWVVXFKDV
WKRVHDULVLQJIURPFXUWDLOPHQWVRUVHWWOHPHQWV7KHQHWƬQDQFHLQFRPH
RUH[SHQVHUHƮHFWVWKHLQWHUHVWRQWKHUHWLUHPHQWEHQHƬWREOLJDWLRQV
recognised in the group balance sheet, based on the discount rate at
the start of the year. Actuarial gains and losses are recognised in full
in the period in which they occur and are presented in the group
statement of comprehensive income.
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income statement expense represents the contributions payable for
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Property, plant and equipment
Property, plant and equipment are included at historical cost, net of
accumulated depreciation, government grants and any impairment
charges. An item of property, plant and equipment is derecognised on
GLVSRVDORUZKHQQRIXWXUHHFRQRPLFEHQHƬWVDUHH[SHFWHGWRDULVH
IURPWKHFRQWLQXHGXVHRIWKHDVVHW7KHGLƪHUHQFHEHWZHHQWKHVDOH
proceeds and the net book value at the date of disposal is recognised in
operating costs in the income statement.
Included within the cost of network infrastructure and equipment
are direct and indirect labour costs, materials and directly
attributable overheads.
Depreciation is provided on property, plant and equipment on a straight
OLQHEDVLVIURPWKHWLPHWKHDVVHWLVDYDLODEOHIRUXVHWRZULWHRƪWKH
asset’s cost over the estimated useful life taking into account any
expected residual value. Freehold land is not depreciated.
15/05/2015 01:51
152
BT Group plc
Annual Report 2015
6LJQLƬFDQWDFFRXQWLQJSROLFLHVFRQWLQXHG
The lives assigned to principal categories of assets are as follows:
Land and buildings
– Freehold buildings
– Leasehold land and buildings
Network infrastructure
Transmission equipment
– Duct
– Cable
– Fibre
Exchange equipment
Other network equipment
Other assets
– Motor vehicles
– &RPSXWHUVDQGRƯFHHTXLSPHQW
40 years
Unexpired portion of lease or
40 years, whichever is the shorter
40 years
3 to 25 years
5 to 20 years
2 to 13 years
2 to 20 years
2 to 9 years
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the lease term or their useful economic life. Residual values and
useful lives are reassessed annually and, if necessary, changes are
recognised prospectively.
Intangible assets
,GHQWLƬDEOHLQWDQJLEOHDVVHWVDUHUHFRJQLVHGZKHQWKHJURXSFRQWUROV
WKHDVVHWLWLVSUREDEOHWKDWIXWXUHHFRQRPLFEHQHƬWVDWWULEXWDEOHWR
WKHDVVHWZLOOƮRZWRWKHJURXSDQGWKHFRVWRIWKHDVVHWFDQEHUHOLDEO\
measured. All intangible assets, other than goodwill, are amortised
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pattern in which the assets are expected to be consumed. If the pattern
cannot be determined reliably, the straight line method is used.
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Goodwill represents the excess of the cost of an acquisition over the
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intangible assets) of the acquired business.
For the purpose of impairment testing, goodwill acquired in a business
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from the business combination. Each CGU to which goodwill is allocated
represents the lowest level within the group at which the goodwill is
monitored for internal management purposes.
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Computer software comprises computer software licences purchased
from third parties, and also the cost of internally developed software.
Computer software licences purchased from third parties are initially
recorded at cost.
Costs directly associated with the production of internally developed
software, including direct and indirect labour costs of development,
are capitalised only where it is probable that the software will generate
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and technical feasibility can be demonstrated, in which case it is
capitalised as an intangible asset on the balance sheet. Costs which do
not meet these criteria and research costs are expensed as incurred.
The group’s development costs which give rise to internally developed
software include upgrading the network architecture or functionality
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the group’s customers.
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Licence fees paid to governments, which permit telecommunications
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and amortised from the time the network is available for use to the end
of the licence period.
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Intangible assets such as customer relationships or brands acquired
through business combinations are recorded at fair value at the date of
acquisition. Assumptions are used in estimating the fair values of these
financials.indb 152
relationships or brands and include management’s estimates of revenue
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The estimated useful economic lives assigned to the principal categories
of intangible assets are as follows:
– Computer software
– Telecommunications licences
– Customer relationships and brands
2 to 10 years
2 to 20 years
5 to 15 years
3URJUDPPHULJKWV
Programme rights are recognised on the balance sheet from the point at
which the legally enforceable licence period begins. Rights for which the
licence period has not started are disclosed as contractual commitments
in note 29. Payments made to receive commissioned or acquired
programming in advance of the legal right to broadcast the programmes
DUHFODVVLƬHGDVSUHSD\PHQWV
Programme rights are initially recognised at cost and are amortised from
the point at which they are available for use, on a straight line basis over
the programming period, or the remaining licence term, as appropriate.
The amortisation charge is recorded within operating costs in the
income statement.
Programmes produced internally are recognised within current assets at
production cost, which includes labour costs and an appropriate portion
of relevant overheads, and charged to the income statement over the
period of the related broadcast.
Programme rights are tested for impairment in accordance with
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SDJH{1535HODWHGFDVKRXWƮRZVDUHFODVVLƬHGDVRSHUDWLQJFDVKƮRZV
LQWKHFDVKƮRZVWDWHPHQW
Provisions
Provisions are recognised when the group has a present legal or
constructive obligation as a result of past events, it is probable that
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the amount can be reliably estimated. Provisions are determined by
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current market assessments of the time value of money and the risks
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recognised at fair value and subsequently carried at amortised cost using
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Current and deferred income tax
Current income tax is calculated on the basis of the tax laws enacted or
substantively enacted at the balance sheet date in the countries where
the company’s subsidiaries, associates and joint ventures operate and
generate taxable income. The group periodically evaluates positions
taken in tax returns with respect to situations in which applicable
tax regulation is subject to interpretation, and the group establishes
provisions where appropriate on the basis of the amounts expected
to be paid to tax authorities.
Deferred tax is recognised, using the liability method, in respect of
WHPSRUDU\GLƪHUHQFHVEHWZHHQWKHFDUU\LQJDPRXQWRIWKHJURXSoV
assets and liabilities and their tax base. Deferred income tax assets and
OLDELOLWLHVDUHRƪVHWZKHQWKHUHLVDOHJDOO\HQIRUFHDEOHULJKWWRRƪVHW
current tax assets against current tax liabilities and when the deferred
income tax assets and liabilities relate to income taxes levied by the
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entities where there is an intention to settle the balances on a net basis.
Any remaining deferred tax asset is recognised only when, on the basis
of all available evidence, it can be regarded as probable that there will be
VXLWDEOHWD[DEOHSURƬWVZLWKLQWKHVDPHMXULVGLFWLRQLQWKHIRUHVHHDEOH
IXWXUHDJDLQVWZKLFKWKHGHGXFWLEOHWHPSRUDU\GLƪHUHQFHFDQEHXWLOLVHG
Deferred tax is determined using tax rates that are expected to apply in
the periods in which the asset is realised or liability settled, based on tax
rates and laws that have been enacted or substantively enacted by the
balance sheet date.
15/05/2015 01:51
Overview
The Strategic Report
Purpose and strategy
Delivering our strategy
Group performance
6LJQLƬFDQWDFFRXQWLQJSROLFLHVFRQWLQXHG
Basis of consolidation
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%7*URXSSOFnWKHFRPSDQ\oDQGLWVVXEVLGLDULHVDQGWKH\LQFRUSRUDWH
its share of the results of associates and joint ventures using the equity
method of accounting.
A subsidiary is an entity that is controlled by another entity, known
as the parent or investor. An investor controls an investee when
the investor is exposed, or has rights, to variable returns from its
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through its power over the investee.
Non-controlling interests in the net assets of consolidated subsidiaries,
which consist of the amounts of those interests at the date of the
original business combination and non-controlling share of changes in
equity since the date of the combination, are not material to the group’s
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The results of subsidiaries acquired or disposed of during the year
are consolidated from and up to the date of change of control.
Where necessary, accounting policies of subsidiaries have been
aligned with the policies adopted by the group. All intra-group
transactions including any gains or losses, balances, income or
expenses are eliminated in full on consolidation.
:KHQWKHJURXSORVHVFRQWURORIDVXEVLGLDU\WKHSURƬWRUORVVRQ
GLVSRVDOLVFDOFXODWHGDVWKHGLƪHUHQFHEHWZHHQLWKHDJJUHJDWHRI
the fair value of the consideration received and the fair value of any
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LQFOXGLQJJRRGZLOODQGOLDELOLWLHVRIWKHVXEVLGLDU\DQGDQ\
QRQFRQWUROOLQJLQWHUHVWV7KHSURƬWRUORVVRQGLVSRVDOLVUHFRJQLVHG
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Business combinations
On acquisition of a subsidiary, purchase consideration is measured at fair
value, which is the aggregate of the fair values of the assets transferred,
liabilities incurred or assumed and the equity instruments issued in
exchange for control of the acquiree. Acquisition-related costs are
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are recognised at their fair value at the acquisition date.
Financial statements
Additional information
Foreign currencies
Foreign currency transactions are translated into the functional currency
using the exchange rates prevailing at the date of the transaction.
Foreign exchange gains and losses resulting from the settlement of
transactions and the translation of monetary assets and liabilities
denominated in foreign currencies at period end exchange rates are
recognised in the income statement line which most appropriately
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On consolidation, assets and liabilities of foreign undertakings are
translated into Sterling at year end exchange rates. The results of
foreign undertakings are translated into Sterling at average rates
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transaction dates, in which case income and expenses are translated at
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retranslation are recognised directly in a separate component of equity,
the translation reserve.
In the event of the disposal of an undertaking with assets and
liabilities denominated in a foreign currency, the cumulative translation
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is charged or credited to the gain or loss on disposal recognised in the
income statement.
Research and development
Research expenditure is recognised in the income statement in the
period in which it is incurred. Development expenditure, including
the cost of internally developed software, is recognised in the income
statement in the period in which it is incurred unless it is probable that
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the cost of the asset can be reliably measured and technical feasibility
can be demonstrated, in which case it is capitalised as an intangible
asset on the balance sheet. Capitalisation ceases when the asset being
developed is ready for use. Research and development costs include
direct and indirect labour, materials and directly attributable overheads.
Leases
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Leases of property, plant and equipment where the group holds
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DVƬQDQFHOHDVHV)LQDQFHOHDVHDVVHWVDUHFDSLWDOLVHGDWWKH
commencement of the lease term at the lower of the present value of
the minimum lease payments or the fair value of the leased asset. The
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of future periods, are recognised as liabilities. Leases are subsequently
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Goodwill is reviewed for impairment at least annually. Impairment
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FDVKJHQHUDWLQJXQLWLVLPSDLUHGLPSDLUPHQWORVVHVDUHDOORFDWHGƬUVWO\
against goodwill, and secondly on a pro rata basis against intangible
and other assets.
Government grants
Government grants are recognised when there is reasonable assurance
that the conditions associated with the grants have been complied with
and the grants will be received.
Grants for the purchase or production of property, plant and equipment
are deducted from the cost of the related assets and reduce future
depreciation expense accordingly. Grants for the reimbursement of
operating expenditure are deducted from the related category of costs
in the income statement. Government grants received relating to future
expenditure are recognised as payments received in advance within
Other payables.
153
Once a government grant is recognised, any related contingent liability
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Contingent Liabilities and Contingent Assets’.
Goodwill arising on acquisition is recognised as an asset and measured at
cost, representing the excess of the aggregate of the consideration, the
amount of any non-controlling interests in the acquiree, and the
fair value of the acquirer’s previously held equity interest in the acquiree
LIDQ\RYHUWKHQHWRIWKHIDLUYDOXHVRIWKHLGHQWLƬDEOHDVVHWVDQG
liabilities at the date of acquisition.
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equipment are tested for impairment if events or changes in
FLUFXPVWDQFHVDVVHVVHGDWHDFKUHSRUWLQJGDWHLQGLFDWHWKDWWKH
carrying amount may not be recoverable. When an impairment test
is performed, the recoverable amount is assessed by reference to the
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YDOXHLQXVHRIWKHUHOHYDQWFDVKJHQHUDWLQJXQLWDQGWKHIDLUYDOXH
less cost to sell.
financials.indb 153
Governance
The determination of whether an arrangement is, or contains, a lease is
based on the substance of the arrangement and requires an assessment
RIZKHWKHUWKHIXOƬOPHQWRIWKHDUUDQJHPHQWLVGHSHQGHQWRQWKHXVHRI
DVSHFLƬFDVVHWRUDVVHWVDQGZKHWKHUWKHDUUDQJHPHQWFRQYH\VWKHULJKW
to use the asset.
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WKHOHVVRUDUHFODVVLƬHGDVRSHUDWLQJOHDVHV5HQWDOVDUHFKDUJHGWRWKH
income statement on a straight line basis over the period of the lease.
Own shares
Own shares represent the shares of the parent company BT Group plc
that are held in treasury or by employee share ownership trusts. Own
shares are recorded at cost and deducted from equity. When shares
vest unconditionally or are cancelled they are transferred from the own
shares reserve to retained earnings at their weighted average cost.
Share-based payments
The group operates a number of equity settled share-based payment
arrangements, under which the group receives services from employees
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group. Equity settled share-based payments are measured at fair value
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conditions but including any market-based performance criteria and
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15/05/2015 01:51
154
BT Group plc
Annual Report 2015
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for employees to save). The fair value determined at the grant date
is recognised as an expense on a straight line basis over the vesting
period, based on the group’s estimate of the options or shares that will
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conditions. Fair value is measured using either the Binomial options
pricing model or Monte Carlo simulations, whichever is most appropriate
to the share-based payment arrangement.
Service and performance conditions are vesting conditions. Any other
conditions are non-vesting conditions which have to be taken into
account to determine the fair value of equity instruments granted. In the
case that an award or option does not vest as a result of a failure to meet
a non-vesting condition that is within the control of either counterparty,
this is accounted for as a cancellation. Cancellations are treated as
accelerated vesting and all remaining future charges are immediately
recognised in the income statement. As the requirement to save
under an employee saveshare arrangement is a non-vesting condition,
employee cancellations are treated as an accelerated vesting.
Awards that lapse or are forfeited result in a credit to the income
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in which they lapse or are forfeited.
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terminated before the normal retirement date, or when an employee
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UHFRJQLVHVWHUPLQDWLRQEHQHƬWVZKHQLWLVGHPRQVWUDEO\FRPPLWWHGWR
WKHDƪHFWHGHPSOR\HHVOHDYLQJWKHJURXS
Financial instruments
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Trade and other payables
Financial liabilities within trade and other payables are initially
recognised at fair value, which is usually the original invoiced
amount, and subsequently carried at amortised cost using the
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Loans and other borrowings
Loans and other borrowings are initially recognised at the fair value of
amounts received net of transaction costs. Loans and other borrowings
DUHVXEVHTXHQWO\PHDVXUHGDWDPRUWLVHGFRVWXVLQJWKHHƪHFWLYHLQWHUHVW
method and, if included in a fair value hedge relationship, are re-valued
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the loans and other borrowings. The resulting amortisation of fair
value movements, on de-designation of the hedge, is recognised in
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investments and are initially recognised at fair value plus direct
transaction costs and then re-measured at subsequent reporting dates
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exchange rates for monetary items, interest, dividends and impairment
losses, which are recognised in the income statement) recognised
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cumulative gain or loss previously recognised in equity is taken to the
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nature of the item or transaction. On disposal or impairment of the
investments, any gains and losses that have been deferred in other
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Dividends on equity investments are recognised in the income
statement when the group’s right to receive payment is established.
Equity investments are recorded in non-current assets unless they
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Trade and other receivables
Trade and other receivables are initially recognised at fair value, which
is usually the original invoiced amount, and are subsequently carried
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PDGHIRUGRXEWIXOUHFHLYDEOHV3URYLVLRQVDUHPDGHVSHFLƬFDOO\ZKHUH
there is evidence of a risk of non-payment, taking into account ageing,
previous losses experienced and general economic conditions.
financials.indb 154
Cash and cash equivalents
Cash and cash equivalents comprise cash in hand and current balances
with banks and similar institutions, which are readily convertible to
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an original maturity of three months or less. For the purpose of the
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are included within loans and other borrowings, in current liabilities
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exposure to foreign exchange and interest rate risks. The group’s
policy is not to use derivatives for trading purposes. However,
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QRWGHVLJQDWHGDVDKHGJHZKHUHQDWXUDORƪVHWLVPRUHDSSURSULDWHDUH
initially recognised and subsequently measured at fair value through
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in the income statement. Gains and losses on re-measurement are
recognised in the income statement in the line that most appropriately
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'HULYDWLYHƬQDQFLDOLQVWUXPHQWVDUHFODVVLƬHGDVFXUUHQWDVVHWVRU
current liabilities where they have a maturity period within 12 months.
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WKDQPRQWKVWKH\DUHFODVVLƬHGZLWKLQHLWKHUQRQFXUUHQWDVVHWV
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Where the fair value of a derivative contract at initial recognition is not
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price, a day one gain or loss will arise which is not recognised in the
income statement. Such gains and losses are deferred and amortised
to the income statement based on the remaining contractual term
and as observable market data becomes available.
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Where derivatives qualify for hedge accounting, recognition of any
resultant gain or loss depends on the nature of the hedge. To qualify
for hedge accounting, hedge documentation must be prepared at
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at inception and in subsequent periods in which the hedge remains
in operation. Hedge accounting is discontinued when the hedging
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hedge accounting or the group chooses to end the hedge relationship.
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or fair value hedges.
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WKHYDULDELOLW\LQFDVKƮRZVRIDUHFRJQLVHGDVVHWRUOLDELOLW\RUD
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WKHGHULYDWLYHƬQDQFLDOLQVWUXPHQWLVUHFRJQLVHGGLUHFWO\LQHTXLW\
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or liabilities, the associated cumulative gain or loss is removed from
equity and recognised in the same line of the income statement and
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of a recognised asset or liability is recognised immediately in the same
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arises on highly probable transactions, it is recognised in the income
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item or transaction.
Fair value hedges
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variability in fair value of a recognised asset or liability, or unrecognised
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designated as a fair value hedge is recorded in the income statement
at each reporting date, together with any changes in fair value of the
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15/05/2015 01:51
The Strategic Report
Purpose and strategy
Overview
Delivering our strategy
Group performance
Governance
Financial statements
Additional information
155
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7KHGHƬQLWLRQRIWKHJURXSoVRSHUDWLQJDQGUHSRUWDEOHVHJPHQWVLVSURYLGHGRQSDJH151.
From 1 April 2014 BT Conferencing and BT Security have moved into BT Global Services, from BT Business and our central group functions within
2WKHUUHVSHFWLYHO\7KLVVLPSOLƬHVWKHZD\ZHSURYLGHLQWHJUDWHGFROODERUDWLRQVROXWLRQVWRRXUJOREDOFXVWRPHUVEHWWHUFRPSHWHLQWKHPDUNHW
and take full advantage of global opportunities. Comparative results for BT Global Services, BT Business and Other and intra-group items have
been restated to be presented on a consistent basis.
7KHLPSDFWRQWKHOLQHRIEXVLQHVVUHVXOWVIRU\HDUHQGHG0DUFKZDVWRLQFUHDVHUHYHQXH(%,7'$DQGRSHUDWLQJSURƬWLQ%7*OREDO6HUYLFHV
E\~P~PDQG~P~P~PDQG~PDQGWRUHGXFHUHYHQXH(%,7'$DQGRSHUDWLQJSURƬWLQ%7%XVLQHVVE\
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£121m).
These organisational changes do not impact the results of BT Consumer, BT Wholesale or Openreach and there is no impact on the total group results,
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Information regarding the results of each reportable segment is provided below.
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BT Global
Services
£m
BT Business
£m
BT Consumer
£m
Segment revenue
Internal revenue
6,779
3,145
4,285
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528
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b
(%,7'$
Depreciation and amortisation
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BT Wholesale
£m
Openreach
£m
Other
£m
Total
£m
2,157
–
5,011
74
21,451
28
561
861
813
337
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Share of post tax loss of associates and
joint ventures
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and joint ventures
25
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BT Global
Services
£m
BT Business
£m
BT Consumer
£m
Segment revenue
Internal revenue
7,269
3,213
4,019
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425
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b
(%,7'$
Depreciation and amortisation
2SHUDWLQJSURƬWa
Openreach
£m
Other
£m
Total
£m
2,422
–
5,061
82
22,066
37
833
614
25
805
614
369
13
6SHFLƬFLWHPVQRWH
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Share of post tax loss of associates and
joint ventures
Loss on disposal of interest in associates
and joint ventures
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BT Wholesale
£m
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financials.indb 155
15/05/2015 01:51
156
BT Group plc
Annual Report 2015
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BT Global
Services
£m
BT Business
£m
BT Consumer
£m
Segment revenue
Internal revenue
7,392
3,220
3,846
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BT Wholesale
£m
Openreach
£m
Other
£m
Total
£m
2,608
–
5,115
54
22,235
28
(%,7'$b
Depreciation and amortisation
950
940
968
620
23
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316
707
720
366
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joint ventures
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and joint ventures
9
130
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Internal revenue and costs
Intra-group revenue generated from the sale of regulated products and services is based on market price. Intra-group revenue from the sale of
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pricing levels.
BT Wholesale does not generate internal revenue from the other lines of business. The majority of internal trading relates to Openreach and arises
on rentals, and any associated connection or migration charges, of the UK access lines and other network products to the customer-facing lines of
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relates primarily to IT services and BT Ireland,QWHUQDOUHYHQXHDULVLQJLQ%7&RQVXPHUUHODWHVSULPDULO\WRHPSOR\HHEURDGEDQGDQGZLƬVHUYLFHV
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Year ended 31 March 2015
BT Global
Services
£m
BT Business
£m
BT Consumer BT Wholesale
£m
£m
Openreach
£m
Other
£m
Total
£m
,QWHUQDOUHYHQXHUHFRUGHGE\
BT Global Services
BT Business
BT Consumer
BT Wholesale
Openreach
Other
–
241
20
–
187
–
29
–
22
–
306
–
–
62
–
–
939
–
–
94
2
–
242
–
–
1
–
–
–
46
–
1
18
–
1,390
–
29
399
62
–
46
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357
338
47
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BT Global
Services
£m
BT Business
£m
BT Consumer
£m
BT Wholesale
£m
Openreach
£m
Other
£m
Total
£m
,QWHUQDOUHYHQXHUHFRUGHGE\
BT Global Services
BT Business
BT Consumer
BT Wholesale
Openreach
Other
–
247
13
–
198
–
31
–
18
–
333
–
–
47
–
–
1,021
3
–
120
3
–
275
–
–
1
–
–
–
42
–
–
15
–
1,412
–
31
415
49
–
45
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458
382
398
43
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financials.indb 156
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Overview
The Strategic Report
Purpose and strategy
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Group performance
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Financial statements
Additional information
157
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BT Globala
Services
£m
BT Businessa BT Consumer
£m
£m
BT Wholesale
£m
Othera
£m
Openreach
£m
Total
£m
,QWHUQDOUHYHQXHUHFRUGHGE\
BT Global Servicesa
BT Businessa
BT Consumer
BT Wholesale
Openreach
Othera
–
247
11
–
198
–
35
–
9
–
386
–
–
55
–
–
1,097
5
–
110
8
–
275
–
–
3
–
–
–
21
–
8
16
–
1,412
–
35
423
44
–
26
7RWDO
456
430
393
24
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Revenue by products and services
2015
£m
Year ended 31 March
ICT and managed networks
Broadband, TV and convergence
Calls and lines and connectivity
Transit
Other products and services
5HYHQXHb
2014a
£m
2013a
£m
6,493
3,540
5,969
555
1,294
6,608
3,205
6,064
697
1,713
6,515
2,906
6,358
869
1,691
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Capital expenditure
Year ended 31 March 2015
BT Global
Services
£m
BT Business
£m
BT Consumer
£m
BT Wholesale
£m
Openreach
£m
Other
£m
Total
£m
Intangible assets
Property, plant and equipment
220
248
31
156
85
122
80
130
55
1,027
90
82
561
1,765
&DSLWDOH[SHQGLWXUHa
468
187
207
210
172
Year ended 31 March 2014
BT Globalb
Services
£m
BT Businessb BT Consumer
£m
£m
BT Wholesale
£m
Openreach
£m
Otherb
£m
Total
£m
Intangible assets
Property, plant and equipment
172
344
18
109
44
167
78
166
74
975
121
78
507
1,839
&DSLWDOH[SHQGLWXUHa
516
127
211
244
199
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financials.indb 157
15/05/2015 01:51
158
BT Group plc
Annual Report 2015
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Geographic information
The UK is the group’s country of domicile and the group generates the majority of its revenue from external customers in the UK. The geographic
analysis of revenue is on the basis of the country of origin in which the customer is invoiced.
Revenue from external customers
Year ended 31 March
2015
£m
2014
£m
2013
£m
UK
Europe, Middle East and Africa, excluding the UK
Americas
$VLD3DFLƬF
13,827
2,328
1,115
581
14,084
2,585
1,074
544
14,152
2,604
1,057
526
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Non-current assets
At 31 March
2015
£m
2014
£m
UK
Europe, Middle East and Africa, excluding the UK
Americas
$VLD3DFLƬF
13,977
2,184
555
169
14,318
2,322
451
68
Non-current assets
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financials.indb 158
15/05/2015 01:51
Overview
The Strategic Report
Purpose and strategy
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Group performance
Governance
Financial statements
Additional information
159
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Year ended 31 March
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Wages and salaries
Social security costs
Other pension costs
Share-based payment expense
Notes
2015
£m
2014
£m
2013
£m
3,574
440
467
70
3,736
444
463
60
3,879
443
399
64
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Own work capitalised
1HWVWDƪFRVWV
Net indirect labour costsa
324
452
499
Net labour costs
Payments to telecommunications operators
Property and energy costs
Network operating and IT costs
TV programme rights charges
Other operating costs
Other operating income
Depreciation of property, plant and equipment
Owned assets
+HOGXQGHUƬQDQFHOHDVHV
Amortisation of intangible assets
2,144
968
605
330
3,573
2,472
959
591
203
3,672
2,677
1,022
587
–
3,552
1,997
11
530
2,090
22
583
2,175
19
649
19
21
13
13
12
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Leaver costsb
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Operating lease charges
Foreign currency gains
Government grants
8
381
276
116
8
662
388
14
739
390
58
829
423
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Compensation of key management personnel
Key management personnel comprise executive and non-executive directors and members of the Operating Committee. Compensation of key
management personnel is shown in the table below:
Year ended 31 March
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Share-based payments
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2015
£m
2014
£m
2013
£m
9.7
1.1
5.7
0.5
11.1
1.0
6.4
–
10.5
1.1
6.0
–
17.0
18.5
17.6
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financials.indb 159
15/05/2015 01:51
160
BT Group plc
Annual Report 2015
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Year end
000
2015
Average
000
UK
Non-UK
70.9
17.6
72.2
16.5
72.2
15.6
72.7
15.1
73.2
14.7
74.1
15.0
7RWDOHPSOR\HHV
88.5
88.7
87.8
87.8
87.9
89.1
Year end
000
2015
Average
000
BT Global Services
BT Business
BT Consumer
BT Wholesale
Openreach
Other
18.1
8.0
6.2
1.5
32.7
22.0
19.2
8.6
6.0
1.7
32.4
20.8
22.7
8.7
6.0
1.8
31.6
17.0
22.1
8.9
6.2
1.8
31.5
17.3
21.4
8.0
6.6
2.0
30.4
19.5
22.0
8.4
6.4
1.4
30.4
20.5
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88.5
88.7
87.8
87.8
87.9
89.1
2015
£000
2014
£000
2013
£000
Number of employees in the groupa
Number of employees in the groupa
Year end
000
Year end
000
2014
Average
000
2014b
Average
000
Year end
000
Year end
000
2013
Average
000
2013b
Average
000
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The following fees were paid or are payable to the company’s auditors, PricewaterhouseCoopers LLP.
Year ended 31 March
Fees payable to the company’s auditors and its associates for:
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2,925
4,809
2,619
5,355
2,674
5,284
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Taxation compliance servicesc
Taxation advisory servicesd
All other assurance servicese
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350
401
3,199
570
260
371
180
829
472
370
166
933
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financials.indb 160
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Overview
The Strategic Report
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Financial statements
Additional information
161
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Year ended 31 March
2015
£m
2014
£m
2013
£m
5HYHQXH
Retrospective regulatory rulings
–
236
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Property rationalisation costs
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315
45
75
19
–
–
276
–
–
–
–
–
–
–
204
–
–
–
18
43
381
276
116
292
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235
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5HWURVSHFWLYHUHJXODWRU\UXOLQJV – in July 2014 the Supreme Court overturned a Court of Appeal judgment, made in July 2012, which had
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revenue and EBITDA of £128m, being the prior year impacts of ladder pricing agreements with the UK mobile operators following the Supreme
Court judgment.
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3URSHUW\UDWLRQDOLVDWLRQFRVWV – we recognised a £45m charge increasing onerous lease provisions relating to the rationalisation of the group’s
property portfolio.
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against a December 2012 Ofcom determination on the pricing of certain Ethernet products. We disagree with the CAT’s judgment and have applied
for permission to appeal to the Court of Appeal. Ofcom had determined that BT had overcharged for certain services between 1 April 2006 and
31{March 2011 and required BT to make repayments. The CAT judged that BT should also pay interest on these amounts. Together with a review of
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charges of £151m and £36m against revenue and EBITDA respectively, following Ofcom’s determinations on historic Ethernet pricing.
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fees of £7m were incurred setting up a £3.6bn acquisition facility.
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,QWHUHVWH[SHQVHRQUHWLUHPHQWEHQHƬWREOLJDWLRQV– see note 19 for more details.
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Accommodation Services Holdings, which was held at £QLOFRVW,QZHUHFRJQLVHGDSURƬWRI~PDVDUHVXOWRIWKHGLVSRVDORIWKHJURXSoV
remaining interest in its associate Tech Mahindra, which was held at a carrying value of £127m at 31 March 2012.
7D[FUHGLWRQUHPHDVXUHPHQWRIGHIHUUHGWD[ – see note 9 for more details.
financials.indb 161
15/05/2015 01:51
162
BT Group plc
Annual Report 2015
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taxation as a result of the following factors:
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36
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208
16
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268
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£m
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£m
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6
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26
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1,161
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permitted by IAS 12, with the exception of deferred tax related to BT’s pension schemes which is disclosed within deferred tax assets.
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are expected to be recovered or settled after more than one year.
financials.indb 163
15/05/2015 01:51
164
BT Group plc
Annual Report 2015
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The rate of UK corporation tax changed from 21% to 20% on 1 April 2015. As deferred tax assets and liabilities are measured at the rates that are
expected to apply in the periods of the reversal, deferred tax balances at 31 March 2014 were calculated using a rate of 20%. This resulted in a tax
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WD[DVVHWVZHUHUHFRJQLVHGDPRXQWLQJWR~EQ~EQ7KHJURXSoVFDSLWDOORVVHVDQGRWKHUWHPSRUDU\GLƪHUHQFHVKDYHQRH[SLU\
date restrictions. The expiry date of operating losses carried forward is dependent upon the tax law of the various territories in which the losses arose.
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recognised in respect of these unremitted earnings because the group is in a position to control the timing of any dividends from subsidiaries and
hence any tax consequences that may arise.
financials.indb 164
15/05/2015 01:51
Overview
The Strategic Report
Purpose and strategy
Delivering our strategy
Group performance
Governance
Financial statements
Additional information
165
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issue after deducting the own shares held by employee share ownership trusts and treasury shares.
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number of shares as the impact of these is antidilutive.
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8,191
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26.5p
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and a reconciliation to basic earnings per share is disclosed on page 203.
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7.5
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The proposed dividend will be payable to all shareholders on the Register of Members on 14 August 2015.
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financials.indb 165
15/05/2015 01:52
166
BT Group plc
Annual Report 2015
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financials.indb 166
15/05/2015 01:52
Overview
The Strategic Report
Purpose and strategy
Delivering our strategy
Group performance
Governance
Financial statements
Additional information
167
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allocated to the group’s CGUs as follows:
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HDFK&*8&DVKƮRZVEH\RQGWKHthree-year period have been extrapolated using perpetuity growth rates.
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used in the calculation of the group’s weighted average cost of capital are benchmarked to externally available data.
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an assessment of the long-term growth prospects of that sector. The growth rates have been benchmarked against external data for the relevant
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financials.indb 167
15/05/2015 01:52
168
BT Group plc
Annual Report 2015
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Land and
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445
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346
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485
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12,341
–
296
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68
13,772
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The carrying amount of land and buildings, including leasehold improvements, comprised:
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208
237
233
252
7RWDOODQGDQGEXLOGLQJV
445
485
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financials.indb 168
15/05/2015 01:52
Overview
The Strategic Report
Purpose and strategy
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169
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On 1 August 2013 the group acquired 100% of the issued share capital of ESPN Global Limited, together with certain trademarks, licences and
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311
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108
340
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118
$GGLWLRQVUHƮHFW79SURJUDPPHULJKWVIRUZKLFKWKHOHJDOO\HQIRUFHDEOHOLFHQFHSHULRGKDVVWDUWHGGXULQJWKH\HDU3D\PHQWVPDGHIRUSURJUDPPH
ULJKWVIRUZKLFKWKHOHJDOO\HQIRUFHDEOHOLFHQFHSHULRGKDVQRW\HWVWDUWHGDUHLQFOXGHGZLWKLQSUHSD\PHQWVVHHQRWH
Programme rights commitments are disclosed in note 29.
7UDGHDQGRWKHUUHFHLYDEOHV
At 31 March
Non-current
Other assetsa
2015
£m
2014
£m
184
214
a2WKHUDVVHWVLQFOXGHVFRVWVUHODWLQJWRWKHLQLWLDOVHWXSWUDQVLWLRQRUWUDQVIRUPDWLRQSKDVHRIORQJWHUPQHWZRUNHG,7VHUYLFHVFRQWUDFWVRI~P~PDQGSUHSD\PHQWVDQGOHDVLQJGHEWRUVRI
~P~P
At 31 March
Current
Trade receivables
Prepayments
Accrued income
Other receivables
2015
£m
2014
£m
1,454
505
810
371
1,370
508
815
214
Trade receivables are stated after deducting allowances for doubtful debts, as follows:
2015
£m
2014
£m
At 1 April
Expense
Utilised
([FKDQJHGLƪHUHQFHV
192
78
218
77
$W0DUFK
196
192
7UDGHUHFHLYDEOHVDUHFRQWLQXRXVO\PRQLWRUHGDQGDOORZDQFHVDSSOLHGDJDLQVWWUDGHUHFHLYDEOHVFRQVLVWRIERWKVSHFLƬFLPSDLUPHQWVDQGFROOHFWLYH
impairments based on the group’s historical loss experiences for the relevant aged category and taking into account general economic conditions.
+LVWRULFDOORVVH[SHULHQFHDOORZDQFHVDUHFDOFXODWHGE\OLQHRIEXVLQHVVLQRUGHUWRUHƮHFWWKHVSHFLƬFQDWXUHRIWKHFXVWRPHUVUHOHYDQWWRWKDWOLQH
of business.
7UDGHDQGRWKHUUHFHLYDEOHVDUHFODVVLƬHGDVORDQVDQGUHFHLYDEOHVDQGKHOGDWDPRUWLVHGFRVW7KHFDUU\LQJDPRXQWRIWKHVHEDODQFHVDSSUR[LPDWHV
to fair value due to the short maturity of amounts receivable.
Note 26 provides further disclosure regarding the credit quality of the group’s gross trade receivables.
financials.indb 169
15/05/2015 01:52
170
BT Group plc
Annual Report 2015
7UDGHDQGRWKHUUHFHLYDEOHVFRQWLQXHG
Trade receivables are due as follows:
3DVWGXHDQGQRWVSHFLƬFDOO\LPSDLUHG
At 31 March
Trade
receivables
VSHFLƬFDOO\
impaired net
Not past due of provision
£m
£m
Between
0 and 3
months
£m
Between
3 and 6
months
£m
Between
6 and 12
months
£m
Over 12
months
£m
Total
£m
2015
867
71
366
44
37
69
2014
857
39
300
31
43
100
*URVVWUDGHUHFHLYDEOHVZKLFKKDYHEHHQVSHFLƬFDOO\LPSDLUHGDPRXQWHGWR~159P~P
Trade receivables not past due and accrued income are analysed below by line of business.
At 31 March
Trade receivables
not past due
2015
2014a
£m
£m
Accrued income
2015
2014a
£m
£m
BT Global Services
BT Business
BT Consumer
BT Wholesale
Openreach
Other
517
143
119
70
15
3
535
193
106
4
12
7
405
115
85
128
75
2
448
112
–
118
137
–
7RWDO
867
857
810
815
a &HUWDLQEDODQFHVKDYHEHHQUHVWDWHGVHHQRWH
Given the broad and varied nature of the group’s customer base, the analysis of trade receivables not past due and accrued income by line of business
is considered the most appropriate disclosure of credit concentrations. Cash collateral held against trade and other receivables amounted to £4m
~P
7UDGHDQGRWKHUSD\DEOHV
At 31 March
Current
Trade payables
Other taxation and social security
Other payables
Accrued expenses
Deferred income
At 31 March
Non-currenta
Other payables
Deferred income
2015
£m
2014
£m
2,835
416
535
414
1,076
2,745
480
545
444
1,047
2015
£m
2014
£m
854
73
845
53
927
898
a1RQFXUUHQWtrade and other SD\DEOHVPDLQO\UHODWHWRRSHUDWLQJOHDVHOLDELOLWLHV andGHIHUUHGJDLQVRQDSULRUSHULRGVDOHDQGƬQDQFHOHDVHEDFNWUDQVDFWLRQDVZHOODV estimatHVRISRWHQWLDOUHLQYHVWPHQWRU
UHSD\PHQWRIJRYHUQPHQWJUDQWVUHFHLYHG.
financials.indb 170
15/05/2015 01:52
Overview
The Strategic Report
Purpose and strategy
3URYLVLRQV
Delivering our strategy
Group performance
Governance
Financial statements
Restructuringa
£m
Propertyb
£m
Additional information
Otherc
£m
Total
£m
At 1 April 2013
Income statement expense
Unwind of discount
Utilised or released
([FKDQJHGLƪHUHQFHV
67
20
–
241
4
8
–
322
17
–
630
41
8
$W0DUFK
Income statement expense
Unwind of discount
Utilised or released
Transfers
([FKDQJHGLƪHUHQFHV
58
6
–
–
1
201
46
8
–
–
274
88
–
6
533
140
8
6
$W0DUFK
45
217
302
564
2015
£m
2014
£m
142
422
99
434
564
533
At 31 March
Analysed as:
Current
Non-current
171
a3URYLVLRQVUHODWLQJWRWKHJURXSZLGHUHVWUXFWXULQJSURJUDPPH7KHVHDUHEHLQJXWLOLVHGDVWKHREOLJDWLRQVDUHVHWWOHG
b3URSHUW\SURYLVLRQVPDLQO\FRPSULVHRQHURXVOHDVHSURYLVLRQVDULVLQJIURPWKHUDWLRQDOLVDWLRQRIWKHJURXSoVSURSHUW\SRUWIROLR7KHSURYLVLRQVZLOOEHXWLOLVHGRYHUWKHUHPDLQLQJOHDVHSHULRGV
ZKLFKUDQJHIURPRQHWR\HDUV
c 2WKHUSURYLVLRQVLQFOXGHDPRXQWVSURYLGHGIRUOHJDORUFRQVWUXFWLYHREOLJDWLRQVDULVLQJIURPLQVXUDQFHFODLPVOLWLJDWLRQDQGUHJXODWRU\ULVNVZKLFKZLOOEHXWLOLVHGDVWKHREOLJDWLRQVDUHVHWWOHG
financials.indb 171
15/05/2015 01:52
172
BT Group plc
Annual Report 2015
5HWLUHPHQWEHQHƬWSODQV
Background
7KHJURXSKDVERWKGHƬQHGEHQHƬWDQGGHƬQHGFRQWULEXWLRQUHWLUHPHQWEHQHƬWSODQV7KHJURXSoVPDLQSODQVDUHLQWKH8.DQGWKHODUJHVWE\
PHPEHUVKLSLVWKH%73HQVLRQ6FKHPH%736ZKLFKLVDGHƬQHGEHQHƬWSODQWKDWZDVFORVHGWRQHZHQWUDQWVRQ0DUFK$IWHUWKDWGDWH
QHZHQWUDQWVLQWKH8.KDYHEHHQDEOHWRMRLQDGHƬQHGFRQWULEXWLRQSODQFXUUHQWO\WKH%75HWLUHPHQW6DYLQJ6FKHPH%7566DFRQWUDFW
based arrangement.
'HƬQHGFRQWULEXWLRQSODQV
$GHƬQHGFRQWULEXWLRQSODQLVDSHQVLRQDUUDQJHPHQWXQGHUZKLFKWKHEHQHƬWVDUHOLQNHGWRFRQWULEXWLRQVSDLGWKHSHUIRUPDQFHRIHDFKLQGLYLGXDOoV
FKRVHQLQYHVWPHQWVDQGWKHIRUPLQZKLFKLQGLYLGXDOVFKRRVHWRWDNHWKHLUEHQHƬWV&RQWULEXWLRQVDUHSDLGLQWRDQLQGHSHQGHQWO\DGPLQLVWHUHG
IXQG7KHLQFRPHVWDWHPHQWFKDUJHLQUHVSHFWRIGHƬQHGFRQWULEXWLRQSODQVUHSUHVHQWVWKHFRQWULEXWLRQSD\DEOHE\WKHJURXSEDVHGXSRQDƬ[HG
percentage of employees’ pay. The company has no exposure to investment and other experience risks.
'HƬQHGEHQHƬWSODQV
$GHƬQHGEHQHƬWSODQLVDSHQVLRQDUUDQJHPHQWXQGHUZKLFKSDUWLFLSDWLQJPHPEHUVUHFHLYHDSHQVLRQEHQHƬWDWUHWLUHPHQWGHWHUPLQHGE\WKHSODQ
rules dependent on factors such as age, years of service and pensionable pay and is not dependent upon actual contributions made by the company
RUPHPEHUV7KHLQFRPHVWDWHPHQWVHUYLFHFRVWLQUHVSHFWRIGHƬQHGEHQHƬWSODQVUHSUHVHQWVWKHLQFUHDVHLQWKHGHƬQHGEHQHƬWOLDELOLW\DULVLQJIURP
SHQVLRQEHQHƬWVHDUQHGE\DFWLYHPHPEHUVLQWKHFXUUHQWSHULRG7KHFRPSDQ\LVH[SRVHGWRLQYHVWPHQWDQGRWKHUH[SHULHQFHULVNVDQGPD\QHHGWR
PDNHDGGLWLRQDOFRQWULEXWLRQVZKHUHLWLVHVWLPDWHGWKDWWKHEHQHƬWVZLOOQRWEHPHWIURPUHJXODUFRQWULEXWLRQVH[SHFWHGLQYHVWPHQWLQFRPH
and assets held.
*URXSLQFRPHVWDWHPHQW
7KHH[SHQVHRULQFRPHDULVLQJIURPDOOJURXSUHWLUHPHQWEHQHƬWDUUDQJHPHQWVUHFRJQLVHGLQWKHJURXSLQFRPHVWDWHPHQWLVVKRZQEHORZ
2015
£m
2014
£m
2013
£m
5HFRJQLVHGLQWKHLQFRPHVWDWHPHQWEHIRUHVSHFLƬFLWHPV
Current service cost:
sGHƬQHGEHQHƬWSODQV
sGHƬQHGFRQWULEXWLRQSODQV
Past service credit
$GPLQLVWUDWLRQH[SHQVHVDQG3HQVLRQ3URWHFWLRQ)XQGn33)oOHY\
254
176
a
42
272
151
–
40
225
136
–
38
7RWDORSHUDWLQJH[SHQVH
467
463
399
1HWLQWHUHVWH[SHQVHRQQHWSHQVLRQVGHƬFLWLQFOXGHGLQVSHFLƬFLWHPVQRWH
292
235
117
7RWDOUHFRJQLVHGLQWKHLQFRPHVWDWHPHQW
759
698
516
Year ended 31 March
a3DVWVHUYLFHFUHGLWUHODWHVWRYDULRXVSHQVLRQSODQVRSHUDWLQJRXWVLGHWKH8.
*URXSVWDWHPHQWRIFRPSUHKHQVLYHLQFRPH
5HPHDVXUHPHQWVRIWKHQHWGHƬQHGEHQHƬWREOLJDWLRQDUHUHFRJQLVHGLQIXOOLQWKHJURXSVWDWHPHQWRIFRPSUHKHQVLYHLQFRPHLQWKH\HDULQZKLFK
WKH\DULVH7KHVHFRPSULVHWKHLPSDFWRQWKHGHƬQHGEHQHƬWOLDELOLW\RIFKDQJHVLQGHPRJUDSKLFDQGƬQDQFLDODVVXPSWLRQVFRPSDUHGZLWKWKHVWDUWRI
WKH\HDUDFWXDOH[SHULHQFHEHLQJGLƪHUHQWWRWKRVHDVVXPSWLRQVDQGWKHUHWXUQRQSODQDVVHWVDERYHWKHDPRXQWLQFOXGHGLQWKHQHWSHQVLRQ
interest expense.
*URXSEDODQFHVKHHW
7KHQHWSHQVLRQREOLJDWLRQLQUHVSHFWRIGHƬQHGEHQHƬWSODQVUHSRUWHGLQWKHJURXSEDODQFHVKHHWLVVHWRXWEHORZ
2015
At 31 March
Present value
Assets of liabilities
£m
£m
'HƬFLW
£m
2014
Present value
Assets of liabilities
£m
£m
'HƬFLW
£m
BTPS
Other plansa
43,386
241
39,939
174
5HWLUHPHQWEHQHƬWREOLJDWLRQ
$GMXVWPHQWVGXHWRHƪHFWRIDVVHWFHLOLQJb
Deferred tax asset
–
1,481
–
1,381
1HWSHQVLRQREOLJDWLRQ
a,QFOXGHGLQWKHSUHVHQWYDOXHRIOLDELOLWLHVRIRWKHUSODQVLV~P~PUHODWHGWRXQIXQGHGSHQVLRQDUUDQJHPHQWV
b7KHUHLVQROLPLWLQJHƪHFWRIWKHDVVHWFHLOLQJDVDQ\DFFRXQWLQJVXUSOXVDULVLQJLVGHHPHGWREHUHFRYHUDEOHGXHWRWKHHFRQRPLFEHQHƬWVDYDLODEOHLQWKHIRUPRIIXWXUHUHIXQGVRUUHGXFWLRQVWR
IXWXUHFRQWULEXWLRQV
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payables in the group balance sheet.
financials.indb 172
15/05/2015 01:52
Overview
The Strategic Report
Purpose and strategy
Delivering our strategy
Group performance
Governance
Financial statements
Additional information
173
5HWLUHPHQWEHQHƬWSODQVFRQWLQXHG
0RYHPHQWVLQGHƬQHGEHQHƬWSODQDVVHWVDQGOLDELOLWLHV
7KHWDEOHEHORZVKRZVWKHPRYHPHQWVRQWKHSODQDVVHWVDQGOLDELOLWLHVLQWKH\HDUDQGLQGLFDWHVZKHUHWKH\DUHUHƮHFWHGLQWKHƬQDQFLDOVWDWHPHQWV
Assets
£m
Liabilities
£m
'HƬFLW
£m
41,566
–
1,710
61
–
Return on plan assets below the amount included in the group income statement
$FWXDULDOJDLQDULVLQJIURPFKDQJHVLQƬQDQFLDODVVXPSWLRQVb
Actuarial loss arising from changes in demographic assumptionsb
Actuarial loss arising from experience adjustmentsc
–
–
–
–
580
–
580
–
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274
At 1 April 2013
Current service cost
,QWHUHVWRQSHQVLRQGHƬFLW
Settlements
Administration expenses and PPF levy
,QFOXGHGLQWKHJURXSLQFRPHVWDWHPHQW
a
Regular contributions by employer
'HƬFLWFRQWULEXWLRQVE\HPSOR\HU
228
325
–
–
228
325
,QFOXGHGLQWKHJURXSFDVKƮRZVWDWHPHQW
553
–
553
12
2,166
15
–
–
9
Contributions by employees
%HQHƬWVSDLG
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2WKHUPRYHPHQWV
$W0DUFK
Current service cost
,QWHUHVWRQSHQVLRQGHƬFLW
Past service credit
Administration expenses and PPF levy
–
1,663
–
5
–
5
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Return on plan assets above the amount included in the group income statementa
$FWXDULDOORVVDULVLQJIURPFKDQJHVLQƬQDQFLDODVVXPSWLRQVb
Actuarial gain arising from changes in demographic assumptionsb
Actuarial gain arising from experience adjustmentsc
3,083
–
–
–
–
126
443
3,083
126
443
,QFOXGHGLQWKHJURXSVWDWHPHQWRIFRPSUHKHQVLYHLQFRPH
Regular contributions by employer
'HƬFLWFRQWULEXWLRQVE\HPSOR\HU
178
876
9
–
–
178
876
,QFOXGHGLQWKHJURXSFDVKƮRZVWDWHPHQW
–
Contributions by employees
%HQHƬWVSDLG
Foreign exchange
12
2,231
44
–
–
19
2WKHUPRYHPHQWV
19
$W0DUFK
a7KHWRWDODFWXDOUHWXUQRQSODQDVVHWVLQZDVDJDLQRI~P~P
b7KHDFWXDULDOJDLQRUORVVDULVHVIURPFKDQJHVLQWKHDVVXPSWLRQVXVHGWRYDOXHWKHGHƬQHGEHQHƬWOLDELOLWLHVDWWKHHQGRIWKH\HDUFRPSDUHGZLWKWKHDVVXPSWLRQVXVHGDWWKHVWDUWRIWKH\HDU7KLV{LQFOXGHV
ERWKƬQDQFLDODVVXPSWLRQVZKLFKDUHEDVHGRQPDUNHWFRQGLWLRQVDWWKH\HDUHQGDQGGHPRJUDSKLFDVVXPSWLRQVVXFKDVOLIHH[SHFWDQF\
c7KHDFWXDULDOORVVRUJDLQDULVLQJIURPH[SHULHQFHDGMXVWPHQWVRQGHƬQHGEHQHƬWOLDELOLWLHVUHSUHVHQWVWKHLPSDFWRQWKHOLDELOLWLHVRIGLƪHUHQFHVEHWZHHQDFWXDOH[SHULHQFHGXULQJWKH\HDUFRPSDUHGZLWK
WKHDVVXPSWLRQVPDGHDWWKHVWDUWRIWKH\HDU6XFKGLƪHUHQFHVPLJKWDULVHIRUH[DPSOHIURPPHPEHUVFKRRVLQJGLƪHUHQWEHQHƬWRSWLRQVDWUHWLUHPHQWDFWXDOVDODU\LQFUHDVHVEHLQJGLƪHUHQWIURPWKRVH
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financials.indb 173
15/05/2015 01:52
174
BT Group plc
Annual Report 2015
5HWLUHPHQWEHQHƬWSODQVFRQWLQXHG
BTPS
$W0DUFKWKHUHZHUHPHPEHUVRIWKH%7360HPEHUVEHORQJWRRQHRIWKUHHVHFWLRQVGHSHQGLQJXSRQWKHGDWHWKH\ƬUVWMRLQHG
WKHVFKHPH6HFWLRQ$LVIRUPHPEHUVZKRMRLQHGEHIRUH'HFHPEHU6HFWLRQ%LVIRUPHPEHUVZKRMRLQHGWKHVFKHPHEHWZHHQ{'HFHPEHU
1971 and 31 March 1986 and Section C is for members who joined the scheme on or after 1 April 1986 but before the scheme closed to new
entrants on 31 March 2001. The membership is analysed below.
At 31 March 2015
Number
of active
members
Number of
deferred Number of
Total
members pensioners membership
Sections A and Ba
Section C
15,000
23,000
32,000
40,500
176,000
20,000
223,000
83,500
7RWDO
Sections A and Ba
Section C
17,000
24,000
35,500
41,000
176,500
19,000
229,000
84,000
7RWDO
At 31 March 2014
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6LQFH$SULOZKHQFKDQJHVWRPHPEHUEHQHƬWVDQGFRQWULEXWLRQUDWHVZHUHLQWURGXFHG6HFWLRQ%DQG&PHPEHUVKDYHDFFUXHGEHQHƬWV
EDVHGXSRQDFDUHHUDYHUDJHUHYDOXHGHDUQLQJV&$5(EDVLVDQGDQRUPDOSHQVLRQDEOHDJHRI2QD&$5(EDVLVEHQHƬWVDUHEXLOWXSEDVHGXSRQ
HDUQLQJVLQHDFK\HDUDQGWKHEHQHƬWDFFUXHGIRUHDFK\HDULVLQFUHDVHGE\WKHORZHURILQƮDWLRQRUWKHLQGLYLGXDOoVDFWXDOSD\LQFUHDVHLQHDFK\HDUWR
UHWLUHPHQW%HQHƬWVHDUQHGIRUSHQVLRQDEOHVHUYLFHSULRUWR$SULODUHEDVHGXSRQDPHPEHUoVƬQDOVDODU\DQGDQRUPDOSHQVLRQDEOHDJHRI
8QGHUWKHVFKHPHUXOHVWKHGHWHUPLQDWLRQRIWKHUDWHRILQƮDWLRQIRUVWDWXWRU\PLQLPXPUDWHVRIUHYDOXDWLRQDQGLQGH[DWLRQRIEHQHƬWVLVEDVHGXSRQ
HLWKHUWKH5HWDLO3ULFHV,QGH[53,RUWKH&RQVXPHU3ULFHV,QGH[&3,ZKLFKDSSO\WRHDFKFDWHJRU\RIPHPEHUDVVKRZQEHORZ
Active members
Section Ba
Section C
Deferred members
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at the lower of RPI or the individual’s actual UHWLUHPHQWEDVHGXSRQ{&3,
pay increase
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upon CPI
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currently based upon RPI up to a maximum
of 5%
a6HFWLRQ$PHPEHUVKDYHW\SLFDOO\HOHFWHGWRWDNH6HFWLRQ%EHQHƬWVDWUHWLUHPHQW
0DQDJHPHQWRIWKHVFKHPH
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behalf of the members in accordance with the terms of the Trust Deed of the scheme and relevant legislation. Under the terms of the Trust Deed there
are nine Trustee directors all of whom are appointed by BT. The chairman of the Trustee is appointed after consultation with, and with the agreement
RIWKHUHOHYDQWWUDGHXQLRQVZKRDUHDOVRUHVSRQVLEOHIRUQRPLQDWLQJIRXUGLUHFWRUVWRDFWDVUHSUHVHQWDWLYHVRIWKHPHPEHUV2I{WKHUHPDLQLQJIRXU
GLUHFWRUVWZRZLOOQRUPDOO\KROGVHQLRUSRVLWLRQVZLWKLQWKHJURXSDQGWZRZLOOQRUPDOO\KROGRUKDYHKHOGVHQLRUSRVLWLRQVLQFRPPHUFHRULQGXVWU\
6XEMHFWWRWKHUHEHLQJDQDSSURSULDWHO\TXDOLƬHGFDQGLGDWHDWOHDVWRQHRIWKH7UXVWHHGLUHFWRUVLVFXVWRPDULO\DFXUUHQWSHQVLRQHURUGHIHUUHG
pensioner of the BTPS. Trustee directors are usually appointed for a three-year term but are then eligible for re-appointment.
BTPS assets
Asset allocation
7KHDOORFDWLRQRIDVVHWVEHWZHHQGLƪHUHQWFODVVHVRILQYHVWPHQWLVUHYLHZHGUHJXODUO\DQGLVDNH\IDFWRULQWKH7UXVWHHoVLQYHVWPHQWSROLF\
7KH{DOORFDWLRQVVHWUHƮHFWWKH7UXVWHHoVYLHZVRQWKHDSSURSULDWHEDODQFHWREHVWUXFNEHWZHHQVHHNLQJUHWXUQVDQGLQFXUULQJULVNDQGRQWKHH[WHQWWR
which the assets should be distributed to match liabilities. Current market conditions and trends are regularly assessed which may lead to adjustments
LQWKHDVVHWDOORFDWLRQ7KH%736DOVRXVHVƬQDQFLDOLQVWUXPHQWVWREDODQFHWKHDVVHWDOORFDWLRQDQGWRPDQDJHLQƮDWLRQULVNLQWHUHVWUDWHULVNOLTXLGLW\
risk and foreign currency risk.
8QGHU,$6{SODQDVVHWVPXVWEHYDOXHGDWWKHELGPDUNHWYDOXHDWWKHEDODQFHVKHHWGDWH)RUWKHPDLQDVVHWFDWHJRULHV
–
–
–
–
securities listed on recognised stock exchanges are valued at closing bid prices
properties are valued on the basis of open market value
XQOLVWHGHTXLWLHVDUHYDOXHGLQDFFRUGDQFHZLWK,QWHUQDWLRQDO3ULYDWH(TXLW\DQG9HQWXUH&DSLWDO,3(9&JXLGHOLQHV
XQOLVWHGƬ[HGLQWHUHVWDQGLQGH[OLQNHGLQVWUXPHQWVDUHYDOXHGXVLQJWKHODWHVWPDUNHWSULFHRUXVLQJGLVFRXQWHGFDVKƮRZPRGHOVWKDWFRQVLGHU
credit risk.
financials.indb 174
15/05/2015 01:52
Overview
The Strategic Report
Purpose and strategy
Delivering our strategy
Group performance
Governance
Financial statements
Additional information
175
5HWLUHPHQWEHQHƬWSODQVFRQWLQXHG
The fair value of the assets of the BTPS analysed by asset category are shown below. These are subdivided by assets that have a quoted market price in
DQDFWLYHPDUNHWDQGWKRVHWKDWGRQRWVXFKDVLQYHVWPHQWIXQGV
2015a
At 31 March
Total assets
£bn
of which
quotedb
£bn
Total
%
2014a
Total assets
£bn
of which
quotedb
£bn
Total
%
Equitiesc
Fixed-interest securities
Index-linked securities
Property
Alternative assetsd
Cash and other
13.1
7.4
11.7
4.6
6.2
0.4
10.6
5.7
10.5
–
–
–
30
17
27
11
14
1
11.2
7.1
9.9
4.3
7.1
0.3
5.8
5.7
8.5
–
1.0
–
28
18
24
11
18
1
7RWDO
43.4
26.8
100
39.9
21.0
100
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c$W0DUFKWKH%736KHOG~EQRI8.HTXLWLHV~EQ
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On 4 July 2014, the Scheme entered into arrangements to hedge around 25% of the Scheme’s exposure to potential improvements in longevity.
These arrangements form part of the Scheme’s investment portfolio and will provide income to the Scheme in the event that pensions are paid out
for longer than expected under the terms of the contract. To facilitate the transaction, the Trustee set up a wholly owned insurance company. The
Scheme transferred longevity risk to this insurer, who has in turn reinsured this longevity risk with The Prudential Insurance Company of America, a
U.S. based life insurance company. These arrangements required no additional cash contributions from BT. At 31 March 2015, the fair value of the
insurance contract was negligible and has been included within cash and other assets.
,QYHVWPHQWSHUIRUPDQFH
The Trustee reports on investment performance against a benchmark which is based on the asset mix and the market returns for each asset class.
BTPS performance against the benchmark for the periods to 30 June 2014 was as follows.
Period ending 30 June 2014
1 year
3 years
10 years
Over
XQGHU
Actual
Benchmark BTPS return performance
%
%
%
6.2
6.2
6.5
6.2
5.8
7.0
–
0.5
BTPS liabilities under IAS 19
9DOXDWLRQPHWKRGRORJ\
7KHOLDELOLWLHVRIWKH%736DUHPHDVXUHGDVWKHSUHVHQWYDOXHRIWKHHVWLPDWHGIXWXUHEHQHƬWFDVKƮRZVWREHSDLGE\WKH6FKHPHFDOFXODWHGXVLQJWKH
SURMHFWHGXQLWFUHGLWPHWKRG7KHVHFDOFXODWLRQVDUHSHUIRUPHGIRUWKHFRPSDQ\E\DSURIHVVLRQDOO\TXDOLƬHGLQGHSHQGHQWDFWXDU\
7KHH[SHFWHGIXWXUHEHQHƬWSD\PHQWVDUHEDVHGRQDQXPEHURIDVVXPSWLRQVLQFOXGLQJIXWXUHLQƮDWLRQUHWLUHPHQWDJHVEHQHƬWRSWLRQVFKRVHQDQG
OLIHH[SHFWDQF\DQGDUHWKHUHIRUHLQKHUHQWO\XQFHUWDLQ$FWXDOEHQHƬWSD\PHQWVLQDJLYHQ\HDUPD\EHKLJKHURUORZHUIRUH[DPSOHLIPHPEHUVUHWLUH
sooner or later than assumed, or take a greater or lesser cash lump sum at retirement. The estimated duration of BTPS liabilities, which is an indicator
RIWKHZHLJKWHGDYHUDJHWHUPRIWKHOLDELOLWLHVLVDURXQG\HDUVDOWKRXJKWKHEHQHƬWVSD\DEOHE\WKH%736DUHH[SHFWHGWREHSDLGRYHUPRUHWKDQ
\HDUVDVVKRZQLQWKHJUDSKEHORZ:KLOVWEHQHƬWSD\PHQWVDUHH[SHFWHGWRLQFUHDVHRYHUWKHHDUOLHU\HDUVWKHYDOXHRIWKHOLDELOLWLHVLVH[SHFWHG
to reduce.
financials.indb 175
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176
BT Group plc
Annual Report 2015
5HWLUHPHQWEHQHƬWSODQVFRQWLQXHG
£bn
£bn
3.0
60
2.5
50
2.0
40
1.5
30
1.0
20
0.5
10
0
0
2015
2035
Forecast benefit payments (Left axis)
a
Liabilitiesa
Forecast benefits payable by the BTPSa
Forecast benefits payable by the BTPS at 31 March 2015 (unaudited)
2055
2075
2095
Liabilities (Right axis)
Based on accrued benefits to date.
.H\DVVXPSWLRQVs,$6
7KHNH\ƬQDQFLDODVVXPSWLRQVXVHGWRPHDVXUHWKHOLDELOLWLHVRIWKH%736XQGHU,$6DUHVKRZQEHORZ
At 31 March
Rate used to discount liabilities
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2015
2014
2013
%
%
%
3.25
2.85
1.85b
4.25
3.25
2.50c
4.20
3.30
2.55c
5HDOUDWHVSHU\HDUa
2015
2014
2013
%
%
%
0.39
–
b
0.97
–
c
0.87
–
c
a
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Rate used to discount liabilities
IAS 19 requires that the discount rate is determined by reference to market yields at the reporting date on high quality corporate bonds. The currency
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EDVHGRQDPDUNHWEDVHG$$FRUSRUDWHERQG\LHOGFXUYHDOORZLQJIRUWKHIXWXUHH[SHFWHGEHQHƬWSD\PHQWVIURPWKH%736
,QƮDWLRQsLQFUHDVHVLQ53,DQG&3,
6DODU\LQFUHDVHVDUHDVVXPHGWREHDOLJQHGZLWK&3,LQƮDWLRQZKLOVWEHQHƬWVDUHDVVXPHGWRLQFUHDVHE\HLWKHU53,RU&3,LQƮDWLRQDVSUHVFULEHGE\
WKHUXOHVRIWKH%736DQGVXPPDULVHGDERYH7KHDVVXPSWLRQIRU53,KDVEHHQDVVHVVHGE\UHIHUHQFHWR\LHOGVRQORQJWHUPƬ[HGDQGLQGH[OLQNHG
*RYHUQPHQWERQGVDQG%DQNRI(QJODQGSXEOLVKHGLQƮDWLRQDU\H[SHFWDWLRQV&3,LVDVVHVVHGDWDPDUJLQEHORZ53,WDNLQJLQWRDFFRXQWPDUNHW
IRUHFDVWVDQGLQGHSHQGHQWHVWLPDWHVRIWKHORQJWHUPGLƪHUHQFH
Longevity
The average life expectancy assumptions, after retirement at 60 years of age, are as follows.
At 31 March
2015
Number of
years
2014
Number of
years
Male in lower pay bracket
26.0
26.0
Male in medium pay bracket
Male in higher pay bracket
27.3
28.7
27.7
Female in lower pay bracket
Female in higher pay bracket
28.7
29.0
28.5
1.0
1.0
Average improvement for a member retiring at age 60 in 10 years’ time
The assumptions about life expectancy have regard to information published by the UK actuarial profession’s Continuous Mortality Investigation.
However, due to the size of the membership of the BTPS it is considered appropriate for the adopted life expectancy assumptions to take into account
the actual membership experience of the scheme. Allowance is also made for future improvements in mortality. The BTPS actuary undertakes formal
reviews of the membership experience at every triennial valuation.
Sensitivity analysis of the principal assumptions used to measure BTPS liabilities
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OLDELOLWLHV7KHWDEOHEHORZSURYLGHVDQLQGLFDWLRQRIWKHVHQVLWLYLW\RIWKH,$6{SHQVLRQOLDELOLWLHVDW0DUFKDQGRIWKHLQFRPHVWDWHPHQW
FKDUJHIRUWRFKDQJHVLQWKHVHDVVXPSWLRQV
There may also be a move in the assets from changes in conditions. The total expected impact to liabilities and assets is illustrated as the sensitivity of
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financials.indb 176
15/05/2015 01:52
Overview
The Strategic Report
Purpose and strategy
Delivering our strategy
Group performance
Governance
Financial statements
5HWLUHPHQWEHQHƬWSODQVFRQWLQXHG
Additional information
177
Decrease
Decrease
Decrease
LQFUHDVHLQ LQFUHDVHLQ LQFUHDVHLQ
liability
GHƬFLW service cost
£bn
£bn
£m
0.25 percentage point increase to:
– discount rate
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s&3,LQƮDWLRQUDWHDVVXPLQJ53,DQGVDODU\LQFUHDVHVDUHXQFKDQJHG
sVDODU\LQFUHDVHVDVVXPLQJ53,DQG&3,DUHXQFKDQJHG
Additional one year increase to life expectancy
1.9
1.2a
b
10
a$OORZVIRUWKHHVWLPDWHGLPSDFWRQDVVHWVIURPDSHU\HDULQFUHDVHWRLQWHUHVWUDWHVDQGFRUSRUDWHERQG\LHOGVZLWKFUHGLWVSUHDGVXQFKDQJHG.
b$OORZVIRUWKHHVWLPDWHGLPSDFWRQDVVHWVGLUHFWO\OLQNHGWRLQƮDWLRQIURPDSHU\HDULQFUHDVHWRLQƮDWLRQ.
BTPS funding
7ULHQQLDOIXQGLQJYDOXDWLRQ
7KHWULHQQLDOYDOXDWLRQLVFDUULHGRXWIRUWKH7UXVWHHE\DSURIHVVLRQDOO\TXDOLƬHGLQGHSHQGHQWDFWXDU\7KH{SXUSRVHRIWKHYDOXDWLRQLVWRGHVLJQD
IXQGLQJSODQWRHQVXUHWKDWWKH6FKHPHKDVVXƯFLHQWIXQGVDYDLODEOHWRPHHWIXWXUHEHQHƬWSD\PHQWV7KHODWHVWIXQGLQJYDOXDWLRQZDVSHUIRUPHG
DVDW-XQH7KHQH[WIXQGLQJYDOXDWLRQZLOOKDYHDQHƪHFWLYHGDWHRIQRODWHUWKDQ-XQH
The valuation methodology for funding purposes, which is based on prudent assumptions, is broadly as follows:
– assets are valued at market value at the valuation date; and
– liabilities are measured on an actuarial funding basis using the projected unit credit method and discounted to their present value.
The results of the two most recent triennial valuations are shown below.
BTPS liabilities
Market value of BTPS assets
)XQGLQJGHƬFLW
3HUFHQWDJHRIDFFUXHGEHQHƬWVFRYHUHGE\%736DVVHWVDWYDOXDWLRQGDWH
3HUFHQWDJHRIDFFUXHGEHQHƬWVRQDVROYHQF\EDVLVFRYHUHGE\WKH%736DVVHWVDWWKHYDOXDWLRQGDWH
June
2014
valuation
£bn
June
2011
valuation
£bn
40.2
36.9
85.2%
63.0%
90.4%
66.0%
7KHIXQGLQJGHƬFLWLQFUHDVHGWR~EQDW-XQH:KLOHGHƬFLWFRQWULEXWLRQSD\PHQWVWRWDOOLQJ~EQDQGLQYHVWPHQWUHWXUQVRI
per year since the 2011 valuation contributed to higher assets at the 2014 valuation date, the low interest rate environment resulted in a higher
YDOXHEHLQJSODFHGRQWKH6FKHPHoVOLDELOLWLHVZKLFKPRUHWKDQRƪVHWWKHLPSURYHPHQWVLQWKH6FKHPHoVDVVHWV
.H\DVVXPSWLRQVsIXQGLQJYDOXDWLRQ
These valuations were determined using the following prudent long-term assumptions.
1RPLQDOUDWHVSHU\HDU
June
June
2014
2011
valuation
valuation
%
%
Average single equivalent discount rate
Average long-term increase in RPI
Average long-term increase in CPI
4.5
3.5
2.5
5.2
3.2
2.2
5HDOUDWHVSHU\HDUa
June
June
2014
2011
valuation
valuation
%
%
1.0
–
2.0
–
a7KHUHDOUDWHLVFDOFXODWHGUHODWLYHWR53,LQƮDWLRQDQGLVVKRZQDVDFRPSDUDWRU
,QOLQHZLWKGHYHORSLQJPDUNHWSUDFWLFHDQGUHƮHFWLQJDPRUHVRSKLVWLFDWHGPHWKRGRORJ\WKHGLVFRXQWUDWHDW-XQHKDVEHHQGHULYHGIURP
SUXGHQWUHWXUQH[SHFWDWLRQVDERYHD\LHOGFXUYHEDVHGRQJLOWDQGVZDSUDWHV7KHGLVFRXQWUDWHUHƮHFWVYLHZVRIIXWXUHUHWXUQVDWWKHYDOXDWLRQGDWH
This gives a prudent discount rate of 2.1% per year above the yield curve initially, trending down to 0.6% per year above the curve in the long-term.
7KHDVVXPSWLRQLVHTXLYDOHQWWRXVLQJDƮDWGLVFRXQWUDWHRISHU\HDU
financials.indb 177
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178
BT Group plc
Annual Report 2015
5HWLUHPHQWEHQHƬWSODQVFRQWLQXHG
The average life expectancy assumptions at the 2014 valuation date, for members 60 years of age, are as follows.
June
June
2014
2011
assumptions assumptions
Number of years from 30 June 2014
Male in lower pay bracket
26.1
26.3
Male in medium pay bracket
Male in high pay bracket
27.5
29.0
28.1
Female in lower pay bracket
Female in high pay bracket
28.9
29.2
28.7
1.3
1.2
2015
£m
2014
£m
168
875
205
325
530
Average improvement for a member retiring at age 60 in 10 years’ time
3D\PHQWVPDGHWRWKH%736
Year ended 31 March
Ordinary contributions
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7RWDOFRQWULEXWLRQVLQWKH\HDU
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%736LQFRPSULVLQJRUGLQDU\FRQWULEXWLRQVRIDSSUR[LPDWHO\~PDQGGHƬFLW{FRQWULEXWLRQVRI~P
)XWXUHIXQGLQJREOLJDWLRQVDQGUHFRYHU\SODQ
Under the terms of the Trust Deed, the group is required to have a funding plan, determined at the conclusion of the triennial funding valuation,
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,Q-DQXDU\WKHWULHQQLDOIXQGLQJYDOXDWLRQZDVƬQDOLVHGDJUHHGZLWKWKH7UXVWHHDQGFHUWLƬHGE\WKH6FKHPH$FWXDU\7KHIXQGLQJ
GHƬFLWDW-XQHZDV~EQ8QGHUWKHDVVRFLDWHGUHFRYHU\SODQ%7PDGHSD\PHQWVRI~PLQ0DUFKDQG~PLQ$SULO
%7ZLOOPDNHIXWXUHGHƬFLWSD\PHQWVLQOLQHZLWKWKHWDEOHEHORZ
Year to 31 March
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
250
250
688
699
711
724
670
670
670
495
495
495
495
495
289
'HƬFLWFRQWULEXWLRQ~P
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employee contributions) from 1 April 2015 through to the next valuation date.
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The 2014 funding agreement with the Trustee included additional features for BT to provide support to the Scheme. These include:
Feature
Detail
6KDUHKROGHU
distributions
In the event that shareholder distributions exceed an agreed threshold, BT will provide matching payments to the Scheme.
The threshold allows for 15% per year dividend per share growth plus £300m per year of share buybacks on a cumulative
basis.
BT will consult with the Trustee if it considers share buybacks in excess of £300m per year or making a special dividend.
7KHVHSURYLVLRQVDSSO\IURP-DQXDU\XQWLO0DUFKRUXQWLOWKHƬQDOLVDWLRQRIWKHQH[WYDOXDWLRQLIHDUOLHU
Material corporate
HYHQWV
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period, BT will make additional contributions to the Scheme equal to one third of those net cash proceeds.
BT will consult with the Trustee if:
– it considers making acquisitions with a total cost of more than £1bn in any 12-month period; or
– it considers making disposals of more than £1bn; or
– LWFRQVLGHUVPDNLQJD&ODVVWUDQVDFWLRQDFTXLVLWLRQRUGLVSRVDORU
– LWLVVXEMHFWWRDWDNHRYHURƪHU
BT will advise the Trustee should there be other material corporate events which may impact BT’s covenant to the Scheme.
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A negative pledge that future creditors will not be granted superior security to the Scheme in excess of a £1.5bn threshold,
to cover both British Telecommunications plc and BT Group plc.
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financials.indb 178
15/05/2015 01:52
Overview
The Strategic Report
Purpose and strategy
Delivering our strategy
Group performance
Governance
Financial statements
Additional information
179
5HWLUHPHQWEHQHƬWSODQVFRQWLQXHG
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Feature
Detail
&URZQ*XDUDQWHH
The Crown Guarantee was granted by the Government when the group was privatised in 1984 and would only come into
HƪHFWXSRQWKHinsolvency of BT.
The Trustee brought court proceedings to clarify the scope and extent of the Crown Guarantee. The Court of Appeal
judgment on 16 July 2014 established that:
– the Crown Guarantee covers BT’s funding obligation in relation to members of the Scheme who joined post-privatisation as
well as thoseZKRMRLQHGSUHSULYDWLVDWLRQVXEMHFWWRFHUWDLQH[FHSWLRQV;
– WKHIXQGLQJREOLJDWLRQWRZKLFKWKH&URZQ*XDUDQWHHUHODWHVLVPHDVXUHGZLWKUHIHUHQFHWR%7oVREOLJDWLRQWRSD\GHƬFLW
contributions under the rules of the Scheme.
The Crown Guarantee is not taken into account for the purposes of the actuarial valuation of the Scheme and is an entirely
separate matter, only being relevant in the highly unlikely event that BT became insolvent.
Pension Protection
)XQG33)
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Crown Guarantee.
7KHUHDUHOLPLWVRQWKHDPRXQWVSDLGE\WKH33)DQGWKLVZRXOGQRWJLYHH[DFWO\WKHVDPHEHQHƬWVDVWKRVHSURYLGHG
by the Scheme.
2WKHUEHQHƬWSODQV
,QDGGLWLRQWRWKH%736WKHJURXSPDLQWDLQVEHQHƬWSODQVLQPRVWRWKHUFRXQWULHVZLWKDIRFXVRQWKHVHEHLQJDSSURSULDWHIRUWKHORFDOPDUNHW
and culture.
$IWHUWKH%736WKHODUJHVWGHƬQHGEHQHƬWSODQVSRQVRUHGE\WKHJURXSLVDSODQLQWKH1HWKHUODQGVZLWKOLDELOLWLHVRIDURXQG~P
7KH%75HWLUHPHQW6DYLQJ6FKHPH%7566LVWKHODUJHVWGHƬQHGFRQWULEXWLRQVFKHPHPDLQWDLQHGE\WKHJURXSZLWKDURXQGDFWLYHPHPEHUV
In the year to 31 March 2015, the group contributed £105m to the BTRSS.
2ZQVKDUHV
Treasury sharesa
millions
£m
Employee share
ownership trusta
millions
£m
Total
millions
£m
At 1 April 2013
Own shares purchasedb
Share options exercisedb,c
Executive share awards vested
271
27
–
172
–
52
59
–
–
133
323
86
172
133
At 31 March 2014
Own shares purchasedb
Share options exercisedb,c
Executive share awards vested
232
25
6)
–
724
–
62
55
173
87
294
80
7)
897
87
1
41
42
$W0DUFK
a$W0DUFKVKDUHVZLWKDQDJJUHJDWHQRPLQDOYDOXHRI~QLO~PZHUHKHOGDWFRVWDVWUHDVXU\VKDUHVDQGVKDUHV
ZLWKDQDJJUHJDWHQRPLQDOYDOXHRI~P~PZHUHKHOGLQWKH7UXVW
b6HHJURXSFDVKƮRZVWDWHPHQWRQSDJH,QWKHFDVKSDLGIRUWKHUHSXUFKDVHRIRUGLQDU\VKDUHFDSLWDOZDV~P~P7KHFDVKUHFHLYHGIRUSURFHHGVRQWKHLVVXHRI
WUHDVXU\VKDUHVZDV~P~P
c,QFOXGHVVKDUHRSWLRQH[HUFLVHVLQUHODWLRQWR(PSOR\HH6DYHVKDUH3ODQVDQG*623DQG*/23/HJDF\3ODQVVHHQRWHIRUGHWDLOVDVZHOODV2PQLOUHODWLQJWRRWKHUSODQV
The treasury shares reserve represents BT Group plc shares purchased directly by the group. The BT Group Employee Share Ownership Trust
nWKH7UXVWoDOVRSXUFKDVHV%7*URXSSOFVKDUHV
The treasury shares and the shares in the Trust are being utilised to satisfy the group’s obligations under its employee share plans. Further details
on Employee Saveshare Plans and Executive share plans are provided in note 21.
financials.indb 179
15/05/2015 01:52
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BT Group plc
Annual Report 2015
6KDUHEDVHGSD\PHQWV
Overview
The company has savings-related share option plans for its employees and those of participating subsidiaries, further share option plans for selected
employees and a stock purchase plan for employees in the US. It also has several share plans for executives. All share-based payment plans are equity
settled and details of these plans and an analysis of the total charge by type of award is set out below.
Year ended 31 March
Employee Saveshare Plans
Executive Share Plans:
,QFHQWLYH6KDUH3ODQ,63
'HIHUUHG%RQXV3ODQ'%3
Other plans
2015
£m
2014
£m
2013
£m
25
25
25
32
9
4
21
11
3
27
10
2
70
60
64
(PSOR\HH6DYHVKDUH3ODQV
8QGHUDQ+05&DSSURYHGVDYLQJVUHODWHGVKDUHRSWLRQSODQHPSOR\HHVVDYHRQDPRQWKO\EDVLVRYHUDWKUHHRUƬYH\HDUSHULRGWRZDUGVWKH
SXUFKDVHRIVKDUHVDWDƬ[HGSULFHGHWHUPLQHGZKHQWKHRSWLRQLVJUDQWHG7KLVSULFHLVXVXDOO\VHWDWDGLVFRXQWWRWKHPDUNHWSULFHIRUƬYH
year plans and 10% for three-year plans. The options must be exercised within six months of maturity of the savings contract, otherwise they lapse.
Similar plans operate for BT’s overseas employees.
,QFHQWLYH6KDUH3ODQ,63
Under the ISP, participants are only entitled to these shares in full at the end of a three-year period if the company has met the relevant preGHWHUPLQHGFRUSRUDWHSHUIRUPDQFHPHDVXUHVDQGLIWKHSDUWLFLSDQWVDUHVWLOOHPSOR\HGE\WKHJURXS)RU,63DZDUGVJUDQWHGLQ
DQGRIHDFKDZDUGLVOLQNHGWRDWRWDOVKDUHKROGHUUHWXUQ765WDUJHWIRUDFRPSDUDWRUJURXSRIFRPSDQLHVIURPWKHEHJLQQLQJRIWKH
UHOHYDQWSHUIRUPDQFHSHULRGLVOLQNHGWRDWKUHH\HDUFXPXODWLYHIUHHFDVKƮRZPHDVXUHDQGWRJURZWKLQXQGHUO\LQJUHYHQXHH[FOXGLQJ
transit.
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Under the DBP, awards are granted annually to selected employees of the group. Shares in the company are transferred to participants at the end of
three years if they continue to be employed by the group throughout that period.
In accordance with the terms of the ISP and DBP, dividends or dividend equivalents earned on shares during the conditional periods are reinvested
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Employee Saveshare Plans
Movements in Employee Saveshare options are shown below.
Year ended 31 March
Movement in the number of share options
2015
2014
2013
millions
millions
millions
Weighted average exercise price
2015
2014
2013
pence
pence
pence
Outstanding at 1 April
Granted
Forfeited
Exercised
Expired
459
81
490
40
561
66
102
326
239
65
163
91
257
158
110
78
79
176
120
69
188
2XWVWDQGLQJDW0DUFK
226
459
490
226
102
91
–
2
–
74
111
–
Exercisable at 31 March
7KHZHLJKWHGDYHUDJHVKDUHSULFHIRUDOORSWLRQVH[HUFLVHGGXULQJZDVSSS
7KHIROORZLQJWDEOHVXPPDULVHVLQIRUPDWLRQUHODWLQJWRRSWLRQVRXWVWDQGLQJDQGH[HUFLVDEOHXQGHU(PSOR\HH6DYHVKDUHSODQVDW{0DUFK
1RUPDOGDWHVRIYHVWLQJDQGH[HUFLVHEDVHGRQFDOHQGDU\HDUV
2015
2016
2017
2018
2019
7RWDO
financials.indb 180
Exercise price per
share
104p – 189p
156p – 280p
168p – 359p
249p – 319p
319p
Weighted
average
Weighted Number of
average outstanding remaining
exercise
options contractual
life
price
millions
135p
205p
236p
251p
319p
226p
61
33
54
22
56
10 months
22 months
34 months
46 months
58 months
226 PRQWKV
15/05/2015 01:52
Overview
The Strategic Report
Purpose and strategy
Delivering our strategy
Group performance
Governance
Financial statements
Additional information
181
6KDUHEDVHGSD\PHQWVFRQWLQXHG
*623DQG*/23/HJDF\([HFXWLYH3ODQV
'XULQJPPPRSWLRQVZHUHH[HUFLVHGQLOQLOPRSWLRQVH[SLUHGDQGQLO
QLOQLORSWLRQVZHUHIRUIHLWHGXQGHUIRUPHUH[HFXWLYHVKDUHRSWLRQSODQV*623DQG*/23 There were no options outstanding
at 31 March 2015.
Executive share plans
0RYHPHQWVLQH[HFXWLYHVKDUHSODQDZDUGVGXULQJDUHVKRZQEHORZ
1XPEHURIVKDUHVPLOOLRQV
ISP
DBP
Total
At 1 April 2014
Awards granted
Awards vested
Awards lapsed
Dividend shares reinvested
70
16
2
13
3
–
–
83
19
2
$W0DUFK
57
11
68
Fair values
The following table summarises the fair values and key assumptions used for valuing grants made under the Employee Saveshare plans and ISP in
DQG
2015
Year ended 31 March
Weighted average fair value
Weighted average share price
Weighted average exercise price
Expected dividend yield
Risk free rates
Expected volatility
Employee
Saveshare
82p
387p
326p
3.5% – 3.8%
1.2% – 2.0%
22.2% – 24.9%
ISP
309p
393p
QD
QD
1.2%
24.3%
2014
Employee
Saveshare
61p
310p
257p
3.9% – 5.6%
0.7% – 1.5%
23.3% – 31.9%
ISP
269p
315p
QD
QD
0.7%
32.0%
2013
Employee
Saveshare
43p
209p
176p
3.6% – 5.2%
0.3% – 0.8%
28.1% – 36.5%
ISP
170p
204p
QD
QD
0.4%
33.6%
Employee Saveshare grants are valued using a Binomial options pricing model. Awards under the ISP are valued using Monte Carlo simulations. TSRs
are generated for BT and the comparator group at the end of the three-year performance period, using each company’s volatility and dividend yield,
as well as the cross correlation between pairs of stocks.
9RODWLOLW\KDVEHHQGHWHUPLQHGE\UHIHUHQFHWR%7oVKLVWRULFDOYRODWLOLW\ZKLFKLVH[SHFWHGWRUHƮHFWWKH%7VKDUHSULFHLQWKHIXWXUH$QH[SHFWHGOLIHRI
three months after vesting date is assumed for Employee Saveshare options and for all other awards the expected life is equal to the vesting period.
7KHULVNIUHHLQWHUHVWUDWHLVEDVHGRQWKH8.JLOWFXUYHLQHƪHFWDWWKHWLPHRIWKHJUDQWIRUWKHH[SHFWHGOLIHRIWKHRSWLRQRUDZDUG
The fair values for the DBP were determined using the market price of the shares at the date of grant. The weighted average share price for DBP
DZDUGVJUDQWHGLQZDVSSS
financials.indb 181
15/05/2015 01:52
182
BT Group plc
Annual Report 2015
,QYHVWPHQWV
At 31 March
Non-current assets
Available-for-sale
)DLUYDOXHWKURXJKSURƬWRUORVV
Current assets
Available-for-sale
Loans and receivables
2015
£m
2014
£m
36
8
25
9
44
34
3,133
390
1,774
–
Loans and receivables are held on balance sheet at amortised cost and this approximates fair value. Loans and receivables consist of investments in
WHUPGHSRVLWVGHQRPLQDWHGLQ6WHUOLQJRI~P~QLODQGLQ86 DollarsRI~P~QLO
)DLUYDOXHKLHUDUFK\
At 31 March 2015
Level 1
£m
Level 2
£m
Level 3
£m
Total held at
fair value
£m
1RQFXUUHQWDQGFXUUHQWLQYHVWPHQWV
Available-for-sale investments
)DLUYDOXHWKURXJKSURƬWRUORVV
26
8
3,133
–
10
–
3,169
8
7RWDO
34
10
At 31 March 2014
Level 1
£m
Level 2
£m
Level 3
£m
Total held at
fair value
£m
1RQFXUUHQWDQGFXUUHQWLQYHVWPHQWV
Available-for-sale investments
)DLUYDOXHWKURXJKSURƬWRUORVV
18
9
1,774
–
7
–
1,799
9
7RWDO
27
7
The three levels of valuation methodology used are:
Level 1 – uses quoted prices in active markets for identical assets or liabilities
Level 2 – uses inputs for the asset or liability other than quoted prices, that are observable either directly or indirectly
Level 3 – uses inputs for the asset or liability that are not based on observable market data, such as internal models or other valuation method.
/HYHOEDODQFHVFODVVLƬHGDVDYDLODEOHIRUVDOHFRQVLVWRILQYHVWPHQWVLQ OLTXLGLW\IXQGVGHQRPLQDWHGLQ6WHUOLQJRI~P~P
DQGLQ(XURVRI~P~QLO
/HYHOEDODQFHVFRQVLVWRIDYDLODEOHIRUVDOHLQYHVWPHQWVRI~P~PZKLFKUHSUHVHQWLQYHVWPHQWVLQDQXPEHURISULYDWHFRPSDQLHV
,QWKHDEVHQFHRIVSHFLƬFPDUNHWGDWDWKHVHLQYHVWPHQWVDUHKHOGDWFRVWDGMXVWHGDVQHFHVVDU\IRULPSDLUPHQWVZKLFKDSSUR[LPDWHVWRIDLUYDOXH
$JDLQRI~PZDVUHFRJQLVHGLQWKHLQFRPHVWDWHPHQWLQUHVSHFWRI/HYHODVVHWVGLVSRVHGRIGXULQJ~QLO
financials.indb 182
15/05/2015 01:52
Overview
The Strategic Report
Purpose and strategy
Delivering our strategy
Group performance
Governance
Financial statements
Additional information
183
&DVKDQGFDVKHTXLYDOHQWV
2015
£m
2014
£m
335
380
&DVKHTXLYDOHQWV
Loans and receivables
US deposits
UK deposits
Other deposits
28
28
43
55
257
3
7RWDOFDVKHTXLYDOHQWV
99
315
7RWDOFDVKDQGFDVKHTXLYDOHQWV
%DQNRYHUGUDIWVQRWH
434
695
&DVKDQGFDVKHTXLYDOHQWVSHUWKHFDVKƮRZVWDWHPHQW
407
684
At 31 March
&DVKDWEDQNDQGLQKDQG
7KHJURXSKDVFURVVXQGHUWDNLQJJXDUDQWHHIDFLOLWLHVDFURVVFHUWDLQEDQNDFFRXQWVZKLFKDOORZDOHJDOO\HQIRUFHDEOHULJKWRIVHWRƪRIWKHUHOHYDQW
cash and overdraft balances on bank accounts included within each scheme.
7KHJURXSoVFDVKDQGFDVKHTXLYDOHQWVLQFOXGHGUHVWULFWHGFDVKRI~P~PRIZKLFK~P~PZDVKHOGLQ
countries in which prior approval is required to transfer funds abroad. Such funds can be used by the group within a reasonable period of time if it
FRPSOLHVZLWKWKHVHUHTXLUHPHQWV7KHUHPDLQLQJEDODQFHRI~P~PZDVKHOGLQHVFURZDFFRXQWV
&DVKDQGFDVKHTXLYDOHQWVDUHFODVVLƬHGDVORDQVDQGUHFHLYDEOHVDQGDUHKHOGRQWKHJURXSEDODQFHVKHHWDWDPRUWLVHGFRVWZKLFKHTXDWHVWRIDLUYDOXH
/RDQVDQGRWKHUERUURZLQJV
Capital management policy
The objective of the group’s capital management policy is to reduce net debt over time whilst investing in the business, supporting the pension
scheme and paying progressive dividends. In order to meet this objective, the group may issue or repay debt, issue new shares, repurchase shares,
or adjust the amount of dividends paid to shareholders. The group manages the capital structure and makes adjustments to it in the light of changes
in economic conditions and the risk characteristics of the group. The Board regularly reviews the capital structure. No changes were made to these
REMHFWLYHVDQGSURFHVVHVGXULQJDQG)RUGHWDLOVRIVKDUHLVVXHVDQGUHSXUFKDVHVLQWKH\HDUVHHQRWH
The group’s capital structure consists of net debt and shareholders’ equity. The analysis below summarises the components which the group manages
as capital.
At 31 March
Net debt
7RWDOSDUHQWVKDUHKROGHUVoHTXLW\GHƬFLWa
2015
£m
2014
£m
5,119
796
7,028
a([FOXGHVQRQFRQWUROOLQJLQWHUHVWVRI~P~P
financials.indb 183
15/05/2015 01:52
184
BT Group plc
Annual Report 2015
/RDQVDQGRWKHUERUURZLQJVFRQWLQXHG
Net debt
1HWGHEWFRQVLVWVRIORDQVDQGRWKHUERUURZLQJVERWKFXUUHQWDQGQRQFXUUHQWOHVVFXUUHQWDVVHWLQYHVWPHQWVDQGFDVKDQGFDVKHTXLYDOHQWV
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 measure, current asset investments and 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. Net debt is considered to be an
DOWHUQDWLYHSHUIRUPDQFHPHDVXUHDVLWLVQRWGHƬQHGLQ,)567KHPRVWGLUHFWO\FRPSDUDEOH,)56PHDVXUHLVWKHDJJUHJDWHRIORDQVDQGRWKHU
ERUURZLQJVFXUUHQW{and non-current), current asset investments and cash and cash equivalents.
A reconciliation from this measure, the most directly comparable IFRS measure, to net debt is given below.
2015
£m
At 31 March
Loans and other borrowings
Less:
Cash and cash equivalents
Current asset investments
Adjustments:
To retranslate debt balances at swap rates where hedged by currency swaps
7RUHPRYHDFFUXHGLQWHUHVWDSSOLHGWRUHƮHFWWKHHƪHFWLYHLQWHUHVWPHWKRGDQGIDLUYDOXHDGMXVWPHQWV
Net debt
9,768
9,814
5,811
7,345
2015
£m
At 31 March
2014
£m
2014
£m
5.25% €750m bond due June 2014a
6.125% €600m bond due July 2014DE
2.00% US$750m bond due June 2015a
6.50% €1,000m bond due July 2015a
1.625% US$600m bond due June 2016a
~PERQGGXH'HFHPEHUPLQLPXPd)
1.25% US$500m bond due February 2017a
6.625% £500m bond due June 2017a
5.95% US$1,100m bond due January 2018a
2.35% US$800m bond due February 2019a
1.125% €1,000m bond due June 2019a
8.625% £300m bond due March 2020
3.50% £250m index linked bond due April 2025
5.75% £600m bond due December 2028c
9.625% US$2,670m bond due December 2030aPLQLPXPd)
6.375% £500m bond due June 2037a
–
–
508
758
406
695
337
525
750
541
730
299
392
751
1,850
522
645
518
452
867
361
699
300
526
668
481
–
299
382
670
1,648
522
7RWDOOLVWHGERQGV
238
264
–
439
27
324
177
11
Finance leases
e
Commercial paper
Other loans
%DQNRYHUGUDIWVQRWH
7RWDORWKHUORDQVDQGERUURZLQJV
7RWDOORDQVDQGERUURZLQJV
466
512
a 'HVLJQDWHGLQDFDVKƮRZKHGJHUHODWLRQVKLS
b7KHLQWHUHVWUDWHSD\DEOHRQWKLVERQGDWWUDFWVDQDGGLWLRQDOIRUDGRZQJUDGHE\RQHFUHGLWUDWLQJFDWHJRU\E\HLWKHURUERWKRI0RRG\oVDQG63EHORZ%DD%%%sUHVSHFWLYHO\
c'HVLJQDWHGLQDIDLUYDOXHKHGJHUHODWLRQVKLS
d7KHLQWHUHVWUDWHSD\DEOHRQWKLVERQGDWWUDFWVDQDGGLWLRQDOIRUDGRZQJUDGHE\RQHFUHGLWUDWLQJE\HLWKHU0RRG\oVRU63WRWKHJURXSoVVHQLRUXQVHFXUHGGHEWEHORZ$$sUHVSHFWLYHO\
,QDGGLWLRQLI0RRG\oVRU63VXEVHTXHQWO\LQFUHDVHWKHUDWLQJVWKHQWKHLQWHUHVWUDWHZLOOEHGHFUHDVHGE\IRUHDFKUDWLQJFDWHJRU\XSJUDGHE\HDFKUDWLQJDJHQF\,QQRHYHQWZLOOWKH
LQWHUHVWUDWHEHUHGXFHGEHORZWKHPLQLPXPUDWHUHƮHFWHGLQWKHDERYHWDEOH
e&RPPHUFLDOSDSHURI~QLO~PLVGHQRPLQDWHGLQ(XURVDQGRI~QLO~PLQ86'ROODUV
Unless designated in a fair value hedge relationship, all loans and other borrowings are carried in the group balance sheet and the table above at
DPRUWLVHGFRVW7KHIDLUYDOXHRIOLVWHGERQGVLV~P~PDQGWKHIDLUYDOXHRIƬQDQFHOHDVHVLV~P~P
The fair value of the group’s bonds and other long-term borrowings is estimated on the basis of quoted market prices, based on the same or similar
LVVXHVZKHUHWKH\H[LVW:KHUHWKHVDPHRUVLPLODULVVXHVGRQRWH[LVWWKHIDLUYDOXHLVHVWLPDWHGEDVHGRQWKHFDOFXODWLRQRIIXWXUHFDVKƮRZVXVLQJ
EOHQGHGGLVFRXQWUDWHVLQHƪHFWDWWKHEDODQFHVKHHWGDWH
financials.indb 184
15/05/2015 01:52
Overview
The Strategic Report
Purpose and strategy
Delivering our strategy
Group performance
Governance
Financial statements
Additional information
185
/RDQVDQGRWKHUERUURZLQJVFRQWLQXHG
The carrying amount of commercial paper, other loans and bank overdrafts equates to fair value due to the short maturity of these items.
7KHLQWHUHVWUDWHVSD\DEOHRQORDQVDQGERUURZLQJVGLVFORVHGDERYHUHƮHFWWKHFRXSRQVRQWKHXQGHUO\LQJLVVXHGORDQVDQGERUURZLQJVDQG
not the interest rates achieved through applying associated cross-currency and interest rate swaps in hedge arrangements.
Loans and other borrowings are analysed as follows:
2015
£m
At 31 March
2014
£m
Current liabilities
Listed bonds
Finance leases
Commercial paper
Other loans and bank overdrafts
1,422
13
–
465
1,349
14
324
186
7RWDOFXUUHQWOLDELOLWLHV
Non-current liabilities
Listed bonds
Finance leases
Other loans and borrowings
7,642
225
1
7,689
250
2
7RWDOQRQFXUUHQWOLDELOLWLHV
7RWDO
7KHFDUU\LQJYDOXHVGLVFORVHGLQWKHDERYHWDEOHUHƮHFWEDODQFHVDWDPRUWLVHGFRVWDGMXVWHGIRUDFFUXHGLQWHUHVWDQGFXUUHQWIDLUYDOXHDGMXVWPHQWV
WRWKHUHOHYDQWORDQVRUERUURZLQJV7KHVHGRQRWUHƮHFWWKHƬQDOSULQFLSDOUHSD\PHQWVWKDWZLOODULVHDIWHUWDNLQJDFFRXQWRIWKHUHOHYDQWGHULYDWLYHV
LQKHGJLQJUHODWLRQVKLSVZKLFKDUHUHƮHFWHGLQWKHWDEOHEHORZ$SDUWIURPƬQDQFHOHDVHVDOOERUURZLQJVDVDW0DUFKDQGZHUH
unsecured.
7KHSULQFLSDOUHSD\PHQWVRIORDQVDQGERUURZLQJVDWKHGJHGUDWHVDPRXQWHGWR~P~PDQGUHSD\PHQWVIDOOGXHDVIROORZV
At 31 March
Carrying
amount
£m
2015
(ƪHFWRI
Principal
hedging repayments
and at hedged
interesta
rates
£m
£m
Carrying
amount
£m
2014
(ƪHFWRI
Principal
hedging repayments
and at hedged
interesta
rates
£m
£m
:LWKLQRQH\HDURURQGHPDQG
Between one and two years
Between two and three years
Between three and four years
%HWZHHQIRXUDQGƬYH\HDUV
$IWHUƬYH\HDUV
1,431
1,251
549
1,033
3,461
89
1,383
1,060
498
1,122
3,263
1,291
1,353
1,172
492
3,572
36
7
1
1,284
1,389
1,061
499
3,573
7RWDOGXHIRUUHSD\PHQWDIWHUPRUHWKDQRQH\HDU
7RWDOUHSD\PHQWV
Fair value adjustments for hedged risk
143
61
7RWDOORDQVDQGRWKHUERUURZLQJV
a$GMXVWPHQWVIRUKHGJLQJDQGLQWHUHVWUHƮHFWWKHLPSDFWRIWKHFXUUHQF\HOHPHQWRIGHULYDWLYHVDQGDGMXVWWKHUHSD\PHQWVWRH[FOXGHLQWHUHVWUHFRJQLVHGLQWKHFDUU\LQJDPRXQW
financials.indb 185
15/05/2015 01:52
186
BT Group plc
Annual Report 2015
/RDQVDQGRWKHUERUURZLQJVFRQWLQXHG
2EOLJDWLRQVXQGHUƬQDQFHOHDVHVDUHDQDO\VHGDVIROORZV
2015
At 31 March
$PRXQWVSD\DEOHXQGHUƬQDQFHOHDVHV
Due within one year
%HWZHHQWZRWRƬYH\HDUV
$IWHUƬYH\HDUV
2014
Minimum lease payments
£m
£m
2015
2014
Repayment of
outstanding
lease obligations
£m
£m
29
101
269
31
111
307
13
46
179
14
51
199
399
449
238
264
/HVVIXWXUHƬQDQFHFKDUJHV
–
–
7RWDOƬQDQFHOHDVHREOLJDWLRQV
238
264
238
264
$VVHWVKHOGXQGHUƬQDQFHOHDVHVPDLQO\FRQVLVWRIEXLOGLQJVDQGQHWZRUNDVVHWV7KHJURXSoVREOLJDWLRQVXQGHUƬQDQFHOHDVHVDUHVHFXUHGE\WKH
lessors’ title to the leased assets.
)LQDQFHH[SHQVH
2015
£m
2014
£m
2013
£m
516
15
7
560
16
13
623
19
5
82
7
26
8
47
9
8
31
6
12
6
Finance expense
/HVVLQWHUHVWFDSLWDOLVHGDWZHLJKWHGDYHUDJHUDWHRI
579
604
671
7RWDOƬQDQFHH[SHQVHEHIRUHVSHFLƬFLWHPV
577
603
666
6SHFLƬFLWHPVQRWH
299
235
119
7RWDOƬQDQFHH[SHQVH
876
838
785
Year ended 31 March
)LQDQFHH[SHQVH
Interest on:
Financial liabilities at amortised cost
Finance leases
Derivatives
Fair value movements:
Bonds designated as hedged items in fair value hedges
Derivatives designated as hedging instruments in fair value hedges
Derivatives not in a designated hedge relationship
5HFODVVLƬFDWLRQRIFDVKƮRZKHGJHIURPRWKHUFRPSUHKHQVLYHLQFRPH
Unwinding of discount on provisions
5HFRQFLOLDWLRQRIQHWƬQDQFHH[SHQVHWRQHWLQWHUHVWFDVKRXWƮRZ
1HWLQWHUHVWFDVKRXWƮRZRI~P~P~PLV~PKLJKHU~P~PWKDQWKHQHW
ƬQDQFHH[SHQVHLQWKHLQFRPHVWDWHPHQW7KLVLVPRVWO\GXHWRFHUWDLQLQWHUHVWFDVKRXWƮRZVDQGLQƮRZVEHLQJVSUHDGRYHUDQXPEHURI\HDUVLQ
the income statement.
2015
£m
2014
£m
2013
£m
1HWƬQDQFHH[SHQVH
7LPLQJGLƪHUHQFHV
– Derivative restructuring costs
– Timing of coupon payments on bonds
– Deferred income
6SHFLƬFLWHPQRWH
560
591
653
–
4
9
7
14
8
–
16
15
8
–
1HWLQWHUHVWFDVKRXWƮRZ
580
608
692
Year ended 31 March
financials.indb 186
15/05/2015 01:52
Overview
The Strategic Report
Purpose and strategy
Delivering our strategy
Group performance
Governance
Financial statements
Additional information
187
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and acquisitions; for the temporary investment of short-term funds; and to manage the currency and interest rate risks arising from its operations
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the group’s operations.
Financial risk management
7KHJURXSoVDFWLYLWLHVH[SRVHLWWRDYDULHW\RIƬQDQFLDOULVNVPDUNHWULVNLQFOXGLQJLQWHUHVWUDWHULVNDQGIRUHLJQH[FKDQJHULVNFUHGLWULVNDQG
OLTXLGLW\{ULVN
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The group has a centralised treasury operation whose primary role is to manage liquidity and funding requirements as well as the group’s exposure
WRDVVRFLDWHGƬQDQFLDODQGPDUNHWULVNVLQFOXGLQJFUHGLWULVNLQWHUHVWUDWHULVNDQGIRUHLJQH[FKDQJHULVN
7UHDVXU\SROLF\
Treasury policy is set by the Board. Group treasury activities are subject to a set of controls appropriate for the magnitude of borrowing, investments
and group-wide exposures. The Board has delegated authority to operate these policies to a series of panels responsible for the management of key
treasury risks and operations. Appointment to and removal from the key panels requires approval from two of the following: the Chairman, the Chief
Executive or the Group Finance Director.
7KHUHKDVEHHQQRFKDQJHLQWKHQDWXUHRIWKHJURXSoVULVNSURƬOHEHWZHHQ0DUFKDQGWKHGDWHRIDSSURYDORIWKHVHƬQDQFLDOVWDWHPHQWV
Interest rate risk management
0DQDJHPHQWSROLF\
,QWHUHVWUDWHULVNDULVHVSULPDULO\IURPWKHJURXSoVORQJWHUPERUURZLQJV,QWHUHVWFDVKƮRZULVNDULVHVIURPERUURZLQJVLVVXHGDWYDULDEOHUDWHSDUWLDOO\
RƪVHWE\FDVKKHOGDWYDULDEOHUDWHV)DLUYDOXHLQWHUHVWUDWHULVNDULVHVIURPERUURZLQJVLVVXHGDWƬ[HGUDWHV
7KHJURXSoVSROLF\DVVHWE\WKH%RDUGLVWRHQVXUHWKDWDWOHDVWRIQHWGHEWLVDWƬ[HGUDWHV6KRUWWHUPLQWHUHVWUDWHPDQDJHPHQWLVGHOHJDWHG
to the treasury operation while long-term interest rate management decisions require further approval by the Group Finance Director, Director of
Treasury, Tax and Risk Management or the BT Group Treasurer who each have been delegated such authority from the Board.
+HGJLQJVWUDWHJ\
,QRUGHUWRPDQDJHWKHJURXSoVLQWHUHVWUDWHSURƬOHWKHJURXSKDVHQWHUHGLQWRFURVVFXUUHQF\DQGLQWHUHVWUDWHVZDSDJUHHPHQWVZLWKFRPPHUFLDO
EDQNVDQGRWKHULQVWLWXWLRQVWRYDU\WKHDPRXQWVDQGSHULRGVIRUZKLFKLQWHUHVWUDWHVRQERUURZLQJVDUHƬ[HG7KHGXUDWLRQRIWKHVZDSDJUHHPHQWV
PDWFKHVWKHGXUDWLRQRIWKHGHEWLQVWUXPHQWV7KHPDMRULW\RIWKHJURXSoVORQJWHUPERUURZLQJVKDYHEHHQDQGDUHVXEMHFWWRƬ[HG6WHUOLQJLQWHUHVW
rates after applying the impact of these hedging instruments.
Foreign exchange risk management
0DQDJHPHQWSROLF\
7KHSXUSRVHRIWKHJURXSoVIRUHLJQFXUUHQF\KHGJLQJDFWLYLWLHVLVWRSURWHFWWKHJURXSIURPWKHULVNWKDWHYHQWXDOIXWXUHQHWLQƮRZVDQGQHWRXWƮRZV
ZLOOEHDGYHUVHO\DƪHFWHGE\FKDQJHVLQH[FKDQJHUDWHV
7KH%RDUGoVSROLF\IRUIRUHLJQH[FKDQJHULVNPDQDJHPHQWGHƬQHVWKHW\SHRIWUDQVDFWLRQVZKLFKVKRXOGQRUPDOO\EHFRYHUHGLQFOXGLQJVLJQLƬFDQW
RSHUDWLRQDOIXQGLQJDQGFXUUHQF\LQWHUHVWH[SRVXUHVDQGWKHSHULRGRYHUZKLFKFRYHUVKRXOGH[WHQGIRUWKHGLƪHUHQWW\SHVRIWUDQVDFWLRQV
Short-term foreign exchange management is delegated to the treasury operation whilst long-term foreign exchange management decisions require
further approval from the Group Finance Director, Director of Treasury, Tax and Risk Management or the BT Group Treasurer who have been delegated
such authority by the Board.
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generally trade and are funded in their functional currency which limits their exposure to foreign exchange volatility. Foreign currency borrowings
XVHGWRƬQDQFHWKHJURXSoVRSHUDWLRQVKDYHEHHQSUHGRPLQDQWO\VZDSSHGLQWR6WHUOLQJXVLQJFURVVFXUUHQF\VZDSV
The group also enters into forward currency contracts to hedge foreign currency, capital purchases, purchase and sale commitments, interest expense
DQGIRUHLJQFXUUHQF\LQYHVWPHQWV7KHFRPPLWPHQWVKHGJHGDUHSULQFLSDOO\GHQRPLQDWHGLQ86'ROODU(XURDQG$VLD3DFLƬFUHJLRQFXUUHQFLHV$VD
UHVXOWWKHJURXSoVH[SRVXUHWRIRUHLJQFXUUHQF\DULVHVPDLQO\RQLWVQRQ8.VXEVLGLDU\LQYHVWPHQWVDQGRQUHVLGXDOFXUUHQF\WUDGLQJƮRZV
7KHWDEOHEHORZUHƮHFWVWKHFXUUHQF\DQGLQWHUHVWUDWHSURƬOHRIRXUORDQVDQGERUURZLQJVDIWHUWKHLPSDFWRIKHGJLQJ
2015
Fixed rate
interest
£m
Floating
rate
interest
£m
Sterling
Euro
7RWDO
7,601
–
991
482
5DWLRRIƬ[HGWRƮRDWLQJ
:HLJKWHGDYHUDJHHƪHFWLYHƬ[HGLQWHUHVWUDWHs6WHUOLQJ
84%
6.3%
16%
At 31 March
financials.indb 187
2014
Fixed rate
interest
£m
Floating
rate
interest
£m
8,592
482
7,946
–
1,265
285
9,211
285
100%
84%
6.6%
16%
100%
Total
£m
Total
£m
15/05/2015 01:52
188
BT Group plc
Annual Report 2015
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7KHƮRDWLQJUDWHORDQVDQGERUURZLQJVEHDULQWHUHVWUDWHVƬ[HGLQDGYDQFHIRUSHULRGVUDQJLQJIURPRQHGD\WRRQH\HDUSULPDULO\E\UHIHUHQFHWR
LIBOR and EURIBOR quoted rates.
6HQVLWLYLW\DQDO\VLV
The group is exposed to volatility in the income statement and shareholders’ equity arising from changes in interest rates and foreign exchange rates.
To demonstrate this volatility, management have concluded that the following are reasonable benchmarks for performing sensitivity analysis:
– for interest, a 1% increase in interest rates and parallel shift in yield curves across Sterling, US Dollar and Euro currencies; and
– IRUIRUHLJQH[FKDQJHDVWUHQJWKHQLQJZHDNHQLQJLQ6WHUOLQJDJDLQVWRWKHUFXUUHQFLHV
7KHLPSDFWRIDFKDQJHLQLQWHUHVWUDWHVRQWKHJURXSoVDQQXDOQHWƬQDQFHH[SHQVHZDVLQVLJQLƬFDQWLQERWKDQG7KHLPSDFW
on equity, before tax, of a 1% increase in interest rates is as detailed below:
At 31 March
Sterling interest rates
US Dollar interest rates
Euro interest rates
2015
£m
Increase
reduce)
2014
£m
Increase
reduce)
428
337
A 1% decrease in interest rates would have broadly the same impact in the opposite direction.
7KHJURXSoVH[SRVXUHWRIRUHLJQH[FKDQJHYRODWLOLW\LQWKHLQFRPHVWDWHPHQWDIWHUKHGJLQJDQGZLWKLQVKDUHKROGHUVoHTXLW\H[FOXGLQJWUDQVODWLRQ
H[SRVXUHVZDVLQVLJQLƬFDQWLQERWKDQG
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The group’s December 2016 and December 2030 bonds contain covenants which have required the group to pay higher rates of interest once the
JURXSFHDVHGWREHUDWHGDWOHDVW$LQWKHFDVHRI0RRG\oVRUDWOHDVW$sLQWKHFDVHRI6WDQGDUG3RRUoV63$GGLWLRQDOLQWHUHVWRISHU\HDU
DFFUXHVIRUHDFKUDWLQJVFDWHJRU\GRZQJUDGHE\HDFKDJHQF\EHORZWKRVHOHYHOVHƪHFWLYHIURPWKHQH[WFRXSRQGDWHIROORZLQJDGRZQJUDGH
%DVHGRQWKHWRWDOQRWLRQDOYDOXHRIGHEWRXWVWDQGLQJRI~EQDW0DUFKWKHJURXSoVƬQDQFHH[SHQVHZRXOGLQFUHDVHGHFUHDVHE\
DSSUR[LPDWHO\~PD\HDULI%7oVFUHGLWUDWLQJZHUHWREHGRZQJUDGHGXSJUDGHGUHVSHFWLYHO\E\RQHFUHGLWUDWLQJFDWHJRU\E\ERWKDJHQFLHVIURP
the current ratings.
The group’s credit ratings were as detailed below:
At 31 March
5DWLQJDJHQF\
Standard & Poor’s
Moody’s
Rating
2015
Outlook
Rating
2014
Outlook
BBB
Baa2
Stable
Positive
BBB
Baa2
Stable
Positive
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Liquidity risk management
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funding requirements. The group determines its liquidity requirements by the use of both short and long-term cash forecasts. These forecasts are
VXSSOHPHQWHGE\DƬQDQFLDOKHDGURRPDQDO\VLVZKLFKLVXVHGWRDVVHVVIXQGLQJDGHTXDF\IRUDWOHDVWDPRQWKSHULRG2QDWOHDVWDQDQQXDOEDVLV
WKH%RDUGUHYLHZVDQGDSSURYHVWKHPD[LPXPORQJWHUPIXQGLQJRIWKHJURXSDQGRQDQRQJRLQJEDVLVFRQVLGHUVDQ\UHODWHGPDWWHUV5HƬQDQFLQJ
ULVNLVPDQDJHGE\OLPLWLQJWKHDPRXQWRIERUURZLQJWKDWPDWXUHVZLWKLQDQ\VSHFLƬHGSHULRGDQGKDYLQJDSSURSULDWHVWUDWHJLHVLQSODFHWRPDQDJH
UHƬQDQFLQJQHHGVDVWKH\DULVH7KHPDWXULW\SURƬOHRIWKHJURXSoVORDQVDQGERUURZLQJVDW0DUFKLVGLVFORVHGLQQRWH7KHJURXSKDV
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Short and medium-term requirements are regularly reviewed and managed by the treasury operation within the parameters of the policies set by
WKH{%RDUGThe group holds cash, cash equivalents and current investments in order to manage short-term liquidity requirements. At 31 March
WKHJURXSKDGXQGUDZQFRPPLWWHGERUURZLQJIDFLOLWLHVRI~EQ~EQPDWXULQJLQ6HSWHPEHUDQGDIXUWKHU~EQ
~QLOZLWKDQDYDLODELOLW\SHULRGWRWKHHDUOLHURIWKHFORVHRIWKHproposed EE acquisition or August 2016, which is subject to certain
restrictions and can only be used to fund the transaction, including transaction costs.
financials.indb 188
15/05/2015 01:52
Overview
The Strategic Report
Purpose and strategy
Delivering our strategy
Group performance
Governance
Financial statements
Additional information
189
)LQDQFLDOLQVWUXPHQWVDQGULVNPDQDJHPHQWFRQWLQXHG
0DWXULW\DQDO\VLV
7KHIROORZLQJWDEOHSURYLGHVDQDQDO\VLVRIWKHUHPDLQLQJFRQWUDFWXDOO\DJUHHGFDVKƮRZVLQFOXGLQJLQWHUHVWSD\DEOHIRUWKHJURXSoVQRQGHULYDWLYH
ƬQDQFLDOOLDELOLWLHVRQDQXQGLVFRXQWHGEDVLVZKLFKWKHUHIRUHGLƪHUVIURPERWKWKHFDUU\LQJYDOXHDQGIDLUYDOXH
1RQGHULYDWLYHƬQDQFLDOOLDELOLWLHV
At 31 March 2015
Due within one year
Between one and two years
Between two and three years
Between three and four years
%HWZHHQIRXUDQGƬYH\HDUV
$IWHUƬYH\HDUV
Interest on
loans
Loans
and other and other
borrowings borrowings
£m
£m
1,706
1,431
1,251
549
1,033
3,461
Trade
and other
payables
£m
Provisions
£m
Total
£m
513
458
392
315
302
2,973
3,784
–
–
–
–
–
32
19
15
15
13
218
6,035
1,908
1,658
879
1,348
6,652
4
312
0
Interest payments not yet accrued
Fair value adjustment for hedged risk
Impact of discounting
–
143
–
–
–
–
–
–
–
–
143
&DUU\LQJYDOXHRQWKHEDODQFHVKHHWa
194
4
208
0
Interest on
loans
Loans
and other and other
borrowings borrowings
£m
£m
Trade
and other
payables
£m
Provisions
£m
Total
£m
At 31 March 2014
Due within one year
Between one and two years
Between two and three years
Between three and four years
%HWZHHQIRXUDQGƬYH\HDUV
$IWHUƬYH\HDUV
1,641
1,291
1,353
1,172
492
3,572
554
485
424
360
287
3,045
3,734
–
–
–
–
–
37
36
22
18
17
225
5,966
1,812
1,799
1,550
796
6,842
355
Interest payments not yet accrued
Fair value adjustment for hedged risk
Impact of discounting
–
61
–
–
–
–
–
–
–
–
61
&DUU\LQJYDOXHRQWKHEDODQFHVKHHWa
232
198
a)RUHLJQFXUUHQF\UHODWHGFDVKƮRZVZHUHWUDQVODWHGDWFORVLQJUDWHVDVDWWKHUHOHYDQWUHSRUWLQJGDWH)XWXUHYDULDEOHLQWHUHVWUDWHFDVKƮRZVZHUHFDOFXODWHGXVLQJWKHPRVWUHFHQWUDWHDSSOLHGDWWKHUHOHYDQW
balance sheet date.
Trade and other payables are held at amortised cost. The carrying amount of these balances approximates to fair value due to the short maturity of
amounts payable.
financials.indb 189
15/05/2015 01:52
190
BT Group plc
Annual Report 2015
)LQDQFLDOLQVWUXPHQWVDQGULVNPDQDJHPHQWFRQWLQXHG
7KHIROORZLQJWDEOHSURYLGHVDQDQDO\VLVRIWKHFRQWUDFWXDOO\DJUHHGFDVKƮRZVLQUHVSHFWRIWKHJURXSoVGHULYDWLYHƬQDQFLDOLQVWUXPHQWV&DVKƮRZV
are presented on a net or gross basis in accordance with the settlement arrangements of the instruments.
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At 31 March 2015
Due within one year
Between one and two years
Between two and three years
Between three and four years
%HWZHHQIRXUDQGƬYH\HDUV
$IWHUƬYH\HDUV
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At 31 March 2014
Due within one year
Between one and two years
Between two and three years
Between three and four years
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$IWHUƬYH\HDUV
7RWDOb
Derivatives – Analysed based on holding instrument
to maturity
Derivatives – Analysed by earliest payment datea
Gross settled Gross settled
Gross settled Gross settled
RXWƮRZV
LQƮRZV
RXWƮRZV
LQƮRZV
Net settled
Total Net settled
Total
£m
£m
£m
£m
£m
£m
£m
£m
215
471
273
177
48
–
1,421
39
38
38
838
390
344
484
285
189
137
88
109
92
94
111
690
1,320
42
42
42
842
476
229
121
104
106
200
675
Derivatives – Analysed based on holding instrument
to maturity
Derivatives – Analysed by earliest payment datea
Gross settled Gross settled
Gross settled Gross settled
RXWƮRZV
LQƮRZV
RXWƮRZV
LQƮRZV
Net settled
Total Net settled
Total
£m
£m
£m
£m
£m
£m
£m
£m
263
351
642
70
–
–
1,754
661
947
806
334
198
311
393
685
55
7
12
125
84
84
84
84
865
1,754
560
950
65
369
1,002
173
119
126
88
92
865
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b)RUHLJQFXUUHQF\UHODWHGFDVKƮRZVZHUHWUDQVODWHGDWFORVLQJUDWHVDVDWWKHUHOHYDQWUHSRUWLQJGDWH)XWXUHYDULDEOHLQWHUHVWUDWHFDVKƮRZVZHUHFDOFXODWHGXVLQJWKHPRVWUHFHQWUDWHDSSOLHGDWWKHUHOHYDQW
balance sheet date.
Credit risk management
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7KHJURXSoVH[SRVXUHWRFUHGLWULVNDULVHVIURPƬQDQFLDODVVHWVWUDQVDFWHGE\WKHWUHDVXU\RSHUDWLRQSULPDULO\GHULYDWLYHVLQYHVWPHQWVFDVKDQG
cash equivalents) and from its trading-related receivables.
)RUWUHDVXU\UHODWHGEDODQFHVWKH%RDUGoVGHƬQHGSROLF\UHVWULFWVH[SRVXUHWRDQ\RQHFRXQWHUSDUW\E\VHWWLQJFUHGLWOLPLWVEDVHGRQWKHFUHGLW
TXDOLW\DVGHƬQHGE\0RRG\oVDQG63DQGE\GHƬQLQJWKHW\SHVRIƬQDQFLDOLQVWUXPHQWVZKLFKPD\EHWUDQVDFWHG7KHPLQLPXPFUHGLWUDWLQJV
SHUPLWWHGZLWKFRXQWHUSDUWLHVLQUHVSHFWRIQHZWUDQVDFWLRQVDUH$$sIRUORQJWHUPDQG3$IRUVKRUWWHUPLQYHVWPHQWV$FWLRQLVWDNHQ
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The treasury operation continuously reviews the limits applied to counterparties and will adjust the limit according to the nature and credit
standing of the counterparty and in response to market conditions, up to the maximum allowable limit set by the Board.
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7KHJURXSoVFUHGLWSROLF\IRUWUDGLQJUHODWHGƬQDQFLDODVVHWVLVDSSOLHGDQGPDQDJHGE\HDFKRIWKHOLQHVRIEXVLQHVVWRHQVXUHFRPSOLDQFH7KH
SROLF\UHTXLUHVWKDWWKHFUHGLWZRUWKLQHVVDQGƬQDQFLDOVWUHQJWKRIFXVWRPHUVLVDVVHVVHGDWLQFHSWLRQDQGRQDQRQJRLQJEDVLV3D\PHQWWHUPV
are set in accordance with industry standards. Where appropriate, the group may endeavour to minimise risks by requesting securities such as
deposits, guarantees and letters of credit. The group takes proactive steps including constantly reviewing credit ratings of relationship banks
WRPLQLPLVHWKHLPSDFWRIDGYHUVHPDUNHWFRQGLWLRQVRQWUDGLQJUHODWHGƬQDQFLDODVVHWV
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7KHPD[LPXPFUHGLWULVNH[SRVXUHRIWKHJURXSoVƬQDQFLDODVVHWVDWWKHEDODQFHVKHHWGDWHLVDVIROORZV
At 31 March
'HULYDWLYHƬQDQFLDODVVHWV
Investments
Trade and other receivablesa
Cash and cash equivalents
Notes
22
16
23
2015
£m
2014
£m
1,329
3,567
2,264
434
653
1,808
2,185
695
a7KHFDUU\LQJDPRXQWH[FOXGHV~P~PRIQRQFXUUHQWWUDGHDQGRWKHUUHFHLYDEOHVZKLFKUHODWHWRQRQƬQDQFLDODVVHWVDQG~P~PRISUHSD\PHQWVDQGRWKHU
UHFHLYDEOHV
financials.indb 190
15/05/2015 01:52
Overview
The Strategic Report
Purpose and strategy
Delivering our strategy
Group performance
Governance
Financial statements
Additional information
191
)LQDQFLDOLQVWUXPHQWVDQGULVNPDQDJHPHQWFRQWLQXHG
7KHFUHGLWTXDOLW\DQGFUHGLWFRQFHQWUDWLRQRIFDVKHTXLYDOHQWVFXUUHQWDVVHWLQYHVWPHQWVDQGGHULYDWLYHƬQDQFLDODVVHWVDUHGHWDLOHGLQWKHWDEOHV
EHORZ:KHUHWKHRSLQLRQRI0RRG\oVDQG63GLƪHUWKHORZHUUDWLQJLVXVHG
2015
£m
0RRG\oV63FUHGLWUDWLQJRIFRXQWHUSDUW\
$D$$DQGDERYH
$D$$s
$$
$$a
$$s
%DD%%%
%DD%%%DQGEHORZ
2014
£m
3,133
206
248
793
121
439
11
1,774
47
111
434
–
376
–
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The concentration of credit risk for trading balances of the group is provided in note 16, which analyses outstanding balances by line of business.
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QHWWLQJDUUDQJHPHQWVWRUHGXFHWKHJURXSoVH[SRVXUHWRFUHGLWULVNE\PDNLQJXVHRIVWDQGDUG,QWHUQDWLRQDO6ZDSVDQG'HULYDWLYHV$VVRFLDWLRQ,6'$
documentation. The group has also entered into credit support agreements with certain swap counterparties whereby on a weekly and monthly basis
WKHIDLUYDOXHSRVLWLRQRQQRWLRQDO~PRIORQJGDWHGFURVVFXUUHQF\VZDSVDQGLQWHUHVWUDWHVZDSVLVFROODWHUDOLVHG7KHUHODWHGQHWFDVKLQƮRZ
GXULQJWKH\HDUZDV~PFDVKRXWƮRZRI~P7KHFROODWHUDOSDLGDQGUHFHLYHGLVUHFRJQLVHGZLWKLQFXUUHQWDVVHWLQYHVWPHQWV
FDVKDQGFDVKHTXLYDOHQWVDQGORDQVDQGRWKHUERUURZLQJVUHVSHFWLYHO\
2ƪVHWWLQJRIƬQDQFLDOLQVWUXPHQWV
7KHWDEOHEHORZVKRZVWKHJURXSoVƬQDQFLDODVVHWVDQGOLDELOLWLHVWKDWDUHVXEMHFWWRRƪVHWLQWKHJURXSoVEDODQFHVKHHWDQGWKHLPSDFWRIHQIRUFHDEOH
master netting or similar agreements.
5HODWHGDPRXQWVQRWVHWRƪLQWKHEDODQFHVKHHW
Amounts
presented in 5LJKWRIVHWRƪZLWK
derivative
Amounts the balance
Cash
Net
sheet
counterparties
VHWRƪ
collateral
amount
£m
£m
£m
£m
£m
Financial assets and liabilities
At 31 March 2015
Gross
amounts
£m
'HULYDWLYHƬQDQFLDODVVHWV
'HULYDWLYHƬQDQFLDOOLDELOLWLHV
Cash and cash equivalents
Bank overdrafts
1,329
588
–
–
154
1,329
434
603
–
–
30
–
–
289
434
641
–
641
–
234
7RWDO
5HODWHGDPRXQWVQRWVHWRƪLQWKHEDODQFHVKHHW
Amounts
presented in 5LJKWRIVHWRƪZLWK
derivative
Amounts the balance
Cash
Net
sheet
counterparties
VHWRƪ
collateral
amount
£m
£m
£m
£m
£m
Financial assets and liabilities
At 31 March 2014
Gross
amounts
£m
'HULYDWLYHƬQDQFLDODVVHWV
'HULYDWLYHƬQDQFLDOOLDELOLWLHV
Cash and cash equivalents
Bank overdrafts
653
3,165
–
–
2,470
653
695
297
–
–
20
–
–
182
695
519
–
519
–
365
7RWDO
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%DUFOD\V{%DQN{3OF%DODQFHVKHOGZLWKLQWKLVDUUDQJHPHQWDUHSRROHGDQGLQWHUHVWLVSDLGRUUHFHLYHGRQWKHQHWEDODQFH
financials.indb 191
15/05/2015 01:52
192
BT Group plc
Annual Report 2015
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Derivatives
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H[FKDQJHFRQWUDFWVDUHHVWLPDWHGXVLQJGLVFRXQWHGFDVKƮRZPRGHOVDQGPDUNHWUDWHVRILQWHUHVWDQGIRUHLJQH[FKDQJHDWWKHEDODQFHVKHHWGDWH
'HULYDWLYHV
At 31 March 2015
Current Non-current
asset
asset
£m
£m
Current Non-current
liability
liability
£m
£m
'HVLJQDWHGLQDFDVKƮRZKHGJH
Designated in a fair value hedge
Other
86
6
5
941
143
148
161
–
7
698
–
229
7RWDOGHULYDWLYHV
97
168
927
'HULYDWLYHV
At 31 March 2014
'HVLJQDWHGLQDFDVKƮRZKHGJH
Designated in a fair value hedge
Other
7RWDOGHULYDWLYHV
Current Non-current
asset
asset
£m
£m
Current Non-current
liability
liability
£m
£m
73
6
35
394
61
84
74
–
65
514
–
165
114
539
139
679
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$W0DUFKWKHDPRXQWGHIHUUHGZKLFKLVQRW\HWUHFRJQLVHGLQWKHLQFRPHVWDWHPHQWLV~P~P:LWKWKHH[FHSWLRQRI
WKLVFRQWUDFWZKLFKLVLQFOXGHGDW/HYHODQGYDOXHGXVLQJDVVXPSWLRQVRQYROXPHVLQƮDWLRQDQGPDUNHWHQHUJ\SULFHVDOORWKHUGHULYDWLYHƬQDQFLDO
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Hedging activities
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accordance with IAS 39.
&DVKƮRZKHGJHV
,QVWUXPHQWVGHVLJQDWHGLQDFDVKƮRZKHGJHLQFOXGHLQWHUHVWUDWHVZDSVDQGFURVVFXUUHQF\VZDSVKHGJLQJ(XURDQG86'ROODUGHQRPLQDWHG
borrowings. Forward currency contracts are taken out to hedge step-up interest on currency denominated borrowings relating to the group’s 2030
86'ROODUERQG7KHKHGJHGFDVKƮRZVZLOODƪHFWWKHJURXSoVLQFRPHVWDWHPHQWDVLQWHUHVWDQGSULQFLSDODPRXQWVDUHUHSDLGRYHUWKHUHPDLQLQJWHUP
RIWKHERUURZLQJVsHH{QRWH
Forecast foreign currency purchases, principally denominated in US Dollar, EuroDQG$VLD3DFLƬFFXUUHQFLHVDUHKHGJHGPRQWKVIRUZDUG, with
certain specLƬFWUDQVDFWLRQVKHdged further forward7KHUHODWHGFDVKƮRZVDUHUHFRJQLVHGLQWKHLQFRPHVWDWHPHQWRYHUWKLVSHULRG
$OOFDVKƮRZKHGJHVZHUHIXOO\HƪHFWLYHLQWKHSHULRG6HHQRWHIRUGHWDLOVRIWKHPRYHPHQWVLQWKHFDVKƮRZKHGJHUHVHUYH
)DLUYDOXHKHGJHV
Fair value hedges consist of interest rate and cross-currency swaps that are used to protect against changes in the fair value of the 2028 Sterling
bond due to movements in market interest rates.
Gains and losses arising on fair value hedges are disclosed in note 25.
Other derivatives
The group’s policy is not to use derivatives for speculative purposes. However, due to the complex nature of hedge accounting under IAS 39, some
GHULYDWLYHVPD\QRWTXDOLI\IRUKHGJHDFFRXQWLQJRUDUHVSHFLƬFDOO\QRWGHVLJQDWHGDVDKHGJHZKHUHQDWXUDORƪVHWLVPRUHDSSURSULDWH'HULYDWLYH
LQVWUXPHQWVWKDWGRQRWTXDOLI\IRUKHGJHDFFRXQWLQJDUHFODVVLƬHGDVKHOGIRUWUDGLQJDQGKHOGDWIDLUYDOXHWKURXJKSURƬWRUORVVXQGHU,$6
financials.indb 192
15/05/2015 01:52
Overview
The Strategic Report
Purpose and strategy
Delivering our strategy
Group performance
Governance
Financial statements
Additional information
193
2WKHUUHVHUYHV
Capital
Merger redemption
reservea
reserve
£m
£m
Other comprehensive income
Available&DVKƮRZ
for-sale Translation
reserveb
reservec
reserved
£m
£m
£m
Total
£m
At 1 April 2012
([FKDQJHGLƪHUHQFHV
Recycled foreign exchange on disposal of subsidiary
1HWIDLUYDOXHJDLQRQFDVKƮRZKHGJHV
Recognised in income and expense
Fair value movement on available-for-sale assets
Tax recognised in other comprehensive income
998
–
–
–
–
–
–
27
–
–
–
–
–
–
229
–
–
105
–
14
24
–
–
–
–
14
–
478
46
13
–
–
–
10
46
13
105
14
24
At 1 April 2013
([FKDQJHGLƪHUHQFHV
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Recognised in income and expense
Fair value movement on available-for-sale assets
Tax recognised in other comprehensive income
998
–
–
–
–
–
27
–
–
–
–
–
180
–
384
–
6
38
–
–
–
–
547
–
–
–
384
4
At 1 April 2014
([FKDQJHGLƪHUHQFHV
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Recognised in income and expense
Fair value movement on available-for-sale assets
Tax recognised in other comprehensive income
998
–
–
–
–
–
27
–
–
–
–
–
42
–
207
–
24
11
–
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7
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5
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207
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37
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27
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387
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WKHDJJUHJDWHRIWKHVKDUHFDSLWDOVKDUHSUHPLXPDFFRXQWDQGFDSLWDOUHGHPSWLRQUHVHUYHRIWKHSULRUSDUHQWFRPSDQ\%ULWLVK7HOHFRPPXQLFDWLRQVSOF
b 7KHFDVKƮRZUHVHUYHLVXVHGWRUHFRUGWKHHƪHFWLYHSRUWLRQRIWKHFXPXODWLYHQHWFKDQJHLQWKHIDLUYDOXHRIFDVKƮRZKHGJLQJLQVWUXPHQWVUHODWHGWRKHGJHGWUDQVDFWLRQVWKDWKDYHQRW\HWRFFXUUHG
$PRXQWVnUHFRJQLVHGLQLQFRPHDQGH[SHQVHoLQFOXGHDQHWFKDUJHWRWKHFDVKƮRZUHVHUYHRI~PQHWFUHGLW~PQHWFKDUJHRI~PUHODWLQJWRIDLUYDOXHPRYHPHQWVRQ
GHULYDWLYHV7KHLWHPVJHQHUDWLQJWKHVHIRUHLJQH[FKDQJHPRYHPHQWVDUHLQGHVLJQDWHGFDVKƮRZKHGJHUHODWLRQVKLSV
c 7KHDYDLODEOHIRUVDOHUHVHUYHLVXVHGWRUHFRUGWKHFXPXODWLYHIDLUYDOXHJDLQVDQGORVVHVRQDYDLODEOHIRUVDOHƬQDQFLDODVVHWV7KHFXPXODWLYHJDLQVDQGORVVHVDUHUHF\FOHGWRWKHLQFRPHVWDWHPHQWRQ
GLVSRVDORIWKHDVVHWV
d 7KHWUDQVODWLRQUHVHUYHLVXVHGWRUHFRUGFXPXODWLYHWUDQVODWLRQGLƪHUHQFHVRQWKHDVVHWVDQGOLDELOLWLHVRIIRUHLJQRSHUDWLRQV7KHFXPXODWLYHWUDQVODWLRQGLƪHUHQFHVDUHUHF\FOHGWRWKHLQFRPHVWDWHPHQWRQ
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Key management personnel comprise executive and non-executive directors and members of the Operating Committee. Compensation of key
management personnel is disclosed in note 5.
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financials.indb 193
15/05/2015 01:52
194
BT Group plc
Annual Report 2015
)LQDQFLDOFRPPLWPHQWVDQGFRQWLQJHQWOLDELOLWLHV
Financial commitments were as follows:
At 31 March
2015
£m
2014
£m
Capital commitments
Programme rights commitments
507
2,512
400
1,657
7RWDO
At 31 March 2015 programme rights commitments, mainly relating to football broadcast rights, are those for which the licence period has not
yet started.
Future minimum operating lease payments for the group were as follows:
2015
£m
2014
£m
Payable in the year ending 31 March:
2015
2016
2017
2018
2019
2020
Thereafter
–
427
401
392
377
365
4,562
396
397
368
365
363
366
4,583
7RWDOIXWXUHPLQLPXPRSHUDWLQJOHDVHSD\PHQWV
Operating lease commitments were mainly in respect of land and buildings which arose from a sale and operating leaseback transaction in a prior
SHULRG/HDVHVKDYHDQDYHUDJHWHUPRI\HDUV\HDUVDQGUHQWDOVDUHƬ[HGIRUDQDYHUDJHRI\HDUV\HDUV
Other than as disclosed below, there were no contingent liabilities or guarantees at 31 March 2015 other than those arising in the ordinary course of
the group’s business and on these no material losses are anticipated. The group has insurance cover to certain limits for major risks on property and
major claims in connection with legal liabilities arising in the course of its operations. Otherwise, the group generally carries its own risks.
On 5 February 20%7DJUHHGGHƬQLtive terms to acquire EE Limited and its subsidiaries for £12.5bn. Under the terms of the sale and purchase
agreement, if BT were to recommend an alternative transaction and not proceed to completion, Deutsche Telekom and Orange have the right to
terminate the sale and purchase agreement and BT would pay a break fee of £250m, in aggregate, to them.
Under the Broadband Delivery UK programme, grants received by the group may be subject to re-investment or repayment to the customer
depending on the level of take-up.
7KHJURXSKDVSURYLGHGJXDUDQWHHVUHODWLQJWRFHUWDLQOHDVHVHQWHUHGLQWRE\7HOHIÎQLFD8./LPLWHGIRUPHUO\28./LPLWHGSULRUWRWKHGHPHUJHURI
PP2IURP%7RQ{1RYHPEHUPP2SOFQRZSDUWRIWKH7HOHIÎQLFD*URXSKDVJLYHQ%7DFRXQWHULQGHPQLW\IRUWKHVHJXDUDQWHHV7KHUH
is no exposure in the event of credit default in respect of amounts used to defease future lease obligations. The guarantee lasts until Telefónica UK
/LPLWHGKDVGLVFKDUJHGDOOLWVREOLJDWLRQVZKLFKLVH[SHFWHGWREHZKHQWKHOHDVHVHQGRQ{-DQXDU\
7KHJURXSGRHVQRWEHOLHYHWKDWWKHUHLVDQ\VLQJOHFXUUHQWFRXUWDFWLRQWKDWZRXOGKDYHDPDWHULDODGYHUVHHƪHFWRQWKHƬQDQFLDOSRVLWLRQRU
RSHUDWLRQVRIWKHJURXS'XULQJWKHDJJUHJDWHYROXPHDQGYDOXHRIOHJDODFWLRQVZKLFKWKHJURXSLVSDUW\to reduced.
6XEVHTXHQWHYHQWV
The shareholders of BT approved the proposed acquisition of EE on 30 April 2015 and we are now awaiting approval from the Competition and
Markets Authority. Subject to merger clearance, we expect the transactionWRFRPSOHWHEHIRUHWKHHQGRIWKHƬQDQFLDO\HDU
financials.indb 194
15/05/2015 01:52
Overview
The Strategic Report
Purpose and strategy
Delivering our strategy
Group performance
,QGHSHQGHQWDXGLWRUVoUHSRUWWRWKHPHPEHUV
RI{%7*URXSSOF
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Our opinion
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ƬQDQFLDOVWDWHPHQWV
r JLYHDWUXHDQGIDLUYLHZRIWKHVWDWHRIWKHFRPSDQ\oVDƪDLUVDVDW
31{March 2015;
r have been properly prepared in accordance with United Kingdom
Generally Accepted Accounting Practice; and
r have been prepared in accordance with the requirements of the
Companies Act 2006.
:KDWZHKDYHDXGLWHG
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r the BT Group plc company balance sheet as at 31 March 2015;
r the BT Group plc company reconciliation of movement in equity
shareholders’ funds for the year then ended; and
r WKHQRWHVWRWKHƬQDQFLDOVWDWHPHQWVZKLFKLQFOXGHDVXPPDU\RI
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Accounting Practice).
Other required reporting
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Companies Act 2006 opinion
In our opinion, the information given in the 6WUDWHJLF5HSRUW and the
5HSRUWRIWKHDirectorsIRUWKHƬQDQFLDO\HDUIRUZKLFKWKHƬQDQFLDO
VWDWHPHQWVDUHSUHSDUHGLVFRQVLVWHQWZLWKWKHƬQDQFLDOVWDWHPHQWV
,6$V8.,UHODQGUHSRUWLQJ
8QGHU,QWHUQDWLRQDO6WDQGDUGVRQ$XGLWLQJ8.DQG,UHODQGp,6$V8.
& Ireland)”) we are required to report to you if, in our opinion, information
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r PDWHULDOO\LQFRQVLVWHQWZLWKWKHLQIRUPDWLRQLQWKHDXGLWHGƬQDQFLDO
statements; or
r apparently materially incorrect based on, or materially inconsistent
with, our knowledge of the company acquired in the course of
performing our audit; or
r otherwise misleading.
We have no exceptions to report arising from this responsibility.
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UHFHLYHG
Under the Companies Act 2006 we are required to report to you if, in
our opinion:
r we have not received all the information and explanations we require
for our audit; or
r adequate accounting records have not been kept by the company, or
returns adequate for our audit have not been received from branches
not visited by us; or
r WKHƬQDQFLDOVWDWHPHQWVDQGWKHSDUWRIWKH5HSRUW on Directors’
5HPXQHUDWLRQto be audited are not in agreement with the accounting
records and returns.
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Report on Directors’ Remuneration – Companies Act 2006 opinion
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be audited has been properly prepared in accordance with the
Companies Act 2006.
Governance
Financial statements
Additional information
195
5HVSRQVLELOLWLHVIRUWKHƬQDQFLDOVWDWHPHQWVDQGWKHDXGLW
2XUUHVSRQVLELOLWLHVDQGWKRVHRIWKHGLUHFWRUV
As explained more fully in the 6WDWHPHQWRIdirectors’ responsibilities
set out on page 130, the directors are responsible for the preparation
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and fair view.
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VWDWHPHQWVLQDFFRUGDQFHZLWKDSSOLFDEOHODZDQG,6$V8.,UHODQG
Those standards require us to comply with the Auditing Practices Board’s
Ethical Standards for Auditors.
This report, including the opinions, has been prepared for and only for
the company’s members as a body in accordance with Chapter 3 of Part
16 of the Companies Act 2006 and for no other purpose. We do not,
in giving these opinions, accept or assume responsibility for any other
purpose or to any other person to whom this report is shown or into
whose hands it may come save where expressly agreed by our prior
consent in writing.
:KDWDQDXGLWRIƬQDQFLDOVWDWHPHQWVLQYROYHV
:HFRQGXFWHGRXUDXGLWLQDFFRUGDQFHZLWK,6$V8.,UHODQG$Q
audit involves obtaining evidence about the amounts and disclosures
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caused by fraud or error. This includes an assessment of:
r whether the accounting policies are appropriate to the company’s
circumstances and have been consistently applied and adequately
disclosed;
r WKHUHDVRQDEOHQHVVRIVLJQLƬFDQWDFFRXQWLQJHVWLPDWHVPDGHE\WKH
directors; and
r WKHRYHUDOOSUHVHQWDWLRQRIWKHƬQDQFLDOVWDWHPHQWV
We primarily focus our work in these areas by assessing the directors’
judgements against available evidence, forming our own judgements,
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We test and examine information, using sampling and other auditing
techniques, to the extent we consider necessary to provide a reasonable
basis for us to draw conclusions. We obtain audit evidence through
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combination of both.
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the Annual Report to identify material inconsistencies with the audited
ƬQDQFLDOVWDWHPHQWVDQGWRLGHQWLI\DQ\LQIRUPDWLRQWKDWLVDSSDUHQWO\
materially incorrect based on, or materially inconsistent with, the
knowledge acquired by us in the course of performing the audit. If we
become aware of any apparent material misstatements or inconsistencies
we consider the implications for our report.
Other matter
:HKDYHUHSRUWHGVHSDUDWHO\RQWKHJURXSƬQDQFLDOVWDWHPHQWVRI
BT{Group plc for the year ended 31 March 2015.
3DXO%DUNXV6HQLRU6WDWXWRU\$XGLWRU
IRUDQGRQEHKDOIRI3ULFHZDWHUKRXVH&RRSHUV//3
Chartered Accountants and Statutory Auditors
London
6 May 2015
Other Companies Act 2006 reporting
Under the Companies Act 2006 we are required to report to you if, in
RXURSLQLRQFHUWDLQGLVFORVXUHVRIGLUHFWRUVoUHPXQHUDWLRQVSHFLƬHG
by law are not made. We have no exceptions to report arising from
this responsibility.
financials.indb 195
15/05/2015 01:52
196
BT Group plc
Annual Report 2015
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BT Group plc accounting policies
$FFRXQWLQJEDVLV
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nFRPSDQ\oUHIHUVWR%7*URXSSOF7KHVHVHSDUDWHƬQDQFLDOVWDWHPHQWV
of the company are presented as required by the Companies Act 2006.
7KHVHSDUDWHƬQDQFLDOVWDWHPHQWVKDYHEHHQSUHSDUHGLQDFFRUGDQFH
ZLWK8.*HQHUDOO\$FFHSWHG$FFRXQWLQJ3UDFWLFH8.*$$37KH
principal accounting policies are set out below and have been applied
consistently throughout the year and the previous year.
7KHƬQDQFLDOVWDWHPHQWVDUHSUHSDUHGRQDJRLQJFRQFHUQEDVLVDQG
XQGHUWKHKLVWRULFDOFRVWFRQYHQWLRQDVPRGLƬHGE\WKHUHYDOXDWLRQRI
FHUWDLQƬQDQFLDOLQVWUXPHQWVDWIDLUYDOXH
$VSHUPLWWHGE\6HFWLRQRIWKH&RPSDQLHV$FW
WKHFRPSDQ\oVSURƬWDQGORVVDFFRXQWKDVQRWEHHQSUHVHQWHG
7KH%7*URXSSOFFRQVROLGDWHGƬQDQFLDOVWDWHPHQWVIRUWKH\HDU
HQGHG0DUFKFRQWDLQDFRQVROLGDWHGFDVKƮRZVWDWHPHQW
&RQVHTXHQWO\DVSHUPLWWHGE\)56n&DVKƮRZVWDWHPHQWVoWKH
FRPSDQ\KDVGHFLGHGQRWWRSUHVHQWLWVRZQFDVKƮRZVWDWHPHQW
7KH%7*URXSSOFFRQVROLGDWHGƬQDQFLDOVWDWHPHQWVIRUWKH\HDU
ended 31 March 2015 contain related party disclosures.
Consequently, the company has taken advantage of the exemption
in FRS 8, ‘Related Party Disclosures’, not to disclose transactions
with other members of the BT Group.
7KH%7*URXSSOFFRQVROLGDWHGƬQDQFLDOVWDWHPHQWVIRUWKH\HDUHQGHG
31 March 2015FRQWDLQƬQDQFLDOLQVWUXPHQWGLVFORVXUHVZKLFKFRPSO\
with FRS 29, ‘Financial Instruments: Disclosures’. Consequently, the
company is exempt from the disclosure requirements of FRS 29 in
UHVSHFWRILWVƬQDQFLDOLQVWUXPHQWV
,QYHVWPHQWVLQVXEVLGLDU\XQGHUWDNLQJV
Investments in subsidiary undertakings are stated at cost and reviewed
for impairment if there are indicators that the carrying value may not
be recoverable.
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which have arisen but not reversed at the balance sheet date. Deferred
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OLNHO\WKDQQRWWKDWWKHUHZLOOEHVXƯFLHQWWD[DEOHSURƬWVIURPZKLFK
WKHXQGHUO\LQJWLPLQJGLƪHUHQFHVFDQEHGHGXFWHG7KHGHIHUUHGWD[
balances are not discounted.
'LYLGHQGV
Dividend distributions are recognised as a liability in the year in which
the dividends are approved by the company’s shareholders. Interim
GLYLGHQGVDUHUHFRJQLVHGZKHQWKH\DUHSDLGƬQDOGLYLGHQGVZKHQ
authorised in general meetings by shareholders.
&DVK
Cash includes cash in hand and bank deposits repayable on demand.
6KDUHEDVHGSD\PHQWV
The company does not incur a charge for share-based payments.
However, the issuance by the company of share options and awards to
employees of its subsidiaries represents additional capital contributions
to its subsidiaries. An addition to the company’s investment in
subsidiaries is recorded with a corresponding increase in equity
shareholders’ funds. The additional capital contribution is determined
based on the fair value of options and awards at the date of grant and
is recognised over the vesting period.
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Following the publication of FRS 100 ‘Application of Financial
Reporting Requirements’ by the Financial Reporting Council, BT
Group plc is required to change its accounting framework for its entity
ƬQDQFLDOVWDWHPHQWVZKLFKLVFXUUHQWO\8.*$$3IRULWVƬQDQFLDO\HDU
commencing 1 April 2015. The purpose of FRS 100 is to align reporting
in the UK with IFRS. As the ultimate parent, the company will adopt FRS
101 ‘Reduced Disclosure Framework’.
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proposed change at the Annual General Meeting in July 2014.
Other information
'LYLGHQGV
7KH%RDUGUHFRPPHQGVWKDWDƬQDOGLYLGHQGLQUHVSHFWRIWKH\HDUHQGHG
31 March 2015 of 8.5SSZLOOEHSDLGWRVKDUHKROGHUV
RQ{6HSWHPEHUWDNLQJWKHIXOO\HDUSURSRVHGGLYLGHQGLQUHVSHFW
of to 12.4S: 10.9p). This dividend is subject to
shareholder approval at the Annual General Meeting and therefore the
liability of approximately £712P: £611m) has not been
LQFOXGHGLQWKHVHƬQDQFLDOVWDWHPHQWV
(PSOR\HHV
The Chairman, the executive directors and the Group General Counsel
&RPSDQ\6HFUHWDU\RI%7{*URXSSOFZHUHWKHRQO\HPSOR\HHV
of the company during . The costs relating to qualifying
services provided to the company’s principal subsidiary, British
Telecommunications plc, are recharged to that company.
$XGLWIHHV
7KHDXGLWIHHLQUHVSHFWRIWKHSDUHQWFRPSDQ\ZDV~
£41,000). Fees payable to PricewaterhouseCoopers LLP for non-audit
services to the company are not required to be disclosed as they are
LQFOXGHGZLWKLQQRWHWRWKHFRQVROLGDWHGƬQDQFLDOVWDWHPHQWVRI
%7{*URXSSOF
6KDUHFDSLWDO
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company are recorded in the balance sheet as part of Own shares and
presented as a deduction from shareholders’ equity at cost.
financials.indb 196
15/05/2015 01:52
Overview
The Strategic Report
Purpose and strategy
Delivering our strategy
Group performance
Governance
Financial statements
Additional information
197
%7*URXSSOFFRPSDQ\EDODQFHVKHHW
2015
£m
At 31 March
2014
£m
)L[HGDVVHWV
Investments in subsidiary undertakingsa
10,686
10,616
7RWDOƬ[HGDVVHWV
10
Current assets
Amounts from subsidiary undertaking falling due after more than one yearb
Cash at bank and in hand
1,004
5
–
5
7RWDOFXUUHQWDVVHWV
5
22
1,260
98
Creditors: amounts falling due within one yearc
Net current liabilities
7RWDODVVHWVOHVVFXUUHQWOLDELOLWLHV
Non-current liabilities
Amounts due to subsidiary undertakingsc
7RWDODVVHWVOHVVORQJWHUPOLDELOLWLHV
&DSLWDODQGUHVHUYHV
Called up share capital
Share premium account
Capital redemption reserve
Own shares
3URƬWDQGORVVDFFRXQW
7RWDOHTXLW\VKDUHKROGHUVoIXQGVd
1,307
–
419
1,051
27
9,034
408
62
27
9,693
a 7KURXJKRXWDQGWKHFRPSDQ\KHOGDLQYHVWPHQWLQ%7*URXS,QYHVWPHQWV/LPLWHGDFRPSDQ\UHJLVWHUHGLQ(QJODQGDQG:DOHV
b$PRXQWVGXHIURPVXEVLGLDU\XQGHUWDNLQJUHODWHSULPDULO\WR~EQWKDWZDVUDLVHGWKURXJKDQHTXLW\SODFLQJLQ)HEUXDU\
c &UHGLWRUVFRQVLVWVRIDPRXQWVRZHGWRVXEVLGLDU\XQGHUWDNLQJVRI~P~PDQGRWKHUFUHGLWRUVRI~P~P 'XULQJDUHYLHZRILQWHUFRPSDQ\ORDQVDQG
ERUURZLQJVZDVXQGHUWDNHQ$GD\UHSD\PHQWFODXVHZDVUHPRYHGIURPWKHORDQGRFXPHQWDWLRQUHVXOWLQJLQDUHFODVVLƬFDWLRQIURPFXUUHQWWRQRQFXUUHQWOLDELOLWLHVRI~P
d7KHPRYHPHQWVLQWRWDOHTXLW\VKDUHKROGHUVoIXQGVDUHVKRZQRQSDJH.
7KHƬQDQFLDOVWDWHPHQWVRIWKHFRPSDQ\RQSDJHV196 to 198 were approved by the Board of Directors on 6 May 2015 and were signed on its
behalf by:
6LU0LFKDHO5DNH
Chairman
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Chief Executive
7RQ\&KDQPXJDP
Group Finance Director
financials.indb 197
15/05/2015 01:52
198
BT Group plc
Annual Report 2015
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Called
XS{VKDUH
capitala
£m
Share
Capital
premium redemption
reserve Own sharesb
account
£m
£m
£m
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and loss
accountb,c
£m
Total
£m
At 1 April 2013
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Dividends paid
Capital contribution in respect of share-based payments
Net buyback of own shares
408
–
–
–
–
62
–
–
–
–
27
–
–
–
–
–
–
–
3
9,667
977
60
9,332
977
60
At 1 April 2014
3URƬWIRUWKHƬQDQFLDO\HDU
Dividends paid
Capital contribution in respect of share-based payments
Issue of new sharesa
Net buyback of own shares
408
–
–
–
11
–
62
–
–
–
989
–
27
–
–
–
–
–
–
–
–
–
664
979
70
–
979
70
1,000
$W0DUFK
419
27
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financials.indb 198
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Overview
The Strategic Report
Purpose and strategy
Delivering our strategy
Group performance
Governance
Financial statements
Additional information
199
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The table below gives brief details of the group’s principala operating subsidiariesb at 31 March 2015. All subsidiaries are unlisted and held through
an intermediate holding company, unless otherwise stated. No subsidiaries are excluded from the group consolidation. The group did not have any
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British Telecommunications plc
BT Americas Incd
BT Australasia Pty Limited
BT Business Direct Limited
BT Communications do Brasil Limitadab
BT Communications Ireland Limited
BT Conferencing Inc
BT Conferencing Video Inc
BT ESPANA, Compania de Servicios Globales
de Telecommunicaciones, SA
BT Fleet Limited
BT France SA
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BT Global Communications India Private
Limited
BT Global Services Limited
BT Holdings Limited
BT Hong Kong Limited
BT Italia SpA
BT IT Services Limitede
BT Latam Argentina SA
BT Limited
BT Managed Services Limited
BT Nederland NV
BT Payment Services Limited
BT Services SA
BT Singapore Pte Ltd
BT Switzerland AG
Communications Global Network Services
Limitedd
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dabs.com plc
Plusnet plc
Radianz Americas Inc
Activity
Communications-related services and products provider
Communications-related services, systems integration and
products provider
Communications-related services and products provider
Technology equipment retailer
Communications-related services, technology consulting
and products provider
Telecommunications services provider
Audio, video and web collaboration services provider
Audio, video and web collaboration services provider
Communications-related services and products provider
Group interest
in allotted capitalc
Country
of operationd
100% ordinary
100% common
UK
International
100% ordinary
100% preference
100% ordinary
100% common
Australia
UK
Brazil
100% ordinary
100% common
100% common
100% ordinary
Republic of Ireland
US
US
Spain
Fleet management company
Communications-related services, systems integration and
products provider
Communications-related services and products provider
Communications-related services
100% ordinary
100% ordinary
UK
France
100% ordinary
74% ordinary
Germany
India
International telecommunications network systems provider
Investment holding company
Communications-related services and products provider
100% ordinary
100% ordinary
100% ordinary
100% preference
98.6% ordinary
100% ordinary
100% common
100% ordinary
100% ordinary
100% ordinary
100% ordinary
100% ordinary
100% ordinary
100% ordinary
100% ordinary
Communications-related services and products provider
IT solutions provider
Communications-related services and products provider
International telecommunications network systems provider
Communications-related services and products provider
Communications-related services and products provider
Payment services provider
Technology consulting and engineering services
Communications-related services and products provider
Communications-related services and products provider
Communications-related services and products provider
Communications-related services and products provider
Technology equipment retailer
Broadband service provider
Global managed network service provider
UK
UK
Hong Kong
Italy
UK
Argentina
International
UK
Netherlands
UK
France
Singapore
Switzerland
International
100% ordinary
100% ordinary
100% ordinary
100% common
100% preference
UK
UK
UK
US
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financials.indb 199
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200
BT Group plc
Annual Report 2015
financials.indb 200
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