We connect
for good
BT Group plc
Annual Report 2021
Staying
connected
has never been
as important
When people connect, there’s no limit to the
good they can do. Today, that’s truer than
ever. The connections we make are helping
solve the world’s biggest challenges such as
the global pandemic, climate change and
cyber security. Through the power of
technology, we’re supporting customers to
live, work and play together better. In these
extraordinary times we are sharpening our
focus and accelerating change.
We connect for good
Good for…
our customers
EE tops the table
Delivering the best mobile experience remains our
priority. Being recognised as the UK’s best network
for the fifteenth consecutive time reflects our
continued investment in keeping our customers
connected to the things that matter to them most.
Giving small
businesses a boost
Last summer, we launched
a support scheme for small
businesses that promises to
boost their connectivity,
cash flow and confidence.
Unbreakable
wi‑fi connection
Innovation is at the heart of what
we do. Our new unbreakable
internet service brings together
the combined power of BT
and EE’s networks.
the country
Gifting tablets and
data to the NHS
Giving unlimited free data to EE
customers who work for the NHS
and providing tablets to hospital
wards so patients could videocall
friends and family are just two of
the ways we supported the NHS
in 2020.
Helped 10 million people in the
UK to improve their digital skills
When we launched Skills for Tomorrow,
we said we wanted to help 10 million
people in the UK learn about tech.
We’ve now achieved this aim, five
years earlier than expected.
Beating loneliness
with BT+1
In a year that has kept us apart
from our loved ones, we started
a movement to bring us closer
to family and friends.
our customers
our colleagues
Better workplace
Our new workplaces are here to shape
the direction of our business. A modern
company that’s better connected to
colleagues and customers.
Celebrating the Colleague
Board’s first birthday
We launched the Colleague Board so
we could give everyone here a voice.
Through a tough year they’ve been
inspiring change across our business.
tomorrow
Our aim to be
Net Zero heroes
We’ve been leading on climate
action for more than 25 years and
we’re now targeting net zero for
the whole of BT by 2045.
Young scientists make
exhibition of themselves
We’ve been sponsoring what’s
now the BT Young Scientist &
Technology Exhibition for the
past 21 years, proud to help
cultivate and nurture Ireland’s
future scientists and engineers.
Taking 5G to school
We’re bringing 5G into the
heart of the classroom through
immersive experiences.
Outer space, under the ocean or
on top of Mount Everest, students
can feel like they’re right there
with this new way of learning
– the first of its kind in the UK.
There never has been a
more crucial time to play
such an important role in the
lives of our customers. We
have sharpened our focus,
accelerated our digital drive
and supported the nation in
adapting to the new normal.
For more information read
our Digital Impact and
Sustainability Report at
bt.com/sustainabilityreport
To read these stories and
more – visit our online
annual review and see how
we’re connecting for good.
bt.com/annualreview
1
Contents
Strategic report
2
A message from our Chairman
5
A message from our Chief Executive
8
Executive Committee
10
About BT and our purpose
12
Our business model
14
Key trends influencing BT
16
Regulatory update
18
Our ambition and strategy
20
Strategic progress
34
Our stakeholders
42
Section 172 statement
44
Non-financial information
46
Our key performance indicators (KPIs)
48
Group performance
56
A letter from the Chair of Openreach
57
How we manage risk
59
Our principal risks and uncertainties
Task Force on Climate-related Financial Disclosures 67
68
Viability statement
Corporate governance report
Financial statements
Additional information
69
111
197
Look out for these throughout the report:
Reference to another page in the report
Reference to further reading online
This Strategic report was approved by the Board on 12 May 2021.
By order of the Board.
Jan du Plessis
Chairman
12 May 2021
Please see the cautionary statement regarding forward‑
looking statements on page 200.
Pages 1 to 68 form the Strategic report. It includes our
business model, strategic progress, our key performance
indicators, group performance and our principal risks
and uncertainties.
The Corporate governance report on pages 69 to 110 forms
the Report of the Directors and includes the Report on
directors’ remuneration.
BT Group plc
Annual Report 2021
Strategic report
2
A message from our Chairman
This has been a year like no other. Competitive
pressures across all of BT’s business areas have
intensified, the pace of technological change
has accelerated further and dependency on
the connectivity we provide our customers
has become absolute. To keep pace with this
changing landscape, business transformation
at BT has become a constant.
A year
like no
other
The vital services we
provide helped to improve
things for those in their time
of greatest need, keeping
friends, families, businesses
and crucial Government
services – including the
NHS – connected.
Net
zero
we have pledged to be a
net zero business by 2045
and we’re working with our
suppliers to help them reduce
their carbon emissions
10m
this year – five years ahead
of target – we hit our goal of
reaching 10m people with help
to improve their digital skills
This year, though, the greatest driving
force of transformation – whether
temporary or permanent – at any
organisation has been Covid-19.
The pandemic has been gruelling for
everybody and BT has more than played
its part in the national and international
effort to deal with its consequences.
The vital services we provide helped to
improve things for those in their time of
greatest need, keeping friends, families,
businesses and crucial Government
services – including the NHS – connected.
We also undoubtedly played a role in
helping the online retailers who have
become so important to many of us.
The way BT has managed through
the pandemic whilst progressing its
business modernisation programme
is a significant achievement. It is the
commitment of the whole BT team
that made this possible, best illustrated
by the award of no fewer than eight
MBEs to colleagues in recognition of
their efforts during the pandemic.
Despite the resilience of our colleagues
and our networks, and the dependency of
our customers on the service we provide,
our financial performance during the year
has been impacted by the pandemic.
Although in line with expectations,
adjusted revenue and EBITDA were both
down 6% compared to last year and
normalised free cash flow was 27%
lower than the previous year.
We know our investors and our customers
understand that BT must modernise
to maintain its leadership position and
return to financial strength. Doing so
will improve our offer to customers and
in turn we will generate value for our
shareholders. Modernising BT is a core
part of the company’s revised strategic
framework which was launched this year
– and on which you will find more detail
in Philip Jansen’s message on page 6.
Building our networks
At the heart of BT lie its networks.
Investing in our broadband and mobile
networks is investing in the future of BT.
The 2020/21 financial year was of vital
importance in this regard: we committed
to make investments that will be the
foundation of BT’s success over the long-
term and which will in turn underpin much
of the UK’s future economic prosperity.
In May 2020 we set out our target,
subject to the right conditions – and
critically the outcome of Ofcom’s
Wholesale Fixed Telecoms Market
Review (WFTMR) – to build full fibre
broadband to 20m premises across
the UK by the mid- to late-2020s.
3
To facilitate this significant investment –
and to help us navigate the uncertainties
caused by the pandemic without
compromising our credit rating – we
took the tough but necessary decision
last year to suspend the 2019/20 final
dividend and all dividends for this year
and rebase it. The Board expects to
resume dividend payments in 2021/22
at 7.7 pence per share, with 30% payable
at the interim stage later this year.
In March 2021, Ofcom published the
outcome of the WFTMR. With it came the
regulatory certainty we required on behalf
of our shareholders to confirm our FTTPa
build investment and we have since further
increased and accelerated our target from
20m to 25m premises by December 2026.
This will be the single largest investment
in the country’s digital infrastructure for
a generation and it will support the UK’s
transition to a gigabit economy.
Ofcom has clearly moved to a regulatory
regime that encourages network builders
to invest in the UK’s digital infrastructure.
This should be welcomed by everybody,
including investors, given the importance
of outstanding connectivity to the UK’s
future prosperity.
Climate pledge and digital skills
Investing for the future must also include
the collective and individual steps we
take on climate change and in supporting
our society and communities. As we build
back better from this awful pandemic,
progress against both these imperatives
couldn’t be more important.
BT has pledged to be a net zero business
by 2045 and we’re working with our
suppliers to help them reduce their
carbon emissions by 42% by March
2031. In November, we reached the
milestone of sourcing 100% of electricity,
worldwide, from renewables. At the same
time, we announced our ambition to move
nearly all of BT Group’s vehicles – the
UK’s second largest commercial fleet at
almost 33,000 in total, including 28,000
Openreach vehicles – to electric and
alternative fuels by 2030.
While climate change has been high
on the agenda for many years, 2020
put digital inclusion at the heart of
UK politics. Our Lockdown Learning
and Standout Skills campaigns are
examples of the support we provided
customers on digital inclusion and
skills training during the year.
These initiatives have been a success. This
year – five years ahead of target – we hit
our goal of reaching 10m people with help
to improve their digital skills by 2026. We
have now extended that target to a more
stretching ambition to reach 25m people
by the end of March 2026.
a Fibre-to-the-premises, also known as full fibre.
BT Group plc
Annual Report 2021
Strategic report 4
A message from our Chairman continued
Board changes
We welcomed two new directors
during the year: Adel Al-Saleh joined
on 15 May 2020 as a non-independent,
non-executive director and Deutsche
Telekom’s nominated representative, and
Sara Weller CBE joined on 16 July 2020,
immediately before the AGM.
Mike Inglis has decided not to put
himself forward for re-election as a
non-executive director at our 2021 AGM.
Our thanks go to Mike for his six years of
service and as a highly active member
of the Board, sitting at various times as a
member of virtually all our committees
– the Audit & Risk, Nominations,
Remuneration, BT Compliance and Digital
Impact & Sustainability Committees.
As announced on 1 March 2021, I will
be retiring as chairman of the company
later in the year. Chairing the Board of
BT has been a tremendous privilege.
Although it’s a much over-used word, it
really is true that BT is a unique business.
With it come a unique set of challenges
but navigating the complexity is as
rewarding as it is demanding, because
what this great company does, really
matters to so many people. However,
having served as chairman of significant
FTSE companies for 17 years, I know
that personally the time is now right
for me to focus on other interests.
The search for my successor is being led
by Iain Conn, the senior independent
director, and shareholders should know
that I have assured the Board that I am
fully committed to serve as chairman as
part of an orderly transition process until
my successor is in place.
Prospects
If, in my fourth and final letter to
shareholders, I wanted to reflect on
events since I stepped up as chairman,
there can be no denying the overall
decline in our share price – a decline
which in fact stretches back a full five
years. I know shareholders will derive little
comfort from the knowledge that much
of this decline reflects trends seen across
our sector, but I am pleased that our share
price has performed much better over the
last year, increasing by about 50% from
the depressed levels at which we traded
for much of last year.
Much of that recovery reflects the
tremendous dedication and hard
work of the management team in
recent years, together with some real
improvements in the fundamental
prospects of our business.
Our relationship with Ofcom has
improved significantly since 2017 and
the business case for FTTP is now
clearly positive. In a few short years,
the number of premises passed by
Openreach has increased more than
tenfold from 420,000 premises to 4.6m.
And Openreach is now building at pace
– aiming to ramp up its build rate to 4m
homes and businesses a year.
Our Global business has fully recovered
from its significant problems some years
ago. A new leadership team with a new
strategy has worked tirelessly to divest
networks and operations in around 20
countries globally and are successfully
executing their strategy to focus
capabilities on today’s software-defined
world. Global is now fully stabilised
and making a positive and valuable
contribution to the group.
In our Consumer business we are seeing
the benefits of some significant long-
term investments aimed at improving
customer experience. We have on-
shored our customer service teams; we
are levelling up the gap between new
and existing customer pricing; and we
are now starting to see the first wave
of truly converged products that use
the combined power of BT’s fixed and
mobile networks coming to market.
We have now seen almost five years
of consecutive improvements in our
quarterly customer satisfaction surveys
and, most recently, record Net Promoter
Scores for both the BT and EE brands.
Looking to the future, the Board and
management do not for a moment under-
estimate the scale of the challenge we
face in further modernising BT to ensure
that we can provide brilliant service to
our customers in a highly competitive
industry. At the same time, we are excited
by the opportunities ahead of us.
BT has a strong and diverse Board at the
helm, an outstanding leadership team
under our chief executive, Philip Jansen,
and a clear strategic purpose and vision
that is being well executed. I am proud to
have played a part in helping to achieve
these strong building blocks and I have
every confidence that BT is well placed
for the next stage in its development
towards consistent and sustainable
growth over the long term.
Jan du Plessis
Chairman
12 May 2021
We have now seen almost
five years of consecutive
improvements in our
quarterly customer
satisfaction surveys and,
most recently, record
Net Promoter Scores for
both the BT and EE brands.
BT Group plc
Annual Report 2021
5
A message from our Chief Executive
In a year when so much has been reappraised
across business and society, BT’s purpose has
shone through as a clear guiding principle:
we connect for good. Globally, our colleagues
have gone the extra mile for our customers
this year, keeping them, their families, friends
and businesses connected.
We launched a range of customer
initiatives to help people during the
pandemic, including our digital skills and
inclusion campaigns, Top Tips on Tech
and our Lockdown Learning support
package; our free unlimited data offer
for EE customers working in the NHS;
the launch of our Small Business Support
Scheme; and we provided high-speed
fibre and wi-fi connectivity to over 200
vaccination centres, connecting mass
testing centres and 17 temporary NHS
hospitals in England, Scotland and Wales.
A pivotal
year
Strategic report 6
A message from our
Chief Executive continued
Our record high customer
service ratings reflect the
outstanding efforts of all
our colleagues. We’ve still
got progress to make but
these are good signs,
demonstrating the value
our customers place on
the critical connectivity
we provide them.
BT Group plc
Annual Report 2021
have the capacity to fund this additional
build from internal resources. However,
we believe we can deliver further value
to shareholders by funding the additional
5m premises through a joint venture
with external parties and we will begin
exploring options.
In mobile, we have extended our 4G
coverage, and hit our target of doubling
our 5G network which now reaches 160
towns and cities with broader and more
highly rated coverage than any other
operator. Following the conclusion of
Ofcom’s 5G spectrum auction in March
2021 – securing the spectrum we need at
a lower than expected cost – we will be
able to continue growing our position
as the UK’s number one 5G network.
The investments we make in these
two leading networks over the next
decade or so mean we’ll be able to
combine them to create the UK’s
leading smart converged network, the
power of which will deliver economic
prosperity for decades to come.
Improved investment case
The confirmation of our FTTP investment,
based on our confidence of being able
to achieve a fair return; the completion
of the 5G spectrum auction; and the
successful conclusion of the 2020
triennial BT Pension Scheme valuation
have cleared up some significant
uncertainties for our shareholders. This
clarity now allows us to focus on executing
our strategy and returning BT to growth.
Refreshed strategic direction
In July 2020, we introduced BT’s new
strategic framework. It comprises three
pillars which support our ambition to be
the world’s most trusted connector of
people, devices and machines: build the
strongest foundations; create standout
customer experiences; and lead the way
to a bright sustainable future.
Our network investments form a key
part of our work to build the strongest
foundations for the company. During
the year, I also made changes to the
Executive Committee and to the way
we operate across the organisation to
ensure we are best placed to continue
delivering for our customers.
Our record high customer service ratings
reflect the outstanding efforts of all
our colleagues. We’ve still got progress
to make but these are good signs,
demonstrating the value our customers
place on the critical connectivity – as well
as the improvements in experience and
service – we’ve provided them this year.
Customer ratings are positive across
virtually all parameters and BT’s customer
satisfaction is the highest it’s ever been.
That doesn’t mask the fact that the
pandemic has been hard for our
colleagues. At the start of the year we
gave our frontline key workers a 1.5%
pay rise and froze pay for managers;
we guaranteed no job losses directly
resulting from the pandemic in the first
three months of the year; and we took
the decision not to use the Government’s
furlough scheme. For the current financial
year we have frozen pay for all colleagues
but plan to pay a special bonus for our
frontline colleagues of £1,000 in cash and
£500 in shares to recognise and thank
them for their efforts.
We also supported colleagues around the
world by setting up a dedicated wellbeing
portal, providing weekly updates from
our chief medical officer, listening and
responding to colleagues’ concerns
and massively ramping up our internal
communications to ensure they felt
supported wherever they are.
Despite the outstanding operational
performance of our colleagues in the
face of the pandemic, our financial
performance during the year was
significantly impacted by Covid-19.
Revenue alone was around £1.6bn lower
than the previous year and this had a
knock-on effect on our EBITDA and
normalised free cash flow.
Importance of our networks
Without connectivity as we know it today,
the global impact of Covid-19 would
have been unthinkable. BT’s leading
networks have been a lifeline throughout
the pandemic for our customers. Daytime
data traffic over our broadband network
doubled from an average of five terabits
per second (Tbps) to around 10 Tbps with
more people at home during the day.
2020 will be the year we look back on as
the moment society truly understood
the value of good connectivity. In 2021,
we’re stepping up to deliver the next
generation of infrastructure and we will
be increasing and accelerating our FTTP
build plan by an additional 5m premises,
from 20m to 25m by December 2026. We
160
We continued to invest in our
mobile network, hitting our target
of doubling our 5G footprint and
reaching 160 towns and cities with
EE’s mobile network
Halo 3+
We’re providing customers with
the seamless connectivity they
need: we launched Halo 3+,
the UK’s first unbreakable
broadband connection
x2
Daytime data traffic over our
broadband network doubled
from an average of five terabits
per second (Tbps) to around
10 Tbps with more people at
home during the day
In January 2021, we announced Mike
Sherman’s departure and the formation
of two new units: Digital, led by Harmeen
Mehta, who joined from Bharti Airtel, in
the newly created role of chief digital and
innovation officer; and Networks, led by
Howard Watson, chief technology officer.
Rob Shuter joined as CEO of Enterprise in
February 2021 from MTN, replacing Gerry
McQuade who retired from BT. In March
we announced that Sabine Chalmers will
become general counsel and director of
regulatory affairs, following the departure
of Cathryn Ross who will leave BT in June
2021 for a new role outside our sector.
With this much strengthened executive
team now in place, we are set to
accelerate our progress to modernise
BT and return this business to top-
line, profitable growth. Last year we
set our target of £1bn annualised cost
savings by 2023, rising to £2bn by
2025. We’ve made very good progress
in the first year, achieving £764m of
gross annualised savings in 2020/21.
During the year we also broke new
ground with the introduction of exciting
products that will provide customers
with the seamless connectivity they
need: we launched Halo 3+, the UK’s first
unbreakable broadband connection; EE
had a great launch of the Apple iPhone
12 in the autumn; and Global launched
Eagle-i, our new security platform that
will transform our managed services
through proactive, predictive cyber
security protection.
7
Looking forward
In March 2021, our chairman, Jan du
Plessis, announced his intention to retire
from the Board. On behalf of everyone at
BT, including the Board and the Executive
Committee, I wish Jan all the very best
for his retirement, thanks for his wise
counsel and congratulations on a truly
outstanding and accomplished career.
We are investing heavily in the future of
the business, including the expansion
and acceleration of our full fibre build
plan. This additional investment
reflects the scale of our ambition to
reinforce the foundations for growth,
both for the company and the nation.
During this financial year we’ll start our
pivot to growth in revenue and EBITDA.
We’ll continue to grow both metrics
predictably and consistently into the
future, underpinning the reintroduction
of our progressive dividend this year.
Although the scale of the investments
we are making will inevitably press
on cash flow over the next few years,
they will not impact our ability to pay a
dividend and they are designed to deliver
enduring success for all BT stakeholders.
Furthermore, once we are through the
peak investment phase, we will see a very
material increase in cash flow creating
further options for BT in the future.
We’ve achieved a huge amount this year,
and while there’s still a lot more to do,
BT is now on the front foot and driving
growth and value for all our investors
and stakeholders.
Philip Jansen
Chief Executive
12 May 2021
To see Philip in conversation
visit our online annual review.
bt.com/annualreview
BT Group plc
Annual Report 2021
Strategic report
8
Executive Committee
The Executive Committee provides
input and recommendations
to assist the chief executive
with strategy development and
operational management. It is
chaired by the chief executive.
The Executive Committee assists the chief executive to:
– develop group strategy and budget for approval by
the Board
– execute the strategy once the Board approves it
– give assurance to the Board on overall performance
and how we’re managing risks.
The chief executive, or his delegate, take all decisions.
This is so there is a single point of accountability.
Executive Committee changes
The following changes to the Executive Committee took
place during the year:
– Gerry McQuade left BT and therefore ceased as
CEO, Enterprise
– Rob Shuter joined BT as CEO, Enterprise
– Michael Sherman left BT and therefore ceased as
chief strategy and transformation officer
– Harmeen Mehta joined BT as chief digital and
innovation officer.
The following changes have been announced to
the Executive Committee that will take effect from
1 June 2021:
– Cathryn Ross will leave BT and therefore cease as
regulatory affairs director
– Sabine Chalmers will become general counsel and
director of regulatory affairs.
BT Group plc
Annual Report 2021
Philip Jansen
Chief executive
Appointed as chief executive in February 2019
and to the Board in January 2019.
Philip joined BT from Worldpay where he
had been CEO since April 2013. Before that
he was CEO and then chairman at Brakes
Group between 2010 and 2015. Philip spent
the previous six years at Sodexo where
he was group chief operating officer and
chief executive, Europe, South Africa and
India. Prior to that he was chief operating
officer at MyTravel Group from 2002 to
2004 and managing director of Telewest
Communications (now Virgin Media) from
2000 to 2002, after starting his career at
Procter & Gamble.
Simon Lowth
Chief financial officer
Appointed July 2016.
Simon was CFO of BG Group before the
takeover by Royal Dutch Shell in February
2016. Prior to that he was CFO of AstraZeneca,
and finance director and executive director of
ScottishPower. Simon was also previously
a director of McKinsey & Company.
Ed Petter
Corporate affairs director
Appointed November 2016.
Ed was formerly deputy director of corporate
affairs at Lloyds Banking Group. Prior to that
he held corporate affairs roles at McDonald’s
Europe, McKinsey & Company and the Blue
Rubicon communications consultancy, having
previously worked as a news producer and
editor at the BBC.
Howard Watson
Chief technology officer
Appointed February 2016 as chief technology
and information officer and became chief
technology officer in March 2021.
Howard was formerly chief architect and
managing director, global IT systems and led
the technical teams behind the launch of
BT Sport in 2013.
Howard joined BT in 2011 and has 30 years
of telecoms experience having spent time
at Telewest Communications (now Virgin
Media) and Cartesian, a telecommunications
consultancy and software company.
Marc Allera
CEO, Consumer
Appointed September 2017.
Marc was previously CEO, EE and prior to that
chief commercial officer for EE from 2011 to
2015. He spent ten years at Three UK as sales
and marketing director and chief commercial
officer. Prior to that, Marc was general
manager of Sega UK and Europe.
Sabine Chalmers
General counsel
Appointed April 2018.
Before joining BT, Sabine was chief legal
and corporate affairs officer and company
secretary of Anheuser-BuschInBev for 12
years. She also held various legal leadership
roles at Diageo. Sabine is qualified to practise
law in England and Wales and New York State.
Cathryn Ross
Regulatory affairs director
Appointed January 2018.
Cathryn was formerly chief executive of
Ofwat, the independent economic regulator
for the water and wastewater sector in
England and Wales. Cathryn is an experienced
regulatory and competition economist and
has worked across a number of different
sectors advising on economic, regulatory
and competition issues.
Alison Wilcox
HR director
Appointed July 2015.
Alison was formerly regional HR director for
Vodafone Europe and, before that, regional HR
director for Vodafone’s Africa, Middle East and
Asia Pacific footprint. Alison joined Vodafone in
2006 as group director of leadership following
a career in consulting.
Clive Selley
Invitee
CEO, Openreach
Appointed February 2016.
Clive was formerly CEO, Technology,
Service & Operations, CEO innovate &
design and before that president, Global
Services portfolio & service design. The CEO,
Openreach cannot be a member of the
Executive Committee under the provisions of
the Commitments. Clive attends Executive
Committee meetings as appropriate.
9
Bas Burger
CEO, Global
Appointed June 2017.
Bas was formerly president, BT in the
Americas, Global Services. Bas joined
BT in 2008 as CEO Benelux.
Before joining BT, Bas was executive president
and a member of the management committee
of Getronics NV, where he ran global sales,
channels and partnerships, developing the
company’s international business. He was
also CEO and managing director of KPN
Entercom Solutions.
Harmeen Mehta
Chief digital and innovation officer
Appointed March 2021.
Before joining BT, Harmeen was group CIO
and head of cloud & security business at Bharti
Airtel. Harmeen has experience leading digital,
engineering, IT and innovation transformation.
Harmeen has previously been CIO at Bank of
America Merrill Lynch, BBVA and HSBC.
Rob Shuter
CEO, Enterprise
Appointed February 2021.
Before joining BT, Rob was group president
and CEO of MTN Group. Prior to joining
MTN, Rob was CEO of the Europe cluster of
Vodafone Group having worked there from
2009 to 2016. Earlier in his career, Rob held
various roles in the financial sector in South
Africa sector including managing director
of retail banking at Nedbank and head of
investment banking at Standard Bank.
Rachel Canham
Company secretary & general
counsel, governance
Rachel is company secretary of BT Group
plc. She joined BT in 2011 as a senior
commercial lawyer before becoming chief
counsel for mergers & acquisitions in 2013.
Rachel was appointed company secretary &
general counsel, governance in November
2018. Rachel or her delegate attends all
Executive Committee meetings.
BT Group plc
Annual Report 2021
Strategic report 10
About BT and our purpose
We’re one of the world’s leading communications
services companies. The solutions we sell are
integral to modern life. Our purpose is as simple
as it is ambitious: we connect for good. There
are no limits to what people can do when they
connect. And as technology changes our world,
connections are becoming even more important
to everyday life.
We
connect
for good
Purpose
Purpose
Purpose
Why we exist
Why we exist
Why we exist
We connect for good
We connect for good
We connect for good
2030 Ambition
2030 Ambition
2030 Ambition
Who we must become
Who we must become
Who we must become
To be the world’s most
To be the world’s most
To be the world’s most
trusted connector of people,
trusted connector of people,
trusted connector of people,
devices and machines
devices and machines
devices and machines
Values
Values
Values
What will guide us
What will guide us
What will guide us
Personal, simple, brilliant
Personal, Simple,
Personal, Simple,
Brilliant
Brilliant
BT Group plc
Annual Report 2021
We champion these connections
and empower people and
organisations to get more from
this emerging world, removing
limits and unlocking potential.
We harness the power of technology
to help solve some of the world’s
biggest challenges such as cyber
security, the global pandemic
and climate change.
Our ambition is to be the world’s most
trusted connector of people, devices
and machines. Technology is rapidly
and fundamentally changing our lives,
businesses and societies, and trust will play
a critical part in our customers being able to
take advantage of these changes. We want
to keep showing our customers they can
trust and depend on us – that we’re by their
side, fixing their problems, innovating to
make their lives easier and better.
Guiding how we deliver our purpose and
ambition, our values of personal, simple,
brilliant help us do the right thing for our
customers, colleagues and country.
We’re one of the UK’s best-known
companies. And we’re also a global
organisation, able to provide solutions for our
customers in over 180 countries. 2021 marks
our 175th birthday, making us the world’s
oldest communications company too.
We provide fixed, mobile and converged
connectivity solutions. They include
broadband, mobile, TV, networking, IT
services and related services and applications.
We’re responsible for building and operating
networks and delivering the connectivity-
based solutions that are essential to modern
lives, businesses and communities.
We’re made up of organisational units. There
are customer-facing units that sell solutions
to our customers and corporate units that
support the whole group. Openreach is a
separate but wholly-owned customer-facing
unit which is operationally independent.
Strategy
How we’ll grow value
for all our stakeholders
1
2
3
Looking in
Build the
strongest
Build the
foundations
strongest
foundations
Looking in
Build the
strongest
foundations
Create
standout
customer
experiences
Looking out
Looking out
Lead the way
to a bright,
Create
Create
sustainable
standout
standout
future
customer experiences
customer experiences
Looking to the future
Looking to the future
Lead the way
Lead the way
to a bright,
to a bright,
sustainable future
sustainable future
See page 19 for more information
on our strategy.
Financial
highlights
Revenue
£21.3bn (7)%
(2019/20: £22.9bn)
Profit before tax
£1.8bn (23)%
(2019/20: £2.4bn)
Adjusteda EBITDA
£7.4bn (6)%
(2019/20: £7.9bn)
Cash flow from
operating activities
£5.3bn (16)%
(2019/20: £6.3bn)
Normalised free
cash flowb
£1.5bn (27)%
(2019/20: £2.0bn)
Basic earnings
per share
14.8p (15)%
(2019/20: 17.5p)
Capital expenditure
£4.2bn 6%
(2019/20: £4.0bn)
11
Our customer‑facing units
Consumer
Global
Serving over 14m households,
we’re the UK’s largest provider of
consumer mobile, fixed and converged
communications solutions. We serve all
types of consumers, giving them a great
connection and keeping them safe online.
Our ambition is to create a single smart,
converged network that seamlessly
connects customers – wherever they are –
to the things that matter most to them.
With the ability to serve customers in
over 180 countries, Global integrates,
secures and manages network and
cloud infrastructure and services for
multinational corporations. Our ambition
is to solve customers’ increasingly
complex connectivity and communication
needs with over-the-top and platform-
enabled business solutions.
Enterprise
Openreach
Enterprise keeps around 1.2m UK and
Republic of Ireland businesses and public
sector organisations connected. We also
provide network solutions to more than
1,400 UK communications providers. Our
ambition is to partner with our customers
in their digital transformation journeys
and be a growth engine for UK business
and the public sector.
Openreach runs the UK’s main fixed
connectivity access network, connecting
homes, mobile phone masts, schools,
shops, banks, hospitals, libraries,
broadcasters, governments and big and
small businesses to the world. To make
sure everyone in the UK benefits from
being connected, we want to build the
best possible network with the highest
quality of service.
How we’re organised
Digital innovation and our network are at the heart of our ambition.
We launched our new Digital and Networks units on 1 April 2021. Digital
is responsible for driving our own digital transformation – and rapidly
developing and delivering innovative solutions and outcomes for our
customers. Networks has clear accountability for building and operating
our networks and protecting network leadership. These two technology
units will work together to lead and drive a unified technology strategy
and architecture to underpin our transformation and growth.
Our operating model
Our operating model shows how our organisation is designed to deliver our strategy.
It describes the business units, their accountabilities and interfaces. It also explains
the intent, purpose and spirit of our operating model.
Corporate
units
Finance,
strategy &
business
services
Human
resources
Corporate
affairs
Legal, company
secretarial
& regulatory
affairs
Digital
Networks
Consumer
Enterprise
Global
Openreach
BT and other
communications
providers
Mandate
a Adjusted (being before specific items,
share of post tax profits/losses of
associates and joint ventures and
net non-interest related finance
expense), as explained on page 198.
b Normalised free cash flow as defined
on page 199.
Corporate units
Technology units
Customer‑facing units
Openreach
Run activities
on behalf of the
business where it’s
beneficial to do
things once,
for everyone
Lead and drive a unified technology
strategy and architecture to underpin
transformation and growth in our
customer-facing units through the
design, build and operation of our
network and IT
Own the customer
relationships and deliver
solutions, outcomes
and services to our
customers
Runs the UK’s main
fixed connectivity
access network for all its
customers with greater
strategic and operational
independence
BT Group plc
Annual Report 2021
Strategic report r
u
O
s
t
e
s
s
a
We have a unique
combination of people,
technology, content,
networks and other
assets. This helps
us stand out from
the competition and
provides opportunities
to create value for all
our stakeholders.
e
v
i
t
c
n
i
t
s
i
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12
Our business model
We build, own and operate the
UK’s largest fixed and mobile
networks which support the
country’s digital ambitions. We
design, market, sell and support
differentiated, innovative and
compelling solutions to our
customers – often working
with partners.
We operate in wholesale and retail markets. Our
customers are consumers, businesses, multinational
corporations, public sector organisations and other
communications providers.
We keep our customers at the heart of everything
we do. Our portfolio of solutions delivers standout
customer experiences – helping customers connect,
communicate, share, be entertained and do business
more effectively.
Consumers buy solutions from our BT, EE and Plusnet
brands. They include landline, mobile, broadband
and TV services, coupled with supplementary
propositions like handsets, accessories and insurance.
Businesses buy similar solutions from us, but with
more focus on complex managed network solutions,
IT services and cyber security.
Most customers buy BT products and services
on monthly, recurring subscriptions or contracts.
Individuals, households and small and medium-sized
enterprises (SMEs) are typically on 12–24 month
contracts. Larger UK and international business
customers usually buy managed solutions on multi-
year contracts. Wholesale customers buy contracts
ranging from one month to five or more years.
All these contracts and subscriptions provide
ongoing revenue and help build long-term,
trusted customer relationships.
Pages 59 to 66 explain how our group risk categories
could affect our business model.
BT Group plc
Annual Report 2021
13
Customers
Colleagues
Innovation
Our trusted relationships with our large
customer base help us understand their
current and future needs and put us in
a strong position when developing and
launching new solutions and propositions.
We have a diverse customer base
including over 14m households, 1.2m
UK and Republic of Ireland business and
public sector organisations and almost
4,000 global customers. More than 1,400
UK communications providers buy our
network solutions and propositions too.
We realise our ambitions through our
colleagues. This was especially clear
during the pandemic as colleagues
everywhere kept the UK and our
global customers connected. We have
99,700 full-time equivalent colleagues
globally, 80,400 of whom are in the UK.
Their knowledge, behaviours, skills and
expertise are vital to delivering on our
purpose to connect for good.
BT Labs is the heart of our research,
development and innovation, continually
pushing the boundaries of connectivity
solutions. This year, we created the 5G
Edge-XR, a real-time service which
combines cloud computing and 5G
networks for sports fans to watch
immersive events from whatever angle,
on whatever device. We invested £720m
on research and development this year,
filing 109 initial patent applications to
add to our current portfolio of more than
5,100 patents and patent applications.
Retail footprint
Financial strength
Data
With more than 580 UK BT/EE retail
stores, we have the largest retail footprint
of any communications provider. It gives
us a uniquely broad reach to engage with,
support and grow our customer base.
Strong, recurring cash flows help us
invest in long-term, value-creating
initiatives. This year, we generated
£1.5bn in normalised free cash flowª,
after investing £2.3bn in our network to
continue delivering the best experiences
to our customers.
Our vast, rich data sets help us create
more personalised and meaningful
experiences for our customers. As we
apply AI and machine learning, we’ll be
able to work smarter, provide customers
with better solutions and outcomes, and
open up new growth opportunities.
Networks and
physical assets
Our
brands
We own and operate the UK’s largest
fixed network. More than 660
communications providers use it to
connect their customers. We also hold
significant stakes in mobile spectrum,
with extensive UK geographic and
population coverage. EE has been
RootMetrics’ No. 1 UK mobile network
for seven years in a row and we have a
leading integrated core network. Our
unique network and physical assets help
us deliver reliable and superior service
to our customers.
We serve end customers through three
distinct, well-established and trusted
brands – BT, EE and Plusnet. They help us
win and keep a wide range of customers
across different market segments,
through solutions targeted to meet their
needs. In addition, the Openreach brand
serves communications providers.
Suppliers
and partners
We work closely with a wide range of
established partners and suppliers.
Without them, we couldn’t deliver
the solutions that best meet our
customers’ needs.
You can find out more about how we engage
with colleagues, customers, suppliers and
other stakeholders on pages 34 to 41.
a Normalised free cash flow as defined on page 199.
BT Group plc
Annual Report 2021
Strategic report 14
Key trends influencing BT
Intense
competition
Many of our markets are mature and highly contested by
well-known and new competitors. This can drive prices down.
But there are still opportunities. Deploying new or more
advanced connectivity technologies and solutions creates
more value for customers, and for us.
Economic
uncertainty
The Covid-19 pandemic led to unprecedented economic
uncertainty. The UK economy has shrunk. Unemployment has
gone up.a Although a recovery is predicted in 2021, it’s by no
means certain. But while Covid-19 has caused financial concern
for many consumers, most expect to spend the same or more
on communications.
Increasing
importance
of connectivity
and digitalisation
a Monetary Policy Report – February 2021 Bank of England.
BT Group plc
Annual Report 2021
New
technologies
FTTP and 5G will help networks handle the
demand of more connected devices and higher
data use, combined with ever-higher speed and
reliability expectations. They will also open up new
growth opportunities like edge computing, cloud
computing, AI and machine learning. And with the
increased reliance on connectivity and these new
technologies comes a need for stronger and more
dependable cyber security.
Covid-19 underlined the importance of being connected.
There was a huge rise in the number of people working
from home and businesses had to accelerate their digital
transformations. While the core network is still essential, we’ll
keep evolving the solutions we offer to meet our customers’
changing needs. As consumers and businesses adapt to the
post-pandemic socio-economic climate, they’ll need reliable
yet flexible connectivity more than ever.
15
Shifting customer
expectations
Customers continue to care
more about getting extra value.
With so many more connected
devices at home and work,
things like flexibility and security
become even more important.
Most important of all is reliability.
Customers need strong and
consistent connectivity that
isn’t affected by family
members, colleagues or
anyone else’s activity.
Convergence
Indoors or outdoors, rural or
urban, on the move or at home,
wherever people or businesses
are based, today the need
for a consistent connection
is universal. Whatever the
underlying technology, service
must be seamless, and converged
propositions that combine fixed
and mobile services also create
richer customer experiences.
BT Group plc
Annual Report 2021
Strategic report 16
Regulatory update
UK Government and Ofcom’s
investment focus
The Government recognises how
important it is to invest in gigabit-
capable networks, with their potential
to deliver big economic and societal
benefits. In line with the Government’s
strategic priorities, Ofcom has
continued working to create a regulatory
framework for fixed communications
that encourages investment.
Wholesale Fixed Telecoms
Market Review (WFTMR)
Ofcom’s WFTMR sets out a clear and
long-term framework that promotes
and rewards network investment by
everyone. It also ensures that consumers
will continue to have access to affordable
broadband as new networks and services
become available. This is positive for
BT and our customers. It supports our
target to deliver 25m full fibre homes by
December 2026 – meaning our customers
will get the faster and more reliable
services they need.
Ofcom’s investment support comes in
a number of forms. The new regulatory
framework provides greater stability by
virtue of having five-year market review
periods instead of three and looking
across all of the wholesale fixed telecoms
markets instead of considering business
and residential connectivity separately.
BT Group plc
Annual Report 2021
To support competitive investment,
wholesale access prices for fixed final
mile legacy services will remain stable
in real terms across the country until at
least 2031. Similarly, Ofcom does not
expect to regulate wholesale prices
of full fibre final mile services until at
least 2031 – depending on prevailing
customer outcomes, investment levels
and competition. Any regulation beyond
that point won’t strip away any upside we
have earned up to then, and won’t cap our
investment returns below what is needed
to compensate for the downside risk our
investors are taking when they decide
to invest in fibre today. This is otherwise
known as Ofcom’s ‘fair bet’ commitment.
We’ll keep working constructively with
Ofcom to implement the new regulatory
framework. At the same time we’ll
make sure we can compete fairly so that
Openreach can offer attractive terms
to all its downstream communications
providers, helping them quickly
deliver new services to customers.
Implementing the framework will need
further work with industry to make
duct and pole use simpler, complying
with new rules on quality of service,
and delivering on our commitment to
a ‘balanced build’ across the UK.
Government support for fibre
We continue to believe there is more the
Government could do to reduce the cost
of building full fibre networks, for us and
other providers. That would speed up
full fibre rollout and catalyse economic
and social benefits. Cumulo rate relief
(relief on the rates charged against our
network assets such as ducts and poles)
and ‘barrier busting measures’ to make
wayleaves and planning easier would help
fibre investment go faster.
The Government says it will provide at
least £1.2bn to support full fibre rollout.
This may potentially increase to £5bn if
our industry can build gigabit-capable
networks to the UK’s ‘final 20%’ of
premises over the next five to ten years to
support its target. We expect this money
to be available through Government
procurement, helping us invest in places
that wouldn’t normally be commercially
viable. When we have more details, we’ll
decide whether to bid for funds in line
with our business investment criteria.
Shared Rural Network
We’re making great progress extending
our rural 4G coverage as part of the
Shared Rural Network initiative. We’re
upgrading hundreds of existing sites to
meet the new coverage obligations in our
spectrum licence – including reaching
88% UK geographic coverage by 2024.
The Department for Digital, Culture,
Media & Sport should announce grant
funding soon which will enable new,
shared infrastructure in areas where
today there’s no 4G on any network –
making sure 95% of the UK will be able
to get 4G from at least one provider.
All‑IP
UK phone services will move from
our legacy public switched telephone
network (PSTN) to IP-based services by
the end of 2025. This is a key enabler for
the wider move to full fibre in the UK.
We’ve started moving customers
off the PSTN and we’re working with
Government, Ofcom and industry to
minimise any disruption. It’s a sensitive
project because of the need to look
after vulnerable customers and the
UK’s Critical National Infrastructure.
Broadband Universal
Service Obligation
Launched in March 2020, the broadband
Universal Service Obligation gives
individuals the right to a decent broadband
connection, where connection costs
do not exceed £3,400 or where the end
customer agrees to pay any excess costs.
That means at least a 10Mbps download
speed and 1Mbps upload speed. As
designated universal service provider
(alongside KCom in Hull), we’re upgrading
the network to reach more than 5,500
homes and businesses. On top of that,
another 400,000 premises can now get
better broadband via a 4G wireless hub.
Getting decent broadband to hard-to-
reach homes and businesses can be
expensive. So we’ve introduced a cost-
sharing scheme that lets customers close
to other premises club together and save
money on getting connected.
However, it’s true that getting a good
connection is prohibitively costly for
some homes and businesses, and
we don’t believe this will be fixed by
the broadband Universal Service
Obligation scheme. We’re committed
to playing our part, alongside others
in industry, Ofcom and Government,
to finding new ways to get decent
broadband to those hardest to reach.
In October 2020, Ofcom opened an
investigation into the way BT quotes
excess costs to individual premises on a
shared infrastructure. The investigation
is ongoing.
Consumer fairness
UK regulators rightly prioritise
consumers’ interests. We support
that. We want regulation which delivers
better outcomes for all customers, while
providing support for those who are
vulnerable. We’ve continued to work with
Ofcom to show how we’re sticking to their
Fairness for Customers commitments we
signed up to in June 2019. That includes:
– supporting customers and helping
them engage with the market
– making sure services work like
they should
– making it quick and easy for customers
to switch communications providers
– ensuring everyone gets fair treatment.
We’ve brought in protections voluntarily
for customers who don’t take up a new
deal at the end of their contract. BT
broadband customers get a capped price
increase, and BT Halo customers keep
paying the same.
EE mobile handset customers who’ve
been out of contract for more than three
months get a price discount from then
on. And when their broadband or mobile
contract is ending, we offer existing BT,
EE and Plusnet customers equivalently-
priced deals to new customers if they
choose to re-contract.
For customers we know are vulnerable,
we’ve committed to regular account
reviews to help them get the best deal
for what they need. And we’re soon
launching a new, easier to access tariff
for financially vulnerable customers with
wider eligibility.
In 2020 we also completed upgrading
around 700,000 customers from copper
to superfast broadband at no extra cost.
17
We’re faithful to Ofcom’s Fairness for
Customers commitments, and therefore,
from 1 April 2021, this will receive Board-
level oversight from the BT Compliance
Committee.
You can find more about the BT Compliance
Committee on page 86.
European Electronic
Communications Code
In October 2020, Ofcom confirmed a
package of new customer protections
based on new European Electronic
Communications Code (EECC) rule
changes. Ofcom and Government have
given us until December 2021 to follow
most of the rules, and until June and
December 2022 for the remainder. This
phased approach is mainly because of the
impact of Covid-19 combined with the
implementation efforts required.
The rules should give customers
enhanced rights. For example, from
December 2021, all mobile devices must
be sold unlocked. And from June 2022,
before they order something, customers
will be able to get an easily readable
contract summary that allows comparison
to other providers and services. On top
of that, from December 2021, vulnerable
customers with a specific need will get
better access to the relevant information
in a format they choose.
We’re implementing these rules and
have responded to Ofcom’s further
consultation on making it easier for
home customers to switch providers.
We support Ofcom’s proposals, which
will benefit our home and business
customers.
We agree with the EECC rules and what
they’re trying to achieve. But some of the
rules are really complicated. An example
of this is the rule on the customer’s ability
to end any or all elements of bundled
services contracts for any non-beneficial
change made to any element of that
bundle. Our systems need to be able to
recognise Ofcom’s broad definition of
‘linked contract’ across any combination
of our fixed and mobile services, and
sometimes across brands, in order to
offer customers this right. We’ll keep
working through business and systems
requirements to comply with this, while
simultaneously planning how to minimise
unintended consequences.
Spectrum auction
In March 2021, we bid successfully for
extra 5G mobile spectrum in Ofcom’s
auction in the 700MHz and 3.6GHz
bands, securing a total of 80MHz for
£475m. Following the assignment phase
of the auction we secured our preferred
positions within the 700MHz and 3.6GHz
bands and will rapidly bring the spectrum
into use for provision of additional
coverage and capacity of 5G services.
Ofcom has now consulted on its 2020s
spectrum management strategy. We’ve
supported a number of its proposals,
including the development of a spectrum
roadmap. We expect Ofcom will issue
a number of consultations relating to
spectrum in the coming year, including
future annual fees for 2100MHz licences
and the award of 26GHz spectrum.
Northern Ireland Public Sector
Shared Network contract
In December 2020, Ofcom found that
we failed to provide information to
telecommunications company eir, related
to Fibre on Demand on an ‘equivalence
of inputs’ basis, compared with BT’s own
downstream Enterprise business unit.
This related to the bidding process for a
public sector fibre contract in Northern
Ireland in 2018. We cooperated with
and accepted Ofcom’s findings, settling
with them to pay a fine of £6.3m. We
have put measures in place to prevent
this happening again. Ofcom recognised
that these errors weren’t deliberate and
that we took a number of steps to comply
with the regulatory obligations. Based on
Ofcom’s decision, we don’t believe this
impacted the tender outcome of
the contract in question.
Brexit
Brexit has changed the UK’s relationship
with the EU. We have been planning for
Brexit for a number of years and there
has been no immediate impact from the
Brexit trade deal on our operations and
service offerings to our customers. We
continue to monitor the evolution of the
Brexit trade deal. We have teams working
on implementing changes needed to
work seamlessly for our customers and
with our partners in the EU to ensure our
services operate as normal.
BT Group plc
Annual Report 2021
Strategic report Looking in
Build the
strongest
foundations
Looking out
Create
standout
Looking to the future
Lead the way
to a bright,
customer experiences
sustainable future
Purpose
Purpose
Why we exist
Why we exist
We connect for good
We connect for good
2030 Ambition
2030 Ambition
Who we must become
Who we must become
To be the world’s most
To be the world’s most
trusted connector of people,
trusted connector of people,
devices and machines
devices and machines
Values
Values
What will guide us
What will guide us
Personal, simple, brilliant
Personal, Simple,
Brilliant
18
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t
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s
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n
a
n
o
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BT Group plc
Annual Report 2021
19
Our strategy underpins our ambition: to be the world’s
most trusted connector of people, devices and machines.
To deliver our ambition we’ve refreshed our strategic
framework so it explains more clearly how our strategy
will generate value for all our stakeholders.
The framework is based on three pillars:
Strategy
How we’ll grow value for all our stakeholders
1
2
3
Build the strongest
foundations
Create standout
customer experiences
Ambitions are only as strong
as the foundations they’re built
on. That’s why we continue to
strengthen ours.
Technologically, we’re building the best
converged network. We’ll keep investing
in full fibre, 5G, network capabilities and
extended access. We want to build the
best, most reliable converged network
to help our customers do more.
Pages 20 to 21
Operationally, we’re building a simpler,
more dynamic BT. We’re simplifying our
processes and products and modernising
our technology. We want to be more
efficient and responsive and be easier
to deal with and work for.
Pages 22 to 23
Internally, we’re building a culture
where people can be their best. We’re
stripping away complexity and giving our
colleagues the chance to learn and grow.
We want to be a destination employer.
One that attracts and retains a diverse
and talented mix of colleagues who are
able to focus on what’s important to
our customers.
By taking these actions, we’ll build strong
foundations that our stakeholders can
count on.
Pages 24 to 25
We’re relentlessly focused on
creating standout customer
experiences. We’re doing that
through the solutions we sell,
the outcomes we deliver and how
we engage with our customers.
We’re moving from selling products and
services to delivering better, smarter,
differentiated solutions and outcomes.
We’re connecting more customers to
new technologies. And we’re investing
in and innovating across our portfolio of
solutions, to meet our customers’ current
and future needs and to make sure they
experience the full benefits that new
technologies offer.
Pages 26 to 27
We want to deliver outstanding
experiences and service for our
customers when they use our solutions
and when they engage with us across
all our channels. We want to always
put our customers’ needs first – acting
transparently, keeping them and their
data safe and secure and delivering
brilliant service every time. We want them
to feel we’re a strong and supportive
partner that they can trust and rely on.
Pages 28 to 29
Lead the way to a
bright, sustainable
future
We’re looking to tomorrow too.
Leading the way to a bright,
sustainable future means two
things for us:
Firstly, incubating new technology‑
driven growth opportunities where we
have a strong right to play and can deliver
outstanding outcomes for customers
and country.
Page 30
Secondly, being a sustainable and
responsible business by helping people
build better digital lives, championing
responsible tech and human rights,
and tackling climate change and
environmental challenges.
Pages 31 to 33
We want what we do to benefit everyone,
and how we do it to build trust between us
and all our stakeholders.
We set out the key performance indicators
we use to track progress against our
strategy on pages 46 to 47.
Our directors' annual bonus scorecard
measures are linked to our strategic pillars,
see page 95.
Pages 59 to 66 explain how our group risk
categories could affect our strategy.
BT Group plc
Annual Report 2021
Strategic report 20
Strategic progress
Our ambition is bold and stretching.
Our strategy guides us on that
journey. There will always be more
work to do, but this year we’ve
made excellent progress against
our strategic priorities.
1
Build the strongest
foundations
The best converged
network
For us, building the strongest
foundations starts with the
network. The need for people and
businesses to connect has never
been greater. As the number of
connected devices keeps growing,
we need a converged network
that uses the best of our mobile
and fixed networks to seamlessly
support our customers’ needs.
To achieve this goal, we continue
to invest in existing and new
technologies. This year we have
made progress against four
key priorities:
BT Group plc
Annual Report 2021
5G by default
Fibre by default
EE is the UK’s best mobile network.
In 2020, RootMetrics awarded EE UK
Best Mobile Network for the seventh
consecutive year, including for 5G. So
far, we’ve launched 5G in 160 towns and
cities. It’s giving our customers faster
speeds, a more reliable service and near-
instant connections to content. We’ve
also further improved our backhaul links
by building almost 3,000 10G links to
support enhanced peak speeds for 4G
and 5G customers.
To support our business customers
we’re building and managing 5G private
networks, as we have done with Belfast
Harbour where we will help accelerate
their digital transformation and smart
port ambitions with a state-of-the-art
5G ecosystem.
160
towns and cities with 5G
Our total full fibre footprint now reaches
4.6m premises, over 2m of which were
passed in the last 12 months. That’s an
average of almost 40,000 a week, and in
the final week of March 2021 Openreach’s
build rate surpassed 100,000.
Given Openreach’s build confidence,
regulatory clarity, the Government’s
recent tax super-deduction and a positive
5G spectrum auction outcome, we have
decided that the conditions are right
to increase and accelerate our full fibre
build. We have increased our target from
20m to 25m premises, and will accelerate
rollout to deliver this by December 2026.
Our accelerated build has three massive
benefits: it allows us to go faster, beefing
up our capacity to build fibre to households
and businesses; it will allow us to go further,
getting fibre to more people including
in rural communities; and it will help fuel
UK economic recovery, delivering better
connectivity and creating new jobs.
4.6m
total full fibre footprint (premises)
25m
we’ve increased our full fibre build
target from 20m to 25m premises
and will accelerate rollout to deliver
this by December 2026
21
7
number of years that EE has been
awarded UK Best Mobile Network
by RootMetrics
100,000+
full fibre premises passed in the final
week of March 2021
2m+
premises passed with full fibre
during 2020/21
Extended access
Today our mobile network covers over
99% of the UK population – helping
customers connect, wherever they are.
But we’re also investing in extending our
reach further, growing our access network
so customers get a brilliant experience in
buildings, on the go and in remote places.
This investment is focused on:
– expanding our public wi-fi network
to reach 5.8m active hotspots, up
from 5.6m
– rolling out 58 new sites in rural and
remote locations
– acquiring new spectrum. The results of
the recent spectrum auction mean that
we will get 700MHz spectrum, which
will further boost indoor coverage in
buildings and venues, and increase
our coverage overall
– deploying a fixed wireless network
for new fixed wireless and hybrid
broadband propositions. In February
2021, we launched our first hybrid
broadband device. It uses fixed and
mobile networks, giving our customers
a more reliable service and an instant
connection when setting up their
broadband for the first time.
5.8m
active public wi-fi hotspots
Network capabilities
Our focus remains on building secure,
flexible and robust core capabilities that
ultimately let our customers do more.
We’re continuing to evolve our core
network towards a common cloud-based
solution that can manage 4G and 5G.
We’re running pilot ‘use cases’ to explore
edge-enabled services. We worked
with Worcester Bosch to enable smart
manufacturing via a private 5G network
and a BT-managed edge computing
infrastructure. For consumers, we’re
testing edge-based solutions to enable
low latency, real-time uses such as the
augmented reality experiences we are
exploring as part of the ‘Green Planet
5G AR’ consortium. The lower latency of
these new network capabilities means
virtually no waiting. It also delivers a much
better experience for consumers and
businesses and opens up new ways of
connecting and working.
99%
of the UK population covered by our
mobile network
c.3,000
10G links built to support enhanced peak
speeds for 4G and 5G customers
BT Group plc
Annual Report 2021
Strategic report 22
Strategic progress continued
1 Build the strongest foundations continued
A simpler, more dynamic BT
In May 2020, we announced the next phase
of our transformation: to modernise our
business. To do that, we’re focusing on
four key missions:
Mission 1. Transforming our
customer journeys
At the core of our transformation is
building simpler and more automated
processes so we can deliver more quickly
and efficiently for our customers. So,
we’re investing in speeding up customer
journeys and reducing the number of
failures and manual interventions. This
will make our operations more productive
and radically improve our customer
experience. We have launched the first
digital journeys for our SME customers,
who can now order many of our Halo for
Business packages online. This means less
effort for our customers, and for our SME
sales advisers. We have also built new full
fibre journeys, supported by components
of our new strategic IT architecture,
which will go live early in 2021/22. Most
importantly, customers are telling us
they’re getting a better experience.
By reducing the complexity
of our product portfolio
– particularly products with
outdated features, slow
speeds, or data caps – we
will be able to deliver a
better customer experience.
BT Group plc
Annual Report 2021
Mission 2. Simplifying our
product portfolio
Reducing the complexity of our product
portfolio – particularly products with
outdated features, slow speeds, or data
caps – is better for us and our customers.
It makes offers simpler for us to manage
and easier for customers to understand.
In the past year, we’ve removed over
half of our older consumer broadband
products. We also reduced the number
of Global product variants we sell by 34%.
Mission 3. Migrating our
customers onto our strategic
networks
Our new strategic networks are more
capable and reliable, with lower running
costs than our legacy infrastructure.
Moving customers to new, converged
propositions helps us gradually retire
these legacy networks. This year, we
have launched a number of strategic
propositions; for example our consumer
customers can now get our IP-based
Digital Voice service. We now have 1.5m
IP voice connections (mainly businesses),
a nearly 40% increase this year.
50%+
reduction in our older consumer
broadband products
c.40%
increase in IP voice connections during
2020/21
23
Mission 4. Moving to a modern,
modular IT architecture
We want to launch market-leading
products and features to our customers
faster. To do that, we’re radically
simplifying our IT estate, embracing
cloud solutions and common
components. Over the last year we’ve
been building the foundations of our
new IT architecture, based on modern,
modularised software components
deployed on industry standard platforms.
We’ve now deployed a number of major
software platforms such as ServiceNow,
Salesforce and Vlocity. And we’ve
started building new, highly automated
customer journeys on these platforms,
for example to support our Halo for
Business and full fibre products.
On top of the progress across these
four missions, we’ve also delivered
productivity improvements and managed
costs through initiatives like:
– new operating models for our
Consumer call centres and Enterprise
regional sales teams
– improved use of data insights and
advanced analytics to identify the most
challenging customer order and fault
journeys to proactively respond to
potential issues
– operational productivity improvement
programmes
– enhanced procurement supported by
digital tools
– rigorous functional cost control and
Covid-19 mitigating actions.
Our modernisation programme is a key
driver for delivering annualised gross
cost savings. Last year we announced
a target of £1bn in gross cost savings
by March 2023, increasing to £2bn
by March 2025. We anticipated each
target would cost £900m and £1.3bn
to deliver, respectively. We’re already
ahead of schedule, having delivered gross
annualised savings of £764m with an
associated cost of £438m.
£764m
gross annualised savings delivered during
2020/21
BT Group plc
Annual Report 2021
Strategic report 24
Strategic progress continued
1 Build the strongest foundations continued
A culture where
people can be
their best
Our colleagues are central to
delivering our ambition so our
people strategy aims to make
BT a brilliant place to work. This
year, we focused on continued
skills development, diversity
and inclusion, and health,
safety and wellbeing.
20,000+
colleagues attended masterclasses led by
learning and business experts
1.5m
video views on our new digital learning
management system
Skills development
Nurturing future skills creates a culture
where people continually want to be
their best. We continue to invest in skills
development for all colleagues, including
technical skills, agile ways of working,
resilience and adaptability.
As part of our commitment to unlimited
learning, this year we deployed a new
digital learning management system.
Since launch, there have been more than
1.5m video views. And more than 20,000
colleagues have attended masterclasses
led by learning and business experts.
We want to understand and match
skill supply to future demand. So we’re
integrating workforce and skills planning
capabilities, and using AI tools, to include
data-driven external benchmarks in our
skills development. This will help us find
opportunities to reskill colleagues to
areas of demand.
We also launched a programme to
support frontline colleagues who want
to transfer into other areas of BT and
continued to host and expand networks
like TechWomen.
Despite the pandemic, we continued to
attract fresh talent – with our graduate
and apprentice programmes playing a
big part. This year, we hired over 8,700
colleagues. 6,700 of them are in the
UK, including more than 1,800 new
apprentices and over 200 graduates.
At the same time c.14,200 colleagues
left BT – c.7,900 through natural attrition,
c.4,200 through paid leaver programmes
and c.2,100 through divestments.
BT Group plc
Annual Report 2021
Diversity and inclusion
We believe that diversity, inclusion,
accessibility and equality is everyone’s
business. And they are core elements
of our people strategy. During the year,
we updated our UK people data by
encouraging colleagues to amend their
diversity records on our systems. Now we
have a far better understanding of our
workforce demographics, which in turn is
helping us identify and tackle bias
and discrimination.
This year, we increased our focus on race
equality, particularly around addressing
issues of systemic racism and instances
of prejudice across our business. We
launched our Ethnicity Rapid Action
Plan, and made significant progress
in the areas where we could make the
biggest immediate differences. We’re
proud to be a Lifetime Visionary Partner
of Race Equality Matters. As at 31 March
2021, nearly 10% of our UK employeesª
declared they were from a Black, Asian
or minority ethnic background.
As part of our Valuable 500 commitments
on disability inclusion, we’ve established
a Disability Rapid Action Plan across our
business to help us make faster progress.
The plan is amplifying colleagues’ voices
through our Able2 People Network and
helping us embed disability inclusion
right across our business.
Further information on our approach
to diversity on our Board as well as our
Board Diversity and Inclusion Policy can
be found in the Corporate governance
report on page 81.
You can find more about our diversity
and inclusion strategy at bt.com/
diversity‑and‑inclusion
Health, safety and wellbeing
Covid-19 presented new and far greater
day-to-day challenges to customers’ and
colleagues’ health, safety and wellbeing.
We’re offering a lot more support to our
colleagues, to promote their ongoing
health and resilience.
During the pandemic, we have delivered
preventative wellbeing services,
supported shielding workers with a
bespoke rehabilitation service and
launched an online medical support
programme. Our chief medical officer has
provided regular updates, with content
on topics like remote working, emotional
resilience and communication.
Putting effective Covid-19 management
measures in place helped our operational,
customer and field teams keep working
a UK employees include, amongst others, those who
had not disclosed, or had responded ‘prefer not to
say’ in respect of their ethnicity pursuant to our self-
declaration campaign. None of those employees are
counted for the purpose of this statistic as coming
from a Black, Asian or minority ethnic background.
25
Workspaces
We’re continuing to improve our
workspaces to make them brilliant places
for our colleagues to work. Our Better
Workplace Programme is going well,
consolidating offices into fewer buildings
that are fit-for-the-future. Once Covid-19
allows, our new Birmingham hub is ready
for colleagues to go back to and will
eventually host around 3,500 people.
In Manchester, building work is about
to start at a new and prestigious office
location. Construction work at our new
London headquarters and Bristol office is
also well underway. In Warrington, we’ve
bought a new contact centre. And as part
of the plan, we’ve also exited several sites
across the UK.
Pay and benefits
To attract and retain the best talent, and
reward our colleagues for their work, we
regularly review pay and benefits in the
context of competitiveness, sustainability
and fairness. For all BT managers
eligible for a bonus, we use a group-wide
scorecard with a mix of financial and
non-financial measures. It means our
bonuses match our strategic priorities
and stakeholder responsibilities. In line
with the Commitments, bonuses for
Openreach colleagues are linked solely
to Openreach’s performance.
We have once again this year announced
that all eligible colleagues will receive
an annual award of £500 worth of shares
through yourshare. Yourshare gives
eligible colleagues an opportunity to be
a shareholder and share in our success.
Colleagues also have the opportunity
to participate in our all-employee share
plans, save as you earn plan and a share
incentive plan, to the extent these are
operated each year.
Additionally, we have announced a
special one-off cash bonus of £1,000 for
our frontline colleagues and key workers,
to recognise their commitment and
contribution during an extraordinarily
challenging year.
safely while following Government
guidelines and legislation.
Over 50,000 key workers continued to
work from our buildings and out in the
field during the pandemic, alongside
more than 3,000 retail colleagues who
staffed our shops when they were
allowed to open.
Sickness absence fell this year, with
2.85% calendar days lost per colleague
(a reduction from 3.00% last year). Our
workforce had 203 lost time injuries as a
result of accidents this year (compared
to 198 last year); whilst the annual injury
volume is down more than 26% from just
five years ago. When our colleagues need
support, BT-funded rehabilitation returns
nearly 95% of them to full duties.
Tragically we suffered one fatality in 2020
involving an Openreach field engineer.
The field engineer had been attempting
to provide a fix to a line passing over a
river following a period of high rainfall.
We are deeply saddened by this loss
and continue to focus all our efforts on
reducing the risks to our workforce and
others affected by our activities.
Gender pay gap
Our peoplea
Our 2020 gender pay gap is stable,
with our median and mean gender
pay gaps both well below national
and industry averages. We’ll keep
using evidence-based interventions
to shift the dial on gender equality.
You can find details of progress
on our gender pay gap at bt.com/
genderpaygap
5.0%
our overall median gender pay gap
(UK colleagues)
4.9%
our mean gender pay gap
(UK colleagues)
BT Group plc Board
Male 8
Female 4
Total 12
Senior managementc
Male 603
Female 279
Total 882
Female
33%
Female
32%
Leadershipb
Male 81
Female 37
Total 118
Employees
Male 75,717
Female 26,320
Total 102,037
Female
31%
Female
26%
a Numbers presented are as at 31 March 2021 and exclude approximately 600 colleagues located in jurisdictions
where local labour laws restrict reporting of gender.
b For the purpose of the UK Corporate Governance Code 2018, our leadership comprises the Executive
Committee (excluding executive directors on the Board but including the CEO, Openreach and the company
secretary) and all of their direct reports.
c For the purpose of the Companies Act 2006, our senior management comprises those employees responsible
for planning, directing and controlling the activities of the group, or a strategically important part of it (being
members of our senior leadership and senior management teams, and directors of the group’s subsidiaries but
excluding executive directors on the Board).
BT Group plc
Annual Report 2021
Strategic report 26
Strategic progress continued
2
Create standout
customer experiences
Our customers are at the heart of everything we
do. This year, we focused on two specific areas
to make sure we created standout experiences
for our customers: offering differentiated
solutions and outcomes, and delivering
outstanding experiences and service.
Differentiated
solutions and
outcomes
We continue to evolve
our portfolio of solutions,
enabling customers to stay
connected and get more
from their digital lives.
5G network
We’ve pioneered 5G ever since we
launched it in May 2019. We now have the
UK’s largest 5G network and over 3.2m
5G-ready EE consumer customers. This
year, we launched the exclusive iPhone
Full Works Plan, with access to Apple
Music, Apple TV+ and Apple Arcade
included. On top of this, we offered
customers access to the market-first
augmented reality BT Sport Match
Day Experience.
3.2m+
5G-ready EE consumer customers
BT Sport was available on
more TV platforms this year,
with customers able to get
it on Fire TV, Android TV
and Roku.
BT Group plc
Annual Report 2021
Halo 3+
We launched BT Halo 3+ this year. It’s
our latest convergence innovation and
was the UK’s first ‘unbreakable’ home
wi-fi product, backed up by the EE
mobile network. Halo 3+ customers get
Complete Wi-Fi for a reliable connection
in every room, a no-extra-cost full fibre
upgrade and support from our Home
Tech Experts.
Gaming
In 2020 EE and BT were the only UK
mobile and fixed network providers to
offer customers PS5 and Xbox Series
X next generation consoles. In January
2021, customers signing up to an EE
Smart Plan with the new 5G Samsung
Galaxy S21 smartphone got EE’s exclusive
Gaming Unleashed bundle for free,
including access to Xbox Game
Pass Ultimate.
BT Sport
BT Sport was available on more TV
platforms this year, with customers able
to get it on Fire TV, Android TV and Roku.
On top of that, our monthly pass provides
quick, unrestricted no-contract access
for fans to enjoy their favourite sports
content on new devices.
27
Halo for Business
For business customers we launched Halo
for Business, with three services in one
– full fibre broadband with a 4G back-
up service (4G Assure), a digital phone
line and unlimited mobile data. Since its
launch, almost 70% of customers are
taking enhanced broadband bundles with
features like 4G Assure and enhanced IT
support.
c.70%
business customers taking enhanced
broadband bundles
Intelligent Connectivity
Our Intelligent Connectivity solution
helps enterprise customers achieve
smarter, digital futures by offering a suite
of products from SD-WAN (Software
Defined Wide Area Network), SD-LAN
(Software Defined Local Area Network),
cloud, security and managed services.
We’ve seen an encouraging level of
interest in our SD-WAN solutions which
offer secure, flexible, high-bandwidth
connections across multiple sites using
both fixed and mobile technologies.
Network solutions
In Global, we launched a new generation
of software-defined managed network
solutions that will provide customers
with increased choice and flexibility as
they optimise their networks for cloud
services. The first service – based on
VMWare’s industry-leading solution and
delivered over our new digital platform –
is available to all customers worldwide.
BT Group plc
Annual Report 2021
Security
Zoom Meetings
This year, we were the first international
service provider to offer a fully managed
Zoom Meetings service. We provide
a managed service on top of the core
solution. It includes service management,
monitoring and user adoption – all critical
for multinational companies. In addition,
we integrate our world-leading voice
networks to provide extended reach
for customers and ensure that security
is embedded into the core solution.
Our unique resources help us combine
exceptional customer experiences with
flexibility and security in one easy-to-
use platform.
Leading security expertise is critical
to protect us and our customers from
cyber attack. This year, we invested in a
programme blending BT’s tradecraft,
unique threat intelligence from
the global network, and the latest
analytical, automation and orchestration
technologies to transform how we deliver
advisory and managed services. As part
of this programme, we launched new
services helping customers understand
and react to increasing cyber security
risks. We also grew our advisory services
team. It’s now made up of approximately
300 security professionals around the
globe helping customers with their
security requirements. Our solution
portfolio has been enhanced by over
30 product launches this year.
30+
security solution product launches
this year
Strategic report 28
Strategic progress continued
2 Create standout customer experiences continued
Outstanding
experiences and
service
We’ve made good progress
on continuing to improve our
customers’ experience. Our group
Net Promoter Score (NPS) has
improved for 19 consecutive
quarters. It continues to be an
area of focus, and is a group KPI
(page 46).
Customer experience
Lockdown Learning
With UK schools closed due to lockdown
restrictions during the year we introduced
our Lockdown Learning support package.
It’s a free scheme for families, carers
and children to help them join virtual
classrooms and stay connected to their
teachers, classmates and schoolwork. It
gives those most in need unlimited mobile
data, BT Wi-Fi vouchers and free mobile
access to BBC Bitesize and Oak National
Academy educational content without
using up data.
Over the last year, Global’s NPS rose
almost 20 points. In Consumer, NPS for
the BT brand is at an all-time high. The
latest figures published by Ofcom show
sustained falling complaint levels over the
last four years with a 50% drop in Ofcom
complaints for EE mobile and BT fixed
products, and an 80% drop in complaints
in EE fixed. EE leads the way, with the
industry’s fewest landline and broadband
complaints of all major providers and
the equal lowest complaints rate of
any major mobile network operator. BT
landline and broadband complaints are
now lower than the industry average.
Against the backdrop of Covid-19, we’ve
paid even closer attention to creating
outstanding customer experiences.
19
consecutive quarters of improvement
in group NPS (a group KPI)
c.20
point improvement in Global NPS
50%
drop in Ofcom complaints for
EE mobile and BT fixed products
BT Group plc
Annual Report 2021
29
NHS
We’ve helped the NHS respond to the
pandemic by connecting a number of
the Nightingale hospitals and over 180
vaccination centres across England and
Wales with high-speed fibre and wi-fi.
This has allowed clinicians to easily access
and update patient records via secure
mobile devices.
From April 2020, we provided NHS
workers and vulnerable customers
with free unlimited mobile data on
pay monthly plans. Today more than
300,000 NHS staff are benefiting from
unlimited data on our EE network. And
EE customers can now access NHS online
services without using any mobile data –
even if they’ve run out.
300,000+
NHS staff are now benefiting from
unlimited data on our EE network
Life Lines
We’ve also worked with Guy’s and St
Thomas’ NHS Trust on their Life Lines
Project enabling families to reach
patients at their bedsides virtually. So
far, it’s allowed more than 100,000
virtual NHS hospital visits – almost
700,000 minutes of much-needed
video conversation in 180 hospitals.
Small Business Support Scheme
Openreach
To support business customers during
the pandemic, we launched the Small
Business Support Scheme to help them
boost their connectivity, cash flow and
confidence. Since launch, we’ve helped
more than 2,000 small businesses fund
the cost of high-speed business or
Ethernet lines. With the shift to digital
ways of working we’ve supported almost
250 small businesses with a free one-
to-one coaching session and more than
270,000 people in businesses with free
digital skills training.
270,000+
people in small businesses supported
through digital skills training
Covid-19 had a major impact on
Openreach, with customer expectations
higher than ever due to an increasing
reliance on broadband with the
move to working and schooling from
home. Through the year, Openreach
supported millions of customers working
from home by increasing capacity
to deliver record repair completions
and get homes and businesses back
up and running quickly and safely.
Openreach repaired copper and
fibre faults on time 84% of the time
– unchanged on last year. Missed
appointments (where Openreach
was responsible) happened just 3%
of the time. 93% of customers got a
first provision appointment within 10
days, up 10% compared to last year.
This performance was recognised
in best-ever NPS results for copper,
fibre and Ethernet access.
84%
copper and fibre faults repaired
on time
93%
customers offered a first appointment for
provision within 10 days
BT Group plc
Annual Report 2021
Strategic report 30
Strategic progress continued
3
Lead the way to a bright,
sustainable future
We have always been committed to a more sustainable future.
Today we are focusing on incubating new technology-driven growth
opportunities and being a sustainable and responsible business.
Incubating new
technology‑driven
growth opportunities
We want to find new areas to
grow, while delivering better,
smarter outcomes for our
customers. We’ll do this by
incubating new technology-driven
growth opportunities where we
have a strong right to play and
can deliver outstanding outcomes
for customers and country.
Data is an example of an adjacent
opportunity where we’ve recently been
able to help customers and the country.
Over the course of the pandemic, we’ve
provided aggregated and anonymised
network data at the UK Government’s
request. For example, generalised data
on the pattern of people’s movements
gave vital and timely insight into the
effects of Covid-19 lockdowns and
helped the Government test and
improve its approach.
Governments, communications providers
and regulators in the UK and worldwide
all recognise the importance of this type
of data in fighting the spread of the virus.
We believe our vast and rich data sets are
important assets for future growth. But
we also understand we have to closely
protect and safeguard them to respect
citizens’ and businesses’ fundamental
rights and freedoms – especially privacy.
Our digital impact and
sustainability strategy
Building better
digital lives
Championing
responsible tech and
human rights
Tackling climate change
and environmental
challenges
Reach 25m people in the
UK with help to improve
their digital skills, by end
of March 2026
The UK Government’s
Digital Strategy includes
giving everyone access to
the digital skills they need
Develop, use, buy and
sell technology in a way
that benefits people and
minimises harms
The UK Government is
committed to world-leading
online safety measures that
also support innovation and a
thriving digital economy
Adopt a sector-leading
approach to climate action,
with a target to become a
net zero carbon emissions
business by 2045
The UK Government’s
target is to achieve net zero
emissions by 2050
Our strategic
focus areas
Our ambitions
Supporting the
UK’s ambitions
Contributing to the
UN Sustainable
Development
Goals
For more details about our digital impact and sustainability strategy and how we’re performing against it,
see our Digital Impact and Sustainability Report at bt.com/sustainabilityreport
BT Group plc
Annual Report 2021
Sustainable and
responsible business
We believe the best way forward is
paved with bold action, and being
a sustainable and responsible
business is critical to our ambition.
For us, this is captured in our
digital impact and sustainability
strategy: helping people build
better digital lives, championing
responsible tech and human
rights, and tackling climate
change and environmental
challenges.
Building better digital lives
Work Ready
To boost social mobility and economic
productivity, our Work Ready programme
is helping jobseekers succeed in an
increasingly digital world of work.
We reached over 10,300 people this year
through webinars and events. Overall
we’ve supported more than 13,700
people with employability skills since
2014. This year we also launched our
Stand Out Skills campaign, reaching over
468,000 people – giving free support to
job hunters to help build their confidence.
468,000+
people reached through our
Stand Out Skills campaign
We want to empower people to
make the most of the digital world
by supporting their daily lives,
families, careers and businesses,
and to help bridge the digital
divide. Our programmes and
campaigns enable customers to
get the most from our products
and services and strengthen
relationships with all our
stakeholders. At the same time,
we’re helping to create a tech-
savvy workforce for the country
and develop the talent we need
for the future.
10m+
people reached with help to improve
their digital skills since 2014/15
(a group KPI)
Skills for Tomorrow
Launched in 2019, our Skills for Tomorrow
programme aims to help give people the
skills and confidence they need to get the
most from the digital world. The original
aim was to help 10m people by the end of
March 2026. We’ve made strong progress
this year, and have already achieved that
goal, reaching over 10m people since
2014/15. The pandemic led us to adapt
our programmes to have a greater online
focus, and consequently we’ve been
able to reach many more people than
we had originally anticipated. As a result
of meeting our original goal, we’ve now
extended the target, aiming to reach 25m
people by the end of March 2026.
Small businesses
As part of our 25m Skills for Tomorrow
target, we want to offer help to one
million people working in small
businesses to improve their digital skills.
This year, we ran over 200 webinars and
virtual workshops with Google, Small
Business Britain and the Great British
Entrepreneur Awards.
We launched a mentoring scheme in
partnership with Digital Boost to support
small businesses, with free advice from
BT colleagues.
5.7m+
people learnt or did something new as a
result of our Top Tips on Tech TV campaign
Top Tips on Tech
Launched during the first UK national
lockdown, our Top Tips on Tech TV
campaign taught viewers basic but vital
digital skills. These included making a
WhatsApp video call, keeping children
safe online, getting a business online, and
finding physical and mental wellbeing
services on the web. As a direct result of
the campaign, more than 5.7m people
learnt or did something new. And 2.1m of
them continued to put what they learned
into practice afterwards.
31
Families
Barefoot, our partnership with Computing
at School, is equipping children with key
computing and problem-solving skills to
help them thrive, through free resources
and training provided to teachers.
Barefoot has reached more than 3m
children and teachers since 2014/15.
This year, we extended Barefoot’s scope
to support children in their early years.
And in response to the pandemic, we’ve
introduced new home learning resources,
including interactive learning games and
activities, and expanded the free online
resources for families available on our
Skills for Tomorrow portal.
bt.com/skillsfortomorrow
We’re helping older, more vulnerable,
and digitally excluded people build
confidence and skills too. Our partnership
with Good Things Foundation (GTF)
sponsored more than 80 online centres,
providing skills training within local
communities.
In order to focus our impact, we are
scaling down our involvement in Barefoot
and the online centres. We will continue
to support the work of Computing at
School and GTF, and help children and
older and vulnerable groups in other ways.
Partnerships
Partnerships are central to our digital
inclusion approach. We’re a founding
member of FutureDotNow, a coalition
of leading companies and non-
governmental organisations that aims
to empower everyone to thrive in a
digital UK.
With Microsoft and Cambridge
University, we helped UNICEF scale up its
pilot Digital Learning Passport campaign.
It helped schoolchildren in need across
five countries by providing free access
to e-books, learning videos, recorded
lessons and resources for teachers
and children.
In India, we partner with the British
Asian Trust to help boost youth skills,
empowering more than 100,000 teenage
girls through digital learning. And we
continue to support the Quality Education
India Development Impact Bond, which
is boosting literacy and maths learning
outcomes. Over 250 BT volunteers have
supported these programmes.
BT Group plc
Annual Report 2021
Strategic report 32
Strategic progress continued
3
Lead the way to a bright, sustainable future continued
Championing responsible
tech and human rights
This year, we launched our new
responsible tech strategy. We
want to make sure we develop,
use, buy and sell technology in
a way that consistently benefits
society and minimises harm.
We aim to use responsible tech to
differentiate existing products and
propositions, and to help us grow in
areas like health, connected homes
and security. Responsible tech directly
supports our ambition to be the world’s
most trusted connector of people,
devices and machines. And it will
differentiate us as customers seek to
make ever more ethical buying decisions.
We base our responsible
tech approach on these
key principles:
For Good
We design and deliver tech to
empower people and improve
their lives.
Accountable
We’re accountable for
our actions and take care
to avoid and protect against
tech misuse.
Fair
We work hard to ensure
everyone is treated fairly
and with respect.
Open
We listen, collaborate and are
transparent about our actions.
We follow all Modern Slavery Act
requirements and international standards
on human rights that apply to our
business. These include the International
Labour Organization’s Declaration on
Fundamental Principles and Rights at
Work and the UN Guiding Principles on
Business and Human Rights.
BT Group plc
Annual Report 2021
We continue to champion human rights
through partnerships and collaborations,
including our work with the Global
Network Initiative, Tech Against
Trafficking, the Marie Collins Foundation,
the Centre for Sport and Human Rights
and UK charity Unseen.
Our processes and procedures identify
and address potential and actual human
rights impacts throughout our business.
We have embedded checks in our sales
processes to help us find and address
potential risks. In our supply chain, we
have mandatory contractual standards
on working conditions – and we check
that our suppliers stick to them.
For more information, take a look at our
modern slavery statement at bt.com/
modernslavery
Tackling climate change and
environmental challenges
We’ve led on climate action for
almost three decades. In 2016, we
hit our first science-based target
of cutting our carbon emissions
intensity by 80% – four years early.
We’ve since set a target to reduce our
carbon emissions intensity by 87%, by the
end of March 2031 (compared to 2016/17
levels) and have pledged to be a net
zero carbon emissions business by 2045.
Furthermore, this year we’ve extended
the scope of our net zero pledge to
include our supply chain, as well as
increasing our target of reducing supplier
carbon emissions by 42% by the end of
March 2031 (previously 29%).
Overall, we’ve cut total carbon emissionsª
from our global operations by a further
29% over the last year, largely as a
result of completing the switch to 100%
renewable electricity globally and, to
a much lesser extent, as the impact of
Covid-19 led to lower in-year emissions
from travel and heating. Since 2016/17,
we’ve cut our carbon emissions intensity
by 57% to 13.7 tonnes of CO2e per £m
value added.
We’re focusing on a number of things to
support our ambitions:
– Switching to renewable electricity –
100% of what we consume worldwide
in our networks, exchanges, offices
and shops is renewably sourcedb. We
purchased over 2.5TWh of electricity
this year.
– Moving to a low carbon fleet – BT
and Openreach together operate the
UK’s second largest commercial fleet.
Our almost 33,000 vehicles make up
more than two thirds of our direct
emissions (greenhouse gas scope
1). We’re committed to switching
nearly all our fleet to run on electric
and alternative fuels by 2030. Joining
forces with The Climate Group, we’ve
launched a partnership (the UK Electric
Fleets Coalition) to push for fleet
decarbonisation and help develop
policy measures that support electric
vehicle uptake. We advocated for and
supported the UK Government’s ban
on new petrol and diesel cars and light
vehicles from 2030.
– Decarbonising our buildings – This
year, our global energy consumption
reduced by 123 GWh. This was
mainly as a result of energy efficiency
measures, including the reduction
of our legacy network and our
investments of nearly £21m in cooling
projects, but also to a lesser extent
due to the impact of Covid-19. Overall,
our investments have helped us save
£358m since 2009/10.
Last year we took action to increase energy
efficiency through decarbonising our
buildings. For more information, please
see page 39 of the Annual Report 2020.
bt.com/about
– Cutting supply chain emissions –
More than two thirds of our end-to-
end carbon emissions come from our
supply chain. We’ve cut our supply
chain emissions by 19% since 2016/17,
and are on track to meet our target of
a 42% reduction by 2030/31. We’re
encouraging key suppliers to set their
own net zero targets, buy renewable
energy and talk to their own suppliers
about climate action. We also have
market-leading carbon emission
reduction clauses into our key
supplier contracts.
33
sector customers move to net zero.
Using its Internet of Things platform to
enable smart buildings, iOpt provides
real-time information and alerts on the
status of properties, with a focus on
social housing. Everimpact is developing
environmental monitoring for its smart
streets proposition – air quality and CO2
sensors will be integrated into street hub
units to help monitor, report and verify
climate actions, and in turn, sales of
carbon offsets to finance climate action.
We’ll offer these products to UK local
councils looking to adopt smart building
and environmental monitoring solutions.
We’re committed to implementing the
recommendations of the Task Force on
Climate-related Financial Disclosures.
See page 67 for more detail.
57%
reduction in our carbon emissions intensity
since 2016/17 (a group KPI)
100%
of the electricity we consume worldwide is
renewably sourcedb
19%
reduction in our supply chain emissions
since 2016/17, and on track to meet our
42% reduction target by 2030/31
We’re helping customers cut carbon too.
Many of our products and services help
them cut emissions by avoiding travel or
by doing things more efficiently.
This year, we launched the green tech
innovation platform, picking tech scale-
ups iOpt and Everimpact to develop joint
products and services that help public
Our worldwide energy use and greenhouse gas emissionsc
Year ended 31 March
2019
2020
2021
UK
Non-UK
UK
Non-UK
UK
Non-UK
Energy
GWhd
CO2ee
Tonnes
Energy
GWh
CO2e
Tonnes
Energy
GWh
CO2e
Tonnes
Energy
GWh
CO2e
Tonnes
Energy
GWh
CO2e
Tonnes
Energy
GWh
CO2e
Tonnes
20
26
Scope 1f (direct emissions)
Gas and oil – heating
Gas and oil – generators
Fugitive emissions – refrigerants
Commercial fleet (converted
from litres fuel)
Commercial travel (converted
from mileage/cost/litres fuel)
201
28
38,148
6,788
1,049
2
1
422
356
1,040
198
22
37,120
5,126
1,571
2
1
174
36
419
172
628
32,625
8,318
1,150
498 123,358
NA
NA
512
125,263
3
723
506
121,733
33
8,259
23 5,462
29
7,298
4,847
9
2,229
2
0.4
3
8
312
94
2,433
723
1,805
Total scope 1
760 177,602
26
7,280
761
176,378
6,789
725
166,055
13
5,367
Scope 2g (electricity incl CHPi)
Total consumption (LBMj)
Renewable consumption CO2e
MBMk adjustment
Nuclear consumption CO2e
MBM adjustment
Total scope 2 CO2e MBM
adjustment
2,412 682,935
345 128,319 2,371
605,976
318 111,955
2,335
544,279
242
80,399
2,136 (604,771)
245 (92,702) 2,260
(577,672)
228 (82,887) 2,335
(544,279)
241
(80,136)
–
–
0.04
(2)
–
–
0.03
(2)
–
–
0.02
(1)
78,164
35,615
28,304
29,066
–
262
Total scopes 1 & 2 (MBM)
3,172 255,766
371
42,895
3,132
204,682
344
35,855
3,060
166,055
255
5,629
Intensity metric scopes 1 & 2
worldwide emissions tonnes
CO2e per £m value added
% change from baseline year
2016/17
Scope 3h worldwide emissions
CO2e tonnes
23.4
(26)%
17.9
(43)%
13.7
(57)%
3,405,146
3,471,692
3,454,525
NA: Not available
a Greenhouse gas scopes 1 and 2.
b 99.9% of the global electricity BT sources is renewable. The remaining 0.1% represents where markets don’t allow due to non-availability of renewable electricity.
c We restate historical years’ data when we think subsequent information is materially significant (e.g. replacing estimates with measured figures).
d For gas & oil based on GWh equivalent input value before combustion and GROSS calorific value.
e CO2e: carbon dioxide equivalent emissions.
f
g Scope 2: indirect emissions from the generation of our consumed energy (mainly electricity) (excludes third party consumption).
h Scope 3: including supply chain, customer use of our products, and other indirect emissions (such as employee commuting).
i CHP: combined heat and power.
j
LBM: location-based method for scope 2 emissions accounting – as defined in the Scope 2 Guidance amendment to the Corporate Standard.
k MBM: market-based method for scope 2 emissions accounting – as defined in the Scope 2 Guidance amendment to the Corporate Standard.
Scope 1: direct emissions from our own operations (e.g. fleet/heating fuel combustion).
We report in line with the Greenhouse Gas Protocol (ghgprotocol.org).
For full methodology and further data see our Digital Impact and Sustainability Report bt.com/sustainabilityreport
BT Group plc
Annual Report 2021
Strategic report 34
Our stakeholders
Our internal and external stakeholders play a vital
part in us building the strongest foundations, creating
standout customer experiences and leading the way
to a bright, sustainable future.
Our colleagues, customers, shareholders,
the communities we do business in,
suppliers, UK Government and regulatory
bodies are all key stakeholders. We
connect with them at all levels of
our business. That includes frontline
operations, customer-facing and
corporate units, our senior leadership
team, the Executive Committee and
the Board and its committees.
We engage with stakeholders in lots of
different ways – from virtual meetings and
conferences to reviews, forums
and webcasts.
To understand how well we’re engaging
with different groups, the Board and
its committees receive regular updates
and use them to make better decisions,
and provide feedback and constructive
challenge on activities, programmes and
initiatives being considered.
This year we introduced a new
stakeholder management risk category,
recognising just how important they are
to our business. You can read more on
page 59.
Our Section 172 statement on pages
42 to 43 includes examples of how the
Board and its committees had regard
for stakeholder interests through its
discussions and decision-making
during the year.
BT Group plc
Annual Report 2021
Colleagues
Our ambition is only as
strong as the foundations
we’re built on, and our
colleagues are absolutely
central to this.
Engaging with them is critical to achieving
a culture where they can be their best
and fully contribute towards realising
our purpose, ambition, strategy and BT’s
long-term success.
We employ approximately 99,700
full-time equivalent colleagues in 44
countries. 80,400 are in the UK. We also
engage with 1,700 colleagues through
agencies and nearly 68,600 other non-
regular staff.
Our colleagues want us to:
– share their personal values
– provide flexible and agile ways of
working
– provide great career opportunities,
development and training
– reward performance with fair and
competitive pay and benefits.
How we engage with colleagues,
and the result
The Board receives regular updates from
the chief executive and the HR director
(as appropriate) on our colleagues,
progress against key people strategy
initiatives, culture and overall sentiment
within the organisation. The Covid-19
pandemic, combined with our cultural
transformation programme, meant that
wellbeing was a priority at the Board’s
discussions about colleagues this year.
Given the focus in the organisation on
diversity and inclusion, the Board also
spent time discussing the diversity
and inclusion strategy, how it supports
the group’s strategy, external targets,
commitments and progress.
The Board uses the Colleague Board as
its chosen method of engagement with
the workforce under the UK Corporate
Governance Code 2018 (Code). Isabel
Hudson, as our designated non-executive
director for workforce engagement, is the
primary liaison and she has discussions
with Colleague Board members both
through the formal meetings and
informal discussions. You can find more
information on the work of the Colleague
Board on the next few pages.
Once a year our colleagues tell us how it
feels to work here through our Your Say
engagement survey. With around 85%
of colleagues taking part this year, this
survey gives us a clear idea how they’re
feeling and helps us understand what
more we can do to make BT a brilliant
place to work. This year, we also wanted
to know how colleagues were feeling
as a result of the pandemic. Given the
impact of Covid-19, we ran monthly
‘pulse surveys’ throughout the first
four months of the year. This allowed
us to review and adjust our approach
to ensure it was effective in supporting
our colleagues. Regular updates
from the chief medical officer were a
key part of the support provided.
Our People Networks are colleague-led
groups that feed back thoughts, opinions
and opportunities to our leadership team
so we can make BT a properly diverse
and inclusive place to work. Our People
Networks are sponsored by one of our
Executive Committee members or the
CEO, Openreach.
Combined with listening directly
to our colleagues, we also hear
concerns through more formal
engagement channels. They include
our European Consultative Council,
the Communications Workers
Union, Prospect and EE employee
representatives in the UK. These were
shared and discussed with the Board via
the chief executive and the HR director.
When we respond to feedback from
colleagues, we first pick areas and
initiatives that will make the biggest
impact. Longer term, we continually
shape and inform our overall people
strategy to create a culture where
colleagues can be their best – with a
focus on skills development, diversity
and inclusion, and health, safety and
wellbeing. More on what we have done
during the year as a result of engaging
with our colleagues can be found on
pages 24 to 25.
c.99,700
full-time equivalent colleagues employed
in 44 countries
The Colleague Board
Who is the Colleague Board
Last year’s Annual Report explained
the Board’s decision to create a
Colleague Board as its chosen workforce
engagement mechanism under the Code.
The Board felt this was the right option
for BT as it would allow for meaningful
input from (and change for) colleagues
across the group and give them a louder
voice at the table. It also best represented
our intent to bring our colleagues closer
to decision-making and to engage with
them to explore initiatives and proposals.
The Colleague Board comprises ten
members representing all our business
units, two Openreach invitees, Isabel
Hudson, our designated non-executive
director for workforce engagement, and
the chief executive (the chair). Isabel
was selected for this role due to her
breadth of understanding and interest in
employee and wider stakeholder matters.
The chairman, HR director and general
counsel are also invited and attend all
formal meetings. The company secretary
is secretary to the Colleague Board and
she or her delegate attends all meetings.
The HR, internal communications and
company secretarial teams support Isabel
Hudson and the Colleague Board. As part
of engagement by other non-executive
directors with our colleagues, Sara Weller
has also decided to attend all meetings
for the rest of 2021.
Colleague Board members have a two-
year tenure. There will be an application
process this year for new Colleague
Board members from January 2022.
For continuity, current members will
be offered the opportunity to apply to
remain on the Colleague Board for
a further year.
Communication with the Board
As the designated non-executive director
for workforce engagement, Isabel
Hudson is the formal link between the
Colleague Board and the Board, openly
reporting back on key discussions and
feedback to the Board and management,
as appropriate. Outside of formal
meetings, Isabel liaises with Colleague
Board members, including attending their
team meetings where appropriate. The
minutes of each Colleague Board meeting
are also shared with the Board and Isabel
also reports back on Colleague Board
feedback on any initiatives that the
Board or its committees are considering,
to allow the Board and management to
use it to shape thinking.
35
Communications with
our colleagues
Throughout the year, Colleague Board
members gave feedback on their
discussions and activities, and received
input from colleagues across the
business, in a number of ways:
– all colleagues are provided with
the opportunity to feed into future
Colleague Board agenda items and
raise ‘hot topics’ via Colleague Board
members for discussion at meetings
– summaries are posted on the
intranet after each formal meeting
and Colleague Board members
also publish video messages on
Workplace from Facebook (our internal
communication platform) updating
colleagues on proposals and initiatives
and the Colleague Board’s views
and contributions
– Colleague Board members use
a number of internal channels to
exchange views and feedback. In
addition to a Workplace group, which
they manage themselves and use to
talk directly and openly with other
colleagues, Colleague Board members
also hold group-wide all-hands calls
– colleagues also connect with BT’s
People Networks and forums to
understand internal trends and
priorities.
The chief executive also invites
Colleague Board members to his
regular leadership calls.
We are fortunate to have
established the Colleague
Board at a time when, given
the tremendous challenges
being faced as a result of
the pandemic, hearing the
views and experiences of
colleagues is paramount.
I have particularly enjoyed
the ‘hot topic’ sessions at
meetings, where there have
been no holds barred!
Isabel Hudson, our designated non-
executive director for workforce
engagement and a member of the
Colleague Board
It is inspiring to be able to
share the positive feedback
and concerns of our
colleagues so that they
genuinely feel heard.
Tom Hannibal, site support lead analyst,
Consumer and Colleague Board member
BT Group plc
Annual Report 2021
Strategic report 36
Our stakeholders continued
The Colleague Board
continued
The Colleague Board made
an outstanding contribution
in helping to shape our
approach in a number of
significant areas during their
first year. I’m delighted with
their engagement and
involvement in a number of
initiatives. It’s exceeded my
expectations in many ways!
Philip Jansen, chief executive and chair
of the Colleague Board
We have been constantly
involved in the plans for
the Better Workplace
Programme this year.
Everything from the design
of colleague surveys and
discussing workplace habits,
spaces and the technology
we will use, through to
Covid-19 measures and our
wellbeing. I am really proud
to have played a part in
shaping BT’s future
workplaces for our
colleagues to love.
Kate MacNicol, Senior service desk
analyst, Enterprise and Colleague
Board member
BT Group plc
Annual Report 2021
Activities in 2020/21
The Colleague Board held four formal meetings this year. It also held
a number of informal meetings and briefings with relevant internal
teams. In its first 15 months, the Colleague Board has successfully
contributed to, and shaped, some of our key initiatives by sharing
views and different perspectives. Through both formal meetings and
informal sessions, our senior leaders seek the Colleague Board’s views
on business-wide programmes (including how they align with our
values and culture), how we communicate with our colleagues and the
effectiveness of wider colleague engagement mechanisms (like the
Your Say employee engagement survey). The meeting agendas are
primarily driven by the Colleague Board members, working with
the company secretarial team.
The Colleague Board’s main highlights
to date are:
– helping the Board understand
employee sentiment through the
pandemic, including the importance
to colleagues of receiving regular
communications. It also shaped the
content, approach and communication
of wellbeing campaigns to support our
colleagues through the pandemic
– giving advice to the chief executive
and Executive Committee on our new
purpose and reaffirmed values and
taking an active role in the subsequent
communications to colleagues
– discussing the need to simplify and
improve our systems, and accelerate
our transformation programme and
digitalisation agenda
– assisting the development and shaping
of the Better Workplace Programme
(see page 25). That included giving
feedback on key design principles to
reflect different colleagues’ needs,
shaping our communications and
engagement and helping to design
success measures for the programme
– helping expand our Ethnic Diversity
Network and create a new Americas
arm to support our diversity and
inclusion strategy and giving feedback
on our Ethnicity Rapid Action Plan (see
page 24). The Colleague Board was also
one of the key internal promoters to
encourage our colleagues to complete
the UK-wide self-declaration campaign
on the diversity of our UK colleagues.
The composition of our UK colleagues
from a diversity perspective has been
invaluable in helping the Board and
management shape our diversity and
inclusion strategy
– highlighting key issues and colleagues’
concerns as part of ‘hot topics’ open
discussion sessions at meetings
during the year. This has included
insights into the importance of timely
and regular communications from
senior management on key business
developments and the impact of
restructuring plans on colleagues, as
well as the need for communications
and initiatives to better reflect the
perspectives of our global colleagues,
and to ensure our sales teams have
better insight into the product and
services roadmaps for different
customers
– launching the Colleague Board’s
ambition with a focus on:
‐ diversity and inclusion bringing an
equilibrium
‐ being your best self
‐ being proud to be at BT
‐ making wellbeing part of our DNA
– discussing BT’s role and plans as a
sustainable and responsible business,
and how to increase colleague
involvement, as well as sharing
feedback on our digital impact and
sustainability strategy
– providing feedback on how to better
communicate career and reskilling
opportunities for our colleagues in line
with the shifting focus of the business
over the medium to long term and the
need to have clearer development
programmes for mid-level managers
– suggesting improvements to our
communication methods across the
business, particularly in relation to
changes in areas such as policies, share
plans and recognition.
Customers
We want to give all our
customers standout
experiences by delivering
brilliant solutions and
outcomes.
We have a large and diverse customer
base including consumers, businesses,
multinational corporations, public sector
organisations and communications
providers. Engaging with our customers
and understanding their needs is critical
to delivering on our strategy, ambition
and purpose.
Our customers want us to:
– give them an outstanding experience
and deliver outcomes that meet their
needs
– provide reliable solutions and
propositions to keep them connected
– protect their security and data.
How we engage with customers,
and the result
There are lots of different ways we
engage with our customers. At the early
stage of developing new solutions, we
work with them to understand their needs
and make sure what we sell – and their
overall buying-to-billing experience – is
the best it can be.
Our insight centre of excellence serves
all parts of BT and gives us a strong
analytical capability that delivers a
deeper understanding of what customers
want and need. We use a number of
different methodologies and data
sources to understand what customers
expect, and how they act, across different
channels. This insight helps shape our
strategy, position our solutions, design
customer-driven improvements and
develop our brand and communications.
See pages 26 to 29 for things we have
done during the year to create standout
experiences for our customers.
Our Global Advisory Board enables us
to talk directly with senior leaders at
our major global customers. It helps us
understand their short-, medium- and
long-term priorities, so we can design
37
solutions that match them – delivering
better business outcomes.
Each customer-facing unit CEO and
management team tracks how well their
business is performing on customer
experience, including NPS, so that
collectively we deliver on our ambitions in
this area. Regular reviews with Executive
Committee members – led by the chief
executive and chief financial officer –
focus on how to continually improve
performance.
This year we built stronger, more trusting
relationships with customers with a range
of initiatives to support them through
the Covid-19 pandemic. They included
a Lockdown Learning support package
for consumers and our Small Business
Support Scheme for business customers.
There’s more information on these
initiatives and others on pages 28 to 29.
Openreach continues to make sure all
its customers get equal access to our
fixed network. It does this by ensuring
that its industry consultation process
is straightforward and compliant,
with strong governance controls. All
communications providers have the
opportunity to engage with Openreach
confidentially during an initial
consultation stage.
The chief executive, Executive Committee
and senior BT leaders regularly review
and discuss complaints directly with
customers. It keeps them connected
to issues on the ground, allows them to
have a better understanding of how to fix
common problems and helps us improve
the way we respond to complaints.
Our customers and the impact on them
are always considered by the Board and
the chief executive (with input from
the Executive Committee) as part of
decision-making – whether on strategic
direction, investments or the solutions
we develop. The Board regularly receives
updates on, and discusses, customer
experience and the NPS for the group
as a whole, customer-facing units and
underlying customer segments. The
Board also discusses initiatives having
a positive impact on our customers, key
focus areas and areas for improvement.
This year, as part of her Board induction,
Sara Weller joined two customer inclusion
panel sessions. These are BT forums
where groups representing vulnerable
customers and people with disabilities
help improve our products and services.
Sara has also observed a number of
customer research panels with Consumer
and SME customers to hear their views on
current service and future priorities. This
type of engagement gives us valuable
insights for Board and committee
discussions and decision-making.
The Board understands how important it
is to act proactively to protect consumers’
interests and meet the expectations
of the regulator and Government for
greater commitment to a culture of
consumer fairness at all levels within
communications providers, including
at Board-level.
To enhance our commitment to
protecting consumers’ interests, the
Board approved proposals to enhance
our consumer fairness governance
framework with Board-level oversight
provided by the BT Compliance
Committee on consumer fairness
matters (see page 86 for more details).
There’s more information on consumer
fairness within our Section 172 statement
on page 43.
7.8pp
percentage points improvement
in group NPS (a KPI)
BT Group plc
Annual Report 2021
Strategic report 38
Our stakeholders continued
BT Group plc
Annual Report 2021
Shareholders
We have two main groups
of shareholder: institutional
and retail investors. As
owners of the business,
engagement with them
is important.
Because of our privatisation in 1984,
a lot of our c.783,000 shareholders
are individuals, although institutional
investors hold the biggest volume of
shares. We also have debt investors.
Our shareholders want us to:
– deliver a return on their investment
through dividends or capital growth
– perform well against our outlook
and long-term strategy.
How we engage with shareholders,
and the result
We communicate regularly with
shareholders through our website, the
Annual Report and our quarterly financial
results and trading statements.
The AGM is normally a chance for
the Board to meet and engage with
shareholders in person. However, as a
result of the pandemic, the 2020 AGM
had to be held as a closed meeting in line
with Government restrictions on public
gatherings. We gave shareholders the
opportunity to ask questions in advance
and the responses were made available
on our website via an audio recording
alongside video messages from the
chairman and the chief executive and an
audio recording of the meeting itself. For
the 2021 AGM, we continue to monitor
the situation and we will publish the
arrangements in the Notice of meeting
(see page 77).
The company secretary communicates
with individual investors, making sure we
respond properly to questions in relation
to their shareholding. Our share registrar
Equiniti also has a team to take care of
shareholders’ needs.
We manage relationships with
institutional investors through an
investor relations programme. It includes
one-to-one conversations, roadshows,
group meetings, conferences and
industry events. The chairman, senior
independent director and other directors
also spend time with investors.
The pandemic has meant significant
changes to the way we interact with
institutional shareholders. All our
meetings were virtual, and this meant that
it was easier for more investors to attend
each group meeting, leading to fewer
meetings over the course of the year.
During 2020/21, the Board, the chief
executive, chief financial officer,
other executives and the investor
relations team held 262 meetings with
investors. Conversation topics included
financial and operational performance,
capital investment, pension deficit
funding plans, capital allocation
policy and prospective governmental
and regulatory policy decisions.
During the year, the chairman also met
investors to discuss any governance
related matters. The senior independent
director also engaged with investors in
relation to the ongoing search for the
new chairman.
Ahead of the 2020 AGM, the
Remuneration Committee chair consulted
extensively with our largest shareholders
and their representative bodies and their
feedback was used to help shape the
Directors’ Remuneration Policy.
The Board receives regular reports on
shares being bought and sold, share price
performance and how we’re engaging
with institutional investors and analysts.
The Board also discusses any shareholder
issues with management.
We maintain a strong relationship
with debt investors (mainly financial
institutions who invest in our publicly-
traded bonds) and meet with them
regularly as part of our investor relations
programme. They’re crucial to making
sure we have access to debt capital to
finance our business.
We have an investment-grade credit
rating based on the strength of our
balance sheet.
262
meetings with investors during the year
39
Communities
Our products, services,
networks and people
are at the heart of the
communities we operate
in, and help bring them
together.
Building and preserving relationships
with all the communities we serve isn’t
just core to our commercial success.
It’s also key to the way we operate as a
responsible and sustainable business
and supports our purpose of connecting
for good.
Communities rely on us to:
– give them reliable and secure
connections
– help local people and enterprises get
more from the digital world
– protect the environment, help tackle
issues like climate change and do
business ethically and responsibly.
How we engage with communities,
and the result
We reach communities in all aspects of
day-to-day life, such as conversations
with customers in EE/BT retail stores and
when visiting individuals in their homes
to set up their broadband service. We
engage with charities, non-governmental
organisations and partners on digital
skills programmes. We also undertake
research to understand the topics that
are most important to communities when
they think of BT.
The insights we get inform the strategies
and programmes we develop, from
digital skills to climate change action. On
behalf of our Board, the Digital Impact &
Sustainability Committee approves our
strategy and monitors our progress as
a responsible and sustainable business.
It also makes sure we’re contributing
positively to the communities we live,
work, and operate in.
This year, the Digital Impact &
Sustainability Committee approved
a change in approach to our Skills for
Tomorrow programme, and its pivot to
become ‘digital-first’ as a direct result
of Covid-19, to make sure we could still
reach all those who needed help most
with digital skills. This also led to a bigger
focus on supporting job seekers and
SMEs – both groups severely affected by
the pandemic.
On top of what we invest through our day-
to-day business, we aim to invest 1% of
profit before tax, as a mixture of cash and
in-kind investments, in our sustainability
activities and communities. This year, we
invested £18m or 0.63% of adjusted profit
before tax – below our 1% target. That
was because of our ‘in-kind contributions’
falling, with Covid-19 severely restricting
volunteering activity. We remain
committed to the target – having invested
£147m into our sustainability activities
and communities, at an average of 0.89%
of profit before tax over the last five years.
During the year, we worked with the UK
National Emergencies Trust to support
many communities through the Covid-19
pandemic. We helped fund its operations
and gave other digital skills support to
help people harness technology to stay
safe, healthy, connected and resilient.
We’ve supported communities through
the pandemic in many other ways too,
such as launching our Lockdown Learning
support package for families and children
most in need of help to continue learning
at home.
To track how we’re doing, we measure
reputational performance and trust, as
well as our progress on the group KPI to
reach 25m people in the UK with help to
improve their digital skills by the end of
March 2026. You can find out more about
what we’ve done this year in the strategic
progress section. Page 31 explains the
contributions we’ve made to building
better digital lives, and pages 32 to 33 set
out how we’re tackling climate change
and environmental challenges for the
benefit of the communities we operate in.
10m+
people reached with help to improve their
digital skills since 2014/15
£147m
invested in communities and our
sustainability activities over last five years
Suppliers
Our relationships with
suppliers are instrumental
to our success. They help
us deliver the solutions
and propositions we use to
create standout customer
experiences.
We source from across the world, with
suppliers in nearly 100 countries.
Our suppliers want us to:
– pay them in line with our agreed terms
– act ethically and transparently
– help them optimise their own
supply chains.
How we engage with suppliers,
and the result
We need to know who we’re doing
business with, and who’s acting on our
behalf. So we:
– choose suppliers based on principles
that make sure we act ethically
and responsibly
– undertake due diligence on them
before and after we sign a contract
– covering financial health, anti-
corruption and bribery, and whether
they meet our standards on areas
such as quality management, security
and data privacy
– check the things we buy are made,
delivered and disposed of in a socially
and environmentally responsible way
– measure suppliers’ energy use,
environmental impact and labour
standards, and work with them to
improve these.
BT Group plc
Annual Report 2021
Strategic report During the year, we announced
and progressed a plan to set up a
standalone procurement company,
BT Sourced, which will manage most of
our purchasing. The new company will
improve our already strong relationships
with suppliers by making it easier for
them to do business with us and creating
more chances to innovate. It will also
challenge some traditional ways of buying
goods and services through simplifying
processes, bringing in new technology
and encouraging more collaboration.
In order to get new suppliers on
board faster, we’re moving a lot of our
processes from manual to digital, whilst
still maintaining the existing rigour in
our due diligence and assurance.
This year the Audit & Risk Committee
discussed our supply chain landscape,
performance across the sourcing and
supplier payment process, and the key
risks and assurance activities in this area.
The committee was also updated on
our progress against the Government’s
Prompt Payment Code (PPC)
programme in the UK and our consistent
improvements in payment performance.
This year, we paid 95% of supplier invoices
in line with the terms we’d agreed with
them. Recent reforms to the PPC require
us to pay 95% of invoices from smaller
suppliers in 30 days, and we’re on target
to do this by the 1 July 2021 deadline.
During the year, the Board discussed
the Government’s evolving advice on
high-risk vendors (including Huawei)
and the development of both the
Telecommunications (Security) Bill in
the UK and US government restrictions,
and the potential procurement and
commercial implications for BT. The
Board reviewed and approved the
entering into of contracts with Nokia
and Ericsson and the split of the services
provided by these two vendors across
our UK sites.
The Digital Impact & Sustainability
Committee considers and approves our
modern slavery initiatives on behalf of the
Board, which we subsequently disclose in
our annual modern slavery statement.
We engage with suppliers on a range
of proactive initiatives – for example
progress towards net zero carbon
emissions, including the increased uptake
in renewable energy, and cutting plastic
packaging and waste. This is a key part
of our digital impact and sustainability
strategy (see page 30) and therefore
initiatives are regularly discussed by the
Digital Impact & Sustainability Committee
with feedback shared to continue to test
and enhance our approach.
On diversity and inclusion, we’ve
developed a plan to encourage and help
our suppliers to meet and match our own
commitments. We’ve also taken more
diversity-led steps in our dealings with
suppliers. They include participating in
SME events like ‘meet the buyer’ and
benchmarking ourselves via external
organisations.
We’re keen to make sure we engage with
as broad a range of suppliers as we can.
We’re discussing how we create a more
diverse supplier selection process with
software suppliers, and next year we’ll
increase the purpose/diversity weighting
we use in the procurement adjudication
process.
A clear framework monitors Covid-19
risks for 430 critical suppliers. It:
– assesses the potential effects of
transport logistics disruption and
manufacturing slowdowns
– monitors suppliers’ financial viability
and tracks incremental costs due
to disruption
– continuously monitors their business
continuity plans to make sure they can
keep delivering services.
£13.1bn
spent with suppliers, more than two thirds
of our total costs
71%
spent with top 100 suppliers
40
Our stakeholders continued
BT Group plc
Annual Report 2021
UK Government
We add over £24bn to the
UK’s economy each year,
supporting critical services
and working with more
than 1,600 public sector
customers.
Our networks make sure vital public
services like welfare, tax, health, social
care, police and defence function, while
protecting citizens’ personal data. Our
relationship with Government bodies
underpins our three strategic pillars and lets
us contribute to policies and initiatives that
promote the best stakeholder outcomes.
Government stakeholders want us to:
– keep investing in our network
infrastructure
– provide the fastest, most reliable and
secure connection possible, to the
widest possible range of communities
– invest in the best products and
services, at fair prices, with high levels
of customer service.
How we engage with the Government,
and the result
We operate the UK’s Critical National
Infrastructure and support national
security. Our priority is fulfilling our
responsibilities and obligations for the
country and our customers.
Our policy and public affairs team
manages our relationships with
Government and other politicians.
Our Enterprise team delivers and looks
after public sector contracts and services
such as the Emergency Services Network.
Under the Communications Act 2003,
the Government can ask us (and
others) to run or restore services during
disasters. The Civil Contingencies Act
2004 also says that the Government can
impose obligations on us (and others) in
emergencies, or in connection with civil
contingency planning.
We keep an open dialogue with
Government through our chairman,
chief executive and senior leaders – as
well as through consultation responses
and cross-industry initiatives. Through
those conversations we build support for
policies that will deliver good results for
the UK and our shareholders.
Our public policy work with Government
covers a wide territory, from
infrastructure investment to national
security, from regulating online harms to
trade and economic policy. For example,
this year we launched a programme with
the Department for Education to give
free BT Wi-Fi vouchers to disadvantaged
families to make sure their children could
continue to learn at home while schools
were closed during Covid-19 lockdowns.
We also helped the wider Government
response through text message alerts
sent on behalf of GOV.UK to around 43m
devices connected to our mobile network,
and gave tailored support to NHS staff
and vulnerable customers.
We’ll continue offering as much support
as possible to Government and NHS
teams to help them during the pandemic.
That includes providing connectivity to
hospitals and vaccination centres.
The Board is updated on discussions
with Government through the chairman,
chief executive and Executive Committee
members, with the Board providing views
and comments.
Regulators
Communications and TV
services are regulated. This
ensures consistent rules
and standards within each
jurisdiction, protecting
consumers and promoting
competition.
If we don’t engage effectively with our
regulators we risk unnecessary regulatory
intervention that could stand in the way of
us achieving our strategy.
Our main regulatory relationship is
with Ofcom in the UK. The main source
of Ofcom’s powers and duties is the
Communications Act 2003, which gives
it general competition powers for the
sector and helps it enforce consumer law.
We also engage with other regulatory
bodies like the Competition and Markets
Authority.
Ofcom wants to:
– advance citizens’ and consumers’
interests, often by promoting
competition
– encourage investment and innovation
– support investment in the UK’s critical
digital infrastructure.
41
How we engage with Ofcom,
and the result
We have a positive and open dialogue
with Ofcom through our chairman,
chief executive and senior leaders.
Our conversations focus on how
regulation can support its ambition for a
world-class UK digital infrastructure and
allow efficient investment, while keeping
the market fair and competitive.
There are more details of the main
regulatory topics we cover with Ofcom on
pages 16 to 17.
We’re briefing Ofcom regularly on our
Covid-19 response. It has welcomed our
efforts to support customers and work
with industry to help UK people and
businesses stay connected during
the pandemic.
Following Ofcom’s 2017 Digital
Communications Review, we
implemented a set of Commitments and
the supporting Governance Protocol.
These provide Openreach with more
strategic and operational independence,
while allowing us to exercise the right
level of parent company control.
The BT Compliance Committee monitors
BT’s compliance with the Commitments.
It also reviews the progress being made
in areas of greatest importance to
consumers, communications providers
and other stakeholders. The committee
seeks views on the Commitments from
stakeholders, and keeps Ofcom updated
including through the annual review of
the BT Compliance Committee.
The BT Compliance Committee’s annual
review can be found at bt.com/btcc
Ofcom says that BT and Openreach
are still making good progress to
safeguard Openreach’s independence.
We continue to engage with Ofcom and
communications providers to increase
their confidence that we’re following both
the letter and spirit of the Commitments.
BT Group plc
Annual Report 2021
Strategic report 42
Section 172 statement
In their discussions and decisions during the
year ending 31 March 2021, the directors of
BT Group plc have acted in the way that they
consider, in good faith, would be most likely to
promote the success of the company for the
benefit of its members as a whole (having regard
to stakeholders and the matters set out in sub-
sections 172(1)(a)-(f) of the Companies Act 2006
(the 2006 Act).
The Board considers the matters
set out in section 172 of the 2006
Act in all its discussions and
decision-making. That includes:
The likely consequence of any
decision in the long term:
The directors recognise that the decisions
they make today will affect BT’s long-
term success. During the year, the Board
had particular regard to the long-term
success of the company in its discussions
on the evolution of the company’s
purpose and strategic framework, as
set out in the Board activities section
on pages 74 to 77. Our purpose and
strategy demonstrate how we will
realise our ambition and grow value for
all our stakeholders. This in turn guides
the Board’s decisions, specifically the
balance between short- and long-term
investments (more details on page 43).
The third pillar of our strategy (lead
the way to a bright, sustainable future)
incorporates our aim to identify and
develop new business opportunities
that will help us grow sustainably in
the future. More information on our
strategy can be found from page 19.
The impact of BT’s operations on the
community and environment:
The Digital Impact & Sustainability
Committee monitors progress on the
digital impact and sustainability strategy
and supporting goals for digital skills,
responsible tech and human rights, and
climate change and the environment.
During the year, the committee reviewed
and endorsed the Skills for Tomorrow
programme and its pivot to become
‘digital-first’ during the Covid-19
pandemic. Our digital impact and
sustainability strategy incorporates
responsible tech and human rights,
and our sector-leading approach to
climate action, with a target to become
a net zero carbon emissions business
by 2045, as well as our two related
group KPIs (see pages 30 to 33).
BT Group plc
Annual Report 2021
We are also committed to implementing
the recommendations of the Task
Force on Climate-related Financial
Disclosures (TCFD). See page 67
for our response to TCFD.
The desirability to maintain a reputation
for high standards of business conduct:
The Board acknowledges its
responsibility for setting and monitoring
the culture, values and reputation of the
company. Our colleagues are central to
us achieving our ambition and we are
building a culture where our colleagues
can be their best. During the year, the
Board considered BT’s culture in its
decision-making and discussions; further
details on this can be found on page
76. The Digital Impact & Sustainability
Committee reviewed and endorsed BT’s
new responsible tech and human rights
approach which aims to develop, use,
buy and sell technology in a way that
benefits people and minimises harms (see
page 87 for more details on the activities
of the Digital Impact & Sustainability
Committee and page 30 for our digital
impact and sustainability strategy).
The Audit & Risk Committee also received
and considered regular reports from the
group ethics and compliance director
on BT’s ethics and compliance priorities,
including Speak Up, our confidential,
whistleblowing hotline (see page 85).
We set out our commitment to high
standards of business conduct in The BT
Way (our Ethics Code), see bt.com/ethics
The interests of our colleagues, and the
need to foster business relationships
with our key stakeholders:
The Board and its committees understand
the strategic importance of stakeholders
to BT’s business. When making decisions,
the directors have regard to the interests
of colleagues, and the need to foster
business relationships with other
key stakeholders. We acknowledge
that not every decision we make will
necessarily result in a positive outcome
for all our stakeholders; the Board
therefore has to balance competing
interests in reaching its decisions.
While the Board engages directly with
stakeholders on some issues, the size and
distribution of BT and our stakeholder
groups means that stakeholder
engagement often happens below Board
level. However, the Board considers
information from across the organisation
to help it understand how our operations
affect our stakeholders’ interests and
views. There are more details on how we
engage with key stakeholders (including
customers and suppliers) on pages 34
to 41 and on the chief executive’s role in
reporting engagement feedback to the
Board through his chief executive’s report
on page 75. For further details on how the
Board operates and makes decisions, and
its activities this year, see pages 71 to 77.
Our colleagues are key to our success and
they are always considered as part of the
Board’s discussions and decision-making.
Their wellbeing, especially during the
Covid-19 pandemic, as well as diversity
and inclusion, our culture, transformation
programme and employee relations,
have been a prominent focus of Board
discussions this year (see page 76 for
more details). The Board engages
with colleagues primarily through
the Colleague Board and via Isabel
Hudson, our designated non-executive
director for workforce engagement
(see pages 35 to 36 for more details on
the Colleague Board). Isabel provides
feedback after each formal Colleague
Board meeting and also discusses any
topics raised by members at relevant
Board and committee meetings.
Our other employee communication
channels are set out on page 34. As
explained on page 76, the Board also
discussed with HR and the chief executive
the findings from other colleague
engagement mechanisms during the year.
The need to act fairly as
between BT’s shareholders
During 2020/21, the Board, the chief
executive and chief financial officer,
other executives and the investor
relations team held various meetings
with investors (see page 38 for more
detail on our engagement with
shareholders). These meetings gave
investors the opportunity to discuss
views on financial and operational
performance, capital investment,
pensions, capital allocation policy,
as well as prospective governmental
and regulatory policy decisions.
43
Decisions made during the year:
The following are some of the decisions made by the Board this year which demonstrate how colleague interests,
the need to foster business relationships with other key stakeholders, and other section 172 matters have been
taken into account in discussions and decision-making:
Decision
What happened
Suspending our
final dividend
for 2019/20 and
all dividends for
2020/21
Strategic intent
to accelerate
full fibre build to
20m premises
by mid-to-late
2020s, subject
to the critical
enablers being
resolved
Endorsement
of proposed
diversity and
inclusion targets
Enhancing
our consumer
fairness
governance
framework
As set out in last year’s report, the Board
made the exceptionally difficult decision to
suspend the final dividend for 2019/20 and
the dividends for 2020/21 and rebase future
dividends at a more sustainable level.
The Board considered the advantages and
disadvantages of the decision and the change
to the distribution policy, including whether
suspending our dividend was the right action to
ensure our long-term success. The views of our
stakeholders, particularly the expected reactions of
our equity investors, which includes our colleagues,
and the nominated representative for Deutsche
Telekom (BT’s largest shareholder), as well as
our brokers’ opinions on the expected reactions
from the market, were taken into account.
The Board carefully considered the short term
negative effect on our shareholders, but determined
that taking the decisive action to suspend our
dividends now would position BT positively for
the future and help us create capacity for value-
enhancing investment opportunities, including
full fibre and 5G, our major modernisation and
simplification programme, and to navigate
the shorter term impact and unprecedented
consequences of the Covid-19 pandemic.
The Board had a number of discussions on its
commitment to the level and pace of the full
fibre build, capital expenditure required, the risks
involved, how it would flow through into our medium
term plan and the regulatory enablers required from
Ofcom as part of the WFTMR.
The Board carefully considered how a commitment
to accelerate our full fibre build to 20m premises
by the mid-to-late 2020s would affect our ability to
pay a dividend to our shareholders in the short term,
balanced against benefits to other stakeholders
in the long term, including customers, colleagues,
shareholders and the country as a whole. This
included the importance of the full fibre rollout to our
purpose, we connect for good, and our reputation as
a national champion.
Despite us not obtaining regulatory clarity until the
publication of the WFTMR in March 2021, the Board
recognised the importance of providing clarity to
shareholders, the market, our regulator, Ofcom and
the UK Government on our proposed intention to
invest, ahead of the final publication of the WFTMR.
For more details on the WFTMR and our target
to increase and accelerate our FTTP build plan by
an additional 5m from 20m to 25m premises by
December 2026, please see pages 16 and 20.
The Board received and considered management’s
proposal in relation to the planned publication of
our diversity and inclusion targets and commitments
in relation to gender, ethnicity and disability. The
Board was supportive of this and the voluntary
publication of our ethnicity pay gap, through our
inaugural Diversity and Inclusion Report (which we
expect to publish in early summer 2021), having
reflected on how targets and commitments would
support the progress of our strategy and our
approach to valuing diversity, embedding inclusion
and progressing equality. The Board discussed that
having clear targets will also help support cultural
shifts and drive a more inclusive workforce, and
accordingly recommended that BT should be bold
in its ambitions in this area, which management also
agreed with.
The Board advised that as part of meeting our
targets, it was important to consider all aspects of
our colleague journey, talent pipeline, recruitment
and the ongoing support provided to under-
represented groups as they progress through the
organisation. The Colleague Board’s feedback on
how we improve diversity was also shared with the
Board by Isabel Hudson, our designated non-
executive director for workforce engagement,
including the importance of diversity on assessor
panels for graduate and apprenticeship assessment
centres to ensure we recruit in line with the diverse
skills we need for the future. The Board considered
the interests and expectations of our stakeholders
as part of this decision, including those of our
colleagues and investors, and the UK Government
given their recent reviews in this area.
The Board approved proposals to enhance our
consumer fairness governance framework during
the year.
In considering these proposals, the Board had regard
to both the importance that BT places on consumer
fairness for our customers, as well as Ofcom’s and
the UK Government’s expectation to see greater
commitment to a culture of consumer fairness at all
levels by communications providers. This enhanced
governance in relation to consumer fairness is
aligned with BT’s purpose and ambition and the
Board’s broader recognition of the importance of
proactively protecting our customers’ interests as
set out on page 86.
Having considered a number of options in relation
to enhanced governance, the Board decided that
the remit of the BT Compliance Committee should
be widened to include the oversight of consumer
fairness matters on its behalf.
Therefore, from 1 April 2021, the BT Compliance
Committee shall monitor whether BT is living up
to Ofcom’s Fairness for Customers commitments,
whether the culture and behaviours of colleagues
are conducive to BT being trusted in relation to
consumer fairness, and the extent to which BT is
meeting the desired outcome of being trusted
in relation to consumer fairness. More details on
consumer fairness can be found on page 17.
BT Group plc
Annual Report 2021
Strategic report 44
Non‑financial
information
The table below (and sections referred to) form our
non-financial information statement – as required
by sections 414CA and 414CB of the Companies
Act 2006.
Environment
(see pages 32, 33, 42, 47 and 67)
Colleagues
(see pages 24, 25, 34 to 36, 42 and 43)
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s Our Environmental Policy supports our
e
aim of cutting our environmental impact
c
i
and helping customers cut theirs.
l
It sets out guiding principles to get us
to our ambition of becoming a net zero
carbon emissions business by 2045.
And it describes how we engage with
stakeholders on environment issues
and monitor and report on progress.
It supports our strategy by describing
how we’ll realise our ambition to create
a more sustainable future for ourselves
and our customers.
Our Health, Safety and Wellbeing Policy
Statement promotes a safe and healthy
workplace and aims to prevent work
related injuries, ill health and diseases.
It supports our strategy to build the
strongest foundations. It does this by
integrating health, safety and wellbeing
considerations into all aspects of our work
to benefit colleagues, contractors and
members of the public.
Our Diversity and Inclusion Strategy
supports our aim to build the strongest
foundations. It does that by ensuring we
apply an inclusion lens across how we
operate – and by promoting a culture
where all our colleagues can thrive. It sets
out a programmatic, evidence-based
approach to understanding and removing
bias and other cognitive barriers from
BT policies, processes, systems and
decision-making.
Social and community
Human rights
(see pages 31 to 33, 39, 42 and 47)
(see pages 32 and 42)
Anti-bribery and corruption
Our Shared Value Policy explains how
Our Human Rights Policy Commitment
The BT Way (our Ethics Code) sets out our zero
we invest in society, including our aim to
explains our commitment to respecting and
tolerance approach to bribery and corruption. It’s
invest at least 1% of our adjusted profit
championing human rights across BT and in
supported by a specific Anti-Bribery and Corruption
before tax each year.
our relationships with others.
(ABC) Standard.
Investments under this policy support
It describes our approach to respecting
It describes our values and behaviours, and how we
areas like digital skills through a mix of
rights and freedoms, positioning these in
expect everyone who works for us (or on our behalf)
cash and in-kind contributions.
a digital context.
Investing in society helps us be a more
Being a human rights leader and having
to do business. It also covers additional key policy
areas like human rights, and equality and diversity.
responsible and sustainable business
strong ethical standards builds trust. So it’s
The code provides an ethical framework for our
leader. It also supports our purpose;
key to our ambition to be the world’s most
ambition to become the world’s most trusted
we connect for good.
trusted connector of people, devices and
connector of people, devices and machines. It
machines.
demonstrates, through our commitment to doing the
right thing, that our stakeholders can depend on us.
The Digital Impact & Sustainability
We have processes to identify and address
All BT colleagues complete mandatory training on the
Committee oversees this policy. It also
potential and actual human rights impacts
code and get periodic communications that reinforce
reviews our strategy and progress on
across our business.
policies – including targeted ‘teaser’ questions.
societal programmes and targets. You can
read more about the role of the Digital
Impact & Sustainability Committee on
page 87.
The Digital Impact & Sustainability
Committee monitors progress against the
revised group KPI of reaching 25m people
with help to improve their digital skills by
the end of March 2026.
We review and update the policy every
two years.
They include embedded checks in sales
Our annual Your Say employee engagement survey
processes, and in how we manage suppliers.
includes questions on ethical perception, with results
We also provide targeted training to those
shared with senior management.
teams most likely to encounter human
Our Speak Up service lets anyone who works for,
rights issues.
We identify, measure and tackle
human rights impacts through people
surveys, supplier questionnaires and risk
or with, BT to confidentially report anything that
goes against our Ethics Code – including bribery,
corruption, human rights violations, bullying or
harassment.
assessments and through the Speak Up
We undertake due diligence on third parties, engage
whistleblowing service.
external providers to assess higher risk areas, and use an
integrity risk dashboard to identify potential focus areas.
We review and update the code regularly.
We report on how we invest in initiatives
This year, we carried out a self-review
We track discipline case numbers and their
and communities on page 39, and there
against the Global Network Initiative
outcomes, including colleagues who leave BT
are details of what we’ve done this year on
principles, in preparation for an external
for ethical misconduct.
pages 31 to 33, including progress made
assessment next year.
in helping people improve their digital
skills and in reducing our carbon emissions
intensity (both group KPIs).
We’ve used what we found to strengthen our
the parts of the Ethics Code that are relevant for
human rights governance and processes.
them, and 23,738 colleagues completed our ABC
This year, 95,825 colleagues completed training on
course for higher risk roles.
We are using the results of an external ABC risk
assessment conducted this year to enhance and
better target our compliance activities.
Speak Up received 491 reports this year. You can
find more details on these in our Digital Impact and
Sustainability Report at bt.com/sustainabilityreport
management group risk category, and within the
legal compliance group risk category where risks
apply across our operations generally. You can read
more on pages 66 and 61 respectively.
Our Environmental Policy can be found
at bt.com/ourpolicies
Our Health, Safety and Wellbeing
Policy Statement can be found at
bt.com/ourpolicies
Our Diversity and Inclusion Strategy
can be found at bt.com/diversity‑and‑
inclusion
e We monitor and manage our environment
c
strategy and risks through the Digital
n
e
Impact & Sustainability Committee,
g
and also through our Environmental
Management Governance Group, which
reports to the Executive Committee.
i
l
i
d
e
u
d
We measure progress on different
environment goals, one of which is a
group KPI (page 47).
We review and update the policy
every year.
s See pages 32 to 33 for our plans and
e
m
o
c
t
u
o
f
o
performance on the environment and
tackling climate change, including progress
made towards becoming a net zero carbon
emissions business.
Additionally, details of performance
against our group KPI target to cut
our carbon emissions intensity of our
operations by 87% by the end of March
2031 is on page 47.
We regularly report to the Executive
Committee on the strategy’s relevance
and effectiveness, including robust
monitoring against our Ethnicity Rapid
Action Plan and broader strategy.
We allocate suitable resources to build a
safe and healthy workplace. That includes
policies, training, processes and effective
risk controls.
We monitor safety and wellbeing with a
‘three lines of defence’ model. We track
and review accidents, near misses and
reasons for sickness absence.
We look at why accidents, injuries and near
misses happen, to stop them happening
again. We monitor sickness absence
trends, adapting processes to better
support colleagues.
We review policies annually and update
them as appropriate.
There are details of actions taken in
pursuance of our policy, along with
sickness absence rates and time lost from
injuries, on pages 24 to 25.
Our strategy creates an environment and
workplace that embraces diversity and
inclusion and includes it in all decision-
making.
Details of the things we’ve done this year
to support our strategy, together with
some of our latest diversity and inclusion
statistics, can be found on pages 24 to 25.
We capture health, safety and wellbeing
risks within a dedicated group risk
category, as set out on page 64.
We reflect diversity risk within our people
group risk category, as set out on page 64.
We consider digital inclusion risks as part
We consider human rights risk as part of
We consider risks on ABC and ethical conduct
of our stakeholder management group
our stakeholder management group risk
relating to our suppliers within the third party
risk category on page 59.
category on page 59.
s We consider the impacts of climate-
k
s
i
r
f
o
related risks across our whole business, for
example in our stakeholder management
and service interruption group risk
categories on pages 59 and 62.
We’re taking action to mitigate key
physical climate risks and our impact
on the environment in a number of
areas. See pages 32 to 33 and our TCFD
statement on page 67 for more details.
BT Group plc
Annual Report 2021
45
We describe our business model on pages 12 to 13. And
we set out the non-financial KPIs relevant to us
on pages 46 to 47.
Social and community
(see pages 31 to 33, 39, 42 and 47)
Human rights
(see pages 32 and 42)
Anti-bribery and corruption
Our Shared Value Policy explains how
we invest in society, including our aim to
invest at least 1% of our adjusted profit
before tax each year.
Our Human Rights Policy Commitment
explains our commitment to respecting and
championing human rights across BT and in
our relationships with others.
The BT Way (our Ethics Code) sets out our zero
tolerance approach to bribery and corruption. It’s
supported by a specific Anti-Bribery and Corruption
(ABC) Standard.
Investments under this policy support
areas like digital skills through a mix of
cash and in-kind contributions.
It describes our approach to respecting
rights and freedoms, positioning these in
a digital context.
Investing in society helps us be a more
responsible and sustainable business
leader. It also supports our purpose;
we connect for good.
Being a human rights leader and having
strong ethical standards builds trust. So it’s
key to our ambition to be the world’s most
trusted connector of people, devices and
machines.
It describes our values and behaviours, and how we
expect everyone who works for us (or on our behalf)
to do business. It also covers additional key policy
areas like human rights, and equality and diversity.
The code provides an ethical framework for our
ambition to become the world’s most trusted
connector of people, devices and machines. It
demonstrates, through our commitment to doing the
right thing, that our stakeholders can depend on us.
Our Shared Value Policy can be found at
bt.com/ourpolicies
Our Human Rights Policy Commitment
can be found at bt.com/ourpolicies
The BT Way (Our Ethics Code) can be found
at bt.com/ethics
We have processes to identify and address
potential and actual human rights impacts
across our business.
All BT colleagues complete mandatory training on the
code and get periodic communications that reinforce
policies – including targeted ‘teaser’ questions.
The Digital Impact & Sustainability
Committee oversees this policy. It also
reviews our strategy and progress on
societal programmes and targets. You can
read more about the role of the Digital
Impact & Sustainability Committee on
page 87.
The Digital Impact & Sustainability
Committee monitors progress against the
revised group KPI of reaching 25m people
with help to improve their digital skills by
the end of March 2026.
We review and update the policy every
two years.
They include embedded checks in sales
processes, and in how we manage suppliers.
We also provide targeted training to those
teams most likely to encounter human
rights issues.
We identify, measure and tackle
human rights impacts through people
surveys, supplier questionnaires and risk
assessments and through the Speak Up
whistleblowing service.
Our annual Your Say employee engagement survey
includes questions on ethical perception, with results
shared with senior management.
Our Speak Up service lets anyone who works for,
or with, BT to confidentially report anything that
goes against our Ethics Code – including bribery,
corruption, human rights violations, bullying or
harassment.
We undertake due diligence on third parties, engage
external providers to assess higher risk areas, and use an
integrity risk dashboard to identify potential focus areas.
We review and update the code regularly.
We track discipline case numbers and their
outcomes, including colleagues who leave BT
for ethical misconduct.
This year, 95,825 colleagues completed training on
the parts of the Ethics Code that are relevant for
them, and 23,738 colleagues completed our ABC
course for higher risk roles.
We are using the results of an external ABC risk
assessment conducted this year to enhance and
better target our compliance activities.
Speak Up received 491 reports this year. You can
find more details on these in our Digital Impact and
Sustainability Report at bt.com/sustainabilityreport
We consider risks on ABC and ethical conduct
relating to our suppliers within the third party
management group risk category, and within the
legal compliance group risk category where risks
apply across our operations generally. You can read
more on pages 66 and 61 respectively.
BT Group plc
Annual Report 2021
We report on how we invest in initiatives
and communities on page 39, and there
are details of what we’ve done this year on
pages 31 to 33, including progress made
in helping people improve their digital
skills and in reducing our carbon emissions
intensity (both group KPIs).
This year, we carried out a self-review
against the Global Network Initiative
principles, in preparation for an external
assessment next year.
We’ve used what we found to strengthen our
human rights governance and processes.
s We consider the impacts of climate-
We capture health, safety and wellbeing
We reflect diversity risk within our people
related risks across our whole business, for
risks within a dedicated group risk
group risk category, as set out on page 64.
example in our stakeholder management
category, as set out on page 64.
We consider digital inclusion risks as part
of our stakeholder management group
risk category on page 59.
We consider human rights risk as part of
our stakeholder management group risk
category on page 59.
n
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i
t
p
i
r
c
s
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i
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p
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c
s
e
D
Environment
Colleagues
(see pages 32, 33, 42, 47 and 67)
(see pages 24, 25, 34 to 36, 42 and 43)
s Our Environmental Policy supports our
Our Health, Safety and Wellbeing Policy
Our Diversity and Inclusion Strategy
aim of cutting our environmental impact
Statement promotes a safe and healthy
supports our aim to build the strongest
and helping customers cut theirs.
workplace and aims to prevent work
foundations. It does that by ensuring we
It sets out guiding principles to get us
related injuries, ill health and diseases.
apply an inclusion lens across how we
to our ambition of becoming a net zero
It supports our strategy to build the
carbon emissions business by 2045.
strongest foundations. It does this by
And it describes how we engage with
integrating health, safety and wellbeing
stakeholders on environment issues
considerations into all aspects of our work
and monitor and report on progress.
to benefit colleagues, contractors and
members of the public.
operate – and by promoting a culture
where all our colleagues can thrive. It sets
out a programmatic, evidence-based
approach to understanding and removing
bias and other cognitive barriers from
BT policies, processes, systems and
decision-making.
It supports our strategy by describing
how we’ll realise our ambition to create
a more sustainable future for ourselves
and our customers.
e We monitor and manage our environment
We allocate suitable resources to build a
We regularly report to the Executive
strategy and risks through the Digital
safe and healthy workplace. That includes
Committee on the strategy’s relevance
Impact & Sustainability Committee,
policies, training, processes and effective
and effectiveness, including robust
monitoring against our Ethnicity Rapid
Action Plan and broader strategy.
and also through our Environmental
risk controls.
Management Governance Group, which
reports to the Executive Committee.
We monitor safety and wellbeing with a
‘three lines of defence’ model. We track
We measure progress on different
and review accidents, near misses and
environment goals, one of which is a
reasons for sickness absence.
We review and update the policy
misses happen, to stop them happening
We look at why accidents, injuries and near
group KPI (page 47).
every year.
again. We monitor sickness absence
trends, adapting processes to better
support colleagues.
We review policies annually and update
them as appropriate.
s See pages 32 to 33 for our plans and
There are details of actions taken in
Our strategy creates an environment and
performance on the environment and
pursuance of our policy, along with
workplace that embraces diversity and
tackling climate change, including progress
sickness absence rates and time lost from
inclusion and includes it in all decision-
made towards becoming a net zero carbon
injuries, on pages 24 to 25.
making.
Details of the things we’ve done this year
to support our strategy, together with
some of our latest diversity and inclusion
statistics, can be found on pages 24 to 25.
emissions business.
Additionally, details of performance
against our group KPI target to cut
our carbon emissions intensity of our
operations by 87% by the end of March
2031 is on page 47.
and service interruption group risk
categories on pages 59 and 62.
We’re taking action to mitigate key
physical climate risks and our impact
on the environment in a number of
areas. See pages 32 to 33 and our TCFD
statement on page 67 for more details.
Strategic report
46
Our key
performance
indicators (KPIs)
Operational At 31 March
The annual bonus and long-term
incentive plans that comprise our
directors’ remuneration are linked
to certain KPIs. See the Report on
directors’ remuneration on pages 88
to 104.
a We gave our original outlook in July 2020 and
updated it in September 2020 to raise the lower
end of the adjustedb EBITDA range. We updated
it again in February 2021 to raise the lower end
of the normalised free cash flow outlook range.
Our final outlook was adjustede revenue down
5%–6%, adjustedb EBITDA £7.3bn–£7.5bn, capital
expenditure £4.0bn–£4.3bn and normalised free
cash flowc £1.3bn–£1.5bn.
b Adjusted EBITDA as stated is before specific items,
share of post tax profits/losses of associates and
joint ventures and net non-interest related finance
expense, as explained on page 198.
c Normalised free cash flow as defined on page 199.
d Restated from 42% as presented in the Annual
Report 2020 following review of our carbon
emissions.
e Adjusted measures exclude specific items, as
explained on page 197.
Financial Year ended 31 March
We hit our operational targets for the
year, but we want to go further. Overall
our financial results were in line with the
guidance we gave in July 2020ª.
This year, we continued to refine the
KPIs we use to track progress against
our strategy. We use 11 KPIs – five
operational and six financial.
We reconcile financial measures to the
closest IFRS measure on pages 197 to 199.
Group Net Promoter Score (NPS)
pp
Total Openreach FTTP connections
’000
(1.7)
5.0
8.3
6.5
5.5
7.8
169
306
524
905
2016
2017
2018
2019
2020
2021
2018
2019
2020
2021
Definition
Definition
This tracks changes in our customers’
perceptions of BT since we launched the
measure in April 2016. It’s a combined measure
of ‘promoters’ minus ‘detractors’ across our
business units. Group NPS measures Net
Promoter Score in our retail business and Net
Satisfaction in our wholesale business.
Link to strategy
2
Performance
Group NPS increased by 7.8pp (2019/20: up
5.5pp). Our priority is to truly differentiate
ourselves on customer experience and we’ll
keep exploring ways to do that.
You can read more about our approach to
customer experience on pages 26 to 29.
This tracks how many premises are connected
to Openreach’s full fibre network.
Link to strategy
1
Performance
A total of 905k premises were connected to
Openreach’s FTTP (full fibre) network at 31
March 2021, compared to 524k at 31 March
2020. Openreach’s full fibre rollout has now
reached 4.6m footprint, achieving a record
2.0m premises passed in year.
You can read more about the full fibre
rollout on page 20.
Reported revenue
£m
Adjustedb EBITDA
£m
Adjustedb EBITDA margin
%
24,062
23,723
23,428
22,905
21,331
7,645
7,505
7,392
7,907
7,415
32%
32%
32%
35%
35%
2017
2018
2019
2020
2021
2017
2018
2019
2020
2021
2017
2018
2019
2020
2021
Definition
Definition
Definition
This is our revenue as reported in our income
statement.
Link to strategy
1 2 3
Performance
Reported revenue was £21,331m (2019/20:
£22,905m). The decrease was mainly due to
the impact of Covid-19 and ongoing legacy
product declines and divestments, partly
offset by higher Openreach bases in fibre
and Ethernet.
You can read more about how our
customer-facing units performed
on pages 54 to 55.
BT Group plc
Annual Report 2021
This measures our earnings before interest, tax,
depreciation and amortisation, specific items,
share of post tax profits/losses of associates
and joint ventures and net non-interest related
finance expenses.
Link to strategy
1 2 3
Performance
Adjustedb EBITDA was £7,415m (2019/20:
£7,907m). The decrease was mainly driven
by the fall in revenue, special frontline bonus,
increased service costs and continued
investment in copper-to-fibre migration
and our full fibre base, partly offset by sports
rights rebates and cost savings including our
modernisation programme, tight cost control
and Covid-19 mitigation actions.
This measures our margin, calculated using our
adjustedb EBITDA and adjustede revenue.
Link to strategy
1 2 3
Performance
Adjustedb EBITDA margin has remained flat
at 35% over the past two financial years. The
increase of 3pp over the preceding years is
attributable to the adoption of IFRS 16 Leases
on 1 April 2019, with lease payments no longer
reflected in EBITDA after this date.
47
Link to strategy
Each KPI measures how we’re
doing against at least one of
our strategic pillars.
You can read more about these, and our
progress against them, from page 19.
1
2
3
Build the
strongest
foundations
Create standout
customer
experiences
Lead the way to a
bright, sustainable
future
Total 5G connections
’000
Percentage reduction in carbon
emissions intensity
% reduction
Cumulative number of people reached
to help improve their digital skills
m
64
1,610
7%
26%
43%
000
57%
2.8
10.1
2020
Definition
2021
2018
2019
2020d
2019
2021
2020
2021
Definition
Definition
This measures the number of EE customers
connected to our 5G products.
Link to strategy
1
Performance
A total of 1,610k EE customers were connected
to our 5G network at 31 March 2021 (2019/20:
64k). Coverage continues to grow and 5G is
now in 160 locations. The new spectrum we
secured in the latest Ofcom auction will allow
us to continue to grow our position as the UK’s
number one 5G network next year and beyond.
You can read more on our 5G rollout
on page 20.
This measures performance against our target
to cut carbon emissions intensity by 87% by the
end of March 2031 (compared to 2016/17 levels).
It’s measured by reference to tonnes of CO2e
(carbon dioxide equivalent) per £m value added
(adjustedb EBITDA plus employee costs).
Link to strategy
3
Performance
We’ve cut our carbon emissions intensity by
57% since 2016/17 (2019/20: 43%d reduction).
You can find more information on how
we’re tackling environmental challenges
on pages 32 to 33.
This measures the number of people we’ve
reached with help to improve their digital skills
through our Skills for Tomorrow programme.
Link to strategy
3
Performance
At 31 March 2021 we had helped a total of
10.1m people improve their digital skills
(2019/20: 2.8m). We hit our initial ambition of
reaching 10m people in the UK five years early,
so we’ve extended our target and now want to
reach 25m people by the end of March 2026.
You can read more about how we
managed to help so many people build
better digital lives on page 31.
Normalised free cash flowc
£m
Reported capital expenditure
£m
Return on Capital Employed (ROCE)
%
2,782
2,973
2,440
2,011
1,459
3,454
3,522
3,963
3,960
4,216
10.2%
8.6%
2017
2018
2019
2020
2021
2017
2018
2019
2020
2021
2020
2021
Definition
Definition
Definition
This measures free cash flow (net cash
inflow from operating activities after capital
expenditure) after net interest paid and
payment of lease liabilities, before pension
deficit payments (including the cash tax benefit
of pension deficit payments) and specific items.
Link to strategy
1 2 3
Performance
We generated £1,459m of normalised free
cash flowc. This was down 27% from last year
and in line with our guidance range of £1.3bn
to £1.5bn. The fall mainly reflects reduced
EBITDA, higher cash capital expenditure and
adverse working capital.
This measures additions to property, plant
and equipment and intangible assets during
the year.
Link to strategy
1 2 3
Performance
Reported capital expenditure was £4,216m
(2019/20: £3,960m). This was primarily driven
by higher network and equipment spend,
reflecting continued investment in full fibre
deployment and the mobile network.
ROCE is adjusted earnings before interest and
tax as a percentage of equity, debt and debt-
like liabilities excluding balances associated
with tax and management of financial risk. For a
full definition and a reconciliation to the nearest
IFRS measure see page 198.
Link to strategy
1 2 3
Performance
ROCE for the year was 8.6% (2019/20: 10.2%).
The decline is attributable to the reduction
in revenue and our investment in full fibre
deployment, which will suppress ROCE in the
short to medium term but will generate value-
creating long-term returns.
BT Group plc
Annual Report 2021
Strategic report 48
Group performance
Introduction from our
Chief Financial Officer
Revenue
£21,331m
(7)%
£21,331m
£22,905m
2021
2020
Adjusteda EBITDA
£7,415m
(6)%
£7,415m
£7,907m
2021
2020
2020/21 Capital expenditurec
£4,216m
2
Network investment
55%
Customer driven
investment
23%
Systems and IT
18%
Non-network
investment
4%
3
3
Profit before tax
£1,804m
(23)%
£1,804m
£2,353m
Alternative performance measures
We assess the performance of the group using various alternative performance
measures. As these are not defined under IFRS they are termed ‘non-GAAP’ or
‘alternative performance’ measures. We reconcile these to the nearest prepared
measure in line with IFRS on pages 197 to 199. The alternative performance
measures we use may not be directly comparable with similarly titled measures.
BT Group plc
Annual Report 2021
2021
2020
49
Outlooke
Result
Performance
in line with
outlook
Change in adjustedb revenue
Down 5%–6% Down 6%
Adjusteda EBITDA
Capital expenditurec
£7.3bn–£7.5bn
£7.4bn
£4.0bn–£4.3bn
£4.2bn
Normalised free cash flowd
£1.3bn–£1.5bn
£1.5bn
Performance
Overall our results for the year were in line
with guidance.
Reported revenue was £21,331m,
down 7% and adjustedb revenue was
£21,370m, down 6%. This was due
primarily to the impact of Covid-19 on
Consumer and our enterprise units,
ongoing legacy product declines and
divestments, but was partially offset
by higher equipment revenue and
Openreach bases in fibre and Ethernet.
benefit from the Government’s tax
super-deduction which is likely to
reduce our UK tax payable to zero over
the next two years. We are therefore
utilising this to accelerate immediately
our FTTP investment. As such we expect
capital expenditurec to increase to
around £4.9bn in 2021/22. We expect
normalised free cash flowd to be between
£1.1bn–£1.3bn with the increase in
capital expenditurec relative to 2020/21
only partially offset by the increase in
adjustedª EBITDA and the impact of the
Government’s tax super-deduction.
Reported profit before tax was £1,804m,
down 23% primarily reflecting the decline
in adjusteda EBITDA.
Dividend
Adjusteda EBITDA of £7,415m was
down 6%. This was primarily due to
the fall in revenue, special frontline
bonus, increased service costs and
continued investment in copper-
to-fibre migrations and our full fibre
base, partly offset by sports rights
rebates and cost savings including our
modernisation programme, tight cost
control and Covid-19 mitigation actions.
Outlook
We continue to expect adjustedª
EBITDA of at least £7.9bn in 2022/23,
with sustainable growth from this
point forward.
For 2021/22 we expect adjustedb
revenue to be broadly flat year on year,
dependent on the speed of Covid-19
recovery. We expect to deliver adjustedª
EBITDA between £7.5bn and £7.7bn,
benefiting from a Covid-19 recovery,
price indexation in Openreach and our
retail businesses, and continued cost
transformation, more than offsetting
legacy declines and normal inflation in
our cost base.
We intend to capitalise on Openreach’s
build capability, a positive spectrum
auction outcome and the expected
As communicated in May 2020, the
Board decided that it was appropriate
to suspend all dividends for 2020/21
reflecting the need to create capacity
for BT’s value-enhancing investment
opportunities, including our strategic
intent for an accelerated FTTP build
and our extensive transformation
and modernisation programme,
coupled with the shorter-term impact
of Covid-19. The Board expects
to resume dividend payments in
2021/22 at 7.7 pence per share with
30% payable at the interim stage.
The Board expects to continue with a
progressive dividend policy from this
re-based level for future years, and to
declare two dividends per year with the
interim dividend being fixed at 30%
of the prior year’s full year dividend.
The Board believes that suspending
and re-basing the dividend and then
maintaining a progressive dividend policy
is the right thing to do for the long-term
future of BT and that the headroom
generated by this decision is prudent
given the Covid-19 pandemic, while
the investments will create significant
additional value for shareholders.
Simon Lowth
Chief Financial Officer
12 May 2021
Normalised free cash flowd
£1,459m
(27)%
£1,459m
£2,011m
2021
2020
Operating cash flow
£5,963m
(5)%
£5,963m
£6,271m
2021
2020
Earnings per share
14.8p
18.9p
17.5p
23.5p
2021
2020
Reported EPS
Adjustedb EPS
Net debtf
£17,802m
£17,802m
£17,969m
2021
2020
a Adjusted EBITDA is stated before specific items, share of post tax profits/losses of associates and joint ventures.
and net non-interest related finance expense, as explained on page 198.
b Adjusted measures exclude specific items, as explained on page 197.
c Additions to property, plant and equipment and intangible assets in the period.
d Normalised free cash flow as defined on page 199.
e Outlook originally provided in July 2020 was updated in September 2020 to raise the lower end of the adjusteda
EBITDA range from £7.2bn to £7.3bn, and again in February 2021 to raise the lower end of the normalised free
cash flow range from £1.2bn to £1.3bn.
f Net debt as defined on page 197. Please refer to note 26 for reconciliation from the nearest IFRS measure.
BT Group plc
Annual Report 2021
Strategic report
50
Group performance continued
Summarised income statement
Year ended 31 March
Revenue
Operating costsa
2021
£m
2020
£m
21,331
22,905
(14,397)
(15,348)
Depreciation and amortisation
(4,347)
(4,274)
Operating profit
Net finance expense
Share of post tax profit/(loss) of
associates and ventures
Profit before tax
Tax
Profit for the period
Revenue
2,587
3,283
(791)
8
(897)
(33)
1,804
2,353
(332)
(619)
1,472
1,734
Reported revenue was down 7%, primarily due to the impact
of Covid-19 on Consumer including reduced BT Sport revenue
and the closures of retail stores and pubs & clubs, as well as a
reduction in business activity in our enterprise units. The decline
in revenue was also driven by ongoing legacy product declines
and divestments in our enterprise businesses, but was partly
offset by higher equipment revenue in Consumer and higher
rental bases of fibre-enabled products and Ethernet
in Openreach.
You can find details of revenue by customer-facing unit
on pages 54 and 55. Note 5 to the consolidated financial
statements shows a full breakdown of revenue by all our
major product and service categories.
Operating costs
Reported operating costs were down 4%, mainly driven by
sports rights rebates and savings including our modernisation
programme, tight cost control and Covid-19 mitigation actions.
This was partly offset by increased service costs in Openreach,
a special bonus for frontline colleagues, and continued
investment in copper-to-fibre migrations and our full fibre
base in Consumer.
In May 2020 we announced the next phase of our transformation
focused on simplifying our product portfolio, simplifying
and automating our customer journeys, moving to a modern,
modular IT architecture, and migrating customers from our
legacy networks to our modern FTTP and 5G networks.
We delivered gross annualised savings of £764m in the first
year of the modernisation programme with an associated cost
of £438m, against the three-year target of £1bn savings at a
£900m cost and a five-year target of £2bn savings at a £1.3bn
cost. The cost savings were delivered through simplification and
automation of processes, operational productivity improvement
programmes, enhanced procurement supported by digital tools,
rigorous functional cost control, and Covid-19 mitigating actions.
You can read more about how we’re modernising our business on
pages 22 and 23.
Note 6 to the consolidated financial statements shows a detailed
breakdown of our operating costs.
Adjustedc EBITDA
Adjustedc EBITDA of £7,415m was down 6%, mainly driven by
the fall in revenue and increased costs as described above. You
can find details of adjustedc EBITDA by customer-facing unit on
pages 54 and 55.
Profit before tax
Reported profit before tax of £1,804m was down 23%, primarily
reflecting the decline in adjustedc EBITDA.
Specific items
As we explain on page 197, we separately identify and disclose
those items that in management’s judgement need to be
disclosed by virtue of their size, nature or incidence. We call
these specific items. Specific items are used to derive the
adjusted results as presented in the consolidated income
statement. Adjusted results are consistent with the way that
financial performance is measured by management and assists
in providing an additional analysis of the reported trading results
of the group.
Adjustedb operating costs before depreciation, amortisation and specific items
Year ended 31 March
£m
14,917
(217)
(232)
(370)
21
18
(84)
(98)
13,955
15,000
14,500
14,000
13,500
13,000
2020
Labour costs
Payments to
telecommunications
operators
Production
costs & sales
commission
Property &
energy
Network & IT
Programme
rights charges
Other
2021
BT Group plc
Annual Report 2021
51
Specific items resulted in a net charge after tax of £403m
(2019/20: £590m). The components are regulatory charges of
£35m (2019/20: release of £72m), restructuring costs of £421m
(2019/20: £322m), the settlement with Dixons Carphone of
£149m (2019/20: £nil), property rationalisation costs of £19m
(2019/20: gains of £131m reflecting the gain on sale of BT
Centre) and interest expense on pensions of £18m (2019/20:
£145m); offset by sale of spectrum of £66m (2019/20: £nil),
a net divestment-related items credit of £60m (2019/20: loss
of £199m), Covid-19-related items credit of £17m (2019/20:
charge of £95m) and a tax credit on specific items of £96m
(2019/20: charge of £83m).
Note 9 to the consolidated financial statements shows
the details of all revenues and costs that we have treated
as specific items.
Taxation
Cash flow
Net cash inflow from operating activities was down 5% to
£5,963m, mainly driven by reduced operating profit partly offset
by a reduction in pension deficit payments. Normalised free
cash flowd was down 27% to £1,459m due to reduced EBITDA,
higher lease payments, cash capital expenditure and adverse
working capital; offset by a cash receipt from the monetisation
of a non-strategic revenue stream generated from our building
infrastructure and the timing of tax payments.
The net cash cost of specific items adjusted from normalised
free cash flowd was £390m (2019/20: £112m), primarily relating
to restructuring payments of £428m (2019/20: £350m) and
regulatory payments of £11m (2019/20: £39m). The prior year
benefited from one-off cash inflows relating to £210m income
on disposal of BT Centre and £87m annual licence fee refund
from Ofcom. In addition, net cash proceeds from divestments
were £164m (2019/20: £60m).
Our effective tax rate was 18.4% (2019/20: 26.3%) on
reported profit and 18.6% (2019/20: 18.7%) on profit before
specific items. We paid income taxes globally of £288m
(2019/20: £210m).
Normalised free cash flowd
Year ended 31 March
2021
£m
2020
£m
We paid UK corporation tax of £229m (2019/20: £147m).
We benefited £181m from tax deductions on employees’
pension schemes (2019/20: £434m).
Our tax expense recognised in the income statement before
specific items was £428m (2019/20: £536m). We also
recognised a £1,051m tax credit (2019/20: £892m tax charge)
in the statement of comprehensive income, mainly relating to
our pension scheme.
We expect our sustainable income statement effective tax rate
before specific items to be around the UK rate of corporation
tax, as we do most of our business in the UK.
Note 10 to the consolidated financial statements shows further
details of our tax expense, along with our key tax risks.
Earnings per share
Reported earnings per share was 14.8p, down 2.7p, while
adjusteda earnings per share fell 4.6p to 18.9p.
Capital expenditure
We continue to invest in existing and new technologies to
underpin our strategy of building the strongest foundations
with the best converged network.
Capital expenditure was £4,216m (2019/20: £3,960m).
Network investment was £2,318m, up 12%. This was driven by
higher fixed network, mobile network and equipment spend,
reflecting continued investment in FTTP deployment and
the mobile network. Other capital expenditure components
were largely flat with £984m spent on customer-driven
investments, £765m on systems and IT, and £149m spent
on non-network infrastructure.
Capital expenditure contracted but not yet spent was £1,365m
at 31 March 2021 (2019/20: £1,234m).
Cash generated from operations
6,251
6,481
Tax paid
(288)
(210)
Net cash inflows from operating
activities
Net purchase of property, plant and
equipment and intangible assetse
Free cash flow
Interest received
Interest paid
Add back pension deficit payments
Remove cash tax benefit of pension
deficit payments
Dividends from associates
Add back net cash flow from specific
items
Add back net sale of non-current asset
investments
Add back prepayment in respect of
spectrum licence auction
Remove payment of lease liabilities
5,963
6,271
(4,818)
(3,889)
1,145
2,382
6
(770)
955
30
(736)
1,274
(181)
(434)
5
1
390
112
(11)
702
(782)
33
–
(651)
Normalised free cash flowd
1,459
2,011
You can see a reconciliation to normalised free cash flowd from
net cash inflow from operating activities (the most directly
comparable IFRS measure) on page 199.
a Excluding depreciation and amortisation.
b Adjusted measures exclude specific items, as explained on page 197.
c Adjusted EBITDA is stated before specific items, share of post tax profits/losses
of associates and joint ventures and net non-interest related finance expense, as
explained on page 198.
d Normalised free cash flow as defined on page 199.
e Consists of additions of £4,197m, movements in capital accruals of £4m and
prepayments of £702m in respect of spectrum which will be recognised as an asset
in 2021/22, net of disposals of £85m.
BT Group plc
Annual Report 2021
Strategic report 52
Group performance continued
The movements in the deficit for the group’s defined benefit
plans are as follows:
Summarised balance sheet
Year ended 31 March
Intangible assets
2021
£m
2020
£m
13,357
13,889
Property, plant and equipment
19,397
18,474
Right-of-use assets
Derivative financial instruments
Cash and cash equivalents
Investments
Trade and other receivables
Contract assets
Deferred tax assets
Other current and non-current assets
4,863
1,235
1,000
3,683
3,571
1,859
989
923
5,391
2,489
1,549
5,112
3,185
1,721
300
957
Total assets
50,877
53,067
Loans and other borrowings
16,685
19,334
Derivative financial instruments
Trade and other payables
Contract liabilities
Lease liabilities
Provisions
Retirement benefit obligations
Deferred tax liabilities
1,283
6,662
1,092
6,152
715
5,096
1,429
Other current and non-current liabilities
84
1,012
6,548
1,151
6,560
719
1,140
1,608
232
Total liabilities
Total equity
Pensions
39,198
38,304
11,679
14,763
Accounting position under IAS 19
The IAS 19 deficit has increased from £1.1bn at 31 March 2020
to £5.1bn at 31 March 2021. Net of deferred tax, the deficit has
increased from £1.0bn to £4.2bn.
The increase in the gross deficit of £4.0bn since 31 March 2020
mainly reflects a fall in the real discount rate, partly offset
by £1bn of deficit contributions paid over the period, lower
assumed future life expectancies and positive asset returns.
BT Group plc
Annual Report 2021
1.0 0.2
0.1
(1.0)
(1.8)
6.6
4.2 0.9
£bn
6
5
4
3
2
1
0
(1)
(2)
Deficit at
1 April 2020
Costs
recognised
in income
statement
Contributions
from BT
Higher than
expected
return on
plan assets
Increase in
liabilities due
to experience
and changes
in assumptions
Deficit at
31 March
2021
Net of deferred tax asset
Deferred tax asset
BT Pension Scheme (BTPS) funding valuation and future
funding obligations
BT and the Trustee of the BTPS have reached agreement
on the 2020 triennial funding valuation and recovery plan. The
funding deficit at 30 June 2020 is £7.98bn, compared to a deficit
of £11.30bn at 30 June 2017. The key drivers for the reduction
are £4.5bn of deficit contributions and lower assumed future
life expectancies, partly offset by an initial allowance for the
impact of the reform of RPI. Due to hedging implemented
by the Scheme in recent years, the fall in real interest rates
over the period had limited impact on the deficit.
The deficit will be met as follows:
– £2bn of deficit met through an asset backed funding
arrangement over 13 years with annual cash payments of
£180m pa, secured against the EE business
– The balance being met over the existing 10 year period with
annual cash contributions reducing from £900m initially to
£600m from 1 July 2024.
A new “stabiliser” mechanism has been agreed that reduces the
risk of future trapped surplus and provides more certainty that
the BTPS will achieve its path to full funding by clarifying how
future increased deficits would be funded.
Note 20 to the consolidated financial statements gives more
information on our pension arrangements.
Net debt and net financial debta
Net financial debtª (which excludes lease liabilities) at 31 March
2021 was £11.7bn, £0.3bn higher than at 31 March 2020, with net
capital expenditure, net interest payments and payment of lease
liabilities offsetting net cash inflow from operating activities and
net proceeds from disposal of subsidiaries.
Net debta (which includes lease liabilities) was £17.8bn at 31
March 2021, £0.2bn lower than at 31 March 2020 (£18.0bn).
The difference to the movement in net financial debt primarily
reflects the lease payments.
At 31 March 2021 the group held cash and current investment
balances of £4.7bn. The current portion of loans and other
borrowings of £0.9bn includes no term debt repayable during
2021/22. Our £2.1bn facility, which matures in March 2026,
remains undrawn at 31 March 2021.
Gross debt translated at swap rates and excluding accrued
interest and fair value adjustments was £22.5bn at 31 March
2021. This comprises term debt of £15.4bn, lease liabilities of
£6.2bn and other loans of £0.9bn.
Debt maturity
Contractual obligations and commitments
53
The graph below shows the maturity profile for our term debt.
Currency denominated balances are translated to sterling at
swapped rates where hedged.
The table below shows our principal undiscounted contractual
financial obligations and commitments at 31 March 2021.
£m
2023
2024
2025
528
450
1,358
1,492
As at 31 March 2021
2.33%
2.80%
2.23%
Loans and other
borrowingsb
Pension deficit
obligations
Less
than
1 year
£m
Between
1 and 3
years
£m
Between
3 and 5
years
£m
More
than 5
years
£m
Total
£m
16,301
692
2,336
3,944
9,329
8,800
1,121
1,776
1,562
4,341
Lease liabilities
6,970
724
1,553
1,302
3,391
Programme rights
commitments
1,691
727
935
Capital
commitments
Other
commitments
1,370
1,154
145
263
263
–
29
71
–
–
–
–
Total
35,395
4,681
6,745
6,908 17,061
We have unused committed borrowing facilities totalling £2.1bn.
We expect that these resources, combined with the future cash
we generate, will allow us to settle our obligations as they fall due.
Notes 15, 20, 26 and 31 to the consolidated financial statements
give further information on these items.
Share buyback
We spent £14m (2019/20: £86m) on our share buyback
programme. We received proceeds of £1m (2019/20: £2m)
from people exercising their share options.
20261
442
2,012
3.16%
1,013
599
548
446
777
673
1,604
497
673
498
673
693
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
2041
2042
2043
2044
2045
2046
2047
2048
247
2049
2050
389
£ debt
$ debt swapped to £
€ swapped to £
2.49%
3.76%
2.76%
9.59%
3.20%
3.27%
6.38%
3.45%
3.49%
3.71%
3.25%
Note 26 to the consolidated financial statements gives more
information on our debt arrangements.
1 Reflects exercise of call option attached to 1.874% €500m bond due in 2080.
b Principal repayments at hedged rates.
a Net debt and net financial debt as defined on page 197. Please refer to note 26 for
reconciliations from the nearest IFRS measure.
BT Group plc
Annual Report 2021
Strategic report
54
Group performance continued
Our customer-facing units
Consumer
Year ended 31 March
2021
£m
2020
£m
Change
£m
Change
%
Year ended 31 March
2021
£m
2020d
£m
Change
£m
Change
%
Enterprise
Adjusteda revenue
9,885 10,388
Adjusteda operating costs
7,757
7,962
(503)
(205)
(5)
(3)
Adjusteda revenue
5,449
5,952
(503)
Adjusteda operating costs
3,745
4,017
(272)
(8)
(7)
Adjustedb EBITDA
2,128
2,426
(298)
(12)
Adjustedb EBITDA
1,704
1,935
(231)
(12)
Depreciation & amortisation 1,281
1,278
3
–
Depreciation & amortisation
740
712
28
4
Adjusteda operating profit
847
1,148
(301)
(26)
Adjusteda operating profit
964
1,223
(259)
(21)
Capital expenditure
1,082
948
134
14
Capital expenditure
492
496
Normalised free cash flowc
714
1,065
(351)
(33)
Normalised free cash flowc
1,352
1,363
(4)
(11)
(1)
(1)
Adjusteda revenue
Adjusteda operating profit
Adjusteda revenue
Adjusteda operating profit
£9,885m
(5)%
£847m
(26)%
£5,449m
(8)%
£964m
(21)%
Revenuea declined due to the continued impact of Covid-19
which resulted in the closure of retail stores and pubs & clubs
(impacting BT Sport revenue) for large parts of the financial
year. There has been pressure on mobile revenue through
reduced roaming and out of bundle usage, reduced prepaid
activity and increased SIM-only mix diluting postpaid ARPC;
which were partially offset by higher equipment revenue driven
by increased direct volumes and a higher mix of premium
handsets. Fixed revenue declined due to lower out of contract
price rises and copper price reductions to address back book
pricing, combined with a continued decline of our voice only
customer base and call volumes.
EBITDAb declined due to lower revenue, continued customer
investment in both copper-to-fibre migrations and the growth of
our full fibre base, along with the bonus provided to our frontline
staff. This has been partially offset by sports rights rebates,
improved mobile margin with lower indirect commissions,
increased equipment margin and tight cost management
throughout the year.
Depreciation and amortisation was flat year on year.
Capital expenditure was up due to higher network and
equipment investment.
Normalised free cash flowc declined due to lower EBITDAb and
higher capital expenditure.
Broadband churn has improved year on year by 0.1ppts to 1.1%
due to significant investment in customer experience. Postpaid
churn has improved year on year by 0.2ppts to 1.0%.
Our full fibre and 5G bases, award-winning mobile network,
low churn, growing customer base on index-linked contracts,
strong NPS and continued converged growth with Halo 3+,
provide us with strong foundations for the future. This is further
strengthened by the Government’s roadmap to lift Covid-19
restrictions, the re-opening of our retail stores, the planned
full re-opening of pubs & clubs and the possibility of a return
to foreign travel.
Revenuea declined due to continued declines in legacy products,
in particular traditional fixed voice volumes and usage, the
ongoing impact of Covid-19 and divestments. Fixed voice
revenue declined by 13% with a decline in traditional voice
lines partly offset by continued growth in VoIP seats.
Mobile revenue declined primarily due to lower roaming and out
of bundle usage in retail mobile, offsetting a 4% increase in our
retail customer base. The fall in retail revenue was partly offset
by an increase in wholesale mobile revenue reflecting a higher
average MVNO base. Excluding divestments in the prior year,
revenue was down 7%.
Operating costsa declined by 7%, primarily reflecting the
decline in revenue and our cost transformation programmes,
partially offset by investment to support our growth areas. The
decline in EBITDAb was mainly a result of the declines in legacy
products and Covid-19, partly offset by cost savings from our
transformation programme. Excluding divestments in the prior
year, EBITDAb was down 11%.
Capital expenditure decreased by 1%. Normalised free cash
flowc decreased 1%, with the fall in EBITDAb partially offset by
the benefit generated from the monetisation of a non-strategic
revenue stream generated from our buildings infrastructure.
Retail order intake fell 27% to £2.6bn and wholesale order intake
fell 27% to £0.9bn for the year. The declines in both retail and
wholesale orders are largely due to major contract extensions in
the prior year.
Despite extension of financial support for businesses in the latest
Government budget, we expect Covid-19 to continue to have an
impact going into 2021/22, particularly on our direct and indirect
SME customers.
BT Group plc
Annual Report 2021
55
Global
Year ended 31 March
2021
£m
2020
£m
Change
£m
Change
%
Year ended 31 March
2021
£m
2020
£m
Change
£m
Change
%
Openreach
Adjusteda revenue
3,731
4,361
(630)
Adjusteda operating costs
3,135
3,727
(592)
(14)
(16)
Adjustedb EBITDA
Depreciation & amortisation
Adjusteda operating profit
Capital expenditure
Normalised free cash flowc
596
405
191
188
187
634
479
155
223
255
(38)
(74)
36
(35)
(68)
Adjusteda revenue
5,244
5,112
132
Adjusteda operating costs
2,307
2,254
(6)
Adjustedb EBITDA
2,937
2,858
(15)
Depreciation & amortisation 1,707
1,712
23
Adjusteda operating profit
1,230
1,146
53
79
(5)
84
(16)
Capital expenditure
2,249
2,108
141
(27)
Normalised free cash flowc
486
670
(184)
(27)
3
2
3
–
7
7
Adjusteda revenue
Adjusteda operating profit
Adjusteda revenue
Adjusteda operating profit
£3,731m
(14)%
£191m
23%
£5,244m
3%
£1,230m
7%
Revenuea declined by 14% due to the negative impact of Covid-19,
divestments of domestic businesses in Spain, Latin America and
France, mature and legacy portfolio declines and a £28m negative
impact from foreign exchange movements. Revenue excluding
divestments and foreign exchange declined by 9%.
EBITDAb declined by £38m reflecting the impact of divestments
and a £11m negative impact from foreign exchange movements.
EBITDAb, excluding divestments, foreign exchange and one-offs
increased by 3%. The negative impact of Covid-19 on revenue
was more than offset by lower operating costsa reflecting
ongoing transformation, rigorous cost control and Covid-19
mitigation actions.
Depreciation and amortisation declined by 15% due to the impact
of divestments and reductions in capital investment over the last
few years.
Capital expenditure declined by 16% due to lower project spend,
Covid-19 related deferrals of customer spend and the impact
of divestments. Normalised free cash flowc declined by £68m
reflecting adverse working capital and lower EBITDAb, partly offset
by lower capital expenditure.
Order intake for the year was £3.7bn, down 15% year on year as
customers continued with a more cautious approach, with ongoing
delays to purchasing processes and lower than expected levels of
demand and non-contracted spend. In addition, order intake in
the prior year benefited from a number of large renewals and the
current year was reduced by the divestments.
The current challenging market conditions resulting from Covid-19
are expected to continue into the next financial year impacting both
order intake and trading performance.
Revenuea growth was primarily due to higher rental bases in fibre-
enablede products, up 15%, and Ethernet, up 7% at year end.
This was partially offset by declines in legacy copper products.
EBITDAb grew 3% driven by revenue growth. Operating costsa
increased with higher service costs as we continue to deliver
against our customers’ increasing service expectations, increased
full fibre provisions and pay inflation and a special frontline bonus
partially offset by ongoing efficiency programmes.
Capital expenditure was up 7% due to investments in the network
and connecting our customers, predominantly fibre-enabled
infrastructure, partly offset by efficiency savings and lower
non-fibre spend.
Normalised free cash flowc declined by 27% due to flow through of
EBITDAb and capital expenditure and timing of working capital and
lease payables.
The UK lockdowns have had some impact on our trading. The first
few months of the year were characterised by lower provision and
upgrade activity, partly offset by lower churn. The impact in the
last few months was limited to lower full fibre and Gfast sales as we
temporarily paused non-essential work inside customer premises.
We have now recommenced entering customer premises for most
services and are expecting to clear backlogs by summer 2021.
a Adjusted measures exclude specific items, as explained on page 197.
b Adjusted EBITDA is stated before specific items, share of post tax profits/losses
of associates and joint ventures and net non-interest related finance expense, as
explained on page 198.
c Normalised free cash flow as defined on page 199.
d The prior year comparatives for Enterprise have been restated for the transfer of
Supply Chain and Pelipod to the central procurement team on 1 April 2020. For
more information please see note 1 to the financial statements on page 123.
e FTTP, FTTC and Gfast, including Single Order Migration.
BT Group plc
Annual Report 2021
Strategic report 56
A letter from the Chair of Openreach
Continued progress on service
Over the last four years we’ve been
recognised for making huge strides
in delivering a better customer
experience, but 2020 was an unusual
year. Despite completing record
volumes of provisions and fixes, we
couldn’t maintain every Minimum
Service Level set for us by Ofcom.
However, the regulator has recognised
the impact of the pandemic and it won’t
be taking enforcement action as long
as we keep doing the right thing for
our customers.
Looking forward
We’re a £5bn revenue business,
employing more than 35,000 colleagues
across the UK, and I’m proud to say this
year we bucked the economic trend by
creating 5,300 new engineering jobs
across Openreach and our supply chain.
I am encouraged by Ofcom’s final
statement in its WFTMR, which
establishes the regulatory framework
for the next five years. The regulator’s
emphasis on investment and its
recognition of the need to create a
regulatory environment encouraging the
renewal of our country’s access network
across all four nations is very welcome.
As we work to speed up adoption, we
know that educating people about the
benefits of full fibre will be key to the
success of this new network. We’re
working closely with communications
providers to raise awareness, stimulate
demand and make sure upgrades are
smooth and affordable.
We’re pressing on with building full
fibre at pace. We’re increasing and
accelerating our build from 20m to 25m
homes and businesses by December
2026. We believe we can ramp our build
up to 4m premises a year – going harder
and faster than previously thought
possible, whilst doing everything we
can to build fairly across the whole of the
UK. It’s the right thing for our business,
our shareholder, our colleagues, and
our customers.
Mike McTighe
Chair, Openreach
12 May 2021
We’re now making our fastest, most
reliable broadband technology available
to another home or business every
14 seconds and recently reached
4.6m premises.
Our build includes millions of homes in
the country’s toughest-to-reach areas
as we do everything we can to connect
rural communities.
We’re in a strong position to build back
better, supporting the wider economy as
well as our shareholder, customers and
the UK, to help the nation recover.
Supercharging the recovery
‘Building back better’ sounds good.
But as we take stock of what the UK
needs to bounce back strongly, we
have to deliver substance.
At Openreach, we know that full fibre
broadband has a huge role to play in the
recovery, and the Centre for Economics
and Business Research (Cebr) has
reinforced that.
In its recent updated study, Cebr
highlights how better broadband can
be a massive platform for economic
growth, social cohesion and positive
environmental change. It could deliver a
£59bn boost to UK productivity by 2025
and help an extra 400,000 people live
and work where they choose, stimulating
regional and rural economic growth.
The Government wants at least 85%
of the UK to have gigabit capable
broadband in the same timeframe.
But getting as close to 100% as possible
has to be the aim – and we’re passionate
about doing our bit.
Building back greener
Based on Cebr’s research, nationwide
full fibre broadband could save 300m
commuting trips each year, with three
billion fewer kilometres travelled by car
and 360,000 fewer tonnes of carbon
emissions. That’s a terrific dividend. But
our focus on sustainability doesn’t end
with the network.
With more than 28,000 vehicles,
Openreach operates the UK’s second
largest commercial van fleet. Our
engineers travel more than 220m miles
a year – producing more than 95,000
tonnes of CO2.
We have to tackle this. So we’re aiming
to switch a third of the fleet to electric
or zero emissions by the middle of this
decade and want to be all-electric or
zero emissions by 2030.
To say this has been a challenging
year would be an understatement.
The pandemic has dominated the
last 12 months. We’ve all learned
more than we ever expected about
viruses, vaccines, social distancing
and how best to wash our hands.
Unsurprisingly Covid-19 affected
our working lives too, and we
certainly saw that here at
Openreach.
Keeping the UK connected
In March 2020, millions of us switched to
working and schooling from home and
our engineers were given key worker
status, meaning they could keep building
and maintaining our network.
From connecting the health service, to
schools and critical infrastructure, we also
maintained links between loved ones and
made sure people could continue to work
from home and keep the country going.
UK broadband use more than doubled
from 22,000 petabytes in 2019 to 50,000
petabytes in 2020 as people relied on
digital connections more than ever.
Our priority was keeping our colleagues
and customers safe and we swiftly re-
engineered processes so we could work
safely and keep the country connected.
And of course, we can’t ignore the impact
of Brexit. In any other year, such a seismic
shift would’ve dominated our thoughts
and actions, but we didn’t let it derail
progress. And now our focus shifts to
the future.
Building back better
Despite everything, we sped up our full
fibre build this year, reaching one million
homes and businesses in just over six
months. This was – and will continue to be
– instrumental in maintaining a strong and
sustainable business for our shareholder
BT, Openreach colleagues and customers.
Even in a year like no other.
BT Group plc
Annual Report 2021
57
How we manage risk
Our risk management framework helps us
tackle risks and uncertainties consistently to
stop them derailing our strategy. It also lets
us think smarter about risk while running our
business with operational discipline.
Our risk management framework
Operational discipline
Point risks
This year, we operated an enhanced risk
management framework to support us
on our journey to be the world’s most
trusted connector of people, devices
and machines.
The framework gives us extra confidence
to tackle risks and uncertainties that
crop up – as we execute our strategy,
transforming and modernising the
business to deliver on our ambition.
How the framework helps
us achieve our ambition
The framework strengthens our
foundations and helps our leaders make
smarter choices. Both things are vital to
help building trust among colleagues,
customers and other stakeholders.
Being smart with risk
The framework identifies key attributes of
a ‘risk-smart’ culture: individual mindset,
attitude to risk and the right behaviours.
These attributes, in combination with
having a robust risk process, help us make
the right risk decisions, knowing which
risks to take and having the courage to
take them.
The framework helps us set simple and
clear requirements through our policy
landscape, key controls and assurance
activities which result in smoother
operations through an enhanced
control environment.
The diagram below illustrates how our
framework supports us in delivering our
strategy and achieving our ambition by
putting these elements into action.
How we identify and assess risks
Group risk categories
We define our risk landscape through
areas of enduring risk called group risk
categories. They are not intended to
contain the whole risk universe, just the
parts we think are most relevant to BT.
For each category, we define the level of
risk we’re willing to take (our risk appetite)
through a number of metrics; and we
describe the rules we’ve set to manage
it (policies, standards and controls).
We apply our framework to constantly
reassess, monitor, manage and report
on the main risks to our strategy.
Some risks aren’t always adequately
covered by the set of rules in place; or by
the ways we normally set our risk appetite.
They might need extra focus at the
moment because they’re unusual,
changing rapidly, or currently have
a potentially significant impact.
We call these point risks and we put
extra management focus on them.
Emerging risks
Other risks might be more like uncertainties
– not yet fully formed into specific risks. That
makes them particularly difficult to quantify
or make specific plans for.
These are emerging risks. We use
ongoing monitoring to spot the triggers
that could crystallise these uncertainties
and turn them into specific risks.
The diagram on the next page illustrates
how the different components of our
framework come together.
Risk and discipline underpin the key parts of our strategy allowing us to achieve our ambition to become the
world’s most trusted connector of people, devices and machines
Building trust
Operational discipline. Being smart with risk
BT Group plc
Annual Report 2021
123PurposeWhy we existWe connect for goodStrategyHow we’ll grow value for all our stakeholdersValuesWhat will guide usPersonal, simple, brilliant2030 AmbitionWho we must becomeTo be the world’s most trusted connector of people, devices and machinesBuild thestrongestfoundationsLooking inLooking outLooking to the futureCreatestandoutcustomer experiencesLead the wayto a bright, sustainable futureStrategic report 58
How we manage risk continued
How we manage risks
Group risk categories are assigned a
member of the Executive Committee as
owner, which helps us make sure all risks
across each category get considered
consistently across the group.
Each owner is ultimately accountable for
setting our risk appetite for each particular
risk category. They set out how we measure
our exposure to that risk, how we manage
it (including setting the right policies and
controls) and ensure that we take the
actions necessary to achieve and maintain
our target risk appetite and level of control.
Point and emerging risks relating to each
category are continuously reviewed
and managed.
Each of our business units also reviews,
on a periodic basis, its exposure in all
these categories and the point and
emerging risks that might affect its
performance.
Our governance structures ensure that
different oversight bodies and leadership
teams get the right level of information on
our risk exposures and how we’re managing
them. This promotes robust discussion and
prioritisation, the right monitoring, and
better decision-making.
How risk links to strategy
On the previous page we show how risk
and discipline underpin our strategy,
which includes building the strongest
foundations, creating standout customer
experiences and leading the way to
a bright sustainable future.
To achieve each of the “pillars”, we need
to manage risks, operate with discipline
and make smart choices in all of our
group risk categories. Some categories
contribute more strongly to particular
pillars than others.
For example, we need to manage cyber
security and service interruption risks in
building the strongest foundations; we
need to manage risks related to customer
service and major contracts in delivering
standout customer experiences; and we
need to manage risks associated with
strategy, technology and competition to
lead the way to a bright sustainable future.
We cover our full risk landscape in detail
over the next pages, including how each
group risk category could affect our
strategy and/or business model.
You can find out more about our strategy
on page 19, and our business model on
pages 12 to 13.
BT Group plc
Annual Report 2021
Our framework explained
We classify our group risk categories in four ways according to the type of risk they
represent: strategic, financial, compliance and operational.
We also identify and manage point and emerging risks within each of these categories
and across categories.
Some risks or risk themes are high-profile topics that cut across different categories
and warrant central coordination and oversight.
Strategic
- Strategy,
technology and
competition
- Stakeholder
management
Financial
- Financing
Compliance
Operational
- Legal compliance
- Service interruption
- Financial control
- Data regulation
- Cyber security
- Regulation
- Transformation
delivery
- People
- Health, safety and
wellbeing
- Major contracts
- Customer service
- Third party
management
Consumer Enterprise Global Openreach Digital
Networks Programmes Other
Units
Point & emerging risks
Covid-19
Risk themes
Brexit
Two of our risk themes are currently widely
represented across the group risk categories:
Brexit
The UK and EU agreed a trade deal
which came into force on 1 January
2021 and established a new trading
relationship. We’ve been planning for
Brexit for four years and the outcome
of the trade deal negotiations hasn’t
had any operational impact on BT
services. Our movement of goods,
people, data and services
are operating normally.
We’re monitoring developments
on both sides to measure any
potential impacts.
Covid‑19
The pandemic is having, and will
continue to have, a big impact across
our entire risk landscape. Responding
to the effects of Covid-19 has become
part of our day-to-day operations
and that response is overseen by an
Executive Committee level steering
group. However, there’s still huge
uncertainty in terms of the timing,
extent and length of national or
regional lockdowns and their impact
on our operations, colleagues
and customers.
Covid-19 has reinforced how critical
our networks are. They supported
large-scale switches to home working.
And they’ve allowed us to give extra
communications support to UK
central government and the devolved
administrations in their pandemic
response activities.
59
Our principal risks and uncertainties
Strategic
Strategy, technology and competition
Owner: Chief financial officer
What this category covers
We could fail to properly respond to an uncertain economic outlook, intensifying competition, rapid
technology developments, or fail to develop products and services that match changing market dynamics
or customer expectations.
How it could affect our strategy and/or business model
– Increased competition might challenge our market share,
How we manage it
– Investing in becoming a network leader with the best
revenue or profit, or could make it harder for us to grow the
value of our business.
– New technology developments could make it harder for us to
monetise our network investment and could potentially force
us to invest more to meet the needs of customers.
– Major economic uncertainty could have a big effect on our
customers – weakening demand, making them less willing to
pay for premium services and increasing the risk of bad debts.
converged network.
– Transforming ourselves to be fitter for the future through
upgrading older services and technologies.
– Investing in differentiated solutions that give us opportunities
to grow and deliver standout customer experiences.
– Monitoring technology developments and competitor
activity.
– Working with regulators and key stakeholders.
Point risks that could affect this category
– Stronger competition in the converged market.
Emerging risks that could affect this category
– New disruptive technologies which substitute our products.
– Increasing competitive intensity.
– Over-the-top players joining the connectivity market.
–
A shrinking global economy.
Stakeholder management
Owner: Corporate affairs director
What this category covers
We might fail to properly manage our stakeholders, which may affect our significant risks, for instance those
around buying, using, selling or developing new or emerging technologies responsibly.
How it could affect our strategy and/or business model
– Not effectively managing our stakeholders’ expectations,
or failing to anticipate the potential effects of certain risks
on the communities we serve, might damage their trust
in us. That could affect our performance, shareholder
value, licence to operate and might also limit new growth
opportunities.
– Our future strategy and growth plans could be undermined.
– There might be legal liabilities for the company or individual
colleagues.
How we manage it
– Tracking trust and reputation across our main stakeholder
groups to inform our plans.
– Proactively engaging with key stakeholders to build stronger
relationships and support a better understanding of risks.
– Exploring more positive outcomes for BT in a fair and
transparent way.
– Operating a responsible and sustainable business,
maintaining our top quartile position on environmental,
social and governance criteria.
Point risks that could affect this category
– Full fibre build commitments and rural connectivity.
Emerging risks that could affect this category
– Evolving trade tensions between the US and China.
– Misinformation on 5G health concerns.
– Climate change policy agenda and perceptions of our
–
Developments from the UK withdrawing from the EU.
sector’s role in carbon emissions.
– Growing focus on the digital divide and its implications.
– Potential for misuse of our products or technologies, in
the context of our commitments to human rights.
BT Group plc
Annual Report 2021
Strategic report 60
Our principal risks and uncertainties continued
Financial
Financing
Owner: Chief financial officer
What this category covers
We could find ourselves not able to fund our business or pension schemes, or to refinance debt.
How it could affect our strategy and/or business model
– Not generating enough cash, being unable to access capital
markets, or a big increase in our pension scheme obligations
could stop us from being able to fund our business cash flows
or meet our payment commitments.
How we manage it
– Regularly reviewing actual and forecast cash
flow performance.
– Performing annual viability assessments and
conducting scenario analysis.
– Issuing hybrid debt.
– Having a pension investment approach that lowers
our risk over time, making contributions less volatile.
– Analysing our pension schemes’ funding position and
investment performance regularly, and negotiating
funding valuations.
– Responding to any relevant pensions consultations.
Point risks that could affect this category
–
Lack of access to capital and liquidity because of the
economic downturn.
– Our credit rating being downgraded.
– An increase in our pension deficit.
Emerging risks that could affect this category
– Pension regulator review of funding regulations, risking
bigger pension liabilities or giving us less time to make
deficit payments.
– Future debt capital markets might not suit all our debt needs.
Financial control
Owner: Chief financial officer
What this category covers
One or more of our financial controls could fail to prevent fraud (including misappropriation of assets) or inaccurate
reporting, resulting in financial losses or causing us to misrepresent our financial position.
How it could affect our strategy and/or business model
– Failings in how we design or operate our financial controls
might lead to financial loss, misstatement and/or wrong
business decisions. On top of that, it could give rise to fraud,
dissatisfied stakeholders, breaches and associated penalties,
legal action and damage to our reputation.
– Not modernising our business and financial processes by
simplifying and automating our controls could make it harder
for us to be agile, proactive and customer-centric.
How we manage it
– Maintaining an internal controls framework with clear
accountability across the three lines of defence.
– Performing quarterly control attestations.
– Conducting annual testing covering all key controls,
including relevant IT general controls.
– Continuing to enhance processes, systems and controls,
for instance by investing in enterprise-wide SAP to deliver
improved and automated accounting and controls.
Point risks that could affect this category
– Failing to simplify and modernise our finance processes.
Emerging risks that could affect this category
– Changes to controls framework requirements as a result
– Impact of complex legacy systems on our internal controls.
– Ability to maintain sound internal controls following
our deregistration from the US Securities and
Exchange Commission.
of changes to regulation and legislation.
BT Group plc
Annual Report 2021
Compliance
Legal compliance
61
Owner: General counselª
What this category covers
We could fail to comply with legal requirements that apply to our business, including law relating to anti-bribery
and corruption, competition, trade sanctions and corporate governance obligations.
How it could affect our strategy and/or business model
– Not following laws that apply to us might lead to fines and
penalties. That could affect our operations and shareholder
value, as well as damaging the public’s trust in us.
– Serious breaches could lead to prosecution, litigation or to
the regulator stepping in. And that might lead to fines or
affect our ability to operate, especially if the breaches were
deemed criminal.
How we manage it
– Assessing risks regularly when providing legal advice
on strategic projects and commercial operations.
– Scanning the horizon to prepare for legislative changes and
developing policies to address them.
– Ensuring compliance with laws and regulations when signing
off new business.
– Training and communication so our colleagues are aware
of legal risks, controls needed and expected standards of
conduct as set out in our Ethics Code.
– Running discipline and reward incentives to encourage the
right behaviour in managing risks.
– Carrying out monitoring and assurance, both internally and
externally, on some of our high-risk suppliers.
– Fostering a culture where our colleagues can speak up, so we
can identify problems and stop them happening again.
Point risks that could affect this category
–
Post-Brexit changes to UK laws and regulations.
Emerging risks that could affect this category
– Increased reliance on third parties following the divestment
of assets.
– The geopolitical risks of further sanctions in
high-risk territories.
Data regulation
Owner: Chief digital and innovation officer
What this category covers
We could fail to follow data regulations, or not anticipate and adequately prepare for future ones.
How it could affect our strategy and/or business model
– Failing to comply with global data protection laws or
How we manage it
– Continuously enhancing our data governance programme to
regulations that apply to us could damage our reputation,
affect our stakeholders’ trust in us and harm our colleagues,
customers and suppliers.
– It also means that we could face potential litigation and big
fines and penalties.
tackle existing and future data regulatory risks.
– Reviewing the use of personal data across the business to
make sure our data protection policies are followed.
– Running data protection and data handling training, and
providing tools to help our colleagues make better, more risk-
aware day-to-day decisions.
– Monitoring the post-Brexit regulatory landscape and making
contingency plans to keep data flowing where it’s needed.
Point risks that could affect this category
–
The UK losing data adequacy status from the EU.
Emerging risks that could affect this category
– Changes to data protection laws and regulations that apply to
–
Preventing data loss in remote working environments.
– Complying with data protection laws and regulations, while
seeking innovative uses for data.
us wherever we operate.
– Increased regulator focus on governance and ethics around
data propositions and processes.
a Owner will change to general counsel and director of regulatory affairs from 1 June 2021, see page 8.
BT Group plc
Annual Report 2021
Strategic report 62
Our principal risks and uncertainties continued
Compliance (continued)
Regulation
Owner: Regulatory affairs directorª
What this category covers
We could face an adverse regulatory environment to execute our strategy. Or we could fail to stick to the guidance
and regulation set by our telecommunications and financial services regulators (Ofcom and the FCA, respectively).
How it could affect our strategy and/or business model
– An overly strict or inflexible regulatory environment might
make it harder for us to innovate and develop new products
and services.
– Unsupportive regulation could stop us investing at pace and
scale in our full fibre rollout, 5G, converged connectivity and
financial services.
– An unclear or unpredictable regulatory environment could
make it harder to deliver what customers and society
expected from us while growing our value.
– Not following regulations applying to us could lead to
regulator action. That might damage our reputation or
public trust, or make it harder to have a say in regulatory and
governmental policy development.
How we manage it
– Making sure the Commitments are always front of mind for
all colleagues, including training those in high-risk roles.
– Proactively engaging with our regulators at different levels
and on different policy topics.
– Creating brilliant customer experiences, for example when
moving customers on to our new networks.
– Maintaining processes that ensure we follow regulations
carefully, building trust and enabling positive future dialogue
with policymakers.
– Supplying timely and accurate information to our regulators.
Point risks that could affect this category
– Uncertainty around the broadband Universal Service
Emerging risks that could affect this category
– Increased regulation for new technology may not support
Obligation.
good customer experience.
– Shutting down our legacy networks as required.
– New or extended customer fairness regulation.
Operational
Service interruption
Owner: Chief technology officer
What this category covers
Our customers could face disruption to the services we provide if we failed to fix vulnerabilities in our networks or IT
infrastructure, or didn’t make them resilient enough.
How it could affect our strategy and/or business model
– An interruption to service, like one of our networks going
down, would affect our customers directly. It could also
make it harder for us to deliver critical services, which could
damage our reputation.
How we manage it
– Regularly testing our business continuity and disaster
recovery plans and keeping them up-to-date.
– Planning how to deal with the effects of climate change
globally, including network and IT resilience to face more
severe weather events.
– Responding quickly to incidents and reducing their impact
through quickly-deployable and geographically dispersed
emergency response teams.
– Continually scanning the horizon and doing more proactive
monitoring across our network and IT estate.
Point risks that could affect this category
– The ability to remove high-risk vendors from our network.
Emerging risks that could affect this category
– Increasing frequency and severity of extreme weather events.
– Our suppliers’ performance.
– Transforming ourselves and our technology without
disrupting service.
a Owner will change to general counsel and director of regulatory affairs from 1 June 2021, see page 8.
BT Group plc
Annual Report 2021
63
Cyber security
Owner: Chief technology officer
What this category covers
We might fail to protect ourselves, or our customers, from harm caused by intended or unintended cyber security
events.
How it could affect our strategy and/or business model
– If we didn’t stop a cyber attack, it could lead to business
disruption or compromised data. And that could lead
to penalties, financial loss, cancelled contracts or
regulatory sanctions.
– If our reputation were damaged by a cyber security issue, it
would also have a negative effect on our security credentials
in the marketplace.
How we manage it
– Monitoring external threats and gathering intelligence
on evolving cyber techniques, tactics and capabilities.
– Keeping ourselves in a heightened state of preparedness
to quickly detect and respond to cyber threats before they
become incidents.
– Promoting good security ‘hygiene’ and behaviour in
our colleagues, through communications, campaigns
and training.
– Continuing to invest in our cyber defences and security
tooling to improve our ability to protect BT and our
customers.
Point risks that could affect this category
– Being exposed to suppliers with security vulnerabilities.
Emerging risks that could affect this category
– AI and machine learning being weaponised as security threats.
– Relying on externally hosted cloud services.
– Growing numbers of connected home devices need more
–
Increasing levels of remote working during and after
the pandemic.
focus on protecting customers.
Transformation delivery
Owner: Chief digital and innovation officer
What this category covers
We could fail to effectively implement the changes needed to radically simplify our processes and products, and
modernise our technology.
How it could affect our strategy and/or business model
– Not realising the benefits of our transformation could
How we manage it
– Having a strong governance model, with senior leaders
negatively impact customer and colleague experience.
owning major transformation activities.
– It could also affect our operational efficiency and make
– Monitoring operational performance using financial and non-
it harder for us to make future investments.
financial measures to make sure we generate value.
– Not having the right processes, tools and techniques to
– Investing in new capabilities, and developing matching skills
transform ourselves might stop us realising benefits, like
improving our productivity through simplification.
in our colleagues, so that we have the right resources to
deliver change effectively.
– Collaborating across the group in a way that properly reflects
our customers’ end-to-end journeys.
Point risks that could affect this category
– Migrating to digital platforms.
Emerging risks that could affect this category
– Delays to our full fibre build might make it harder to simplify
– Allocating the right resources, capabilities and organisational
our portfolio.
design to maximise value creation.
– Switching off the PSTN in December 2025.
BT Group plc
Annual Report 2021
Strategic report 64
Our principal risks and uncertainties continued
Operational (continued)
People
Risk Owner: HR director
What this category covers
Our organisational structure, or the diversity, skills, engagement and culture of our workforce, could fall short of what
is needed to deliver for customers in the short or longer term.
How it could affect our strategy and/or business model
– A less diverse workforce could lead to poorer decision-
making, and might make it harder for us to attract and
retain talent.
How we manage it
– Following a diversity and inclusion strategy to raise
awareness, address bias and promote people networks
and support for underrepresented groups.
– If our colleagues weren’t engaged, it might cut
– Listening to colleagues through things like employee
productivity, hinder innovation and slow down the pace
of our transformation. It could also potentially lead to
industrial action.
engagement and pulse surveys, the Colleague Board, town
halls or social platforms, and maintaining close relationships
with formal employee representative groups.
– Failing to attract and retain talent in critical roles or with
critical skills, and to foster a culture where everyone felt
able to be their best, could affect our overall capabilities.
– Investing in group-wide workforce and talent planning,
training and development, with both role-specific and future
skills in mind.
– Providing fair and competitive remuneration to colleagues
that promotes smart risk taking, supports engagement
and retention and aligns colleagues’ interests with those
of shareholders.
Point risks that could affect this category
–
The post-Brexit employment environment.
Emerging risks that could affect this category
–
Long-term social and workplace effects from the
–
Social disruption and challenges around post-pandemic
pandemic.
return to workplaces.
– Growing colleague activism on social or environmental topics.
Health, safety and wellbeing
Owner: HR director
What this category covers
We could fail in our duty of care to make sure our colleagues are safe, healthy and fulfilled in a culture where they feel
they can be and perform their best.
How it could affect our strategy and/or business model
– Failing to promote and embed a culture of continual
improvement could stop us building a safe and compliant
business that protects our colleagues at work. This would
affect their morale and make us a less attractive employer.
– If we don’t meet leading health, safety and wellbeing
standards, and reduce avoidable harm incidents to zero, we
could face financial penalties and damage to our reputation.
How we manage it
– Training our colleagues and ensuring they are clear on their
role and accountabilities with regards to health, safety and
wellbeing practices.
– Monitoring our colleagues’ health, safety and wellbeing
through surveys and focus groups, supported by a dedicated
portal and mental health awareness training for managers.
– Using an incident reporting system to monitor our
performance on health, safety and wellbeing.
– Making sure all BT suppliers operate in line with our
safety standards.
Point risks that could affect this category
–
Maintaining secure workplace measures and controls.
Emerging risks that could affect this category
–
The long-term physical and mental health effects of
lengthy periods of social restriction and limited mobility.
BT Group plc
Annual Report 2021
65
Major contracts
Owner: Chief executive
What this category covers
We could fail to sign or retain high-value national or multinational customer contracts because we weren’t able to
deliver the critical services agreed. Or we might end up entering into contracts with unfavourable commercial or
legal terms.
How it could affect our strategy and/or business model
– Failing to meet our contractual commitments – or respond to
changing customer needs – while ensuring productivity and
avoiding cost over-runs, could affect our future revenues,
profitability and cash generation.
– Service failures could damage our brand and reputation,
particularly if they affected critical infrastructure contracts or
security and data protection services.
How we manage it
– Using a clear governance framework to manage the bid
process and in-life management of contract risks.
– Following a cycle of regular contract reviews, led by senior
management or our specialist independent review team.
– Using advanced contract management tools to support
frontline contract managers.
– Profits could be impacted following the pandemic as
customers’ businesses shrink or face consolidation or
financial failure.
Point risks that could affect this category
– The complexities associated with handling multiple customer
Emerging risks that could affect this category
–
Fast-changing customer needs in a post-Brexit business
obligations.
environment.
– Delivering complex critical national infrastructure contracts.
– Changes to the geopolitical landscape affecting growth
– Moving customers away from end-of-life products
and services.
prospects in certain regions.
Customer service
Owner: CEO, Consumer
What this category covers
We might fail to give our customers the good-value, outstanding service they expect, making it harder for us to build
personal and enduring relationships with them.
How it could affect our strategy and/or business model
– If we don’t satisfy our customers with modern, competitive
How we manage it
– Delivering on our promises about the service levels
products and solutions, combined with outstanding service,
they might leave BT for a competitor and, as a result, damage
our reputation.
customers should expect from us, and tracking a range
of customer experience performance metrics.
– Planning with all our suppliers how we’ll manage the impact
– Failing to transform our customer experience could
of a potential future pandemic resurgence.
negatively affect customer satisfaction and retention,
colleague pride and advocacy, our group revenues and
brand value.
– If we miss our regulatory commitments, we could face
associated financial penalties.
– Piloting schemes and testing customer equipment to
minimise the impact of new hardware, services or platforms.
– Making sure we won’t be short on key skills by following
a colleague retention and skills development plan.
Point risks that could affect this category
–
Drops in service level because of reduced retail presence.
Emerging risks that could affect this category
–
Long-term changes in customer needs and expectations.
– Migrating to new service platforms.
BT Group plc
Annual Report 2021
Strategic report 66
Our principal risks and uncertainties continued
Operational (continued)
Third party management
Owner: Chief financial officer
What this category covers
We might fail to select the right suppliers and partners, or there might be failures in how we manage the relationships
with the third parties we rely on.
How it could affect our strategy and/or business model
– Selecting suppliers who couldn’t meet our needs, or
How we manage it
– Applying ethical and responsible business principles when
depending too much on too few suppliers, could lead to
poor third party commercial terms. That could damage our
strategic, market or competitive position.
– Picking suppliers who weren’t up to the job might lead to
failed deliveries, lost revenue or investment, fines or damage
to our reputation.
– Managing suppliers poorly could disrupt our business and
lead to regulatory fines and brand damage. For example if
we discovered a supplier was involved in modern slavery, or
was vulnerable to a cyber attack that could compromise BT
sensitive data.
picking suppliers.
– Conducting pre-contract checks on our suppliers covering
their financial health and their ability to meet our standards
on anti-bribery and corruption, security or data privacy.
– Monitoring suppliers’ performance on energy use,
environmental impact and labour standards and supporting
their improvement plans.
– Getting assurance that the goods and services we buy
are made, delivered and disposed of in a socially and
environmentally responsible way.
– Continuing to invest in AI and machine learning tools to
give us greater transparency to supplier risk across our top
suppliers, and to help develop category-specific strategies.
Point risks that could affect this category
–
Disruption due to worldwide shortages of critical supplies.
Emerging risks that could affect this category
– Political tensions in regions where we have a high
– Supplier-related cyber and data security threats.
– Being sure of ethical business practices across our whole
concentration of suppliers.
– Single-source vendors’ delivery performance.
supply chain.
–
Driver shortages affecting our suppliers’ delivery models.
BT Group plc
Annual Report 2021
Task Force on
Climate‑related
Financial
Disclosures
We’re committed to implementing the
recommendations of the Task Force on
Climate-related Financial Disclosures
(TCFD). They’re a big step towards
a net zero carbon economy and will
help manage the future impact of
climate change on BT. This is our second
year of disclosure aligned to TCFD
recommendations.
Climate change governance
The Board has overall responsibility
for how we identify and manage
climate‑related risks, delegated to
the Digital Impact & Sustainability
Committee which oversees our
climate change strategy, programme
and goals, chaired by non-executive
director Leena Nair.
The Executive Committee sets
operational strategy on climate
change and sustainability and
monitors the associated risks,
supported by our digital impact and
sustainability team.
Our Environmental Management
Governance Group manages day‑to‑
day climate‑related compliance and
risk issues on behalf of the Executive
Committee, reporting back regularly.
This year, we commissioned an
independent review based on the World
Economic Forum’s Principles for effective
climate governance on corporate boards.
We got high ‘maturity ratings’ across
four of the eight principles, with useful
improvement plans laid out for the
other four (which got moderate to good
ratings). The review helped us set our
internal governance priorities, including
integrating climate change better within
our risk management framework.
Five percent of the annual bonus available
to eligible managers, including executive
directors, is linked to our target of cutting the
carbon emissions intensity of our operations
by 87% by the end of March 2031.
For more on our climate strategy, see pages
32 to 33.
Climate‑related risks and
opportunities
Identifying the risks
We identify all risks, including those
around climate change, within our risk
management framework. Last year
we reviewed the climate-related risks
around transitioning to a lower-carbon
economy, and the physical impacts of
climate change by using TCFD’s different
reference scenarios.
We’ve taken steps to consider climate
change risks and opportunities across the
whole group and reflect them in our group
risk categories. Risk owners are getting
training to improve their awareness of the
issues. We’re also developing a process
to review climate change risks as a whole
across all risk categories as we continue to
implement the TCFD recommendations.
You can read more on our risk management
framework on pages 57 to 58.
Analysing scenarios
This year, we continued analysing
scenarios to understand the potential
financial impact of climate change to
BT in 2030 and 2050. Impacts were
considered under a range of scenarios
reflecting different rises in global
temperatures above pre-industrial levels
by 2100. The Intergovernmental Panel on
Climate Change’s shared socioeconomic
pathways (which look at how various
climate policies influence greenhouse gas
emissions) and transition scenarios from
the Network for Greening the Financial
System, also helped inform our analyses.
We’ve used a core scenario (2°C to 3°C)
that we think is most likely, and then
reviewed more extreme ‘what if?’ transition
and physical scenarios (1.5°C and 4°C).
Responding to our main physical risks
Flooding: Longer term, our full fibre rollout
will mean fewer physical network sites,
cutting our overall exposure to physical
climate change risks. We’ve analysed
possible risks from large-scale flooding at
150 business critical sites. In the scenarios
we explored, the potential financial
impacts aren’t material – partly because of
the flood defence work we’ve already done
in 19 high-risk locations. We expect our
flood defence programme to cost around
£6m once we complete it next year. In
2021 we’ll continue our flood analysis and
consider the potential effects of weather-
related repairs across our UK estate.
Heat: In most scenarios in 2030 and 2050,
the UK will see a rise in extreme heat
days. The risk of these days damaging
our network sites is very low – largely
because of cooling system upgrades in
our metronode sites which are effective
up to a 45°C external temperature.
Once complete, we expect the upgrades
program to cost us £119m. So higher
temperatures should not have a material
impact on repair or cooling costs.
Outside the UK, extreme weather
could affect our customers and disrupt
service, as well as affecting colleagues
in key operational sites. In particular, our
India sites are already being affected by
extreme heat, set to increase in future.
67
Our supply chain reaches nearly 100
different countries. But a significant
proportion of raw materials for our
products are concentrated in China where
flood risks are predicted to increase under
future warming scenarios. This is a shared
concern across our sector – however we’ll
keep monitoring our supply chain risks
and work to minimise them.
Managing transition risks and reaching
net zero
We’ve promised to become a net zero
carbon emissions businessa by 2045.
This year, we extended the scope to
include our supply chain as well as our
operations. This reduces the potential
impact of transition risks. There are
details of our strategy for achieving that
target on pages 32 to 33. This section
focuses on how the different elements of
that strategy affect transition risks.
100% renewable electricity: All
the electricity we use worldwide is
renewableb. Under the scenarios we’ve
considered, we know there are risks from
potential gaps in UK renewable electricity
supply. We’ll keep monitoring this.
Moving to a low carbon fleet: We’re
committed to switching as much of our
fleet as we can to run on electric and
alternative fuels by 2030. This largely
cuts any risks around policies designed to
reduce vehicle carbon emissions.
Decarbonising our buildings: This year,
we invested nearly £21m in energy
efficiency projects, contributing to a
global energy reduction of 123 GWh.
This, together with our commitment to
renewables, minimises any transition risks
around carbon pricing.
Helping suppliers cut carbon: If our
suppliers fail to cut their emissions, it
could lead to carbon costs being passed
on by 2030 under a 2°C scenario. That risk
applies to our whole sector. To respond,
we want to cut supply chain emissions by
42% by the end of March 2031 (compared
to 2016/17 levels) and to reach net zero
by 2045. We’ll keep monitoring possible
carbon pricing risks, tracking how they
might be affected by the growing number
of net zero commitments and China’s
plans for carbon neutrality (where many
of our raw material suppliers are based).
Metrics and targets
Performance on our climate targets and
emissions reporting can be found in our
tackling climate change and environmental
challenges section on pages 32 to 33.
a Measures for scopes 1, 2 and supply chain
greenhouse gas emissions.
b 99.9% is renewable – the remaining 0.1% represents
markets where renewable electricity isn’t available
(eight countries).
BT Group plc
Annual Report 2021
Strategic report 68
Viability statement
In accordance with provision 31
of the UK Corporate Governance
Code 2018, the Directors have
assessed the prospects and
viability of the group.
The assessment has been based on the
company’s strategy, balance sheet and
financing position, including our £2.1bn
undrawn committed borrowing facility
which matures in March 2026, and the
potential impact of ‘Our principal risks
and uncertainties’. The Board has chosen
to conduct its review for a period of three
years to 31 March 2024. It believes this
is an appropriate timeframe as it aligns
with the primary focus of our business
planning and the time cycles shared by
some of our major internal and external
risks and uncertainties, for example the
pension scheme funding valuation and
the interval between significant sports
rights auctions. We are reviewing the
focus of our planning period to determine
if we are able to make this statement over
a longer five year period in future years,
as our business and financial planning
already takes into account our longer-
term obligations.
The assessment of viability is based on
our medium term plan which forecasts
the group’s profitability, cash flows and
funding requirements, and is approved
by the Board at the end of each year.
The medium term plan is built from
bottom-up forecasts of each of our
customer-facing units, supplemented
by items managed at a group level
and assumptions such as macro-
economic activity and exchange rates.
The performance of the group and our
customer-facing units against these
forecasts is monitored monthly and this
is supplemented each quarter through
a series of quarterly business reviews of
each business unit conducted by the chief
executive and chief financial officer.
Beyond our medium term plan horizon,
the group also makes investments
that have business cases covering a
longer time period, such as our network
investments. Significant capital
expenditure investment cases are
approved by the chief executive and,
where appropriate, the Board, after
taking into account longer-term risks
and opportunities such as the economy,
technology and regulation.
In support of our viability statement we’ve
stress tested our forecast cash flows by
assessing the impacts our principal risks
and uncertainties, as set out on pages
59 to 66, could have on our forecasts. In
this assessment we’ve adopted a number
of assumptions designed to stress test
our resilience, in particular, we have not
automatically assumed that, should the
need arise, we would be able to raise new
debt; we have instead considered this as
part of any mitigating action.
Our assessment considered the
following:
Individual risks
What: the potential financial impact of
severe but plausible scenarios quantified
for each of our principal risks and
uncertainties
Why: to test viability under any individual
risk and uncertainty
How: we produced a scenario for each
of our principle risks and uncertainties,
including a Covid-19 scenario assuming
another nationwide lockdown
Outcome: our stress testing confirmed
that existing projected cash flows and
cash management activities provide us
with a buffer against the impact of any
individual risk
Combined risks
What: a combination of the full
financial impact of individual scenarios
materialising simultaneously
Why: to test viability should a
combination of multiple risks materialise
in parallel
How: we have combined a number of
risks including another lockdown due to
Covid-19, a revaluation of the BT Pension
Scheme (BTPS) and enforcement action
from Ofcom. We have also assumed
that industrial action takes place and a
scenario where we are unable to prevent a
cyber attack which leads to a class action
due to loss of customer data
Outcome: in this most extreme combined
scenario we would need to take further
action to mitigate the negative cash flow
impact and ensure additional liquidity
Mitigations: should we be able to raise
new debt in line with our normal treasury
BT Group plc
Annual Report 2021
funding policies we would fully mitigate
any downside. If this was not possible
other actions management could take
include limiting or delaying discretionary
capital expenditure and marketing
activities, and/or not reintroducing
dividend payments. A reasonable
combination of these actions would
also fully mitigate any downside
Probabilistic risk modelling
What: a model estimating the impacts
of the individual severe but plausible
scenarios
Why: a test of viability under multiple
occurrences of severe scenarios
How: we have modelled a probabilistic
analysis of the potential financial
impact of each individual risk if they
materialise together with their likelihood
of occurrence using a Monte Carlo
simulation
Outcome: in extreme probabilistic
modelled scenarios we would need
to take further action to mitigate the
negative cash flow impact and ensure
additional liquidity
Mitigations: should we be able to raise
new debt in line with our normal treasury
funding policies we would fully mitigate
any downside. If this was not possible
other actions management could take
include limiting or delaying discretionary
capital expenditure and marketing
activities, and/or not reintroducing
dividend payments. A reasonable
combination of these actions would
also fully mitigate any downside
Based on the results of this analysis, the
directors have a reasonable expectation
that the group will be able to continue in
operation and meet its liabilities as they
fall due over the three‑year period of
their assessment.
Corporate governance report
We are committed to delivering
our strategy and creating long-term
value for our stakeholders and the
communities we operate in through
effective Board leadership and strong
corporate governance.
Compliance with the 2018 UK
Corporate Governance Code (the Code)
In respect of the year ended 31 March
2021, BT Group plc was subject to
the Code, which was published by the
Financial Reporting Council in July 2018
(available at frc.org.uk). BT complied with
the provisions of the Code throughout
the year. Details explaining how we have
applied principles A-R of the Code can be
found in the table opposite.
US Securities and Exchange
Commission (US SEC) deregistration
On 24 September 2020, BT Group plc
deregistered from the US SEC. We are
therefore no longer required to produce
a Form 20-F (or make the associated
filings) alongside this report.
* Further details on the key roles within BT
can be found on our website bt.com/governance
69
70
71
72
74
74
77
80
82
86
87
88
88
91
94
103
105
106
111
197
Contents
Corporate governance report
Chairman’s governance letter
Our governance framework
Board of directors
Board leadership
Board activities in 2020/21
Board composition, succession
and evaluation
Nominations Committee chair’s report
Audit & Risk Committee chair’s report
BT Compliance Committee chair’s report
Digital Impact & Sustainability
Committee chair’s report
Report on directors’ remuneration
– Committee chair’s letter
– Focus on remuneration
– Annual remuneration report
– Remuneration in context
Statement of directors’ responsibilities
Report of the Directors
Financial statements
Additional information
Further information on the application of
the Code’s Principles can be found on the
following pages:
1. Board leadership and company purpose
A: Leadership, long-term
success, value generation
and societal contribution
B: Purpose, values, strategy
and culture
C: Resources and controls
30–33, 67,
70–74, 87
42, 70, 74,
76, 81, 85, 87
43, 46–55, 57–58,
74–76, 87
D: Stakeholder engagement
34–41, 70, 75–76, 87
E: Workforce policies and
practices
2. Division of responsibilities*
F: The chairman
G: Board composition and
division of responsibilities
H: Role and time commitment
of non-executive directors
I: Board function and the
company secretary
24–25, 44, 76, 85
70, 72, 74, 77
71–73, 79
72–73, 74, 77, 79
71, 72, 74, 77, 81
3. Composition, succession and evaluation
J: Board appointments and
succession planning
80–81
K: Board and committee skills,
experience and knowledge
L: Board evaluation
72–73, 77, 79, 80–81
70, 79
4. Audit, risk and internal control
M: Internal and external
audit independence and
effectiveness
N: Fair, balanced and
understandable assessment
of position and prospects
O. Risk management, internal
control framework and
principal risks
5. Remuneration
P: Remuneration policies
and practices
Q: Executive remuneration
R: Independent judgement and
discretion in remuneration
outcomes
85
77, 84, 105
57–58, 82–85, 107
91
88–104
89, 92, 95
BT Group plc
Annual Report 2021
Corporate governance report 70
Chairman’s governance letter
to the breadth of experience, skills and
diversity of the Board. Together, they
bring knowledge and experience in retail,
fast moving consumer goods, financial
services and eCommerce both in the UK
and internationally, as well as within the
telecommunications sector.
As recently announced, Mike Inglis will
cease being a non-executive director at
the conclusion of the 2021 AGM. I’d like to
thank Mike for his contribution to BT and
the Board. As stated in last year’s Annual
Report, Tim Höttges stepped down from
the Board on 15 May 2020 and Nick Rose
stepped down at the conclusion of the
2020 AGM. There were also a number
of changes to the membership and
chairmanships of each of the committees
and to the role of senior independent
director. Through the Nominations
Committee, we have continued to review
the composition of the Board to ensure
we have the right balance of skills,
independence, experience and diversity
in line with the current and future needs
of the group.
The search for my successor, led by
Iain Conn as the senior independent
director, is underway. Further to the
announcement that Mike Inglis will step
down and the external Board evaluation,
we believe the Board requires more
technology expertise. We have decided
to wait until a successor is identified
before making any future non-executive
director appointments to ensure the
Board’s skills as a whole are reviewed
with the new chairman in role. As part of
reviewing the leadership of the business,
the Nominations Committee considered
a number of changes to the Executive
Committee (see page 80). These changes
have sought to further strengthen our
senior leadership, bringing the fresh
perspective required for the future long-
term growth of our business.
Diversity and inclusion
The Board continues to recognise
the importance of diversity within our
organisation. I am pleased to report that
female directors continue to make up
33% of our Board with Isabel Hudson
and Leena Nair chairing two of our
committees, and Isabel acting as our
designated non-executive director
for workforce engagement. We have
two directors from an ethnic minority
background on our Board exceeding the
Parker Review recommendation. I am
pleased that our Executive Committee
also currently comprises 33% female
members and one member from an
ethnic minority background.
Stakeholders
Engagement with our key stakeholders
was vital this year given the pandemic.
The existing mechanisms for feedback
to the Board concerning engagement
both within the group and between the
group and its stakeholders have proved
effective, ensuring the continuous flow
of information between the Board, senior
management and the wider workforce
throughout the pandemic, despite much
of this taking place virtually. Details of the
engagement undertaken during the year
and its impact on the Board’s decision-
making can be found on pages 34 and
76 and in our Section 172 statement on
pages 42 to 43.
The Colleague Board, established at the
start of 2020, has strengthened the voice
of our colleagues at board-level and given
the Board valuable insights into colleague
sentiment, with Isabel Hudson reporting
back to the Board on key discussions and
feedback from the members (see pages
35 to 36). Reflecting on its first year, we
continue to believe that this is the right
mechanism for BT.
During the year, in order to enhance BT’s
commitment to protecting the interests
of consumers and promoting a culture of
consumer fairness, the Board decided to
delegate board-level oversight of consumer
fairness to the BT Compliance Committee
from 1 April 2021 (see page 86).
Evaluation
Clare Chalmers Limited undertook
our externally facilitated Board and
committee evaluation this year. Overall,
the evaluation acknowledged the
benefit of the Board comprising a highly
experienced group of non-executive
directors with a strong skillset, a diverse
range of viewpoints, an environment of
healthy challenge and an appreciation of
the stakeholder context in which BT sits.
Further details about the process and the
proposed focus areas for 2021/22 can be
found on page 79.
I would like to thank my fellow Board
members and the executive team for their
ongoing support and the commitment
of our entire workforce during this
exceptional year.
Jan du Plessis
Chairman
12 May 2021
This year, in response to the continuing
challenges caused by Covid-19, the
Board discussed with our executives
how we would mitigate the impact of the
pandemic on the group, our stakeholders
and on our current and long-term
operations. Central to this is ensuring
that the various services BT provides
continue to keep everyone connected.
We also considered the macroeconomic
environment and related uncertainties.
After much deliberation, I took the
decision to retire as chairman from
the BT Board in March. After 17 years
of demanding roles as chairman of
significant FTSE companies, I know the
time is now right for me to step down and
focus on other interests. Until I hand over
to my successor, I remain fully committed
to BT and helping Philip continue to
deliver for all our stakeholders.
It has been a pleasure to lead a Board
that believes that strong corporate
governance is critical to how we make
decisions and providing oversight in
order to generate long-term sustainable
value for all our stakeholders, including
investors, colleagues, customers, the
regulators, the Government and the
communities in which we operate.
Central to the delivery of our strategy is
the group’s culture, underpinned by the
values and behaviours expected of our
colleagues. This corporate governance
report for the year ended 31 March 2021
sets out our approach to governance
and how it supports our strategy, the
Board and its committees’ key focus
areas during the year and the decisions
we have made in line with the group’s
new purpose, we connect for good,
whilst considering the interests of our
stakeholders as well as our contribution
to society as a national champion.
Changes to the leadership
The Board welcomed two new non-
executive directors during the year,
Adel Al-Saleh and Sara Weller, with Sir
Ian Cheshire joining the Board in March
2020. All three directors have added
BT Group plc
Annual Report 2021
71
Our governance framework
The Board
Responsible for the stewardship of the group, overseeing its conduct and affairs to deliver on our strategic objectives
and creating long-term success in order to generate sustainable value for our shareholders and the interests of other
stakeholders. The Board has established certain committees to assist it in discharging its responsibilities and
delegates day-to-day responsibilities to the chief executive.
Board leadership on page 74
Audit & Risk Committee
Oversees, assesses and reviews our
financial and narrative reporting,
internal controls and risk management,
including internal and external audit
and pan-BT finance, control
and compliance-related transformation
programmes.
Audit & Risk Committee chair’s
report on pages 82 to 85
BT Compliance Committee
Oversees our adherence to the
Commitments we made as part of
the 2017 Digital Communications
Review with Ofcom and consumer
fairness matters.
BT Compliance Committee
chair’s report on page 86
Nominations Committee
Considers the structure, size and
composition of the Board and its
committees and advises on succession
planning for the Board and the Executive
Committee. It ensures the Board is
diverse, with the appropriate balance
of skills, experience, independence
and knowledge.
Nominations Committee chair’s
report on pages 80 to 81
Digital Impact &
Sustainability Committee
Provides oversight and direction to bring
our purpose to life through our digital
impact and sustainability strategy.
Digital Impact & Sustainability
Committee chair’s report
on page 87
Remuneration Committee
Agrees the remuneration framework for
the chairman, executive directors and
certain senior executives and monitors
remuneration practices and policies
for the wider workforce.
Remuneration Committee chair’s
letter and Report on directors’
remuneration on pages 88 to 104
Colleague Board
Discusses and inputs into significant
proposals and initiatives impacting
our colleagues. Our designated
non-executive director for workforce
engagement reports back to the
Board on its activities.
Colleague Board on pages 35 to 36
Investigatory Powers Governance Committee
Oversees our role in the use of official investigatory powers.
Chief executive
Responsible for running the business and setting and executing the group strategy.
Executive Committee
Assists the chief executive to develop and
execute the group strategy and budget,
and monitors overall performance and
how we’re managing risks.
BT Investment Board
Provides input and recommendations that
support the chief executive’s decision-
making on investment budgets and cases.
Disclosure Committee
Ensures BT meets its disclosure
obligations and reviews and approves
regulatory and other announcements
before publication.
Matters reserved to the Board and its committees’ terms of reference can be found on our website at bt.com/governance
Each committee chair formally reports to the Board following their meetings and makes any recommendation
to the Board in line with that committee’s terms of reference.
Papers and minutes are circulated to all Board and committee members as appropriate, other than to those with a potential
conflict of interest. Deutsche Telekom’s nominated representative owes a fiduciary duty to both BT and Deutsche Telekom. The Conflicted
Matters Committee reviews all papers ahead of sharing these with him to identify potential or actual conflicts of interest.
BT Group plc
Annual Report 2021
Corporate governance report 72
Board of
directors
Membership key
Committee chair
Audit & Risk Committee
BT Compliance Committee
Colleague Board
Digital Impact & Sustainability
Committee
Executive Committee
Investigatory Powers
Governance Committee
Nominations Committee
Remuneration Committee
Our directors share
collective responsibility for
the activities of the Board.
There is a clear division of
responsibilities between
the chairman and the chief
executive as required by the
Code. The responsibilities of
the chairman, chief executive,
chief financial officer and
senior independent director
and other key roles within
BT, along with the matters
reserved to the Board, are
set out on our website at
bt.com/governance
BT Group plc
Annual Report 2021
Jan du Plessis
Chairman
Appointed chairman in November
2017 and to the Board in June 2017.
Age 67.
Experience
Jan was chairman of Rio Tinto from
2009 to 2018 and chairman of
SABMiller from 2015 until 2016. He
was also a director and later senior
independent director of Marks &
Spencer from 2008 until 2015. Before
that he served as chairman or non-
executive director of a number of
public companies. Prior to that, until
2004, Jan was group finance director
of Richemont.
Relevant skills and
contribution to the Board
Significant experience serving as
chairman and as a non-executive
director on the boards of FTSE
100 international companies
across varying sectors. Jan has the
knowledge and insight to lead an
effective board and an in-depth
understanding of UK corporate
governance requirements.
External appointments
None.
Philip Jansen
Chief executive
Appointed chief executive in February
2019 and to the Board in January
2019. Age 54.
Experience
From April 2013 until joining BT, Philip
was CEO of Worldpay. Before that he
was CEO and then chairman at Brakes
Group between 2010 and 2015. Philip
spent the previous six years at Sodexo
where he was group chief executive,
Europe, South Africa and India.
Prior to that he was chief operating
officer at MyTravel Group from 2002
to 2004 and managing director of
Telewest Communications (now
Virgin Media) from 2000 to 2002
after initially starting his career at
Procter & Gamble.
Relevant skills and
contribution to the Board
Extensive experience of leading
and growing large private
and publicly listed UK and
international businesses, delivering
transformational change and large
technology programmes.
External appointments
Senior adviser at Bain Capital and
trustee of Wellbeing of Women.
Simon Lowth
Chief financial officer
Appointed chief financial officer and
to the Board in July 2016. Age 59.
Experience
Simon was CFO of BG Group before
the takeover by Royal Dutch Shell in
February 2016. Prior to that, he was
CFO of AstraZeneca from 2007 to
2013. He was an executive director
of ScottishPower from 2003 to
2007 having been appointed as the
finance director in 2005. Before 2003,
Simon was a director of McKinsey &
Company.
Relevant skills and
contribution to the Board
A strong background in finance,
accounting, risk, corporate strategy
and mergers and acquisitions.
Experience and implementation of
cost transformation and performance
improvement programmes provide
valuable expertise.
External appointments
None.
Mike Inglis
Independent non-executive director
Appointed to the Board in September
2015. Age 61.
Matthew Key
Independent non-executive director
Appointed to the Board in October
2018. Age 58.
Allison Kirkby
Independent non-executive director
Appointed to the Board in
March 2019. Age 53.
Experience
Mike served as non-executive
chairman of Ilika until January
2019 and was on the board of ARM
Holdings from 2002 to 2013. His roles
at ARM included chief commercial
officer, executive vice president and
general manager of the processor
division and executive vice president
of sales and marketing. Prior to joining
ARM, Mike worked in management
consultancy with AT Kearney and held
a number of senior operational and
marketing positions at Motorola. Mike
was previously a director of Pace and
an independent director of Advanced
Micro Devices.
Relevant skills and
contribution to the Board
Significant experience in the
technology industry and expertise
in marketing, management and
operations.
External appointments
None.
Experience
Matthew held various positions
at Telefónica from 2007 to 2014
including as chairman and CEO of
Telefónica Europe and chairman and
CEO of Telefónica Digital. From 2002
to 2004 he was the CFO, strategy and
regulation director of O2 UK before
becoming CEO in 2004. Matthew
has also served as finance director
at Vodafone UK and chairman of
Tesco Mobile. He has previously
held positions at companies
including Kingfisher, Coca-Cola
and Schweppes Beverages and
Grand Metropolitan.
Relevant skills and
contribution to the Board
Strong strategic skills and a wealth
of experience in finance and the
telecoms sector.
External appointments
Non-executive director and audit
committee chair of Burberry and
chairman of Dallaglio Rugbyworks.
Experience
Allison was appointed President &
CEO of Telia Company in May 2020.
Allison was previously President
& Group CEO of TDC Group until
October 2019, and President & Group
CEO of Tele2 AB from 2015 to 2018,
having been Tele2 AB’s Group CFO
from 2014. She was chair of the audit
committee and a non-executive
director of Greggs until May 2019.
She has also held financial and
operational roles within 21st Century
Fox, Virgin Media, Procter & Gamble
and Guinness.
Relevant skills and
contribution to the Board
Valuable and recent experience
in finance and the international
telecoms and media sector, combined
with strong experience in driving
performance, improving customer
service and delivering shareholder
value.
External appointments
President & CEO of Telia Company.
73
Adel Al‑Saleh
Non-independent,
non-executive director
Appointed to the Board in
May 2020. Age 57.
Experience
Adel has been chief executive officer
of T-Systems International GmbH
(a subsidiary of Deutsche Telekom
AG) since 2017 and is a member of
the Management Board of Deutsche
Telekom AG. Adel was chief executive
officer of Northgate Information
Solutions from 2011 to 2017, and
before that held a variety of senior
posts at both IMS Health (IQVIA
today) and IBM.
Relevant skills and
contribution to the Board
Significant experience in managing
global technology companies,
enterprise transformation and
digitalisation.
External appointments
Member of the Boston University,
College of Engineering Advisory
Board.
Sir Ian Cheshire
Independent non-executive director
Appointed to the Board in
March 2020. Age 61.
Experience
Ian was chairman of Barclays Bank
UK until December 2020 and a non-
executive director of Barclays until
May 2021. Ian was also previously
group chief executive of Kingfisher
and senior independent director
and remuneration committee chair
of Whitbread. Ian held a variety of
posts whilst at Kingfisher from 1998
to 2014, including chief executive
of B&Q from 2005 to 2008 and
group chief executive from 2008
to 2014. He was also previously the
chairman of Debenhams and the
lead non-executive director for HM
Government and former chairman
of the Corporate Leaders Group on
Climate Change.
Relevant skills and
contribution to the Board
A wealth of listed company
experience, with a notable
background in strategy, international
retail and eCommerce.
External appointments
Ian is chairman designate of Spire
Healthcare Group and will accede
to the role of chairman following its
annual general meeting in May 2021.
Ian is also chairman of Menhaden,
a UK investment trust.
Iain Conn
Senior independent non-executive
director
Appointed to the Board in
June 2014. Age 58.
Experience
Iain was group chief executive of
Centrica for over five years from
2015 to 2020. Prior to that, Iain spent
29 years at BP and was a board
director for ten years from 2004 to
2014 including as chief executive
Downstream from 2007 to 2014, and
a member of the executive committee
from 2002 to 2014. Until May 2014,
Iain was a non-executive director of
Rolls-Royce for nine years and senior
independent director. Iain also served
as a member of Council of the Imperial
College from 2010 to 2019 and was
chairman of the advisory board of
the Imperial College Business School
from 2004 to 2020.
Relevant skills and
contribution to the Board
Deep experience in the global energy
markets, industrial operations,
regulated consumer markets, and in
finance, technology and engineering.
Broad international experience.
External appointments
Senior adviser to Blackstone
on energy, infrastructure and
sustainability and to the Boston
Consulting Group. Adviser to Oxford
Sciences Innovation. Advisory Board
member of Columbia University
Center on Global Energy Policy.
Isabel Hudson
Independent non-executive director
Appointed to the Board in November
2014. Age 61.
Experience
Isabel was previously non-executive
chair of National House Building
Council until May 2020. Isabel was
also previously senior independent
director of RSA Insurance, non-
executive director of The Pensions
Regulator, MGM Advantage, QBE
Insurance, Standard Life and an
executive director of Prudential
Assurance Company in the UK.
Relevant skills and
contribution to the Board
A wealth of experience in financial
services, in the life, non-life and
pensions industries as well as risk,
control, governance and international
business. Insight and expertise in
regulatory, pensions and financial
matters.
External appointments
Non-executive director and chair
of the audit committee of Axa S.A.
She is also chair of the remuneration
committee and an advisory council
member of University College
Lady Margaret Hall, Oxford and an
ambassador for the disability charity,
SCOPE.
Leena Nair
Independent non-executive director
Appointed to the Board in July 2019.
Age 51.
Sara Weller CBE
Independent non-executive director
Appointed to the Board in July 2020.
Age 59.
Experience
Since 2016, Leena has been the chief
human resources officer at Unilever.
She is responsible for Unilever’s
global people agenda, working across
160 markets to help deliver Unilever’s
business financial performance as
well as its environmental and social
impact objectives. Leena joined
Unilever in 1992 and has held a wide
variety of HR roles throughout her
career, including senior vice president
for leadership and organisational
development and global head of
diversity, executive director of
Hindustan Unilever and vice president
HR South Asia.
Leena was previously a non-executive
director at the Department for
Business, Energy and Industrial
Strategy until December 2020.
Relevant skills and
contribution to the Board
A deep understanding of the strategic
and practical challenges of driving
large-scale cultural transformation.
External appointments
Chief human resources officer at
Unilever.
Experience
Sara’s previous roles include managing
director of Argos and various senior
positions at J Sainsbury, including
deputy managing director and serving
on its board between 2002 and 2004.
Sara was also a non-executive director
of United Utilities Group until July 2020
and the lead non-executive director at
the Department for Work and Pensions
until April 2020. She has also previously
been a non-executive director of
Mitchells & Butlers and held senior
management roles at Abbey National
and Mars Confectionery.
Relevant skills and
contribution to the Board
A broad perspective coming from
a background in retail, fast moving
consumer goods and financial
services, as well as strong board
experience at both executive and
non-executive level.
External appointments
Non-executive director and chair of
the responsible business committee
of Lloyds Banking Group and a
trustee of Lloyds Bank Foundation for
England & Wales until May 2021.
Board changes
In line with our recent
announcement, Mike Inglis
has decided not to put himself
forward for re-election as a
non-executive director at the
2021 AGM. Accordingly, Mike
will cease being a non-executive
director on the Board at the
conclusion of the 2021 AGM.
Rachel Canham
Company secretary &
general counsel, governance
Rachel joined BT in 2011 and was
appointed company secretary &
general counsel, governance in
November 2018.
BT Group plc
Annual Report 2021
Corporate governance report
74
Board leadership
Membership and attendance
We held nine scheduled Board meetings, two strategy meetings
and two ad hoc Board meetings in 2020/21. The company
secretary or her nominated delegate is secretary to the Board, and
they attend all meetings. The chairman held private sessions with
our non-executive directors before all Board meetings in 2020/21.
As a result of the Covid-19 pandemic all Board and committee
meetings this year were held remotely by video conference. We
thought carefully about how meetings were organised to allow
us to continue to maintain constructive levels of engagement
and discussions, to challenge management, have robust debates
as part of decision-making and in order to operate effectively.
Unfortunately, given the restrictions, the Board was unable to
have the usual informal interactions as part of pre-Board dinners
and was also unable to meet colleagues across all levels of the
organisation during visits to other operations and offices.
Board and committee members are provided with papers in
advance of each meeting on a secure electronic portal. Directors
are expected to attend Board and relevant committee meetings,
of which they are a member, unless prevented from doing so by
prior commitments, illness or a conflict of interest. All directors
attended scheduled Board meetings during the year, as set out
below, and the attendance for committee meetings is set out in
each of the respective committee reports. If a director is unable
to attend a meeting, they give their comments to the chairman or
the committee chair in advance of the meeting so that these can
be duly considered as part of the discussion at the meeting.
Member
Attended
Eligible to attend
Jan du Plessis (chairman)
Philip Jansen
Simon Lowth
Adel Al-Saleha
Ian Cheshire
Iain Conn
Tim Höttgesb
Isabel Hudson
Mike Inglis
Matthew Key
Allison Kirkby
Leena Nair
Nick Rosec
Sara Wellerd
9
9
9
7
9
9
2
9
9
9
9
9
3
6
9
9
9
7
9
9
2
9
9
9
9
9
3
6
a Adel was appointed to the Board on 15 May 2020.
b Tim stepped down from the Board on 15 May 2020.
c Nick stepped down from the Board on 16 July 2020.
d Sara was appointed to the Board on 16 July 2020.
Section 172 statement and stakeholders
Our Section 172 statement on pages 42 to 43 sets out how our
directors have had regards to the matters in section 172 of the
Companies Act 2006 in performing their duties. See the Strategic
report on pages 34 to 41 for details of how we engage with our
key stakeholders.
For details of how the directors have engaged with our colleagues
during the year, how they have had regard to their interests
and the need to foster business relationships with suppliers,
customers and others, together with a summary of the effect
of that regard including on the Board’s principal decisions,
see pages 34 to 43.
BT Group plc
Annual Report 2021
Key responsibilities
The Board is responsible for establishing the group’s purpose,
values and strategy and satisfying itself that these align to our
culture, long-term objectives and development, promoting the
long-term sustainable success of the group, generating value
for shareholders and contributing to wider society.
The Board also maintains oversight of the group’s operations,
performance and governance and ensures compliance with
statutory and regulatory obligations. It determines the group’s
risk appetite and ensures that we have in place robust systems
of risk management and internal control, and is responsible
for ensuring that the group has an effective leadership team
in place to efficiently execute BT’s strategy.
A number of key decisions and matters are reserved for
the Board and are not delegated to the chief executive or
management. These are set out in the matters reserved to
the Board and available on our website bt.com/governance
Board activities in 2020/21
Below are some of the matters that the Board
focused on during the year, which should be read
in conjunction with our Section 172 statement on
pages 42 to 43
Strategy and operations
Purpose and strategy
The Board and management discussed the new corporate
narrative, which comprises our new purpose (we connect
for good), our new ambition (to be the world’s most trusted
connector of people, devices and machines), our reaffirmed
values (personal, simple, brilliant) and the refreshed three
strategic pillars of our strategy, and related KPIs. These were
also discussed with senior colleagues and the Colleague Board
for their feedback. The Board also considered how to embed the
new corporate narrative into the organisation’s culture and into
our decision-making. Our new corporate narrative and strategy
is used by the Board and management to align our actions and
priorities and consider the interests of all our stakeholders. This
year, in particular, we brought our purpose to life for the benefit
of our stakeholders with the support we offered during the
pandemic (see pages 28 to 29). BT continued to invest in our
networks, our modernisation programme and our portfolio of
solutions to deliver for our customers, in recognition of the ever
increasing need for improved connectivity.
The Board discussed the group’s strategy in detail with the
customer-facing unit CEOs and chief technology officer at two
full-day strategy meetings. These sessions considered long-
term growth opportunities, strategic priorities and how these
are built into the group’s medium term plan, progress on key
initiatives, the key challenges to achieving our priorities and
the material risks to delivering them and plans to address or
mitigate these. The Board also spent time considering Covid-19
as part of updates at Board meetings including the group’s
operational resilience given the impact of the pandemic on the
different parts of the group, as well as discussing the strategic
implications and potential value creation opportunities.
Transformation and modernisation
The Board received regular updates on the progress of BT’s
transformation and simplification programme particularly in the
context of Covid-19 to drive pan-BT efficiencies, opportunities,
continued cost reduction and consideration of reskilling our
colleagues and new skills needed in line with the future needs of
the business. There was a specific focus on BT’s IT strategy and
the need to drive digital transformation through the creation of
the new Digital unit.
75
WFTMR and FTTP
The Board considered and approved the intention to invest in
our full fibre build to reach 20m premises by the mid-to-late
2020s, subject to the required critical enablers, as discussed in
our Section 172 statement on page 43. In May 2021, we agreed
to increase our FTTP build target by an additional 5m from 20m
to 25m premises by December 2026 (see page 20).
As part of the WFTMR consultation, the Board was kept
updated on our continued engagement with Ofcom and on
developments in relation to each of the required enablers,
which it discussed and provided feedback on. The Board also
considered the proposed response dependent on the outcomes.
More details on the outcomes of the WFTMR publication in
March 2021 can be found on page 16.
Chief executive’s report
At each scheduled meeting, the chief executive discussed with
the Board the group’s overall performance and operations
(including the impact of Covid-19), progress against our
strategic pillars and priorities, progress on our transformation
and simplification programme, the competitive and regulatory
environment that BT is operating in, as well as engagement with,
and the views of, our stakeholders including our investors, our
colleagues, Ofcom and Government. Updates from the chief
executive on key business operations through the year have
focused on a range of stakeholder interests, including matters
which are key to the group’s reputation and being a national
champion, as well as colleague considerations and support
for our customers, suppliers and communities.
Stakeholders
The Board and each of its committees always have regard to
wider stakeholder interests beyond those of our shareholders
as part of discussions and decision-making. Details of our
engagement with our key stakeholders is set out from page 34.
On behalf of the Board, the Audit & Risk Committee discussed
our key stakeholder groups including their expectations, our
engagement and the risks associated with managing these
relationships as part of reviewing the group risk category
report for this area. The committee considered engagement
with our key stakeholder groups, in light of broader
developments including in relation to Brexit, FTTP, rural
connectivity and the growing consumer fairness agenda.
5G spectrum auction
The Board was kept updated on the timing of Ofcom’s recent
spectrum auction. Further to the approval of the maximum
spend, the Board discussed balancing the capex investment with
the long-term benefits of securing additional spectrum. These
benefits include boosting BT’s 5G network leadership position
and enabling BT to deliver improved customer experience,
particularly indoor coverage in buildings and venues, and
increasing our coverage overall. More details on the outcome
of the spectrum auction can be found on page 17.
Customer experience
The Board received updates on customer experience
throughout the year focusing on the improvements in Net
Promoter Score (NPS), a KPI, against our overall ambition for
customer experience. There were detailed discussions on the
NPS of each customer-facing unit, customer segment and
brand, as well as on the initiatives and customer insights which
are being used to drive improvement for our customers. Further
details on customer experience can be found on pages 26 to 29
and on how BT is living up to Ofcom’s Fairness for Customers
commitments on page 17.
Suppliers
The Board received updates regarding key suppliers from
the chief executive. During the year, the Board discussed the
Government’s evolving advice on high-risk vendors (including
Huawei) and the development of both the Telecommunications
(Security) Bill in the UK and US government restrictions, and
the potential procurement and commercial implications for BT.
The Board reviewed and approved the entering into of contracts
with Nokia and Ericsson and the split of the services provided by
these two vendors across our UK sites.
Responsible procurement and technology were also examined
by the Digital Impact & Sustainability Committee with specific
discussions with the procurement team on how we embed this
into our processes and procedures as part of helping us to meet
our ambition in this area.
Investigations and potential claims
The Board discussed any regulatory/competition investigations
and litigation claims, including BT’s response and the
stakeholder and reputational impact of these. This included the
challenges with the delivery of the broadband Universal Service
Obligation and the class action in relation to standalone fixed
voice services. More details on the broadband Universal Service
Obligation can be found on page 16.
Finance and risk
Dividend policy
As set out in last year’s report, in May 2020, having considered
the various stakeholder interests, in particular the long-term
interests of our shareholders and their likely reaction, the
Board took the difficult but prudent decision to suspend the
final dividend for 2019/20 and all dividends for 2020/21, and to
re-base future dividends to a more sustainable level in 2021/22.
This decision was made to create capacity for BT to invest
in long-term, value-enhancing opportunities (see both our
Section 172 statement on page 43 and Dividend (including
our dividend policy) on page 49 for more details).
Financial performance
The chief financial officer discussed with the Board at each
scheduled meeting BT’s financial and trading performance
for the period against budget and consensus, and the full year
outlook for the group as a whole and for each business unit, in
particular focusing on the impact of Covid-19 and the actions
being taken to mitigate its impact. The Board reviewed and
approved the financial statements and trading updates at year-
end, half year and at each quarter. It also discussed the feedback
from investors further to the publication of each set of results.
The Board considered and approved the going concern and
viability statements and reviewed and approved the group’s
tax strategy.
Pensions
The Board was updated throughout the year on ongoing
discussions with the BT Pension Scheme Trustee on the triennial
valuation as at 30 June 2020. The Board considered the possible
range of valuation outcomes and different approaches to future
contribution and investment strategy. The Board reviewed these
outcomes in the context of our overall business objectives and
both the current and expected future regulatory and legislative
environment.
In May 2021, the Board provided its agreement to an
overall valuation package including an asset backed funding
arrangement based on EE Limited shares, arrangements
giving potential for some return of any future surplus to BT
with downside protection for the BT Pension Scheme and
the extension of existing legal protections.
Risk management
The Board discussed the new group risk management
framework, which had been implemented during the year and
comprises 15 group risk categories, and includes the point and
emerging risks and uncertainties facing the group (including in
BT Group plc
Annual Report 2021
Corporate governance report 76
Board activities in 2020/21 continued
Health, safety and wellbeing
The Board was regularly updated on, and discussed, the health,
safety and wellbeing of our colleagues across the business,
including those in Openreach. Given the Covid-19 pandemic, the
Board has been focused on the measures taken to support our
colleagues and customers, including ensuring our workplaces
and BT/EE retail shops are Covid-19 secure, that we have
the necessary protection measures and PPE for our frontline
colleagues and key workers, that wellbeing support is provided
for all colleagues throughout these challenging times, with a
particular focus on mental wellbeing, as well as the return to
the workplace plans for those who have been able to work
from home.
Tragically we suffered one fatality in 2020 involving one of our
Openreach field engineers (see page 25). The Board continues
to focus all its efforts on reducing the risks to our workforce and
others affected by our activities.
Diversity and inclusion
Our goal is to have a diverse workforce where inclusivity is
valued and prioritised. The Board discussed with management
the launch and progress of our Ethnicity Rapid Action Plan and
the related commitments and the progress being made in this
area as a whole. As described in our Section 172 statement
on page 43, the Board discussed and was supportive of the
proposed publication of diversity and inclusion targets and
commitments, and the voluntary publication of our ethnicity pay
gap, in our inaugural Diversity and Inclusion Report (which we
expect to publish in early summer 2021). For more detail on our
culture and our diversity and inclusion approach, see page 24.
Workforce engagement
As discussed on pages 35 to 36, the Colleague Board is the
chosen method of engagement with the workforce under the
Code and the Board is updated on the discussions from the
formal Colleague Board meetings and any informal check-ins,
by Isabel Hudson as the designated non-executive director
for workforce engagement and a Colleague Board member.
The Board continues to feel that this is the right method for BT
to obtain invaluable direct insight into the views of colleagues
across the business.
Directors liaise with colleagues outside of Board and committee
meetings to provide their own insights and perspectives on
matters or to learn more about our colleagues’ sentiments.
The Board also discussed with HR and the chief executive
other mechanisms and initiatives used to engage with our
colleagues and feedback on these, including our Your Say
colleague engagement survey and regular Covid-19 pulse
surveys. See page 34 for more details on our colleague
engagement mechanisms.
Employee relations
The Board and the Remuneration Committee discussed the
updates on employee relations matters including aligning and
simplifying BT’s paid leaver and redundancy arrangements
across the UK workforce and the impact of our transformation
programmes on colleagues. The Board discussed the
rationale for the changes, alongside the associated risks, and
management’s engagement with colleagues and the unions in
relation to the proposals, including possible strike action.
relation to Covid-19) and our risk appetite for each (set out from
page 57). The Board and the Audit & Risk Committee continued
to deepen its understanding of the group’s business and the
risks and opportunities it faces with detailed reviews into the
different group risk categories with the Board focusing on cyber,
financing and people and also biannual reviews of the entire risk
landscape. On behalf of the Board, the Audit & Risk Committee
also undertook detailed reviews of BT’s risk management and
internal control systems and provided regular updates to the
Board on these discussions (see page 82 onwards).
Medium term plan
In May 2021, the Board approved the medium term plan 2021.
It discussed the current market position of BT and the main
opportunities and challenges, as well as considering how the
medium term plan aligns to our strategy and group KPIs. The
Board also reviewed progress against our EBITDA guidance
for 2023.
Investor perceptions, shareholder relations and consideration
of analysts’ reports
The Board received regular reports outlining share register
movement, our share price performance relative to the market,
investor relations activities and engagement with shareholders.
The Board also discussed investor feedback from the meetings
following our full and half year financial results and quarterly
trading updates.
Brexit
The Board received updates on BT’s readiness and the actions
being taken to mitigate the impact of Brexit on our operations.
Colleagues
Culture
The Board discussed the progress made against our people and
cultural strategy in the context of a challenging year and any
resulting changes to our ways of working in the short, medium
and long term given the pandemic. We continue to believe that
our offices will be critical to the way we work, and therefore
have continued with progressing with our Better Workplace
Programme but will maximise the lessons learned from
remote working.
As discussed in the Purpose and strategy section above, the
Board was updated on the launch of our new purpose and
the reaffirmation of our values. The Board also looked at the
communication of these and how these are being embedded
in our culture through workforce policies and practices, for
instance in relation to recruitment, reward and incentives and
the performance of our colleagues. Our ambition remains to
build a progressive and engaging culture, with the wellbeing
of our colleagues at its centre. The Board monitored progress
against this ambition throughout the year with detailed
discussions on our people strategy with the HR director and
her team. Further details on our culture, purpose and values
can be found in the Strategic report on pages 10 and 18 to
33. The Board and its committees (as relevant) also continued
to monitor key areas that we consider important indicators
of BT’s culture, such as health, safety and wellbeing, diversity
and inclusion, customer experience, employee relations and
whistleblowing.
BT Group plc
Annual Report 2021
77
Governance
AGM
Given the UK Government’s restrictions on public gatherings
due to Covid-19 and to protect the health and wellbeing of our
shareholders, colleagues and the wider communities in which
we operate, the Board decided to hold a closed meeting for
the 2020 AGM. Shareholders were able to pre-register their
questions ahead of the meeting, which were then answered
by the chairman and chief executive. An audio recording of the
questions and answers, together with that of the AGM itself
and video messages from our chairman and chief executive,
were all made available on our website.
The Board continues to monitor developments in UK
Government guidance relating to the Covid-19 situation in
planning the approach for the 2021 AGM, ensuring we balance
the need to engage with our shareholders, investor expectations
and guidance, with their health and safety and that of our
colleagues, the Board and the communities in which we operate.
Information on the arrangements for the 2021 AGM will be
published in our Notice of meeting 2021.
Annual Report
In May 2021, the Board reviewed and approved the Annual
Report on the recommendation of the Audit & Risk Committee
(see page 84), having considered that taken as a whole, it is fair,
balanced and understandable and provides the information
necessary for shareholders to assess the group’s position and
performance, business model and strategy.
Board, committee and directors’ evaluations
During the year, we carried out an externally facilitated
evaluation of the Board and its committees. The details of this
external evaluation can be found on page 79. The chairman
also held individual discussions with each director to make sure
they continue to contribute effectively and are committed to
their roles. The senior independent director led the evaluation
of the chairman’s performance through individual discussions
with each of the directors and sharing feedback at a meeting
without the chairman. The non-executive directors reviewed the
performance of the chief executive during the year. The Board
also reviewed progress against the actions agreed as part of
last year’s internal Board and committee evaluation.
Committee terms of reference
The Board and each of its committees carried out an annual
review of the terms of reference of each committee to ensure
they continue to be fit for purpose and reflect best practice.
Changes were made as appropriate and these can be found
on our website bt.com/governance
Board composition,
succession and evaluation
Board induction
On appointment, directors take part in a comprehensive,
induction programme designed to give them a thorough
overview and understanding of the business. This is tailored
to take into account the director’s previous experience, their
responsibilities and, for each non-executive director, specific
responsibilities relevant to their committee memberships. The
programme includes meetings with the chairman, the chief
executive, the senior independent director and the company
secretary (or her delegate), as well as other members of the
Board, Executive Committee and senior management. Directors
also receive key information on our governance framework,
recent financial data and the policies supporting our business
practices, including our Ethics Code. Directors are encouraged
to visit our offices, contact centres and BT/EE retail shops, as
well as spending a day with an Openreach engineer. As a result of
the Covid-19 pandemic, we modified our induction meetings to
be by video conference and non-executive directors appointed
during 2020 were unable to visit any sites or offices. Once the
restrictions ease in line with the Government roadmap, we will
look to recommence these.
Ian Cheshire, Adel Al-Saleh and Sara Weller joined the Board
as non-executive directors on 16 March 2020, 15 May 2020 and
16 July 2020 respectively. The details of Sara Weller’s Board
induction programme are set out on page 78.
Training and development
The chairman and the company secretary keep under
review the training and development needs of directors.
Non-executive directors meet with management, enhancing
their understanding of the business through briefing sessions.
We encourage all directors to keep their skills and knowledge
up-to-date and to ask for any support they need. As part of
ongoing development, the company secretary (or her delegate)
briefs the Board at each meeting, and its committees as
relevant, on any key legal, regulatory and corporate governance
developments. During the year, these briefings included updates
on the institutional investor guidelines, corporate reporting in
relation to Covid-19 and environmental, social and governance
considerations, the FRC’s Company Reporting Expectations
for 2020/21, the Hampton-Alexander Review 2021 and the
guidance in relation to AGMs. Directors are updated as required
on developments in the environment in which the business
operates and internal and external advisers are invited to
meetings to provide updates and discuss these as necessary.
Each director may obtain independent professional advice at the
company’s expense as required. The Board and each committee
are supported by the company secretary and her team and they
are available to all directors to provide advice and support.
We encourage all directors to visit our sites and offices to meet
our colleagues and broaden their understanding of the business
and we usually also aim to have one Board offsite visit annually.
As a result of the Covid-19 pandemic, this has not been possible
in the last year.
Time commitment
On accepting their appointment, directors must confirm they
are able to allocate sufficient time to discharge their
responsibilities effectively.
Directors are expected to attend meetings of the Board and
any committees of which they are members, as well as the
AGM, and any Board offsites or away days. Directors are also
expected to devote sufficient time to prepare for each meeting
and to take part in at least one visit to one of our offices or other
sites annually. Before accepting new external appointments,
directors are required to obtain the prior approval of the Board.
Ian Cheshire’s proposed appointment as chair of Spire
Healthcare was considered by the Board in April 2021 in light
of his other appointments and his role on the BT Board. Given
that Ian would be stepping down as a non-executive director
of Barclays in May 2021, it was concluded that becoming
chair of Spire Healthcare would not be detrimental to his
ability to perform his duties as a non-executive director of
BT, and accordingly the Board gave its prior approval of Ian’s
appointment in line with the Code.
BT Group plc
Annual Report 2021
Corporate governance report 78
Board composition, succession and
evaluation continued
Re‑election of directors
The Nominations Committee considers, in respect of each
director, their skills and experience, time commitment and
tenure as part of the Board’s recommendation to shareholders
for the re-election of directors. The Board believes that each
director who is being put forward for re-election at the 2021
AGM brings considerable knowledge, wide-ranging skills and
experience to the Board, makes an effective and valuable
contribution and continues to demonstrate commitment
to their role. The Board also considered the continued
independence of non-executive directors and the chairman
as part of its consideration of the re-election of directors. The
Board continues to consider all non-executive directors as
being independent in line with the Code, with the exception of
Deutsche Telekom’s nominated representative. The chairman
was judged to be independent at the time of his appointment.
Details of all directors’ contracts or letters of appointment
are in the Report on directors’ remuneration on page 102.
Sara Weller’s
Board induction
programme
Although it has been very strange to join the
Board of BT during this year of remote working,
my induction programme was able to cover a great
deal of ground in a condensed time. Colleagues
throughout BT have been both welcoming and
generous in sharing their time and expertise with me
so I can contribute to the Board across the full range
of a very diverse agenda. I am, though, looking
forward very much to the day when I can meet
people face-to-face, and visit some of the locations
where BT colleagues are based, to see first-hand
their work to build out our network and to support
our customers.
Sara joined the Board immediately before the AGM on 16 July
2020. Ahead of her appointment, Sara received an induction
pack with key reference materials that provided a thorough
understanding of BT, including our most recent financial
results, and information on our business units, governance
framework, director responsibilities, the Code, our ethical
policies including our Ethics Code, and our Commitments.
Sara met with the chairman, senior independent director and
the chief executive in person in early 2020, before joining the
Board. All other meetings to date have been held by video
conference due to the Covid-19 restrictions.
Sara also had a number of induction meetings before joining
the Board, and received briefings from each Executive
Committee member and had introductory meetings with each
of the other non-executive directors.
Given Sara’s membership on the Digital Impact & Sustainability
and Audit & Risk Committees on her appointment to the Board,
she attended other briefings with the key attendees including
the director of digital impact & sustainability; KPMG, our
external auditor; the director, group finance; and the director
of risk, compliance & assurance.
Sara also identified key members of senior management to
meet with, including the managing director BT security; our
chief medical officer; managing director applied research
and Adastral Park; and the director of quality & customer
resolutions, Consumer.
In addition, during Sara’s first year on the Board, she has:
– joined a Colleague Board meeting to help understand the
culture of the group and our colleagues’ views. She will
attend all Colleague Board meetings throughout the coming
year (see pages 35 to 36 for information on the Colleague
Board)
– attended a BT Compliance Committee meeting (ahead
of becoming a member) for a better understanding of the
Commitments and our relationship with Ofcom and other
communications providers
– taken part in two BT customer inclusion panel sessions,
where groups representing vulnerable customers and
people with disabilities provide feedback to help us improve
our products and services
– observed a number of customer research panels with
Enterprise’s SME customers and Consumer’s customers,
to hear their perspectives on service and future priorities
– attended a virtual tour of Adastral Park to gain an insight
into BT’s research and development focus.
Sara will continue to join future customer inclusion panels
where possible and, as the Covid-19 restrictions ease, she
plans to visit Adastral Park, a BT/EE retail shop and a customer
contact centre, and to shadow an Openreach field visit to gain
a broader insight into the work of our frontline colleagues.
BT Group plc
Annual Report 2021
79
2020/21: Externally facilitated Board and committee evaluation
In line with the Code, we annually undertake a formal and rigorous evaluation of the performance of the Board and all its committees
(internally or externally facilitated), and the chairman and individual directors, which takes into account the Board’s composition, diversity
and effectiveness. In 2020/21 we undertook an external evaluation (given the last external evaluation was completed in 2017/18).
Appointment of the external evaluator: The chairman,
supported by the company secretarial team, led a tender
process, which resulted in Clare Chalmers Limited being
appointed to undertake the evaluation, based on style and the
best fit for the Board. Clare Chalmers Limited is considered to
be independent, having no other connection (including any past
business relationship) to BT or any of the individual directors.
A brief and the key areas of focus were discussed and agreed
by Clare, the chairman and the company secretarial team.
Agreed areas of focus and actions: There were certain areas
of focus which the Board felt would continue to improve its
performance and effectiveness. Accordingly, the directors
agreed the areas of focus and suggested actions for 2021/22,
as set out below. Progress against these will be reviewed by
the Board and/or its committees as appropriate during the
year, with any ongoing areas feeding into next year’s internal
evaluation process.
Process: Clare observed a meeting of the Board and each
of the committees, and received the papers in advance. She
also reviewed a selection of Board and committee papers
from meetings during the year. Confidential one-to-one
meetings were conducted with each director, certain senior
management attendees and external advisers. The evaluation
focused on composition, succession and chairmanship and
how well placed the Board is to add value to the business, in
terms of how it oversees strategy, risk management, people,
culture and performance. Focus was also given to the Board’s
decision-making processes, as well as how it considers
stakeholders as part of its decisions and discussions.
Final Report: Clare discussed the draft report, which included
proposed recommendations and actions, with the chairman,
and then with the whole Board at its March 2021 meeting. Clare
felt that the Board comprises a highly experienced group of
non-executive directors with a strong skillset and a diverse range
of viewpoints and perspectives. There is healthy challenge and a
good appreciation of the stakeholder context in which BT sits.
Areas of focus
Suggested actions
In reviewing Board composition, size and succession planning
in light of potential Board changes and the future of the
business, the Nominations Committee should consider the
need for a new non-executive director with an understanding
of technology trends and cyber.
Management should increase their interaction with
non-executive directors outside of Board meetings to get
their perspectives dependent on their area of experience
and expertise.
Non-executive directors should be included earlier in
the decision-making process for large strategic projects
being considered.
Executive succession plans should include more depth and
detail beyond the top tier, with an increased focus on talent,
development and diversity.
When possible, non-executive directors should be encouraged
to visit different parts of the business individually to get a feel
for the culture.
Whilst it is acknowledged that Board papers have improved
in quality, there should be continued refinement of Board and
committee papers, ensuring that the ask is clearer upfront,
there is a more concise narrative and a focus on the key facts,
figures, issues and risks.
Given the inability to hold pre-Board dinners during the
year due to the pandemic, the Board has felt the absence of
not being able to have informal discussions ahead of Board
meetings. It is suggested that until the Covid-19 restrictions
allow for face-to-face meetings, virtual informal Board
sessions are utilised.
The current focus of the Nominations Committee is on
the search for a new chairman. Once a successor has been
appointed, a review of the Board as a whole will be undertaken
by the new chairman and the Nominations Committee, having
regard to skills, experience and knowledge in line with the
future needs of the business. This will allow a more focused
brief for a future non-executive director appointment.
The chief executive will discuss this further with members
of the Executive Committee to see how this is best achieved
outside of formal Board meetings. Non-executive directors
are also encouraged to liaise with relevant senior executives
to share views and provide perspectives.
The chairman, chief executive and company secretary will
consider how we use Board meetings and informal Board
discussions to more effectively highlight potential material
projects to gauge initial views from the Board.
This will be reviewed as part of the Executive Committee
succession planning discussions undertaken by the
Nominations Committee, with consideration given as to
how non-executive directors can meet other talent in the
organisation more often.
All non-executive directors are encouraged to visit different
offices and sites. There is usually an annual offsite visit for the
Board but this was not possible this year due to the pandemic.
Once it is possible to recommence site visits, we will look to
return to holding at least one offsite visit for the Board each year.
The Board and committee paper templates have been
updated and there will continue to be a focus with paper
submitters on improving the clarity of the recommendation
and information contained in papers.
Informal Board sessions will be scheduled around Board
meetings going forward until we are able to recommence
face-to-face Board meetings and pre-Board dinners.
BT Group plc
Annual Report 2021
Corporate governance report 80
Nominations
Committee
Chair’s report
Jan du Plessis
Chair of the Nominations
Committee
12 May 2021
This year, the committee has spent its time focusing
on changes to the Executive Committee and
continued to review the Board’s composition
and succession planning to ensure our leadership
comprises the right diversity of skills, knowledge
and experience in line with the future needs of
the business. The committee’s current priority
is the search for a new chairman.
Membership and attendance
All non-executive directors are members of the committee.
The chief executive attends meetings where appropriate. The
company secretary or her appointed delegate acts as secretary
to the committee, and they attend all meetings and provide
advice and support as required. Committee members and
attendees do not attend committee discussions where a conflict
exists. For discussions in relation to the search for my successor,
Iain Conn, our senior independent director, chairs the meeting.
Attendance
Member
Jan du Plessis (chair)
Adel Al-Saleha
Ian Cheshire
Iain Conn
Isabel Hudson
Mike Inglis
Matthew Key
Allison Kirkby
Leena Nair
Sara Wellerb
Attended
Eligible to attend
5
4
5
5
5
5
5
5
5
4
5
5
5
5
5
5
5
5
5
5
a Adel joined the committee on 15 May 2020. Adel was unable to attend one
committee meeting due to a prior business commitment.
b Sara joined the committee on 16 July 2020. Sara was unable to attend one
committee meeting due to a prior business commitment notified in advance
of her appointment.
Tim Höttges and Nick Rose stepped down from the committee
on 15 May 2020 and 16 July 2020 respectively and no scheduled
committee meetings were held in this financial year for which
they were eligible to attend.
BT Group plc
Annual Report 2021
Key responsibilities
On behalf of the Board, the committee is responsible
for keeping under review the succession planning and
appointments of executive and non-executive directors,
the chairman, the composition of the Board and its committees,
succession planning and changes to the Executive Committee.
After each meeting, I report back to the Board on the
committee’s activities.
The committee’s key responsibilities are set out in its terms
of reference available at bt.com/governance
Committee activities in 2020/21
The committee held five scheduled meetings during the
year and six ad hoc meetings. The ad hoc meetings have
predominantly been focused on Executive Committee
changes and the search for my successor.
During the year, the committee considered and, as appropriate,
made recommendations to the Board regarding:
Board composition and succession planning
– Board composition and succession planning for directors with
a focus on the skills, experience, independence, knowledge
and diversity requirements in line with the current and future
needs of the business. The committee continually keeps
succession planning under review, particularly for our longer
serving directors. Given the Board appointments during
2020, it is felt that there is a good balance of newer and longer
serving directors who provide consistency of BT knowledge
and experience. Given the focus of the committee is currently
on the search for a new chairman, the committee has decided
to undertake a comprehensive review of the skills, experience
and diversity on the Board as a whole once a successor is in
role. We recognise that both the Board evaluation and the
recent announcement that Mike Inglis will cease being a
non-executive director at the 2021 AGM, reiterate the need
for us to appoint a director with technology experience.
– changes to the membership of the committees, the
committee chairs and the senior independent director
as a result of changes to the Board which took effect
from the conclusion of the 2020 AGM.
Executive Committee
– a number of changes to the Executive Committee structure
and roles and responsibilities of members, as recommended
by the chief executive, in light of the continuing transformation
of BT. These included the appointment of Rob Shuter, CEO,
Enterprise, and Harmeen Mehta, chief digital and innovation
officer (see page 8), the restructuring of the Technology
unit into a Networks unit and a newly created Digital unit in
line with our digital transformation and growth programme,
the removal of a standalone Strategy & Transformation unit
and the amalgamation of the regulatory affairs and legal
and company secretarial functions under a combined role
of general counsel and director of regulatory affairs. Recent
appointments have sought to further strengthen the senior
management of the group bringing fresh perspectives,
experiences and skills required for the future long-term
growth of our business.
– the performance and succession planning of Executive
Committee members (including executive directors).
The committee undertook a detailed review of succession
planning, reviewing key talent at senior leadership level
with the chief executive and the HR director. The committee
reflected on the importance of identifying critical roles
and building stronger diversity of experience, gender
and ethnicity, as well as commercial, technology and
transformation capabilities, both through potential
external candidates and our internal talent pipeline.
– external appointments of Executive Committee members,
in line with our policy on external interests for Executive
Committee members (including executive directors) and the
CEO, Openreach.
Search for new chairman
Further to our announcement in March 2021 of my intention
to retire from the Board once a successor has been appointed,
Iain Conn, our senior independent director, has been chairing
the committee and leading the search process for my successor.
I am not present for these discussions. As Ian Cheshire has
expressed an interest in being considered as a potential
candidate for the role of chairman, he is also not present
for these discussions. After a formal tender process, MWM
Consulting, an independent external search agency, who has no
other connection to BT, or any of the directors, was appointed
to facilitate the process. MWM Consulting is a signatory of the
Voluntary Code of Conduct for Executive Search Firms (in line
with our Board Diversity and Inclusion Policy).
Further to a committee discussion on the capabilities, skills
and experience required, and having considered the future
needs of the business, a search brief was agreed. In line with
that brief, MWM Consulting prepared a longlist of candidates
and was specifically requested by the committee to ensure that
it comprised a diverse range of candidates including female
candidates and those from ethnic minority backgrounds. The
committee has agreed a shortlist of candidates to be formally
approached by MWM Consulting for the purpose of further
interviews and assessment. Feedback will be discussed by the
committee to consider the relative merits of the candidates
based on the criteria and brief for this appointment. Once the
committee has identified a preferred candidate, the committee
shall recommend that candidate to the Board for approval.
Diversity and inclusion
The Board Diversity and Inclusion Policy sets out our approach
to Board diversity and our aim to have a well-balanced Board
with the appropriate skills, knowledge, experience and diversity
to meet our business needs and in support of our strategic aim
of building the strongest foundations (see bt.com/governance).
It reflects the recommendations of the Code, the Hampton-
Alexander Review on gender diversity and the Parker Review
of ethnicity for FTSE 100 companies. Diversity is considered in
the broadest sense and all forms of difference are considered,
including age, gender, nationality, independence, professional
background, social and ethnic backgrounds, business and
geographic experience, as well as cognitive and personal
strengths. These are considered in reviewing the composition
of the Board, and where possible, these should be appropriately
balanced. Under the Board Diversity and Inclusion Policy, the
Nominations Committee reviews progress against the policy’s
targets and objectives. As at 31 March 2021, four of our 12
Board directors were female (33%), in line with our target, and
two directors were from an ethnic minority background (17%),
exceeding the Parker Review recommendation. We continue
to challenge our external search consultants to ensure that
all forms of diversity, in particular ethnicity and gender, are
considered when drawing up candidate shortlists.
This year, the Board prioritised diversity matters, discussing
with management BT’s proposed publication of diversity and
inclusion targets and commitments, our Ethnicity Rapid Action
Plan and the related commitments and the progress being
made in this area as a whole (see page 24). The Remuneration
Committee discussed our planned communications in relation
to the ethnicity and gender pay gap reporting.
Details of our group-wide Diversity and Inclusion Strategy,
including its objectives, link to strategy, implementation and
progress can be found on pages 24, 25 and 44.
81
Chairman and non‑executive directors’ tenure
As at 31 March 2021
Post 2021 AGM
0–1 years
2–3 years
4–6 years
7–9 years
9+ years
0–1 years
2–3 years
4–6 years
7–9 years
9+ years
4
3
3
0
0
3
3
2
1
0
40%
30%
30%
0%
0%
33%
33%
22%
12%
0%
Diversity and independence
Board
As at 31 March 2021
Male
Female
Chairman*: 1
Executive directors: 2
Non-independent,
non-executive director: 1
Independent
non-executive directors: 8
* Independent on appointment to role.
Post 2021 AGM
Chairman*: 1
Executive directors: 2
Non-independent,
non-executive director: 1
Independent
non-executive directors: 7
* Independent on appointment to role.
Executive Committee (including CEO, Openreach)
As at 31 March 2021
8 (67%)
4 (33%)
Executive Committee, company secretary and direct reports
(including CEO, Openreach and excluding executive directors on the Board)
As at 31 March 2021
81 (69%)
37 (31%)
BT Group plc
Annual Report 2021
Corporate governance report 82
Audit & Risk
Committee
Chair’s report
Matthew Key
Chair of the Audit & Risk
Committee
12 May 2021
Given the Covid-19 pandemic and the level of
business-wide transformation, the committee has
focused on detailed reviews of the group’s risk
categories and risk management framework and
how these are being managed, with an emphasis
on the foundations. The committee held a number
of discussions on the progress of the finance
transformation programme, which will enhance,
automate and rationalise our financial controls
landscape, key reporting and transactional
processes and systems.
Membership and attendance
Our members are all independent non-executive directors with
a range of skills, and the committee as a whole has experience
relevant to the sector and acts independently of the executive.
Allison and I have recent and relevant financial experience (as
set out in our biographies on page 72) in line with the Code.
The committee met six times during the year in line with the
financial reporting timetable. The company secretary or her
appointed delegate acts as secretary to the committee, and they
attend all meetings and provide advice and support as required.
The chairman and chief executive attended all committee
meetings during the year. Private committee sessions with
the internal and external auditors were held at each meeting
without management being present. The external auditor was
not present at meetings where their performance and/or their
remuneration was discussed.
Attended
Eligible to attend
Attendance
Member
Matthew Key (chair)a
Nick Roseb
Iain Conn
Mike Inglis
Allison Kirkby
Sara Wellerc
6
1
6
6
6
4
a Matthew became chair on 16 July 2020.
b Nick stepped down from the committee and as chair on 16 July 2020.
c Sara joined the committee on 16 July 2020. Sara was unable to attend one
committee meeting during the year due to a prior business commitment which
she had notified us of prior to her appointment.
BT Group plc
Annual Report 2021
Other attendees
Chief financial officer
Director, group finance
Director of risk,
compliance & assurance
Group general counsel
External reporting &
financial controls director
Group risk director
Group internal audit
director
Group ethics and
compliance director
Regular
attendee
Attends as
required
•
•
•
•
•
•
•
•
This is my first report as chair of the Audit & Risk Committee
having taken over from Nick Rose at the conclusion of the 2020
AGM. I would like to thank Nick for his strong chairmanship of
the committee.
Key responsibilities
The committee is responsible, on behalf of the Board, for
monitoring the integrity of the financial statements and
the group’s risk management and internal control systems,
including with regard to principal and emerging risks.
The committee’s key responsibilities are set out in its terms
of reference available at bt.com/governance
As committee chair, I meet with the KPMG lead audit partner
and the regular attendees ahead of meetings to discuss the key
areas of focus. After each meeting, I report back to the Board
on the committee’s activities, the main issues discussed and
matters of particular relevance, with the Board receiving copies
of the committee’s minutes.
Committee activities in 2020/21
Internal controls and finance transformation
As a result of BT’s deregistration from the US SEC, BT is no
longer required to provide formal certification regarding the
effectiveness of its controls over financial reporting, or make
any corresponding public disclosures, to comply with Sarbanes-
Oxley regulations. Notwithstanding this, management’s financial
controls objective continues to be to ensure that our overall
controls framework is effective, and therefore management
has followed a financial controls assurance approach this year
similar to that adopted in previous years under Sarbanes-Oxley
regulations. On behalf of the Board, and in line with the Code,
the committee monitored and reviewed the effectiveness of our
systems of risk management and internal control during the year.
6
1
6
6
6
5
Management has undertaken testing of the design and
implementation of all key financial controls. Effective reliance
on the systems tested was confirmed. A limited number of
these controls are also within the scope of KPMG’s audit work to
support the current year audit. At the request of the committee,
and in addition to external audit activities, KPMG also tested
the design and operation of all IT general controls relevant to IT
applications in-scope for management’s internal controls over
financial reporting.
The committee continued to monitor the implementation of
the end-to-end finance transformation programme, which
will enhance, automate and rationalise our financial controls
landscape, key reporting and transactional processes and
systems. The finance transformation programme supports
the ongoing improvement of controls identified through
83
management’s testing and compliance monitoring programme,
especially in relation to front end revenue processes and key
data sources. When complete, the transformation programme
will reduce the need for the existing mitigating manual controls
including management review controls and data analytics. The
committee received updates on the progress of the programme
throughout the year, including the benefits, who is accountable,
and the potential risks and mitigations, and continued to provide
feedback in order to support the success and timeliness of the
programme’s conclusion. Progress during the year included go-
lives of our management reporting and planning and forecasting
tools for most of the business, including the deployment of our
new information model and additional reporting capabilities.
This has resulted in significant progress in terms of enhancing
both our controls and quality of data.
Using the capabilities delivered through the finance
transformation programme, management continues to
build a more robust controls landscape. As reported last year,
management implemented the SAP Governance, Risk and
Compliance module to support the end-to-end monitoring of
our financial controls. This reinforces access controls within SAP
and the controls framework, and allows for the timely detection
of access violations together with greater assurance over
appropriate access in line with user roles and responsibilities.
we know what our key risks are, who’s accountable for their
management, what we’re doing about them, and how effective
our efforts have been. Mindset refers to the capabilities
and culture required to achieve our risk management goals,
including how we measure and achieve them and how we can
intervene throughout colleague lifecycle, from recruitment to
development to reward, to deliver the improvements we need
to take on risk with confidence.
The committee reviewed how the programme has improved risk
management and assurance activities and reporting, specifically
in relation to:
– a new risk management framework (see more details in the
Risk management section below)
– a simplified policy, standards and key controls structure
– a common enhanced three lines of defence model clarifying
accountabilities
– an improved governance framework including business unit
audit and risk committees that bring the right discussions and
decisions to the appropriate audiences
– the wider promotion of risk awareness, operational discipline
and improved decision-making.
BT Integrity and Compliance (BTIC) programme
Risk management
As mentioned in last year’s report, BTIC is a multi-year
programme which aims to ensure that we have in place an
enhanced framework of risk management, controls and
assurance for dealing with our landscape of risks, and the right
mindset to support it, in order to deliver our strategic outcomes.
The programme is delivering the tools to enable BT to be smart
with risk and improve operational and ethical discipline.
A key focus this year has been to implement and enhance our
new risk management framework and embed the output from
this work into the day-to-day management, operations and
culture of BT. Our risk management processes identify and
monitor the risks facing the group. The Executive Committee,
the Board and this committee regularly review the risks BT
considers to be material.
The two key areas of the BTIC programme are “Wiring” and
“Mindset”. Wiring relates to the governance, risk, compliance
and assurance frameworks and processes that help ensure
We define our risk landscape in areas of enduring risk called
group risk categories, covering strategic, financial, operational
and compliance risks. In line with the Code, the Board monitored
and reviewed the effectiveness of the group’s systems of risk
Key matters considered in 2020/21
by the Audit & Risk Committee
2019/20 Full year results and
Annual Report and Form 20-F
2020, including goodwill, viability
statement and going concern
statement
2020/21 quarterly trading updates
2019/20 regulatory financial
statements
Accounting judgements, IAS 19
pensions and corporate income tax
accounting, internal controls over
financial reporting assurance
2020/21 audit and assurance
approach
External audit and non-audit fees
External auditor effectiveness
External auditor engagement letter
Internal and external auditors’
quarterly reports
Internal control requirements
under the Code
management, financial control and
data regulation
Group internal audit plan
and internal audit charter
Ethics, compliance and
Speak Up reports
Supplier risks and assurance
Other risks including Covid-19,
finance transformation, Brexit and
data protection
BTIC programme, including progress
on the implementation of a new risk
management framework
Finance transformation programme
BT Compliance Committee chair’s
annual review and terms of reference
Major contentious matters reports
Group risk report containing the
status of the point and emerging
risks, how we are trending against
our desired risk appetite, and
conformance with our control
expectations
Group risk category report
deep dives including on major
contracts, legal compliance, third
party management, stakeholder
Openreach Limited board audit, risk
and compliance committee chair’s
annual update
Duty to Report – payment practices
Financial services compliance
2019/20 committee evaluation
actions review
Committee terms of reference
BT Group plc
Annual Report 2021
Corporate governance report 84
Audit & Risk Committee continued
Significant issues considered relating
to the financial statements
management and internal control through detailed reviews
of our group risk categories and consideration of reports from
group internal audit and other assurance functions. Much of this
work was undertaken by this committee on the Board’s behalf
and the committee considers progress made and where we need
to develop. In these sessions, the committee held open and
honest discussions with the Executive Committee risk owners
to understand current and anticipated risk developments,
including any impacts of Covid-19, and reviewed how effectively
the risks are being managed. The committee used these
discussions to assess both current specific concerns (point risks)
and uncertainties that might become significant (emerging
risks) and agree on actions required to manage the risks
effectively. The committee also reviewed the definition of risk
appetite and supporting metrics within each of the categories,
the effectiveness of our controls, mitigation activities and any
areas for improvement.
As chair, I subsequently reported the key points from each
of these risk sessions to the Board, given that the Board
is ultimately responsible for the group’s systems of risk
management and internal control. The above activities,
including those described in the Internal controls and finance
transformation section above, and consideration of the key
matters reviewed by the committee, collectively enable the
committee to confirm that the systems of risk management
and internal control have been appropriately reviewed. Where
required, improvements have been agreed and put into action.
Further information on risk management and our principal risks
can be found in the How we manage risk section from page 57 and
the Our principal risks and uncertainties section from page 59.
Financial reporting
The committee monitors the financial reporting process and
oversees its integrity. During the year, the committee considered:
– the full year and half year results, and quarterly trading
updates, and subsequently recommended these to the
Board for approval
– the quality of accounting policies and practices, as well as
Group accounting policies, critical estimates and judgements
The committee considered the accounting policies and
disclosures in the consolidated financial statements that
relate to critical and key accounting estimates and significant
judgements, including the critical estimates and judgements
relating to the valuation of our pensions assets and obligations,
those relating to taxation, and contingent liabilities associated
with litigation; along with other key estimates and judgements
relating to provisions and our goodwill impairment model; and
significant judgements around lease term.
Going concern
The committee considered management’s forecasts of group
cash flows and net debt, as well as our liquidity requirements
and borrowing facilities, including downside scenarios from our
viability model as discussed below. Following this review and
a discussion of the sensitivities, we confirmed that the going
concern basis of accounting continues to be an appropriate basis
of preparation for the financial statements. Further detail on the
basis of our going concern assessment is set out on page 106.
Viability statement
The committee assessed the process and assessment of the
group’s prospects, the time horizon and how this aligned
with the group’s long-term forecasts, taking into account the
company’s current position and principal risks. The committee
also considered the group risks in management’s stress testing
model, including the review of combined downside scenarios.
We have combined a number of risks including another
lockdown due to Covid-19, a revaluation of the BT Pension
Scheme and enforcement action from Ofcom. We have also
assumed that industrial action takes place and a scenario where
we are unable to prevent a cyber attack which leads to a class
action due to loss of customer data. The committee was satisfied
that the viability statement could be provided and endorsed
the continued selection of a three-year time horizon as a basis
for the statement and the approach to its development. Further
detail on the assessment of viability and the viability statement
are set out on page 68.
critical accounting estimates and key judgements for results
and considered these to be appropriate.
Covid‑19
In May 2021, the committee carried out a detailed assessment
of the Annual Report, having previously provided comments
and feedback throughout the drafting process. As part of this
assessment, the committee reviewed the material matters
reported, ensured that the report accurately reflected the
company’s performance and that it was consistent in its
messaging throughout. The committee also considered whether
the information was presented in a clear and concise manner.
The committee considered that, taken as a whole, the Annual
Report is fair, balanced and understandable and provides
the information necessary for shareholders to assess the
group’s position, performance, business model and strategy.
This assessment formed the basis of the committee’s
recommendation on its advice to the Board in respect of this.
BT’s significant accounting policies are set out on pages 124
and 125. The consistent application of these policies is subject
to ongoing verification through management review and
independent review by the internal and external auditors.
The processes supporting the preparation and consolidation
of the financial statements have been documented and are
subject to annual verification through the programme of testing
completed by our internal auditor. This serves to confirm the
operation of internal controls over financial reporting.
BT Group plc
Annual Report 2021
The committee considered the impact of Covid-19 on the
financial statements, including the adequacy of the provisions
booked as a specific item in 2019/20 and their subsequent
utilisation and release in 2020/21.
Regulatory reporting
The committee supported the continued changes across our
colleagues, processes and systems that were put in place to ensure
that we met our 2020/21 regulatory financial reporting obligations.
Pensions
The committee considered the assumptions underlying the
valuation of the pension assets and liabilities in the financial
statements, as summarised in note 20 to the financial
statements, the sensitivities around the assumptions and
the impact of the assumptions on the balance sheet, income
statement and related disclosures. The committee was updated
on the triennial funding valuation for the BT Pension Scheme, the
possible range of valuation outcomes and our funding position.
85
Goodwill impairment
The committee considered and was satisfied with the
key assumptions, including operating cash flow forecasts,
resulting headroom and the sensitivity analysis performed
by management and agreed that no goodwill impairment
charges were required this year.
Major contracts
The performance of major contracts in Enterprise and
Global were considered, including accounting judgements,
assessments of the recoverability of dedicated contract
assets, and any requirement for loss provisions.
Asset verification and asset lives
The committee assessed the results of management’s annual
asset life review, asset verification exercise and review of fully
depreciated assets and the committee was satisfied that the
judgements made, and the methodology applied,
were appropriate.
Divestments
The committee reviewed the judgements made in relation to
the group’s divestments, including on whether the held for sale
criteria had been satisfied and how goodwill should be allocated
to divested or held for sale entities.
Other matters
The committee reviewed specific items quarterly, and considered
and agreed that they were appropriately categorised. We also
considered management’s view of the quality of earnings and
of the effective tax rate. At the half year and the full year, we
considered a detailed assessment of provisions and the committee
was satisfied with the analysis provided in relation to the results.
External audit
KPMG has been our external auditor since the conclusion of the
2018 AGM, following an audit tender process that took place
in 2016 and 2017. John Luke was appointed as the lead audit
partner for KPMG during the year, having been the audit partner
for Openreach since 2018/19 (the date of his appointment
as Openreach audit partner being the effective date for the
purpose of determining his length of tenure to date). The
company confirms that it complied with the provisions of the
Competition and Markets Authority’s Statutory Audit Services
Order for the financial year under review. During the year, the
committee reviewed, with the external auditor, the scope of
work and the risk informing this, external audit findings and their
letter of engagement. The committee approved KPMG’s audit
plan and management’s letter of representation. The committee
also considered and subsequently approved the proposed
external audit fees for the year ended 31 March 2021, as well as
the recurring audit fee for the regulatory financial statements
and the interim review fee (see the Independent auditor's
report on pages 112 to 117 for more details).
External auditor independence, objectivity and effectiveness
The committee discussed the external auditor’s independence
and potential areas that could give rise to a conflict of
interest, and considered the safeguards in place to prevent
compromising their independence and objectivity. Our non-
audit services policy sets out the non-audit services that can be
provided by the external auditor, in line with the latest ethical
standards. The external auditor is not permitted to perform any
work which they may later be required to audit, or which might
affect their objectivity and independence, or create a conflict of
interest. Internal procedures describe the approval process for
work performed by the external auditor. This applied to KPMG
throughout the year. The committee monitored compliance
with the policies and procedures and considered business
relationships with the external auditor, and the level and
appropriateness of non-audit services and fees. Our non-audit
services policy can be found at bt.com/governance
The nature of the non-audit services carried out by the external
auditor during the year, including to review our in-scope IT
general controls, are described in note 8 to the consolidated
financial statements on page 134. These were carried out due
to legal or regulatory obligations, contractual requirements,
or represented areas of assurance work where it was materially
more efficient for the external auditor to be engaged, as
opposed to another third party, due to the work completed in
relation to the audit, and which were permitted to be performed
by an auditor under the Revised Ethical Standard 2019.
Audit-related assurance services, including the audit of the
regulatory financial statements, as well as non-audit services
performed by KPMG, are considered a low threat to auditor
independence. The proportion of other non-audit services to total
services carried out by the external auditor is therefore considered
the most suitable measure of the non-audit services provided.
These represented 0.8% of the total fees (2019/20: 2%).
The committee assessed the quality of the audit and the
performance of the external auditor throughout the year
and concluded that the audit contributed to the integrity
of the group’s financial reporting. The committee agreed
that the external auditor continues to be independent and
recommended to the Board (which was subsequently approved)
that the reappointment of KPMG be put to our shareholders for
approval at the 2021 AGM.
Internal audit
During the year, the committee:
– reviewed and approved the internal audit charter, establishing
group internal audit’s independence, authority, remit and
reporting lines to conduct its work
– reviewed and approved the annual group internal audit plan
(at the start of the year) and received regular updates on
internal audit activities, progress against the plan, details
of unsatisfactory audit findings and action plans to address
these and progress
– discussed with executive management all internal audit
reports where controls were assessed as “inadequate”
– reviewed the performance and effectiveness of the internal
audit function, including consideration of whether the quality,
experience and expertise of the function were appropriate
for the business. An external effectiveness review of internal
audit was previously conducted in 2018/19 by the Chartered
Institute of Internal Auditors in accordance with our five-year
cycle of such reviews
– reviewed the status of management actions arising from
internal audits, including those that became overdue and
ensured that these were tracked through to completion and
subject to close monitoring by management.
Ethics and compliance
The committee considered reports from the group ethics and
compliance director on BT’s ethics and compliance priorities,
including Speak Up, our confidential, whistleblowing hotline. As
part of this, there was a focus on communications regulation in
line with our group risk category, anti-bribery and corruption,
international trade, compliance learning programmes and
how these are embedded in our culture and financial services
compliance. The committee ensures that arrangements are in
place for the proportionate and independent investigation of
these and other matters, including data privacy and governance.
BT Group plc
Annual Report 2021
Corporate governance report 86
BT Compliance
Committee
Chair’s report
Isabel Hudson
Chair of the BT
Compliance Committee
12 May 2021
In responding to the unprecedented challenges of the
Covid-19 pandemic, BT and Openreach have adhered
well to the spirit and letter of the Commitments,
evidencing the resilience of the governance
arrangements and ways of working between them.
Good progress continues to be made in delivering on
the Commitments’ objectives and as BT progresses
with its transformation agenda, we will continue to
monitor the arrangements with vigilance to ensure
they continue to operate as intended.
Membership and attendance
The committee comprises independent non-executive directors
only. The company secretary or her appointed delegate acts
as secretary to the committee, and they attend all meetings
and provide advice and support as required. The chairman,
regulatory affairs director, general counsel, commitments
assurance office (CAO) director and Openreach’s commitments
monitoring office director also attend all meetings as invitees.
Member
Attended
Eligible to attend
Isabel Hudson (chair)
Ian Cheshirea
Mike Inglis
Allison Kirkbyb
4
3
4
3
4
3
4
4
a Ian joined the committee on 16 July 2020.
b Allison was unable to join one committee meeting during the year due
to other business commitments and provided her comments to the chair
ahead of the meeting.
Key responsibilities
This committee is responsible for monitoring whether Openreach’s
governance model is working as expected and achieving
appropriate outcomes for consumers and industry. It ensures that
Openreach is able to act with appropriate independence while BT
is properly able to fulfil its parent company duties.
The committee reviews BT’s compliance with the letter and
spirit of the Commitments made as part of Ofcom’s 2017 Digital
Communications Review and reviews the culture and behaviours of
colleagues. The committee continues to be supported by the CAO.
Having regard to the importance BT places on consumer
fairness for our customers, the Board approved proposals
to enhance BT’s consumer fairness governance framework,
BT Group plc
Annual Report 2021
widening the committee’s remit to include oversight of
consumer fairness matters on behalf of the Board. From 1 April
2021, the committee monitors whether BT is living up to Ofcom’s
Fairness for Customers commitments (see page 17 for more
detail on consumer fairness).
The Board receives copies of the committee’s minutes and I
report to the Board after each committee meeting. Ofcom
receives copies of minutes and each year we publish an annual
review (available at bt.com/btcc). Further details on how we
engage with Ofcom can be found on page 41.
The committee’s key responsibilities are set out in its terms
of reference available at bt.com/governance
Committee activities in 2020/21
The committee met four times during the year and has continued
to focus on the letter and the spirit of the Commitments and
how they are working in practice. The committee has focused
on processes that may affect the balance of Openreach’s
independence and BT’s oversight. I am pleased to note that
the Commitments proved resilient in the face of the
Covid-19 pandemic.
The committee reviewed and discussed:
– BT’s second independent cultural maturity survey which
reported significant improvements and that Openreach has
become culturally more independent since 2018. While the
Openreach/BT parent company relationship has improved,
there needs to be continued focus on the Openreach/
customer-facing units' dynamic. The committee has sought
updates on the actions and has engaged with industry
stakeholders on their perspectives on the Commitments.
– the outputs of an independent assessment on the
effectiveness of BT’s monitoring framework, tools and
capabilities, which were generally found to be robust. The
committee discussed recommendations to enhance these,
including the effectiveness and proportionality of information
sharing controls.
– how intended outcomes are being delivered including on
BT’s investment in fibre and the delivery of the broadband
Universal Service Obligation. The regulatory affairs and
CAO directors reported on key activities and priorities at
each meeting. The CAO reviewed whether BT’s responses
to Covid-19 aligned with expectations. The committee
was pleased to note that as BT adapted ways of working
to safeguard colleagues and customers, and respond to
operational and financial challenges, colleagues continued
to adhere to the letter and spirit of the Commitments. As
BT progresses its strategic initiatives and makes new senior
appointments, the committee will continue to monitor the
alignment of BT’s leadership with the Commitments. The
committee also considered the CAO’s reviews of financial
planning, strategy development and commercial processes,
and the outcomes of its compliance “quick checks”. The
committee decided on all the potential Commitments
breaches reported to the CAO by BT and where appropriate
discussed remedial actions. Breaches and process non-
conformances remain at a low level in nature and number.
– how Openreach and BT share commercial information
and support management in improving the quality of the
reporting on this. The committee invited BT and Openreach
to brief it on the lessons learned and remedial actions in train
following Ofcom’s finding that Openreach had not given a
competing company the same information as BT’s own bid
team during the tender for a public sector telecoms contract
in Northern Ireland in 2017/18 (see page 17). The committee
also considered reports from group internal audit focusing on
Commitments focused audits.
87
Digital Impact &
Sustainability Committee
Chair’s report
After each meeting, I report back to the Board on the
committee’s activities and the main issues discussed, with
the Board receiving copies of the committee’s minutes.
The committee’s key responsibilities are set out in its terms
of reference available at bt.com/governance
Leena Nair
Chair of the Digital
Impact & Sustainability
Committee
12 May 2021
This year, it has been great to see the launch of the
group’s new purpose and strategy, which places
digital impact and sustainability at the heart of
everything the business does.
Membership and attendance
The committee comprises independent non-executive directors
and the chairman. The company secretary or her appointed
delegate acts as secretary to the committee, and they attend all
meetings and provide advice and support as required. The HR
director, corporate affairs director and director of digital impact
& sustainability also attend all meetings as invitees.
Member
Leena Nair (chair)
Jan du Plessis
Isabel Hudson
Mike Inglis
Sara Wellera
Attended
Eligible to attend
4
4
4
4
2
4
4
4
4
3
a Sara joined the committee on 16 July 2020. Sara was unable to attend one
committee meeting during the year, due to a prior business commitment which she
had notified us of prior to her appointment.
Key responsibilities
This is my first full year as committee chair. During what has been
a difficult year for so many, it’s been encouraging to see BT step
up to the challenge to help our colleagues, our communities and
the country. This includes its support for critical health services,
key workers and building digital skills for school children,
small businesses and jobseekers. BT has continued to focus on
tackling climate change, championing human rights and keeping
people safe online through its responsible tech approach. As a
core part of the strategy, with the outcome of related KPIs being
annual bonus measures, progress in this area helps to build trust
and create value for all stakeholders.
The committee is responsible for agreeing the digital impact and
sustainability strategy for the group. It monitors progress on the
strategy and supporting goals covering digital skills, human and
digital rights, climate change and the environment, fundraising
and volunteering.
Committee activities in 2020/21
The committee met four times during the year and, focused
on our digital impact and sustainability strategy, considering
and discussing:
Digital impact
The reach and impact of the Skills for Tomorrow programme and
its pivot to become ‘digital-first’ during the Covid-19 pandemic,
as well as the related KPI (see pages 31 and 47). The committee
considered BT’s role as a national enabler in helping people
improve their digital skills, including our targeted programmes
for school children, families, jobseekers, SMEs and vulnerable
customers, and how the programme is helping to drive positive
societal outcomes, as well as strengthening relationships with
our customers and supporting their priorities.
Responsible tech and human rights
The progress on BT’s human rights programme, how human
rights are respected across the group’s operations and
supply chain, as well as efforts to tackle modern slavery, and
the introduction of a forward-looking and principles-based
approach to responsible tech. The committee endorsed
BT’s commitment to consistently develop, use, buy and sell
technology in a way that benefits people and minimises harm.
Climate and the environment
The progress on BT’s climate strategy and efforts to meet
our decarbonisation target of an 87% reduction in carbon
emissions intensity by the end of March 2031, Openreach’s
decarbonisation targets and the progress made in transitioning
its commercial vehicle fleet to run on electric or alternative fuels
(see pages 32, 33 and 47). The committee was also updated on
the launch of the UK Electric Fleets Coalition, which has been
co-founded by BT (including Openreach) and The Climate
Group with the aim of influencing policy and to accelerate
the transition to electric vehicles.
The committee also discussed the approach to the 2021
COP26 climate summit and BT’s plans, including a presentation
and discussion with an external expert. During the year,
the committee also monitored BT’s efforts to address the
recommendations of the Task Force on Climate-related
Financial Disclosures. Further details on how BT is
implementing this can be found on page 67.
Vulnerable customers
The accessibility, inclusion and vulnerability programme within
Consumer and the ongoing focus in this area. Further details on
how BT supports our customers can be found on pages 26 to 29.
Stakeholder engagement
BT’s approach to understanding the interests of our key
stakeholders and how this is reflected in the digital impact
and sustainability strategy, our external reporting, and our
engagement with stakeholders going forward in a landscape of
increasing focus on environmental, social and governance factors.
Supply chain
Programmes and initiatives that are in place across the group to
manage risks within our supply chain. The committee was kept
updated on how we mitigate risks within our supply chain and
in ensuring BT remains a responsible and sustainable business.
Further details on our engagement with suppliers can be found
on pages 39 to 40 and more details on our digital impact and
sustainability strategy and targets can be found on pages 30
to 33, and 47.
BT Group plc
Annual Report 2021
Corporate governance report 88
Report on directors’
remuneration
Committee chair’s letter
Sir Ian Cheshire
Chair of the Remuneration
Committee
12 May 2021
During what has been an extraordinary year
for everyone, not just for BT, the committee has
recognised the commitment and contribution
of our entire workforce. We’ve also ensured that any
remuneration decisions taken during the year are in
line with the new Directors’ Remuneration Policy.
Contents
Committee chair’s letter
Review of the year; committee decisions; key outturns and plans
for the year ahead – pages 88 to 90.
Focus on remuneration
The key aspects of our remuneration structure, outcomes for
2020/21 and implementation of the Directors’ Remuneration
Policy (Policy) in 2021/22 – pages 91 to 93.
Annual remuneration report
More detail on how we have implemented our Policy during
2020/21 including the single figure of remuneration for each
director – pages 94 to 102.
Remuneration in context
How we take account of remuneration conditions across the
group – pages 103 to 104.
Membership and attendance
The committee comprises five independent non-executive
directors only. The company secretary or her appointed
delegate acts as secretary to the committee, and they attend
all meetings and provide advice and support as required.
The chairman, chief executive, group HR director and director
of reward are typically invited to attend meetings. None of
the above attends meetings where their own remuneration is
discussed or in other circumstances where their attendance
would not be appropriate.
Deloitte LLP, as the independent remuneration adviser to the
committee, also attends all meetings.
The committee held four scheduled meetings during the
year and four ad hoc meetings. The ad hoc meetings have
predominantly been focused on remuneration arrangements as
a result of changes to the Executive Committee.
Member
Attended
Eligible to attend
Ian Cheshire (chair)a
Iain Connb
Isabel Hudson
Mike Inglisc
Matthew Key
Leena Nair
Nick Rosed
4
3
4
2
4
4
2
4
3
4
2
4
4
2
a Ian became committee chair on 16 July 2020.
b Iain joined the committee on 16 July 2020.
c Mike stepped down from the committee on 16 July 2020.
d Nick stepped down from the committee and as committee chair on 16 July 2020.
Key responsibilities
– Determines the salary and benefits for the executive directors,
members of the Executive Committee and the company
secretary, and monitors remuneration practices and policies
for the wider workforce
– Operation of the annual bonus scheme for senior executives,
including setting performance targets for the year ahead
– Determines awards under the annual bonus scheme for
senior executives
– Governance of the company’s long-term incentive plans
– Reviews and approves the Report on directors’ remuneration
for inclusion in the Annual Report
– Reviews and approves the Policy including seeking
shareholder approval, on a binding basis, at least every
three years
– Ensures that all remuneration decisions are made within the
parameters of the approved Policy and align with our reward
philosophy and our values. No senior executive is involved in
any decision about their own remuneration.
After each meeting, I report back to the Board on the
committee’s activities and the main issues discussed.
The committee’s key responsibilities are set out in its
terms of reference available at bt.com/governance
BT Group plc
Annual Report 2021
This is my first letter since becoming the remuneration
committee chair and I would like to start by thanking Nick Rose,
the former committee chair, for his seamless handover and for
securing strong shareholder support for BT’s new Directors’
Remuneration Policy (Policy) at the 2020 Annual General
Meeting (AGM). I must admit that I had envisaged a relatively
quiet year implementing the new Policy across the business.
However, it has been an extraordinary year, and the committee
has spent much of its time focused on five key areas: purpose,
people, the pandemic, performance and Policy.
Purpose, people, and the pandemic
“We connect for good”, BT’s purpose, has really been brought
to life during the pandemic. Despite the surge in demand on
our fixed-line, broadband, and mobile networks, BT kept our
customers and the country connected. BT also played a vital role
in supporting the NHS by connecting the Nightingale hospitals
and testing centres, rolling out our high-speed network to
vaccination centres, keeping the Emergency Services Network
working 24/7, and gifting unlimited data to NHS workers to
show our appreciation of their valiant work.
Achieving this required an enormous amount of effort and
commitment from our entire workforce. A special mention must
be made of our frontline colleagues and key workers such as
the Openreach engineers, who have worked around the clock
to install services and repair technical faults, our call centre
colleagues who assisted our customers, and the retail teams
that kept our EE/BT retail shops running where possible.
At the start of the pandemic, the chief executive made a
commitment that BT would support the wellbeing of our
colleagues as best it could, and that no colleague would lose
their job as a direct result of changing trading conditions
brought about by Covid-19. I am pleased to say that we
delivered on this promise. Despite the challenges we have
faced, we have continued to invest in our network, we have
not needed to make use of the Government’s furlough scheme,
and we have created new jobs in Openreach at a time when
many companies have cut employees’ pay, cut working hours
and made redundancies. Like many other companies, we did
expect our profits to be lower than last year given the impact
of Covid-19 on the global economy, however the committee
and the Executive Committee felt it was important to reward
our colleagues and to recognise their commitment and
contribution during an extraordinarily challenging year. All
frontline colleagues and key workers will receive a special
one-off cash bonus of £1,000, and all eligible colleagues will
receive £500 worth of shares that vest after three years.
We took the difficult decision to freeze executive salaries for
a second consecutive year and, despite the higher formulaic
outturn of 129% of target, the committee exercised its discretion
to cap executive bonuses at 100% of target in line with the chief
executive’s recommendation. In addition, all members of the
Executive Committee have for a second year voluntarily agreed
to defer all of their annual bonus into shares for three years. This
means that executives have not received cash bonuses for the
last two years. As announced in April 2020, the chief executive
also donated six months of his salary to health charities and
small businesses in his local community.
During the year, there were a few changes to the Executive
Committee as mentioned by Philip Jansen in his introduction on
page 7. The committee considered and approved competitive
remuneration packages for the new joiners and the treatment to
be applied for leavers.
89
Performance and executive remuneration
outcomes for 2020/21
Annual bonus performance was based on a scorecard
of seven key financial and non-financial measures that
align to our strategic priorities. All targets were set at the
start of the financial year based on a forecast impact of
the Covid-19 pandemic. Acknowledging the significant
uncertainty caused by the pandemic at the time the targets
were set, the committee reviewed the measures and
targets in the middle of the year. No adjustments to the
targets were made as a result of the Covid-19 pandemic.
Financial performance accounts for 70% of the bonus scorecard:
– EBITDA (35%) – the outcome was in line with our expectations
at £7,415m and came in between target and stretch. Despite
pressures on our revenue, we continued to see benefits from
our simplification and transformation programme.
– Normalised free cash flow (35%) – the outcome was £1,459m
which was also between target and stretch.
Our non-financial measures account for 30% of the bonus
scorecard and comprise the following:
– Customer (10%) – our colleagues have worked hard to deliver
standout customer experience during the year, and the overall
group Net Promoter Score (NPS) saw its 19th consecutive
quarterly improvement, with Consumer and Global results at
an all-time high.
– Converged networks (10%) – Openreach worked hard to
maintain FTTP connection rates despite multiple lockdowns
and delivered performance between target and stretch. We
took advantage of new product launches to drive sales of our
5G tariffs and handsets and significantly exceeded our 5G
customers stretch target.
– Digital impact (5%) – as Covid-19 hit, we successfully pivoted
to a digital-first model for Skills for Tomorrow, delivering
campaigns designed to help small businesses and families,
as well as Stand Out Skills, focusing on providing support
to jobseekers. We also launched our Top Tips on Tech TV
campaign, which reached an incredible 5.7m people. As this
campaign was not foreseen at the time the target was set, we
removed it from our scorecard results – however the number
of people reached through our other delivery channels still
exceeded our stretch goal for the year.
– Sustainability (5%) – significant progress has been made
towards reducing our carbon emissions intensity; putting
in the foundations for accelerated fleet electrification and
switching to purchasing 100% renewable electricity globally.
While Covid-19 has had a positive impact on our emissions
during the year due to factors such as increased homeworking
and reduced vehicle usage, our underlying performance for
the year excluding the impact of Covid-19 was still between
target and stretch. We are on-track to meet our KPI of an
87% reduction in carbon emissions intensity by the end of
March 2031.
When determining overall performance and bonus pay-outs, the
committee also considers a number of other factors including
share price performance, the external environment and overall
affordability. Given ongoing cost constraints, pay freezes across
the organisation and continued economic uncertainty, despite
the formulaic outturn of the final bonus scorecard being 129% of
target, the committee exercised its discretion to cap executive
bonuses at 100% of target in line with the chief executive’s
recommendation. The committee also believes this is a fair
outturn given the overall performance of the business under
challenging conditions.
BT Group plc
Annual Report 2021
Corporate governance report Other matters
The committee receives regular updates on HR policies and
reward practices for the wider workforce as well as updates
on employee relations. The committee takes account of
these factors when making decisions relating to executive
remuneration.
During the year, Isabel Hudson, as the designated non-
executive director for workforce engagement, also fed back any
comments to the committee on sentiments being raised by our
colleagues in relation to the remuneration of our workforce and
related decisions, as raised by the Colleague Board through their
‘hot topics’ discussions at their meetings.
We increased our focus on race equality and launched our
Ethnicity Rapid Action Plan, which was set up to help improve
diversity and inclusion across BT. As part of this plan we have
elected to voluntarily undertake our first ethnicity pay gap, in
addition to the mandatory gender pay gap. The result of the
ethnicity pay gap will be included in our inaugural Diversity and
Inclusion Report, which is to be published in early summer 2021.
Following the Policy review, the change in the committee chair
during the year and as agreed by the committee as part of last
year’s internal committee evaluation, we decided that it was
timely and in good order to run a competitive tender for the
appointment of advisers to the committee. Further to this,
Deloitte were successful in retaining their appointment and
the committee is satisfied that Deloitte continues to provide
independent and objective advice.
As always, the committee and I wish to maintain an open
dialogue on remuneration matters with our investors and
I would welcome their comments or feedback and support
at the forthcoming AGM.
Sir Ian Cheshire
Chair of the Remuneration Committee
12 May 2021
90
Report on directors’ remuneration
Committee chair’s letter continued
Accordingly, the chief executive and chief financial officer will be
awarded bonuses of £1,320,000 and £882,526 respectively. As
was the case last year, both executive directors have volunteered
to defer their annual bonuses in full into shares for three years.
The 2018 Incentive Share Plan (ISP) award will lapse in full in
May 2021 as we did not meet the threshold performance target
in respect of each measure over the last three years.
Policy implementation in 2021/22
a) Salary
As outlined above, we have made the decision this year to
not increase base salaries for the management population.
Accordingly, the chief executive and the chief financial officer
will not receive a salary increase in June 2021.
b) Pension
As set out in our Policy last year, Simon Lowth’s pension
allowance was reduced to 15% of salary from 1 April 2021 and
will further reduce to 10% of salary from 1 April 2022, which will
fully align him with the rate offered to the majority of our UK
workforce. Philip Jansen’s pension allowance remains at 10%
of salary.
c) Annual bonus
We have reviewed the bonus scorecard measures and
weightings and determined that they remain well-aligned to
our strategic priorities for the coming year. The committee
is satisfied that they represent a meaningful balance of
financial performance measures and our broader strategic
priorities, including the impact we make for our customers
and society. The same group bonus scorecard applies to all
eligible managers, so everyone is focused on and aligned to
the same goals. Openreach managers have a similar bonus
scorecard but it is based on Openreach performance to
maintain independence and to reflect our Commitments.
No changes are proposed to the structure of the annual bonus
plan: the on-target and maximum opportunity will remain at
120% and 200% of salary for both executive directors, with
half deferred for a period of three years.
d) Long‑term incentives
Awards will be made to both the chief executive and chief
financial officer in June 2021 under our Restricted Share Plan
(RSP). The committee considers the level of such awards each
year, taking into consideration several factors, including the
share price performance over the preceding year. In 2020,
the level of awards granted was reduced from the normal
Policy level of 200% of salary to 160% of salary due to share
price performance and the decision to suspend the dividend
until 2021/22. Since then, our share price has recovered,
with performance above that of the FTSE 100 index, and the
committee has therefore agreed that awards would be granted
to both executive directors this year at the normal Policy level
of 200% of salary.
Awards will vest in three equal tranches after three, four and five
years, and no tranche may be sold until year five. As per last year,
awards are subject to both return on capital employed (ROCE)
and environmental, social and governance (ESG) underpins
(see page 96), and the committee retains ultimate discretion
to adjust the vesting outcome if considered appropriate.
BT Group plc
Annual Report 2021
91
Focus on remuneration
Our remuneration principles are to maintain a competitive remuneration package that
promotes the long-term success of the business, avoids excessive or inappropriate risk
taking and aligns management’s interests with those of shareholders.
Below is how remuneration is aligned with the
principles of the Code.
Clarity
– Our remuneration framework is structured to support the
financial and strategic objectives of the company, aligning
the interests of our executive directors with those of
our shareholders
– We are committed to transparent communication with all our
stakeholders, including our shareholders
Risk
– Our incentives are structured to align with the company’s risk
management framework
– The three-year deferral under the annual bonus and having
no release of RSP awards until five years from the date of
award create long-term alignment, as do our in- and post-
employment shareholding requirements
– The annual bonus, deferred bonus and RSP also incorporate
malus and clawback provisions, and there is overarching
committee discretion to adjust formulaic outcomes.
– Performance for senior management and all other managers
is measured against a single consistent scorecard.
Proportionality
Predictability
– The long-term RSP reflects that we operate in a tightly regulated
environment, ensuring a narrower but more predictable
range of reward and performance outcomes to align with
our business model.
Simplicity
– We operate a simple but effective remuneration framework
which is applied on a consistent basis for all employees
– The annual bonus rewards performance against key
performance indicators, while the RSP provides long-term
sustainable alignment with our shareholders
– There is clear alignment between the performance of the
company, the business strategy, and the reward paid to
executive directors
– Target total compensation levels are set competitively
compared to other companies of similar size and complexity
to ensure we can attract and retain the executives needed
to deliver the business strategy. However, the maximum
total compensation levels are set lower than typical market
practice to reflect the narrower and more predictable range
of performance outcomes for BT
– Formulaic incentive outcomes are reviewed by the committee
and may be adjusted having consideration to overall group
performance and wider workforce remuneration policies
and practices.
– There is clear line of sight for management and shareholders.
Alignment to culture
Directors’ Remuneration Policy (Policy)
The Policy as approved by shareholders at the AGM on 16 July 2020
in accordance with section 439A of the Companies Act 2006 can be
found online at bt.com/annualreport
Legacy matters
The committee can make remuneration payments and payments for
loss of office outside of the Policy where the terms of the payment
were agreed (i) before the Policy came into effect, provided that the
terms of the payment were consistent with any applicable policy in
force at the time they were agreed, or (ii) at a time when the relevant
individual was not a director of the company (or another person to
whom the Policy applied) and that, in the opinion of the committee,
– When considering performance, the committee takes account
of BT’s values
– The committee receives regular updates on pay conditions
across the company, and colleagues may provide feedback to
the Board via the Colleague Board and the designated non-
executive director for workforce engagement
– All-employee share plans help encourage our colleagues to
become shareholders in the business.
the payment was not in consideration for the individual becoming
a director of the company (or taking on such other applicable
position). This includes the exercise of any discretion available to the
committee in connection with such payments. For these purposes,
payments include the committee satisfying awards of variable
remuneration and, in relation to an award over shares, the terms
of the payment are agreed at the time the award is granted.
Minor amendments
The committee may make minor amendments to the arrangements
for the directors as described in the Policy, for regulatory, exchange
control, tax or administrative purposes, or to take account of a
change in legislation.
BT Group plc
Annual Report 2021
Corporate governance report 92
Focus on remuneration continued
F
V
Look out for these
icons in the Report on
directors’ remuneration
to distinguish the
different types of pay.
Fixed pay
Base salary
Pension allowance
Benefits
Variable pay
Annual bonus
RSP awards
Remuneration earned in 2020/21
Philip Jansen
Chief executive
£000
3,500
3,500
3,000
3,000
2,500
2,500
2,000
2,000
1,308
1,308
1,500
1,500
1,000
1,000
500
0
1,320
500
1,320
0
1,379
1,379
1,869
1,869
Simon Lowth
Chief financial officer
£000
3,500
3,500
3,000
3,000
2,500
2,500
2,000
2,000
F Base salary
Pension
Benefits
Total fixed pay
V Annual bonus (shares)
Annual bonus (cash)a
ISP (shares)b,c
RSP (shares)d
Total variable pay
2020/21
£000
2019/20
£000
1,100
110
98
1,308
1,320
0
0
n/a
1,320
1,100
165
114
1,379
1,320
0
n/a
549
1,869
F Base salary
Pension
Benefits
Total fixed pay
V Annual bonus (shares)
Annual bonus (cash)a
ISP (shares)c
Total variable pay
1,500
1,500
905
1,000
1,000
905
976
976
500
500
883
883
900
900
0
0
2020/21
£000
2019/20
£000
735
147
23
905
883
0
0
883
732
220
24
976
900
0
0
900
Total
2,628
3,248
Total
1,788
1,876
a The executive directors have again voluntarily agreed to defer all
c The group returned below threshold performance against all the
their bonus for 2020/21 into shares for three years.
b Philip’s first ISP award was made in February 2019.
performance measures for the 2018 ISP. The awards will lapse in full.
d The buyout award granted to Philip on appointment to compensate
him for his loss in shares forfeited from Worldpay.
Performance outcomes in 2020/21
Annual bonus 2020/21
Measure
Payout (% of max)
– Bonus was subject to seven measures of financial and non-
Adjusted EBITDA
financial performance
– EBITDA and cashflow performance was between target and
stretch despite challenging circumstances
– Performance under each of the non-financial measures was
either close to or above our stretch targets
– This resulted in a formulaic outcome of 129% of target.
However, the committee exercised its discretion to cap
executive bonuses at 100% of target in line with the chief
executive’s recommendation
– In line with the commitment made last year, the executive
directors have again voluntarily agreed to defer all their bonus
for 2020/21 into shares for three years.
Normalised free cash flow
Group Net Promoter Score (NPS)
5G customers
FTTP connections
Carbon emissions
Skills for Tomorrow
2018 ISP
Measure
Payout (% of max)
– Awards are subject to three performance measures
Total shareholder return (TSR)
– Performance was below threshold, so the awards will lapse
in full.
Normalised free cash flow
Underlying revenue growth
(excluding transit)
70%
70%
99%
100%
87%
80%
100%
0%
0%
0%
BT Group plc
Annual Report 2021
93
Implementation of the Policy in 2021/22
F Fixed pay
V Annual bonus
V RSP
Philip Jansen
(Chief executive)
Simon Lowth
(Chief financial officer)
Salary – £1,100,000
Benefits
Pension – 10% of salary
Salary – £735,438
Benefits
Pension – 15% of salarya
Performance
measures
n/a
Framework
n/a
a This will reduce to 10% of salary in 2022/23.
Max. opportunity – 200% of salary
Target opportunity – 120% of salary
2021 award – 200% of salary
Max. opportunity – 200% of salary
Target opportunity – 120% of salary
2021 award – 200% of salary
Adjusted EBITDA (35%)
Normalised free cash flow (35%)
Customer experience (10%)
Converged networks (10%)
Digital impact & sustainability (10%)
Awards subject to two underpins over the
initial three-year vesting period:
– ROCE is equal to or exceeds WACC
– No ESG issues resulting in material
reputational damage
– 50% of any bonus payment for
2021/22 will be deferred into shares
for three years
– Awards vest in three equal tranches after
three, four and five years; no shares can
be sold until year five
– Malus and clawback provisions apply
– Full committee discretion available
– Malus and clawback provisions apply
– Full committee discretion available
Illustration of Policy
2021/22
2022/23
2023/24
2024/25
2025/26
2026/27
2027/28
2028/29
Fixed pay
Base salary
Pension allowance
Benefits
Annual bonusa
50% cash
50% deferred shares
50% of the bonus deferred for three years
Tranche 1
RSP awards
Tranche 2
Tranche 3
No shares
may be
sold until
year five
Underpins apply over three years
Malus and clawback up to two years after vesting of each tranche
a All seven of the annual bonus measures are linked to our key performance indicators (KPIs) as set out on pages 46 to 47.
BT Group plc
Annual Report 2021
Corporate governance report 94
Annual remuneration report
This section summarises all elements of the directors’ remuneration in 2020/21.
References to ‘audited’ refer to an audit performed in accordance with UK statutory reporting requirements.
Single total figure of remuneration (audited)
The following table sets out all emoluments received by directors for the financial years 2020/21 and 2019/20, including bonus and
deferred bonus, long-term incentive plans and pension arrangements.
F Fixed pay
V Variable pay
Basic salary
and fees
£000
Benefitsa
£000
Pensionb
£000
Total
fixed pay
£000
Annual
bonusc
£000
Long-term
incentives
£000
Total
variable
pay
£000
Total
£000
2020/21
2019/20
2020/21
2019/20
2020/21
2019/20
2020/21
2019/20
2020/21
2019/20
2020/21d,e
2019/20f
2020/21
2019/20
2020/21
2019/20
Chairman
Jan du Plessis
700
700
8
18
708
718
708
718
Executive directors
Philip Jansen
1,100
1,100
Simon Lowth
735
732
98
23
114
24
110
147
165
1,308
1,379
1,320
1,320
220
905
976
883
900
–
–
549
1,320
1,869
2,628
3,248
–
883
900
1,788
1,876
Non‑executive directors
Adel Al-Salehg
–
Ian Cheshire
Iain Conn
121
150
Isabel Hudsonh
145
Mike Inglish
Matthew Keyh
Allison Kirkby
Leena Nair
Sara Welleri
136
134
124
116
85
–
4
112
139
132
119
117
82
0
1
3
3
1
–
121
150
146
136
134
124
116
85
–
4
112
142
135
120
117
82
0
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
121
150
146
136
134
124
116
85
–
4
112
142
135
120
117
82
0
Sub‑total
3,546
3,237
130
163
257
385
3,933
3,785
2,203
2,220
0
549
2,203
2,769
6,136
6,554
Former directors
Tim Höttgesj
Nick Rosek
–
52
–
178
2
–
52
–
180
–
52
–
180
Total
3,598
3,415
130
165
257
385
3,985
3,965
2,203
2,220
0
549
2,203
2,769
6,188
6,734
a Benefits provided to the executive directors and the chairman typically include (but are not limited to) car benefits (which may include any of a company provided car, cash
allowance in lieu, fuel allowance, and driver), personal telecommunication facilities and home security, medical and dental cover for the directors and their immediate
family, life cover, professional subscriptions, personal tax advice and financial counselling up to a maximum of £5,000 (excluding VAT) per year. For the chief executive, the
value for 2020/21 includes a company provided car and personal driver to the value of c. £63,000.
b Pension allowance paid in cash for the financial year – see ̒ Total pension entitlements’ on page 95.
c Annual bonus shown includes both the cash and deferred share element. The deferred element of the 2020/21 bonus includes the value of deferred shares to be granted in
June 2021. Further details of the deferred element are set out below.
d The ISP 2018 granted in June 2018 to Simon and in February 2019 to Philip will lapse in full. Further details are provided on page 98.
e The ISP 2017 granted in June 2017 lapsed in full in May 2020.
f The RSP 2019 granted on Philip’s appointment vested on 20 March 2020.
g Adel was appointed as a director on 15 May 2020. Under the terms of the Relationship Agreement between BT and Deutsche Telekom and Adel’s letter of appointment, no
remuneration is payable for this position.
h Value shown relates to reimbursement of reasonable travelling and other expenses (including any relevant tax) incurred in carrying out their duties.
i Sara was appointed as a director on 16 July 2020 and the figure represents her pro-rated remuneration during the year.
j Tim stepped down as a director on 15 May 2020.
k Nick stepped down as a director on 16 July 2020 and the figure represents his pro-rated remuneration during the year.
Additional disclosures relating to the single figure table (audited)
Salaries and fees
Executive directors’ salaries are reviewed annually, with any increases typically effective from 1 June. No salary increases were made
for our UK management population in June 2020 and accordingly Simon’s base salary remained at £735,438. Philip Jansen’s salary
of £1,100,000 was fixed for five years at the time of his appointment in January 2019.
The fees for non-executive directors reflect committee-related or other additional responsibilities, including on a pro-rated basis
for any appointments during the year. The chairman and executive directors reviewed the fees for non-executive directors during the
year and agreed that there would be no fee increases for the non-executive directors. The chairman’s fees were agreed to be fixed
for five years on appointment as chairman in November 2017. A full breakdown of non-executive director fees is set out on page 100.
BT Group plc
Annual Report 2021
95
Total pension entitlements
We closed the BT Pension Scheme (BTPS) for most members on 30 June 2018. None of the executive directors participate in future
service accrual in the BTPS.
New UK employees are eligible to join a defined contribution scheme, typically a personal pension plan. For executive directors, the
company agrees to pay a fixed percentage of their salary each year which can be put towards the provision of retirement benefits.
During the year, Philip Jansen received an annual allowance equal to 10% of salary in lieu of pension provision as set out in the table
on page 94. BT also provides death in service cover consisting of a lump sum equal to four times his salary.
During the year, Simon Lowth received an annual allowance equal to 20% of salary in lieu of pension provision as set out in the table
on page 94. This will further reduce to 15% of salary in 2021/22 and 10% of salary in 2022/23. BT also provides death in service cover
consisting of a lump sum equal to four times his salary plus a dependants pension equal to 30% of his capped salary.
Annual bonus
Both executive directors were eligible for an on-target bonus in respect of 2020/21 of 120% of salary with a maximum opportunity of
200% of salary. The annual bonus is based on performance against a scorecard of seven key financial and non-financial measures.
Category
Measure
Weighting Threshold
Target
Stretch
Actual
Payout (% of max)
Financial
Adjusted EBITDA (£m)
35%
6,936
7,301
7,849
7,415
Normalised free cash flow (£m) 35%
1,352
1,423
1,566
1,459
Customer
NPS
10%
50
Converged
networks
5G customers (000s)
FTTP connections (000s)
Digital impact
& sustainability
Carbon emissions
5%
5%
5%
100
664
861
200
730
927
199
1,403
905
587
720
(50)%
(52)%
(54)%
(53)%
Skills for Tomorrow (people)
5%
2.9m
3.0m
3.1m
4.3m
70%
70%
99%
100%
87%
80%
100%
All targets were set at the start of the financial year based on
a forecast impact of the Covid-19 pandemic. The committee
reviewed the measures and targets in the middle of the year
to ensure they remained appropriate. No adjustments to the
targets were made as a result of the Covid-19 pandemic.
Performance under both financial measures was between
target and stretch despite challenging circumstances. Likewise,
performance against the non-financial measures was strong,
with all measures coming either close to or above our
stretch targets.
Significant progress was made towards reducing our carbon
emissions intensity; putting in the foundations for accelerated
fleet electrification and switching to purchasing 100%
renewable electricity globally. The final outcome on our
carbon emissions measure was a 57% reduction on our baseline.
However, this included the positive impact of Covid-19 as a
result of increased homeworking and reduced vehicle usage.
For scorecard purposes we used the underlying figure of 53%,
which was between target and stretch.
recommendation. The committee also believes this is a fair
outturn given the overall performance of the business under
challenging conditions.
The final bonus outturns for the executive directors are set out in
the table below:
Formulaic
outcome
Following
discretion
% of
max
Value
Philip Jansen
Simon Lowth
129% of
target
129% of
target
100% of
target
100% of
target
60% £1,320,000
60%
£882,526
As previously agreed, the chief executive’s and chief financial
officer’s bonus for 2020/21 will be deferred in full into shares
for three years. This means that the executive directors have
not taken any cash bonuses for two consecutive years. Other
members of the Executive Committee have also voluntarily
agreed to defer all of their annual bonus into shares for a
second consecutive year.
In addition to the 4.3m people reached through our Skills for
Tomorrow programme, our successful Top Tips on Tech TV
campaign also reached 5.7m people. This was not included in
the scorecard results as it was not envisaged at the time the
targets were set.
This resulted in a formulaic outcome of 129% of target. When
considering bonus outcomes each year, the committee
takes account of a number of factors including share
price performance, the external environment and overall
affordability. Given ongoing cost constraints, pay freezes
across the organisation and continued economic uncertainty,
the committee exercised its discretion to cap executive
bonuses at 100% of target in line with the chief executive’s
BT Group plc
Annual Report 2021
Corporate governance report 96
Annual remuneration report continued
2018 ISP
2020 deferred shares
The ISP is a conditional share award. The committee assesses
the performance conditions to 31 March 2021 and the awards
would ordinarily vest in May 2021. The performance conditions
are based 40% on relative TSR, 40% on normalised free cash
flow, and 20% on growth in underlying revenue (excluding
transit) over a three-year performance period from 1 April 2018
to 31 March 2021. As set out in the table below, the threshold
performance target in respect of each measure was not met and
therefore the awards lapsed in full and no payment was made.
The full bonus awarded for 2019/20 was deferred into shares.
The awards were made in June 2020 as set out below and on
page 98. The face value is based on the BT share price at the
date of grant of 119.27p. The grant price is calculated using the
average middle-market price of a BT share for the three dealing
days prior to grant.
Director
Date of
award
Number of
deferred
shares
Face value
of award
Measure
Weighting Threshold Maximum
Actual
Payout
(% of
max)
Philip Jansen
25 June 2020
1,106,763
£1,320,000
Simon Lowth
25 June 2020
754,759
£900,176
TSR (rank)
40%
9th
5th
14th
0%
Normalised free
cash flow (£bn)
Underlying
revenue growth
(excluding transit)
(%)
40%
£6.4
£7.4
£5.9
0%
20%
0.2
1.9
(7.1)
0%
Awards granted during the year (audited)
2020 RSP
The 2020 RSP awards were made in August 2020 as set out
below and on page 98. An award of 160% of salary was made to
both executive directors, which represented a 20% discount to
the normal level permitted under the Policy. The face value is
based on the BT share price at the date of grant of 106.11p. The
grant price is calculated using the average middle-market price
of a BT share for the three dealing days prior to grant.
Director
Date of
award
RSP award
(shares)
Face value
of award
Philip Jansen
3 August 2020
1,658,656
£1,760,000
Simon Lowth
3 August 2020
1,108,944
£1,176,700
These awards are conditional share awards without any
performance targets. Two underpins will apply over the initial
three-year vesting period, as follows:
– ROCE is equal to or exceeds WACC over the same period
– there must have been no ESG issues which have resulted in
material reputational damage for the company.
Should one or both underpins not be met, the committee may
at its discretion reduce the number of shares vesting, including
to nil.
The RSP awards will vest in three equal tranches after three,
four and five years. A holding period will apply such that no
shares may be sold until year five. When RSP awards vest,
additional shares representing the value of reinvested
dividends on the underlying shares are added.
RSP awards are subject to malus and clawback provisions as
set out in the Policy, and the committee retains the ultimate
discretion to adjust vesting levels in exceptional circumstances,
should they not reflect the overall performance.
Details of all interests under the RSP are set out on page 98.
BT Group plc
Annual Report 2021
Deferred shares are not subject to performance conditions
and have a three-year vesting period. Details of all interests in
deferred shares are set out on page 98.
When deferred share awards vest, additional shares
representing the value of reinvested dividends on the underlying
shares are added.
Payments for loss of office (audited)
No payments were made to directors during the year for loss
of office.
Former directors (audited)
No payments were made to former directors during the year.
Directors’ share ownership (audited)
The committee believes that the interests of the executive
directors should be closely aligned with those of shareholders.
The aim is to encourage the build-up of a meaningful
shareholding in the company over time by retaining shares
received through the executive share plans (other than shares
sold to meet tax and other statutory deductions) or from
purchases in the market.
The shareholding requirement for both executive directors
increased to 500% of salary under the new Policy.
Executive directors must achieve the increased shareholding
guideline within five years of the approval of the Policy or, in the
case of any new executive directors appointed, within five years
of their date of appointment.
The shareholding requirement will continue to apply for a period
of two years post-cessation of employment, to the same value as
in employment (or the total number of shares held immediately
prior to cessation of employment, if lower). The post-cessation
shareholding requirement will be calculated and expressed as
a fixed number of shares by reference to the closing BT share
price on the day immediately prior to the cessation date. The
requirement is fixed as this number of shares for a period of two
years and compliance will be measured at cessation and annually
thereafter. In enforcing continued compliance post-cessation,
the committee may request that the executive director transfers
any shares subject to the shareholding requirement to be held in
trust by the company until such time that they no longer need to
be retained.
The company encourages the chairman and independent
non-executive directors to purchase, on a voluntary basis, BT
shares with an aggregate value of £5,000 on average each year
(based on acquisition price) to further align the interests of non-
executive directors with those of our shareholders. The directors
97
are asked to hold these shares until they cease being a member
of the Board. This policy is not mandatory.
This policy does not apply to the Deutsche Telekom nominated
representative director appointed to the Board as a non-
independent, non-executive director under the terms of the
EE acquisition in January 2016. This helps avoid any conflict
of interest.
Directors’ interests at 31 March 2021 or on cessation (audited)
The following table shows the beneficial interests in the
company’s shares of directors and persons closely associated as
at 31 March 2021 (or at the point of leaving for directors who left
during the year).
The table includes interests held by the executive directors
under the company’s share plans. The numbers represent the
maximum possible vesting levels. The ISP awards will only vest
to the extent the performance conditions are met over the
three-year period. Full details of all DBP, RSP and ISP awards,
including performance periods and vesting conditions, are set
out on page 98.
For executive directors we use the average BT share price over
the preceding 12 months (or the share price at acquisition/
vesting date if higher) to determine whether the minimum
shareholding requirement has been reached.
During the period 1 April 2021 to 12 May 2021, there were no
movements in directors’ beneficial holdings or other interests in
shares. The directors, as a group, beneficially own less than 1%
of the company’s shares.
Beneficial
holding
owned
outright at
1 April
2020
Beneficial
holding
owned
outright at
31 March
2021
Unvested interests in share plans
DBPa
RSPa
ISPb
Otherc
502,475 1,004,138
–
–
–
3,059,481 4,895,142
1,171,722 1,658,656 3,896,440
–
–
Total
shareholding
at 31 March
2021d
Percentage
of salary
helde
1,004,138
n/a
6,395,242
582,436
609,886 1,094,754 1,108,944 2,748,082
10,975
1,788,821
n/a
0
0
19,646
19,442
69,442
24,090
24,090
25,000
75,000
29,091
29,091
115,933
161,686
0
n/a
50,000
7,000
0
0
400,000
400,000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
0
19,464
69,442
24,090
75,000
29,091
161,686
50,000
7,000
0
400,000
4,757,948 7,345,121 2,266,476 2,767,600 6,644,522
10,975
10,023,974
933%
361%
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
Chairman
Jan du Plessis
Executive directors
Philip Jansen
Simon Lowth
Non‑executive directors
Adel Al-Salehf
Ian Cheshire
Iain Conn
Isabel Hudson
Allison Kirkby
Mike Inglis
Matthew Key
Leena Nair
Sara Wellerg
Former directors
Tim Höttgesh
Nick Rosei
Total
a Subject to continued employment and, for the RSP, two underpins over the initial three-year vesting period.
b Subject to performance.
c Interests in saveshare, a HMRC-approved all-employee plan.
d The number of shares held for the purpose of satisfaction of the shareholding guideline. This includes all beneficial holdings, plus outstanding share awards that are subject
to continued employment only included on a net-of-tax basis.
e For the purpose of determining the minimum shareholding guideline, the average BT share price over the preceding 12 months of £1.1937 has been used (or for shares
owned outright, the share price at acquisition/vesting date if higher).
f Adel was appointed as a director on 15 May 2020.
g Sara was appointed as a director on 16 July 2020.
h Tim stepped down as a director on 15 May 2020 and the number reflects his holding at that date.
i Nick stepped down as a director on 16 July 2020 and the number reflects his holding at that date.
BT Group plc
Annual Report 2021
Corporate governance report 98
Annual remuneration report continued
Outstanding share awards at 31 March 2021 (audited)
The table below sets out share awards granted to the executive directors.
1 April
2020
Awarded/
granted
Dividends
re-invested
Vested
Lapsed
Total number
of award
shares at
31 March
2021
Vesting date
Price at
grant
Market
price at
date of
vesting
Market
price at
date of
exercise
Monetary
value of
vested
award
£000
Philip Jansen
DBP 2019
DBP 2020a
ISP 2018b
ISP 2019c
RSP 2020d
Simon Lowth
DBP 2017
DBP 2018
DBP 2019
DBP 2020a
ISP 2017e
ISP 2018f
ISP 2019c
RSP 2020d
64,959
–
–
1,106,763
1,576,404
2,320,036
–
–
–
1,658,656
51,886
167,480
172,515
–
–
–
–
754,759
1,056,494
1,390,845
1,357,237
–
–
–
–
1,108,944
saveshare (2019)g
10,975
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
51,886
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
64,959
01/08/2022
207.45p
1,106,763
01/08/2023
119.27p
1,576,404
31/03/2021
233.56p
2,320,036
31/03/2022
207.45p
1,658,656
03/08/2023
106.11p
–
–
–
–
–
–
01/08/2020
286.40p
103.07p
167,480
01/08/2021
211.01p
172,515
01/08/2022
207.45p
754,759
01/08/2023
119.27p
1,056,494
–
31/03/2020
286.40p
–
1,390,845
31/03/2021
211.01p
–
–
–
1,357,237
31/03/2022
207.45p
1,108,944
03/08/2023
106.11p
10,975
01/08/2024
163.92p
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
53
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
a Awards granted on 25 June 2020. The number of shares subject to award was calculated using the average middle market price of a BT share for the three days prior to grant
of 119.27p. Awards of deferred shares in respect of 2021 will be calculated using the average middle market price of a BT share for the three dealing days prior to grant.
b Award granted on 1 February 2019. The number of shares subject to award was calculated using the average middle-market price of a BT share for the three dealing days
prior to grant of 233.56p. 40% of each award is linked to TSR compared with a group of 17 companies, 40% is linked to a three-year normalised free cash flow measure and
20% to a measure of underlying revenue growth (excluding transit) over three years. Performance against the TSR, normalised free cash flow and revenue targets was below
threshold so the award will lapse in full in May 2021.
c Awards granted on 19 June 2019. The number of shares subject to award was calculated using the average middle-market price of a BT share for the three dealing days prior
to grant of 207.45p. 40% of each award is linked to TSR compared with a group of 16 companies, 40% is linked to a three-year normalised free cash flow measure and 20% to
a measure of underlying revenue growth (including transit) over three years.
d Awards granted on 3 August 2020. The number of shares subject to award was calculated using the average middle market price of a BT share for the three dealing days prior
to grant of 106.11p. Awards will vest in three equal tranches after three, four and five years. A holding period will apply such that no shares may be sold until year five. Two
underpins will apply over the initial three-year vesting period as set out on page 96.
e Award granted on 22 June 2017. The number of shares subject to award was calculated using the average middle-market price of a BT share for the three dealing days prior
to grant of 286.40p. 40% of each award is linked to TSR compared with a group of 21 companies, 40% is linked to a three-year normalised free cash flow measure and 20%
to a measure of underlying revenue growth (excluding transit) over three years. Performance against the TSR, normalised free cash flow and revenue targets resulted in the
threshold targets not being met and none of the shares vesting under the 2017 ISP. The award lapsed in full in May 2020.
f Award granted on 19 June 2018. The number of shares subject to award was calculated using the average middle-market price of a BT share for the three dealing days prior
to grant of 211.01p. 40% of each award is linked to TSR compared with a group of 17 companies, 40% is linked to a three-year normalised free cash flow measure and 20%
to a measure of underlying revenue growth (excluding transit) over three years. Performance against the TSR, normalised free cash flow and revenue targets was below
threshold so the award will lapse in full in May 2021.
g Option granted on 14 June 2019 under the employee saveshare scheme, in which all employees of the company are entitled to participate.
BT Group plc
Annual Report 2021
99
Implementation of Policy in 2021/22
Base salary
Philip Jansen’s base salary of £1,100,000 was agreed on
appointment in January 2019 and is fixed for five years.
Therefore, there is no increase for 2021/22.
In line with the agreed approach for our UK management
population, Simon Lowth will not receive a salary increase
effective 1 June 2021.
Director
Philip Jansen
Simon Lowth
Benefits
2021/22
Base salary
% change
£1,100,000
£735,438
0%
0%
For executive directors, the committee has set benefits in
line with the Policy. No changes are proposed to the benefit
framework for 2021/22.
Pension
In line with the Policy, both executive directors will receive an
annual allowance in lieu of pension provision for 2021/22 as set
out in the table below:
All seven of the annual bonus measures are linked to our key
performance indicators as set out on pages 46 to 47.
We do not publish details of the targets in advance as these are
commercially confidential. We will publish achievement against
the targets at the same time as we disclose bonus payments in
the 2022 Report on directors’ remuneration so shareholders can
evaluate performance against the targets.
RSP
Awards will be granted to both executive directors under the
RSP in June 2021.
When considering grant levels each year, the committee takes
account of share price performance over the preceding year. In
2020, the level of awards granted was reduced from the normal
Policy level of 200% of salary to 160% of salary due to share
price performance and the decision to suspend the dividend
until 2021/22. Since then, our share price has recovered,
with performance above that of the FTSE 100 index and the
committee has therefore agreed that awards will be granted to
both executive directors this year at the normal Policy level of
200% of salary.
Two underpins will apply over the initial three-year vesting
period, as follows:
– ROCE is equal to or exceeds WACC over the same period
% of salary
– there must have been no ESG issues which have resulted in
Director
Philip Jansen
Simon Lowtha
10% in lieu of pension provision
15% in lieu of pension provision
a This will reduce to 10% of salary in 2022/23 (effective from 1 April).
Annual bonus
Both executive directors are eligible for an on-target and
maximum bonus payment of 120% and 200% of salary. As per
the Policy, 50% of any bonus payable will be deferred into shares
for three years.
The committee has reviewed in full the measures, weightings
and targets used in the annual bonus scorecard and agreed that
the measures and weightings remain appropriate and aligned to
our strategy for 2021/22.
The 2021/22 annual bonus structure measures and weightings
are set out below.
Category
Measure
Weighting
Financial
Adjusted EBITDA
Normalised free cash flow
Customer
NPS
Converged
networks
5G customers – the number of
customers on our 5G network
Digital impact
& sustainability
FTTP connections – the number of
connections in the Openreach
FTTP network
Carbon emissions – progress
towards an 87% reduction in
carbon emissions intensity by the
end of March 2031
Skills for Tomorrow – progress
towards our ambition to reach 25m
people in the UK with help to
improve their digital skills by end of
March 2026
35%
35%
10%
5%
5%
5%
5%
material reputational damage for the company.
Should one or both underpins not be met, the committee may
at its discretion reduce the number of shares vesting, including
to nil.
The RSP awards will vest in three equal tranches after three, four
and five years. A holding period will apply such that no shares
may be sold until year five. When RSP awards vest, additional
shares representing the value of reinvested dividends on the
underlying shares are added.
RSP awards are subject to malus and clawback provisions as
set out in the Policy, and the committee retains the ultimate
discretion to adjust vesting levels in exceptional circumstances,
should they not reflect the overall performance of the business
over the vesting period, or for any other reason.
BT Group plc
Annual Report 2021
Corporate governance report
100
Annual remuneration report continued
Chairman and non‑executive director remuneration
The fees for non-executive directors were reviewed during
the year by the chairman and executive directors, taking into
consideration the role and requirements of BT, together with
the fees paid to non-executive directors at companies of a
similar size and complexity, previous years’ increases and in
light of there being no salary increases for the UK management
population. It was once again agreed that there would be no
increase in fees.
The basic fee for non-executive directors is £77,000 per annum.
There are additional fees for membership and chairing a Board
committee, details of which are set out in the table below:
The fees are charged on a time-spent basis in delivering
advice. That advice materially assisted the committee in their
consideration of matters relating to executive remuneration and
the new Policy.
Deloitte is a founder member of the Remuneration Consultants
Group and as such, voluntarily operates under the code of
conduct in relation to executive remuneration consulting in
the UK.
In addition, during 2020/21, Deloitte provided the company
with advice on corporate and indirect taxes, assistance
with regulatory, risk and compliance issues and additional
consultancy services.
Committee
Audit & Risk
BT Compliance
Chair’s
fee
Member’s
fee
Dilution
£35,000
£25,000
£ 25,000
£12,000
We use both treasury shares and shares purchased by the BT
Group Employee Share Ownership Trust (the Trust) to satisfy our
all-employee share plans and executive share plans. Shares held
in the Trust do not have any voting rights.
As at 31 March 2021, shares equivalent to 5.12%
(2019/20: 2.34%) of the issued share capital (excluding treasury
shares) would be required to satisfy all outstanding share
options and awards. Of these, we estimate that for 2021/22,
shares equivalent to approximately 0.26% (2020/21: 0.26%)
of the issued share capital (excluding treasury shares) will be
required to satisfy the all-employee share plans.
External appointments held by Executive Committee members
The Nominations Committee determines the policy for, and
if thought fit, agrees the taking up of external directorships
and other significant external interests by members of the
Executive Committee, including the executive directors,
the CEO, Openreach and other senior direct reports to the
chief executive.
Proposed external directorships and other significant external
interests must not: be to an organisation that is a BT competitor/
major supplier to BT; create a conflict of interest for the
individual with his/her BT role; involve significant amounts of
BT working hours nor impede the ability of the individual to
perform their BT role; or involve disproportionate incentives or
remuneration, with reference to the time commitment of the
role.
Any fees or other incentives arising from such appointments
may be retained by the individual, subject to the amount
being proportionate.
Previous AGM voting outcomes
The table below sets out the previous votes cast at the AGM in
respect of the Annual remuneration report and the Policy.
For
% of
votes cast
Number
Against
% of votes cast
Number
Withheld
votes
Number
Annual
remuneration
report at the
2020 AGM
Policy
at the
2020 AGM
93.32
6.68
5,920,755,265
423,941,635
11,335,964
95.04
4.96
6,036,920,089
315,057,559
4,101,574
Withheld votes are not counted when calculating voting
outcomes.
Digital Impact & Sustainability
£14,000
£8,000
Investigatory Powers Governance
Nominations
Remuneration
n/aa
n/aa
£8,000
£10,000
£30,000
£15,000
a Where the chairman or chief executive acts as chair of a board committee, no
additional committee chair fee is payable.
The senior independent director receives an additional fee of
£27,000 per annum.
The designated non-executive director for workforce
engagement receives an additional fee of £10,000 per annum.
No element of non-executive director remuneration is
performance related. Non-executive directors do not
participate in BT’s bonus or employee share plans and are
not members of any of the company pension schemes.
The committee agreed a fee of £700,000 per year, fixed for five
years, on the current chairman’s appointment in November 2017
and therefore no review of his fee was undertaken.
Other remuneration matters
Advisers tender
Deloitte LLP have been advisers to the committee since 2012.
As agreed as part of the 2019/20 internal committee evaluation,
during the year the committee undertook a competitive
tender exercise to review its advisers. This was led by the
committee chair supported by members of the committee
and representatives of the reward, HR and company
secretarial teams.
A number of leading advisers were invited to submit a proposal,
and a shortlist of candidates presented to a panel of committee
and management representatives, focusing on the capability
of the proposed team as well as the insight provided on the key
issues faced by the committee.
Following a detailed evaluation of the proposals and discussion,
Deloitte were reappointed as advisers to the committee in
January 2021. The committee is comfortable that the Deloitte
team have no connections with BT that may impair their
independence or objectivity.
Advisers
During the year, the committee received independent advice
on executive remuneration matters from Deloitte LLP. Deloitte
received £202,375 (excluding VAT) in fees for these services.
BT Group plc
Annual Report 2021
101
Committee evaluation 2020/21
History of chief executive remuneration
Details of our 2020/21 Board and committee evaluation which
was externally facilitated by Clare Chalmers Limited can be
found on page 79.
Comparison of chief executive remuneration to TSR
(unaudited)
TSR is the measure of the returns that a company has provided
for its shareholders, reflecting share price movements and
assuming reinvestment of dividends. The graph below illustrates
the performance of BT Group plc measured by TSR relative to a
broad equity market index over the past ten years. We consider
the FTSE 100 to be the most appropriate index against which
to measure performance, as BT has been a member of the
FTSE 100 throughout the ten-year period.
BT’s TSR performance vs the FTSE 100
350
300
250
200
150
100
50
0
Apr
11
Apr
12
Apr
13
Apr
14
Apr
15
Apr
16
Apr
17
Apr
18
Apr
19
Apr
20
Apr
21
BT
FTSE 100
Source: Datastream.
The graph shows the relative TSR performance of BT and the FTSE 100 over the past
ten years.
Year end Chief executive
2021
Philip Jansen
2020
Philip Jansen
2019
Philip Jansena
Gavin Pattersonb
2018
Gavin Patterson
2017
Gavin Patterson
Total
remuneration
£000
Annual
bonus
(% of
max)
ISP
vesting
(% of
max)
2,628
3,248
725
1,719
2,307
1,345
60%
50%
56%
28%
54%
0%
0%
n/a
n/a
0%
0%
0%
2016
Gavin Patterson
5,396
45% 82.0%
2015
2014
Gavin Pattersonb
Gavin Pattersonc
4,562
58% 67.4%
2,901
62% 78.7%
Ian Livingstond
4,236
35% 63.4%
2013
Ian Livingston
9,402
65% 100%
2012
Ian Livingston
8,520
73% 100%
a Philip was appointed as a director on 1 January 2019 and became chief executive
from 1 February 2019. His first ISP award was made in February 2019.
b Gavin stood down as chief executive at midnight on 31 January 2019 and Philip
took over from 1 February 2019.
c The total remuneration figure includes the ISP award as CEO BT Retail and the first
award as chief executive, granted in 2013.
d Ian stepped down on 10 September 2013 and Gavin took over from that date.
BT Group plc
Annual Report 2021
Corporate governance report
102
Annual remuneration report continued
Directors’ service agreements and letters of appointment
The following table sets out the dates on which directors’ service agreements/initial letters of appointment commenced and
termination provisions:
Chairman and executive directors
Commencement date
Termination provisions
Jan du Plessis
1 June 2017
Philip Jansen
1 January 2019
Simon Lowth
6 July 2016
Independent non-executive directors
Commencement date
Termination provisions
Ian Cheshire
16 March 2020
Iain Conn
1 June 2014
Isabel Hudson
1 November 2014
Mike Inglis
1 September 2015
Matthew Key
25 October 2018
Allison Kirkby
15 March 2019
Leena Nair
10 July 2019
Sara Weller
16 July 2020
Directors’ service agreements do not contain fixed term
periods and are terminable by the company on 12 months’
notice and by the director on six months’ notice.
Letters of appointment do not contain fixed term periods
and are terminable by either party by three months’ written
notice.
Non-independent, non-executive director
Commencement date
Termination provisions
Adel Al‑Saleh
15 May 2020
Appointed as a non-independent, non-executive director under the terms of the
Relationship Agreement between BT and Deutsche Telekom. The appointment is
terminable immediately by either party.
There are no other service agreements, letters of appointment or material contracts, existing or proposed, between the company
and any of the directors. There are no arrangements or understandings between any director or executive officer and any other
person pursuant to which any director or executive officer was selected to serve. There are no family relationships between
the directors.
Non‑executive directors’ letters of appointment
Each independent non-executive director has an appointment letter setting out the terms of his or her appointment. We ask each
non-executive director to allow a minimum commitment of 22 days each year, subject to committee responsibilities, and to allow
slightly more in the first year in order to take part in the induction programme. The actual time commitment required in any year
may vary depending on business and additional time may be required during periods of increased activity.
Inspection by the public
The service agreements and letters of appointment are available for inspection by the public at the company’s registered office.
BT Group plc
Annual Report 2021
103
Remuneration in context
Consideration of colleague and stakeholder views
Our colleagues are vital to our business. At BT, we believe
in fairness throughout the group. There are several general
reward principles which we apply at all levels:
– We will provide a competitive package with reference to the
relevant market for each colleague
– We will ensure colleagues can share in the success of the
business, and through the operation of all-employee share
plans, encourage colleagues to become shareholders
– Where appropriate, variable remuneration is provided to
incentivise employees towards driving the strategic aims
of the business. Performance is based on both individual
performance and the performance of the group, measured
on a consistent basis for senior executives and the majority of
other colleagues
– We offer a range of employee benefits, many of which are
available to all colleagues
– We aim for transparency and a fair cascade of remuneration
throughout the group
– Employment conditions for all colleagues reflect our values
and are commensurate with those of a large publicly listed
company, including high standards of health and safety and
equal opportunities.
The committee supports fairness and transparency of
remuneration arrangements and the Policy has been designed
to align with the remuneration philosophy and principles that
underpin remuneration across the wider group. To support this,
the committee receives regular updates on HR policies and
reward practices for the wider workforce as well as updates on
employee relations.
Whilst the committee does not directly consult with our
employees as part of the process of determining executive pay,
the Board does receive feedback from employee surveys that
take into account remuneration throughout the organisation.
Total remuneration
The designated non-executive director for workforce
engagement also updates the committee on sentiments being
raised by our colleagues in relation to the remuneration of our
workforce and related decisions, as raised by the Colleague
Board through their ‘hot topics’ discussions.
When setting executive directors’ remuneration, the committee
considers the remuneration of other senior managers and
colleagues in the group more generally to ensure that
arrangements for executive directors are appropriate in this
context. When determining salary increases for executive
directors, the committee considers the outcome of the wider
pay review for the group.
Chief executive pay ratio
The table below sets out the chief executive pay ratios as at 31
March 2021, as well as those reported in respect of the prior two
years. This report will build up over time to show a rolling ten-
year period.
The ratios compare the single total figure of remuneration of the
chief executive with the equivalent figures for the lower quartile
(P25), median (P50) and upper quartile (P75) employees.
A significant proportion of the chief executive’s remuneration is
delivered through long-term incentives, where awards are linked
to share price movements over the longer term. This means
that the ratios will depend significantly on long-term incentive
outcomes and may fluctuate from year to year – for example,
a higher total remuneration ratio was exhibited in 2020 due to
the vesting of the chief executive’s Worldpay buyout award.
We believe that these ratios are appropriate given the size
and complexity of the business, and are a fair reflection of our
remuneration principles and practices.
We have used the ‘Option B’ methodology (based on gender
pay reporting), as the most robust way to identify the individual
reference points within an organisation with multiple
operating segments.
2019
2020
2021
Base salary
2019
2020
2021
Chief executive
£2,444,000
£3,248,012
£2,628,107
Chief executive
£1,222,000
£1,100,000
£1,100,000
Employee remuneration
Pay ratio
P25
P50
P75
£34,281
£41,477
£51,594
£34,881
£42,173
£51,351
£35,569
£41,600
£50,391
P25
71:1
93:1
74:1
P50
59:1
77:1
63:1
Employee remuneration
Pay ratio
P25
P50
P75
£30,090
£35,918
£41,740
£31,144
£37,321
£42,800
£31,842
£35,606
£42,836
P25
37:1
35:1
35:1
P50
31:1
29:1
31:1
P75
47:1
63:1
52:1
P75
27:1
26:1
26:1
The P25, P50 and P75 employees were identified from the
company’s gender pay reporting data, based on the April
snapshot period at the start of each respective year. We then
identified the 80 employees above and below each of the ‘P’
points to form enlarged groups. This approach is thought to
be an appropriate representation – while there is a reasonable
level of consistency given the size of the UK population, this
methodology reduces volatility in the underlying data, and
helps account for differences in the gender pay and pay ratio
calculation methodologies. Other than the exclusion of a small
number of data points for leavers and divestments, no other
adjustments were made to the underlying data.
The total FTE remuneration paid during the year in question for
each employee in each of the groups was then calculated, on the
same basis as the information set out in the ‘single figure’ table
for the chief executive. Bonus payments in respect of each year
have been determined based on the latest available information
at the time of analysis. The median total remuneration figure for
each group was then used to determine the three ratios.
BT Group plc
Annual Report 2021
Corporate governance report
104
Remuneration in context continued
Percentage change in remuneration of the executive
and non‑executive directors and all employees
BT Group plc, our parent company, employs our executive
and non-executive directors and company secretary only,
and as such no meaningful comparison can be drawn based
on the parent company alone, as is required by the reporting
regulations.
Instead, we have chosen to present a comparison with our UK
management and technical employee population, comprising
around 25,000 colleagues.
We believe this is the most meaningful comparison given the
nature of our workforce, as this group has similar performance-
related pay arrangements as our executive directors. This is also
consistent with prior year disclosures.
The salary/fee levels set out in the table below are in accordance
with the Policy. Any increase in fees paid to the non-executive
directors represents a change in role (and accordingly fees
payable) over the relevant period. The decrease in benefits is
as a result of the Board and committee meetings being held
remotely by video conference due to the Covid-19 pandemic,
and therefore a reduction in travel and other expenses.
Chairman
Jan du Plessis
Executive directors
Philip Jansen
Simon Lowth
Non‑executive directors
Adel Al-Saleha
Ian Cheshireb
Iain Conn
Isabel Hudson
Mike Inglis
Matthew Key
Allison Kirkby
Leena Nair
Sara Wellerc
UK management colleagues
Salary/fees Benefits
Annual
bonus
0% (55)%
–
0% (14)%
0%
0%
(5)%
(2)%
–
19%
33%
–
–
–
4% (66)%
4% (90)%
13% (83)%
–
–
–
6%
3%
–
0%
–
–
–
–
–
–
–
–
–
0%
18%
a Under the terms of the Relationship Agreement between BT and Deutsche
Telekom and Adel’s letter of appointment, no remuneration is payable for
this position.
b Ian joined during the prior financial year and so any increase has been determined
on a full-year equivalent basis.
c Sara joined during the year and so no relevant comparison can be presented.
BT Group plc
Annual Report 2021
Relative importance of the spend on pay
The table below shows the percentage change in total
remuneration paid to all employees compared to expenditure on
dividends and share buybacks.
Area
Remuneration paid to all
employees
Dividends/share buybacks
2020/21
(£m)
2019/20
(£m)
% change
5,162
14
5,327
1,607
(3)%
(99)%
Gender pay gap reporting
At a group level, our median hourly pay gap between male and
female colleagues has remained stable at 5% (4.8% in 2019).
This compares favourably with the telecommunications industry
median of 11.6% (ONS provisional), and the UK national median
of 15.5%. In an organisation of our size, any change in workforce
demographics might not be reflected in the pay gap figures in
the short term, but over the course of several years.
Our Gender Pay Gap report is available on our website
bt.com/genderpaygap
Diversity and inclusion
This year for the first time we will also be disclosing our ethnicity
pay gap analysis, which has been completed in line with the
gender pay gap methodology. The result of the ethnicity pay gap
will be included in our Diversity and Inclusion Report which we
expect to publish in early summer 2021.
It’s important that our colleagues reflect the diversity of
our customers, and that all our colleagues are given the
opportunities to succeed. Across our business, our Diversity and
Inclusion Centre of Excellence, comprising of subject matter
experts and support colleagues, are partnering with workstream
leads to ensure that we address this issue in an evidenced-based
manner, with the broadest reach and widest impact. More
information about our approach to diversity and inclusion, the
progress we’re making and our pay gaps, can be found in our
Diversity and Inclusion Report, which we expect to publish in
early summer 2021.
Sir Ian Cheshire
Chair of the Remuneration Committee
12 May 2021
Statement of directors’ responsibilities in respect of the
Annual Report and the financial statements
105
The directors are responsible for
preparing the Annual Report and the
group and parent company financial
statements in accordance with
applicable law and regulations.
Company law requires the directors to prepare group and parent
company financial statements for each financial year. Under that
law they are required to prepare the group financial statements
in accordance with international accounting standards in
conformity with the requirements of the Companies Act 2006
(the 2006 Act) and applicable law and have elected to prepare
the parent company financial statements in accordance with
UK accounting standards and applicable law, including FRS 101
Reduced Disclosure Framework. In addition the group financial
statements are required under the Financial Conduct Authority’s
Disclosure Guidance and Transparency Rules (DTRs) to be
prepared in accordance with International Financial Reporting
Standards adopted pursuant to Regulation (EC) No 1606/2002
as it applies in the European Union (IFRSs as adopted by the EU).
Under company law the directors must not approve the financial
statements unless they are satisfied that they give a true and fair
view of the state of affairs of the group and parent company
and of the group’s profit or loss for that period. In preparing
each of the group and parent company financial statements,
the directors are required to:
– select suitable accounting policies and then apply
them consistently
– make judgements and estimates that are reasonable,
relevant, reliable and prudent
– for the group financial statements, state whether they have
been prepared in accordance with international accounting
standards in conformity with the requirements of the 2006 Act
and IFRSs as adopted by the EU
– for the parent company financial statements, state whether
applicable UK accounting standards have been followed,
subject to any material departures disclosed and explained
in the parent company financial statements
– assess the group and parent company’s ability to continue as
a going concern, disclosing, as applicable, matters related to
going concern
– use the going concern basis of accounting unless they either
intend to liquidate the group or the parent company or to
cease operations or have no realistic alternative but to do so.
The directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the parent
company’s transactions and disclose with reasonable accuracy
at any time the financial position of the parent company and
enable them to ensure that its financial statements comply with
the 2006 Act. They are responsible for such internal control
as they determine is necessary to enable the preparation of
financial statements that are free from material misstatement,
whether due to fraud or error, and have general responsibility for
taking such steps as are reasonably open to them to safeguard
the assets of the group and to prevent and detect fraud and
other irregularities.
Under applicable law and regulations, the directors are also
responsible for preparing a strategic report, directors’ report,
directors’ remuneration report and corporate governance
statement that comply with such law and regulation.
The directors are responsible for the maintenance and
integrity of the corporate and financial information included
on the company’s website. Legislation in the UK governing the
preparation and dissemination of financial statements may
differ from legislation in other jurisdictions.
Responsibility statement of the Board in respect of the annual
financial report
We confirm that to the best of our knowledge:
– the financial statements, prepared in accordance with the
applicable set of accounting standards, give a true and fair
view of the assets, liabilities, financial position and profit or
loss of the company and the undertakings included in the
consolidation taken as a whole
– the Strategic report and the Report of the Directors
include a fair review of the development and performance
of the business and the position of the company and the
undertakings included in the consolidation taken as a
whole, together with a description of the principal risks and
uncertainties that they face.
We consider the annual report and accounts, taken as a whole, is
fair, balanced and understandable and provides the information
necessary for shareholders to assess the group’s position,
performance, business model and strategy.
This responsibility statement was approved by the Board on
12 May 2021 and signed on its behalf by:
Philip Jansen
Chief Executive
Simon Lowth
Chief Financial Officer
BT Group plc
Annual Report 2021
Corporate governance report 106
Report of the Directors
The directors present the Report of the Directors, together with
audited financial information for the year ended 31 March 2021.
The Report of the Directors also encompasses the entirety of
our Corporate governance report on pages 69 to 110 for the
purpose of section 463 of the Companies Act 2006 (the 2006
Act). The Report of the Directors together with the Strategic
report on pages 1 to 68 form the Management Report for the
basis of DTR 4.1.5R.
Critical accounting estimates, key judgements and significant
accounting policies
Our critical accounting estimates, key judgements and
significant accounting policies conform with IFRSs as adopted
by the EU and IFRSs issued by the International Accounting
Standards Board (IASB), and are set out on pages 124 and 125
of the consolidated financial statements. The directors have
reviewed these policies and applicable estimation techniques,
and have confirmed they are appropriate for the preparation
of the 2020/21 consolidated financial statements.
Disclosure of information to the auditor
As far as each of the directors is aware, there is no relevant audit
information (as defined by section 418(3) of the 2006 Act) that
hasn’t been disclosed to the auditor. Each of the directors confirms
that all steps have been taken that ought to have been taken to
make them aware of any relevant audit information and to establish
that the auditor has been made aware of that information.
Going concern
In line with IAS 1 ‘Presentation of financial statements’, and
revised FRC guidance on ‘risk management, internal control
and related financial and business reporting’, management has
taken into account all available information about the future
for a period of at least, but not limited to, 12 months from the
date of approval of the financial statements when assessing
the group’s ability to continue as a going concern.
The Strategic report on pages 1 to 68 includes information
on the group structure, strategy and business model, the
performance of each customer-facing unit and the impact of
regulation and competition. The Group performance section
on pages 48 to 55 includes information on our group financial
results, financial outlook, cash flow and net debt, and balance
sheet position. Notes 25, 26 and 28 of the consolidated financial
statements include information on the group’s investments,
cash and cash equivalents, borrowings, derivatives, financial
risk management objectives, hedging policies and exposure to
interest, foreign exchange, credit, liquidity and market risks.
Our principal risks and uncertainties are set out on pages 59
to 66 including details of each risk and how we manage and
mitigate them. The directors carried out a robust assessment of
the emerging and principal risks affecting the group, including
any that could threaten our business model, future performance,
insolvency or liquidity.
This assessment is consistent with the assessment of our
viability, as set out on page 68, in estimating the financial
impact for a severe but plausible outcome for each risk, both
individually, in combination and through probabilistic risk
modelling. This stress testing confirmed that existing projected
cash flows and cash management activities provide us with
adequate headroom over the going concern assessment period.
Having assessed the principal and emerging risks, the directors
considered it appropriate to adopt the going concern basis
of accounting when preparing the financial statements. This
assessment covers the period to May 2022, which is consistent
with the FRC guidance. When reaching this conclusion, the
directors took into account the group’s overall financial position
BT Group plc
Annual Report 2021
(including trading results and ability to repay term debt as it
matures without recourse to refinancing) and the exposure to
emerging and principal risks.
At 31 March 2021, the group had cash and cash equivalents of
£1.0bn and current asset investments of £3.7bn. The group also
had access to committed borrowing facilities of £2.1bn. These
facilities were undrawn at the period-end and are not subject
to renewal until March 2026.
Independent advice
The Board has a procedure that allows directors to seek
independent professional advice at BT’s expense. All directors
also have access to the advice and services of the company
secretary and her nominated delegate.
Directors’ and officers’ liability insurance and indemnity
For some years, BT has bought insurance cover for directors,
officers and employees in positions of managerial supervision
of BT Group plc and its subsidiaries. This is intended to protect
against defence costs, civil damages and, in some circumstances,
civil fines and penalties following an action brought against them
in their personal capacity. The policy also covers individuals
serving as directors of other companies or of joint ventures, or
on boards of trade associations or charitable organisations at
BT’s request. The insurance protects the directors and officers
directly in circumstances where, by law, BT cannot provide an
indemnity. It also provides BT, subject to a retention, with cover
against the cost of indemnifying a director or officer. One layer
of insurance is ringfenced for the main directors of the company.
As at 12 May 2021, and throughout 2020/21, the company’s
wholly-owned subsidiary, British Telecommunications plc, has
provided an indemnity for a group of people similar to the group
covered by the above insurance. Neither the insurance nor the
indemnity provides cover where the individual is proven to have
acted fraudulently or dishonestly.
As permitted by the company’s Articles of Association, and to
the extent permitted by law, the company indemnifies each of its
directors and other officers of the group against certain liabilities
that may be incurred as a result of their positions with the group.
The indemnity was in force throughout the tenure of each
director during the last financial year, and is currently in force.
Interest of management in certain transactions
During and at the end of 2020/21, none of BT’s directors were
materially interested in any material transaction in relation to the
group’s business. None are materially interested in any currently
proposed material transactions.
Power to authorise conflicts
All directors have a duty under the 2006 Act to avoid a situation
in which he or she has, or can have, a direct or indirect interest
that conflicts, or possibly may conflict, with the interests of
the company. The company’s Articles of Association include
provisions for dealing with directors’ conflicts of interest in
accordance with the 2006 Act. The company has procedures in
place, which it follows, to deal with such situations. These require
the Board to:
– consider each conflict situation separately on its particular facts
– consider the conflict situation in conjunction with its other
duties under the 2006 Act
– keep records and Board minutes on any authorisations
granted by directors and the scope of any approvals given
– regularly review conflict authorisation.
The company secretary maintains a conflicts of interest register.
The Conflicted Matters Committee identifies to what extent
Board and committee materials are likely to refer to a potential
or actual conflict of interest between BT and Deutsche Telekom
and, as a result, what materials should be shared with our non-
independent, non-executive director and Deutsche Telekom
nominated representative. He owes duties to both BT and
Deutsche Telekom, and the Conflicted Matters Committee
helps him comply with his fiduciary duties, although ultimate
responsibility rests with him.
Systems of risk management and internal control
The Board is responsible for reviewing the group’s systems of
risk management and internal control each year, and ensuring
their effectiveness including in respect of relevant assurance
activities. These systems are designed to manage, rather than
eliminate, risks we face that may prevent us achieving our
business objectives and delivering our strategy. Any system can
provide only reasonable, and not absolute, assurance against
material misstatement or loss.
Our group risk management framework assists the Board in
carrying out its duties as set above. The framework has been in
operation throughout the year and up to the date on which this
document was approved.
The framework provides the business with the tools to take
on the right risks and make smart risk decisions, supports the
identification, assessment and management of the principal
risks and uncertainties faced by the group and is an integral part
of the company’s annual strategic review cycle. The framework
was also designed in accordance with the FRC guidance on
risk management, internal control and related financial and
business reporting.
Further information on our group risk management framework
can be found under the section How we manage risk on
pages 57 to 58.
Internal audit carry out periodic assessments of the quality
of risk management and control, promote effective risk
management across all our units and report to management
and the Audit & Risk Committee on the status of specific areas
identified for improvement. We do not cover joint ventures
and associates not controlled by the company in the scope of
our group risk management framework. Such third parties are
responsible for their own internal control assessment.
Furthermore, the Audit & Risk Committee, on behalf of
the Board, reviews the effectiveness of the systems of risk
management and internal control across the group. Further
details on how the Audit & Risk Committee fulfils these duties
can be found on pages 82 to 84.
Capital management and funding policy
The objective of our capital management policy is to target an
overall level of debt consistent with our credit rating objectives,
while investing in the business, supporting the pension fund and
meeting our distribution policy.
The Board reviews the group’s capital structure regularly.
Management proposes actions which reflect the group’s
investment plans and risk characteristics, as well as the
macroeconomic conditions in which we operate.
Our funding policy is to raise and invest funds centrally to meet
the group’s anticipated requirements. We use a combination of
capital market bond issuance, commercial paper borrowing and
committed borrowing facilities to fund the group. When issuing
debt, in order to avoid refinancing risk, group treasury will take
into consideration the maturity profile of the group’s debt
portfolio as well as forecast cash flows.
107
See note 28 to the consolidated financial statements for details
of our treasury policy.
Financial instruments
Details of the group’s financial risk management objectives,
policies of the group and exposure to interest risk, credit risk,
liquidity risk and foreign exchange are given in note 28 to the
consolidated financial statements.
Credit risk management policy
We take proactive steps to minimise the impact of adverse
market conditions on our financial instruments. In managing
investments and derivative financial instruments, the group’s
central treasury function monitors the credit quality across
treasury counterparties and actively manages any exposures
that arise. Management within the business units also actively
monitors any exposures arising from trading balances.
Off‑balance sheet arrangements
Other than the financial commitments and contingent liabilities
disclosed in note 31 to the consolidated financial statements,
there are no off-balance sheet arrangements that have, or are
reasonably likely to have, a current or future material effect on:
– our financial condition
– changes in financial condition
– revenues or expenses
– results of operations
– liquidity
– capital expenditure
– capital resources.
BT Group plc
Annual Report 2021
Corporate governance report 108
Report of the Directors continued
Legal proceedings
Section information
The group is involved in various legal proceedings, including
actual or threatened litigation and government or regulatory
investigations. For further details of legal and regulatory
proceedings to which the group is party please see note 31
to the consolidated financial statements.
Apart from the information disclosed in note 31 to the
consolidated financial statements, the group does not currently
believe that there are any legal proceedings, government or
regulatory investigations that may have a material adverse
impact on the operations or financial condition of the group.
In respect of each of the claims described in note 31, the nature
and progression of such proceedings and investigations can
make it difficult to predict the impact they will have on the
group. Many factors prevent us from making these assessments
with certainty, including that the proceedings or investigations
are in early stages, no damages or remedies have been specified,
and/or the frequently slow pace of litigation.
Other information – Listing Rules
For the purposes of the Listing Rule (LR) 9.8.4R, the information
below is disclosed as follows:
Section information
LR 9.8.4R(4)
LR 9.8.4R(12)
LR 9.8.4R(13)
Page
49
See below
See below
In respect of LR 9.8.4R(12) and (13), the trustee of the BT Group
Employee Share Ownership Trust (the Trust) agrees to waive
dividends payable on the BT shares it holds for satisfying awards
under the company’s executive share plans. Under the rules of
these share plans, the dividends are reinvested in BT shares that
are added to the relevant share awards.
No other information is required to be disclosed pursuant to
LR 9.8.4R.
Other statutory information – the 2006 Act
Certain provisions of the 2006 Act (or regulations made
pursuant thereto) require us to make additional disclosures
within the Report of the Directors. The disclosures referred
to below are included elsewhere in this Annual Report and
incorporated by reference into the Report of the Directors:
Section information
Future developments
Particulars of any important events affecting the
company or any of its subsidiary undertakings which
have occurred since the end of the financial year
Research and development activities
How the directors have engaged with UK employees,
had regard to UK employee interests, and the effect
of that regard, including on principal decisions
during the year
How the directors have had regard to the need to
foster business relationships with suppliers,
customers and others, and the effect of that regard,
including on principal decisions during the year
Page
1 to 68
186
13 and
20 to 21
34 to 36
and
42 to 43
37 to 43
Greenhouse gas emissions, energy consumption and
energy efficiency action
32 to 33
Structure of BT’s share capital (including the rights
and obligations attaching to the shares)
121
BT Group plc
Annual Report 2021
Page
n/a
Significant agreements to which BT Group plc is a
party that take effect, alter or terminate upon a
change of control following a takeover
Branches
191 to 196
The following disclosures are not covered elsewhere in this
Annual Report:
– the company has two employee share ownership trusts
that hold BT shares for satisfying awards under our various
employee share plans
– the trustee of the BT Group Employee Share Investment Plan
may invite participants, on whose behalf it holds shares, to
direct it how to vote in respect of those shares. If there is an
offer for the shares or another transaction that would lead
to a change of control of the company, such participants
may direct the trustee to accept the offer or agree to
the transaction
– in respect of shares held in the Trust, the trustee abstains from
voting those shares if there is an offer for the shares, does not
have to accept or reject the offer but will have regard to the
interests of the participants, may consult the participants to
obtain their views on the offer, and may otherwise take any
action with respect to the offer it thinks fair
– EasyShare is the company’s corporate sponsored nominee
service, which allows UK and European Economic Area
resident shareholders to hold BT shares electronically.
EasyShare is administered by Equiniti Financial Services
Limited. As at 10 May 2021 384m shares were held in
EasyShare (3.85% of issued share capital (3.87% excluding
treasury shares)) on behalf of BT shareholders
– no person holds securities carrying special rights with regard
to control of the company
– our share registrar, Equiniti must receive proxy appointment
and voting instructions not less than 48 hours before any
general meeting (see also page 110)
– the business of the company is managed by the Board.
The powers of the company’s directors are subject to UK
legislation and the company’s Articles of Association, and
any requirement (consistent with UK legislation and the
company’s Articles of Association) approved by shareholders
passing an ordinary resolution. The directors are authorised
to issue and allot shares, and to undertake purchases of BT
shares, subject to shareholder approval
– we have no agreements with directors providing for
compensation for loss of office or employment as a result of a
takeover. Similarly, there is no provision for this in our standard
employee contracts
– we are not aware of any agreements between shareholders
that may result in restrictions on the transfer of shares or on
voting rights.
Articles of Association
The company’s current Articles of Association were adopted
pursuant to a resolution passed at the AGM of the company
held on 16 July 2020 and contain, amongst others, provisions
on the rights and obligations attaching to the company’s
shares. The Articles of Association may only be amended by
special resolution at a general meeting of the shareholders in
accordance with applicable legislation.
Directors’ appointment, retirement and removal
The company’s Articles of Association regulate the appointment
and removal of directors, as does the 2006 Act and related
legislation. The Board, and shareholders (by ordinary resolution),
may appoint a person who is willing to be elected as a director,
either to fill a vacancy or as an additional director. At every AGM,
all directors must automatically retire. A retiring director is
eligible for election or re-election (as applicable). In addition
to any power of removal under the 2006 Act, the shareholders
can pass an ordinary resolution to remove a director.
Adel Al-Saleh is appointed as a non-independent, non-
executive director under the terms of the Relationship
Agreement between BT and Deutsche Telekom. The
appointment is terminable immediately by either party.
Share rights
(a) Voting rights
On a show of hands, every shareholder present in person or by
proxy at any general meeting has one vote and, on a poll, every
shareholder present in person or by proxy has one vote for each
share which they hold.
There are no restrictions on exercising voting rights except in
situations where the company is legally entitled to impose such a
restriction (for example where a notice under section 793 of the
2006 Act has been served).
(b) Variation of rights
Whenever the share capital of the company is split into different
classes of shares, the special rights attached to any of those
classes can be varied or withdrawn either: (i) with the sanction of
a special resolution passed at a separate meeting of the holders
of the shares of that class; or (ii) with the consent in writing of
the holders of at least 75% in nominal value of the issued shares
of that class. The company can issue new shares and attach any
rights and restrictions to them, as long as this is not restricted by
special rights previously given to holders of any existing shares.
Subject to this, the rights of new shares can take priority over the
rights of existing shares, or existing shares can take priority over
them, or the new shares and the existing shares can rank equally.
Transfer of shares
There are no specific restrictions on the transfer of shares in the
company, which is governed by the Articles of Association and
prevailing legislation.
Employee engagement
Engaging with our colleagues takes many forms including
through our annual Your Say survey, union/employee
representative engagement, pulse surveys, the Colleague Board
and regular colleague communications. Colleagues are kept well
informed on matters such as the strategy and performance of
the group, including after certain key events such as quarterly
trading updates. Please see further details of the Colleague
Board’s activities on page 36 and the other means by which we
engage with our colleagues on page 34.
Share plans are used to encourage colleagues to have a stake
in the future of the company. We annually consider which
all-employee plans to offer both within the UK and globally.
In 2020/21, we offered all colleagues based in the UK the
opportunity to participate in a HMRC-approved save as you earn
plan (saveshare) and a similar scheme for our colleagues based
outside the UK (dependent on local laws). We also offered UK
colleagues the opportunity to participate in a HMRC-approved
share incentive plan (directshare). In June 2020 we launched
the yourshare plan which utilised the free share element of the
share incentive plan in the UK and conditional share awards
109
internationally. In June 2020, we granted all eligible colleagues
£500 worth of BT shares (or a cash equivalent where there were
geographical restrictions).
Employees with disabilities
We are an inclusive employer and actively encourage the
recruitment, development, promotion and retention of people
with a disability. We are a member of the Business Disability
Forum and have well established global practices to support
colleagues who have or acquire disabilities or health conditions
during their employment. Our disability practices also include
those colleagues who are employed by the company who have
caring responsibilities.
We have established a Disability Rapid Action Plan across our
business to help us make faster progress as part of our Valuable
500 commitments on disability inclusion. The plan is amplifying
colleagues’ voices through our Able2 People Network and
helping us embed disability inclusion right across our business.
Political donations
Our policy is that no company in the group will make
contributions in cash or in kind to any political party, whether by
gift or loan. However, the definition of political donations used
in the 2006 Act is very much broader than the sense in which
these words are ordinarily used. For example, it could cover
making members of Parliament and others in the political world
aware of key industry issues and matters affecting the company,
enhancing their understanding of the company.
The authority for political donations requested at the AGM
is not intended to change this policy. It will, however, ensure
that the group continues to act within the provisions of the
2006 Act requiring companies to obtain shareholder authority
before they make donations to political parties and/or political
organisations as defined in the 2006 Act. During 2020/21, the
company’s wholly owned subsidiary, British Telecommunications
plc, paid the costs of BT colleagues joining corporate days at
(i) the Liberal Democrats party conference; and (ii) the Labour
party conference. This year these costs totalled £922 (2019/20:
£9,967) which were significantly lower than last year as events
were attended virtually. No company in the BT group made any
loans to any political party.
Substantial shareholdings
At 31 March 2021, the company had received notice, under the
DTRs, in respect of the following holdings of 3% or more of the
voting rights in the issued ordinary share capital of the company:
Date of notification
Shares
% of total
voting
rights
T-Mobile Holdings
23 March 2018 1,196,175,322 12.06%
BlackRock, Inc.
27 January 2020
512,002,221
5.18%
Norges Bank
6 January 2021
297,729,786 3.002%
At 12 May 2021, the company had not received any further such
notices under the DTRs.
BT Group plc
Annual Report 2021
Corporate governance report
Cross‑reference to the Strategic report
We have chosen to include the following information in the
Strategic report in line with the 2006 Act (otherwise required by
law to be included in the Report of the Directors):
– an indication of likely future developments in the business of
the company and its group (pages 1 to 68)
– an indication of our research and development activities
(pages 13 and 20 to 21)
– information about how the directors have engaged with UK
employees, had regard to UK employee interests, and the
effect of that regard, including on principal decisions during
the year (pages 34 to 36 and 42 to 43)
– information about how the directors have had regard to
the need to foster business relationships with suppliers,
customers and others, and the effect of that regard, including
on principal decisions during the year (pages 37 to 43)
– information about greenhouse gas emissions, energy
consumption and energy efficiency action (pages 32 to 33).
By order of the Board
Jan du Plessis
Chairman
12 May 2021
110
Report of the Directors continued
AGM
Resolutions
At our AGM, we give our shareholders the opportunity to vote
on every important issue by proposing a separate resolution
for each.
Before the AGM, we count the proxy votes for and against
each resolution, as well as votes withheld, and make the results
available at the meeting. As at previous AGMs, we will take votes
on all matters at the 2021 AGM on a poll.
The separate Notice of meeting 2021, which we send to all
shareholders who have requested shareholder documents by
post, contains the resolutions (with explanatory notes) which
we will propose at the 2021 AGM on 15 July 2021. We notify all
shareholders of the publication of these documents which are
available on our website at bt.com/annualreport
At the 2021 AGM we will propose resolutions to re-appoint
KPMG LLP as the company’s auditor and to authorise the Audit
& Risk Committee to agree their remuneration. We will also
ask shareholders to vote on the Annual Report, the Report on
directors’ remuneration, allotment of shares in the company,
the disapplication of pre-emption rights and new Articles
of Association.
Authority to purchase shares
The authority given at last year’s AGM for the company to
purchase in the market 988m of its shares, representing 10%
of the company’s issued share capital (excluding treasury
shares), expires at the conclusion of the 2021 AGM. We will ask
shareholders to give a similar authority at the 2021 AGM.
During 2020/21 and up to 10 May 2021, no shares were
purchased under this authority.
At the start of the year, 85.9m shares (having a nominal value
of £4.3m, and constituting 0.86% of the company’s issued share
capital (0.87% excluding treasury shares)) were held by the
company as treasury shares. During 2020/21, 35.2m treasury
shares (having a nominal value of £1.8m, and constituting 0.35%
of the company’s issued share capital (0.35% excluding treasury
shares)) were transferred to meet the company’s obligations
under its employee share plans. At 31 March 2021, a total of
50.7m shares (having a nominal value of £2.5m, and constituting
0.50% of the company’s issued share capital (0.51% excluding
treasury shares)) were held by the company as treasury shares.
Since 31 March 2021 (up to and including 10 May 2021),
245,047 treasury shares (having a nominal value of £12,252,
and constituting 0.002% of the company’s issued share capital
(0.002% excluding treasury shares)) have been transferred to
meet the company’s obligations under its employee share plans.
At 10 May 2021, a total of 50.4m shares (having a nominal value
of £2.5m, and constituting 0.50% of the company’s issued share
capital (0.50% excluding treasury shares)) were held by the
company as treasury shares.
In addition, the Trust purchased 11.3m BT shares for a total
consideration of £14m. The Trust held 9.1m shares both at
31 March 2021 and 10 May 2021.
BT Group plc
Annual Report 2021
Financial Statements
Detailed analysis of our statutory
accounts, independently audited and
providing in-depth disclosure on the
financial performance and position
of the group.
111
112
118
119
120
121
122
123
124
124
126
129
133
134
134
135
136
139
139
140
143
145
149
149
152
153
154
166
166
169
170
171
172
176
177
184
184
185
186
187
191
197
Contents
Financial statements
Independent auditor’s report
Group income statement
Group statement of
comprehensive income
Group balance sheet
Group statement of changes in equity
Group cash flow statement
Notes to the consolidated
financial statements
Basis of preparation
Critical & key accounting estimates
and significant judgements
Significant accounting policies
that apply to the overall
financial statements
Segment information
Revenue
Operating costs
Employees
Audit, audit related and other
non-audit services
Specific items
Taxation
Earnings per share
Dividends
Intangible assets
Property, plant and equipment
Leases
Programme rights
Trade and other receivables
Trade and other payables
Provisions
Retirement benefit plans
Own shares
Share-based payments
Divestments and assets & liabilities
classified as held for sale
Investments
Cash and cash equivalents
Loans and other borrowings
Finance expense
Financial instruments and risk
management
Other reserves
Related party transactions
Financial commitments
and contingent liabilities
Post balance sheet events
Financial statements of BT Group plc
Related undertakings
Additional information
Look out for these throughout the
financial statements:
Significant accounting policies
Critical & key accounting estimates and
significant judgements
BT Group plc
Annual Report 2021
Financial statements
112
Independent auditor’s report to the members of BT Group plc
1. Our opinion is unmodified
We have audited the financial statements of BT Group plc
(“the Company”) for the year ended 31 March 2021 which
comprise the group income statement, group statement of
comprehensive income, group balance sheet, group statement
of changes in equity, group cash flow statement, company
balance sheet, company statement of changes in equity,
and the related notes, including the accounting policies.
In our opinion:
– the financial statements give a true and fair view of the state
of the Group’s and of the parent Company’s affairs as at 31
March 2021 and of the Group’s profit for the year then ended;
– the Group financial statements have been properly prepared
in accordance with international accounting standards in
conformity with the requirements of the Companies Act 2006
and International Financial Reporting Standards adopted
pursuant to Regulation (EC) No 1606/2002 as it applies to the
European Union;
– the parent Company financial statements have been properly
prepared in accordance with UK accounting standards,
including FRS 101 Reduced Disclosure Framework; and
– the financial statements have been prepared in accordance
with the requirements of the Companies Act 2006 and, as
regards the Group financial statements, Article 4 of the IAS
Regulation to the extent applicable.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (“ISAs (UK)”) and applicable law.
Our responsibilities are described below. We believe that the
audit evidence we have obtained is a sufficient and appropriate
basis for our opinion. Our audit opinion is consistent with our
report to the audit committee.
We were first appointed as auditor by the shareholders on 11
July 2018. The period of total uninterrupted engagement is for
the three financial years ended 31 March 2021. We have fulfilled
our ethical responsibilities under, and we remain independent of
the Group in accordance with, UK ethical requirements including
the FRC Ethical Standard as applied to listed public interest
entities. No non-audit services prohibited by that standard
were provided.
2. Key audit matters: our assessment of risks of
material misstatement
Key audit matters are those matters that, in our professional
judgement, were of most significance in the audit of the
financial statements and include the most significant assessed
risks of material misstatement (whether or not due to fraud)
identified by us, including those which had the greatest effect
on: the overall audit strategy; the allocation of resources in the
audit; and directing the efforts of the engagement team. We
summarise below the key audit matters, in decreasing order
of audit significance, in arriving at our audit opinion above,
together with our key audit procedures to address those matters
and, as required for public interest entities, our results from
those procedures. These matters were addressed, and our
results are based on procedures undertaken, in the context
of, and solely for the purpose of, our audit of the financial
statements as a whole, and in forming our opinion thereon, and
consequently are incidental to that opinion, and we do
not provide a separate opinion on these matters.
BT Group plc
Annual Report 2021
Valuation of certain unquoted investments in the BT Pension
Scheme (BTPS)
Certain unquoted investments in the BTPS: included within
unquoted BTPS plan assets of £18.0 billion (2020: £20.3 billion)
Risk vs 2020:
Refer to page 82 (Audit & Risk Committee Report), page 155 (note
20 accounting policy Retirement benefit plans) and pages 154 to 165
(disclosures note 20 Retirement benefit plans).
The risk
Subjective valuation:
The BTPS has unquoted plan assets in private equity, UK and
overseas property, mature infrastructure, longevity insurance
contracts, secure income and non-core credit assets. Significant
judgement is required in determining the value of a portion of
these unquoted investments which are valued based on inputs
that are not directly observable.
In 2020, for certain private equity and non-core credit assets
the latest asset valuations preceded the negative impact of the
Covid-19 pandemic on financial markets, and as such significant
judgement was required to evaluate the market indices used by
the Group to estimate adjustments to those asset valuations.
The same level of market turbulence has not occurred in 2021,
therefore the judgement required in evaluating the asset values
has reduced.
The key unobservable inputs used to determine the fair value
of these plan assets includes estimated rental value for UK and
overseas property, discount rates for mature infrastructure and
certain secure income assets, discount rate and projected future
mortality for the longevity insurance contract and estimated
net asset values for private equity, non-core credit assets and
certain secure income assets.
The effect of these matters is that, as part of our risk assessment,
we determined that the valuation of unquoted plan assets in
the BTPS has a high degree of estimation uncertainty, with
a potential range of reasonable outcomes greater than our
materiality for the financial statements as a whole, and possibly
many times that amount. The financial statements (note 20)
disclose the sensitivities of key assumptions for the valuation
of certain unquoted plan assets estimated by the Group.
Our response – our procedures included:
Assessing valuers’ credentials: Evaluating the scope,
competencies and objectivity of the Group’s external experts
who assisted in determining the key unobservable inputs and
market indices listed above.
Assessing transparency: Considering the adequacy of the
Group’s disclosures in respect of the sensitivity of the asset
valuations to these assumptions.
Longevity insurance contract
Comparing valuations: Challenging, with the support of our own
actuarial specialists, the fair value of the longevity insurance
contract by comparing it to an independently developed range
of fair values using assumptions, such as the discount rate and
projected future mortality, based on external data.
Property/infrastructure and certain secure income assets
Benchmarking assumptions: Challenging, with the support of
our own valuation specialists, the key unobservable inputs, such
as estimated rental value and market value, used in determining
the fair value of a sample of UK and overseas property assets,
and discount rates used in determining the mature infrastructure
and certain secure income assets by comparing them to
discount rates for comparable external assets.
113
Comparing valuations: Developed an independent expectation
of the fair value for a sample of UK and overseas property based
on changes in valuation for the relevant geography and asset
type obtained from external market data and the historical
valuation for each property.
Private equity, non-core credit assets and certain secure
income assets
External confirmations: Comparing the estimated net asset
values for private equity, non-core credit and certain secure
income assets to confirmations obtained directly from
third parties.
Test of details: Comparing the Group’s fund managers’
historical estimated net asset values to the latest audited
financial statements of those funds to assess the Group’s ability
to accurately estimate the fair value of private equity and non-
core credit assets.
We performed the tests above rather than seeking to rely on any
of the Group’s controls because the nature of the balance is such
that we would expect to obtain audit evidence primarily through
the detailed procedures described.
Our results
We consider the valuation of the BTPS unquoted plan assets to
be acceptable (2020: acceptable).
Valuation of defined benefit obligation of the BT Pension
Scheme (BTPS)
BTPS obligation: £57.7 billion (2020: £53.0 billion)
Risk vs 2020:
Our results
We found the resulting estimate of the BTPS defined benefit
obligation to be acceptable (2020: acceptable).
Accuracy of revenue due to the complexity of the billing
systems
Certain revenue streams: included within total revenue of
£21.3 billion (2020: £22.9 billion)
Risk vs 2020:
Refer to pages 129 to 132 (financial disclosures note 5 Revenue).
The risk
Processing error
BT non-long-term contract revenue consists of a large number
of low value transactions. The Group operates a number of
distinct billing systems and the IT landscape underpinning
revenue and linking the billing systems together is complex.
There are multiple products sold at multiple rates with varying
price structures in place. Products represent a combination of
service based products, such as fixed line telephony, as well
as goods, such as the provision of mobile handsets. There are
monthly tariff charges.
The revenue recognition of non-long-term contract revenue is
not subject to significant judgement. However, due to the large
number of transactions and complexity of the billing systems,
this is considered to be an area of most significance in our audit.
Our response
Our procedures included:
Refer to page 82 (Audit & Risk Committee Report), page 155 (note
20 accounting policy Retirement benefits) and pages 154 to 165
(disclosures note 20 Retirement benefit plans).
Process understanding: Obtaining an understanding of the
revenue processes by observing transactions from customer
initiation to cash received for certain material revenue streams.
The risk
Subjective estimate:
Small changes in certain key actuarial assumptions used to
determine the BTPS defined benefit obligation, including the
life expectancy of the members, price inflation and discount
rates, can have a significant impact on the BTPS defined
benefit obligation.
The effect of these matters is that, as part of our risk assessment,
we determined that the valuation of the BTPS defined benefit
obligation has a high degree of estimation uncertainty, with
a potential range of reasonable outcomes greater than our
materiality for the financial statements as a whole, and possibly
many times that amount. The financial statements (note 20)
disclose the sensitivity of key assumptions for the obligation
estimated by the Group.
Our response – our procedures included:
Benchmarking assumptions: Challenging, with the support
of our own actuarial specialists, the life expectancy of the
members, price inflation and discount rates used to determine
the defined benefit obligation against independently developed
assumptions using external market data.
Assessing actuaries’ credentials: Evaluating the scope,
competency and objectivity of the Group’s external experts
who assisted in determining the actuarial assumptions used to
determine the defined benefit obligation.
Assessing transparency: Considering the adequacy of the
Group’s disclosures in respect of the sensitivity of the obligation
to these assumptions.
We performed the tests above rather than seeking to rely on any
of the Group’s controls because the nature of the balance is such
that we would expect to obtain audit evidence primarily through
the detailed procedures described.
Test of details: Comparing a sample of revenue transactions,
including credit notes, to supporting evidence e.g. customer
bills, orders, price lists, contractual terms, proof of service and
cash received (all where applicable).
We performed the detailed tests above rather than seeking
to rely on the Group’s controls because our knowledge of the
design of these controls indicated that we would be unlikely to
obtain the required evidence to support reliance on controls.
Our results
We considered revenue relating to non-long-term contract
revenue to be acceptable (2020: acceptable).
Recoverability of parent company investment in subsidiaries
and loans to group undertakings
Investment in subsidiary £11,096 million (2020: £11,024 million)
Refer to page 189 (accounting policy Investments) and page 189
(financial disclosures note 2 Investments).
Loans to group undertakings £972 million (2020: £4,234 million)
Refer to page 189 (accounting policy Impairment of financial assets).
The risk
Low risk, high value
The carrying amount of the parent company investment in
subsidiary and the amount of loans to group undertakings
represent 92% and 8% respectively (2020: 72% and 28%
respectively), of the company’s total assets.
Their recoverability is not considered a significant risk or subject
to significant judgement. However, due to their materiality in the
context of the parent company financial statements, these are
considered to be the areas that had the greatest effect on our
overall parent company audit.
BT Group plc
Annual Report 2021
Financial statements 114
Independent auditor’s report to the members of BT Group plc continued
Our response
Our procedures included:
Test of details: Comparing the carrying amount of the parent
company’s investment and loans to group undertakings, with
the relevant subsidiary balance sheet to identify whether
its net assets, being an approximation of their minimum
recoverable amount, was in excess of its carrying amount and
assessing whether that subsidiary group has historically been
profit-making.
Comparing valuations: Comparing the carrying amount of the
parent company’s investment and loans to group undertakings,
with the market capitalisation of the Group.
We performed the tests above rather than seeking to rely on any
of the Company’s controls because the nature of the balance
is such that we would expect to obtain audit evidence primarily
through the detailed procedures described.
Our results
We found the carrying amounts of the investment in
subsidiary and debt due from group entities to be acceptable
(2020: acceptable).
We continue to perform procedures over the adequacy
of regulatory provisions. However, as there have not been
significant changes in the judgements taken in the current
year, and no new matters with a high degree of estimation
uncertainty, we have not assessed this as one of the most
significant risks in our current year audit and, therefore,
it is not separately identified in our report this year.
3. Our application of materiality and an overview of
the scope of our audit
Materiality for the group financial statements as a whole was set
at £105 million (2020: £115 million), determined with reference
to a benchmark of group profit before tax from continuing
operations normalised by averaging over the last 5 years
due to fluctuations as a result of Covid-19 of £2,359 million
(2020: benchmark of group profit before tax from continuing
operations of £2,353 million), of which it represents 4.5%
(2020: 4.9%).
Materiality for the parent company financial statements as a
whole was set at £95 million (2020: £75 million), determined with
reference to a benchmark of total assets, of which it represents
0.8% (2020: 0.5%), and chosen to be lower than materiality for
the group financial statements as a whole.
In line with our audit methodology, our procedures on
individual account balances and disclosures were performed
to a lower threshold, performance materiality, so as to reduce
to an acceptable level the risk that individually immaterial
misstatements in individual account balances add up to a
material amount across the financial statements as a whole.
Performance materiality was set at 65% (2020: 65%) of
materiality for the financial statements as a whole, which
equates to £68 million (2020: £75 million) for the group and
£61.75 million (2020: £48 million) for the parent company. We
applied this percentage in our determination of performance
materiality based on the level of identified control deficiencies
during the prior year.
We agreed to report the Audit Committee any corrected
or uncorrected identified misstatements exceeding £5.25
million (2020: £5.5 million), in addition to other identified
misstatements that warranted reporting on qualitative grounds.
In the current year we reassessed how we define components of
the group and have determined our audit scope predominately
on a legal entity basis, rather than a Consumer Facing Unit/
Corporate Unit basis. Of the group’s 233 (2020: seven) reporting
components, we subjected four (2020: all) to full scope audits
for group purposes. Work on the Group’s entire property, plant
and equipment balance was performed by the group audit team
on behalf of the Group and component teams.
The components within the scope of our work accounted for the
following percentages:
Group
revenue
87%
Group
profit
before
tax
78%
Group total
assets
95%
Audits for group reporting
purposes
2020
98%
97%
100%
The remaining 13% (2020: 2%) of total group revenue, 22%
(2020: 3%) of group profit before tax and 5% (2020: 0%) of
total group assets is represented by 229 (2020: nil) reporting
components, none of which individually represented more than
6% (2020: 2%) of any of total group revenue, group profit before
tax or total group assets. For the residual components, we
performed analysis at an aggregated group level to re-examine
our assessment that there were no significant risks of material
misstatement within these.
The work on all components, excluding the audit of BT Italy,
was performed by the Group audit team. The parent company
was also audited by the Group audit team. The group team
instructed the BT Italy component auditor as to the significant
areas to be covered, including the risks identified above and the
information to be reported back.
The group team approved the component materialities, which
ranged from £25 million to £90 million (2020: £40 million to £110
million), having regard to the mix and size and risk profile of the
Group across components.
The Group audit team met frequently on video conference
meetings with the BT Italy component audit team as part of
the audit planning and completion stages to explain our audit
instructions and discuss the component auditor’s plans as well as
performing file reviews upon the completion of the component
auditor’s engagement.
At these meetings with the component auditor, the findings
reported to the Group team were discussed in more detail,
and any further work required by the Group team was then
performed by the component auditor.
4. Going concern
The Directors have prepared the financial statements on the
going concern basis as they do not intend to liquidate the Group
or the Company or to cease their operations, and as they have
concluded that the Group’s and the Company’s financial position
means that this is realistic. They have also concluded that there
are no material uncertainties that could have cast significant
doubt over their ability to continue as a going concern for at
least a year from the date of approval of the financial statements
(“the going concern period”).
BT Group plc
Annual Report 2021
115
We used our knowledge of the Group, its industry, and the
general economic environment to identify the inherent risks to
its business model and analysed how those risks might affect the
Group’s and Company’s financial resources or ability to continue
operations over the going concern period. The risks that we
considered most likely to adversely affect the Group’s and
Company’s available financial resources over this period were:
– The impact of an additional lockdown as a result of Covid;
– The impact of a complete ban on certain high-risk vendors;
– The impact of a significant service interruption.
We also considered less predictable but realistic second order
impacts, such as a large scale cyber breach or adverse changes
to telecoms regulation which could result in a rapid reduction of
available financial resources.
We considered whether these risks could plausibly affect the
liquidity in the going concern period by comparing severe
but plausible downside scenarios that could arise from these
risks individually and collectively against the level of available
financial resources indicated by the Group’s financial forecasts.
We also assessed the completeness of the going
concern disclosure.
Our conclusions based on this work:
– we consider that the directors’ use of the going concern basis
of accounting in the preparation of the financial statements is
appropriate;
– we have not identified, and concur with the directors’
assessment that there is not, a material uncertainty related
to events or conditions that, individually or collectively, may
cast significant doubt on the Group’s or Company’s ability to
continue as a going concern for the going concern period;
– we have nothing material to add or draw attention to
in relation to the directors’ statement in note 1 to the
financial statements on the use of the going concern basis
of accounting with no material uncertainties that may cast
significant doubt over the Group and Company’s use of that
basis for the going concern period, and we found the going
concern disclosure in note 1 to be acceptable; and
– the related statement under the Listing Rules set out on page
106 is materially consistent with the financial statements and
our audit knowledge.
However, as we cannot predict all future events or conditions
and as subsequent events may result in outcomes that are
inconsistent with judgements that were reasonable at the time
they were made, the above conclusions are not a guarantee that
the Group or the Company will continue in operation.
5. Fraud and breaches of laws and regulations –
ability to detect
Identifying and responding to risks of material misstatement
due to fraud
To identify risks of material misstatement due to fraud (“fraud
risks”) we assessed events or conditions that could indicate an
incentive or pressure to commit fraud or provide an opportunity
to commit fraud. Our risk assessment procedures included:
– Enquiring of directors, the audit committee, internal audit and
inspection of policy documentation as to the Group’s high-
level policies and procedures to prevent and detect fraud,
including the internal audit function, and the Group’s channel
for “whistleblowing”, as well as whether they have knowledge
of any actual, suspected or alleged fraud.
– Reading Board, Remuneration Committee and Executive
Committee minutes.
– Considering remuneration incentive schemes and
performance targets for management and directors including
the EPS target for management remuneration.
– Using analytical procedures to identify any unusual or
unexpected relationships.
We communicated identified fraud risks throughout the audit
team and remained alert to any indications of fraud throughout
the audit. This included communication from the group to full
scope component audit teams of relevant fraud risks identified
at the Group level and request to full scope component audit
teams to report to the Group audit team any instances of fraud
that could give rise to a material misstatement at group.
As required by auditing standards, and taking into account
possible pressures to meet profit targets, recent revisions to
guidance and our overall knowledge of the control environment,
we perform procedures to address the risk of management
override of controls, in particular the risk that Group and
component management may be in a position to make
inappropriate accounting entries. On this audit we do not believe
there is a fraud risk related to revenue recognition because
non-long-term contract revenues are not judgemental and
consist of a high number of low value transactions, and long-
term contracts are generally low in complexity with most having
a revenue recognition profile aligned to billing.
We did not identify any additional fraud risks.
We performed procedures including:
– Identifying journal entries to test for all full scope components
based on risk criteria and comparing the identified entries to
supporting documentation. These included those posted
by senior finance management, those posted and approved
by the same user and those posted to unusual or seldom
used accounts.
Identifying and responding to risks of material misstatement
due to non‑compliance with laws and regulations
We identified areas of laws and regulations that could
reasonably be expected to have a material effect on the financial
statements from our general commercial and sector experience,
through discussion with the directors and other management
(as required by auditing standards), and from inspection of the
Group’s regulatory and legal correspondence and discussed
with the directors and other management the policies and
procedures regarding compliance with laws and regulations.
As the Group is regulated, our assessment of risks involved gaining
an understanding of the control environment including the entity’s
procedures for complying with regulatory requirements.
We communicated identified laws and regulations throughout
our team and remained alert to any indications of non-
compliance throughout the audit. This included communication
from the group to full-scope component audit teams of relevant
laws and regulations identified at the Group level, and a request
for full scope component auditors to report to the group team
any instances of non-compliance with laws and regulations that
could give rise to a material misstatement at group.
The potential effect of these laws and regulations on the
financial statements varies considerably.
BT Group plc
Annual Report 2021
Financial statements 116
Independent auditor’s report to the members of BT Group plc continued
Firstly, the Group is subject to laws and regulations that
directly affect the financial statements including financial
reporting legislation (including related companies legislation),
distributable profits legislation, taxation legislation, and pension
legislation and we assessed the extent of compliance with these
laws and regulations as part of our procedures on the related
financial statement items.
Secondly, the Group is subject to many other laws and
regulations where the consequences of non-compliance
could have a material effect on amounts or disclosures in the
financial statements, for instance through the imposition of
fines or litigation or the loss of the Group’s license to operate.
We identified the following areas as those most likely to
have such an effect: anti-bribery, regulations affecting
telecommunication providers, and certain aspects of company
legislation recognising the financial and regulated nature of the
Group’s activities (including compliance with Ofcom regulation)
and its legal form. Auditing standards limit the required audit
procedures to identify non-compliance with these laws and
regulations to enquiry of the directors and other management
and inspection of regulatory and legal correspondence, if any.
Therefore if a breach of operational regulations is not disclosed
to us or evident from relevant correspondence, an audit
will not detect that breach.
We discussed with the audit committee other matters related
to actual or suspected breaches of laws or regulations, for which
disclosure is not necessary, and considered any implications for
our audit.
Context of the ability of the audit to detect fraud or breaches
of law or regulation
Owing to the inherent limitations of an audit, there is an
unavoidable risk that we may not have detected some material
misstatements in the financial statements, even though we have
properly planned and performed our audit in accordance with
auditing standards. For example, the further removed non-
compliance with laws and regulations is from the events and
transactions reflected in the financial statements, the less
likely the inherently limited procedures required by auditing
standards would identify it.
In addition, as with any audit, there remained a higher risk of
non-detection of fraud, as these may involve collusion, forgery,
intentional omissions, misrepresentations, or the override of
internal controls. Our audit procedures are designed to detect
material misstatement. We are not responsible for preventing
non-compliance or fraud and cannot be expected to detect
non-compliance with all laws and regulations.
6. We have nothing to report on the other
information in the Annual Report
The directors are responsible for the other information
presented in the Annual Report together with the financial
statements. Our opinion on the financial statements does not
cover the other information and, accordingly, we do not express
an audit opinion or, except as explicitly stated below, any form of
assurance conclusion thereon.
Our responsibility is to read the other information and, in
doing so, consider whether, based on our financial statements
audit work, the information therein is materially misstated
or inconsistent with the financial statements or our audit
knowledge. Based solely on that work we have not identified
material misstatements in the other information.
BT Group plc
Annual Report 2021
Strategic report and directors’ report
Based solely on our work on the other information:
– we have not identified material misstatements in the strategic
report and the directors’ report;
– in our opinion the information given in those reports for the
financial year is consistent with the financial statements; and
– in our opinion those reports have been prepared in
accordance with the Companies Act 2006.
Directors’ remuneration report
In our opinion the part of the Directors’ Remuneration Report to
be audited has been properly prepared in accordance with the
Companies Act 2006.
Disclosures of emerging and principal risks and longer‑term
viability
We are required to perform procedures to identify whether
there is a material inconsistency between the directors’
disclosures in respect of emerging and principal risks and
the viability statement, and the financial statements and our
audit knowledge.
Based on those procedures, we have nothing material to add or
draw attention to in relation to:
– the directors’ confirmation within the Viability statement on
page 68 that they have carried out a robust assessment of the
emerging and principal risks facing the Group, including those
that would threaten its business model, future performance,
solvency and liquidity;
– the Emerging and Principal Risks disclosures describing these
risks and how emerging risks are identified, and explaining
how they are being managed and mitigated; and
– the directors’ explanation in the Viability statement of how
they have assessed the prospects of the Group, over what
period they have done so and why they considered that period
to be appropriate, and their statement as to whether they
have a reasonable expectation that the Group will be able to
continue in operation and meet its liabilities as they fall due
over the period of their assessment, including any related
disclosures drawing attention to any necessary qualifications
or assumptions.
We are also required to review the Viability statement, set
out on page 68 under the Listing Rules. Based on the above
procedures, we have concluded that the above disclosures are
materially consistent with the financial statements and our
audit knowledge.
Our work is limited to assessing these matters in the context of
only the knowledge acquired during our financial statements
audit. As we cannot predict all future events or conditions and as
subsequent events may result in outcomes that are inconsistent
with judgements that were reasonable at the time they were
made, the absence of anything to report on these statements
is not a guarantee as to the Group’s and Company’s longer-
term viability.
Corporate governance disclosures
We are required to perform procedures to identify whether
there is a material inconsistency between the directors’
corporate governance disclosures and the financial statements
and our audit knowledge.
Based on those procedures, we have concluded that each of the
following is materially consistent with the financial statements
and our audit knowledge:
– the directors’ statement that they consider that the annual
report and financial statements taken as a whole is fair,
balanced and understandable, and provides the information
necessary for shareholders to assess the Group’s position and
performance, business model and strategy;
– the section of the annual report describing the work of the
Audit Committee, including the significant issues that the
audit committee considered in relation to the financial
statements, and how these issues were addressed; and
– the section of the annual report that describes the review of
the effectiveness of the Group’s risk management and internal
control systems.
We are required to review the part of the Corporate Governance
Statement relating to the Group’s compliance with the
provisions of the UK Corporate Governance Code specified by
the Listing Rules for our review. We have nothing to report in
this respect.
7. We have nothing to report on the other matters on
which we are required to report by exception
Under the Companies Act 2006, we are required to report to you
if, in our opinion:
– adequate accounting records have not been kept by the
parent Company, or returns adequate for our audit have not
been received from branches not visited by us; or
– the parent Company financial statements and the part of
the Directors’ Remuneration Report to be audited are not in
agreement with the accounting records and returns; or
– certain disclosures of directors’ remuneration specified by law
are not made; or
– we have not received all the information and explanations we
require for our audit.
We have nothing to report in these respects.
8. Respective responsibilities
Directors’ responsibilities
As explained more fully in their statement set out on page
105, the directors are responsible for: the preparation of the
financial statements including being satisfied that they give
a true and fair view; such internal control as they determine is
necessary to enable the preparation of financial statements
that are free from material misstatement, whether due to
fraud or error; assessing the Group and parent Company’s
ability to continue as a going concern, disclosing, as
applicable, matters related to going concern; and using the
going concern basis of accounting unless they either intend
to liquidate the Group or the parent Company or to cease
operations, or have no realistic alternative but to do so.
117
Auditor’s responsibilities
Our objectives are to obtain reasonable assurance about
whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to
issue our opinion in an auditor’s report. Reasonable assurance is
a high level of assurance, but does not guarantee that an audit
conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists. Misstatements can arise
from fraud or error and are considered material if, individually
or in aggregate, they could reasonably be expected to influence
the economic decisions of users taken on the basis of the
financial statements.
A fuller description of our responsibilities is provided on the
FRC’s website at www.frc.org.uk/auditorsresponsibilities.
9. The purpose of our audit work and to whom we
owe our responsibilities
This report is made solely to the Company’s members, as a
body, in accordance with Chapter 3 of Part 16 of the Companies
Act 2006 and the terms of our engagement by the Company.
Our audit work has been undertaken so that we might state
to the Company’s members those matters we are required to
state to them in an auditor’s report and the further matters
we are required to state to them in accordance with the terms
agreed with the Company, and for no other purpose. To the
fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Company and the
Company’s members, as a body, for our audit work, for this
report, or for the opinions we have formed.
John Luke
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
15 Canada Square
London
E14 5GL
13 May 2021
BT Group plc
Annual Report 2021
Financial statements 118
Group income statement
Year ended 31 March 2021
Revenue
Operating costs
Operating profit (loss)
Finance expense
Finance income
Net finance expense
Share of post tax profit (loss) of associates and joint ventures
Profit (loss) before taxation
Taxation
Profit (loss) for the year
Earnings per share
Basic
Diluted
Year ended 31 March 2020
Revenue
Operating costs
Operating profit (loss)
Finance expense
Finance income
Net finance expense
Share of post tax profit (loss) of associates and joint ventures
Profit (loss) before taxation
Taxation
Profit (loss) for the year
Earnings per share
Basic
Diluted
a For a definition of specific items, see page 197. An analysis of specific items is provided in note 9.
Before
specific
items
(‘Adjusted’)
£m
21,370
(18,302)
3,068
(785)
12
(773)
8
2,303
(428)
1,875
Specific
itemsa
£m
Total
(Reported)
£m
(39)
(442)
(481)
(18)
–
(18)
–
(499)
96
(403)
21,331
(18,744)
2,587
(803)
12
(791)
8
1,804
(332)
1,472
18.9p
18.6p
(4.1)p
(4.0)p
14.8p
14.6p
Before
specific
items
(‘Adjusted’)
£m
22,824
(19,213)
3,611
(796)
39
(757)
6
2,860
(536)
2,324
23.5p
23.3p
Specific
itemsa
£m
Total
(Reported)
£m
81
(409)
(328)
(145)
5
(140)
(39)
(507)
(83)
(590)
22,905
(19,622)
3,283
(941)
44
(897)
(33)
2,353
(619)
1,734
(6.0)p
(5.9)p
17.5p
17.4p
Notes
4, 5
6
4
27
10
11
Notes
4, 5
6
4
27
10
11
BT Group plc
Annual Report 2021
Group statement of comprehensive income
Year ended 31 March
Profit for the year
Other comprehensive income (loss)
Items that will not be reclassified to the income statement
Remeasurements of the net pension obligation
Tax on pension remeasurements
Items that have been or may be reclassified to the income statement
Exchange differences on translation of foreign operations
Fair value movements on assets at fair value through other comprehensive income
Movements in relation to cash flow hedges:
– net fair value gains (losses)
– recognised in income and expense
Tax on components of other comprehensive income that have been or may be reclassified
Other comprehensive (loss) income for the year, net of tax
Total comprehensive (loss) income for the year
119
Notes
20
10
29
29
29
29
10, 29
2021
£m
2020
£m
1,472
1,734
(4,856)
918
4,853
(808)
(189)
–
(1,468)
850
133
(4,612)
(3,140)
40
(5)
854
(382)
(84)
4,468
6,202
BT Group plc
Annual Report 2021
Financial statements 120
Group balance sheet
At 31 March
Non‑current assets
Intangible assets
Property, plant and equipment
Right-of-use assets
Derivative financial instruments
Investments
Associates and joint ventures
Trade and other receivables
Contract assets
Deferred tax assets
Current assets
Programme rights
Inventories
Trade and other receivables
Contract assets
Assets classified as held for sale
Current tax receivable
Derivative financial instruments
Investments
Cash and cash equivalents
Current liabilities
Loans and other borrowings
Derivative financial instruments
Trade and other payables
Contract liabilities
Lease liabilities
Liabilities classified as held for sale
Current tax liabilities
Provisions
Total assets less current liabilities
Non‑current liabilities
Loans and other borrowings
Derivative financial instruments
Contract liabilities
Lease liabilities
Retirement benefit obligations
Other payables
Deferred tax liabilities
Provisions
Equity
Share capital
Share premium
Own shares
Merger reserve
Other reserves
Retained earnings
Total equity
Notes
2021
£m
2020
£m
13
14
15
28
24
17
5
10
16
17
5
23
28
24
25
26
28
18
5
15
23
19
26
28
5
15
20
18
10
19
21
29
13,357
19,397
4,863
1,165
31
17
314
344
989
13,889
18,474
5,391
2,229
20
12
481
279
300
40,477
41,075
328
297
3,257
1,515
–
281
70
3,652
1,000
310
300
2,704
1,442
268
67
260
5,092
1,549
10,400
11,992
911
88
5,980
925
730
–
84
288
2,842
46
5,794
972
812
211
21
288
9,006
10,986
41,871
42,081
15,774
1,195
167
5,422
5,096
682
1,429
427
16,492
966
179
5,748
1,140
754
1,608
431
30,192
27,318
499
1,051
(143)
998
436
8,838
499
1,051
(237)
2,572
1,119
9,759
11,679
14,763
41,871
42,081
The consolidated financial statements on pages 118 to 196 were approved by the Board of Directors on 12 May 2021 and were
signed on its behalf by:
Jan du Plessis
Chairman
Philip Jansen
Chief Executive
Simon Lowth
Chief Financial Officer
BT Group plc
Annual Report 2021
121
Group statement of changes in equity
At 1 April 2019
Profit for the year
Other comprehensive income
(loss) – before tax
Tax on other comprehensive
income (loss)
Transferred to the income
statement
Total comprehensive income
(loss) for the year
Dividends to shareholders
Unclaimed dividend over 10 years
Share-based payments
Tax on share-based payments
Net buyback of own shares
Transfer to realised profit
Other movements
At 31 March 2020
Profit for the year
Other comprehensive income
(loss) – before tax
Tax on other comprehensive
income (loss)
Transferred to the income
statement
Total comprehensive income
(loss) for the year
Dividends to shareholders
Share-based payments
Tax on share-based payments
Net buyback of own shares
Transfer to realised profit
Other movements
Notes
Share
capitala
£m
Share
premiumb
£m
499
–
–
1,051
–
–
Own
sharesc
£m
(167)
–
–
Merger
reserved
£m
Other
reservese
£m
4,147
–
–
718
–
889
Retained
(loss)
earnings
£m
3,848
1,734
4,853
Total
equity
(deficit)
£m
10,096
1,734
5,742
10
12
22
10
21
10
12
22
10
21
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
499
–
–
1,051
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(70)
–
–
(237)
–
–
–
–
–
–
–
–
94
–
–
–
–
–
–
–
–
–
–
(1,575)
–
2,572
–
–
–
–
–
–
–
–
–
(1,574)
–
(84)
(808)
(892)
(382)
–
(382)
423
5,779
6,202
–
–
–
–
–
(22)
–
1,119
–
(1,657)
133
850
(1,521)
2
72
–
(14)
1,597
(4)
9,759
1,472
(4,856)
(1,521)
2
72
–
(84)
–
(4)
14,763
1,472
(6,513)
918
1,051
–
850
(674)
(2,466)
(3,140)
–
–
–
–
(9)
–
–
72
5
(107)
1,583
(8)
–
72
5
(13)
–
(8)
At 31 March 2021
499
1,051
(143)
998
436
8,838
11,679
a The allotted, called up, and fully paid ordinary share capital of BT Group plc at 31 March 2021 was £499m comprising 9,968,127,681 ordinary shares of 5p each (2019/20:
£499m comprising 9,968,127,681 ordinary shares of 5p each).
b The share premium account, comprising the premium on allotment of shares, is not available for distribution.
c For further analysis of own shares, see note 21.
d The merger reserve balance at 1 April 2019 includes £998m related to the group reorganisation that occurred in November 2001 and represented the difference between
the nominal value of shares in the new parent company, BT Group plc, and the aggregate of the share capital, share premium account and capital redemption reserve of
the prior parent company, British Telecommunications plc. In addition, on 29 January 2016, the company issued 1,594,900,429 ordinary shares of 5p at 470.7p per share.
These shares were used as part consideration for the acquisition of EE. As a result of this transaction the merger reserve was credited with £7,424m net of £3m issue costs.
Following settlement of intercompany loans by qualifying consideration of £1,574m (2019/20: £1,575m), equivalent balances were transferred from merger reserve to
realised profit.
e For further analysis of other reserves, see note 29.
BT Group plc
Annual Report 2021
Financial statements 122
Group cash flow statement
Year ended 31 March
Cash flow from operating activities
Profit before taxation
Share of post tax (profit) loss of associates and joint ventures
Net finance expense
Operating profit
Other non-cash chargesa
(Profit) loss on disposal of businesses
Profit on disposal of property, plant and equipment and intangible assets
Depreciation and amortisation
Decrease (increase) in inventories
Decrease (increase) in programme rights
(Increase) decrease in trade and other receivablesb
(Increase) decrease in contract assets
(Decrease) increase in trade and other payables
(Decrease) increase in contract liabilities
(Decrease) increase in other liabilitiesc
(Decrease) increase in provisions
Cash generated from operations
Income taxes paid
Net cash inflow from operating activities
Cash flow from investing activities
Interest received
Dividends received from associates and joint ventures
Acquisition of subsidiaries
Proceeds on disposal of subsidiaries, associates and joint ventures
Acquisition of associates and joint ventures
Proceeds on disposal of current financial assetsd
Purchases of current financial assetsd
Net (purchase) disposal of non-current asset investmentse
Proceeds on disposal of property, plant and equipment and intangible assets
Purchases of property, plant and equipment and intangible assetsf
Net cash outflow from investing activities
Cash flow from financing activities
Equity dividends paid
Interest paid
Repayment of borrowingsg
Proceeds from bank loans and bonds
Payment of lease liabilities
Cash flows from derivatives related to net debt
Proceeds from issue of own shares
Repurchase of ordinary share capital
Net cash outflow from financing activities
Net decrease in cash and cash equivalents
Opening cash and cash equivalentsh
Net decrease in cash and cash equivalents
Effect of exchange rate changes
Closing cash and cash equivalentsh
Notes
2021
£m
2020
£m
1,804
(8)
791
2,587
267
(65)
(66)
4,347
2
13
327
(141)
(43)
(48)
(927)
(2)
2,353
33
897
3,283
209
36
(115)
4,274
69
33
163
(119)
144
(236)
(1,182)
(78)
6,251
6,481
(288)
(210)
5,963
6,271
6
5
(7)
164
–
13,506
(12,085)
(11)
85
(4,903)
30
1
–
60
(8)
12,000
(13,877)
33
216
(4,105)
(3,240)
(5,650)
(2)
(770)
(1,162)
–
(782)
(490)
1
(14)
(3,219)
(496)
1,409
(496)
(17)
(1,520)
(736)
(1,111)
2,843
(651)
452
2
(86)
(807)
(186)
1,594
(186)
1
25
896
1,409
a Other non-cash charges in 2019/20 include £58m goodwill impairment charge on assets associated with our domestic operations in France and selected domestic
operations and infrastructure in 16 countries in Latin America that were classified as held for sale. See note 23.
b Excludes a prepayment of £702m (2019/20: £nil) in respect of the acquisition of spectrum which completes in 2021/22.
c Includes pension deficit payments of £955m (2019/20: £1,274m).
d Primarily consists of investment in and redemption of amounts held in liquidity funds.
e Relates to (purchase) disposal of fair value through equity investments.
f Consists of additions to property, plant and equipment and software of £4,197m, movements in capital accruals of £4m and prepayments of £702m in respect of spectrum
which will be recognised as an asset in 2021/22.
g Repayment of borrowings includes the impact of hedging.
h Net of bank overdrafts of £104m (2019/20: £183m).
BT Group plc
Annual Report 2021
Notes to the consolidated financial statements
123
1. Basis of preparation
Preparation of the financial statements
These consolidated financial statements have been prepared
in accordance with international accounting standards in
conformity with the requirements of the Companies Act 2006.
The consolidated financial statements are also prepared in
accordance with international financial reporting standards
adopted pursuant to Regulation (EC) No 1606/2002 as it applies
in the European Union.
The consolidated financial statements are prepared on a going
concern basis.
This assessment is consistent with the assessment of our
viability, as set out on page 68, in estimating the financial
impact for a severe but plausible outcome for each risk, both
individually, in combination and through probabilistic risk
modelling. This stress testing confirmed that existing projected
cash flows and cash management activities provide us with
adequate headroom over the going concern assessment period.
Having assessed the principal and emerging risks, the directors
considered it appropriate to adopt the going concern basis of
accounting when preparing the group and parent company
financial statements. This assessment covers the period to May
2022, which is consistent with the FRC guidance. When reaching
this conclusion, the directors took into account the group’s and
parent company’s overall financial position (including trading
results and ability to repay term debt as it matures without
recourse to refinancing) and the exposure to principal risks.
These financial statements consolidate BT Group plc, the parent
company, and its subsidiaries (together the ‘group’, ‘us’, ‘we’
or ‘our’).
The consolidated financial statements are prepared on the
historical cost basis, except for certain financial and equity
instruments that have been measured at fair value. The
consolidated financial statements are presented in sterling,
the functional currency of BT Group plc.
New and amended accounting standards effective during
the year
The following amended standards and interpretations were
also effective during the year, however, they have not had a
significant impact on our consolidated financial statements.
– Amendments to References to Conceptual Framework in
IFRS Standards
– Definition of a Business (Amendments to IFRS 3)
– Definition of Material (Amendments to IAS 1 and IAS 8)
– Interest Rate Benchmark Reform (Amendments to IFRS 9, IAS
39 and IFRS 7)
– Extension of the Temporary Exemption from Applying IFRS 9
(Amendments to IFRS 4)
– Covid-19-Related Rent Concessions (Amendment to IFRS 16)
New and amended accounting standards that have been
issued but are not yet effective
The following new or amended standards and interpretations
are applicable in future periods but are not expected to have a
significant impact on the consolidated financial statements.
– Interest Rate Benchmark Reform – Phase 2 (Amendments to
IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16)
The replacement of Interbank Offered Rates (IBORs) with
Alternative Reference Rates (ARAs) will begin from December
2021. Where floating interest bearing receivables and payables
exist (currently based on IBORs) the Group will apply suitable
replacement benchmark rates and account for the instruments
in accordance with the amendments to IFRS 9 Financial
Instruments published in 2019 (Phase 1) and 2020 (Phase 2).
The adoption of these amendments and the transition to
ARAs are expected to have an immaterial financial impact.
The implications on the trading results of our segments of
IBOR reform have also been assessed and the expected impact
is immaterial. The Group is preparing to move to the new
benchmark rates in accordance with timelines as per
regulatory guidelines.
Presentation of specific items
Our income statement and segmental analysis separately
identify trading results before specific items (‘adjusted’). The
directors believe that presentation of our results in this way is
relevant to an understanding of our financial performance, as
specific items are identified by virtue of their size, nature
or incidence.
This presentation is consistent with the way that financial
performance is measured by management and reported to the
Board and the Executive Committee and assists in providing
a meaningful analysis of our trading results. In determining
whether an event or transaction is specific, management
considers quantitative as well as qualitative factors such as
the frequency or predictability of occurrence.
Specific items may not be comparable to similarly titled
measures used by other companies. Examples of charges or
credits meeting the above definition and which have been
presented as specific items in the current and/or prior years
include acquisitions/disposals of businesses and investments,
regulatory settlements, historical 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 as specific items.
Specific items for the current and prior year are disclosed in
note 9.
Adjustments to prior year disclosures due to internal
reorganisations
On 1 April 2020, Supply Chain and Pelipod, which serve several
parts of BT, were transferred from Enterprise to the central
procurement team and as a result will now be reported in Group
‘Other’ financial results. This did not impact the primary financial
statements. In 2019/20 the impact on segmental revenue was
a reduction in Enterprise segmental revenue of £141m and an
increase in Other segmental revenue of £28m. The prior year
comparatives for Enterprise and Other CFU results have been
restated to reflect this. Refer to Notes 4, 5, 7 and 17.
BT Group plc
Annual Report 2021
Financial statements 124
Notes to the consolidated financial statements continued
2. Critical & key accounting estimates and significant
judgements
3. Significant accounting policies that apply to the
overall financial statements
The preparation of financial statements in conformity with IFRS
requires the use of accounting estimates and assumptions.
It also requires management to exercise its judgement in the
process of applying our accounting policies. We continually
evaluate our estimates, assumptions and judgements based on
available information and experience. As the use of estimates is
inherent in financial reporting, actual results could differ from
these estimates.
Our critical accounting estimates are those estimates that carry
a significant risk of resulting in a material adjustment to the
carrying amount of assets and liabilities within the next financial
year. We also make other key estimates when preparing the
financial statements, which, while not meeting the definition
of a critical estimate, involve a higher degree of complexity and
can reasonably be expected to be of relevance to a user of the
financial statements. Management has discussed its critical and
other key accounting estimates and associated disclosures with
the Audit & Risk Committee.
Significant judgements are those made by management in
applying our significant accounting policies that have a material
impact on the amounts presented in the financial statements.
We may exercise significant judgement in our critical and key
accounting estimates.
Our critical and key accounting estimates and significant
judgements are described in the following notes to the financial
.
statements. They can be identified by the following symbol
Note
10. Current and deferred
income tax
13. Goodwill impairment
15. Reasonable certainty
and determination of lease
terms
19. & 31. Contingent
liabilities associated with
litigation
19. & 31. Other provisions
and contingent liabilities
20. Pension obligations
Critical
estimate
Key
estimate
Significant
judgement
ü
ü
ü
ü
ü
ü
ü
ü
ü
ü
ü
The significant accounting policies applied in the preparation of
our consolidated financial statements are set out below. Other
significant accounting policies applicable to a particular area are
disclosed in the most relevant note. They can be identified by the
following symbol
.
We have applied all policies consistently to all the years
presented, unless otherwise stated.
Basis of consolidation
The group financial statements consolidate the financial
statements of BT Group plc and its subsidiaries, and include its
share of the results of associates and joint ventures using the
equity method of accounting. The group recognises its direct
rights to (and its share of) jointly held assets, liabilities, revenues
and expenses of joint operations under the appropriate headings
in the consolidated financial statements.
All business combinations are accounted for using the
acquisition method regardless of whether equity instruments
or other assets are acquired. No material acquisitions were made
in the year.
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 involvement with the investee and has the ability to
affect those returns 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 financial statements.
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.
When the group loses control of a subsidiary, the profit or loss
on disposal is calculated as the difference between (i) the
aggregate of the fair value of the consideration received and the
fair value of any retained interest and (ii) the previous carrying
amount of the assets (including goodwill), and liabilities of the
subsidiary and any non-controlling interests. The profit or loss
on disposal is recognised as a specific item.
BT Group plc
Annual Report 2021
125
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 economic benefits will flow
to the group from the asset being developed, 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.
Termination benefits
Termination benefits (leaver costs) are payable when
employment is terminated before the normal retirement date, or
when an employee accepts voluntary redundancy in exchange
for these benefits. We recognise termination benefits when they
are demonstrably committed to the affected employees leaving
the group.
3. Significant accounting policies that apply to the
overall financial statements continued
Inventories
Network maintenance equipment and equipment to be sold
to customers are stated at the lower of cost or net realisable
value, taking into account expected revenue from the sale of
packages comprising a mobile handset and a subscription. Cost
corresponds to purchase or production cost determined by
either the first in first out (FIFO) or average cost method.
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. Estimates
and judgements applied in accounting for government grants
received in respect of the BDUK programme and other rural
superfast broadband contracts are described in note 14.
Once a government grant is recognised, any related deferred
income is treated in accordance with IAS 20 ‘Accounting for
Government Grants and Disclosure of Government Assistance’.
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 reflects the nature of the item or
transaction.
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 of exchange for the year (unless this average is
not a reasonable approximation of the cumulative effects of the
rates prevailing on the transaction dates, in which case income
and expenses are translated at the dates of the transactions).
Foreign exchange differences arising on the retranslation of
foreign undertakings 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 difference associated with the undertaking in the
translation reserve is charged or credited to the gain or loss on
disposal recognised in the income statement.
BT Group plc
Annual Report 2021
Financial statements 126
Notes to the consolidated financial statements continued
4. Segment information
Significant accounting policies that apply to segment information
Operating and reportable segments
Our operating segments are reported based on financial information provided to the Executive Committee, which is the key
management committee and represents the ‘chief operating decision maker’.
Our organisational structure reflects the different customer groups to which we provide communications products and services
via our customer-facing units (CFUs): Consumer, Enterprise, Global and Openreach. The customer-facing units are supported
by an internal service unit, Technology, and corporate units including procurement and property management.
The customer-facing units are our reportable segments and generate substantially all of our revenue. Technology and the
group’s corporate units are not reportable segments as they did not meet the quantitative thresholds as set out in IFRS 8
‘Operating Segments’ for any of the years presented.
We aggregate the remaining operations and include within the ‘Other’ category to reconcile to the consolidated results of the
group. The ‘Other’ category includes unallocated Technology costs and our corporate units.
Allocation of certain items to segments
Provisions for the settlement of significant legal, commercial and regulatory disputes, which are negotiated at a group level, are
initially recorded in the ‘Other’ segment. On resolution of the dispute, the full impact is recognised in the results of the relevant
customer-facing unit and offset in the group results through the utilisation of the provision previously charged to the ‘Other’
segment. Settlements which are particularly significant or cover more than one financial year may fall within the definition of
specific items as detailed in note 9.
The costs incurred by Technology and corporate units are recharged to the customer-facing units to reflect the services it
provides to them. Depreciation and amortisation incurred by Technology in relation to the networks and systems it manages
and operates on behalf of the customer-facing units is allocated to the customer-facing units based on their respective
utilisation. Capital expenditure incurred by Technology for specific projects undertaken on behalf of the customer-facing units
is allocated based on the value of the directly attributable expenditure incurred. Where projects are not directly attributable to
a particular customer-facing unit, capital expenditure is allocated between them based on the proportion of estimated future
economic benefits.
Specific items are detailed in note 9 and are not allocated to the reportable segments as this reflects how they are reported to
the Executive 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.
Measuring segment performance
Performance of each reportable segment is measured based on adjusted EBITDA. EBITDA is defined as the group profit or
loss before interest, taxation, depreciation and amortisation. Adjusted EBITDA is defined as EBITDA before specific items,
net non-interest related finance expense, and share of profits or losses of associates and joint ventures. Adjusted EBITDA is
considered to be a useful measure of the operating performance of the customer-facing units because it approximates the
underlying operating cash flow by eliminating depreciation and amortisation and also provides a meaningful analysis of
trading performance by excluding specific items, which are disclosed separately by virtue of their size, nature or incidence.
Revenue recognition
Our revenue recognition policy is set out in the following note.
Internal revenue and costs
Most of our 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 units, including the use of BT Ireland’s network. This
occurs both directly, and also indirectly, through Technology which is included within the ‘Other’ segment. Enterprise internal
revenue arises from Consumer for mobile Ethernet access and Technology for transmission planning services. Internal revenue
arising in Consumer relates primarily to employee broadband and wi-fi services. Intra-group revenue generated from the sale of
regulated products and services is based on market price. Intra-group revenue from the sale of other products and services is
agreed between the relevant customer-facing units and therefore the profitability of customer-facing units may be impacted
by transfer pricing levels.
Geographic segmentation
The UK is our country of domicile and we generate the majority of our revenue from external customers in the UK. The
geographic analysis of revenue is based on the country of origin in which the customer is invoiced. The geographic analysis of
non-current assets, which exclude derivative financial instruments, investments and deferred tax assets, is based on the
location of the assets.
BT Group plc
Annual Report 2021
4. Segment information continued
Segment revenue and profit
Year ended 31 March 2021
Segment revenue
Internal revenue
Revenue from external customersa
Adjusted EBITDAb
Depreciation and amortisationa
Operating profit (loss)a
Specific items (note 9)
Operating profit
Net finance expensec
Share of post tax profit (loss) of associates and joint
ventures
Profit before tax
Year ended 31 March 2020 (restated)
Segment revenue
Internal revenue
Revenue from external customersa
Adjusted EBITDAb
Depreciation and amortisationa
Operating profit (loss)a
Specific items (note 9)
Operating profit
Net finance expensec
Share of post tax profit (loss) of associates and joint
ventures
Profit before tax
127
Consumer
£m
Enterprise
£m
Global
£m
Openreach
£m
Other
£m
9,885
(97)
5,449
(109)
9,788
5,340
2,128
(1,281)
1,704
(740)
3,731
–
3,731
596
(405)
5,244
(2,756)
2,488
2,937
(1,707)
23
–
23
50
(214)
Total
£m
24,332
(2,962)
21,370
7,415
(4,347)
847
964
191
1,230
(164)
3,068
Consumer
£m
Enterprised
£m
Global
£m
Openreach
£m
Otherd
£m
10,388
(102)
5,952
(163)
10,286
5,789
2,426
(1,278)
1,935
(712)
1,148
1,223
4,361
–
4,361
634
(479)
155
5,112
(2,753)
2,359
2,858
(1,712)
1,146
29
–
29
54
(115)
(61)
(481)
2,587
(791)
8
1,804
Total
£m
25,842
(3,018)
22,824
7,907
(4,296)
3,611
(328)
3,283
(897)
(33)
2,353
a Before specific items.
b Adjusted EBITDA, defined as EBITDA before specific items, net non-interest related finance expense, and share of profits or losses of associates and joint ventures.
c Net finance expense includes specific item expense of £18m (2019/20): £140m. See note 9.
d On 1 April 2020, Supply Chain and Pelipod, which serve several parts of BT, were transferred from Enterprise to the central procurement team and as a result will now be
reported in Group ‘Other’ financial results. The prior year comparative for the Enterprise and the Other CFU results has been restated to reflect this.
Internal revenue and costs
Year ended 31 March 2021
Internal revenue recorded by
Consumer
Enterprise
Global
Openreach
Total
Year ended 31 March 2020
Internal revenue recorded by
Consumer
Enterprisea
Global
Openreach
Total
Internal cost recorded by
Consumer
£m
Enterprise
£m
Global
£m
Openreach
£m
Other
£m
Total
£m
–
17
–
1,592
1,609
60
–
–
919
979
19
29
–
231
279
–
–
–
–
–
18
63
–
14
95
97
109
–
2,756
2,962
Internal cost recorded byb
Consumer
£m
Enterprisea
£m
Global
£m
Openreach
£m
Othera
£m
Total
£m
–
11
–
1,559
1,570
63
–
–
932
995
21
51
–
247
319
–
34
–
–
34
18
67
–
15
100
102
163
–
2,753
3,018
a On 1 April 2020, Supply Chain and Pelipod, which serve several parts of BT, were transferred from Enterprise to the central procurement team and as a result will now be
reported in Group ‘Other’ financial results. The prior year comparative for the Enterprise and the Other CFU results has been restated to reflect this.
b Internal charges incurred by a corporate business unit and presented against ‘Other’ in prior years are now shown against the customer-facing unit that the costs are
ultimately recharged to. As a result £1,416m costs presented against ‘Other’ in 2019/20 have been reclassified and are now presented against the relevant customer-
facing unit.
BT Group plc
Annual Report 2021
Financial statements 128
Notes to the consolidated financial statements continued
4. Segment information continued
Capital expenditure
Year ended 31 March 2021
Intangible assetsa
Property, plant and equipmentb
Capital expenditure
Year ended 31 March 2020
Intangible assetsa
Property, plant and equipmentb
Capital expenditure
Consumer
£m
Enterprise
£m
Global
£m
Openreach
£m
311
771
1,082
192
300
492
95
93
101
2,148
188
2,249
Other
£m
84
121
205
Consumer
£m
Enterprisec
£m
Global
£m
Openreach
£m
Otherc
£m
291
657
948
216
280
496
123
100
223
103
2,005
2,108
57
128
185
Total
£m
783
3,433
4,216
Total
£m
790
3,170
3,960
a Additions to intangible assets as presented in note 13.
b Additions to property, plant and equipment as presented in note 14, inclusive of movement on engineering stores.
c On 1 April 2020, Supply Chain and Pelipod, which serve several parts of BT, were transferred from Enterprise to the central procurement team and as a result will now be
reported in Group ‘Other’ financial results. The prior year comparative for the Enterprise and the Other CFU results has been restated to reflect this.
Geographic segmentation
Revenue from external customers
Year ended 31 March
UK
Europe, Middle East and Africa, excluding the UK
Americas
Asia Pacific
Revenuea
a Before specific items.
Non-current assets
Year ended 31 March
UK
Europe, Middle East and Africa, excluding the UK
Americas
Asia Pacific
Non‑current assetsa
2021
£m
18,524
1,599
739
508
2020
£m
19,401
1,904
924
595
21,370
22,824
2021
£m
35,664
2,190
277
161
2020
£m
35,597
2,347
384
198
38,292
38,526
a Comprising the following balances presented in the group balance sheet: intangible assets; property, plant and equipment; right-of-use assets; associates and joint
ventures; trade and other receivables and contract assets.
BT Group plc
Annual Report 2021
129
5. Revenue
Significant accounting policies that apply to revenue
Revenue from contracts with customers in scope of IFRS 15
Most revenue recognised by the group (excluding Openreach where most revenue is recognised under the scope of IFRS 16)
is in scope of IFRS 15 and is subject to the following revenue recognition policy.
On inception of the contract we identify a “performance obligation” for each of the distinct goods or services we have promised
to provide to the customer. The consideration specified in the contract with the customer is allocated to each performance
obligation identified based on their relative standalone selling prices, and is recognised as revenue as they are satisfied.
The table below summarises the performance obligations we have identified for our major service lines and provides
information on the timing of when they are satisfied and the related revenue recognition policy. Also detailed in this note is
revenue expected to be recognised in future periods for contracts in place at 31 March 2021 that contain unsatisfied
performance obligations.
Service line
Performance obligations
Revenue recognition policy
ICT and managed
networks
Provision of networked IT services, managed
network services, and arrangements to design
and build software solutions. Performance
obligations are identified for each distinct
service or deliverable for which the customer has
contracted, and are considered to be satisfied over
the time period that we deliver these services or
deliverables. Commitments to provide hardware
to customers that are distinct from the other
promises are considered to be satisfied at the
point in time that control passes to the customer.
Fixed access
subscriptions
Mobile
subscriptions
Equipment and
other services
Provision of broadband, TV and fixed telephony
services including local, national and international
calls, connections, line rental, and calling features.
Performance obligations exist for each ongoing
service provided to the customer and are satisfied
over the period that the services are provided.
Installation services are recognised as distinct
performance obligations if their relationship with
the other services in the contract is purely
functional. These are satisfied when the customer
benefits from the service. Connection services are
not distinct performance obligations and are
therefore combined with the associated service
performance obligation.
Provision of mobile postpaid and prepaid services,
including voice minutes, SMS, and data services.
Performance obligations exist for each ongoing
service provided to the customer and are satisfied
over the period that the services are provided.
Provision of equipment and other services,
including mobile phone handsets and hardware
such as set top boxes and broadband routers
provided as part of customer contracts.
Performance obligations are satisfied at the point
in time that control passes to the customer. For
other services, performance obligations are
identified based on the distinct goods and
services we have committed to provide.
Revenue for services is recognised over time using a
measure of progress that appropriately reflects the
pattern by which the performance obligation is
satisfied. For time and material contracts, revenue
is recognised as the service is received by the
customer. Where performance obligations exist for
the provision of hardware, revenue is recognised at
the point in time that the customer obtains control
of the promised asset. For long-term fixed price
contracts revenue recognition will typically be
based on the satisfaction of performance
obligations in respect of the achievement of
contract milestones and customer acceptance,
which is the best measure of progress towards the
completion of the performance obligation.
Fixed subscription charges are recognised as
revenue on a straight line basis over the period that
the services are provided. Upfront charges for
non-distinct connection and installation services
are deferred as contract liabilities and are
recognised as revenue over the same period.
Variable charges such as call charges are
recognised when the related services are delivered.
Where installation activities are distinct
performance obligations, revenue is recognised at
the point in time that the installation is completed.
Subscription fees, consisting primarily of monthly
charges for access to internet access or voice and
data services, are recognised as the service is
provided. One-off services such as calls outside of
plan and excess data usage are recognised when
the service is used.
Revenue from equipment sales is recognised at the
point in time that control passes to the customer.
Where payment is not received in full at the time of
the sale, such as with equipment provided as part
of mobile and fixed access subscriptions, contract
assets are recognised for the amount due from the
customer that will be recovered over the contract
period. Revenue to be recognised is calculated by
reference to the relative standalone selling price
of the equipment. For other services, revenue is
recognised when the related performance
obligations are satisfied, which could be over time,
in line with contract milestones, or at a point in
time depending on the nature of the service.
BT Group plc
Annual Report 2021
Financial statements 130
Notes to the consolidated financial statements continued
5. Revenue continued
We recognise revenue based on the relative standalone selling price of each performance obligation. Determining the
standalone selling price often requires judgement and may be derived from regulated prices, list prices, a cost-plus derived price,
or the price of similar products when sold on a standalone basis by BT or a competitor. In some cases it may be appropriate to use
the contract price when this represents a bespoke price that would be the same for a similar customer in a similar circumstance.
The fixed access and mobile subscription arrangements sold by our Consumer business is typically payable in advance, with any
variable or one-off charges billed in arrears. Payment is received immediately for direct sales of equipment to customers. Where
equipment is provided to customers under mobile and fixed access subscription arrangements, payment for the equipment is
received over the course of the contract term. For sales by our enterprise businesses, invoices are issued in line with contractual
terms. Payments received in advance are recognised as contract liabilities, amounts billed in arrears are recognised as contract
assets.
Variable consideration arising from contracts where services have been performed but customer acceptance has not yet been
received are not recognised until it is highly probable that a significant reversal of revenue recognised will not occur.
We are applying the practical expedient to recognise revenue “as-invoiced” for certain fixed access and mobile subscription
services revenues. Where we have a right to invoice at an amount that directly corresponds with performance to date, we
recognise revenue at that amount. We have also adopted the practical expedient not to calculate the aggregate amount of the
transaction price allocated to the performance obligations that are unsatisfied for these contracts.
We do not have any material obligations in respect of returns, refunds or warranties. Where we act as an agent in a transaction,
such as insurance services offered, we recognise commission net of directly attributable costs. Where the actual and estimated
costs to completion of the contract exceed the estimated revenue, a loss is recognised immediately.
We exercise judgement in assessing whether the initial set-up, transition and transformation phases of long-term contracts are
distinct from the other services to be delivered under the contract and therefore represent distinct performance obligations.
This determines whether revenue is recognised in the early stages of the contract, or deferred until delivery of the other services
promised in the contract begins.
We recognise immediately the entire estimated loss for a contract when we have evidence that the contract is unprofitable. If
these estimates indicate that any contract will be less profitable than previously forecast, contract assets may have to be written
down to the extent they are no longer considered to be fully recoverable. We perform ongoing profitability reviews of our
contracts in order to determine whether the latest estimates are appropriate. Key factors reviewed include:
– Transaction volumes or other inputs affecting future revenues which 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 implications for future revenue and cost projections.
– Our estimates of future staff and third-party costs and the degree to which cost savings and efficiencies are deliverable.
Revenue from lease arrangements in scope of IFRS 16
Some consumer broadband and TV products and arrangements to provide external communications providers with exclusive use
of fixed-network telecommunications infrastructure meet the definition of operating leases under IFRS 16.
At inception of a contract, we determine whether the contact is, or contains a lease following the accounting policy set out in note
15. Arrangements meeting the definition of a lease in which we act as lessor are classified as operating or finance leases at lease
inception based on an overall assessment of whether the lease transfers substantially all the risks and rewards incidental to
ownership of the underlying asset. If this is the case then the lease is a finance lease; if not, it is an operating lease. For sub-leases,
we make this assessment by reference to the characteristics of the right-of-use asset associated with the head lease rather than
the underlying leased asset.
Income from arrangements classified as operating leases is presented as revenue where it relates to our core operating activities,
for example leases of fixed-line telecommunications infrastructure to external communications providers and leases of devices to
consumer customers as part of fixed access subscription products. Operating lease income from other arrangements is
presented within other operating income (note 6).
We recognise operating lease payments as income on a straight-line basis over the lease term. Any upfront payments received,
such as connection fees, are deferred over the lease term. Determining the lease term is subject to the significant judgements set
out in note 15.
Where the contract contains both lease and non-lease components, the transaction price is allocated between the components
on the basis of relative stand-alone selling price.
Where an arrangement is assessed as a finance lease we derecognise the underlying asset and recognise a receivable equivalent
to the net investment in the lease. The receivable is measured based on future payments to be received discounted using the
interest rate implicit in the lease, adjusted for any direct costs. Any difference between the derecognised asset and the finance
lease receivable is recognised in the income statement. Where the nature of services delivered relates to our core operating
activities it is presented as revenue. Where it relates to non-core activities it is presented within other operating income (note 6).
BT Group plc
Annual Report 2021
5. Revenue continued
Disaggregation of external revenue
The following table disaggregates external revenue by our major service lines and by reportable segment.
Year ended 31 March 2021
ICT and managed networks
Fixed access subscriptions
Mobile subscriptions
Equipment and other services
Revenue before specific items
Specific itemsb (note 9)
Revenue
Year ended 31 March 2020 (restated)
ICT and managed networks
Fixed access subscriptions
Mobile subscriptions
Equipment and other services
Revenue before specific items
Specific itemsb (note 9)
Revenue
Consumer
£m
Enterprise
£m
Global
£m
Openreach
£m
Other
£m
–
4,089
3,492
2,207
9,788
1,993
1,762
1,262
323
5,340
1,977
321
87
1,346
3,731
–
2,426
–
62
2,488
–
–
–
23
23
Consumer
£m
Enterprisea
£m
Global
£m
Openreach
£m
Othera
£m
–
4,443
3,807
2,036
10,286
2,109
2,007
1,297
376
5,789
2,199
352
84
1,726
4,361
–
2,293
–
66
2,359
–
–
–
29
29
131
Total
£m
3,970
8,598
4,841
3,961
21,370
(39)
21,331
Total
£m
4,308
9,095
5,188
4,233
22,824
81
22,905
a Following a review of a number of products, we have re-presented the classifications within Enterprise in the 2019/20 comparative. We have also transferred £28m of
revenue from Enterprise to Other due to the Ventures reorganisation. Refer to note 1 for further details.
b Relates to regulatory matters classified as specific. See note 9.
Revenue expected to be recognised in future periods for performance obligations that are not complete (or are partially complete)
as at 31 March 2021 is £13,317m (2019/20: restated £14,248m). Of this, £7,415m (2019/20: £8,191m) relates to ICT and managed
services contracts and equipment and other services which will substantially be recognised as revenue within three years. Fixed
access and mobile subscription services typically have shorter contract periods and so £5,902m (2019/20: restated £6,057m) will
substantially be recognised as revenue within two years.
Revenue recognised this year relating to performance obligations that were satisfied, or partially satisfied, in previous years was not
material. Revenue related to customers’ unexercised rights (for example, unused amounts on prepaid SIM cards) was not material.
Lease income
Presented within revenue is £2,496m (2019/20: £2,297m) income from arrangements classified as operating leases under IFRS
16 and which represent core business activities for the group. Income relates predominantly to Openreach’s leases of fixed-line
telecommunications infrastructure to external communications providers, classified as fixed access subscription revenue in the table
above, and leases of devices to Consumer customers as part of fixed access subscription offerings, classified as equipment and other
services.
During the year we also recognised £36m (2019/20: £41m) operating lease income from non-core business activities which is
presented in other operating income (note 6). This income relates primarily to sub-leases of unutilised properties.
Note 15 presents an analysis of payments to be received across the remaining term of operating lease arrangements.
During the year we renegotiated a non-strategic revenue contract delivered using elements of our leased buildings infrastructure,
in exchange for an up-front payment of £196m. The revised arrangement, previously classified as an operating sub-lease, was
reassessed as a finance sub-lease in line with the accounting policy set out above. We derecognised the £208m carrying amount of
the associated right-of-use asset and a net deferred income balance of £33m previously reported within trade and other payables,
and recognised in revenue a gain on disposal of £21m, consistent with the presentation of the previous operating lease income. No
further amounts are due, therefore no finance lease receivable was recognised.
BT Group plc
Annual Report 2021
Financial statements 132
Notes to the consolidated financial statements continued
5. Revenue continued
Contract assets and liabilities
Significant accounting policies that apply to contract assets and liabilities
We recognise contract assets for goods and services for which control has transferred to the customer before consideration is
due. These assets mainly relate to mobile handsets provided upfront but paid for over the course of a contract. Contract assets
are reclassified as receivables when the right to payment becomes unconditional and we have billed the customer.
Contract liabilities are recognised when we have received advance payment for goods and services that we have not transferred
to the customer. These primarily relate to fees received for connection and installation services that are not distinct
performance obligations.
Where the initial set-up, transition or transformation phase of a long-term contract is considered to be a distinct performance
obligation we recognise a contract asset for any work performed but not billed. Conversely a contract liability is recognised
where these activities are not distinct performance obligations and we receive upfront consideration. In this case eligible costs
associated with delivering these services are capitalised as fulfilment costs, see note 17.
We provide for expected lifetime losses on contract assets following the policy set out in note 17.
Contract assets and liabilities recognised are as follows:
Year ended 31 March
Contract assets
Current
Non-current
Contract liabilities
Current
Non-current
2021
£m
2020
£m
1,515
344
1,859
925
167
1,442
279
1,721
972
179
1,092
1,151
£886m of the contract liability recognised at 31 March 2021 was recognised as revenue during the year (2019/20: £1,094m).
Impairment losses of £47m were recognised on contract assets during the year (2019/20: £59m).
The expected credit loss provision recognised against contract assets vary across the group due to the nature of our customers; the
expected loss rate at 31 March 2021 was 4% (2019/20: 4%).
BT Group plc
Annual Report 2021
6. Operating costs
Year ended 31 March
Operating costs by nature
Staff costs:
Wages and salaries
Social security costs
Other pension costs
Share-based payment expense
Total staff costs
Own work capitalised
Net staff costs
Net indirect labour costsa
Net labour costs
Product costs and sales commissions
Payments to telecommunications operators
Property and energy costs
Network operating and IT costs
TV programme rights charges
Provision and installation
Marketing and sales
Net impairment losses on trade receivables and contract assetsb
Other operating costs
Other operating income
Depreciation of property, plant and equipment:
Owned assets
Right-of-use assetsc
Amortisation of intangible assets
Total operating costs before specific items
Specific items
Total operating costs
Operating costs before specific items include the following:
Leaver costsd
Research and development expendituree
Foreign currency gains
Inventories recognised as an expense
133
Notes
2021
£m
2020
£m
20
22
14
15
13
9
4,096
403
591
72
5,162
(895)
4,267
294
4,561
4,070
1,517
1,025
916
786
558
255
150
343
(226)
2,460
690
1,197
4,203
426
626
72
5,327
(903)
4,424
354
4,778
4,440
1,749
1,004
898
870
604
303
124
370
(223)
2,452
671
1,173
18,302
19,213
442
409
18,744
19,622
11
720
9
2,315
15
662
(12)
2,447
a Net of capitalised indirect labour costs of £748m (2019/20: £675m).
b Previously included in other operating costs in 2019/20. This consists of net impairment losses on trade receivables and contract assets in Consumer of £115m (2019/20:
£92m), in Enterprise of £33m 2019/20: £31m),in Global of £0m 2019/20: £(1)m) and in Openreach of £2m (2019/20: £2m).
c 2019/20 comparative excludes £22m reversal of impairment on right-of-use assets presented as a specific item which relate to assets impaired on adoption of IFRS 16.
d Leaver costs are included within wages and salaries, except for leaver costs of £270m (2019/20: £197m) associated with restructuring costs, which have been recorded as
specific items.
e Research and development expenditure reported in the income statement includes amortisation of £650m (2019/20: £599m) in respect of capitalised development costs
and operating expenses of £69m (2019/20: £63m). In addition, the group capitalised software development costs of £519m (2019/20: £476m).
Who are our key management personnel and how are they compensated?
Key management personnel comprise executive and non-executive directors and members of the Executive Committee.
Compensation of key management personnel is shown in the table below:
Year ended 31 March
Short-term employee benefits
Post employment benefitsa
Share-based payments
Termination benefits
2021
£m
9.3
0.9
4.9
0.2
2020
£m
9.6
1.0
7.1
–
15.3
17.7
a Post employment benefits comprise cash pension allowances paid to the chief executive and chief financial officer. The group does not contribute to defined contribution or
defined benefit pension schemes on behalf of key management personnel.
Key management personnel are compensated solely in the form of cash and share-based payments. During the current and prior
years, key management personnel made no gains from exercise of share options.
BT Group plc
Annual Report 2021
Financial statements 134
Notes to the consolidated financial statements continued
7. Employees
Number of employees in the groupa
UK
Non-UK
Total employees
Number of employees in the groupa
Consumer
Enterpriseb
Global
Openreach
Otherb
Total employees
2021
2020
Year end
000
Average
000
Year end
000
Average
000
80.4
19.3
99.7
81.3
20.9
82.6
22.7
82.8
22.6
102.2
105.3
105.4
2021
2020
Year end
000
Average
000
Year end
000
Average
000
18.5
11.3
12.8
35.4
21.7
99.7
19.2
11.4
14.4
34.8
22.4
19.6
11.3
16.3
35.0
23.1
19.7
11.9
16.5
34.1
23.2
102.2
105.3
105.4
a These reflect the full-time equivalent of full and part-time employees.
b On 1 April 2020, Supply Chain and Pelipod, which serve several parts of BT, were transferred from Enterprise to the central procurement team and as a result will now be
reported in Group ‘Other’ financial results. The prior year comparative for the Enterprise and the Other CFU results has been restated to reflect this. Refer to note 1.
8. Audit, audit related and other non‑audit services
The following fees were paid or are payable to the company’s auditors, KPMG LLP and other firms in the KPMG network, for the years
ended 31 March 2021 and 2020.
Year ended 31 March
Fees payable to the company’s auditors and its associates for:
Audit servicesa
The audit of the parent company and the consolidated financial statements
The audit of the company’s subsidiaries
Audit related assurance servicesb
Other non‑audit services
All other assurance services
All other servicesc
Total services
2021
£000
2020
£000
10,482
6,280
16,762
1,993
10,546
6,315
16,861
2,416
155
–
155
228
247
475
18,910
19,752
a Services in relation to the audit of the parent company and the consolidated financial statements, including, in the prior year, fees for reports under section 404 of the
Sarbanes-Oxley Act. This also includes fees payable for the statutory audits of the financial statements of subsidiary companies. This excludes amounts for the audit of BT
Group Employee Share Ownership Trust and Ilford Trustees (Jersey) Limited amounting to £20,000 (2019/20: £20,000).
b Services in relation to other statutory filings or engagements that are required by law or regulation to be carried out by an appointed auditor. This includes fees for the review
of interim results, the accrued fee for the audit of the group’s regulatory financial statements and fees for reporting associated with the group’s US debt shelf registration
before de-registration from the New York Stock Exchange in November 2019.
c Fees payable for all non-audit services not included above, principally comprising other advisory services. This does not include fees for BT’s I4 forum membership, which is
facilitated by KPMG but not considered to be a service.
The BT Pension Scheme is an associated pension fund as defined in the Companies (Disclosure of Auditor Remuneration and
Liability Limitation Agreements) (Amendment) Regulations 2011. In the year ended 31 March 2021 KPMG LLP received total fees
from the BT Pension Scheme of £1.5m (2019/20: £0.8m) in respect of the following services:
Year ended 31 March
Audit of financial statements of associates
Audit-related assurance services
Other non-audit services
Total services
BT Group plc
Annual Report 2021
2021
£000
1,494
9
–
1,503
2020
£000
819
9
2
830
135
9. Specific items
Significant accounting policies that apply to specific items
Our income statement and segmental analysis separately identify trading results on an adjusted basis, being before specific
items. The directors believe that presentation of the group’s results in this way is relevant to an understanding of the group’s
financial performance as specific items are those that in management’s judgement need to be disclosed by virtue of their size,
nature or incidence.
This presentation is consistent with the way that financial performance is measured by management and reported to the Board
and the Executive Committee and assists in providing an additional analysis of our reporting trading results. Specific items may
not be comparable to similarly titled measures used by other companies.
In determining whether an event or transaction is specific, management considers quantitative as well as qualitative factors.
Examples of charges or credits meeting the above definition and which have been presented as specific items in the current
and/or prior years include acquisitions/disposals of businesses and investments, retrospective regulatory matters, historical
insurance or litigation claims, business restructuring programmes, significant out of period contract settlements, asset
impairment charges, property rationalisation programmes, net interest on pensions and the settlement of multiple tax years.
In the event that items meet the criteria, which are applied consistently from year to year, they are treated as specific items.
In 2019/20 we included the impacts of Covid-19 on various balance sheet items as at 31 March 2020 as specific. Any releases to
this provision have been released through specific items in 2020/21. The impact of Covid-19 on underlying trading is recognised
in our underlying (adjusted) results and not as a specific item.
Year ended 31 March
Revenue
Retrospective regulatory matters
Operating costs
Retrospective regulatory matters
Restructuring charges
Settlement with Dixons Carphone
Sale of spectrum
Divestment-related items
Property rationalisation
Covid-19
Spectrum annual licence fee refund
Provision for claims
Italian business investigation
Operating loss
Net finance expense
Interest expense on retirement benefit obligation
Interest on spectrum annual licence fee refund
Associates and joint ventures
Net specific items charge before tax
Taxation
Tax credit on specific items above
Tax charge on re-measurement of deferred tax
Net specific items charge after tax
Retrospective regulatory matters
2021
£m
2020
£m
39
39
(4)
421
149
(66)
(60)
19
(17)
–
–
–
442
481
18
–
18
–
499
(96)
–
(96)
403
(81)
(81)
9
322
–
–
199
(131)
95
(82)
(5)
2
409
328
145
(5)
140
39
507
(73)
156
83
590
We recognised a net charge of £35m (2019/20: net credit of £72m) in relation to regulatory matters. This reflects the settlement of
various matters. Of this, £39m charge is recognised in revenue and £4m credit in operating costs.
Restructuring charges
We incurred charges of £421m (2019/20: £322m), primarily relating to leaver costs. These costs reflect projects within the next stage
of our group-wide modernisation programme, as announced in May 2020, which will deliver annualised gross benefits of £1bn by
March 2023 and £2bn by March 2025, with a £1.3bn one-off cost to achieve across the five years.
BT Group plc
Annual Report 2021
Financial statements 136
Notes to the consolidated financial statements continued
9. Specific items continued
Settlement with Dixons Carphone
In March 2021, following the expiry of the retail agreement
between Dixons Carphone and EE Limited earlier in the year,
we mutually agreed to resolve all outstanding matters which
primarily related to contingent revenue share costs that
could have previously been recognised over future years.
The associated cost of £149m which includes the agreed cash
payment and the write off of balance sheet prepayments and
accruals has been treated as a specific item in the full year 2021
results. The associated cash payment was made in April 2021
and will be reflected in the 2021/22 financial statements.
Sale of spectrum
In the year, we sold 25 MHz of unpaired 2.6 GHz spectrum
and recognised a gain on disposal of £66m (2019/20: £nil)
as a specific item.
Divestment‑related items
In May 2020 we completed the sale of our Spanish operations
and recorded a net gain of £80m. We incurred net losses on the
disposals of our operations in Latin America and France of £11m.
We recognised an additional £4m loss on disposal of a number
of other businesses and £5m of costs relating to ongoing
divestment projects.
In 2019/20 we recognised impairment charges of £127m on
reclassification of our operations in Spain, France and Latin
America as held for sale, losses on disposal of £36m relating to
the completed divestments of BT Fleet Solutions and Tikit, and
a further £36m of costs relating to ongoing divestment projects.
Property rationalisation costs
We recognised a charge of £19m (2019/20: net credit of £131m)
relating to the rationalisation of the group’s property portfolio
under our Better Workplace Programme. The 2019/20 credit
included the gain on sale of BT Centre of £115m.
10. Taxation
Covid‑19
In 2019/20 we recognised one-off charges of £95m relating
to the impact of Covid-19 on various balance sheet items. In
2020/21 £17m has been released through the income statement
as a specific item. At 31 March 2021 we retain £55m of provisions
relating to Covid-19.
Spectrum annual licence fee refund
In 2019/20 we received a payment of £87m including interest
of £5m from Ofcom, relating to overpaid fees that were charged
during the period 2015–2017 under the previous 2015 fees
regulation that was quashed by the Court of Appeal in 2017.
Provision for claims
In 2019/20 we recognised a credit of £5m in relation to release
of provisions for claims created through specific items in
2012/13 which were fully settled.
Italian business investigation
In 2019/20 we recognised £2m costs relating to the historical
investigation in our Italian business.
Interest expense on retirement benefit obligation
During the year we incurred £18m (2019/20: £145m) of interest
costs in relation to our defined benefit pension obligations.
Associates and joint ventures
In 2019/20, following renegotiation of a contract, £39m owed
by an associate was determined irrecoverable and the resulting
impairment recognised as a specific item.
Tax on specific items
A net tax credit of £96m (2019/20: net tax credit of £73m) was
recognised in relation to specific items. In 2019/20, legislation
was enacted to maintain the UK corporation tax rate at 19%.
Accordingly the group re-measured its deferred tax balances
which resulted in a charge of £156m.
Significant accounting policies that apply to taxation
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 group’s subsidiaries, associates and joint ventures operate and generate taxable income. We periodically
evaluate positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation,
and establish 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 temporary differences between the carrying amount of our
assets and liabilities and their tax base. 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.
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against
current tax liabilities and when the deferred income tax assets and liabilities relate to income taxes levied by the same taxation
authority on either the taxable entity or different taxable 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 suitable taxable profits, within the same jurisdiction, in the foreseeable future against which the deductible
temporary difference can be utilised. Deferred tax balances for which there is a right of offset within the same jurisdiction are
presented net on the face of the group balance sheet as permitted by IAS 12, with the exception of deferred tax related to our
pension schemes which is disclosed within deferred tax assets.
BT Group plc
Annual Report 2021
137
10. Taxation continued
Critical accounting estimates and significant judgements made in accounting for taxation
We seek to pay tax in accordance with the laws of the countries where we do business. However, in some areas these laws
are unclear, and it can take many years to agree an outcome with a tax authority or through litigation. We estimate our tax on
country-by-country and issue-by-issue bases. Our key uncertainties are whether EE’s tax losses will be available to us, whether
our intra-group trading model will be accepted by a particular tax authority and whether intra-group payments are subject
to withholding taxes. We provide for the predicted outcome where an outflow is probable, but the agreed amount can differ
materially from our estimates. Approximately 79% by value of the provisions are under active tax authority examination and are
therefore likely to be re-estimated or resolved in the coming 12 months. £200m (2019/20: £191m) is included in current tax
liabilities or offset against current tax assets where netting is appropriate.
Under a downside case an additional amount of £572m could be required to be paid, of which £474m would relate to EE losses.
This amount is not provided as we don’t consider this outcome to be probable.
Deciding whether to recognise deferred tax assets is judgemental. We only recognise them when we consider it is probable that
they can be recovered. In making this judgement we consider evidence such as historical financial performance, future financial
plans and trends, the duration of existing customer contracts and whether our intra-group pricing model has been agreed by
the relevant tax authority.
The value of the group’s income tax assets and liabilities is disclosed on the group balance sheet on page 120. The value of the
group’s deferred tax assets and liabilities is disclosed below.
Analysis of our taxation expense for the year
Year ended 31 March
United Kingdom
Corporation tax at 19% (2019/20: 19%)
Adjustments in respect of earlier years
Non‑UK taxation
Current
Adjustments in respect of earlier years
Total current tax (expense)
Deferred taxation
Origination and reversal of temporary differences
Adjustments in respect of earlier years
Impact of change in UK corporation tax rate to 19% (2019/20: 19%)
Remeasurement of temporary differences
Total deferred taxation credit/(expense)
Total taxation (expense)
Factors affecting our taxation expense for the year
2021
£m
(300)
6
(65)
6
2020
£m
(495)
41
(58)
(1)
(353)
(513)
6
12
–
3
21
(332)
55
–
(156)
(5)
(106)
(619)
The taxation expense on the profit for the year differs from the amount computed by applying the UK corporation tax rate to the profit
before taxation as a result of the following factors:
Year ended 31 March
Profit before taxation
Expected taxation expense at UK rate of 19% (2019/20: 19%, 2018/19: 19%)
Effects of:
Lower/(higher) taxes on non-UK profits
Net permanent differences between tax and accountingª
Adjustments in respect of earlier yearsb
Prior year non-UK losses used against current year profits
Non-UK losses not recognisedc
Re-measurement of deferred tax balances
Total taxation expense
Exclude specific items (note 9)
Total taxation expense before specific items
2021
£m
2020
£m
1,804
2,353
(343)
(447)
15
(34)
24
12
(9)
3
(332)
(96)
(428)
(5)
(40)
40
11
(17)
(161)
(619)
83
(536)
a Includes income that is not taxable or UK income taxable at a different rate, and expenses for which no tax relief is received. Examples include some types of depreciation
and amortisation and the benefit of R&D tax incentives.
b Reflects the differences between initial accounting estimates and tax returns submitted to tax authorities, including the release and establishment of provisions for
uncertain tax positions.
c Reflects losses made in countries where it has not been considered appropriate to recognise a deferred tax asset, as future taxable profits are not probable.
BT Group plc
Annual Report 2021
Financial statements 138
Notes to the consolidated financial statements continued
10. Taxation continued
Tax components of other comprehensive income
Year ended 31 March
Tax on items that will not be reclassified to the income statement
Pension remeasurements
Tax on items that have been or may be reclassified subsequently to the income statement
Exchange differences on translation of foreign operations
Fair value movements on cash flow hedges
– net fair value gains or (losses)
– recognised in income and expense
Total tax recognised in other comprehensive income
Current tax credita
Deferred tax credit (expense)
Total tax recognised in other comprehensive income
a Includes £181m (2019/20: £271m) relating to cash contributions made to reduce retirement benefit obligations.
Tax (expense) credit recognised directly in equity
Year ended 31 March
Tax (expense) credit relating to share-based payments
Deferred taxation
2021
Tax credit
(expense)
£m
2020
Tax credit
(expense)
£m
918
22
111
–
1,051
203
848
1,051
(808)
(4)
(80)
–
(892)
267
(1,159)
(892)
2021
£m
5
2020
£m
–
Fixed asset
temporary
differences
£m
Retirement
benefit
obligationsa
£m
Share‑
based
payments
£m
Tax losses
£m
Other
£m
Jurisdictional
offset
£m
At 1 April 2019
Expense (credit) recognised in the income
statement
Expense (credit) recognised in other
comprehensive income
Exchange differences
Transfer to held for sale (note 23)
Transfer from current tax
1,398
191
–
1
–
–
(1,210)
(46)
1,079
1
–
–
1,590
(176)
(17)
1,607
1,590
(11)
–
–
8
(176)
–
(176)
(13)
(737)
–
–
At 31 March 2020
Non‑current
Deferred tax asset
Deferred tax liability
At 31 March 2020
Expense (credit) recognised in the income
statement
Expense (credit) recognised in other
comprehensive income
Expense (credit) recognised in equity
Exchange difference
At 31 March 2021
Non‑current
Deferred tax asset
Deferred tax liability
At 31 March 2021
(6)
(1)
–
–
–
–
(7)
(7)
–
(7)
(8)
–
(5)
–
(70)
2
–
2
–
–
(66)
(66)
–
(66)
2
–
–
(2)
(54)
(40)
80
(1)
(4)
(14)
(33)
(33)
–
(33)
9
(111)
–
–
Total
£m
58
106
1,159
3
(4)
(14)
1,308
(300)
1,608
1,308
(21)
(848)
(5)
6
440
–
–
–
–
–
–
–
(1)
1
–
–
–
–
–
–
1,587
(926)
(20)
(66)
(135)
–
1,587
1,587
(926)
–
(926)
(20)
–
(20)
(66)
–
(66)
(135)
–
(135)
158
(158)
(989)
1,429
–
440
a Includes a deferred tax asset of £1m (2019/20: £1m) arising on contributions payable to defined contribution pension plans.
The majority of the deferred tax assets and liabilities noted above are anticipated to be realised after more than 12 months.
BT Group plc
Annual Report 2021
139
10. Taxation continued
What factors affect our future tax charges?
The Chancellor’s Budget on 3 March 2021 announced a UK corporation tax rate increase from 19% to 25%, effective from 1 April
2023. As this rate change was not substantively enacted as at 31 March 2021, deferred tax assets and liabilities in these financial
statements continue to be measured at 19%, the enacted rate at which they are expected to reverse. In the event that the rate
change is enacted, BT Group estimates that the impact of revaluing existing deferred tax assets and liabilities will be a £0.4bn
income statement charge and a £0.3bn credit to other comprehensive income, if the rate change is theoretically applied to the
deferred tax balances at 31 March 2021.
What are our unrecognised tax losses and other temporary differences?
At 31 March 2021 we had operating losses and other temporary differences carried forward in respect of which no deferred tax
assets were recognised amounting to £4.1bn (2019/20: £4.5bn). Our other temporary differences have no expiry 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.
A summary of expiry dates for losses in respect of which restrictions apply is set out below:
At 31 March 2021
Restricted losses
Europe
Americas
Other
Total restricted losses
Unrestricted operating losses
Other temporary differences
Total
£m
Expiry
1 2022 – 2025
409 2022 – 2045
3 2022 – 2030
413
3,302
No expiry
360
No expiry
4,075
At 31 March 2021 we had UK capital losses carried forward in respect of which no deferred tax assets were recognised amounting to
£16.8bn (2019/20: £16.9bn). These losses have no expiry date, but we consider the future utilisation of significant amounts of these
losses to be remote.
At 31 March 2021 the undistributed earnings of non-UK subsidiaries were £1.8bn (2019/20: £2.5bn). No deferred tax liabilities have
been 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. Under current tax rules, tax of £43m (2019/20: £36.0m) would
arise if these earnings were to be repatriated to the UK.
11. Earnings per share
How is earnings per share calculated?
Basic earnings per share is calculated by dividing the profit after tax attributable to equity shareholders by the weighted average
number of shares in issue after deducting the own shares held by employee share ownership trusts and treasury shares.
In calculating the diluted earnings per share, share options outstanding and other potential shares have been taken into account
where the impact of these is dilutive.
Year ended 31 March
Basic weighted average number of shares (millions)
Dilutive shares from share options (millions)
Dilutive shares from share awards (millions)
Diluted weighted average number of shares (millions)
Basic earnings per share
Diluted earnings per share
2021
9,905
30
137
10,072
14.8 p
14.6 p
2020
9,885
–
80
9,965
17.5 p
17.4 p
The earnings per share calculations are based on profit after tax attributable to equity shareholders of the parent company which
excludes non-controlling interests. Profit after tax was £1,472m (2019/20: £1,734m) and profit after tax attributable to non-
controlling interests was £3m (2019/20: £2m). Profit attributable to non-controlling interests is not presented separately in the
financial statements as it is not material.
12. Dividends
What dividends have been paid?
No dividend is proposed in respect of the year ended 31 March 2021 (2019/20: no final dividend paid, interim dividend of 4.62p per
share amounting to £457m paid on 3 February 2020).
The amount of £1,521m for total dividends paid in the prior year ended 31 March 2020 is disclosed in our statement of changes in
equity and analysed below. This value may differ from the amount shown for equity dividends paid in the group cash flow statement,
which represents the actual cash paid in relation to dividend cheques that have been presented over the course of the financial year.
BT Group plc
Annual Report 2021
Financial statements 140
Notes to the consolidated financial statements continued
12. Dividends continued
Year ended 31 March
Final dividend in respect of the prior year
Interim dividend in respect of the current year
13. Intangible assets
2021
2020
pence per
share
pence per
share
£m
–
–
–
–
–
–
10.78
4.62
15.40
£m
1,064
457
1,521
Significant accounting policies that apply to intangible assets
We recognise identifiable intangible assets where we control the asset, it is probable that future economic benefits attributable
to the asset will flow to the group, and we can reliably measure the cost of the asset. We amortise all intangible assets, other
than goodwill, over their useful economic life. The method of amortisation reflects the pattern in which the assets are expected
to be consumed. If the pattern cannot be determined reliably, the straight line method is used.
Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair value of the group’s share of the identifiable net assets
(including intangible assets) of the acquired business. Our goodwill impairment policy is set out later in this note.
Acquired intangible assets – customer relationships and brands
Intangible assets such as customer relationships or brands acquired through business combinations are recorded at fair value at
the date of acquisition and subsequently carried at amortised cost. Assumptions are used in estimating the fair values of these
relationships or brands and include management’s estimates of revenue and profits to be generated by them.
Telecommunications licences
Licence fees paid to governments, which permit telecommunications activities to be operated for defined periods, are initially
recorded at cost and amortised from the time the network is available for use to the end of the licence period or where our usage
can extend beyond the initial licence period, over the period we expect to benefit from the use of the licences, which is typically
20 years. Licences acquired through business combinations are recorded at fair value at the date of acquisition and
subsequently carried at amortised cost. The fair value is based on management’s assumption of future cash flows using market
expectations at acquisition date.
Computer software
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. We only capitalise
costs directly associated with the production of internally developed software, including direct and indirect labour costs of
development, where it is probable that the software will generate future economic benefits, 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. Costs which do not meet these criteria and research costs are expensed as incurred.
Our development costs which give rise to internally developed software include upgrading the network architecture or
functionality and developing service platforms aimed at offering new services to our customers.
Other
Other intangible assets include website development costs and other licences. Items are capitalised at cost and amortised on a
straight line basis over their useful economic life or the term of the contract.
Estimated useful economic lives
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
1 to 15 years
Impairment of intangible assets
Intangible assets with finite useful lives are tested for impairment if events or changes in circumstances (assessed at each
reporting date) indicate that the carrying amount may not be recoverable. When an impairment test is performed, the
recoverable amount is assessed by reference to the higher of the net present value of the expected future cash flows (value in
use) of the relevant cash generating unit and the fair value less costs to dispose.
Goodwill is reviewed for impairment at least annually as described below. Impairment losses are recognised in the income
statement, as a specific item. If a cash generating unit is impaired, impairment losses are allocated firstly against goodwill, and
secondly on a pro-rata basis against intangible and other assets.
BT Group plc
Annual Report 2021
13. Intangible assets continued
Customer
relationships
and brands
£m
Telecoms
licences
and other
£m
Internally
developed
softwarea
£m
Purchased
software
£m
Goodwill
£m
141
Total
£m
20,513
790
(1,398)
9
73
(141)
19,846
783
(380)
9
(136)
8,006
–
(30)
–
52
(83)
7,945
–
1
–
(108)
7,838
–
–
–
–
–
–
–
–
–
–
–
–
3,417
–
(28)
–
8
–
3,397
–
–
–
(14)
3,067
–
(34)
(2)
1
–
3,032
–
(19)
–
–
4,518
598
(765)
14
2
(13)
4,354
596
(240)
46
(3)
1,505
192
(541)
(3)
10
(45)
1,118
187
(122)
(37)
(11)
3,383
3,013
4,753
1,135
20,122
1,571
373
(22)
–
8
–
1,930
322
–
–
(14)
2,238
445
177
(49)
–
1
–
574
162
(2)
–
–
734
3,221
538
(786)
(15)
1
(8)
2,951
593
(242)
(1)
(2)
3,299
961
85
(529)
15
9
(39)
502
120
(119)
1
(10)
494
6,198
1,173
(1,386)
–
19
(47)
5,957
1,197
(363)
–
(26)
6,765
7,945
7,838
1,467
1,145
2,458
2,279
1,403
1,454
616
641
13,889
13,357
Cost
At 1 April 2019
Additions
Disposals and adjustmentsb
Transfers
Exchange differences
Transfer to assets held for salec
At 31 March 2020
Additions
Disposals and adjustmentsb
Transfers
Exchange differences
At 31 March 2021
Accumulated amortisation
At 1 April 2019
Charge for the year
Disposals and adjustmentsb
Transfers
Exchange differences
Transfer to assets held for salec
At 31 March 2020
Charge for the year
Disposals and adjustmentsb
Transfers
Exchange differences
At 31 March 2021
Carrying amount
At 31 March 2020
At 31 March 2021
a Includes a carrying amount of £608m (2019/20: £538m) in respect of assets in course of construction, which are not yet amortised.
b Fully depreciated assets in the group’s fixed asset registers were reviewed during the year, as part of the group’s annual asset verification exercise, and certain assets that
were no longer in use have been written off, reducing cost and accumulated depreciation by £0.3bn (2019/20: £1.1bn).
c Assets transferred to held for sale during 2019/20 relate to our domestic operations in France, our domestic operations in Spain and selected domestic operations and
infrastructure in 16 countries in Latin America. On reclassification to held for sale, goodwill associated with the France and Latin America disposals was impaired by £58m,
and other intangible assets associated with these disposals were impaired by £1m. See note 23.
Impairment of goodwill
Significant accounting policies that apply to impairment of goodwill
We perform an annual goodwill impairment review.
Goodwill recognised in a business combination does not generate cash flows independently of other assets or groups of assets.
As a result, the recoverable amount, being the value in use, is determined at a cash generating unit (CGU) level. These CGUs
represent the smallest identifiable groups of assets that generate cash inflows that are largely independent of the cash inflows
from other groups of assets. Our CGUs are deemed to be legacy BT Consumer, legacy EE, Enterprise, and Global.
We allocate goodwill to each of the CGUs that we expect to benefit 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.
The value in use of each CGU is determined using cash flow projections derived from financial plans approved by the Board
covering a five-year period. They reflect management’s expectations of revenue, EBITDA growth, capital expenditure, working
capital and operating cash flows, based on past experience and future expectations of business performance. Cash flows
beyond the fifth year have been extrapolated using perpetuity growth rates.
BT Group plc
Annual Report 2021
Financial statements 142
Notes to the consolidated financial statements continued
13. Intangible assets continued
Key accounting estimates and significant judgements made in reviewing goodwill for impairment
Determining our CGUs
The determination of our CGUs is judgemental. The identification of CGUs involves an assessment of whether the asset or group
of assets generate largely independent cash inflows. This involves consideration of how our core assets are operated and
whether these generate independent revenue streams. The legacy BT Consumer and EE CGUs remain as two separate CGUs
due to their having independent cash flows.
Estimating value in use
Our value in use calculations require estimates in relation to uncertain items, including management’s expectations of future
revenue growth, operating costs, profit margins, operating cash flows, and the discount rate for each CGU. Future cash flows
used in the value in use calculations are based on our latest Board-approved five-year financial plans. Expectations about future
growth reflect the expectations of growth in the markets to which the CGU relates. The future cash flows are discounted using a
pre-tax discount rate that reflects current market assessments of the time value of money. The discount rate used in each CGU
is adjusted for the risk specific to the asset, including the countries in which cash flow will be generated, for which the future cash
flow estimates have not been adjusted.
We tested our goodwill for impairment as at 31 March 2021. The carrying value of goodwill and the key assumptions used in
performing the annual impairment assessment and sensitivities are disclosed below.
Cost
At 1 April 2019
Exchange differences
Acquisitions and disposals
Transfers to assets held for sale
At 31 March 2020
Exchange differences
Acquisitions and disposals
At 31 March 2021
Legacy BT
Consumer
£m
Legacy EE
£m
Enterprisea
£m
Global
£m
1,183
–
–
–
1,183
–
–
1,183
2,768
–
–
–
2,768
–
–
2,768
3,509
4
(30)
–
3,483
(8)
–
3,475
546
48
–
(83)
511
(100)
1
412
Total
£m
8,006
52
(30)
(83)
7,945
(108)
1
7,838
a On 1 April 2020, Supply Chain and Pelipod, which serve several parts of BT, were transferred from Enterprise to the central procurement team and as a result will now be
reported in Group ‘Other’ financial results. Goodwill was not affected by the transfer.
The decrease in goodwill is driven by foreign exchange losses.
What discount rate have we used?
The pre-tax discount rates applied to the cash flow forecasts are derived from our post-tax weighted average cost of capital. The
assumptions used in the calculation of the group’s weighted average cost of capital are benchmarked to externally available data.
The pre-tax discount rate used in performing the value in use calculation in 2020/21 was 8.1% (2019/20: 8.0%). We have used
the same discount rate for all CGUs except Global where we have used 8.5% (2019/20: 8.6%) reflecting higher risk in some of
the countries in which Global operates.
What growth rates have we used?
The perpetuity growth rates are determined based on the forecast market growth rates of the regions in which the CGU operates,
and reflect an assessment of the long-term growth prospects of that market. The growth rates have been benchmarked against
external data for the relevant markets. None of the growth rates applied exceed the expected average long-term growth rates
for those markets or sectors. We used a perpetuity growth rate of 2.3% (2019/20: 2.4%) for Global and 2.0% (2019/20: 2.0%) for
Enterprise and our legacy BT Consumer and EE CGUs.
What sensitivities have we applied?
There is significant headroom in all of our CGUs. The CGU with the lowest headroom is legacy Consumer.
For legacy Consumer, the value in use exceeds the carrying value of the CGU by approximately £2.2bn (2019/20: £2.5bn). Any of the
following changes in assumptions in isolation would cause the recoverable amount for the CGU to equal its carrying amount:
– A reduction in the perpetuity growth rate from our 2.0% assumption to a revised assumption of a perpetuity decline rate of 2.7%;
– An increase in the discount rate from our 8.1% assumption to a revised assumption of 11.8%; or
– Shortfalls in trading performance against forecast resulting in operating cash flows decreasing by 39.3% each year and in
perpetuity.
BT Group plc
Annual Report 2021
143
13. Intangible assets continued
Has Covid‑19 had a material impact on the impairment assessment?
Covid-19 is not considered to have a significant impact on the assessment of impairment as at 31 March 2021. Its impact on the
group is considered to be relatively short-term, and it is not anticipated to have a significant impact on the terminal year which
is a key driver of our value in use calculations.
14. Property, plant and equipment
Significant accounting policies that apply to property, plant and equipment
Our property, plant and equipment is included at historical cost, net of accumulated depreciation, government grants and
any impairment charges. Property, plant and equipment acquired through business combinations are initially recorded at fair
value and subsequently accounted for on the same basis as our existing assets. We derecognise items of property, plant and
equipment on disposal or when no future economic benefits are expected to arise from the continued use of the asset. The
difference between the sale 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.
We depreciate property, plant and equipment on a straight line basis from the time the asset is available for use, to write off the
asset’s cost over the estimated useful life taking into account any expected residual value. Freehold land is not depreciated.
Estimated useful economic lives
The estimated useful lives assigned to principal categories of assets are as follows:
Land and buildings
– Freehold buildings
– Short-term leasehold improvements Shorter of 10 years or lease term
– Leasehold land and buildings
14 to 50 years
Unexpired portion of lease or 40 years, whichever is the shorter
Network infrastructure
Transmission equipment
– Duct
– Cable
– Fibre
Exchange equipment
Other network equipment
Other assets
40 years
3 to 25 years
5 to 20 years
2 to 13 years
2 to 20 years
– Motor vehicles
– Computers and office equipment
2 to 9 years
3 to 7 years
Residual values and useful lives are reassessed annually and, if necessary, changes are recognised prospectively.
Network share assets
Certain assets have been contributed to a network share arrangement by both EE and Hutchison 3G UK Limited, with legal title
remaining with the contributor. This is considered to be a reciprocal arrangement. Our share of the assets on acquisition of EE
were recognised at fair value within tangible assets, and depreciated in line with policy. Subsequent additions are recorded at
cost.
Impairment of property, plant and equipment
We test property, plant and equipment for impairment if events or changes in circumstances (assessed at each reporting date)
indicate that the carrying amount may not be recoverable. When an impairment test is performed, we assess the recoverable
amount by reference to the higher of the net present value of the expected future cash flows (value in use) of the relevant asset
and the fair value less costs to dispose. If it is not possible to determine the recoverable amount for the individual asset then we
assess impairment by reference to the relevant cash generating unit as described in note 13.
BT Group plc
Annual Report 2021
Financial statements 144
Notes to the consolidated financial statements continued
14. Property, plant and equipment continued
Building Digital UK (BDUK) government grants
We receive government grants in relation to the BDUK programme and other rural superfast broadband contracts. Where we
have achieved certain service levels, or delivered the network more efficiently than anticipated, we have an obligation to either
re-invest or repay grant funding. Where this is the case, we recognise deferred income in respect of the funding that will be
re-invested or repaid, and make a corresponding adjustment to the carrying amount of the related property, plant and
equipment.
Assessing the timing of whether and when we change the estimated take-up assumption is judgemental as it involves
considering information which is not always observable. Our consideration on whether and when to change the base case
assumption is dependent on our expectation of the long-term take-up trend.
Our assessment of how much grant income to defer includes consideration of the difference between the take-up percentage
agreed with the local authority and the likelihood of actual take-up. The value of the government grants deferred is disclosed in
note 18.
Land and
buildings
£m
Network
infrastructure
£m
Cost
At 1 April 2019
Additionsb
Transfers
Disposals and adjustmentsc
Transfer to assets held for saled
Exchange differences
At 31 March 2020
Additionsb
Transfers
Disposals and adjustmentsc
Exchange differences
At 31 March 2021
Accumulated depreciation
At 1 April 2019
Charge for the year
Transfers
Disposals and adjustmentsc
Transfer to assets held for saled
Exchange differences
At 31 March 2020
Charge for the year
Transfers
Disposals and adjustmentsc
Exchange differences
At 31 March 2021
Carrying amount
At 31 March 2020
Engineering stores
Total at 31 March 2020
At 31 March 2021
Engineering stores
Total at 31 March 2021
1,026
7
25
(55)
(69)
11
945
10
32
(19)
(22)
946
673
49
1
(68)
(55)
10
610
41
(1)
(20)
(18)
612
335
–
335
334
–
334
Assets in
course of
construction
£m
1,191
2,978
(3,295)
42
–
–
916
3,401
(3,305)
(21)
(1)
Othera
£m
1,722
69
17
(130)
(24)
8
1,662
69
141
(333)
(19)
Total
£m
55,832
3,137
(9)
(1,275)
(348)
79
57,416
3,415
(9)
(2,582)
(188)
51,893
83
3,244
(1,132)
(255)
60
53,893
(65)
3,123
(2,209)
(146)
54,596
1,520
990
58,052
36,052
2,318
–
(1,128)
(216)
54
37,080
2,282
2
(2,209)
(133)
1,371
85
(1)
(91)
(22)
8
1,350
137
(1)
(332)
(17)
37,022
1,137
16,813
–
16,813
17,574
–
17,574
312
–
312
383
–
383
–
–
–
–
–
–
–
–
–
–
–
–
38,096
2,452
–
(1,287)
(293)
72
39,040
2,460
–
(2,561)
(168)
38,771
916
98
18,376
98
1,014
18,474
990
116
19,281
116
1,106
19,397
a Other mainly comprises motor vehicles, computers and fixtures and fittings.
b Net of government grants of £21m (2019/20: £98m).
c Fully depreciated assets in the group’s fixed asset registers were reviewed during the year, as part of the group’s annual asset verification exercise, and certain assets that
were no longer in use have been written off, reducing cost and accumulated depreciation by £2.3bn (2019/20: £0.7bn). Disposals and adjustments include adjustments
resulting from changes in assumptions used in calculating lease-end obligations where the corresponding asset is capitalised.
d Transfers to assets held for sale during 2019/20 relate to our domestic operations in France, our domestic operations in Spain and selected domestic operations and
infrastructure in 16 countries in Latin America. On reclassification to held for sale, assets associated with the France and Latin America disposals were impaired by £18m.
See note 23.
BT Group plc
Annual Report 2021
145
14. Property, plant and equipment continued
Included within the above disclosure are assets used in arrangements which represent core business activities for the group and
which meet the definition of operating leases:
– £13,032m (2019/20: £12,284m) of the carrying amount of the network infrastructure asset class represents Openreach’s network
infrastructure. The majority of the associated assets are used to deliver fixed-line telecommunications services that have been
assessed as containing operating leases, to both internal and external Communications Providers.
– Other assets includes devices with a carrying amount of £128m (2019/20: £33m) that are made available to retail customers under
arrangements that contain operating leases.
The carrying amount of land and buildings, including leasehold improvements, comprised:
At 31 March
Freehold
Leasehold
Total land and buildings
Network infrastructure
2021
£m
123
211
334
2020
£m
105
230
335
Some of our network assets are jointly controlled by EE Limited with Hutchison 3G UK Limited. These relate to shared 3G network
and certain elements of network for 4G rural sites. The net book value of the group’s share of assets controlled by its joint operation
MBNL is £625m (2019/20: £600m) and is recorded within network infrastructure. Included within this is £95m (2019/20: £112m),
being the group’s share of assets owned by its joint operation MBNL.
Within network infrastructure are assets with a net book value of £10.3bn (2019/20: £10bn) which have useful economic lives of
more than 18 years.
15. Leases
Significant accounting policies that apply to leases
Identifying whether a lease exists
At inception of a contract, we determine whether the contract is, or contains a lease. A lease exists if the contract conveys the
right to control the use of an identified asset, for a period of time, in exchange for consideration. In making this assessment,
we consider whether:
– The contract involves the use of an identified asset, either explicitly or implicitly. The asset must be physically distinct or
represent substantially all the capacity of a physically distinct asset. Assets that a supplier has a substantive right to substitute
are not considered distinct.
– The lessee (either the group, or the group’s customers) has the right to obtain substantially all the economic benefits from the
use of the asset throughout the period of use; and
– The lessee has the right to direct the use of the asset, in other words, has the decision-making rights that are most relevant to
changing how and for what purpose the asset is used.
Where practicable, and by class of underlying asset, we have elected to account for leases containing a lease component and
one or more non-lease components as a single lease component. Where this election has been taken, it has been applied to the
entire asset.
Lessee accounting
We recognise a lease liability and right-of-use asset at the commencement of a lease.
Lease liabilities are initially measured at the present value of lease payments that are due over the lease term, discounted using
the group’s incremental borrowing rate.
The lease term is the non-cancellable period of the lease adjusted for the impact of any extension options that we are
reasonably certain the lessee will exercise, or termination options that we are reasonably certain the lessee will not exercise.
The incremental borrowing rate is the rate that we would have to pay for a loan of a similar term, and with similar security, to
obtain an asset of similar value.
Lease payments include:
– fixed payments
– variable lease payments that depend on an index or rate
– amounts expected to be paid under residual value guarantees
– the exercise price of any purchase options that we are reasonably certain to exercise
– payments due over optional renewal periods where we are reasonably certain to renew
– penalties for early termination of the lease where we are reasonably certain to terminate early
BT Group plc
Annual Report 2021
Financial statements 146
Notes to the consolidated financial statements continued
15. Leases continued
Lease liabilities are subsequently measured at amortised cost using the effective interest method. They are remeasured if there
is a change in future lease payments, including changes in the index or rate used to determine those payments, or the amount
we expect to be payable under a residual value guarantee.
We also remeasure lease liabilities where the lease term changes. This occurs when the non-cancellable period of the lease
changes, or on occurrence of a significant event or change in circumstances within the control of the lessee and which changes
our initial assessment in regard to whether the lessee is reasonably certain to exercise extension options or not to exercise
termination options. Where the lease term changes we remeasure the lease liability using the group’s incremental borrowing
rate at the date of reassessment. Where a significant event or change in circumstances does not occur, the lease term remains
unchanged and the carrying amounts of the lease liability and associated right-of-use asset will decline over time.
Right-of-use assets are initially measured at the initial amount of the corresponding lease liabilities, adjusted for any prepaid
lease payments, plus any initial direct costs incurred and an estimate of any decommissioning costs that have been recognised
as provisions, less any lease incentives received. They are subsequently depreciated using the straight-line method to the earlier
of the end of the useful life of the asset or the end of the lease term. Right-of-use assets are tested for impairment following the
policy set out in note 14 and are adjusted for any remeasurement of lease liabilities.
We have elected not to recognise lease liabilities and right-of-use assets for short-term leases that have a lease term of 12
months or less, and leases of low-value assets with a purchase price under £5,000. We recognise lease payments associated
with these items as an expense on a straight-line basis over the lease term.
Any variable lease payments that do not depend on an index or rate, such as usage-based payments, are recognised as an
expense in the period to which the variability relates.
During the year we made limited use of the practical expedient available under IFRS 16 when accounting for Covid-19 related
rent concessions. Its use had a negligible impact on the amounts that otherwise have been recognised in the income statement.
Significant judgements made in accounting for leases
The lease term is a key determinant of the size of the lease liability and right-of-use asset recognised where the group acts
as lessee; and the deferral period for any upfront connection charges where the group acts as lessor. Determining the lease
term requires judgement to evaluate whether we are reasonably certain the lessee will exercise extension options or will not
exercise termination options. Key facts and circumstances that create an incentive to exercise those options are considered,
these include:
– Our anticipated operational, retail and office property requirements in the mid and long-term.
– The availability of suitable alternative sites.
– Costs or penalties associated with exiting lease arrangements relative to the benefits to be gained, including costs of
removing leasehold improvements or relocating, and indirect costs such as disruption to business.
– Significant investments in leased sites, in particular those with useful lives beyond the lease term.
– Costs associated with extending lease arrangements including rent increases during secondary lease periods.
Our definition of ‘reasonable certainty’, and therefore the lease term, will often align with the judgements made in our medium-
term plan, in particular for leases of non-specialised property and equipment on rolling (or ‘evergreen’) arrangements that
continue until terminated and which can be exited without significant penalty.
Following initial determination of the lease term, we exercise judgement in evaluating whether events or changes in
circumstances are sufficiently significant to change the initial assessment of whether we are reasonably certain the lessee will
exercise extension options or will not exercise termination options; and in the subsequent reassessment of the lease term.
The key judgements exercised in setting the lease term are associated with our portfolios of leased properties and cell sites.
Property
Substantially all of our leased property estate is held under an arrangement with an initial term ending in 2036 but which can be
terminated in 2031, at which point we may either vacate some or all properties; or purchase the entire estate. The lease liability
recognised for the arrangement reflects a lease end date of 2031. On initial recognition we concluded that although the majority
of these properties are expected to be needed on a long-term basis, we couldn’t be reasonably certain that we wouldn’t
exercise either of the termination or purchase options. In coming to this conclusion we had due regard to material sub-lease
arrangements relating to the estate. As time progresses our assessment may change. If this happens we will remeasure the
lease liability and right-of-use asset to reflect either the rentals due over through to 2036 for any properties we will continue to
occupy, or the cost of purchasing the estate. This could result in a significant increase to the respective lease liabilities and
right-of-use assets.
BT Group plc
Annual Report 2021
147
15. Leases continued
We are permitted to hand a limited number of properties back to the lessor prior to 2031. On initial adoption of IFRS 16 we were
not reasonably certain which properties would be handed back and as such the lease term did not reflect the exercise of these
options. Subsequently we exercise judgement in identifying significant events that trigger reassessment of our initial conclusion.
We exercise similar judgement in identifying events triggering reassessment of whether we are reasonably certain we will not
exercise termination options associated with other leased properties.
In doing so we consider decisions associated with our ongoing workplace rationalisation programme, in particular decisions
to exit a particular location or lease an alternative property. Generally we remain reasonably certain that we will not exercise a
termination option until implementation of the associated business plan has progressed to a stage that we are committed to
exiting the property. At that point we reassess the lease term by reference to the time we expect to remain in occupation of the
property and any notice period associated with exercise of the option.
Cell sites
Most of the liability recognised in respect of leased cell sites relates to multi-site arrangements with commercial providers.
The fixed-term nature of these arrangements means it has not been necessary to exercise significant judgement when
determining the lease term.
A smaller proportion of the cell site liability relates to arrangements with individual landlords which are either rolling or can be
exited with notice. When setting the initial lease term for these arrangements we exercised significant judgement in establishing
the period that we are reasonably certain to require use of the site. We broadly aligned lease terms with our medium-term
planning horizon after assessing the relative strengths of the following factors:
– Long-term economic incentives to remain on sites including existing capital improvements;
– A need to maintain flexibility in our ability to develop and manage our network infrastructure to react quickly to technological
developments and evolving capacity requirements; and
– Incentives to renegotiate arrangements in the medium term to gain more security over sites to support future capital
investment.
Subsequently, we consider key events that trigger reassessment of lease terms to be developments which resolve uncertainty
around our economic incentive to remain on individual sites in the long term. These are primarily lease renegotiations and
significant capital investments, for example that associated our 5G rollout and other capital refresh programmes.
Right‑of‑use assets
Most of our right-of-use assets are associated with our leased property portfolio, specifically our office, retail and exchange estate.
We also lease a significant proportion of our network infrastructure, including mobile cell and switch sites.
At 1 April 2019
Additionsb
Depreciation charge for the year
Other movementsc,d,e
At 1 April 2020e
Additionsb
Depreciation charge for the year
Other movementsc,f
At 31 March 2021
Land and
buildings
£m
Network
infrastructure
£m
Motor
vehiclesa
£m
Othera
£m
4,628
942
(513)
(228)
4,829
361
(546)
(312)
4,332
189
59
(37)
(32)
179
6
(30)
(10)
145
314
475
(97)
(315)
377
116
(110)
(8)
375
24
–
(2)
(16)
6
11
(4)
(2)
11
Total
£m
5,155
1,476
(649)
(591)
5,391
494
(690)
(332)
4,863
a The ‘other’ asset class has been disaggregated to present motor vehicles and other types of leased asset separately. Balances disclosed in 2019/20 have been re-presented.
b Additions comprise increases to right-of-use assets as a result of entering into new leases, and upwards remeasurement of existing leases arising from lease extensions or
reassessments and increases to lease payments.
c Other movements primarily relate to terminated leases and downwards remeasurements of right-of-use assets arising from reductions or reassessments of lease terms and
decreases in lease payments.
d Other movements in 2019/20 include reclassification of right-of-use assets with a carrying amount of £65m to held-for-sale, see note 23. On reclassification to held for sale,
assets associated with the France and Latin America disposals were impaired by £31m.
e Other movements in 2019/20 have also been re-presented to reclassify £25m downwards movements in leased property from ‘other’ to ‘land and buildings’ with a
corresponding impact on opening right-of-use assets at 1 April 2020.
f Other movements in 2020/21 include derecognition of right-of-use assets with a carrying amount of £208m associated with a finance sub-lease arrangement.
BT Group plc
Annual Report 2021
Financial statements 148
Notes to the consolidated financial statements continued
15. Leases continued
Lease liabilities
Lease liabilities recognised at 31 March 2021 total £6,152m (31 March 2020: £6,560m). £730m (31 March 2020: £812m) of this
balance is classified as current, with the remaining £5,422m (31 March 2020: £5,748m) classified as non-current.
In the prior year we reclassified lease liabilities with a carrying amount of £62m to held-for-sale, see note 23.
The following amounts relating to the group’s obligations under lease arrangements were recognised in the income statement
in the year:
– Interest expense of £142m (2019/20: £140m) accrued on lease liabilities.
– Variable lease payments of £27m (2019/20: £29m) which are not dependent on an index or rate and which have not been included
in the measurement of lease liabilities.
Expenses relating to leases of low-value assets and short-term leases for which no right-of-use asset or lease liability has been
recognised were not material.
The total cash outflow for leases in the year was £924m (2019/20: £791m). Our cash flow statement (page 122) and normalised free
cash flow reconciliation (page 199) present £782m (2019/20: £651m) of the cash outflow as relating to the principal element of lease
liability payments, with the remaining balance of £142m (2019/20: £140m) presented within interest paid.
Note 28 presents a maturity analysis of the payments due over the remaining lease term for lease liabilities currently recognised on
the balance sheet. This analysis only includes payments to be made over the reasonably certain lease term. Cash outflows are likely
to exceed these amounts as payments will be made on optional periods that we do not currently consider to be reasonably certain,
and in respect of leases entered into in future periods.
Other information relating to leases
We did not enter into any material sale and leaseback transactions this year. In 2019/20 we recognised net gains of £115m from sale
and leaseback transactions, substantially all of which related to the disposal of our BT Centre headquarters. We occupy the property
under a lease arrangement while our new headquarters is prepared. As the transaction met the definition of a sale under IFRS 15 we
recognised a right-of-use asset for the leaseback at the proportion of the previous carrying amount of the headquarters, reflecting
the right of use retained. We recognised a gain in the income statement relating to the rights transferred to the buyer-lessor.
Our material lease arrangements do not have indexation clauses linked to Interbank Offered Rates (IBORs). As a result we do not
consider that the upcoming Interest Rate Benchmark Reform will have a material impact on the lease liabilities or right-of-use assets
recognised at 31 March 2021.
At 31 March 2021 the group was committed to future minimum lease payments of £4m in respect of leases which have not yet
commenced and for which no lease liability has been recognised (31 March 2020: £274m, primarily leases entered into under our
workplace restructuring programme and including our new headquarters).
The following table analyses payments to be received across the remaining term of operating lease arrangements where BT is lessor:
At 31 March 2021
Less than one year
One to two years
Two to three years
Three to four years
Four to five years
More than five years
Total undiscounted lease payments
At 31 March 2020
Less than one year
One to two years
Two to three years
Three to four years
Four to five years
More than five years
Total undiscounted lease payments
BT Group plc
Annual Report 2021
To be recognised as
revenue (note 5)
£m
To be recognised as
other operating
income (note 6)
£m
449
179
51
2
1
–
682
27
13
10
10
10
30
100
To be recognised as
revenue (note 5)
£m
To be recognised as
other operating
income (note 6)
£m
310
130
34
1
–
–
475
52
16
10
9
7
11
105
Total
£m
476
192
61
12
11
30
782
Total
£m
362
146
44
10
7
11
580
149
16. Programme rights
Significant accounting policies that apply to programme rights
Programme rights are recognised on the balance sheet from the point at which the legally enforceable licence period begins.
They 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, which is generally 12 months. Programme rights
are tested for impairment in accordance with our impairment policy as set out in note 13.
Additions reflect TV programme rights for which the legally enforceable licence period has started during the year. Rights for
which the licence period has not started are disclosed as contractual commitments in note 31. Payments made to receive
commissioned or acquired programming in advance of the legal right to broadcast the programmes are classified as
prepayments (see note 17).
At 1 April 2019
Additions
Amortisation
At 1 April 2020
Additions
Credits received on prepaid programme rightsa
Amortisation
At 31 March 2021
Total
£m
310
870
(870)
310
903
(99)
(786)
328
a Credits received in respect of prepaid programme rights relating to sporting events postponed or cancelled as a result of the Covid-19 pandemic.
17. Trade and other receivables
Significant accounting policies that apply to trade and other receivables
We initially recognise trade and other receivables at fair value, which is usually the original invoiced amount. They are
subsequently carried at amortised cost using the effective interest method. The carrying amount of these balances
approximates to fair value due to the short maturity of amounts receivable.
We provide 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. Because of this, we recognise an allowance for doubtful debts
on initial recognition of receivables, which is deducted from the gross carrying amount of the receivable. The allowance is
calculated by reference to credit losses expected to be incurred over the lifetime of the receivable. In estimating a loss
allowance we consider historical experience and informed credit assessment alongside other factors such as the current state of
the economy and particular industry issues. We consider reasonable and supportable information that is relevant and available
without undue cost or effort.
Once recognised, trade receivables are continuously monitored and updated. Allowances are based on our historical loss
experiences for the relevant aged category as well as forward-looking information and general economic conditions, this
includes the impact of Covid-19. Allowances are calculated by individual customer-facing units in order to reflect the specific
nature of the customers relevant to that customer-facing unit.
Following the outbreak of Covid-19 we have reassessed our expected loss provisions including assessing the risk factors
associated with various industry sectors and applying a risk weighting to each sector.
Contingent assets such as any insurance recoveries, or prepaid programme rights which we expect to recoup, have not been
recognised in the financial statements as these are only recognised within trade and other receivables when their receipt is
virtually certain.
BT Group plc
Annual Report 2021
Financial statements 150
Notes to the consolidated financial statements continued
17. Trade and other receivables continued
At 31 March
Current
Trade receivables
Prepaymentsa
Accrued income
Deferred contract costs
Other receivables
At 31 March
Non‑current
Other assetsb
Deferred contract costs
a Prepayments include £702m (2019/20: £nil) relating to funds prepaid to Ofcom for the recent Spectrum auction.
b Other assets comprise prepayments and leasing debtors.
Trade receivables are stated after deducting allowances for doubtful debts, as follows:
At 1 April
Expense
Utilised
Exchange differences
At 31 March
2021
£m
2020
£m
1,209
1,357
130
348
213
3,257
1,375
607
57
422
243
2,704
2021
£m
2020
£m
103
211
314
222
259
481
2021
£m
329
95
(131)
(9)
284
2020
£m
299
213
(189)
6
329
Included within the movements above are certain items which have been classified as a specific item (see note 9). In 2020/21 a £7m
release (2019/20: £67m increase) in the provision was treated as specific, reflecting lower expected credit losses above our standard
provisioning policies as a result of Covid-19.
Note 28 provides further disclosure regarding the credit quality of our gross trade receivables. Trade receivables are due as follows:
At 31 March
2021
2020
Past due and not specifically impaired
Trade
receivables
specifically
impaired
net of
provision
£m
36
25
Not past
due
£m
845
903
Between
0 and
3 months
£m
205
308
Between
3 and
6 months
£m
40
45
Between
6 and
12 months
£m
Over
12 months
£m
51
49
32
45
Total
£m
1,209
1,375
Gross trade receivables which have been specifically impaired amounted to £52m (2019/20: £34m).
BT Group plc
Annual Report 2021
17. Trade and other receivables continued
The expected credit loss allowance for trade receivables was determined as follows:
At 31 March
2021
Expected loss rate %
Gross carrying amount
Loss allowance
Net carrying amount
2020
Expected loss rate %
Gross carrying amount
Loss allowance
Net carrying amount
Past due and not specifically impaired
Trade
receivables
specifically
impaired
net of
provision
£m
Not past
due
£m
Between
0 and
3 months
£m
Between
3 and
6 months
£m
Between
6 and
12 months
£m
Over
12 months
£m
4%
880
(35)
845
4%
944
(41)
903
29%
51
(15)
36
26%
34
(9)
25
15%
240
(35)
205
12%
351
(43)
308
38%
65
(25)
40
36%
70
(25)
45
47%
97
(46)
51
42%
84
(35)
49
87%
254
(222)
32
86%
316
(271)
45
Trade receivables not past due and accrued income are analysed below by customer-facing unit.
151
Total
£m
24%
1,587
(378)
1,209
24%
1,799
(424)
1,375
At 31 March
Consumer
Enterprisea
Global
Openreach
Othera
Total
Trade receivables
not past due
Accrued income
2021
£m
319
144
380
–
2
845
2020
£m
2021
£m
2020
£m
353
139
409
–
2
903
50
–
–
78
2
130
1
3
–
51
2
57
a On 1 April 2020, Supply Chain and Pelipod, which serve several parts of BT, were transferred from Enterprise to the central procurement team and as a result will now be
reported in Group ‘Other’ financial results. The impact on trade receivables was less than £1m in 2019/20 so the 2020 comparatives have not been restated.
Given the broad and varied nature of our customer base, the analysis of trade receivables not past due and accrued income by
customer-facing unit is considered the most appropriate disclosure of credit concentrations.
Deferred contract costs
Significant accounting policies that apply to deferred contract costs
We capitalise certain costs associated with the acquisition and fulfilment of contracts with customers and amortise them over
the period that we transfer the associated services.
Connection costs are deferred as contract fulfilment costs because they allow satisfaction of the associated connection
performance obligation and are considered recoverable. Sales commissions and other third party contract acquisition costs are
capitalised as costs to acquire a contract unless the associated contract term is less than 12 months, in which case they are
expensed as incurred. Capitalised costs are amortised over the minimum contract term. A portfolio approach is used to
determine contract term.
Where the initial set-up, transition and transformation phases of long-term contractual arrangements represent distinct
performance obligations, costs in delivering these services are expensed as incurred. Where these services are not distinct
performance obligations, we capitalise eligible costs as a cost of fulfilling the related service. Capitalised costs are amortised on
a straight line basis over the remaining contract term, unless the pattern of service delivery indicates a more appropriate profile.
To be eligible for capitalisation, costs must be directly attributable to specific contracts, relate to future activity, and generate
future economic benefits. Capitalised costs are regularly assessed for recoverability.
BT Group plc
Annual Report 2021
Financial statements 152
Notes to the consolidated financial statements continued
17. Trade and other receivables continued
The following table shows the movement on deferred costs:
Deferred
connection
costs
£m
Deferred
contract
acquisition
costs –
commissions
£m
Deferred
contract
acquisition
costs – dealer
incentives
£m
Transition and
transformation
£m
31
10
(9)
(1)
1
32
10
(9)
(1)
–
32
86
86
(75)
(4)
1
94
76
(68)
(4)
(4)
94
432
451
(426)
(7)
(1)
449
301
(391)
(11)
–
348
140
21
(27)
(21)
(7)
106
26
(19)
(15)
(13)
85
Total
£m
689
568
(537)
(33)
(6)
681
413
(487)
(31)
(17)
559
At 1 April 2019
Additions
Amortisation
Impairment
Other
At 1 April 2020
Additions
Amortisation
Impairment
Other
At 31 March 2021
18. Trade and other payables
Significant accounting policies that apply to trade and other payables
We initially recognise trade and other payables at fair value, which is usually the original invoiced amount. We subsequently
carry them at amortised cost using the effective interest method.
At 31 March
Current
Trade payables
Other taxation and social security
Other payables
Accrued expenses
Deferred incomea
At 31 March
Non‑current
Other payables
Deferred incomea
2021
£m
2020
£m
4,024
491
495
634
336
5,980
2021
£m
12
670
682
3,889
562
498
545
300
5,794
2020
£m
18
736
754
a Deferred income includes £96m (2019/20: £94m) current and £472m (2019/20: £525m) non-current liabilities relating to the Building Digital UK programme, for which
grants received by the group may be subject to re-investment or repayment depending on the level of take-up.
Current trade and other payables at 31 March 2021 include £45m of trade payables that have been factored by suppliers in a supply
chain financing programme (31 March 2020: £81m). These programmes are used with a limited number of suppliers with short
payment terms to extend them to a more typical payment term.
BT Group plc
Annual Report 2021
153
19. Provisions
Our provisions principally relate to obligations arising from property rationalisation programmes, restructuring programmes, asset
retirement obligations, network assets, insurance claims, litigation and regulatory risks.
Significant accounting policies that apply to provisions
We recognise provisions when the group has a present legal or constructive obligation as a result of past events, it is probable
that an outflow of resources will be required to settle the obligation and the amount can be reliably estimated. Where these
criteria are not met we disclose a contingent liability if the group has a possible obligation, or has a present obligation with an
outflow that is not probable or which cannot be reliably estimated. Contingent liabilities are disclosed in note 31.
Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market
assessments of the time value of money and the risks specific to the liability.
Critical & key accounting estimates and significant judgements made in accounting for provisions
We exercise judgement in determining the quantum of all provisions to be recognised. Our assessment includes consideration
of whether we have a present obligation, whether payment is probable and if so whether the amount can be estimated reliably.
As part of this assessment, we also assess the likelihood of contingent liabilities occurring in the future. Contingent liabilities are
not recognised as liabilities on our balance sheet; they are disclosed in note 31. By their nature, contingencies will be resolved
only when one or more uncertain future events occur or fail to occur. We assess the likelihood that a potential claim or liability
will arise and also quantify the possible range of financial outcomes where this can be reasonably determined.
In estimating contingent liabilities we make key judgements in relation to applicable law and any historical and pending court
rulings, and the likelihood, timing and cost of resolution.
Establishing contingent liabilities associated with litigation brought against the group may involve the use of critical estimates
and assumptions, in particular around the ability to form a reliable estimate of any probable outflow. We provide further
information in note 31.
Other provisions and contingent liabilities may involve the use of key (but not critical) estimates as explained below.
Restructuring programmes involve estimation of the direct cost necessary for the restructuring and exclude items that are
associated with ongoing activities. The amounts below exclude restructuring costs for which the timing and amount are certain.
These are recognised as part of trade and other payables.
In measuring property provisions, we have made estimates of the costs to restore properties upon vacation where this is
required under the lease agreements.
Asset retirement obligations (AROs) involve an estimate of the cost to dismantle equipment and restore network sites upon
vacation and the timing of the event. The provision represents the group’s best estimate of the amount that may be required to
settle the obligation.
Network asset provisions represent our future operational costs and vacant site rentals arising from obligations relating to
network share agreements. Costs are expected to be incurred over a period of up to 20 years.
Our regulatory provision represents our best estimate of the cost to settle our present obligation in relation to historical
regulatory matters. The charge/credit for the year represents the outcome of management’s re-assessment of the estimates
and regulatory risks across a range of issues, including price and service issues. The prices at which certain services are charged
are regulated and may be subject to retrospective adjustment by regulators. When estimating the likely value of regulatory risk
we make key judgements, including in regard to interpreting Ofcom regulations and past and current claims.
For all risks, the ultimate liability may vary materially from the amounts provided and will be dependent upon the eventual
outcome of any settlement.
BT Group plc
Annual Report 2021
Financial statements 154
Notes to the consolidated financial statements continued
19. Provisions continued
At 1 April 2019
Additions
Unwind of discount
Utilised or released
Transfersa
Exchange differences
At 31 March 2020
Additions
Unwind of discount
Utilised or released
Transfers
Exchange differences
31 March 2021
Property
£m
Network
ARO
£m
Network
share
£m
Regulatory
£m
Litigation
£m
Insuranceb
£m
Otherb
£m
156
18
1
(31)
–
–
144
9
1
(16)
–
–
138
148
52
1
(22)
–
–
179
–
–
(21)
–
–
158
15
88
–
(91)
–
–
12
1
–
(1)
–
–
12
182
26
–
(129)
–
–
79
32
–
(15)
–
–
96
84
7
–
(14)
11
–
88
17
–
–
4
–
109
96
7
–
(14)
–
–
89
7
–
(5)
–
–
91
a Transfers in 2019/20 include £5m on provisions associated with held-for-sale assets during the period. See note 23.
b We have re-presented previously reported Insurance provisions as their own category. Previously these were included within ‘Other’.
At 31 March
Analysed as:
Current
Non-current
Total
£m
797
261
2
(364)
22
1
719
116
1
(121)
–
–
715
2020
£m
288
431
719
116
63
–
(63)
11
1
128
50
–
(63)
(4)
–
111
2021
£m
288
427
715
Included within ‘Other’ provisions are contract loss provisions of £2m (2019/20: £10m) relating to the anticipated total losses
in respect of certain contracts. Last year we identified £7m of contract loss provisions in respect of revenue contracts that are
expected to become loss-making as a result of Covid-19 impacts. This increase above our standard contract loss provisioning
policies was recorded as a specific item (note 9). In 2020/21 this provision has been fully released. This release has been classified
as a specific item.
20. Retirement benefit plans
Background to BT’s pension plans
The group has both defined benefit and defined contribution retirement benefit plans. The group’s main plans are in the UK and the
largest by membership is the BT Pension Scheme (BTPS) which is a defined benefit plan that was closed to new entrants on 31 March
2001. After that date new entrants to BT in the UK have been able to join a defined contribution plan, currently the BT Retirement
Saving Scheme (BTRSS), a contract-based arrangement operated by Standard Life.
Sections B and C of the BTPS were closed to future benefit accrual on 30 June 2018 (which represented over 99% of the BTPS active
membership at the time) and affected employees were able to join the BTRSS or the BT Hybrid Scheme (BTHS) for future pension
accrual. The BTHS, which combines elements of both defined benefit and defined contribution pension schemes, was set up in April
2019 for non-management employees impacted by the closure of the BTPS and was closed to new entrants on 30 September 2019.
EE Limited operates the EE Pension Scheme (EEPS), which has a defined benefit section that was closed to future benefit accrual in
2014 and a defined contribution section which is open to new joiners.
We also have retirement arrangements around the world in line with local markets and culture.
What are they?
Future implications for BT?
Defined
contribution
plans
Defined
benefit
plans
Benefits in a defined contribution plan are linked to the
value of each member’s fund, which is based on:
The group has no exposure to investment and other
experience risks.
– contributions paid
– the performance of each individual’s chosen investments
Benefits in a defined benefit plan are determined by the
plan rules and are:
– dependent on factors such as age, years of service and
pensionable pay
– not dependent on actual contributions made by the
company or members.
The group is exposed to investment and other
experience risks and may need to make additional
contributions where it is estimated that the benefits
will not be met from regular contributions, expected
investment income and assets held.
BT Group plc
Annual Report 2021
155
20. Retirement benefit plans continued
Significant accounting policies that apply to retirement benefit plans
Defined benefit plans
The Retirement Benefit Obligations in respect of defined benefit plans is the liability (the present value of all expected future
benefit cash flows to be paid by each plan, calculated using the projected unit credit method by professionally qualified
actuaries) less the fair value of the plan assets.
The income statement expense is allocated between an operating charge and net finance income or expense.
– The operating charge reflects the increase in the liability resulting from the pension benefit earned by active employees in the
current period, the costs of administering the plans and any past service costs/credits such as those arising from curtailments
or settlements.
– The net finance income or expense reflects the interest on the Retirement Benefit Obligations recognised in the group
balance sheet, based on the discount rate at the start of the year.
Remeasurements of the Retirement Benefit Obligations are recognised in full in the group statement of comprehensive income
in the year in which they arise. These comprise:
– The impact on the liabilities of changes in financial assumptions, which are based on market conditions at the reporting date,
and demographic assumptions, such as life expectancy, compared with those adopted the start of the year;
– The impact on the liabilities of actual experience being different to assumptions made at the start of the year, for example,
from members choosing different benefit options at retirement or actual benefit increases being different to the pension
increase assumption; and
– The return on plan assets being above or below the amount included in the net finance income or expense.
Defined contribution plans
The operating charge for the defined contribution pension plans we operate represents the contributions payable for the year.
Amounts in the financial statements
Group income statement
The expense or income arising from all group retirement benefit arrangements recognised in the group income statement
is shown below.
Year ended 31 March
Recognised in the income statement before specific items
– Service cost (including administration expenses and PPF levy):
– defined benefit plans
– defined contribution plans
– Past service cost
Subtotal
Recognised in the income statement as specific items (note 9)
– Costs to close BT Pension Scheme and provide transition paymentsa for affected employees
– Interest on pensions deficit
Subtotal
Total recognised in the income statement
2021
£m
2020
£m
63
527
1
591
21
18
39
630
86
540
–
626
22
145
167
793
a All employees impacted by the closure of the BTPS were eligible for transition payments from the date of closure into their BTRSS pot for a period linked to the employee’s
age. There was no past service cost or credit on closure due to the assumed past service benefit link as an active member being the same as that assumed for a deferred
member.
Group balance sheet
The Retirement Benefit Obligations in respect of defined benefit plans reported in the group balance sheet are set out below.
At 31 March
BTPS
EEPS
Other plansb
Retirement Benefit Obligations (gross of tax)
Deferred tax asset
Retirement Benefit Obligations (net of tax)
2021
Assets
£m
Liabilities
£m
53,172
934
506
54,612
(57,737)
(1,127)
(844)
(59,708)
2020
Assets
£m
Liabilities
£m
52,240
820
411
53,471
(53,010)
(879)
(722)
(54,611)
Deficita
£m
(4,565)
(193)
(338)
(5,096)
925
(4,171)
Deficita
£m
(770)
(59)
(311)
(1,140)
175
(965)
a BT is not required to limit any pension surplus or recognise additional pensions liabilities in individual plans as economic benefits are available in the form of either future
refunds or reductions to future contributions. This is on the basis that IFRIC 14 applies enabling a refund of surplus following the gradual settlement of the liabilities over
time until there are no members remaining in the scheme.
b Included in the liabilities of other plans is £146m (2019/20: £150m) related to unfunded pension arrangements.
BT Group plc
Annual Report 2021
Financial statements 156
Notes to the consolidated financial statements continued
20. Retirement benefit plans continued
Movements in defined benefit plan assets and liabilities
The table below shows the movements on the pension assets and liabilities and shows where they are reflected in the
financial statements.
At 31 March 2019
Service cost (including administration expenses and PPF levy)
Interest on pension deficit
Included in the group income statement
Return on plan assets above the amount included in the group income statement
Actuarial gain arising from changes in financial assumptions
Actuarial gain arising from changes in demographic assumptions
Actuarial gain arising from experience adjustments
Included in the group statement of comprehensive income
Regular contributions by employer
Deficit contributions by employer
Included in the group cash flow statement
Contributions by employees
Benefits paid
Other (e.g. foreign exchange)
Other movements
At 31 March 2020
Service cost (including administration expenses and PPF levy)
Past service cost
Interest on pension deficit
Included in the group income statement
Return on plan assets above the amount included in the group income statement
Actuarial loss arising from changes in financial assumptions
Actuarial gain arising from changes in demographic assumptions
Actuarial gain arising from experience adjustments
Included in the group statement of comprehensive income
Regular contributions by employer
Deficit contributions by employer
Included in the group cash flow statement
Contributions by employees
Benefits paid
Other (e.g. foreign exchange)
Other movements
At 31 March 2021
Overview and governance of the BTPS
What are the benefits under the BTPS?
Assets
£m
Liabilities
£m
53,364
(66)
1,246
(60,546)
(20)
(1,391)
249
–
–
–
160
1,274
–
3,746
498
360
–
–
–
(2,764)
8
–
2,764
(22)
Deficit
£m
(7,182)
(86)
(145)
(231)
249
3,746
498
360
4,853
160
1,274
1,434
–
–
(14)
(14)
53,471
(54,611)
(1,140)
(44)
–
1,281
(19)
(1)
(1,299)
1,766
–
–
–
17
955
–
(8,504)
1,746
136
–
–
1
(2,822)
(13)
(1)
2,822
23
(63)
(1)
(18)
(82)
1,766
(8,504)
1,746
136
(4,856)
17
955
972
–
–
10
10
54,612
(59,708)
(5,096)
Benefits earned for pensionable service prior to 1 April 2009 are based upon a member’s final salary and a normal pensionable age
of 60.
Between 1 April 2009 and 30 June 2018, Section B and C active members accrued benefits based upon a career average re-valued
earnings (CARE) basis and a normal pensionable age of 65. On a CARE basis benefits are built up based upon earnings in each year
and the benefit accrued for each year is increased by the lower of inflation or the individual’s actual pay increase in each year to
retirement.
BT Group plc
Annual Report 2021
157
20. Retirement benefit plans continued
Under the Scheme rules the determination of the rate of inflation for statutory minimum rates of revaluation and indexation for the
majority of benefits is based upon either the Retail Price Index (RPI) or the Consumer Price Index (CPI) which apply to each category
of member as shown below.
Active members
Deferred members
Pensioners
Sections
A & Ba
Section C
Benefits accrue on a CARE basis
increasing at the lower of RPI or the
individual’s actual pensionable pay
increase
Preserved benefits are revalued
before retirement based upon CPI
Increases in benefits in payment are
currently based upon CPI
Increases in benefits in payment are
currently based upon RPI up to a
maximum of 5%
a Section A members have typically elected to take Section B benefits at retirement.
How is the BTPS governed and managed?
BT Pension Scheme Trustees Limited (the Trustee) has been appointed by BT as an independent trustee to administer and manage
the BTPS on behalf of the members in accordance with the terms of the BTPS Trust Deed and Rules and relevant legislation
(principally the Pensions Acts of 1993, 1995, 2004 and 2021).
Under the terms of the Trust Deed there are nine Trustee directors, all of whom are appointed by BT, as illustrated below. Trustee
directors are usually appointed for a three-year term but are then eligible for re-appointment.
Chairman of the Trustees
Member nominated Trustees
Employer nominated Trustees
Appointed by BT after consultation
with, and with the agreement of, the
relevant trade unions.
Appointed by BT based on
nominations by trade unions.
Appointed by BT. Two normally hold senior
positions within the group and two normally
hold (or have held) senior positions in
commerce or industry.
BTPS assets
Critical accounting estimates and significant judgements made when valuing our pension assets
Under IAS19, plan assets must be valued at the bid market value at the balance sheet date. Our pension assets include quoted
and unquoted investments. A portion of unquoted investments are valued based on inputs that are not directly observable,
which require more judgement. The assumptions used in valuing unquoted investments are affected by market conditions.
Around £5bn of these unquoted investments have valuations which precede the reporting date and where the valuations have
been adjusted for cash movements between the last valuation date and 31 March 2021, using the valuation approach and inputs
as at the last valuation date. Typically, the valuation approach and inputs for these investments are only updated over this period
where there are indications of significant market movements.
Valuation of main quoted investments
– Equities listed on recognised stock exchanges are valued at closing bid prices.
– Bonds that are regularly traded are valued using broker quotes.
– Exchange traded derivative contracts are valued based on closing bid prices.
Valuation of main unquoted investments
– Equities are valued using the IPEVC guidelines where the most significant assumptions are the discount rate and earnings
assumptions.
– Property investments are valued on the basis of open market value by an independent valuer. The significant assumptions
used in the valuation are rental yields and occupancy rates.
– Bonds that are not regularly traded are valued by an independent valuer using pricing models making assumptions for credit
risk, market risk and market yield curves.
– Over the counter derivatives are valued by an independent valuer using cashflows discounted at market rates. The significant
assumptions used in the valuation are the yield curves and cost of carry.
– Holdings in investment funds are valued at fair value which is typically the Net Asset Value provided by the fund administrator
or investment manager. The significant assumption used in the valuation is the Net Asset Value.
– Infrastructure investments are valued by an independent valuer using a model-based valuation such as a discounted cash
flow approach. The significant assumptions used in the valuation are the discount rate and the expected cash flows.
– The value of the longevity insurance contract held by the BTPS is measured by discounting the projected cash flows payable
under the contract (projected by an actuary, consistent with the terms of the contract). The significant assumptions used to
value the asset are the discount rate (including adjustments to the risk free rate) and the mortality assumptions.
BT Group plc
Annual Report 2021
Financial statements 158
Notes to the consolidated financial statements continued
20. Retirement benefit plans continued
Asset allocation
The allocation of assets between different classes of investment is reviewed regularly and is a key factor in the Trustee’s investment
policy. The allocations reflect the Trustee’s views on the appropriate balance to be struck between seeking returns and incurring
risk, and on the extent to which the assets should be allocated to match liabilities. Current market conditions and trends are regularly
assessed which may lead to adjustments in the asset allocation.
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 an active market and those that do not (such as investment funds).
UK
Overseas developed
Emerging markets
UK
Overseas
Absolute Returnc
Non Core Creditd
Mature Infrastructure
UK
Global
Growth
Equities
Private Equity
Property
Other growth assets
Liability matching
Government bonds
Investment grade credit
Secure income assetse
Cash, derivatives and other
Cash balances
Longevity insurance contractf
Otherg
Total
Total
assets
£bn
2021a
of which
quotedb
£bn
2020 (Restated)a
Total
%
Total
assets
£bn
of which
quotedb
£bn
Total
%
0.3
7.0
1.3
1.6
2.9
0.8
1.1
4.3
1.3
14.3
14.1
2.1
1.4
(0.8)
1.5
0.3
6.5
1.3
–
–
–
–
1.4
–
14.3
11.5
–
–
–
–
1
13
2
3
5
2
2
8
2
27
27
4
3
(2)
3
0.3
6.7
1.0
1.3
3.0
1.1
1.2
4.1
1.3
13.9
14.4
0.8
2.3
(0.8)
1.6
0.3
5.6
1.0
–
–
–
–
1.0
–
13.9
10.1
–
–
–
–
1
13
2
2
6
2
2
8
2
27
28
2
4
(2)
3
53.2
35.3
100
52.2
31.9
100
a At 31 March 2021, the Scheme did not hold any equity issued by the group (2019/20: nil). The Scheme held £2,216m (2019/20: £1,867m) of bonds issued by the group.
b Assets with a quoted price in an active market.
c This allocation seeks to generate a positive return irrespective in all market conditions.
d This allocation includes a range of credit investments, including emerging market, sub-investment grade and unrated credit. The allocation seeks to exploit investment
opportunities within credit markets using the expertise of a range of specialist investment managers.
e Category introduced in 2020/21 reclassifying certain existing assets, including property, infrastructure and credit investments, as these provide a stable income which
supports cashflow and liability management.
f The Trustee has hedged some of the Scheme’s longevity risk through a longevity insurance contract which was entered into in 2014. The value reflects experience to date
on the contract from higher than expected deaths and movements partly offset a corresponding reduction in the Scheme’s liabilities over the same period
g Includes collateral posted in relation to derivatives held by the Scheme.
BTPS IAS 19 liabilities
Critical accounting judgements and key estimates made when valuing our pension liabilities
The measurement of the service cost and the liabilities involves judgements about uncertain events including the life
expectancy of the members, price inflation and discount rates used to calculate the net present value of the future pension
payments. We use estimates for all of these uncertain events. Our assumptions reflect historical experience, external advice and
our judgement regarding future expectations at the balance sheet date.
BT Group plc
Annual Report 2021
159
20. Retirement benefit plans continued
What are the forecast benefits payable from the BTPS?
There were 280,000 members in the BTPS at 30 June 2020, the date of the membership data used to value the IAS 19 liabilities.
Members belong to one of three sections depending upon the date they first joined the BTPS, which impacts the benefits they are
expected to receive.
Benefits to members from the BTPS are expected to be paid over more than 60 years. Projecting future expected benefit payments
requires a number of assumptions, including future inflation, retirement ages, benefit options chosen and life expectancy and is
therefore inherently uncertain. Actual benefit payments in a given year may be higher or lower, for example if members retire sooner
or later than assumed, or take a greater or lesser cash lump sum at retirement than assumed. The liabilities are the present value of
the future estimated benefit payments.
The chart below illustrates the estimated benefits payable from the BTPS, and projected liabilities, forecast using the IAS 19
assumptions. Whilst benefit payments are expected to increase over the earlier years, the value of the liabilities is expected to reduce.
Forecast benefits payable by BTPS at 31 March 2021 (unaudited)
)
m
£
(
s
t
n
e
m
y
a
p
t
i
f
e
n
e
B
3,000
2,500
2,000
1,500
1,000
500
0
60,000
50,000
40,000
30,000
20,000
10,000
0
)
m
£
(
s
e
i
t
i
l
i
b
a
i
l
9
1
S
A
I
2021
2041
2061
2081
Forecast benefit payments (left axis)
Liabilities (right axis)
The estimated duration of the BTPS liabilities, which is an indicator of the weighted average term of the liabilities, is 15 years using
the IAS 19 assumptions.
What is the breakdown of the membership and liabilities?
Active
members
Deferred
members Pensioners
Total
38.4
19.3
57.7
Sections A and B liabilities (£bn)a
Section C liabilities (£bn)
Total IAS 19 liabilities (£bn)
Total number of members
–
–
–
–b
6.9
14.0
20.9
31.5
5.3
36.8
73,900
206,100
280,000
a Sections A and B have been aggregated in this table as Section A members have typically elected to take Section B benefits at retirement.
b At 30 June 2020 there were around 30 active members in the BTPS.
What are the key assumptions and how have they been set?
The key financial assumptions used to measure the liabilities of the BTPS are shown below.
At 31 March
Rate used to discount liabilities
Inflation – average increase in RPI
Inflation – average increase in CPI
a The real rate is calculated relative to RPI inflation.
Nominal rates (per year)
Real rates (per year)a
2021
2020
2021
2020
2.05%
3.20%
2.75%
2.45%
2.60%
1.90%
(1.11)%
–%
(0.44)%
(0.15)%
–%
(0.68)%
The BTPS represents around 97% of the group’s pension liabilities. While the financial assumptions may vary for each scheme,
the nominal financial assumptions weighted by liabilities across all schemes are equal to the figures shown in the table above
(to the nearest 0.05%).
BT Group plc
Annual Report 2021
Financial statements
160
Notes to the consolidated financial statements continued
20. Retirement benefit plans continued
Based on the IAS 19 longevity assumptions, the forecast life expectancies for BTPS members aged 60 are as follows:
At 31 March
Male in lower pension bracket
Male in higher pension bracket
Female
Average additional life expectancy for a member retiring at age 60 in 10 years’ time
The table below summarises the approach used to set the key IAS 19 assumptions for the BTPS.
Approach to set the assumption
2021
2020
Number of
years
Number
of years
25.5
27.6
27.9
0.4
25.4 to 26.7
28.1
28.1 to 28.4
0.7
Discount rate
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 and term of these should be consistent with the currency and
estimated term of the pension obligations.
The assumption is calculated by applying the projected BTPS benefit cash flows to a corporate bond yield
curve constructed by our external actuary based on the yield on AA-rated corporate bonds.
In setting the yield curve, judgement is required on the selection of appropriate bonds to be included in the
universe and the approach used to then derive the yield curve.
The discount rate model has been updated over the year to use a wider universe of corporate bonds to derive
the yield curve. The revised model is a standard approach developed by our external actuary. The revised
model leads to a 20bps increase in the discount rate at 31 March 2021 and a corresponding £1.7bn reduction
in the BTPS liabilities.
RPI and CPI inflation The RPI inflation assumption is set using an inflation curve derived from market yields on government bonds,
weighted by projected BTPS benefit cash flows, and making an adjustment for an inflation risk premium (to
reflect the extra premium paid by investors for inflation protection). CPI is assessed at a margin below RPI
taking into account market forecasts and independent estimates of the expected difference.
In 2020, it was announced that RPI will be aligned with CPIH from 2030 onwards. The following judgements
have been updated reflecting the announcement:
– the assumed inflation risk premium has been increased from 20bps to an average of 25bps (based on
20bps until 2030, and 30bps thereafter). This has reduced the BTPS liabilities by £0.4bn at 31 March 2021
– CPI is assumed to be in line with RPI after 2030, as historically CPI and CPIH have been broadly comparable.
This has increased the BTPS liabilities by £1.1bn at 31 March 2021
Pension increases
Benefits are assumed to increase in line with the RPI or CPI inflation assumptions, based on the relevant index
for increasing benefits, as prescribed by the rules of the BTPS and summarised above.
Certain pension increases in the BTPS are linked to benefits provided by Government to public sector pension
schemes. In 2018, Government made a temporary decision about how these benefits would be increased. We
anticipated Government would continue to pay higher pension increases to public sector pension schemes
at the end of the temporary period and intended to reflect in the liabilities once confirmed. In March 2021,
Government confirmed this decision, which has crystallised a £0.3bn increase to the BTPS liabilities at 31
March 2021.
Longevity
The longevity assumption takes into account:
– the actual mortality experience of the BTPS pensioners, based on a formal review conducted at the 2020
triennial funding valuation
– future improvements in longevity based on a model published by the UK actuarial profession’s Continuous
Mortality Investigation (updating to use the CMI 2019 Mortality Projections model, and reducing the long-
term improvement parameter to 1.00% per year). No adjustments were made to mortality assumptions in
relation to Covid-19.
These changes reflect our expectation that life expectancy will not improve as quickly as previously assumed
and reduce the BTPS liabilities by £1.7bn at 31 March 2021.
BT Group plc
Annual Report 2021
161
20. Retirement benefit plans continued
Risks underlying the assumptions
Background
The BTPS faces similar risks to other UK DB schemes: things like future low investment returns, high inflation, longer life expectancy
and regulatory changes may all mean the BTPS becomes more of a financial burden.
Changes in external factors, such as bond yields, can have an impact on the IAS 19 assumptions, impacting the measurement of
BTPS liabilities. These factors can also impact the Scheme assets. The BTPS hedges some of these risks, including longevity and
currency using financial instruments and insurance contracts with reference to the funding liabilities (see page 163 for sensitivities
to the funding liabilities). This leads to the BTPS being over-hedged to changes in bond yields under IAS 19.
Some of the key financial risks, and mitigations, for the BTPS are set out in the table below.
Changes in corporate
and government bond
yields
A fall in yields on AA-rated corporate bonds, used to set the IAS 19 discount rate, will lead to an increase
in the IAS 19 liabilities.
The BTPS’s assets include corporate bonds, government bonds and interest rate derivatives which
are expected to more than offset the impact of movements in the discount rate on the IAS 19 liabilities
(but only partly offset movements in the funding liabilities). Yields on these assets may diverge compared
with the discount rate in some scenarios.
Changes in inflation
expectations
A significant proportion of the benefits paid to members are currently increased in line with RPI or CPI
inflation. An increase in long-term inflation expectations will lead to an increase in the IAS 19 liabilities.
The BTPS’s assets include index-linked government bonds and inflation derivatives which are expected
to largely offset the impact of movements in inflation expectations.
Changes in growth
assets
A significant proportion of the BTPS assets are invested in growth assets, such as equities and property.
Although the BTPS has temporary hedges in place to partly offset the impact of a fall in equity markets,
and adopts a diverse portfolio, a fall in these growth assets will lead to a worsening of the IAS 19 deficit.
Changes in life
expectancy
An increase in the life expectancy of members will result in benefits being paid out for longer, leading to an
increase in the BTPS liabilities.
The BTPS holds a longevity insurance contract which covers around 20% of the BTPS’s total exposure
to improvements in longevity, providing long-term protection and income to the BTPS in the event that
members live longer than currently expected.
Other risks include: volatile asset returns (i.e. where asset returns differ from the discount rate); changes in legislation or regulation
which impact the value of the liabilities or assets; and member take-up of options before and at retirement to reshape their benefits.
Scenario analysis
The potential negative impact of the key risks is illustrated by the following five scenarios. These have been assessed by BT’s
independent actuary as scenarios that might occur no more than once in every 20 years.
Scenario
1. Fall in bond yieldsa
2. Increase in credit spreadsb
3. Increase to inflation ratec
4. Fall in growth assetsd
5. Increase to life expectancy
1‑in‑20 events
2021
2020
1.1%
0.7%
0.7%
20.0%
1.1%
0.7%
0.7%
20.0%
1.00 years 1.25 years
a Scenario assumes a fall in the yields on both government and corporate bonds.
b Scenario assumes an increase in the yield on corporate bonds, with no change to yield on government bonds.
c Assuming RPI, CPI, pension increases and salary increases all increase by the same amount.
d Impact includes the potential impact of temporary equity hedges held by the Scheme. Scenario considers combinations of changes to the key inputs used to value the
growth assets, as detailed on page 157, leading to a 20% fall in the aggregate value of the growth assets prior to temporary hedges held by the Scheme.
The impact shown under each scenario looks at each event in isolation – in practice a combination of events could arise.
BT Group plc
Annual Report 2021
Financial statements 162
Notes to the consolidated financial statements continued
20. Retirement benefit plans continued
Impact of illustrative scenarios which might occur no more than once in every 20 years
Scenario analysis
10.6
11.6
(5.4)
(0.8)
5.0
4.8
0.0
(3.2)
2.9
0.6
n
b
£
14
12
10
8
6
4
2
0
(2)
(4)
(6)
1.1 percentage point
fall in bond yields
0.7 percentage point
increase in credit spreads
0.7 percentage point
increase in inflation rate
20% fall in growth assets
1.00 year increase to
life expectancy
Increase/(decrease) in liabilities
Increase/(decrease) in assets
While the IAS 19 position is over-hedged against movements in interest rates, the funding deficit remains under-hedged against
these movements.
The sensitivities have been prepared using the same approach as 2019/20 which involves calculating the liabilities and assets
assuming the change in market conditions assumed under the scenario occurs.
BTPS funding
Triennial funding valuation
A funding valuation is carried out for the Trustee by a professionally qualified independent actuary at least every three years. The
purpose of the funding valuation is for BT and the Trustee to agree cash contributions from BT to the BTPS to ensure the BTPS has
sufficient funds available to meet future benefit payments to members. It is prepared using the principles set out in UK Pension
legislation, e.g. the 2004 Pensions Act, and uses a prudent approach overall.
This differs from the IAS 19 valuation, which is used for deriving balance sheet and P&L figures in Company accounts with principles
being set out in the IFRS standards, and uses a best-estimate approach overall.
The different purpose and principles lead to different assumptions being used, and therefore a different estimate for the liabilities
and deficit.
The latest funding valuation was performed as at 30 June 2020. The next funding valuation will have an effective date of no later
than 30 June 2023.
The results of the two most recent triennial valuations are shown below.
BTPS funding liabilities
Market value of BTPS assets
Funding deficit
Percentage of accrued benefits covered by BTPS assets at valuation date
Percentage of accrued benefits on a solvency basis covered by the BTPS assets at the valuation date
Key assumptions – funding valuation
The most recent funding valuations were determined using the following prudent long-term assumptions.
June 2020
valuation
£bn
June 2017
valuation
£bn
(65.3)
57.3
(8.0)
88%
71%
(60.4)
49.1
(11.3)
81%
62%
Nominal rates (per year)
Real rates (per year)a
June 2020
valuation
%
June 2017
valuation
%
June 2020
valuation
%
June 2017
valuation
%
1.4
3.2
2.4
2.6
3.4
2.4
(1.7)
–
(0.7)
(0.8)
–
(1.0)
Average single equivalent discount rate
Average long-term increase in RPI
Average long-term increase in CPI
a The real rate is calculated relative to RPI inflation and is shown as a comparator.
BT Group plc
Annual Report 2021
163
20. Retirement benefit plans continued
The discount rate at 30 June 2020 was derived from prudent return expectations above a risk-free yield curve based on gilt and
swap rates. The discount rate reflects the investment strategy over time, allowing for the Scheme de-risk to a portfolio consisting
predominantly of bond and bond-like investments by 2034. It has been set consistently with the 2017 valuation, mechanically
updated to reflect the move in swap pricing from LIBOR to SONIA, leading to a prudent discount rate of 1.4% per year above the
yield curve in 2020, trending down to 0.8% per year above the curve in the long-term. The assumption is equivalent to using a flat
discount rate of 0.9% per year above the risk-free yield curve at 30 June 2020.
The average life expectancy assumptions at the funding valuation dates, for members 60 years of age, are as follows.
Number of years from valuation date
Male in lower pension bracket
Male in higher pension bracket
Female
Average additional life expectancy for a member retiring at age 60 in 10 years’ time
Changes in the funding position (unaudited)
June 2020
assumptions
June 2017
assumptions
25.8
28.0
28.5
0.9
25.9 to 27.2
28.6
28.6 to 28.9
0.9
The impact of changes in market conditions on the funding liabilities may differ from the impact on the IAS 19 liabilities. The
estimated impact of the scenarios illustrated on page 162 on the 30 June 2020 funding liabilities, assets and deficit is shown in the
table below.
Scenario
1.1% fall in bond yields
0.7% increase to inflation rate
1.00 years increase to life expectancy
Future funding obligations and deficit repair plan
Increase in
funding
liabilities
(£bn)
13.8
7.2
3.3
Increase in
assets
(£bn)
13.6
5.6
0.6
Increase in
funding
deficit
(£bn)
0.2
1.6
2.7
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, which is a legal agreement between BT and the Trustee and should address the deficit over a maximum period of 20 years.
In May 2021, the 2020 triennial funding valuation was finalised, agreed with the Trustee and certified by the Scheme Actuary.
The funding deficit at 30 June 2020 was £7.98bn. The deficit was agreed to be met as follows:
– £2bn met through an Asset Backed Funding arrangement, expected to be implemented by 30 June 2021.
This will be structured as a Scottish Limited Partnership (SLP), with £180m per year payable annually for 13 years between
June 2021 and June 2033. The stream of payments will be financed through proceeds from EE Limited, and shares in EE Limited
will provide security over the payment stream. No impact is expected to the day to day operations of BT or EE as a result of
implementing the structure.
If the Scheme reaches full funding as calculated by the Scheme Actuary at any 30 June, the payments to the Scheme will cease.
The ABF meets £2bn of deficit as all 13 payments are assumed to be made to the BTPS. However, the market value reflects
the possibility that payments may switch-off. This leads to the BTPS recognising a £1.7bn asset initially, with a corresponding
reduction in the funding deficit, and BT receiving tax relief on that amount. Tax relief on the balance of the payments comes
through over time as payments are made to the BTPS.
The Asset Backed Funding arrangement has no impact on the gross IAS 19 deficit in the BT plc consolidated accounts initially,
but will reduce the deferred tax asset recognised, as tax relief has been received up-front. Annual capital and interest payments
will reduce the IAS 19 deficit.
– Cash contributions over the 10 years to 30 June 2030.
These payments are set out in the table below.
Year to 31 March
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
Cash provided by BT
Cash provided by ABF structure
Total
900a
180
1,080
800a
180
980
600b
180
780
600c
180
780
600c
180
780
600c
180
780
600c
180
780
600c
180
780
600c
180
780
500c
180
680
180
180
180
180
180
180
a £400m of each payment due by 30 June.
b £500m due by 30 June.
c £490m of each payment due by 30 June. £10m is payable to the BTPS, and BT has the option to pay remaining amounts into the co-investment vehicle.
Based on the 2020 funding valuation agreement, the group expects to make cash payments of approximately £1,140m to the BTPS
in 2021/22, comprising of contributions of approximately £60m for expenses and future accrual and payments from BT and the ABF
to meet the deficit of £1,080m.
BT Group plc
Annual Report 2021
Financial statements
164
Notes to the consolidated financial statements continued
20. Retirement benefit plans continued
Co‑investment vehicle
BT and the Trustee have agreed a new co-investment vehicle, which provides BT with some protection against the risk of
overfunding by allowing money to be returned if not needed by the Scheme, enabling BT to provide upfront funding with
greater confidence.
BT has the option to pay deficit repair plan payments after 30 June 2023 into the co-investment vehicle (which is a SLP separate to
the SLP used for the Asset Backed Funding vehicle), which will be invested as if part of the overall BTPS investment strategy. The
value of the assets held in the vehicle will be included in the assets of the BTPS for the purposes of calculating the both the funding
deficit and the IAS 19 deficit.
To the extent there is a funding deficit at 30 June 2034, the co-investment vehicle will pay funds to the BTPS. BT will receive tax relief
on funds paid at this point, rather than in the year when funds are paid from BT into the vehicle.
Any remaining funds in the co-investment vehicle will then be returned to BT in three annual payments in 2035, 2036 and 2037,
unless the Scheme has subsequently moved into deficit or the Trustee, acting prudently but reasonably, decides to defer or reduce
these payments.
Future funding commitment
BT has agreed additional contributions which will be automatically payable in the event the deficit repair plan is no longer sufficient
to meet the deficit.
Should an annual update of the funding position reveal that the Scheme has fallen more than £1bn behind plan, BT will commence
additional payments between £150m to £200m per year. The first annual test will be at 30 June 2021.
The payments will stop once the funding deficit at a future annual update has improved such that the remaining deficit repair plan is
sufficient to meet the deficit. Payments can switch-on again if the deficit position subsequently deteriorates. Any payments under
this mechanism cease by 30 June 2034.
Other protections
The 2020 funding agreement with the Trustee included additional features for BT to provide support to the BTPS. BT has agreed to
continue to provide the Trustee with certain protections to 2035, or until the deficit calculated using the long-term discount rate,
currently 0.8% per year above the risk-free yield curve, (the “Protections Deficit”) has reduced below £2bn. A £2bn deficit on this
measure is currently broadly equivalent to a nil funding deficit. These include:
Feature
Detail
Shareholder
distributions
BT will provide additional payments to the BTPS by the amount that shareholder distributions exceed a threshold. For
the next three years the threshold allows for 10% per year dividend per share growth based on dividends restarting at
7.7p per share in 2021/22.
BT has agreed to implement a similar protection at each subsequent valuation, with the terms to be negotiated
at the time.
BT will consult with the Trustee if:
– it considers share buybacks for any purpose other than relating to employee share awards; or
– it considers making any shareholder distributions in any of the next 3 years if annual normalised free cashflow of the
Group is below £1bn in the year and distributions within the year would be in excess of 120% of the above threshold;
or
– it considers making a special dividend.
BT Group plc
Annual Report 2021
165
20. Retirement benefit plans continued
Feature
Detail
Material
corporate
events
In the event that BT generates net cash proceeds greater than a threshold from disposals (net of acquisitions)
in any financial year, BT will make additional contributions to the BTPS. The threshold is £750m until 30 June 2023,
and £1bn thereafter (increased by CPI from 30 June 2020).
The amount payable is one third of the total net cash proceeds, or the amount by which the Protections Deficit
exceeds £2bn if lower.
BT will consult with the Trustee if:
– it considers making acquisitions with a total cost of more than £1.0bn in any 12-month period; or
– it considers making disposals of more than £1.0bn; or
– it considers making a Class 1 transaction (acquisition or disposal); or
– it is likely to be subject to a takeover offer; or
– there is any other material corporate or third-party events which may have a material detrimental impact on BT’s
covenant to the Scheme, and BT will use best endeavours to agree appropriate mitigation
This obligation is on-going until otherwise terminated.
Negative
pledge
A negative pledge that future creditors will not be granted superior security to the BTPS in excess of a £0.5bn
threshold, to cover any member of the BT group. Business as usual financing arrangements are not included within
the £0.5bn threshold.
In the highly unlikely event that the group were to become insolvent there are additional protections of BTPS members’ benefits:
Feature
Detail
Crown
Guarantee
The Crown Guarantee was granted by the Government when the group was privatised in 1984 and would only come
into effect upon the insolvency of BT.
The Trustee brought court proceedings to clarify the scope and extent of the Crown Guarantee. The Court of Appeal
judgement on 16 July 2014 established that:
– the Crown Guarantee covers BT’s funding obligation in relation to the benefits of members of the BTPS who joined
post-privatisation as well as those who joined pre-privatisation (subject to certain exceptions)
– the funding obligation to which the Crown Guarantee relates is measured with reference to BT’s obligation to pay
deficit contributions under the rules of the BTPS.
The Crown Guarantee is not taken into account for the purposes of the actuarial valuation of the BTPS and is an
entirely separate matter, only being relevant in the highly unlikely event that BT became insolvent.
Further protection is also provided by the Pension Protection Fund which is the fund responsible for paying
compensation in schemes where the employer becomes insolvent.
Pension
Protection
Fund (PPF)
Other benefit plans
In addition to the BTPS, the group maintains benefit plans around the world with a focus on these being appropriate for the local
market and culture.
EEPS
The EEPS is the second largest defined benefit plan sponsored by the group. It has a defined benefit section that is closed to future
accrual, with liabilities of around £1.1bn, and a defined contribution section with around 9,000 members.
At 31 March 2021, the defined benefit section’s assets are invested across a number of asset classes including global equities (25%),
property & illiquid alternatives (26%), an absolute return portfolio (20%) and a liability driven investment portfolio (29%).
The most recent triennial valuation of the defined benefit section was performed as at 31 December 2018 and agreed in March
2020. This showed a funding deficit of £161m. The group is scheduled to contribute £3.3m each month until 31 July 2022.
BTRSS
The BTRSS is the largest defined contribution plan maintained by the group with around 66,000 active members. In the year to
31 March 2021, £468m of contributions were payable by the group to the BTRSS.
BTHS
The BTHS combines elements of both defined benefit and defined contribution pension schemes. It was set up in April 2019 for non-
management employees impacted by the closure of the BTPS and was closed to new entrants on 30 September 2019. At 31 March
2021 it had liabilities of around £38m.
BT Group plc
Annual Report 2021
Financial statements 166
Notes to the consolidated financial statements continued
21. Own shares
Significant accounting policies that apply to own shares
Own shares are recorded at cost and deducted from equity. When shares held for the beneficial ownership of employees vest
unconditionally or are cancelled they are transferred from the own shares reserve to retained earnings at their weighted average
cost.
At 1 April 2019
Own shares purchasedb
Share options exercisedb
Executive share awards vested
Conversion of ADR sharesc
At 31 March 2020
Own shares purchasedb
Yourshare issue
Share options exercisedb
Share awards vested
At 31 March 2021
Treasury sharesa
Employee share
ownership trusta
Total
millions
£m
millions
£m
millions
45
41
–
–
–
86
–
(35)
–
–
51
(143)
(80)
–
–
–
(223)
–
90
1
–
(132)
9
3
–
(8)
3
7
11
–
–
(9)
9
(24)
(6)
–
22
(6)
(14)
(14)
–
–
17
(11)
54
44
–
(8)
3
93
11
(35)
–
(9)
60
£m
(167)
(86)
–
22
(6)
(237)
(14)
90
1
17
(143)
a At 31 March 2021, 50,724,972 shares (2019/20: 85,921,056) with an aggregate nominal value of £3m (2019/20: £4m) were held at cost as treasury shares and 9,172,675
shares (2019/20: 7,255,789) with an aggregate nominal value of £nil (2019/20: £nil) were held in the Trust.
b See group cash flow statement on page 122. The cash paid for the repurchase of ordinary shares was £14m (2019/20: £86m). The cash received for proceeds on the issue of
treasury shares was £1m (2019/20: £2m).
c Conversion of American Depositary Receipts (“ADR”) to ordinary shares following delisting from the NYSE and termination of BT’s ADR programme from the US Securities
Exchange Commission registration.
The treasury shares reserve represents BT Group plc shares purchased directly by the group. The BT Group Employee Share
Ownership Trust (the Trust) also purchases BT Group plc shares.
The treasury shares and the shares in the Trust are being used to satisfy our obligations under employee share plans. Further details
on these plans are provided in note 22.
22. Share‑based payments
Significant accounting policies that apply to share‑based payments
We operate a number of equity-settled share-based payment arrangements, under which we receive services from employees
in consideration for equity instruments (share options and shares) of the group. Equity-settled share-based payments are
measured at fair value at the date of grant. Market-based performance criteria and non-vesting conditions (for example, the
requirement for employees to make contributions to the share purchase programme) are reflected in this measurement of fair
value. 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 eventually vest and adjusted for the effect of non market-based
vesting conditions. Fair value is measured using either the Binomial options pricing model or Monte Carlo simulations,
whichever is more 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, other than through a termination of service, are treated as an accelerated vesting.
No adjustment is made to total equity for awards that lapse or are forfeited after the vesting date.
BT Group plc
Annual Report 2021
22. Share‑based payments continued
Year ended 31 March
Employee Saveshare Plans
Executive Share Plans:
Incentive Share Plan (ISP)
Deferred Bonus Plan (DBP)
Retention and Restricted Share Plans (RSP)
Yourshare
167
2020
£m
36
16
7
9
4
72
2021
£m
38
(8)
10
14
18
72
What share incentive arrangements do we have?
Our plans include savings-related share option plans for employees and those of participating subsidiaries, further share option
plans for selected employees and a stock purchase plan for employees in the US. We also have several share plans for executives.
All share-based payment plans are equity-settled. Details of these plans is set out below.
Employee Saveshare Plans
Under an HMRC-approved savings-related share option plan, employees save on a monthly basis, over a three or five-year period,
towards the purchase of shares at a fixed price determined when the option is granted. This price is set at a 20% discount to the
market price for five-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 our overseas employees.
Incentive Share Plan (ISP)
Participants are entitled to ISP shares in full at the end of a three-year period only if the company has met the relevant pre-
determined corporate performance measures and if the participants are still employed by the group. No ISP awards were granted
in 2020/21. For ISP awards granted in previous years 40% of each award is linked to a total shareholder return (TSR) target for a
comparator group of companies from the beginning of the relevant performance period; 40% is linked to a three-year cumulative
normalised free cash flow measure; and 20% to growth in underlying revenue.
Deferred Bonus Plan (DBP)
Awards are granted annually to selected employees. 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.
Retention and Restricted Share Plans (RSP)
Awards are granted to selected employees. Shares in the company are transferred to participants at the end of a specified retention
or restricted period if they continue to be employed by the group throughout that period.
Under the terms of the ISP, DBP and RSP, dividends or dividend equivalents earned on shares during the conditional periods are
reinvested in company shares for the potential benefit of the participants.
Yourshare
This share incentive plan will operate again this year. All eligible employees of the group at 31 December 2020 who remain employed
in June 2021 will be awarded £500 of BT shares in June 2021. The shares will be held in trust for a 3 year vesting period after which
they will be transferred to employees, providing they have been continuously employed during that time. A similar plan operates for
our overseas employees.
Employee Saveshare Plans
Movements in Employee Saveshare options are shown below.
Year ended 31 March
Outstanding at 1 April
Granted
Forfeited
Exercised
Expired
Outstanding at 31 March
Exercisable at 31 March
Number of
share options
Weighted average
exercise price
2021
millions
2020
millions
2021
pence
2020
pence
214
283
(59)
–
(24)
414
–
190
107
(50)
–
(33)
214
–
202
85
175
85
277
121
282
254
168
251
174
318
202
319
The weighted average share price for all options exercised during 2020/21 was 134p (2019/20: 203p).
BT Group plc
Annual Report 2021
Financial statements 168
Notes to the consolidated financial statements continued
22. Share‑based payments continued
The following table summarises information relating to options outstanding and exercisable under Employee Saveshare plans at
31 March 2021.
Normal dates of vesting and exercise (based on calendar years)
2021
2022
2023
2024
2025
Total
Exercise price
per share
170p – 376p
164p – 243p
82p – 170p
164p
82p
Weighted
average
exercise price
Number of
outstanding
options
millions
229p
200p
108p
164p
82p
121p
26
44
120
50
174
414
Weighted
average
remaining
contractual
life
10 months
22 months
34 months
46 months
58 months
43 months
Executive share plans
Movements in executive share plan awards during 2020/21 are shown below:
At 1 April 2020
Awards granted
Awards vested
Awards lapsed
At 31 March 2021
Fair values
Number of shares (millions)
DBP
RSP
Total
12
10
(2)
–
20
13
41
(6)
(1)
47
116
51
(8)
(26)
133
ISP
91
–
–
(25)
66
The following table summarises the fair values and key assumptions used for valuing grants made under the Employee Saveshare
plans and ISP in 2020/21 and 2019/20.
Year ended 31 March
Weighted average fair value
Weighted average share price
Weighted average exercise price of options granted
Expected dividend yield
Risk free rates
Expected volatility
2021
Employee
Saveshare
23p
114p
85p
5.19% – 6.49%
‑0.001% – 0.11%
28.33% – 28.39%
2020
Employee
Saveshare
39p
206p
168p
4.16% – 5.01%
0.55% – 0.63%
25.0% – 28.1%
ISP
152p
202p
n/a
n/a
0.7%
24.3%
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 the cross correlation between pairs of stocks.
Volatility has been determined by reference to BT’s historical volatility which is expected to reflect the BT share price in the future.
An expected life of six months after vesting date is assumed for Employee Saveshare options. For all other awards the expected life is
equal to the vesting period. The risk-free interest rate is based on the UK gilt curve in effect at the time of the grant, for the expected
life of the option or award.
The fair values for the DBP and RSP were determined using the market price of the shares at the grant date. The weighted
average share price for DBP awards granted in 2020/21 was 117p (2019/20: 195p) and for RSP awards granted in 2020/21 103p
(2019/20: 177p).
BT Group plc
Annual Report 2021
169
23. Divestments and assets & liabilities classified as held for sale
Significant accounting policies that apply to divestments and assets & liabilities classified as held for sale
We classify non-current assets or a group of assets and associated liabilities, together forming a disposal group, as ‘held for
sale’ when their carrying amount will be recovered principally through disposal rather than continuing use and the sale is highly
probable. Sale is considered to be highly probable when management are committed to a plan to sell the asset or disposal
group and the sale should be expected to qualify for recognition as a completed divestment within one year from the date of
classification. We measure non-current assets or disposal groups classified as held for sale at the lower of their carrying amount
and fair value less costs of disposal. Intangible assets, property, plant and equipment and right-of-use assets classified as held
for sale are not depreciated or amortised.
Upon completion of a divestment, we recognise a profit or loss on disposal calculated as the difference between (i) the
aggregate of the fair value of the consideration received and the fair value of any retained interest less costs incurred in
disposing of the asset or disposal group and (ii) the carrying amount of the asset or disposal group (including goodwill).
The profit or loss on disposal is recognised as a specific item, see note 9.
In the event that non-current assets or disposal groups held for sale form a separate and identifiable major line of business,
the results for both the current and comparative periods are reclassified as ‘discontinued operations’.
Divestments
During the year we completed the sale of our domestic operations in Spain, our domestic operations in France and selected
domestic operations and infrastructure in 16 countries in Latin America, which were all classified as held for sale at 31 March 2020.
We recorded a net gain of £80m on disposal of our Spain operations, a combined net loss of £11m on the disposals of our operations
in France and Latin America, and a net loss of £4m relating to the disposal of a number of other businesses.
In 2019/20 we recognised a loss on disposal of £36m relating to the completed divestments of BT Fleet Solutions and Tikit.
The divestment of these operations is in line with our long-term strategy. The disposals in the current or prior year have not been
reclassified as discontinued operations as they do not meet our definition of a separate major line of business.
The net consideration recognised on completion of these divestments was as follows:
Intangible assets (including goodwill)
Property, plant and equipment
Right-of-use assets
Other non-current assets
Current assets
Liabilities
Net assets of operations disposeda
Less: recycling from translation reserveb
Net impact on the consolidated balance sheet
Profit/(loss) on disposalc
Net consideration
Satisfied by
Cash proceeds received from disposals completed in the year
Cash received in respect of disposals completed in prior years
Proceeds received in the year per the cash flow statement
Adjustments to consideration for expected future payments (to)/from the purchaserd
Costs of disposale
Net consideration
2021
£m
37
39
38
3
159
(199)
77
(23)
54
65
119
161
3
164
(25)
(20)
119
2020
£m
41
12
4
8
69
(50)
84
–
84
(36)
48
60
–
60
5
(17)
48
a After impairment charge of £127m in 2019/20 relating to the France and Latin America divestments, see ‘Assets and liabilities held for sale’ below.
b Cumulative translation differences previously held in equity and recycled to the income statement on disposal of foreign operations.
c Fully recognised as specific items, see note 9.
d 2020/21 includes provisions for proceeds to be paid back to the purchaser through deferred or contingent payments or where negotiations on post-completion purchase
price adjustments are ongoing at 31 March 2021. 2019/20 relates to deferred consideration receivable. Payments expected to be made after 12 months from the balance
sheet date have been discounted to a present value at the group pre-tax discount rate of 8.1%.
e £13m (2019/20: £11m) disposal costs have been paid and are included within cash flows from operating activities in the cash flow statement. The remaining £7m
(2019/20: £6m) costs were accrued for at the end of the year.
BT Group plc
Annual Report 2021
Financial statements 170
Notes to the consolidated financial statements continued
23. Divestments and assets & liabilities classified as held for sale continued
Assets and liabilities held for sale
There are no assets or liabilities classified as held for sale at 31 March 2021.
During the year we reached a preliminary agreement to sell certain business units of our domestic operations in Italy. The divestment
is subject to regulatory approval and therefore, in our view, does not meet the held for sale criteria per IFRS 5. Accordingly the asset
and liabilities have not been classified as held for sale at 31 March 2021.
Assets and liabilities classified as held for sale at 31 March 2020 related to our domestic operations in France, our domestic
operations in Spain and selected domestic operations and infrastructure in 16 countries in Latin America. All of these divestments
are part of the Global segment and have been completed during 2020/21.
On classification as held for sale, we tested these operations for impairment by reference to whether the carrying value of the
associated disposal groups was supported by the fair value less costs to sell. We used the selling price agreed with the prospective
purchaser as the fair value for the impairment test, which was classified as Level 3 on the fair value hierarchy. As a result we
recognised impairment charges of £37m in relation to the France divestment, and £90m in relation to the Latin America divestment.
These impairment charges were recognised as specific items, see note 9.
The disposal groups were stated at fair value less costs to sell and comprised the following assets and liabilities:
At 31 March
Assets
Intangible assets
Property, plant and equipment
Right-of-use assets
Trade and other receivables
Contract assets
Deferred tax assets
Inventories
Current tax receivable
Cash and cash equivalents
Assets held for sale
Liabilities
Trade and other payables
Contract liabilities
Lease liabilities
Current tax liabilities
Retirement benefit obligations
Provisions
Liabilities held for sale
24. Investments
2021
£m
2020
£m
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
35
37
34
87
8
4
1
19
43
268
104
28
62
4
8
5
211
Significant accounting policies that apply to investments
Investments classified as amortised cost
These investments are measured at amortised cost. Any gain or loss on derecognition is recognised in the income statement.
Investments classified as fair value through profit and loss
These investments are initially recognised at fair value plus direct transaction costs. They are re-measured at subsequent
reporting dates to fair value and changes are recognised directly in the income statement.
Equity instruments classified as fair value through other comprehensive income
We have made an irrevocable election to present changes in the fair value of equity investments that are not held for trading in
other comprehensive income. All gains or losses are recognised in other comprehensive income and are not reclassified to the
income statement when the investments are disposed of, aside from dividends which are recognised in the income statement
when our right to receive payment is established. Equity investments are recorded in non-current assets unless they are
expected to be sold within one year.
BT Group plc
Annual Report 2021
24. Investments continued
At 31 March
Non‑current assets
Fair value through other comprehensive income
Fair value through profit or loss
Current assets
Investments held at amortised cost
171
2021
£m
2020
£m
20
11
31
9
11
20
3,652
3,652
5,092
5,092
Investments held at amortised cost relate to money market investments denominated in sterling of £3,171m (2019/20: £4,181m),
in euros of £456m (2019/20: £882m) and in US dollars of £25m (2019/20: £29m). Within these amounts are investments in liquidity
funds of £3,570m (2019/20: £4,209m), £82m collateral paid on swaps (2019/20 : £83m) and term deposits £nil (2019/20: £800m).
Fair value estimation
Fair value hierarchy
At 31 March 2021
Non‑current and current investments
Fair value through other comprehensive income
Fair value through profit or loss
Total
Fair value hierarchy
At 31 March 2020
Non‑current and current investments
Fair value through other comprehensive income
Fair value through profit or loss
Total
The three levels of valuation methodology used are:
Level 1
£m
Level 2
£m
Level 3
£m
Total held
at fair value
£m
–
11
11
–
–
–
20
–
20
20
11
31
Level 1
£m
Level 2
£m
Level 3
£m
Total held
at fair value
£m
–
11
11
–
–
–
9
–
9
9
11
20
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 methods.
Level 3 balances consist of investments classified as fair value through other comprehensive income of £20m (2019/20: £9m) which
represent investments in a number of private companies. In the absence of specific market data, these investments are held at cost,
adjusted as necessary for impairments, which approximates to fair value.
25. Cash and cash equivalents
Significant accounting policies that apply to 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 cash, are subject to insignificant risk of changes in value and have an original maturity of three months or less.
All are held at amortised cost on the balance sheet, equating to fair value.
For the purpose of the consolidated cash flow statement, cash and cash equivalents are as defined above net of outstanding
bank overdrafts. Bank overdrafts are included within the current element of loans and other borrowings (note 26).
BT Group plc
Annual Report 2021
Financial statements 172
Notes to the consolidated financial statements continued
25. Cash and cash equivalents continued
At 31 March
Cash at bank and in hand
Cash equivalents
UK deposits
US deposits
Other deposits
Total cash equivalents
Total cash and cash equivalents
Bank overdrafts (note 26)
Cash and cash equivalents classified as held for sale (note 23)
Cash and cash equivalents per the cash flow statement
2021
£m
371
601
–
28
629
1,000
(104)
–
2020
£m
463
1,043
8
35
1,086
1,549
(183)
43
896
1,409
Cash and cash equivalents include restricted cash of £38m (2019/20: £42m), of which £29m (2019/20: £29m) was held in countries
where local capital or exchange controls currently prevent us from accessing cash balances. The remaining balance of £9m
(2019/20: £13m) was held in escrow accounts, or in commercial arrangements akin to escrow.
26. Loans and other borrowings
Significant accounting policies that apply to loans and other borrowings
We initially recognise loans and other borrowings at the fair value of amounts received net of transaction costs. They are
subsequently measured at amortised cost using the effective interest method and, if included in a fair value hedge relationship,
are re-valued to reflect the fair value movements on the associated hedged risk. The resulting amortisation of fair value
movements, on de-designation of the hedge, is recognised in the income statement.
What’s our capital management policy?
The objective of our capital management policy is to target an overall level of debt consistent with our credit rating target while
investing in the business, supporting the pension scheme and meeting our distribution policy. In order to meet this objective, we
may issue or repay debt, issue new shares, repurchase shares, or adjust the amount of dividends paid to shareholders. We manage
the capital structure and make 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 objectives and processes during 2020/21.
For details of share issues and repurchases in the year see note 21.
Our capital structure consists of net debt and shareholders’ equity. The analysis below summarises the components which we
manage as capital.
At 31 March
Net debt
Total parent shareholders’ equitya
a Excludes non-controlling interests of £29m (2019/20: £22m).
Net debt and net financial debt
2021
£m
17,802
11,650
2020
£m
17,969
14,741
29,452
32,710
Net debt consists of loans and other borrowings and lease liabilities (both current and non-current), less current asset investments
and cash and cash equivalents, including items which have been classified as held for sale on balance sheet.
Our net debt calculation starts from the expected undiscounted cash flows that should arise when our financial instruments mature.
Currency denominated balances within net debt are translated to sterling at swapped rates where hedged. Fair value adjustments
and accrued interest applied to loans and other borrowings, current asset investments and cash equivalents to reflect the effective
interest method are removed. Net financial debt is net debt excluding lease liabilities.
BT Group plc
Annual Report 2021
173
26. Loans and other borrowings continued
Net debt and net financial debt are considered to be alternative performance measures as they are not defined in IFRS. The most
directly comparable IFRS measure is the aggregate of loans and other borrowings and lease liabilities (current and non-current),
current asset investments and cash and cash equivalents. A reconciliation from these IFRS measures to net debt and net financial
debt is given below.
At 31 March
Loans and other borrowingsa
Lease liabilities
Net liabilities classified as held for saleb
Less:
Cash and cash equivalents
Current asset investments
Adjustments:
To retranslate debt balances at swap rates where hedged by currency swapsc
To remove accrued interest applied to reflect the effective interest method and fair value adjustmentsd
Net debt
Lease liabilities
Lease liabilities classified as held for saleb
Net financial debt
2021
£m
16,685
6,152
–
2020
£m
19,334
6,560
19
(1,000)
(3,652)
(1,549)
(5,092)
18,185
19,272
(142)
(241)
(1,049)
(254)
17,802
17,969
(6,152)
–
(6,560)
(62)
11,650
11,347
a Includes overdrafts of £104m at 31 March 2021 (31 March 2020: £183m).
b There are no net liabilities classified as held for sale. In 2019/20, net liabilities classified as held for sale included lease liabilities of £62m less cash and cash equivalents of
£43m, refer to note 23.
c The translation difference between spot rate and hedged rate of loans and borrowings denominated in foreign currency.
d Includes remaining fair value adjustments made on certain loans and other borrowings and accrued interest at the balance sheet date.
The table below shows the key components of net debt and the decrease of £167m this year.
At
31 March
2020
£m
Cash
flows
£m
Net lease
additionsa
£m
Foreign
exchange
£m
Transfer to
within one
year
£m
Other
movementsd
£m
At
31 March
2021
£m
Loans and other borrowings due within
one yearb
Lease liabilities due within one year
Loans and other borrowings due after
one year
Lease liabilities due after one year
Liabilities classified as held for sale
Impact of cross-currency swapsc
Removal of the accrued interest and fair
value adjustments
Gross debte
Less:
Cash and cash equivalents
Current asset investments
Assets classified as held for sale
Removal of the accrued interest
2,842
(1,853)
812
16,492
5,748
62
(1,049)
(257)
(924)
–
–
–
122
–
–
–
–
543
–
–
–
(57)
–
(742)
(27)
–
785
–
24,650
(2,655)
543
(41)
(1,549)
(5,092)
(43)
3
532
1,421
43
–
–
–
–
–
15
19
–
–
(7)
Net debt
17,969
(659)
543
–
842
–
(842)
–
–
–
–
–
–
–
–
–
(21)
911
–
24
–
(62)
–
15
730
15,774
5,422
–
(142)
(242)
(44)
22,453
2
–
–
(2)
(1,000)
(3,652)
–
1
(44)
17,802
BT Group plc
Annual Report 2021
Financial statements 174
Notes to the consolidated financial statements continued
26. Loans and other borrowings continued
At
31 March
2019
£m
IFRS 16
lease
liabilitiesa
£m
At
1 April
2019
£m
2,100
(16)
2,084
Cash
flows
£m
(629)
–
725
725
(791)
14,776
(190)
14,586
2,843
–
–
(701)
(263)
5,544
5,544
–
–
–
–
(701)
(263)
–
–
81
–
–
–
–
1,139
–
–
–
15,912
6,063
21,975
1,504
1,139
(1,666)
(3,214)
–
3
–
–
–
–
(1,666)
75
(3,214)
(1,877)
–
3
–
–
–
–
–
–
Loans and other
borrowings due
within one yearb
Lease liabilities
due within one
year
Loans and other
borrowings due
after one year
Lease liabilities
due after one year
Liabilities classified
as held for sale
Impact of
cross-currency
swapsc
Removal of the
accrued interest
and fair value
adjustments
Gross debte
Less:
Cash and cash
equivalents
Current asset
investments
Assets classified as
held for sale
Removal of the
accrued interestd
Net lease
additionsa
£m
Foreign
exchange
£m
Transfer to
within one
year
£m
Other
movementsd
£m
At
31 March
2020
£m
33
1,326
28
2,842
–
897
(19)
812
398
(1,326)
(9)
16,492
5
–
(429)
–
7
(2)
(1)
–
–
4
(897)
(43)
5,748
–
–
–
–
–
–
–
–
–
62
62
–
6
25
44
–
(1,049)
257
24,650
(1,549)
(5,092)
(43)
(43)
–
3
26
17,969
Net debt
11,035
6,063
17,098
(298)
1,139
a Net lease additions comprise net non-cash movements in lease liabilities during the period primarily new and terminated leases, remeasurements of existing leases and
lease interest charges.
b Includes accrued interest and bank overdrafts.
c Translation of debt balances at swap rates where hedged by cross-currency swaps.
d Other movements include removal of accrued interest applied to reflect the effective interest rate method, removal of fair value adjustments and divestment of held for
sale liabilities (see note 23).
e Cash flows from gross debt of £2,655m outflow (2019/20: £1,504m inflow) include repayment of borrowings £1,162m (2019/20: £1,111m outflow), proceeds from bank
loans and bonds £nil (2019/20: £2,843m inflow), cash flows from derivatives related to net debt £490m outflow (2019:20: £452m inflow), payment of lease liabilities £782m
(2019/20: £651m outflow), interest paid on lease liabilities £142m (2019/20: £140m outflow), and change in bank overdraft £79m outflow (2019/20: £111m inflow).
BT Group plc
Annual Report 2021
26. Loans and other borrowings continued
The table below gives details of the listed bonds and other debt.
At 31 March
0.625% €1,500m bond due March 2021a
0.5% €575m bond due June 2022a
1.125% €1,100m bond due March 2023a
0.875% €500m bond due September 2023a
4.5% US$675m bond due December 2023a
1% €575m bond due June 2024a
1% €1,100m bond due November 2024a
3.50% £250m index linked bond due April 2025
0.5% €650m bond due September 2025a
1.75% €1,300m bond due March 2026a
1.5% €1,150m bond due June 2027a
2.125% €500m bond due September 2028a
5.125% US$700m bond due December 2028a
5.75% £600m bond due December 2028
1.125% €750m bond due September 2029a
3.25% US$1,000m bond due November 2029a
9.625% US$2,670m bond due December 2030a (minimum 8.625%b)
3.125% £500m bond due November 2031
3.64% £330m bond due June 2033
1.613% £330m index linked bond due June 2033
6.375% £500m bond due June 2037a
3.883% £330m bond due June 2039
1.739% £330m index linked bond due June 2039
3.924% £340m bond due June 2042
1.774% £340m index linked bond due June 2042
3.625% £250m bond due November 2047
4.25% US$500m bond due November 2049a
1.874% €500m bond due August 2080c
Total listed bonds
Other loans
Bank overdrafts (note 25)
Total other loans and borrowings
Total loans and other borrowings
175
2020
£m
1,326
509
972
442
551
512
970
445
574
1,149
1,020
445
570
700
658
807
2,203
502
339
343
522
340
343
350
354
250
407
441
2021
£m
–
491
936
426
496
493
935
449
553
1,106
984
428
512
690
635
726
1,981
503
339
347
522
340
348
350
358
250
366
429
15,993
18,044
588
104
692
1,107
183
1,290
16,685
19,334
a Designated in a cash flow hedge relationship.
b The interest rate payable on this bond attracts an additional 0.25% for rating category downgrade by either Moody’s or Standard & Poor’s to the group’s senior unsecured
debt below A3/A– respectively. In addition, if Moody’s or Standard & Poor’s subsequently increase the ratings then the interest rate will be decreased by 0.25% for each
rating category upgrade by either rating agency. In no event will the interest rate be reduced below the minimum rate reflected in the above table.
c Includes a call option at 4.5 years (May 2025).
Unless previously designated in a fair value hedge relationship, all loans and other borrowings are carried on our balance sheet and in
the table above at amortised cost. The fair value of listed bonds is £18,554m (2019/20: £20,088m).
The fair value of our listed bonds is estimated on the basis of quoted market prices (Level 1).
The carrying amount of other loans and bank overdrafts equates to fair value due to the short maturity of these items (Level 3).
The interest rates payable on loans and borrowings disclosed above reflect the coupons on the underlying issued loans and
borrowings and not the interest rates achieved through applying associated cross-currency and interest rate swaps in hedge
arrangements.
The group does not have any listed bonds that are exposed to any benchmark interest rates that are impacted by the Interest Rate
Benchmark reform. Overdraft arrangements that reference LIBOR will be transitioned onto Alternative Reference Rates (ARRs)
where applicable.
BT Group plc
Annual Report 2021
Financial statements 176
Notes to the consolidated financial statements continued
26. Loans and other borrowings continued
Loans and other borrowings are analysed as follows:
At 31 March
Current liabilities
Listed bonds
Other loans and bank overdraftsa
Total current liabilities
Non‑current liabilities
Listed bonds
Total non‑current liabilities
Total
2021
£m
219
692
911
2020
£m
1,552
1,290
2,842
15,774
16,492
15,774
16,492
16,685
19,334
a Includes collateral received on swaps of £588m (2019/20: £1,091m).
The carrying values disclosed in the above table reflect balances at amortised cost adjusted for accrued interest and fair value
adjustments to the relevant loans or borrowings. These do not reflect the final principal repayments that will arise after taking
account of the relevant derivatives in hedging relationships which are reflected in the table below. All borrowings as at 31 March
2021 were unsecured.
The principal repayments of loans and borrowings at hedged rates amounted to £16,301m (2019/20: £18,028m) and repayments fall
due as follows:
2021
2020
Effect of
hedging
and
interest
£m
Principal
repayments
at hedged
rates
£m
Carrying
amount
£m
Effect of
hedging
and interest
£m
Principal
repayments
at hedged
rates
£m
(219)
(69)
63
65
(77)
(134)
692
2,842
(406)
2,436
1,358
978
1,492
2,452
9,329
–
1,482
987
1,482
12,536
–
(125)
(9)
9
(770)
–
1,357
978
1,491
11,766
(152)
15,609
16,487
(895)
15,592
(371)
16,301
19,329
(1,301)
18,028
5
19,334
Carrying
amount
£m
911
1,427
915
1,427
2,529
9,463
15,761
16,672
13
16,685
2021
£m
2020
£m
572
142
–
(1)
72
–
785
18
803
608
140
3
(3)
46
2
796
145
941
At 31 March
Within one year, or on demand
Between one and two years
Between two and three years
Between three and four years
Between four and five years
After five years
Total due for repayment after more than one year
Total repayments
Fair value adjustments
Total loans and other borrowings
27. Finance expense
Year ended 31 March
Finance expense
Interest on:
Financial liabilities at amortised cost and associated derivatives
Lease liabilities
Derivatives
Fair value movements on derivatives not in a designated hedge relationship
Reclassification of cash flow hedge from other comprehensive income
Unwinding of discount on provisions
Total finance expense before specific items
Specific items (note 9)
Total finance expense
BT Group plc
Annual Report 2021
177
28. Financial instruments and risk management
We issue or hold financial instruments mainly to finance our operations; to finance corporate transactions such as dividends, share
buybacks and acquisitions; for the temporary investment of short-term funds; and to manage currency and interest rate risks.
In addition, various financial instruments, for example trade receivables and payables arise directly from operations.
How do we manage financial risk?
Our activities expose us to a variety of financial risks: market risk (including interest rate risk and foreign exchange risk), credit risk
and liquidity risk.
Treasury operation
We have a centralised treasury operation whose primary role is to manage liquidity and funding requirements as well as our exposure
to associated market risks, and credit risk.
Treasury policy
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 chief financial officer.
There has been no change in the nature of our risk profile between 31 March 2021 and the date of approval of these financial
statements.
How do we manage interest rate risk?
Management policy
Interest rate risk arises primarily from our long-term borrowings. Interest cash flow risk arises from borrowings issued at variable
rates, partially offset by cash held at variable rates. Fair value interest rate risk arises from borrowings issued at fixed rates.
Our policy, as set by the Board, is to ensure that at least 70% of on-going net debt is at fixed rates. Short-term interest rate
management is delegated to the treasury operation while long-term interest rate management decisions require further approval
by the chief financial officer, director tax, treasury, insurance and pensions or the treasury director who each have been delegated
such authority from the Board.
Hedging strategy
In order to manage our interest rate profile, we have entered into cross-currency and interest rate swap agreements to vary the
amounts and periods for which interest rates on borrowings are fixed. The duration of the swap agreements matches the duration of
the debt instruments. The majority of the group’s long-term borrowings are subject to fixed sterling interest rates after applying the
impact of these hedging instruments.
Interest Rate Benchmark reform
The UK Financial Conduct Authority announced on 5 March 2021 that as part of the Interest Rate Benchmark Reform, LIBOR will
start being discontinued as a benchmark rate from 31 December 2021. The group has no floating rate debt securities. It has 5 US
dollar cross-currency interest rate swaps and 21 sterling interest rate swaps impacted by the IBOR reform maturing between 2028
and 2030. The net exposure of these swaps is nil. The group has adhered to the International Swaps And Derivatives Association,
Inc. (ISDA) 2020 IBOR Fall backs Protocol and appropriate fall back rates will apply to derivatives once LIBOR benchmarks are
discontinued. The impact of any resulting ineffectiveness arising from the discontinuation of LIBOR will be immaterial to the group
and will not adversely affect the group’s ability to manage interest rate risk.
How do we manage foreign exchange risk?
Management policy
Foreign currency hedging activities protect the group from the risk that changes in exchange rates will adversely affect future net
cash flows.
The Board’s policy for foreign exchange risk management defines the types of transactions typically covered, including significant
operational, funding and currency interest exposures, and the period over which cover should extend for each type of transaction.
The Board has delegated short-term foreign exchange management to the treasury operation and long-term foreign exchange
management decisions require further approval from the chief financial officer, director tax, treasury, insurance and pensions or
the treasury director.
Hedging strategy
A significant proportion of our external revenue and costs arise within the UK and are denominated in sterling. Our non-UK
operations generally trade and are funded in their functional currency which limits their exposure to foreign exchange volatility.
We enter into forward currency contracts to hedge foreign currency capital purchases, purchase and sale commitments, interest
expense and foreign currency investments. The commitments hedged are principally denominated in US dollar, euro and Asia
Pacific region currencies. As a result, our exposure to foreign currency arises mainly on non-UK subsidiary investments and on
residual currency trading flows. We use cross-currency swaps to swap foreign currency borrowings into sterling.
BT Group plc
Annual Report 2021
Financial statements 178
Notes to the consolidated financial statements continued
28. Financial instruments and risk management continued
The table below reflects the currency and interest rate profile of our loans and borrowings after the impact of hedging.
At 31 March
Sterling
Euro
Other
Total
Ratio of fixed to floating
Weighted average effective fixed interest rate – sterling
2021
Floating
rate
interest
£m
1,688
464
20
2,172
13%
Fixed rate
interest
£m
14,129
–
–
14,129
87%
3.8%
Total
£m
15,817
464
20
16,301
100%
Fixed rate
interest
£m
15,289
–
–
15,289
85%
3.9%
2020
Floating
rate
interest
£m
1,757
888
94
2,739
Total
£m
17,046
888
94
18,028
15%
100%
The floating rate loans and borrowings and committed facilities bear interest rates fixed in advance for periods up to one year,
primarily by reference to RPI, CPI and LIBOR which will be transitioned onto ARRs where applicable.
Sensitivity analysis
The income statement and shareholders’ equity are exposed to volatility arising from changes in interest rates and foreign exchange
rates. To demonstrate this volatility, management has 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.
– For foreign exchange, a 10% strengthening of sterling against other currencies.
The impact on equity, before tax and excluding any impact related to retirement benefit plans, of a 1% increase in interest rates and
a 10% strengthening of sterling against other currencies is as detailed below:
At 31 March
Sterling interest rates
US dollar interest rates
Euro interest rates
Sterling strengthening
2021
£m
Increase
(reduce)
2020
£m
Increase
(reduce)
816
(438)
(349)
(255)
989
(610)
(451)
(289)
A 1% decrease in interest rates and 10% weakening of sterling against other currencies would have broadly the same impact in the
opposite direction.
The impact of a 1% change in interest rates on the group’s annual net finance expense and our exposure to foreign exchange
volatility in the income statement, after hedging, (excluding translation exposures) would not have been material in 2020/21
and 2019/20.
Credit ratings
We continue to target a BBB+/Baa1 credit rating over the cycle, with a BBB floor. We regularly review the liquidity of the group and
our funding strategy takes account of medium-term requirements. These include the pension deficit and shareholder distributions.
Our December 2030 bond contains covenants which require us to pay higher rates of interest since our credit ratings fell below A3
in the case of Moody’s or A– in the case of Standard & Poor’s (S&P). Additional interest of 0.25% per year accrues for each ratings
category downgrade by each agency below those levels effective from the next coupon date following a downgrade. Based on the
total notional value of debt outstanding of £1.9bn at 31 March 2021, our finance expense would increase/decrease by approximately
£10m a year if the group’s credit rating were to be downgraded/upgraded, respectively, by one credit rating category by both
agencies.
Our credit ratings were as detailed below:
At 31 March
Rating agency
Moody’s
Standard & Poor’s
BT Group plc
Annual Report 2021
2021
2020
Rating
Outlook
Rating
Outlook
Baa2 Negative
Stable
BBB
Baa2 Negative
Stable
BBB
179
28. Financial instruments and risk management continued
How do we manage liquidity risk?
Management policy
We maintain liquidity by entering into short and long-term financial instruments to support operational and other funding
requirements, determined by using short and long-term cash forecasts. These forecasts are supplemented by a financial headroom
analysis which is used to assess funding adequacy for at least a 12-month period. On at least an annual basis the Board reviews and
approves the long-term funding requirements of the group and on an ongoing basis considers any related matters. We manage
refinancing risk by limiting the amount of borrowing that matures within any specified period and having appropriate strategies
in place to manage refinancing needs as they arise. The maturity profile of our loans and borrowings at 31 March 2021 is disclosed
in note 26. We have no term debt maturities in 2021/22.
Our treasury operation reviews and manages our short-term requirements within the parameters of the policies set by the Board.
We hold cash, cash equivalents and current investments in order to manage short-term liquidity requirements. At 31 March 2021
we had undrawn committed borrowing facilities of £2.1bn (2019/20: £2.1bn) maturing in March 2026.
In the UK, the group has arranged for funders to offer a supplier financing scheme to the group’s suppliers. This enables suppliers
who sign up to the arrangements to sell their invoices to the funders and to be paid earlier than the invoice due date. The group
assesses the arrangement against indicators to assess if debts which vendors have sold to the funder under the supplier financing
scheme continue to meet the definition of trade payables or should be classified as borrowings. At 31 March 2021 the payables met
the criteria of trade payables.
Interest Rate Benchmark reform
The group’s syndicated Revolving Credit Facility (undrawn at 31st March 2021) currently refers to Euribor, sterling LIBOR and US
dollar LIBOR, and includes standard market LIBOR replacement language to adopt alternative benchmark rates for sterling (Sonia)
and US dollars (SOFR). Notional cash pooling arrangements and overdraft arrangements which reference LIBOR will be transitioned
onto ARRs where applicable. Any outstanding group contracts with reference to LIBOR benchmarks will include provisions for
calculation of interest based on alternative benchmark rates when LIBOR is discontinued.
The following table provides an analysis of the remaining cash flows including interest payable for our non-derivative financial
liabilities on an undiscounted basis, which therefore differs from both the carrying value and fair value.
Loans and
other
borrowingsc
£m
Interest on
loans and
other
borrowingsc
£m
Trade and
other
payables
£m
Provisions
£m
Lease
liabilities
£m
Non‑derivative financial liabilities
At 31 March 2021
Due within one year
Between one and two years
Between two and three years
Between three and four years
Between four and five years
After five years
Interest payments not yet accrued
Fair value adjustment
Impact of discounting
Non-derivative financial liabilities
At 31 March 2020
Due within one year
Between one and two years
Between two and three years
Between three and four years
Between four and five years
After five years
Interest payments not yet accrued
Fair value adjustment
Impact of discounting
692
1,427
915
1,427
2,529
9,463
16,453
–
13
–
528
528
515
489
467
3,076
5,603
(5,384)
–
–
5,153
–
–
–
–
–
5,153
–
–
–
2,602
–
1,482
987
1,482
12,536
19,089
–
5
–
566
562
562
548
520
3,740
6,498
(6,258)
–
–
4,932
–
–
–
–
–
4,932
–
–
–
1
3
4
2
2
–
724
791
762
710
592
3,391
Total
£m
7,098
2,749
2,196
2,628
3,590
15,930
12
6,970
34,191
–
–
–
–
–
(818)
(5,384)
13
(818)
Total
£m
8,904
1,348
2,809
2,263
2,668
20,028
799
783
762
724
664
3,752
7,484
38,020
–
–
(924)
(6,258)
5
(925)
6,560
30,842
5
3
3
4
2
–
17
–
–
(1)
16
Carrying value on the balance sheeta,b
16,466
219
5,153
12
6,152
28,002
Loans and
other
borrowingsc
£m
Interest on
loans and
other
borrowingsc
£m
Trade and
other
payables
£m
Provisions
£m
Lease
liabilities
£m
Carrying value on the balance sheeta,b
19,094
240
4,932
a Foreign currency-related cash flows were translated at closing foreign exchange rates as at the relevant reporting date. Future variable interest cash flows were calculated
using the most recent interest or indexation rates at the relevant balance sheet date.
b The carrying amount of trade and other payables excludes £682m (2019/20: £754m) of non-current trade and other payables which relates to non-financial liabilities, and
£827m (2019/20: £862m) of other taxation and social security and deferred income.
c The cash flows related to index-linked bonds have not been adjusted for inflation.
BT Group plc
Annual Report 2021
Financial statements 180
Notes to the consolidated financial statements continued
28. Financial instruments and risk management continued
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.
The following table provides an analysis of the contractually agreed cash flows in respect of the group’s derivative financial
instruments. Cash flows are presented on a net or gross basis in accordance with settlement arrangements of the instruments.
Derivatives – Analysed by
earliest payment datea
Derivatives – Analysis based on holding
instrument to maturity
Derivative financial liabilities
At 31 March 2021
Due within one year
Between one and two years
Between two and three years
Between three and four years
Between four and five years
After five years
Totalb
Derivative financial liabilities
At 31 March 2020
Due within one year
Between one and two years
Between two and three years
Between three and four years
Between four and five years
After five years
Totalb
Net
settled
£m
Gross
settled
outflows
£m
Net
settled
£m
Gross
settled
outflows
£m
Gross
settled
inflows
£m
(1,274)
(1,166)
(1,541)
(1,540)
(652)
(4,266)
Total
£m
221
365
390
134
79
287
Gross
settled
inflows
£m
(608)
(36)
(131)
(476)
(1,003)
(1,759)
Total
£m
143
161
280
275
72
193
1,365
1,248
1,663
1,646
703
4,439
671
88
171
524
1,054
1,842
130
283
268
28
28
114
851
80
109
240
227
21
110
787
Gross
settled
inflows
£m
(1,274)
(1,166)
(1,541)
(1,540)
(652)
(4,266)
Total
£m
181
172
212
196
141
574
Gross
settled
inflows
£m
(608)
(36)
(131)
(476)
(1,003)
(1,759)
Total
£m
143
126
114
122
126
493
1,365
1,248
1,663
1,646
703
4,439
671
88
171
524
1,054
1,842
90
90
90
90
90
401
851
80
74
74
74
75
410
787
11,064
(10,439)
1,476
11,064
(10,439)
1,476
Derivatives – Analysed by
earliest payment datea
Derivatives – Analysis based on holding
instrument to maturity
Net
settled
£m
Gross
settled
outflows
£m
Net
settled
£m
Gross
settled
outflows
£m
4,350
(4,013)
1,124
4,350
(4,013)
1,124
a Certain derivative financial instruments contain break clauses whereby either the group or bank counterparty can terminate the swap on certain dates and the mark to
market position is settled in cash.
b Foreign currency-related cash flows were translated at closing rates as at the relevant reporting date. Future variable interest rate cash flows were calculated using the most
recent rate applied at the relevant balance sheet date.
How do we manage credit risk?
Management policy
Our exposure to credit risk arises from financial assets transacted by the treasury operation (primarily derivatives, investments, cash
and cash equivalents) and from trading-related receivables.
For treasury-related balances, the Board’s defined policy restricts exposure to any one counterparty by setting credit limits based
on the credit quality as defined by Moody’s and Standard & Poor’s. The minimum credit ratings permitted with counterparties in
respect of new transactions are A3/A– for long-term and P1/A1 for short-term investments. If counterparties in respect of existing
transactions fall below the permitted criteria we will take action where appropriate.
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.
Operational management policy
Our credit policy for trading-related financial assets is applied and managed by each of the customer-facing units to ensure
compliance. The policy requires that the creditworthiness and financial strength of customers are assessed at inception and on
an ongoing basis. Payment terms are set in accordance with industry standards. Where appropriate, we may minimise risks by
requesting securities such as deposits, guarantees and letters of credit. We take proactive steps including constantly reviewing
credit ratings of counterparties to minimise the impact of adverse market conditions on trading-related financial assets.
BT Group plc
Annual Report 2021
181
28. Financial instruments and risk management continued
Exposures
The maximum credit risk exposure of the group’s financial assets at the balance sheet date is as follows:
At 31 March
Derivative financial assets
Investments
Trade and other receivablesa
Contract assets
Cash and cash equivalents
Total
Notes
24
17
5
25
2021
£m
1,235
3,683
1,339
1,859
1,000
2020
£m
2,489
5,112
1,432
1,721
1,549
9,116
12,303
a The carrying amount excludes £314m (2019/20: £481m) of non-current trade and other receivables which relate to non-financial assets, and £1,918m (2019/20: £1,272m)
of prepayments, deferred contract costs and other receivables.
The credit quality and credit concentration of cash equivalents, current asset investments and derivative financial assets are detailed
in the tables below. Where the opinion of Moody’s and Standard & Poor’s (S&P) differ, the lower rating is used.
Moody’s/S&P credit rating of counterparty
Aa2/AA and above
Aa3/AA–
A1/A+
A2/A
A3/A–
Baa1/BBB+
Baa2/BBB and below
Totalb
2021
£m
3,571
656
775
334
115
65
–
5,516
2020a
£m
5,987
270
1,363
786
–
100
160
8,666
a The 2020 comparative has been re-presented following a review of how repurchase agreements are presented. Where GILTs had been used as collateral, it has been
determined that the exposure was to the UK Government and therefore it is more appropriate to present these agreements in the credit rating band that reflects UK
Government risk.
b We hold cash collateral of £588m (2019/20: £1,091m) in respect of derivative financial assets with certain counterparties.
The concentration of credit risk for our trading balances is provided in note 17, which analyses outstanding balances by customer-
facing unit. Where multiple transactions are undertaken with a single financial counterparty or group of related counterparties, we
enter into netting arrangements to reduce our exposure to credit risk by making use of standard International Swaps and Derivatives
Association (ISDA) documentation. We have also entered into credit support agreements with certain swap counterparties whereby,
on a daily, weekly and monthly basis, the fair value position on notional £2,024m of long dated cross-currency swaps and interest
rate swaps is collateralised. The related net cash outflow during the year was £490m (2019/20: inflow £460m). The collateral paid
and received is recognised within current asset investments and loans and other borrowings, respectively.
Offsetting of financial instruments
The table below shows our financial assets and liabilities that are subject to offset in the group’s balance sheet and the impact of
enforceable master netting or similar agreements.
Financial assets and liabilities
At 31 March 2021
Derivative financial assets
Derivative financial liabilities
Total
Financial assets and liabilities
At 31 March 2020
Derivative financial assets
Derivative financial liabilities
Total
Related amounts not set off
in the balance sheet
Amounts
presented in
the balance
sheet
£m
Right of set off
with derivative
counterparties
£m
1,235
(1,283)
(48)
(585)
585
–
Cash
collateral
£m
(588)
82
(506)
Related amounts not set off
in the balance sheet
Amounts
presented in
the balance
sheet
£m
Right of set off
with derivative
counterpartiesa
£m
2,489
(1,012)
1,477
(742)
742
–
Cash
collateral
£m
(1,091)
83
(1,008)
Net
amount
£m
62
(616)
(554)
Net
amount
£m
656
(187)
469
a The 2020 comparative has been re-presented to take account of collateral received from counterparties.
BT Group plc
Annual Report 2021
Financial statements 182
Notes to the consolidated financial statements continued
28. Financial instruments and risk management continued
Derivatives and hedging
We use derivative financial instruments mainly to reduce exposure to foreign exchange and interest rate risks. Derivatives may
qualify as hedges for accounting purposes if they meet the criteria for designation as cash flow hedges or fair value hedges in
accordance with IFRS 9.
Significant accounting policies that apply to derivatives and hedge accounting
All of our derivative financial instruments are held at fair value on the balance sheet.
Derivatives designated in a cash flow hedge
The group designates certain derivatives in a cash flow hedge relationship. 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 inception, the hedge must be in line with BT’s risk management strategy and there must
be an economic relationship based on the currency, amount and timing of the respective cash flows of the hedging instrument
and hedged item. This is assessed at inception and in subsequent periods in which the hedge remains in operation. Hedge
accounting is discontinued when it is no longer in line with BT’s risk management strategy or if it no longer qualifies for
hedge accounting.
When a derivative financial instrument is designated as a hedge of the variability in cash flows of a recognised asset or liability,
or a highly probable transaction, the effective part of any gain or loss on the derivative financial instrument is recognised
directly in equity. For cash flow hedges of recognised assets or liabilities, the associated cumulative gain or loss is removed from
equity and recognised in the same line of the income statement and in the same period or periods that the hedged transaction
affects the income statement. Any ineffectiveness arising on a cash flow hedge is recognised immediately in the income
statement. This includes any ineffectiveness as a result of changes in our hedged forecast cash flows as a result of Covid-19.
Other derivatives
Our policy is not to use derivatives for trading purposes. However, due to the complex nature of hedge accounting, some
derivatives may not qualify for hedge accounting, or may be specifically not designated as a hedge because natural offset
is more appropriate. These derivatives are classified as fair value through profit and loss and are recognised at fair value.
Any direct transaction costs are recognised immediately in the income statement. Gains and losses on re-measurement
are recognised in the income statement in the line that most appropriately reflects the nature of the item or transaction
to which they relate.
Where the fair value of a derivative contract at initial recognition is not supported by observable market data and differs from
the transaction 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.
The fair values of outstanding swaps and foreign exchange contracts are estimated using discounted cash flow models and
market rates of interest and foreign exchange at the balance sheet date.
At 31 March 2021
Designated in a cash flow hedge
Other
Total derivatives
At 31 March 2020
Designated in a cash flow hedge
Other
Total derivatives
Current
asset
£m
Non‑current
asset
£m
Current
liability
£m
Non‑current
liability
£m
56
14
70
950
215
1,165
58
30
88
1,023
172
1,195
Current
asset
£m
Non-current
asset
£m
Current
liability
£m
Non-current
liability
£m
250
10
260
1,954
275
2,229
36
10
46
740
226
966
All derivative financial instruments are categorised at Level 2 of the fair value hierarchy as defined in note 24.
Instruments designated in a cash flow hedge include interest rate swaps and cross-currency swaps hedging euro and US dollar-
denominated borrowings. Forward currency contracts are taken out to hedge step-up interest on currency denominated borrowings
relating to the group’s 2030 US dollar bond. The hedged cash flows will affect the group’s income statement as interest and principal
amounts are repaid over the remaining term of the borrowings (see note 26).
BT Group plc
Annual Report 2021
183
28. Financial instruments and risk management continued
We hedge forecast foreign currency purchases, principally denominated in US dollar, euro and Asia Pacific currencies 12 months
forward with certain specific transactions hedged further forward. The related cash flows are recognised in the income statement
over this period.
The amounts related to items designated as hedging instruments were as follows:
Hedged items
At 31 March 2021
Sterling, euro and US dollar
denominated borrowingsa
Step up interest on the 2030 US dollar
bondb
Foreign currency purchases, principally
denominated in US dollar, euro and Asia
Pacific currenciesc
Fallago Rigg Energy Contract
Notional
principal
£m
Asset
£m
Liability
£m
12,302
999
147
2,145
–
7
–
(974)
(7)
(64)
(36)
Total cash flow hedges
14,594
1,006
(1,081)
Deferred tax
Derivatives not in a designated hedge
relationship
Carrying value on the balance sheet
Hedged items
At 31 March 2020
Sterling, euro and US dollar
denominated borrowingsa
Step up interest on the 2030 US dollar
bondb
Foreign currency purchases, principally
denominated in US dollar, euro and Asia
Pacific currenciesc
Fallago Rigg Energy Contract
Notional
principal
£m
13,464
159
2,480
–
229
1,235
Asset
£m
2,142
7
55
–
Total cash flow hedges
16,103
2,204
Deferred tax
Derivatives not in a designated hedge
relationship
Carrying value on the balance sheet
–
285
2,489
Balance in
cash flow
hedge related
reserves
(gain)/loss
£m
Fair value
(gain)/loss
recognised in
OCI
£m
Amount
recycled from
cash flow
hedge related
reserves to
P&L
£m
1,349
(862)
16
88
15
3
9
–
1,468
(850)
(3)
(26)
40
36
47
(16)
–
31
–
(202)
(1,283)
Balance in cash
flow hedge
related
reserves
(gain)/loss
£m
Fair value
(gain)/loss
recognised in
OCI
£m
Amount
recycled from
cash flow
hedge related
reserves to P&L
£m
Liability
£m
(744)
(490)
(828)
386
(11)
(36)
21
(854)
4
(8)
–
382
–
(11)
(21)
(776)
–
(236)
(1,012)
(45)
(57)
21
(571)
95
–
(476)
a Sterling, euro and US dollar denominated borrowings are hedged using cross-currency swaps and interest rate swaps. Amounts recycled to profit and loss are presented
within other operating costs and finance expense.
b US dollar step up interest on US denominated borrowings are hedged using forward currency contracts. Amounts recycled to profit and loss are presented within finance
expense.
c Foreign currency purchases, principally denominated in US dollar, euro and Asia Pacific currencies are hedged using forward currency contracts. Amounts recycled to profit
and loss in respect of these items are presented within cost of sales and other operating costs.
All cash flow hedges were fully effective in the period.
BT Group plc
Annual Report 2021
Financial statements 184
Notes to the consolidated financial statements continued
29. Other reserves
At 1 April 2019
Exchange differencese
Net fair value gain (loss) on cash flow hedges
Movements in relation to cash flow hedges recognised in
income and expensef
Fair value movement on assets at fair value through other
comprehensive income
Tax recognised in other comprehensive income
Transfer to realised profit
At 31 March 2020
Exchange differencese
Net fair value gain (loss) on cash flow hedges
Movements in relation to cash flow hedges recognised in
income and expensef
Fair value movement on assets at fair value through other
comprehensive income
Tax recognised in other comprehensive income
Transfer to realised profit
At 31 March 2021
Other comprehensive income
Capital
redemption
reserve
£m
Cash flow
reservea
£m
Fair value
reserveb
£m
27
–
–
–
–
–
–
27
–
–
–
–
–
–
27
144
–
823
(411)
–
(80)
–
476
–
(1,481)
804
–
111
–
(90)
27
–
–
–
(5)
–
(22)
–
–
–
–
–
–
–
–
Cost of
hedging
reservec
£m
(60)
–
31
29
–
–
–
–
–
13
46
–
–
–
Translation
reserved,g
£m
580
40
–
–
–
(4)
–
616
(189)
–
–
–
22
(9)
59
440
Total
£m
718
40
854
(382)
(5)
(84)
(22)
1,119
(189)
(1,468)
850
–
133
(9)
436
a The cash flow reserve is used to record the effective portion of the cumulative net change in the fair value of cash flow hedging instruments related to hedged transactions
that have not yet occurred.
b The fair value reserve is used to record the cumulative fair value gains and losses on assets classified as fair value through other comprehensive income. The cumulative
gains and losses are recycled to the income statement on disposal of the assets. Level 1 investments, classified as fair value through other comprehensive income, were sold
in 2020. The fair value gain was reclassified from fair value reserve to profit and loss reserve after disposal.
c The cost of hedging reserve reflects the gain or loss on the portion excluded from the designated hedging instrument that relates to the currency basis element of our cross
currency swaps. It is initially recognised in other comprehensive income and accounted for similarly to gains or losses in the cash flow reserve.
d The translation reserve is used to record cumulative translation differences on the net assets of foreign operations. The cumulative translation differences are recycled to
the income statement on disposal of the foreign operation.
e Excludes £nil (2019/20: £(1)m) of exchange differences in relation to retained earnings attributed to non-controlling interests.
f Movements in cash flow hedges recognised in income and expense include a net charge to other comprehensive income of £778m (2019/20: charge of £428m) which have
been reclassified to operating costs, and a net credit to the cash flow reserve of £72m (2019/20: £46m) which have been reclassified to finance expense (see note 27).
g Included within the £189m movement in the translation reserve is £23m which relate to disposals (see note 23).
30. Related party transactions
Key management personnel comprise executive and non-executive directors and members of the Executive Committee.
Compensation of key management personnel is disclosed in note 6.
Amounts paid to the group’s retirement benefit plans are set out in note 20.
Transactions with associates are shown below:
At 31 March
Sales of services to associates
Purchases from associates
Accounts receivable from associates
Accounts payable to associates
2021
£m
9
51
3
5
2020
£m
11
44
2
3
BT Group plc
Annual Report 2021
31. Financial commitments and contingent liabilities
Financial commitments were as follows:
At 31 March
TV programme rights commitments
Capital commitments
Other commitments
Total
185
2021
£m
1,691
1,370
263
3,324
2020
£m
2,434
1,234
228
3,896
TV programme rights commitments, mainly relating to football broadcast rights, are those for which the licence period has not yet
started. Payments made to receive programming in advance of the licence period are classified as prepayments in note 17.
Other than as disclosed below, there were no contingent liabilities or guarantees at 31 March 2021 other than those arising in the
ordinary course of the group’s business and on these no material losses are anticipated. We have insurance cover to certain limits
for major risks on property and major claims in connection with legal liabilities arising in the course of our operations. Otherwise,
the group generally carries its own risks.
Commitments and guarantees
BT plc
From March 2019 a formal guarantee was put in place by BT Group plc to fully and unconditionally guarantee the obligations of its
wholly owned subsidiary British Telecommunications plc (“BT plc”) under its corporate bonds. This guarantee has been given in
respect of all bonds issued since that date and was retrospectively applied to bonds issued prior to that date. It applies to all bonds
issued in BT plc’s Yankee, Euro Medium Term Note and hybrid bond programmes, and under the BT plc £600 5.75% bonds due
in 2028.
BDUK
Under the Building Digital UK programme, grants received by the group may be subject to reinvestment or repayment to the local
authority depending on the level of take-up.
Telefónica UK Limited leases
We’ve provided guarantees relating to certain leases entered into by Telefónica UK Limited (formerly O2 UK Limited) prior to the
demerger of mmO2 from BT on 19 November 2001. mmO2 plc (now part of the Telefónica Group) has given BT a counter indemnity
for these guarantees. There 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 Limited has discharged all its obligations.
Legal and regulatory proceedings
The group is involved in various proceedings, including actual or threatened litigation, and government or regulatory investigations.
However, save as disclosed below, the group does not currently believe that there are any legal proceedings, or government or
regulatory investigations that may have a material adverse impact on the operations or financial condition of the group. In respect
of each of the claims below, the nature and progression of such proceedings and investigations can make it difficult to predict the
impact they will have on the group. There are many reasons why we cannot make these assessments with certainty, including,
among others, that they are in early stages, no damages or remedies have been specified, and/or the often slow pace of litigation.
Class action claim
In January 2021, law firm Mishcon de Reya applied to the Competition Appeal Tribunal to bring a proposed class action claim for
damages estimated at £608m (inclusive of compound interest) or £589m (inclusive of simple interest) on behalf of our landline-
only customers alleging anti-competitive behaviour through excessive pricing by BT to customers with certain residential landline
services. We regret being drawn into litigation on a topic which Ofcom considered more than three years ago. At that time, Ofcom’s
final statement made no finding of excessive pricing or breach of competition law more generally. The claim seeks to hold against
us the fact that we implemented a voluntary commitment to reduce prices for customers that have a BT landline only and not to
increase those prices beyond inflation (CPI). At the reporting date we are not aware of any evidence to indicate that a present
obligation exists such that any amount should be provided for. Class actions must be certified by the Competition Appeal Tribunal at
a Collective Proceedings Order (CPO) hearing before proceeding to a substantive trial. The CPO hearing is listed on 24 and 25 June
2021. If the class action is certified the substantive trial will not conclude during 2021/22. BT intends to defend itself vigorously.
Italian business
Milan Public Prosecutor prosecutions: In February 2019 the Milan Public Prosecutor served BT Italia S.P.A. (BT Italia) with a notice
(which named BT Italia, as well as various individuals) to record the Prosecutor’s view that there is a basis for proceeding with
its case against BT Italia for certain potential offences, namely the charge of having adopted, from 2011 to 2016, an inadequate
management and control organisation model for the purposes of Articles 5 and 25 of Legislative Decree 231/2001.
BT Italia disputes this and maintains in a defence brief filed in April 2019 that: (i) BT Italia did not gain any interest or benefit from the
conduct in question; and (ii) in any event, it had a sufficient organisational, management and audit model that was circumvented/
overridden by individuals acting in their own self-interest. However, following a series of committal hearings in Autumn 2020,
on 10 November 2020, the Italian court agreed (as is the normal process unless there are limitation or other fundamental issues
with the claim) that BT Italia, and all but one of the individuals, should be committed to a full trial.
BT Group plc
Annual Report 2021
Financial statements 186
Notes to the consolidated financial statements continued
31. Financial commitments and contingent liabilities continued
The trial commenced on 26 January 2021 and is expected to last at least two years. On 23 April 2021, the Italian court allowed some
parties to be joined to the criminal proceedings as civil parties (‘parte civile’) – a procedural feature of the Italian criminal law system.
These claims are directed at certain individual defendants (which include former BT/BT Italia employees). Those parties have now
applied to join BT Italia as a respondent to their civil claims (‘responsabile civile’) on the basis that it is vicariously responsible for the
individuals’ wrongdoing. If successful, the quantum of those claims is not anticipated to be material.
Phones 4U
Since 2015 the administrators of Phones 4U Limited have made allegations that EE and other mobile network operators colluded to
procure Phones 4U’s insolvency. Legal proceedings for an unquantified amount were issued in December 2018 by the administrators
and in April 2019 we submitted our defence to this claim. The parties are now working through the procedural steps in the litigation.
We continue to dispute these allegations vigorously.
Regulatory matters
In the ordinary course of business, we are periodically notified of regulatory and compliance matters and investigations. We provide
for anticipated costs where an outflow of resources is considered probable and a reasonable estimate can be made of the likely
outcome. Provisions reflect management’s estimates of regulatory and compliance risks across a range of issues, including price
and service issues.
The precise outcome of each matter depends on whether it becomes an active issue, and the extent to which negotiation or
regulatory and compliance decisions will result in financial settlement. The ultimate liability may vary from the amounts provided
and will be dependent upon the eventual outcome of any settlement.
32. Post balance sheet events
BT OnePhone acquisition
On 17 April 2021 the group completed the acquisition of the remaining 30% of the share capital of BT One Phone Limited (“BTOP”),
a telecom provider offering fixed-to-mobile replacement telephony networks and enterprise telephony solutions. BTOP is currently
accounted for as a joint venture. The acquisition supports the group’s strategy to invest in innovative technologies to become the
most trusted connector of people, devices and machines.
The acquisition will be treated as a business combination under IFRS 3 and therefore the results of BTOP will be fully consolidated
from the date of acquisition. The group paid £97m for full and final settlement for the remaining share of the company. A purchase
price allocation exercise will be completed and allocation of consideration between net assets, identifiable intangible assets and
goodwill will be reported in the group’s 2021/22 results.
Spectrum auction
On 27 April 2021 it was announced that the assignment stage of Ofcom’s spectrum auction for 700 MHz and 3.6–3.8 GHz spectrum
bands had been completed. EE Limited, a wholly owned subsidiary of BT Group plc, has secured the following positions within the
respective spectrum bands: 723–733 MHz and 778–788 MHz; 738–758 MHz; and 3680–3720 MHz. The total cost of the spectrum
was £475m which will be accounted for within 2021/22 together with the related interference mitigation provision. In the 2020/21
Annual Report, £702m is held within prepayments on deposit with Ofcom. We received a refund of £227m at the conclusion of the
process at the end of April 2021.
BT Group plc
Annual Report 2021
Financial Statements of BT Group plc
BT Group plc company balance sheet
Registered number 4190816
At 31 March
Non‑current assets
Investments
Trade and other receivablesa
Current assets
Trade and other receivablesa
Cash and cash equivalents
Current liabilities
Trade and other payablesb
Total assets less current liabilities
Non‑current liabilities
Loans and other borrowingsc
Equity
Ordinary shares
Share premium
Capital redemption reserve
Merger reserve
Own shares
Profit and loss accountd
Total equity
187
Notes
2021
£m
2020
£m
2
11,096
972
11,024
3,063
12,068
14,087
–
3
3
27
27
1,171
5
1,176
107
107
12,044
15,156
–
–
499
1,051
27
–
(143)
10,610
3,177
3,177
499
1,051
27
1,574
(237)
9,065
12,044
11,979
12,044
15,156
3
a Trade and other receivables consisted of two loans to group undertakings of £nil (2019/20: £1,082m) repayable on 31 January 2058 and £nil (2019/20: £1,981m) repayable
on 21 December 2064. Both loans were fully settled as at 31 March 2021. The remaining balance as at 31 March 2021 consists of a loan to group undertakings of £971m
(2019/20: nil) and accrued interest of £1m (2019/20:£nil). The loan attracts interest of LIBOR plus 37.5 basis points (2019/20: nil). The loan is measured at amortised cost
using the effective interest rate method. The expected credit loss provision against long-term loan to group undertakings is immaterial. Included in current trade and other
receivables are loans to group undertakings of £nil (2019/20: £1,074m) and accrued interest of £nil (2019/20: £97m).
b Trade and other payables consists of loans from group undertakings of £10m (2019/20: £82m) and other creditors of £17m (2019/20: £25m).
c Loans and other borrowings consist of a loan from group undertakings of £nil (2019/20: £3,177m) repayable on 31 January 2058 and attracted an interest of nil (2019/20:
LIBOR plus 102.5 basis points). The loan was fully settled as at 31 March 2021.
d As permitted by Section 408(3) of the Companies Act 2006, no profit and loss account of the company is presented. The profit for the financial year, dealt with in the profit
and loss account of the company was £6m (2019/20: £24m).
The financial statements of the company on pages 187 to 190 were approved by the Board of Directors on 12 May 2021 and were
signed on its behalf by:
Jan du Plessis
Chairman
Philip Jansen
Chief Executive
Simon Lowth
Chief Financial Officer
BT Group plc
Annual Report 2021
Financial statements 188
BT Group plc company statement of changes in equity
Called up
share
capitala
£m
Share
premium
account
£m
Capital
redemption
reserve
£m
Note
At 1 April 2019
Profit for the financial year
Transfer to realised profit
Dividends paid
Capital contribution in respect of
share-based payments
Net buyback of own shares
Unclaimed dividends over 10 years
At 31 March 2020
Profit for the financial year
Transfer to realised profit
Capital contribution in respect of
share-based payments
Net buyback of own shares
499
–
–
–
–
–
–
499
–
–
–
–
1,051
–
–
–
–
–
–
1,051
–
–
–
–
3
At 31 March 2021
499
1,051
27
–
–
–
–
–
–
27
–
–
–
–
27
Merger
reserve
£m
3,149
–
(1,575)
–
–
–
–
1,574
–
(1,574)
–
–
–
Own
sharesb
£m
Profit
and loss
accountb,c
£m
(167)
–
–
–
–
(70)
–
(237)
–
–
–
94
8,927
24
1,575
(1,521)
72
(14)
2
9,065
6
1,574
72
(107)
Total
£m
13,486
24
–
(1,521)
72
(84)
2
11,979
6
–
72
(13)
(143)
10,610
12,044
a The allotted, called up and fully paid ordinary share capital of the company at 31 March 2021 was £499m (31 March 2020: £499m), representing 9,968,127,681
(31 March 2020: 9,968,127,681) ordinary shares of 5p each.
b In 2020/21, 44,573,595 shares (2019/20: 8,642,708) were issued from Own shares to satisfy obligations under employee share schemes and executive share awards at a
cost of £108m (2019/20: £22m). At 31 March 2021, 50,724,972 shares (2019/20: 85,921,056) with an aggregate nominal value of £3m (2019/20: £4m) were held at cost as
treasury shares and 9,172,675 shares (2019/20: 7,255,789) with an aggregate nominal value of £nil (2019/20: £nil) were held in the Trust.
c As permitted by Section 408(3) of the Companies Act 2006, no profit and loss account of the company is presented. The profit for the financial year, dealt with in the profit
and loss account of the company was £6m (2019/20: £24m).
BT Group plc
Annual Report 2021
189
Notes to the company financial statements
1. BT Group plc accounting policies
Investments
Principal activity
The principal activity of the company is to act as the ultimate
holding company of the BT group.
Accounting basis
As used in these financial statements and associated notes, the
term ‘company’ refers to BT Group plc (a public company limited
by shares). These separate financial statements of the company
are prepared in accordance with, and presented as required
by, the Companies Act 2006 as applicable to companies using
Financial Reporting Standard 101 (FRS 101). These financial
statements have been prepared in accordance with FRS 101.
FRS 101 incorporates, with limited amendments, International
Financial Reporting Standards (IFRS).
Financial statements
The financial statements are prepared on a going concern basis
and under the historical cost convention. Refer to page 123 for
further details of this assessment.
As permitted by Section 408(3) of the Companies Act 2006,
the company’s profit and loss account has not been presented.
New and amended accounting standards effective during
the year
There have been no new or amended accounting standards or
interpretations adopted during the year that have a significant
impact on the financial statements.
Exemptions
As permitted by FRS 101, the company has taken advantage
of the disclosure exemptions available under that standard
in relation to business combinations, share-based payments,
non-current assets held for sale, financial instruments, capital
management, and presentation of comparative information in
respect of certain assets, presentation of a cash flow statement,
standards not yet effective, impairment of assets and related
party transactions. The company intends to continue to take
advantage of these exemptions in future years. Further detail is
provided below.
Where required, equivalent disclosures have been given in the
consolidated financial statements of BT Group plc.
The BT Group plc consolidated financial statements for the
year ended 31 March 2021 contain a consolidated cash flow
statement. Consequently, as permitted by IAS 7 ‘Statement
of Cash flow’, the company has not presented its own cash
flow statement.
The BT Group plc consolidated financial statements for the
year ended 31 March 2021 contain related party disclosures.
Consequently, the company has taken advantage of the
exemption in IAS 24, ‘Related Party Disclosures’ not to disclose
transactions with other members of the BT Group.
The BT Group plc consolidated financial statements for the year
ended 31 March 2021 contain financial instrument disclosures
which comply with IFRS 7, ‘Financial Instruments: Disclosures’.
Consequently, the company is exempt from the disclosure
requirements of IFRS 7 in respect of its financial instruments.
Investments are stated at cost and reviewed for impairment
if there are indicators that the carrying value may not be
recoverable. An impairment loss is recognised to the extent that
the carrying amount cannot be recovered either by selling the
asset or by continuing to hold the asset and benefiting from the
net present value of the future cash flows of the investment.
Taxation
Full provision is made for deferred taxation on all temporary
differences which have arisen but not reversed at the balance
sheet date. Deferred tax assets are recognised to the extent that
it is regarded as more likely than not that there will be sufficient
taxable profits from which the underlying timing differences can
be deducted. The deferred tax balances are not discounted.
Dividends
Dividend distributions are recognised as a liability in the
year in which the dividends are approved by the company’s
shareholders. Interim dividends are recognised when they are
paid; final dividends when authorised in general meetings by
shareholders. Dividend income is recognised on receipt.
Share capital
Ordinary shares are classified as equity. Repurchased shares of
the company are recorded in the balance sheet as part of Own
shares and presented as a deduction from shareholders’ equity
at cost.
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 cash and are subject to insignificant risk of
changes in value and have an original maturity of three months
or less.
Share‑based payments
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.
2. Investments
Cost
At 1 April 2019
Additions
At 31 March 2020
Additions
At 31 March 2021
Total
£m
10,952
72
11,024
72
11,096
Additions of £72m (2019/20: £72m) comprise capital
contributions in respect of share-based payments.
The company held a 100% investment in BT Group Investments
Limited, a company registered in England and Wales,
throughout 2020/21 and 2019/20.
BT Group plc
Annual Report 2021
Financial statements 190
Notes to the company financial statements continued
4. Other information
Dividends
No interim or final dividend is proposed in respect of the
year ended 31 March 2021 (2019/20: interim dividend 4.62p
amounting to £457m was paid; no final dividend paid).
Employees
The chairman, the executive and non-executive directors
and the company secretary & general counsel, governance
of BT Group plc were the only employees of the company
during 2020/21 and 2019/20. The costs relating to qualifying
services provided to the company’s principal subsidiary, British
Telecommunications plc, are recharged to that company.
3. Merger reserve
On 29 January 2016, the company issued 1,594,900,429
ordinary shares of 5p at 470.70p per share resulting in a total of
£80m being credited to the share capital.
These shares were used as part consideration for the acquisition
of EE, which completed on 29 January 2016. As a result of this
transaction, a merger reserve was created of £7,424m net of
£3m issue costs. The acquisition of EE was structured by way
of a share-for-share exchange. This transaction fell within the
provisions of Section 612 of the Companies Act 2006 (merger
relief) such that no share premium was recorded in respect of
the shares issued. The company chose to record its investment
in EE at fair value and therefore recorded a merger reserve
equal to the value of the share premium which would have been
recorded had Section 612 of the Companies Act 2006 not been
applicable i.e. equal to the difference between the fair value of
EE and the aggregate nominal value of the shares issued.
This merger reserve was initially considered unrealised on the
basis it was represented by the investment in EE. This was not
considered to represent qualifying consideration (in accordance
with Tech 02/10 (Guidance on the determination of realised
profits and losses in the context of distributions under the
Companies Act 2006)), as superseded by Tech 02/17 (Guidance
on realised and distributable profits under the Companies
Act 2006).
Immediately following the acquisition of EE, the company’s
investment in EE was transferred to the company’s subsidiary,
BT plc, in exchange for an intercompany loan. To the extent
the loan is settled in qualifying consideration, the related
proportion of the merger reserve is considered realised.
Hence the merger reserve is an unrealised reserve until it
is realised by the settlement of the intercompany loan by
qualifying consideration.
During 2020/21, the remaining £1,574m (2019/20: £1,575m) of
merger reserve was transferred to realised profit following the
settlement of an intercompany loan by qualifying consideration.
BT Group plc
Annual Report 2021
Related undertakings
191
Subsidiaries
Company name
Held directly
United Kingdom
Group
interest
in
allotted
capitala
Share
class
Company name
Belgium
Group
interest
in
allotted
capitala
Share
class
Company name
Chile
Group
interest
in
allotted
capitala
Share
class
81 Newgate Street, London, EC1A 7AJ,
United Kingdom
BT Group Investments
Limited
BT Group Nominees
Limited
100%
Held via other group companies
Algeria
100%
ordinary
ordinary
20 Micro zone d’Activités Dar El Madina,
Bloc B, Loc N01 Hydra, Alger, 16000, Algeria
BT Algeria
Communications SARL
Argentina
100%
ordinary
Av. Luis Maria Campos 877, Piso 10, Ciudad
Autonoma de, Buenos Aires, C1426, Argentina
BT Argentina S.R.L.
Australia
100%
ordinary
Level 1, 76 Berry Street, North Sydney NSW
2060, Australia
BT Australasia Pty
Limited
Austria
100%
ordinary
100% preference
Telecomlaan 9, 1831 Diegem, Belgium
BT Global Services
Belgium BV
BT Professional
Services (Holdings) N.V.
Telecomlaan 9, 1830 Diegem, Belgium
100%
100%
ordinary
ordinary
Global Security Europe
Limited – Belgian
Branchb
Rue de L’Aêropostale 8, 4460 Grâce‑Hollogne,
Belgium
100%
–
IP Trade SA
Bermuda
Century House, 16 Par‑la‑Ville Road,
Hamilton, HM08, Bermuda
100%
ordinary
Communications Global
Network Services
Limited
Bolivia
100%
ordinary
Avda. 6 de Agosto N° 2700, Torre Empresarial
CADECO, Piso 4, La Paz, Bolivia
BT Solutions Limited
Sucursal Boliviab
Bosnia and Herzegovina
100%
–
Skenderpasina 33, Sarajevo, 71000, Bosnia
and Herzegovina
Louis‑Häfliger‑Gasse 10, 1210, Wien, Austria
BT Austria GmbH
Azerbaijan
100%
ordinary
The Landmark III Building, 8th Floor, c/o
Deloitte & Touche, 96 Nizami Street, Baku,
AZ 1010, Azerbaijan
BTIH Teleconsult
Drustvo sa organicenom
odgovornoscu za
posredovanje i
zastupanje d.o.o.
Sarajevo
Botswana
100%
–
BT Azerbaijan Limited,
Limited Liability
Company
Bahrain
100%
ordinary
Suite #659, 6th floor, Building No. 247,
Road 1704, Diplomat Area 317, Bahrain
BT Solutions Limited
(Bahrain Branch)b
Bangladesh
100%
–
JHK Windcel, Level 4, KA‑90 Progoti Sarani,
Kuril, Dhaka, Bangladesh, 1229, Bangladesh
BT Communications
Bangladesh Limited
Barbados
100%
ordinary
3rd Floor, The Goddard Building, Haggatt Hall,
St. Michael, BB11059, Barbados
BT (Barbados) Limited
Belarus
100%
ordinary
Deloitte House, Plot 64518, Fairgrounds,
Gaborone, PO Box 1839, Botswana
BT Global Services
Botswana (Proprietary)
Limited
Brazil
100%
ordinary
Avenida Doutora Ruth Cardoso, nº 4777, 14º
andar, parte, Jardim Universidade – Pinheiros,
na Cidade de, São Paulo‑ SP‑ CEP, 05477–000,
Brasil
BT Global
Communications do
quotas
Brasil Limitada
Avenida Das Naçôes Unidas, 4777 – 14 andar,
Pinheiros, São Paulo, SP 05477–000, Brazil
100%
BT Communications do
Brasil Limitada
Bulgaria
100%
quotas
51B Bulgaria Blvd., fl. 4, Sofia, 1404, Bulgaria
Rosario Norte 407, Piso 6, Las Condes,
Santiago, Chile
Servicios de
Telecomunicaciones BT
Global Networks Chile
Limitada
China
100%
ordinary
Building 16, 6th Floor, Room 602‑B, No. 269
Wuyi Road, Hi‑tech Park, Dalian, 116023,
China
BT Technology (Dalian)
Company Limited
No. 3 Dong San Huan Bei Lu, Chao Yang
District, Beijing, 100027, China
100% registered
BT Limited, Beijing
Officeb
–
Room 1206, Tower A, United Plaza, 5022 Bin
He Avenue, Fu Tian District, Shenzhen, P. R.
China
100%
Infonet Primalliance
Shenzhen Co. Ltd.
ordinary
Room 2101–2103, 21/F, International Capital
Plaza, No. 1318 North Sichuan Road, Hong Kou
District, Shanghai, 200080, China
100%
BT China Limited-
Shanghai Branch
Officeb
Room 4B, 7/F, Tower W3, Oriental Plaza, 1
East Chang An Avenue, Dong Cheng District,
Beijing, P. R. China
100%
–
Infonet Primalliance
ordinary
Beijing Co. Ltd.
Room 601, No. 2 BLDG, 750 West Zhong Shan
Rd., Shanghai, 200051, P.R . China
80%
Infonet Primalliance
Shanghai Co. Ltd.
ordinary
Room 635–3, No. 2 BLDG, 351 Guo Shou Jing
Road, Zhang Jiang High Technology Park,
Shanghai, P. R. China
90%
Infonet Primalliance
Holding Co. Ltd.
ordinary
Room 702A, Tower W3, Oriental Plaza, 1 East
Chang An Avenue, Dongcheng, Beijing,
100738, China
100%
BT China Limited
Unit 1537B, Floor 15th, No. 55, Xili Road,
Shanghai Free Trade Zone, Shanghai, China
100% registered
BT China
Communications
Limited
Colombia
50%
ordinary
Calle 113, 7–21 Piso 11, Torre A Oficina 1015,
Teleport Business Park, Bogota, Colombia
58 Voronyanskogo St, Office 89, Minsk
220007, Belarus
BT Bulgaria EOOD
Canada
100%
ordinary
BT Colombia Limitada
Costa Rica
100%
quotas
BT BELRUS Foreign
Limited Liability
Company
100%
ordinary
Regus Brookfield Place, 161 Bay Street, 26th
and 27th Floors, Toronto, Ontario, M5J 2S1,
Canada
BT Canada Inc.
100%
common
Heredia–Belen La Ribera, Centro Corporativo
El Cafeta, Edificio B, segundo piso, Oficinas de
Deloitte, San José, Costa Rica
BT Global Costa Rica
SRL
100%
ordinary
BT Group plc
Annual Report 2021
Financial statements 192
Related undertakings continued
Subsidiaries continued
Group
interest
in
allotted
capitala
Share
class
Company name
Finland
Group
interest
in
allotted
capitala
Share
class
Company name
Côte d’Ivoire
Abidjan Plateau, Rue du commerce, Immeuble
Nabil 1er étage, 01 BP 12721 Abidjan 01, Côte
d’Ivoire
Mannerheimvägen 12 B 6, 00100 Helsinki,
Finland
BT Nordics Finland Oy
France
100%
ordinary
BT Cote D’Ivoire
Croatia
100%
ordinary
Tour Ariane, 5 place de la Pyramide, La
Defense Cedex, 92088 PARIS, France
Savska Cesta 64, Zagreb, 10000, Croatia
BT Solutions Limited
Podruznica Hrvatskab
Cyprus
100%
–
Hadjianastassiou, Ioannides LLC, DELOITTE
LEGAL, Maximos Plaza, Tower 3, 2nd Floor,
213 Arch. Makariou III Avenue, Limassol, 3030,
Cyprus
BT Solutions Limitedb
–
Arch. Makarios III, 213, Maximos Plaza, Tower
3, Floor 2, Limassol, 3030, Cyprus
100%
BT Global Europe B.V.b
Czech Republic
100%
–
Muchova 240/6, Dejvice, 160 00 Prague 6,
Czech Republic
BT Limited, organizacni
slozkab
Pujmanové 1753/10a, Nusle, 140 00, Prague, 4,
Czech Republic
100%
–
BT France S.A.S.
BT Newco France S.A.S.
Germany
100%
100%
ordinary
ordinary
Barthstraße 4, 80339, Munich, Germany
BT (Germany) GmbH &
ordinary
Co. oHG
ordinary
BT Deutschland GmbH
BT Garrick GmbH
ordinary
Frankfurter Straße 21–25, Eschborn, 65760,
Frankfurt am Main, Germany
100%
100%
100%
IP Trade Networks
GmbH
ordinary
Widdersdorfer Strasse 252, 50933, Cologne,
Germany
100%
Global Security Europe
Limited – Germany
Branchb
Ghana
100%
–
5th Floor, Vivo Place, Cantonments City,
Rangoon lane, Accra, P.O. Box MB 595, Ghana
BT Global Europe B.V.,
odštěpný závodb
Denmark
100%
–
BT Ghana Limited
Greece
100%
ordinary
Havnegade 39, 1058, Kobenhavn K, Denmark
75 Patision Street, Athens, 10434, Greece
BT Denmark ApS
Dominican Republic
100%
ordinary
Av. Abraham Lincoln Esq. Jose Amado Soler,
Edif. Progresso, Local 3‑A, Sector Ens.
Serralles, Santo Domingo, Dominican
Republic
BT Solutions Limited-
Greek Branchb
Guatemala
100%
–
5ta avenida 5–55 zona 14, Edificio Europlaza
World Business Center, Torre IV, nivel 7, oficina
702, Guatemala City, Guatemala
BT Dominican Republic,
S. A.
Ecuador
100%
ordinary
BT Guatemala S.A.
Honduras
100%
unique
Av. Amazonas N21‑252 y Carrión, Edificio
Londres, 4° Piso, Quito, Ecuador
BT Solutions Limited
(Sucursal Ecuador)b
Egypt
100%
–
1 Wadi El Nile St., Mohandessin, Giza, Cairo,
Egypt
BT Telecom Egypt LLC
El Salvador
100%
stakes
Edificio Avante Penthouse Oficina, 10–01 Y
10–03 Urbanizacion, Madre Selva, Antiguo
Cuscatlan, La Libertad, El Salvador
BT El Salvador, Limitada
de Capital Variable
Estonia
Colonia Pueblo Nuevo, Edificio Torre Morazán,
torre número uno (1), piso número nueve (9),
cubículo diez mil novecientos dieciocho
(10918) en la Ciudad de Tegucigalpa,
Municipio del Distrito Central, Departamento
de Francisco Morazán, Honduras
BT Sociedad De
Responsabilidad
Limitada
Hong Kong
38th Floor Dorset House, Taikoo Place, 979
King’s Road, Island East, Hong Kong
BT Hong Kong Limited
Infonet China Limited
Hungary
100%
100%
ordinary
ordinary
100%
ordinary
Budafoki U. 91–93, Budapest, 1117, Hungary
A.H. Tammsaare tee 47, Tallinn, 11316, Estonia
BT Solutions Limited
Eesti Filiaalb
100%
–
BT Global Europe B.V.
Magyarorszagi
Fioktelepeb
100%
–
BT Group plc
Annual Report 2021
Group
interest
in
allotted
capitala
Share
class
100%
100%
–
business
Company name
BT Limited
Magyarorszagi
Fioktelepeb
BT ROC Kft
Iceland
Skútuvogi 1e, 104, Reykjavik, Iceland
BT Solutions Limited
Útibú á Íslandib
India
100%
–
11th Floor, Eros Corporate Tower, Opp.
International Trade Tower, Nehru Place, New
Delhi, 110019, India
100%
100%
BT (India) Private
Limited
BT e-Serv (India)
Private Limited
BT Global Business
Services Private Limited
BT Global
Communications India
Private Limited
BT Telecom India
Private Limited
A‑47, Hauz Khas, New Delhi, Delhi‑DL,
110016, India
100%
74%
74%
ordinary
equity
ordinary
ordinary
ordinary
Orange Services India
Private Limited
Indonesia
100%
ordinary
World Trade Centre 5, Lantai. 13, Jl. Jend.
Sudirman Kav. 29–31, Kel. Karet Setiabudi,
Jakarta Selatan, Jakarta, 12920, Indonesia
PT BT Indonesia
PT BT Communications
Indonesia
Isle of Man
100%
ordinary
95%
ordinary
Third Floor, St Georges Court, Upper Church
Street, Douglas, IM1 1EE, Isle of Man
Belmullet Limited
Communicator
Insurance Company
Limited
Priestgate Limited
Israel
100%
ordinary
100%
100%
ordinary
ordinary
Beit Oz, 14 Abba Hillel Silver Rd, Ramat Gan,
52506, Israel
B.T. Communication
Israel Ltd
Italy
100%
ordinary
BT Enìa
Telecomunicazioni
S.P.A.
Via Charles Robert Darwin, no 85, Settimo
Milanese, 20019, Milano, Italy
99%
ordinary
ERPTech S.p.A.
ordinary
Via Correggio 5, San Donato Milanese, 20097,
Milan, Italy
99%
Radianz Italia S.r.l.
100%
ordinary
100%
–
Strada Santa Margherita, 6/A, 43123, Parma,
Italy
Subsidiaries continued
Company name
Via Mario Bianchini 15,
00142 Roma, Italy
BT Global Services
Limitedb
Via Pianezza n° 123,
Torino, Italy
Atlanet SpA
Via Tucidide 56, Torre 7,
20134, Milano, Italy
Basictel SpA
BT Italia S.p.A.
BT Nederland N.V.b
Nuova Societa di
Telecomunicazioni SpA
Jamaica
193
Group
interest
in
allotted
capitala
Share
class
Company name
Morocco
Group
interest
in
allotted
capitala
Share
class
Group
interest
in
allotted
capitala
Share
class
Company name
Lebanon
100%
–
Abou Hamad, Merheb, Nohra & Chedid Law
Firm, Chbaro Street, 22nd Achrafieh Warde
Building, 1st Floor, Beirut, P.O.BOX 165126,
Lebanon
BT Lebanon S.A.L.
Lithuania
100%
ordinary
Bd. Abdelmoumen, Immeuble Atrium, n 374,
Lot. Manazyl Al Maymoune, 5 etage,
Casablanca, 20390, Morocco
BT Solutions Limited –
Morocco Branchb
Mozambique
100%
–
99%
ordinary
Aludariu str 2–33, LT‑01113 Vilnius, Lithuania
99%
99%
100%
ordinary
ordinary
–
99%
ordinary
26 Beechwood Avenue, Cross Roads, St.
Andrew, Kingston 5, Jamaica
BT Jamaica Limited
Japan
100%
ordinary
ARK Mori Building, 12–32 Akasaka, 1‑Chome,
Minato‑Ku, Tokyo, 107 – 6024, Japan
UAB BTH Vilnius
Luxembourg
100%
ordinary
12 rue Eugene Ruppert, L 2453, Luxembourg
BT Global Services
Luxembourg SARL
BT Professional
Services (Luxembourg)
S.A.
BT Broadband
Luxembourg Sàrl
Macao
100%
ordinary
100%
ordinary
100%
ordinary
Avenida da.Praia Grande, No. 367–371, Keng
Ou Building, 15th andar C, em Macao, Macau,
Macao
BT Global Japan
Corporation
BT Japan Corporation
Jersey
100%
100%
ordinary
ordinary
BT Hong Kong Ltd. –
Macau Branchb
Malawi
100%
–
26 New Street, St Helier, JE2 3RA, Jersey
Ilford Trustees (Jersey)
Limited
PO Box 264, Forum 4, Grenville Street,
St Helier, JE4 8TQ, Jersey
100%
ordinary
BT Jersey Limited
Jordan
100%
ordinary
Al Gardens Area (Tlaa Al Ali), Al Salheen
Neighborhood, Building #185, 7th Floor, Wasfi
Al Tal Street, Amman, 962178, Jordan
BT (International)
Holdings Limited
(Jordan)
Kazakhstan
100%
ordinary
KEZA Office Park Blocks 3, First Floor, Near
Chichiri, Shopping Mall, Blantyre, Malawi
BT Malawi Limited
Malaysia
100%
ordinary
Menara BT, Level 8, Tower 3, Avenue 7,
Bangsar South, No.8, Jalan Kerinchi, 59200,
Kuala Lumpur, Malaysia
BT Global Services (M)
Sdn Bhd
BT Global Services
Solutions Sdn Bhd
BT Global Technology
(M) Sdn. Bhd
BT Systems (Malaysia)
Sdn Bhd
Malta
100%
ordinary
100%
ordinary
100%
ordinary
100%
ordinary
36 Al Farabi Ave., Bldg. B, Almaty Financial
District, Almaty, Republic of Kazakhstan,
050059, Kazakhstan
Level 1, LM Complex, Brewery Street, Zone 3,
Central Business District, Birkirkara CBD,
3040, Malta
BT Kazakhstan LLP
Kenya
100%
–
BT Solutions Limitedb
Mauritius
100%
–
Aln House, Eldama Ravine close, off Eldama
Ravine Road, Westlands, P O Box 764, Sarit
Centre, Nairobi, 00606, Kenya
c/o Deloitte, 7th Floor Standard Chartered
Tower, 19–21 Bank Street, Cybercity, Ebène,
72201, Mauritius
BT Communications
Kenya Limited
P.O. BOX 10032–00100, Nairobi, Kenya
100%
ordinary
BT Telecommunications
Kenya Limited
Korea
100%
ordinary
8th Floor, KTB Building, 66 Yeoui‑daero,
Yeongdeungpo‑gu, Seoul, 07325, Korea
BT Global Services
Korea Limited
Latvia
100%
common
Muitas iela 1A, Riga, LV‑1010, Latvia
BT Latvia Limited,
Sabiedriba ar
ierobezotu atbildibu
100%
ordinary
BT Global
Communications
(Mauritius) Limited
Mexico
100%
ordinary
Edificio Plaza Inverlat Blvd, Manuel Avila
Camacho 1, Piso, Piso 6, Colonia Lomas de
Chapultepec, Miguel Hidalgo, Mexico City,
11009, Mexico
BT LatAm México, S.A.
de C.V.
Montenegro
100%
common
Vasa Raickovica 4b, Podgorica, Podgorica,
Montenegro
BT Montenegro DOO
100%
–
Avenida Kenneth Kaunda, number 660,
Sommershield, Maputo City, Mozambique
BT Mozambique,
Limitada
Namibia
100%
quotas
Unit 3, 2nd floor, Ausspann Plaza, Dr
Agostinho Neto Road, Ausspannplatz,
Windhoek, Private Bag, 12012, Namibia
BT Solutions Limitedb
Netherlands
100%
–
Herikerbergweg 2, 1101CM, Amsterdam
Zuidoost, Netherlands
BT Global Europe B.V.
BT (Netherlands)
Holdings B.V.
BT Nederland N.V.
BT Professional
Services Nederland B.V.
Global Security Europe
Limitedb
New Zealand
100%
ordinary
100%
100%
ordinary
ordinary
100%
ordinary
100%
–
c/o Deloitte, Level 18, 80 Queen Street,
Auckland Central, Auckland, 1010, NZ, New
Zealand
BT Australasia Pty
Limited – New Zealand
Branchb
Nicaragua
100%
–
De donde fué el Restaurante Marea Alta
(Ahora quesillos EL PIPE) 2 cuadras al este,
10 Metros al norte, frente al Hotel El Gran
Marquez, Casa # 351, Nicaragua, Zip code:
2815
BT Nicaragua S.A.
Niger
100%
capital
57, Rue des Sorkhos, BP 616, Niamey, Niger
BT Niger
Nigeria
100%
ordinary
Civic Towers, Plot GA1, Ozumba Mbadiwe
Avenue, Victoria Island, Lagos, Nigeria
BT (Nigeria) Limited
North Macedonia
100%
ordinary
Str. Dame Gruev no.8, 5th floor, Building “Dom
na voenite invalidi”, SKOPJE 1000, North
Macedonia
BT Solutions Limited
Branch Office in Skopjeb
Norway
100%
–
Munkedamsveien 45, c/o BDO AS, 0121 Oslo,
Norway
BT Solutions Norway AS
100%
ordinary
BT Group plc
Annual Report 2021
Financial statements 194
Related undertakings continued
Subsidiaries continued
Group
interest
in
allotted
capitala
Share
class
Company name
Qatar
Group
interest
in
allotted
capitala
Share
class
Company name
Slovenia
Group
interest
in
allotted
capitala
Share
class
Company name
Oman
Maktabi Building, Building No. 458, Unit No.
413 (4th Floor, Road No – R41, Block No. 203,
Plot No. 107, Zone No. SW41, Complex No. 271,
Al Watiyah, Bausher, Muscat, Sultanate of
Oman, Oman
1413, 14th Floor, Al Fardan Office Tower, Doha,
31316, Qatar
BT Global Services
(North Gulf) LLC
Republic of Ireland
49%
ordinary
BT International
Holdings Limited & Co.
LLC
Pakistan
100%
ordinary
2 Grand Canal Plaza, Upper Grand Canal
Street, Dublin 4, Republic of Ireland
Cavish Court, A‑35, Block 7&8, KCHSU,
Shahrah‑e‑Faisal, Karachi, 75350, Pakistan
BT Pakistan (Private)
Limited
Panama
100%
ordinary
Edificio Credicorp Bank, Piso 3, Oficina 301,
Cuidad de Panama, Panama
BT de Panama, S.R.L.
Paraguay
100%
ordinary
Av. Brasilia N° 767 casi Siria, Asunción,
Paraguay
BT Paraguay S.R.L.
Peru
100%
quotas
BT Communications
Ireland Limited
BT Communications
Ireland Group Limited
BT Communications
Ireland Holdings
Limited
BT Global
Communications
(Ireland) Limited
Canal Capital
Investment Limited
The Faraday
Procurement Company
Limited
Whitestream Industries
Limited
Romania
100%
ordinary
100%
ordinary
100%
ordinary
100%
ordinary
100%
ordinary
100%
ordinary
100%
ordinary
Urb. Jardin Av. Las Begonias No. 441, San
Isidro, Lima, Peru
Cladirea A1, Biroul Nr. 52, Nr 35–37, Str.
Oltenitei, Sector 4, Bucharest, Romania
BT Peru S.R.L.
Philippines
100%
ordinary
11th Floor, Page One Building, 1215 Acacia
Ave Madrigal Business Park, Ayala Alabang,
Muntinlupa, Metro Manila, 1780, Philippines
IT Holdings, Inc
40th Floor, PBCom Tower 6795, Ayala Avenue
cor. Rufino St, Makati City, 1226, Philippines
ordinary
100%
BT Communications
Philippines
Incorporated
c/o Sun Microsystems Phil Inc., 8767 Paseo de
Roxas, Makati City, Philippines
ordinary
100%
PSPI-Subic, Inc
Poland
51%
ordinary
BT Global Services
Limited Londra
Sucursala Bucurestib
Russia
100%
–
Room 62, prem xx, Floor 2, Pravdy, 26, 127137,
Moscow, Russian Federation
BT Solutions Limited
Liability Company
Serbia
100%
–
Dimitrija Georgijevica Starike 20, Belgrade,
11070, Serbia
Al. Armii Ludowej 14, 00–638 Warszawa,
International Business Center, Poland
BT (SL) Limited
Singapore
100%
ordinary
BT Poland Spółka Z
Ograniczoną
Odpowiedzialnością
Portugal
100%
ordinary
Level 3, #03–01/02 & #03–04, Block B,
Alexandra Technopark, 438B Alexandra Road,
Singapore, 119968
BT (India) Private
Limited Singapore
Branchb
BT Global Services
Technologies Pte. Ltd.
BT Global Solutions Pte.
Ltd.
BT Singapore Pte. Ltd.
Slovakia
100%
–
100%
ordinary
100%
100%
ordinary
ordinary
Dvorakovo nabrezie 4, 811 02, Bratislava,
Slovakia
BT Slovakia s.r.o.
100%
ordinary
Rua D. Francisco Manuel de Melo 21–1,
1070–085 Lisboa, Portugal
BT Portugal –
Telecomunicaçöes,
Unipessoal Lda
Puerto Rico
100%
ordinary
The Prentice‑Hall Corporation System, Puerto
Rico, Inc., c/o Fast Solutions, LLC, Citi Tower,
252 Ponce de Leon Avenue, Floor 20, San Juan,
Puerto Rico, 00918, Puerto Rico
BT Communications
Sales, LLC Puerto Rico
branchb
100%
–
BT Group plc
Annual Report 2021
Cesta v Mestni Log 1, Ljubljana, 1000, Slovenia
BT GLOBALNE
STORITVE,
telekomunikacijske
storitve, obdelava
podatkov, podatkovnih
baz; d.o.o.
South Africa
100%
ordinary
BT Building, Woodmead North Office Park, 54
Maxwell Drive, Woodmead, 2191, South Africa
BT Communications
Services South Africa
(Pty) Limited
BT Limitedb
Spain
70%
100%
ordinary
–
Calle Isabel Colbrand 8, 3rd Floor, 28050,
Madrid, Spain
BT Global ICT Business
Spain SLU
Sri Lanka
100%
ordinary
Level 03, No.11, Castle Lane, Sri Lanka,
Colombo, 04, Sri Lanka
BT Communications
Lanka (Private) Limited
Sudan
100%
ordinary
Alskheikh Mustafa Building, Parlman Street,
Khartoum, Sudan
Newgate
Communication
(Sudan) Co. Ltd
Sweden
100%
ordinary
Box 30005, 104 25, Stockholm, Sweden
BT Nordics Sweden AB
Switzerland
100%
ordinary
Richtistrasse 5, 8304 Wallisellen, Switzerland
BT Limited Taiwan
Branchb
Tanzania
100%
–
BDO East Africa, 1st Floor‑Wing B, Infotech
Place, Mwai Kibaki Road, Dar es Salaam,
Tanzania
BT Solutions Limited –
Tanzania Branchb
Thailand
100%
–
Athenee Tower, 23rd Floor, (CEO Suite,
Suite 38 & 40), 63 Wireless Road, Lumpini,
Pathumwan, Bangkok, 10330, Thailand
BT Siam
Communications Co.,
Ltd
BT Siam Limited
49%
class B
69% preference
BT Belgrade d.o.o
Sierra Leone
100%
ordinary
BT Switzerland AG
Taiwan
100%
ordinary
84 Dundas Street, Freetown, Sierra Leone
Shin Kong Manhattan Building, 14F, No. 8, Sec.
5, Xinyi Road, Taipei, 11049, Taiwan
195
Group
interest
in
allotted
capitala
Share
class
100%
ordinary
100%
ordinary
100%
ordinary
100%
ordinary
100%
ordinary
Mainline
Communications Group
Limited
Mainline Digital
Communications
Limited
Orange Furbs Trustees
Limited
Orange Home UK
Limited
Orange Personal
Communications
Services Limited
United States
c/o Corporation Service Company, 251 Little
Falls Drive, Wilmington DE 19808,
United States
BT Americas Holdings
Inc.
BT Americas Inc.
BT Communications
Sales LLC
BT Federal Inc.
BT Procure L.L.C.
BT United States L.L.C.
Infonet Services
Corporation
Radianz Americas Inc.
Uruguay
100%
100%
100%
100%
100%
100%
100%
100%
common
common
units
common
units
units
common
common
Rincón 487 Piso 11, Montevideo, ZIP CODE
11.000, Uruguay
BT Solutions Limited
Sucursal Uruguayb
Venezuela
100%
–
Edificio Parque Cristal, Torre Oeste, Piso 5,
Oficina 5, Avenida Francisco de Miranda,
Urbanización Los Palos Grandes, Caracas
1060, Venezuela
BT LatAm Venezuela,
S.A.
BT Global (Venezuela)
S.A.
Vietnam
100%
ordinary
100%
ordinary
16th Floor Saigon Tower, 29 Le Duan Road,
District 1, Ho Chi Minh City, 710000, Socialist
Republic of Vietnam
BT (Vietnam) Co. Ltd.
Zambia
100%
ordinary
Plot No. 11058, Haile Selassie Avenue,
Zimbabwe, Lusaka, Lusaka Province, 34972,
Zambia
BT Solutions Limitedb
Zimbabwe
100%
–
3 Baines Avenue, Box 334, Harare, Zimbabwe
Numberrapid Limitedb
100%
–
Group
interest
in
allotted
capitala
Company name
Share
class
Company name
Subsidiaries continued
Group
interest
in
allotted
capitala
Share
class
Company name
Trinidad and Tobago
2nd Floor CIC Building, 122–124 Frederick
Street, Port of Spain, Trinidad and Tobago
BT Solutions Limitedb
Tunisia
100%
–
Road Lac de Constance, Carthage Center
Building, Block A‑2nd floor‑Les berges du Lac,
Tunis, 1053, Tunisia
BT Tunisia S.A.R.L
Turkey
100%
ordinary
Acıbadem Mahallesi Çeçen Sk. Akasya A, Kule
Kent Etabı Apt. No: 25 A/28- Üsküdar/
İstanbul, Turkey
BT Bilisim Hizmetleri
Anonim Şirketi
BT Telekom Hizmetleri
Anonim Şirketi
Uganda
100%
ordinary
100%
common
Engoru, Mutebi Advocates, Ground Floor,
Rwenzori House, 1 Lumumba Avenue,
Kampala, 22510, Uganda
BT Solutions Limitedb
Ukraine
100%
–
Office 702, 34 Lesi Ukrainky Boulevard, Kyiv
01042, Ukraine
BT Ukraine Limited
Liability Company
United Arab Emirates
100%
stakes
Office No G03, Ground Floor, EIB Building No
04, Dubai, United Arab Emirates
BT MEA FZ-LLC
Office no.206 BLOCK B, Diamond Business
Center 1, Al Barsha South Third, Dubai, P.O.
BOX 25205, United Arab Emirates
100%
ordinary
BT UAE Limited – Dubai
Branch (1)b
BT UAE Limited – Dubai
Branch (2)b
United Kingdom
100%
100%
–
–
81 Newgate Street, London, EC1A 7AJ,
United Kingdom
Autumnwindow Limited
Autumnwindow No.2
Limited
Autumnwindow No.3
Limited
Belmullet (IoM)
Limitedb
BPSLP Limited
British
Telecommunications
plc
Bruning Limited
BT (International)
Holdings Limited
BT (RRS LP) Limited
BT Communications
Ireland Group Limited
– UK Branchb
BT Corporate Trustee
Limited
BT European
Investments Limited
BT Fifty-One
BT Fifty-Three Limited
100%
ordinary
100%
ordinary
100%
ordinary
100%
100%
–
ordinary
100%
100%
100%
100%
100%
100%
100%
100%
100%
ordinary
ordinary
ordinary
ordinary
–
limited by
guarantee
ordinary
ordinary
ordinary
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
BT Global Security
Services Limited
BT Global Services
Limited
BT Holdings Limited
BT IoT Networks
Limited
BT Lancashire Services
Limited
BT Limited
BT Nominees Limited
BT Property Holdings
(Aberdeen) Limited
BT Property Limited
BT Sixty-Four Limited
BT SLE Euro Limited
BT SLE USD Limited
BT Solutions Limited
BT UAE Limited
Communications Global
Network Services
Limited – UK Branchb
Communications
Networking Services
(UK)
EE Group Investments
Limited
ESAT
Telecommunications
(UK) Limited
Extraclick Limited
Global Security Europe
Limited
Newgate Street
Secretaries Limited
Numberrapid Limited
Pelipod Ltd
Radianz Limited
Southgate
Developments Limited
Tudor Minstrel
Alexander Bain House, 15 York Street,
Glasgow, Lanarkshire, G2 8LA, Scotland
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
ordinary
ordinary
ordinary
ordinary
ordinary
ordinary
ordinary
ordinary
ordinary
ordinary
ordinary
ordinary
ordinary
ordinary
–
ordinary
ordinary
ordinary
ordinary
ordinary
ordinary
ordinary
ordinary
ordinary
ordinary
ordinary
100%
BT Corporate Limited
Holland House
(Northern) Limited
55 Baker Street, London, W1U 7EU,
United Kingdom
100%
ordinary
ordinary
ordinary
ordinary
100%
100%
100%
100%
BT Centre Nominee 2
Limited
BT Cornwall Limited
BT Facilities Services
Limited
BT LGS Limited
BT Managed Services
Limited
BT South Tyneside
Limited
EE Finance Limited
groupBT Limited
Kelvin House, 123 Judd Street, London,
WC1H 9NP, United Kingdom
100%
100%
100%
100%
ordinary
ordinary
ordinary
ordinary
ordinary
ordinary
Openreach Limited
The Balance, 2 Pinfold Street, Sheffield,
S1 2GU, United Kingdom
100%
ordinary
Plusnet plc
Trident Place, Mosquito Way, Hatfield,
Hertfordshire, AL10 9BW, United Kingdom
100%
ordinary
EE (Group) Limited
EE Limited
EE Pension Trustee
Limited
100%
100%
ordinary
ordinary
100%
ordinary
BT Group plc
Annual Report 2021
Financial statements 196
Related undertakings continued
Associates
Joint ventures
Joint operations
Group
interest
in
allotted
capitala Share class
Company name
Group
interest
in
allotted
capitala Share class
Company name
Group
interest
in
allotted
capitala Share class
Company name
Held via other group companies
Mauritius
Held via other group companies
Indonesia
Held via other group companies
United Kingdom
Sixth Floor, Thames Tower, Station Road,
Reading, RG1 1LX, United Kingdom
Mobile Broadband
Network Limited
50%
ordinary
EE Limited and Hutchison 3G UK Limited
(together ‘the Companies’) each have a
50% share in the joint operation Mobile
Broadband Network Limited (‘MBNL’).
MBNL’s ongoing purpose is the operation
and maintenance of radio access sites
for mobile networks through a sharing
arrangement. This includes the efficient
management of shared infrastructure and
a 3G network on behalf of the Companies,
acquiring certain network elements
for shared use, and coordinating the
deployment of new infrastructure
and networks on either a shared or a
unilateral basis (unilateral elements
being network assets or services specific
to one company only). The group is
committed to incurring 50% of costs in
respect of restructuring the shared MBNL
network, a broadly similar proportion of
the operating costs (which varies in line
with usage), and 100% of any unilateral
elements.
MBNL is accounted for as a joint operation.
Guarantees for the joint operation are
given by British Telecommunications plc
and CK Hutchison Holdings Limited.
The principal place of business of the joint
operation is in the UK.
a The proportion of voting rights held corresponds
to the aggregate interest in percentage held by the
holding company and subsidiaries undertaking.
b No shares issued for a branch.
c In April 2021, the group acquired the remaining
30% ordinary shares of BT OnePhone Limited.
See note 32.
IFS Court, Bank Street, TwentyEight
Cybercity, Ebene, 72201, Mauritius
World Trade Centre 5, Lantai. 13, Jl. Jend.
Sudirman Kav. 29–31, Kel. Karet Setiabudi,
Jakarta Selatan, Jakarta, 12920, Indonesia
43%
ordinary
PT Sun Microsystems
Indonesia
Philippines
60%
ordinary
32F Philam Life Tower, 8767 Paseo de Roxas,
Makati City, Philippines
11th Floor, Page One Building, 1215 Acacia
Ave Madrigal Business Park, Ayala Alabang,
Muntinlupa, Metro Manila, 1780, Philippines
Mahindra – BT
Investment Company
(Mauritius) Limited
Philippines
ePLDTSunphilcox JV,
Inc
SunPhilcox JV, Inc
United Kingdom
20%
20%
ordinary
ordinary
Sun Microsystems
Philippines, Inc
Singapore
51%
common
Level 3, #03–01/02 & #03–04, Block B,
Alexandra Technopark, 438B Alexandra Road,
Singapore, 119968
Sun Vietnam Pte. Ltd.
United Kingdom
60%
ordinary
6th Floor, One London Wall, London, EC2Y
5EB, United Kingdom
Internet Matters
Limited
81 Newgate Street, London, EC1A 7AJ,
United Kingdom
25%
–
BT OnePhone Limitedc
ordinary
St Helen’s 1 Undershaft, London, EC3P 3DQ,
United Kingdom
70%c
Rugby Radio Station
(General Partner)
Limited
Rugby Radio Station
ordinary
(Nominee) Limited
Rugby Radio Station LP
–
10 Lower Thames Street, Third Floor, London,
EC3R 6YT, United Kingdom
50%
50%
ordinary
50%
Youview TV Limited
14%
voting
All joint ventures are governed by a joint
venture agreement.
24/25 The Shard, 32 London Bridge Street,
London, SE1 9SG, United Kingdom
Digital Mobile Spectrum
Limited
Unit 1, Colwick Quays Business Park, Colwick,
Nottingham, Nottinghamshire, NG4 2JY,
United Kingdom
ordinary
25%
Midland
Communications
Distribution Limited
Phoneline (M.C.D)
Limited
35%
ordinary
35%
ordinary
BT Group plc
Annual Report 2021
Additional information
Alternative performance measures
Net debt and net financial debt
197
Net debt consists of loans and other borrowings, lease liabilities
(both current and non-current) less current asset investments
and cash and cash equivalents, including items which have been
classified as held for sale on balance sheet.
Our net debt calculation starts from the expected future
undiscounted cash flows that should arise when our financial
instruments mature. Currency-denominated balances within
net debt are translated to sterling at swap rates where hedged.
Fair value adjustments and accrued interest applied to loans and
borrowings, current asset investments and cash equivalents to
reflect the effective interest method are removed.
Net debt is a measure of the group’s net indebtedness that
provides an indicator of overall balance sheet strength. It is a key
indicator used by management to assess both the group’s cash
position and its indebtedness. The use of the term ‘net debt’
does not necessarily mean that the cash included in the net
debt calculation is available to settle the liabilities included in
this measure.
Net financial debt is net debt excluding lease liabilities. It allows
for the comparison to net debt measures reported before the
introduction of IFRS 16 on 1 April 2019, and reflects a view that
lease liabilities are operational debt in substance, rather than
financing transactions.
Net debt and net financial debt are considered to be alternative
performance measures as they are not defined in IFRS. A
reconciliation from loans and other borrowings, lease liabilities,
cash and cash equivalents, and current asset investments, the
most directly comparable IFRS measures to net debt and net
financial debt, is set out in note 26.
Introduction
We assess the performance of the group using a variety of
alternative performance measures that are not defined under
IFRS and are therefore termed non-GAAP measures. The
non-GAAP measures we use are: adjusted revenue, adjusted
operating costs, adjusted finance expense, adjusted EBITDA,
adjusted operating profit, adjusted profit before tax, adjusted
earnings per share, return on capital employed, normalised free
cash flow and net debt. The rationale for using these measures,
along with a reconciliation from the nearest measures prepared
in accordance with IFRS, are presented below.
The alternative performance measures we use may not be
directly comparable with similarly titled measures used by
other companies.
Specific items
Our income statement and segmental analysis separately
identify trading results on an adjusted basis, being before
specific items. The directors believe that presentation of the
group’s results in this way is relevant to an understanding of the
group’s financial performance as specific items are those that in
management’s judgement need to be disclosed by virtue of their
size, nature or incidence.
This presentation is consistent with the way that financial
performance is measured by management and reported to the
Board and the Executive Committee and assists in providing an
additional analysis of our reporting trading results.
In determining whether an event or transaction is specific,
management considers quantitative as well as qualitative
factors, such as the frequency or predictability of occurrence.
Examples of charges or credits meeting the above definition and
which have been presented as specific items in the current and/
or prior years include acquisitions/disposals of businesses and
investments, regulatory, historical 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 items
meet the criteria, which are applied consistently from year to
year, they are treated as specific items.
Details of items meeting the definition of specific items in the
current and prior year are set out in note 9.
Reported revenue, reported operating costs, reported
operating profit, reported net finance expense, reported profit
before tax and reported earnings per share are the equivalent
IFRS measures. A reconciliation from these can be seen in the
group income statement on page 118.
BT Group plc
Annual Report 2021
Additional information 198
Additional information continued
Return on Capital Employed
Adjusted EBITDA
In addition to measuring financial performance of the group
and customer-facing units based on operating profit, we also
measure performance based on EBITDA and adjusted EBITDA.
EBITDA is defined as the group profit or loss before interest,
taxation, depreciation and amortisation. Adjusted EBITDA
is defined as EBITDA before specific items, net non-interest
related finance expense, and share of post-tax profits or losses
of associates and joint ventures. EBITDA is a common measure
used by investors and analysts to evaluate the operating
financial performance of companies, particularly in the
telecommunications sector.
We consider EBITDA and adjusted EBITDA to be useful
measures of our operating performance because they
approximate the underlying operating cash flow by eliminating
depreciation and amortisation. EBITDA and adjusted EBITDA
are not direct measures of our liquidity, which is shown by our
cash flow statement, and need to be considered in the context
of our financial commitments.
A reconciliation of reported profit for the period, the most
directly comparable IFRS measure, to EBITDA and adjusted
EBITDA is set out below.
Year ended 31 March
Reported profit for the period
Tax
Reported profit before tax
Net interest related finance expense
Depreciation and amortisation
EBITDA
EBITDA specific items
Net other finance expense
Share of post tax losses (profits) of
associates and joint ventures
2021
£m
1,472
332
1,804
773
4,347
6,924
481
18
(8)
2020
£m
1,734
619
2,353
750
4,274
7,377
350
147
33
Adjusted EBITDA
7,415
7,907
We use a return on capital employed (ROCE) measure that
serves as an indicator of how efficiently we generate returns
from the capital invested in the business. It is a group KPI that
is directly relatable to the outcome of investment decisions.
ROCE represents the group’s returns as percentage of
capital employed.
Returns are defined as adjusted earnings before interest and
tax. We use an adjusted measure (before specific items) for
the reasons explained in the ‘specific items’ section above.
Capital employed represents equity, debt and debt-like
liabilities. We net the derivative financial instruments and cash
and cash equivalent balances that we use to manage financial
risk against gross debt, and exclude current and deferred tax
balances as the measure is determined on a pre-tax basis.
While our long-term capital investment programmes such
as our full fibre rollout deliver value-creating long term returns,
they suppress ROCE in the short to medium term.
The following table sets out the calculation of our ROCE
measure. In doing so it reconciles returns to operating profit,
the most directly comparable IFRS measure, and presents the
components of capital employed.
Year ended 31 March
Reported operating profit for the
period
Share of post tax profits (losses) of
associates and joint ventures
Specific items (non-finance and tax)
Return for the period
Equity, debt and debt-like liabilities
Loans and other borrowings
Lease liabilities
Retirement benefit obligations
BDUK grant funding deferral
Total equity
Adjust for balances used to hedge
financial risk
Cash and cash equivalents
Investments
Net derivative financial instruments
Adjust for tax balances
Net deferred tax liabilities
Net current tax receivable
Capital employed
2021
£m
2020
£m
2,587
3,283
8
(33)
481
367
3,076
3,617
16,685
6,152
5,096
568
11,679
19,334
6,560
1,140
619
14,763
(1,000)
(3,683)
48
(1,549)
(5,112)
(1,477)
440
(197)
1,308
(46)
35,788
35,540
Return on capital employed
8.6%
10.2%
BT Group plc
Annual Report 2021
Normalised free cash flow
Normalised free cash flow is one of the group’s key performance
indicators by which our financial performance is measured. It is
primarily a liquidity measure. However, we also believe it is an
important indicator of our overall operational performance as
it reflects the cash we generate from operations after capital
expenditure and financing costs, both of which are significant
ongoing cash outflows associated with investing in our
infrastructure and financing our operations.
Normalised free cash flow is defined as free cash flow (net cash
inflow from operating activities after net capital expenditure)
after net interest paid and payment of lease liabilities, before
pension deficit payments (including their cash tax benefit),
payments relating to spectrum, and specific items. For non-tax
related items the adjustments are made on a pre-tax basis.
It excludes cash flows that are determined at a corporate level
independently of ongoing trading operations such as dividends,
share buybacks, acquisitions and disposals, and repayment and
raising of debt.
Normalised free cash flow is not a measure of the funds that are
available for distribution to shareholders.
A reconciliation from cash inflow from operating activities, the
most directly comparable IFRS measure, to free cash flow and
normalised free cash flow, is set out below.
Year ended 31 March
Cash generated from operations
Tax paid
Net cash inflow from operating
activities
Net purchase of property, plant and
equipment and intangible assets
Free cash flow
Interest received
Interest paid
Add back pension deficit payments
Remove cash tax benefit of pension
deficit payments
Dividends from associates
Add back net cash flow from specific
items
Add back net sale of non-current asset
investments
Add back prepayment in respect of
spectrum licence auction
Remove payment of lease liabilities
2021
£m
6,251
(288)
2020
£m
6,481
(210)
5,963
6,271
(4,818)
(3,889)
1,145
6
(770)
955
(181)
5
390
(11)
702
2,382
30
(736)
1,274
(434)
1
112
33
–
(782)
(651)
Normalised free cash flow
1,459
2,011
199
BT Group plc
Annual Report 2021
Additional information 200
Cautionary statement regarding
forward‑looking statements
Certain information included in this Annual Report is forward-
looking and involves risks, assumptions and uncertainties
that could cause actual results to differ materially from those
expressed or implied by forward-looking statements. Forward-
looking statements cover all matters which are not historical
facts and include, without limitation, projections relating to
results of operations and financial conditions and the company’s
plans and objectives for future operations. Forward-looking
statements can be identified by the use of forward-looking
terminology, including terms such as ‘believes’, ‘estimates’,
‘anticipates’, ‘expects’, ‘forecasts’, ‘intends’, ‘plans’, ‘projects’,
‘goal’, ‘target’, ‘aim’, ‘may’, ‘will’, ‘would’, ‘could’ or ‘should’ or,
in each case, their negative or other variations or comparable
terminology. Forward-looking statements in this Annual Report
are not guarantees of future performance. All forward-looking
statements in this Annual Report are based upon information
known to the company on the date of this Annual Report.
Accordingly, no assurance can be given that any particular
expectation will be met and readers are cautioned not to place
undue reliance on forward-looking statements, which speak
only at their respective dates. Additionally, forward-looking
statements regarding past trends or activities should not be
taken as a representation that such trends or activities will
continue in the future. Other than in accordance with its legal
or regulatory obligations (including under the UK Listing Rules
and the Financial Conduct Authority’s Disclosure Guidance and
Transparency Rules), the company undertakes no obligation
to publicly update or revise any forward-looking statement,
whether as a result of new information, future events or
otherwise. Nothing in this Annual Report shall exclude any
liability under applicable laws that cannot be excluded in
accordance with such laws.
BT Group plc
Annual Report 2021
BT Group plc
Registered office: 81 Newgate Street, London EC1A 7AJ
Registered in England and Wales No. 4190816
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