BT Group plc
Annual Report 2022
We connect
for good
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BT Group is one of the world’s leading
connectivity services providers.
We manage some of the UK’s best-
known brands too. As the oldest
telecommunications company in the
world, we’ve been at the forefront of
technology innovation and progress
for 176 years.
We’ve seen a lot of change over that
time, and today the solutions we offer
have never been more important to
our customers. The connectivity-
based solutions we sell are integral
to modern lives, businesses and
communities in the UK and across
the world. We support millions of
customers across c. 180 countries
and employ around 100,000
brilliant colleagues.
50%
5G now covers over half
of the UK population and
7.2m 5G ready customers
+2.3
New all-time NPS high for
BT Group including best ever
results in Consumer, BT SME
and Global
7m+
over 7m homes and businesses
passed with full fibre, with
speeds of up to 900Mbps
2031
Achieve net zero carbon
emissions by the end of
March 2031
Financial highlights
Revenue
£20.9bn (2)%
(FY21: £21.3bn)
Profit before tax
£2.0bn 9%
(FY21: £1.8bn)
Adjusteda EBITDA
£7.6bn 2%
(FY21: £7.4bn)
Cash flow from
operating activities
£5.9bn (1)%
(FY21: £6.0bn)
Normalised free
cash flowb
£1.4bn (5)%
(FY21: £1.5bn)
Basic earnings per share
12.9p (13)%
(FY21: 14.8p)
Capital expenditure
£5.3bn 25%
(FY21: £4.2bn)
Look out for these throughout
the report
Reference to another
page in the report
Reference to further
reading online
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4
8
10
14
16
18
20
36
42
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46
54
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58
66
70
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121
209
Contents
Strategic report
A message from our Chairman
A message from our Chief Executive
Executive Committee
Our business model
Key trends influencing us
Regulatory update
Our strategic framework
Progress against our strategic framework
Our stakeholders
Non-financial information
Our key performance indicators (KPIs)
Group performance
A letter from the Chair of Openreach
Risk management
Our principal risks and uncertainties
Task Force on Climate-related Financial Disclosures
Viability statement
Corporate governance report
Financial statements
Additional information
This Strategic report was approved
by the Board on 11 May 2022.
By order of the Board.
Adam Crozier
Chairman
11 May 2022
Please see the cautionary statement regarding forward-looking statements
on page 212.
Pages 1 to 70 form the Strategic report. It includes our business model,
progress against our strategic framework, our key performance indicators,
group performance and our principal risks and uncertainties.
The Corporate governance report on pages 71 to 120 forms the Report of the
Directors and includes the Report on directors’ remuneration.
In this document, references to ‘BT Group’ and ‘the group’ are to BT Group plc
comprising its subsidiaries, customer-facing units and internal corporate
units. A reference to a year expressed as FY22 is to the financial year ended
31 March 2022; FY23 is to the financial year ended 31 March 2023 and so on.
Read more about the
BT Group Manifesto
bt.com/manifestoreport
Visit our online annual review and
see how we’re connecting for
good bt.com/annualreview
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 210.
b Normalised free cash flow as defined on page 211.
BT Group plc
Manifesto Report
2022
We connect
for good
Growth through tech that’s
responsible, inclusive and sustainable
BT Group plc Annual Report 2022
Strategic report
2
A message from our Chairman
Building trust
and value across
our business.
The strategic and operational progress BT Group
has made in FY22 would be more than satisfactory
in any year but in the context of the current
extraordinary economic backdrop, it is particularly
impressive. When I joined BT Group at the end
of 2021, I was often asked why I’d chosen to lead
a company that, for all its impressive strengths,
can feel like a procession of challenges.
That role is not a given right. As Philip
describes in this report, we are now
sharply focused on network investment
and ever-better customer service. We’re
modernising both what we do and how we
do it, aligned to the UK Government and
Ofcom agenda of transforming the UK’s
digital infrastructure.
This is a uniquely complex task – which
is my other reason for joining the group.
It will take a number of years and
resolute focus.
My answer was that getting it right here matters.
BT Group is central to the UK’s economy, public
services and security. And it’s at the heart of family
and professional life for millions of people.
Building for the long term
Much of business, politics and media
tend to run on shorter loops than jobs like
this. But the truth is we are in the early
stages of a mammoth and long-term
transformation programme. Our task is
not only to make sure BT Group evolves
as a truly world class telecoms leader,
but that it develops its role within the
ever-shifting technology landscape.
We are up to speed – rolling out fibre
faster and cheaper than ever and already
reaching more than half the population
with 5G. My focus is making sure we keep
this momentum and stay the course.
Better to do the job properly than pretend
it’s a quick win.
The past couple of years have seen the
group prove its mettle, rising to the role
of critical national telecommunications
provider, keeping people working and
families connected, and underpinning
vital public services.
£229bn
the new networks we and others
are building will yield a national
productivity gain of around £229bnb
BT Group plc Annual Report 2022
3
opportunities and challenges facing us
and succession (given the tenure of longer
serving directors). The Nominations
Committee is focused on finding non-
executive directors with skills to boost the
Board’s technology and digital capabilities
and transformation expertise.
At this year’s AGM, we’ll bid a fond and
grateful farewell to Leena Nair. Leena has
chaired our Digital Impact & Sustainability
Committee with great impact and we will
miss her. But we recognise that her new
role as Global CEO of Chanel is highly
demanding. Sara Weller will succeed
her as chair of the Digital Impact &
Sustainability Committee.
In November Sir Jan du Plessis stepped
down as chairman. I want to say a big
personal thank you to Jan for his
dedication to BT Group and for the
support he gave me when handing over
the role. It is thanks in no small part to his
stewardship that I inherited the job of
chairman of a business with such clear
strategic direction.
In recent years BT Group’s share price
performance has demanded considerable
patience from our investors. In the last
12 months it has performed much better.
I’m confident that our Executive
Committee now has the investment and
transformation plans in place to deliver
for shareholders, customers and other
stakeholders.
We are well on our way but this is no quick
task. It needs our investors’ faith. We will
repay that literally through reinstating
the full year dividend at 7.7 pence per
share, but also through open and
consistent dialogue about our progress.
I want to close by thanking the many
colleagues who have given me such a
warm welcome. This company has an
immense task ahead of it. But it is built
on a brilliant team – one I’m really
pleased to be part of.
Adam Crozier
Chairman
11 May 2022
BT Group plc Annual Report 2022
Our task is not only to make sure BT Group
evolves as a truly world class telecoms
leader, but that it develops its role within
the ever-shifting technology landscape.”
As we build back from the economic
damage of the pandemic and cope with
inflation, supply chain constraints and
shifting geopolitics, our role is vital for
the country’s future. BT Group is already
responsible for generating £1 in every
£75 produced in the UK economyª. The
new networks we and others are building
will yield a national productivity gain of
around £229bnb.
It is those fibre and 5G networks that,
rightly, take the headlines. But the
challenges we face are much wider.
Connecting places is a yardstick but it is
connecting people that will yield a return
on our once-in-a-generation investment.
And while doing that we must strive for
ever-better customer service, building
trust and confidence in everything we do.
Building a modern BT Group
Our digitisation agenda runs through
the group. New platforms and services –
for businesses as well as individuals –
must be matched by a concerted drive for
backroom efficiency. I have been highly
impressed by our colleagues’ expertise
and dedication to this transition. It is
of course a human as well as technical
process. We will continue to develop our
skills base, recruiting and training the
brightest, whilst reskilling our colleagues
to stay competitive.
We are digitising both BT Group and the
services we offer, but we must leave no
one behind. It’s why our full fibre build
of 25m homes will include access for
a Regeneris for BT, 2021.
b FTTP £59bn productivity gains to the UK if delivered
by 2025 (Source: Centre for Economics and Business
Research) – 5G a further £170bn benefit. (Source:
FCCG report for DCMS).
a guaranteed 6.2m rural homes. It’s why
we make sure connectivity is financially
accessible to all through our social tariffs,
and why we’re supporting vulnerable
customers by freezing those tariff prices
in 2022.
For all our best efforts and intentions,
we won’t always get it right. We saw that
this year with the move to digital voice
services – where not enough caution on
our part caused real anxiety to some of
our most vulnerable customers.
Pausing that programme was the right
thing to do to learn lessons and improve
the experience for customers. But at
the same time, we must keep leading the
UK’s digital transition, explaining both
practical necessities and advantages
to customers – like the value of digital
telephony in tackling scam calls.
This year we published BT Group’s
Manifesto to capture how we’ll grow our
business in a responsible, inclusive and
sustainable way, meeting our purpose
to connect for good.
It sets bold goals for the social and
environmental impact of our work (see
page 32). As chairman, I am determined
to make sure we use it not as an exercise
in saying the right things but as a basis
for action.
Governance
The first job for any incoming chairman
is to judge whether the right strategy and
management are in place. I am certain
that Philip and his executive team have
the vision and experience for the task.
As we look ahead to FY23 and beyond, my
priority for the Board will be to bolster its
skills, diversity and experience – taking
into account group strategy, the
Strategic report 4
A message from our Chief Executive
A clear
strategy
accelerating
delivery.
We’re on a purposeful,
fast-paced journey.
Bringing our unique assets
together and delivering
significant and sustainable
long-term growth.
To read more about our strategic
progress go to page 20
bt.com/annualreview
£15bn
investment in our full fibre
network
£604m
R&D expenditure in FY22
BT Group plc Annual Report 2022
5
Building a bright sustainable future for
BT Group revolves around enabling our
long-term growth and prosperity. Our
Digital unit will be at the centre of this, with
a dual-track role to cut back our reliance
on complex, costly legacy systems and
create new growth opportunities. Little
over a year since its creation, the Digital
team is radically simplifying our internal
systems and processes, supported in part
by AWS, and working with Google Cloud
to accelerate our progress to becoming
AI-led. A significant new agreement
with Microsoft is helping us move in the
direction of a platform business, and we
have signed another deal with Distributed
to enhance our access to the talent we
need to deliver on our ambition.
The highly regulated nature of our
business and the importance of
connectivity and the other services we
provide means we’ll always be front of
mind for a broad range of stakeholders.
Delivering our plan is helping us continue
to strengthen our relationships with key
groups, including the UK Government
and our regulator, Ofcom.
We have stepped up our
modernisation agenda
as we strengthen,
simplify and sharpen
the group’s focus; We
are achieving record
customer satisfaction
scores across all our
brands; and we continue
to accelerate our next
generation network
build programmes.”
a Fibre-to-the-premises (also known as full fibre).
b EE consumer customers receiving or capable of
receiving 5G network connection using one or both
of a 5G-enabled handset and a 5G-enabled SIM.
BT Group plc Annual Report 2022
This year BT Group again proved its resilience
and ability to get on and deliver. Our operational
performance was strong – and doubly impressive
in the context of global economic challenges.
Two factors underpin this.
BT Group is delivering
We’re sticking to our plan: we have
stepped up our modernisation agenda as
we strengthen, simplify and sharpen the
group’s focus; we are achieving record
customer satisfaction scores across all
our brands; and we continue to accelerate
our next generation network build
programmes.
Openreach is now almost 30% of the way
through our full fibre broadband build,
having passed 7.2m premises and
building faster and cheaper than any
other operator. On 31 March, we had
almost 1.8m FTTPª end user connections
from 42 different communications
providers.
From a standing start three years ago,
EE’s 5G network now covers more than
50% of the UK population, 12 months
ahead of target. Building next generation
networks is one thing but connecting
customers to them is what counts. On that
measure we are also performing really
well: our 5G-readyb customer base now
stands at 7.2m.
Our next generation networks will
underpin all future BT Group products
and propositions. Our FTTP customer
base in Consumer has grown to its largest
ever level at 1.1m; Enterprise signed a
deal with BAI Communications to deliver
connectivity solutions for the London
Underground; and in Global we are
continuing to grow next generation
services, including Eagle-i which predicts
and prevents cyber attacks for corporate
and public sector customers.
First, and above all: the continued
dedication and hard work of around
100,000 colleagues across the company
and around the world. On behalf of the
Board and my executive team, I want
to thank each and every one of them
for their efforts during the year and
unwavering support for our customers.
Recognising that our people face an
extraordinary inflationary environment,
we have been determined to offer the
best pay rises we can afford, awarding
colleagues increases ranging from 2%
to 8%, and with a particular focus on
those on lower salaries.
Second, clarity and alignment across
the entire organisation on our purpose
– we connect for good – and delivery
on our strategic framework: building the
strongest foundations, creating standout
customer experiences and leading the
way to a bright, sustainable future. (See
page 18) These are now evident in all
activity across the business and we see
this in our ever-improving customer
satisfaction results.
Despite the economic uncertainty,
BT Group shares performed well; over
the 12 months to 31 March 2022, and
including the reinstated full year dividend
of 7.7 pence per share, we will have
achieved a total shareholder return
of 22.7% compared to 16.1% for the
FTSE 100.
Of course, the turbulent global economy
has made its presence felt in all walks
of life. BT Group was not immune – as
seen in our FY22 financial performance –
but despite an overall decline in revenue,
savings from our transformation
programmes and tight cost management
delivered EBITDA growth of 2%.
c. 1.8m
customers already connected
to full fibre
Strategic report 6
A message from our Chief Executive continued
Five clear priorities to
drive sustainable growth.
1
2
3
4
Drive Consumer
growth through
converged
solutions
Consumer will lead in full fibre, 5G and
convergence to win in households across the UK
and build deeper customer relationships by giving
them exceptional customer experiences.
Capitalise
on Enterprise
and Global’s
unrivalled assets
to restore growth
Enterprise and Global will help business customers
to grow through next generation connectivity
solutions. Alongside leading capability and
expertise in managed services and security, and
superior customer experiences, these solutions
will support our business customers on their
digital journeys.
Deliver
Openreach
growth and
strong returns
on FTTP
Digitise,
automate and
reskill to
transform our
cost base and
improve
productivity
Openreach will build the UK’s largest full fibre
network, get cost advantages from this scale and
switch customers to the new platform as fast as
possible. Openreach will also keep providing
industry leading service and strengthen
its relationship with all communications
providers (CPs).
Across BT Group we’ll fundamentally change what
we do and how we work. We’ll simplify our product
portfolio, automate and digitise our operations
and shut down legacy systems, processes and
networks. This will cut costs, boost execution
speed and ensure we can deliver better
experiences for customers and colleagues.
5
Optimise
our business
portfolio
and capital
allocation
We’ll keep reviewing how we can strengthen our
business portfolio through opportunities to own,
sell or partner. We’ll continue to optimise the way
we allocate the cash flow generated from our
operations, balancing the need to reinvest capital
in the business, especially in next generation
networks and solutions, with meeting our
obligations to service our debt and pension fund
while allowing us to pay a progressive dividend.
BT Group plc Annual Report 2022
Strategic priorities
Outstanding connectivity remains our
beating heart. Building next generation
networks will not just lay the foundations
for the future economic prosperity of our
customers and the whole of the UK. It will
also be the bedrock for BT Group’s future
success, but this is only the start.
As we grow the group into a digital
platform-led business to ensure our
lasting competitiveness, we’ll deliver
on five key priorities.
1. EE will become our flagship brand for
consumers, leading our approach to
future innovation, convergence and
services beyond connectivity. Eventually,
this will help us win in households across
the UK and build deeper customer
relationships by giving them exceptional
experiences.
2. BT will be our flagship brand for
Enterprise and Global under the new
heading, BT Means Business. Enterprise
and Global have a strong portfolio of next
generation services and we will capitalise
on these to drive market share in fast-
growing areas where we’re under-indexed.
3. Openreach has a strong and growing
early customer connection rate of 25% to
the new FTTP network. At such an early
stage in this asset’s life, it’s an
encouraging indicator of the long-term
economic return we’ll generate on this
once-in-a-generation investment.
4. Half-way through FY22 we achieved
our £1bn gross annualised cost savings
target – 18 months ahead of schedule.
This let us bring forward our £2bn savings
target by a year to FY24 and target
further savings totalling £2.5bn by end
FY25.
5. We’re sharpening our focus to make
sure we are adapting to the changing
markets we operate in and funding the
right assets and initiatives for growth. To
that end, we have finalised the sports joint
venture with Warner Bros. Discovery to
improve our content offering to
customers, aligning our business with
a new global content powerhouse.
Separately, we have now extended our
reciprocal channel supply deal with Sky
into the next decade and, following
successful trials, Openreach and Sky have
signed an MOU allowing Sky engineers to
complete home installations of full-fibre
for their customers. These deals
strengthen our strategic relationship
with a key partner, mutually benefiting
all of our customers.
7
Looking ahead
BT Group has emerged from the global
pandemic a stronger organisation with a
clear path to future success. Despite lower
revenue in FY22, we’ve grown EBITDA,
we are well on track to modernise and
improve every aspect of our operations
and our mid- to longer-term financial
outlook is improving.
The majority of our revenue base is now
inflation-linked and customers are on
clear, predictable and transparent pricing
plans. Annual data consumption has more
than doubled in the last five years and
with the once-in-a-generation network
upgrades needed to support this, it’s
critical that our pricing structures are fit for
purpose and can fund these investments.
That said, in the current inflationary
environment we know every penny counts
for our customers – which is why we won’t
increase social tariff prices in 2022.
In FY23 we expect to deliver revenue
growth and EBITDA of at least £7.9bn.
Looking further out, we have expanded
our gross annualised cost savings target
to £2.5bn by FY25.
As we pass the peak of our fibre build and
move towards an all-fibre, all-IP network,
we expect an annual capex reduction of
at least £1bn and lower operating costs
of £500m. From these two things alone,
by the end of the decade we expect at
least £1.5bn higher normalised free cash
flow compared to FY22. Our progressive
dividend policy will be underpinned by
these increased cash flows as we move
to sustainable growth going forward.
It is thanks to shareholders’ support that
we are making big investments in the
long-term future and prosperity of BT
Group – on their behalf, and on behalf
of customers and the whole of the UK.
The true strength of our business lies in
our unwavering commitment to putting
customers first. Building and maintaining
their trust in us is the single most important
thing we do; we will never take it for
granted and we will always strive for better.
Philip Jansen
Chief Executive
11 May 2022
We launched the BT Group Manifesto
in December, setting out how we’ll
accelerate responsible, inclusive and
sustainable growth over the next decade.”
25m
our target is to help 25m
people improve their digital
skills by the end of March 2026,
and we’re already half-way to
achieving that goal
60m
we will help customers
avoid 60m tonnes of carbon
emissions by 2030
£7.9bn
in FY23 we expect to deliver
EBITDA of at least £7.9bn
BT Group Manifesto
As the world of technology evolves,
the weight of societal responsibility
on companies like ours becomes ever
greater and more complex. We will only
succeed if we help solve some of the
problems faced by the customers and
societies we serve. To that end, we
launched the BT Group Manifesto
in December, setting out how we’ll
accelerate responsible, inclusive and
sustainable growth over the next decade.
Central to this is making sure customers
have the necessary skills for their own
digital futures – whether that’s helping
parents help their children get online or
ready themselves for a career in coding
after school or university. Our target is
to help 25m people improve their digital
skills by the end of March 2026. We’re
already over half-way to achieving
that goal.
We have also set out clear workforce
diversity and inclusion targets which
are stretching but we’re determined to
pursue them and champion an inclusive
culture that celebrates our differences. In
addition, we have brought forward our net
zero target by 15 years – to 31 March 2031
for our own emissions and 31 March 2041
for supply chain and customer emissions.
By embracing new technologies such as
full fibre, 5G, cloud computing and IoT,
we will help customers avoid 60m tonnes
of carbon emissions by 2030.
To see Philip in conversation, visit our online
annual review bt.com/annualreview
BT Group plc Annual Report 2022
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.
Executive Committee changes
The following changes to the Executive
Committee took place during the year:
• Alison Wilcox ceased as HR director
on leaving BT
• Debbie White joined BT Group
as interim HR director.
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.
Philip Jansen
Chief executive
Appointed as chief executive in February
2019 and to the Board in January 2019.
Philip joined BT Group 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 O2) from 2000 to 2002, after
starting his career at Procter & Gamble.
Harmeen Mehta
Chief digital and innovation officer
Ed Petter
Corporate affairs director
Rob Shuter
CEO, Enterprise
Appointed March 2021.
Appointed November 2016.
Appointed February 2021.
Before joining BT Group, Harmeen was
group CIO and head of cloud & security
business at Bharti Airtel. Harmeen has
experience of incubating new businesses
and creating new revenue streams, and
over 25 years’ experience leading digital,
and technology transformation and
running technology-led businesses.
Harmeen has previously been CIO at Bank
of America Merrill Lynch, BBVA and HSBC.
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.
Before joining BT Group, 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 including
managing director of retail banking at
Nedbank and head of investment banking
at Standard Bank.
BT Group plc Annual Report 2022
9
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.
Marc Allera
CEO, Consumer
Bas Burger
CEO, Global
Appointed September 2017.
Appointed June 2017.
Sabine Chalmers
General counsel, company secretary &
director regulatory affairs
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.
Bas was formerly president, BT in the
Americas, Global Services. Bas joined BT
Group in 2008 as CEO Benelux. Before
joining BT Group, 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.
Appointed April 2018 as general counsel
and became director regulatory affairs and
company secretary in May and September
2021 respectively.
Before joining BT Group, 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.
Howard Watson
Chief technology officer
Debbie White
HR director (interim)
Clive Selley Invitee
CEO, Openreach
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
Group in 2011 and has 35 years of telecoms
experience, having spent time at Telewest
Communications (now Virgin Media O2)
and Cartesian, a telecommunications
consultancy and software company.
Appointed October 2021.
Appointed February 2016.
Before joining BT Group, Debbie was CEO
of Interserve Group and prior to this held
various senior positions within Sodexo
including CEO of Sodexo Healthcare and
Sodexo Government, CFO in the UK and
Ireland and later CEO for Sodexo UK and
Ireland. Debbie started her career with
Arthur Andersen in the UK, before joining
AstraZeneca where she held a range of
financial roles.
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 (see page
41). Clive attends Executive Committee
meetings as appropriate.
BT Group plc Annual Report 2022
Strategic report 10
Our business model
What we do
We own, build and operate the UK’s biggest
and best fixed and mobile networks. We use
them to give UK customers innovative digital
connectivity solutions. Beyond the UK we provide
global businesses with networking, security and
connectivity solutions too. To meet our customers’
needs – from individuals and families to the public
sector and global multinationals – we design, build,
market, sell and support differentiated solutions
that deliver smarter outcomes for them.
Our customers span a wide range of
customer segments. We earn revenue
by selling them different types of
connectivity solutions – often in
collaboration with partners.
We invest what we earn in outstanding
customer service, building and
maintaining our leading mobile and fixed
networks, and developing the next
generation of connectivity solutions.
We also use the money we earn to pay for
obligations like tax, interest and pension
fund contributions as well as returning
a portion of it to our shareholders in
return for the capital they have invested
in the business.
Consumer
customers
Business
customers
For consumers we offer a range of
broadband, mobile, landline and
converged solutions, as well as
entertainment including sport, TV and
gaming. Typically, we deliver services to
households through 12 to 24 month
contracts or subscriptions.
For businesses we offer, manage and
support differentiated, innovative and
compelling connectivity solutions to
enable businesses to digitally transform
and grow. We sell them a wide range of
digital capabilities like networking, cyber
security, cloud and collaboration tools
and solutions. We support businesses
large and small as well as the public sector
and governments around the world.
Typically, we provide small and medium
businesses solutions on 12 to 24 month
contracts. Larger business and public
sector customers often buy multi-year
managed solution contracts but they can
also buy one-off services related to
specific technologies or outcomes. These
contracts give us ongoing revenue and
help us become trusted partners to our
customers through developing long-
standing relationships.
Communications
providers (CPs)
We serve CPs in two ways. Through
Enterprise, we wholesale our mobile
network capabilities, voice services,
broadband, Ethernet and other
connectivity solutions. Typically, these
wholesale contracts range from a month
to five years or more. And through
Openreach we sell wholesale access to
our fixed network infrastructure to 690
CPs. A large portion of Openreach’s
portfolio is regulated and we typically
strike long-term contracts of up to 10
years with CPs, including our Consumer
and Enterprise units.
BT Group plc Annual Report 2022
11
How we’re organised
BT Group comprises customer-facing units (CFUs), technology units (TUs)
and corporate units (CUs). Openreach is a CFU but manages much of its
business separately to meet regulatory requirements. In the rest of the group,
we have an integrated operating model that shares common assets like our
mobile network, technology, colleagues and brands – helping us efficiently
deliver the best outcomes for our customers.
UK individuals and
households
UK businesses
and CPs
MNCs and international
businesses
CPs including Consumer
& Enterprise
Customers
Consumer
Enterprise
Global
Openreach
Digital
Digital is transforming the way we work and
building the next generation of customer
solutions.
Networks
Networks builds, maintains and operates our
mobile, core and global networks so customers
have the best connectivity experiences.
Finance, strategy &
business services
Human resources
Legal, company
secretarial &
regulatory affairs
Corporate affairs
Customer-facing units
Our four CFUs design, market, sell
and service differentiated customer
solutions, with each focusing on a
different segment. They drive growth
by delivering outstanding customer
experience and differentiated solutions
and outcomes.
Technology units
This year we split our TUs into Digital
and Networks to give sharper focus on
transforming these areas and building
a modern BT Group, fit for the future.
Our TUs also lead our innovation and
R&D activity.
Corporate units
Our CUs support our CFUs and
TUs with centres of excellence and
provide group-level management and
coordination. They give us efficiencies
by sharing common activities and
best practices.
The role of our CFUs
Consumer
Serves individuals and households through three brands – EE, BT
and Plusnet. Together they mean that BT Group is the UK’s largest
consumer mobile, fixed and converged communication provider.
We have a relationship with over 45% of UK households, helping
them communicate, study, work, learn, play, and be entertained.
Global
Serves multinational companies (MNCs) and governments.
We have the ability to serve customers in c. 180 countries. We
integrate, secure, and manage network and cloud infrastructure,
and offer security, collaboration and contact centre solutions to
help our customers thrive in an increasingly digital
business environment.
Enterprise
Helps businesses of all sizes across the UK and Republic of
Ireland reach their digital goals. Our 1.2m customers range from
big household names, Government departments and public
sector, to small businesses and start-ups. This year Enterprise
was reorganised to focus more sharply on small office and home
office (SoHo), small and medium enterprises (SMEs), large
corporates and public sector, and wholesale customers. And we
launched our Division X unit to develop innovative solutions for
our business customers.
Openreach
In line with our regulatory Commitments, Openreach is a
CFU but has greater strategic and operational independence.
Openreach operates our fixed access network and is building the
next generation of full fibre infrastructure. It manages the fixed
network connecting homes, mobile masts, schools, shops,
banks, hospitals, libraries, governments and businesses to the
world. Openreach serves 690 CPs within the UK who then sell
fixed access services to end customers.
BT Group plc Annual Report 2022
Strategic report 12
Our business model continued
Our unique
assets
We’re well positioned in our markets
through a unique set of assets that help
us deliver for customers. This sets us apart
from the competition and creates value
for our stakeholders.
Leading networks
We build, own, and operate the UK’s biggest and best
fixed and mobile networks. They allow us to provide
widespread coverage and superior connectivity
experiences for our retail and wholesale customers.
Our fixed access network has unparalleled reach
with connections available to more than 31m premises.
We are building the largest full fibre network faster
than all other major players combined and have already
passed over 7m premises with a more reliable network
with speeds of up to 900Mbps.
Large customer base
Our large and diverse customer base and trusted
relationships with them gives us insight and
understanding into their current and future needs.
This in turn helps us sell them more connectivity
and related solutions.
Openreach is the largest fixed access wholesale
network in the UK and serves 690 CPs. 42 of them are
signed up to our latest Equinox deal on our full fibre
platform. Through these CPs Openreach serves over
24m physical lines with nearly 80% share of the fixed
access market.
Our colleagues and local presence
Our group is made up of around 100,000 colleagues.
Their technical and commercial knowledge, skills,
expertise and attitude are vital to our purpose and
ambition. They build and maintain our networks, create
and service our solutions and make sure we meet and
exceed our customers’ expectations. And they do
all this while we’re fundamentally transforming
the organisation.
Our widespread local presence gives us assets and
colleagues on the ground to deliver for customers.
These local assets mean we can give customers service
and support – and respond swiftly to their needs.
Openreach’s c.30,000 engineers play a critical role in
keeping the UK connected by building and maintaining
our fixed network out in the field. Their dedication and
skill enable us to roll out our new full fibre network at
pace and scale.
For eight years Rootmetrics has rated our mobile
network #1. We have a big stake in mobile spectrum
and we continue to extend our network coverage. Our
4G network already reaches 99% of the UK population
and we now have over 50% population coverage with
our new 5G network. We’re also investing in advanced
network capabilities and developing new use cases
for our customers.
The collective scale of our EE, BT and Plusnet brands
means that we serve over 45% of UK householdsa.
Our Global and Enterprise units work with over
1.2m customers including global and multinational
businesses, 76 of FTSE 100 companies, and over 11,300
large businesses and public sector organisations in the
UK as well as our SME and SoHo customer bases.
In the UK we have the biggest retail footprint of any
connectivity provider. We have over 15,000 customer
support colleagues. And our Home Tech experts help
individuals and families get the most out of our solutions
in their homes.
For our business customers we’re truly a global
organisation – able to serve customers in c. 180
countries. We’re physically present all over the world.
That includes 13 accredited global security operations
centres and 7 innovation and customer experience
centres including in London, Paris, Amsterdam and New
York. Our Enterprise and Global sales teams engage
with customers on the ground to understand their
needs and make sure we’re delivering on them.
BT Group plc Annual Report 2022
a Source: Flows, Q3 FY21/22, BTG Household Penetration UK.
13
Well established and trusted brands
We serve millions of customers through four
established brands. This lets us meet the connectivity
needs of different audiences and market segments.
Strong partner and supplier relationships
We understand the value of working with others.
In every area of our business, we work with a valuable
ecosystem of partners and suppliers – helping us
efficiently provide the best solutions for customers.
We work with lots of the world’s leading technology
companies (like Microsoft) on shared solutions that
combine the best of both parties for our customers.
Openreach has strong relationships with third-party
contractors and suppliers. These enable us to build our
full fibre network at scale, at pace and at the right cost.
On top of that, deep partnerships with CPs mean we
can give the best experience to end customers. For
example, Sky can use their own engineers to connect
their customers to our full fibre network.
Research and development (R&D) and innovation capabilities
Innovation has always been at the heart of the BT
Group’s business and continues to be vital today.
We find new, exciting ways to use technology to improve
solutions, processes and networks and better serve
our customers.
Employing over 10,000 colleagues in our technology
units, we spent £604m on R&D this year. Adastral Park
is our global R&D centre and has played a pivotal role
pushing the boundaries of telecommunications
research. We have leading specialist facilities and
labs exploring the value of emerging technologies
including 5G, IoT and cyber security.
Openreach innovation helps manage cost and
continually improve network quality. R&D investment
has revolutionised the technologies, tools and
techniques that underpin our multi-billion pound full
fibre build. For example, our Cleanfast machine, Marais
Trencher and Ground Penetrating Radar enable faster,
safer and cheaper civil works which cause less disruption
to local residents.
We hold over 5,200 patents and patent applications and
have achieved world firsts in areas like quantum-secure
communications. We run an extensive, long-standing,
joint-research programme and currently work with
more than 60 universities. Together we pioneer the
future of connectivity and connectivity-related
services for our customers.
Rich data assets
Our large, rich data sets help us to deliver better service
to our customers and to create outstanding solutions.
Our customer, product, networks and operational data
give us insights into what is important and where we
can improve.
As we apply more artificial intelligence (AI) and
machine learning we’re creating more personalised
and meaningful experiences for our customers, and
working smarter, faster and more efficiently.
BT Group plc Annual Report 2022
Strategic report We operate in a rapidly changing
environment. By understanding key trends,
we can take advantage of opportunities as
they arise and act quickly to reduce risks
to our business where necessary.
Availability of next generation
network connectivity
Around the world telcos are making huge
investments in next generation networks
and technology. In the UK, 5G and full
fibre rollout is progressing at pace.
These new high capacity, high
speed networks will support greater
consumption of connectivity and new
digital technologies. These technologies
will open up new opportunities (like 5G
private networks) and shape how
customers interact with the digital world.
Digitalisation and
the shift to cloud
In parallel to revolutions in access
networks, other digital technologies
like cloud computing, AI and machine
learning continue to evolve. This is
changing the way people live and work.
Businesses are continuing to digitise, with
communication and collaboration tools,
and with shifts to cloud. And the explosion
of available data makes AI and machine
learning a critical part of new solutions,
services and business operations.
14
Key trends influencing us
Growing demand for
connectivity services
Our customers’ demand for connectivity
continues to grow and connected services
are supporting more aspects of their
personal and work lives. Even as the
world’s Covid-19 restrictions unlock,
some behaviour changes are here to stay.
Digital workplaces will continue. People
will work from home more often. More
home activities will rely on connectivity.
All of this means that seamless, ‘always-
on’ connectivity and greater data
consumption are here to stay too.
Overall monthly mobile traffic growth
in our core network vs. January 2019
x2.0
x1.4
x2.3
January 2020
January 2021
January 2022
x2.3
mobile traffic growth in our
core network (January 2022
vs. January 2019)
BT Group plc Annual Report 2022
Connected devices and computing
at the edge
Connected devices, machines and sensors
are playing an increasingly important role in
factories, homes and workplaces. As they
become more fundamental to lives and
businesses, reliable connectivity does too.
Alongside this, edge computing is changing
how people and machines connect – and
what can be done with these connections.
Data privacy and cyber security
The unstoppable rise of digitalisation,
connected devices and connectivity
services means an increased focus on
data privacy and the threats posed by
cybercrime. Consumers, businesses
and regulators want more control and
transparency over personal information
and how, where and why data is kept
and used.
Cyber attacks and data breaches in the
past year highlight how much damage
is done when something goes wrong.
Customers need a trusted provider to
help them prepare for, identify, mitigate
and manage threats.
15
Competitive markets
Competition is strong in all our active
markets. In the UK fixed access wholesale
market there’s more investment from
alternative network providers (altnets)
as well as established players. Traditional
telcos and new entrants in the consumer
and enterprise connectivity markets
continue to drive intense competition.
As connectivity and digital service
markets more closely intertwine,
we face a wider set of competitors –
including non-traditional digital and
big tech players.
Caring about societal and
environmental impacts
Today consumers, enterprises and
governments want to buy from, or work
with, companies that show they care
about society and the environment.
Companies that have a clear purpose,
behave responsibly, offer solutions that
help customers address these issues,
and directly help tackle climate change,
environmental challenges and inequality
will benefit.
Macroeconomic environment
The past two years have seen
unprecedented levels of economic
uncertainty. The pandemic continues
to disrupt economies across the world
and geopolitical tensions add further
uncertainty. There are positive signs with
potentially more stable, positive growth
and low unemployment as we emerge
from the pandemic. But inflation, supply
chain disruptions, rising interest rates and
depressed levels of business investment
continue to impact our business and
our customers.
BT Group plc Annual Report 2022
Strategic report 16
Regulatory update
Consumer fairness
UK regulators rightly prioritise
consumers’ interests. We support this
and want regulation which delivers
better outcomes for all customers, while
supporting the vulnerable ones. 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 CPs
• making sure everyone gets fair
treatment.
This year we launched Home Essentials
– a new tariff for financially vulnerable
customers. It has wider eligibility and is
easier to access than our previous
social tariff.
We’ve also voluntarily improved our
protections for customers who don’t take
a new deal when their contract ends. BT
broadband customers get a lower capped
price rise than before. And we’ve been
moving more customers on to BT Halo
– which means there is no change to what
they pay when their contracts end.
EE mobile handset customers out of
contract for more than three months
get a price discount from then on. When
existing BT, EE and Plusnet broadband
or mobile customers’ contracts end,
we offer them the same price as new
customers if they choose to re-contract.
Vulnerable customers are offered regular
account reviews to make sure they’re on
the best deal for their needs.
In April 2021, we voluntarily decided to
introduce Board-level oversight on our
approach to consumer fairness through the
BT Compliance Committee (see page 96).
Much of our commercial activity is regulated in
recognition of our significant presence across a
number of markets. As a result of this, we need
to engage closely with several UK regulatory
authorities but with Ofcom being our key focus.
Over the past 12 months that engagement has
touched upon some crucial issues for the UK
telecommunications market in general and for
BT Group in particular.
Shared Rural Network (SRN)
We’re making great strides extending 4G
rural coverage through the SRN initiative.
The SRN will extend coverage to 95% of
the UK’s geography by the middle of this
decade, delivering better connectivity to
local communities and businesses.
We’ve already improved coverage in
over 800 areas since the start of the
programme in March 2020. And in
December 2021 we announced plans to
boost coverage in another 1,500 locations
by 2024.
All IP
UK landlines will move from the legacy
public switched telephone network
(PSTN) to be IP-based by the end of
2025 – a key enabler for the UK’s wider
move to full fibre. We recognise that this
is a sensitive project given the need to
protect vulnerable customers and the
UK’s Critical National Infrastructure.
The scale and nature of this challenge
has meant we have put in place a pause
on the managed migration of our
consumer customers whilst we seek
to implement additional measures to
protect vulnerable users. We will continue
to engage closely with Government,
Ofcom, industry and user groups to
minimise any disruption for all customers.
Government support for fibre
Government has supported the sector
to accelerate and cut the cost of network
deployment, since this is essential
technology that will deliver widespread
economic and social benefits right
across the UK. We believe there is still
more the Government could do.
The current super-deduction for
infrastructure investors has provided
positive support to our fibre rollout, and
we are arguing for it to be extended in
some form, beyond the current end date
of March 2023, to provide the right
incentives for future, further investment.
Further investment could be encouraged
by making business rates for fibre
networks more fair and predictable.
At the same time, ‘barrier busting’
measures to facilitate wayleaves
negotiations, planning and access to
buildings and land could also assist
in accelerating full fibre rollout.
The Government is progressing with
‘Project Gigabit’ to support fibre
deployment to the ‘final 20%’ where
commercial build is unlikely. This is
likely to be drawn out beyond current
commercial build timescales – targeting
nationwide gigabit connectivity by 2030.
Some of the original planned £5bn
of funds are now being allocated.
We are continuing to engage with the
Department for Digital, Culture, Media &
Sport (DCMS) and the Building Digital UK
(BDUK) executive agency on the
framework for procuring them,
building on our extensive commercial
programmes that are already delivering
significant volumes of full fibre to
rural communities.
BT Group plc Annual Report 2022
17
European Electronic
Communications Code (EECC)
In October 2020, Ofcom launched
new customer protections based on
EECC rule changes. In line with Ofcom’s
recommended phases we implemented
most in December 2021, with the rest
following in June and the remainder in
April 2023. The rules give customers
enhanced rights. For example since
December 2021 all mobile devices have
been sold unlocked, and vulnerable
customers with specific needs have
had better access to information in a
format they choose. From June 2022,
before customers order anything they’ll
get an easy-to-read contract summary
which will also be easy to compare
to other providers and services.
Whilst we agree with what the EECC rules
are trying to achieve, we feel that some of
them 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. To give this right to customers,
our systems need to be able to recognise
Ofcom’s broad definition of ‘linked
contract’ across any combination of
our fixed and mobile services, even
across brands. We’ll keep working
through our business and systems to
comply with this from June 2022, while
simultaneously planning how to minimise
any unintended consequences.
Following Ofcom’s final decision in
September 2021, we’ve been working
with the rest of industry to design and
implement One Touch Switching. This new
‘gaining provider-led’ process will help
customers switch quickly and seamlessly,
not only within the Openreach network,
but also between different networks. The
deadline is April 2023. This is extremely
challenging as there’s a lot of complex
cross-industry work to be done. But we
support Ofcom’s proposals. They’ll benefit
both home and business customers.
Net neutrality
Ofcom has started a review of the net
neutrality framework which requires
internet service providers to treat
all internet traffic on their networks
equally. Ofcom will consider whether
the rules are still fit for purpose, given
market developments and how changes
could support innovation while still
protecting customers. Ofcom aims
to publish its thinking later in 2022.
Mobile strategy
As technologies develop markets change,
but they must still deliver mobile services
that work for consumers and businesses.
So Ofcom is conducting a broad scope
mobile strategy review of the next
five to ten years. It will include mobile
investment returns and how competition
(including large tech companies) and
the mobile value chain could change.
In parallel, DCMS has launched a
‘Wireless Infrastructure Strategy’ review
with an initial call for evidence. It will
explore UK wireless connectivity over the
next decade – and whether current policy
and regulation will support the
investment and innovation needed.
Ofcom and DCMS’ reviews come at a
really important time. The UK has made
a strong start to rolling out 5G. It was one
of the world’s first countries to launch
commercial networks in 2019, led by EE.
But 5G is still in its infancy. New
technologies and use cases will emerge
in the coming years, transforming
UK productivity and playing a critical
role in the UK’s plan to move to net
zero greenhouse gas emissions.
World class connectivity will underpin
this potential. That’s why the Ofcom
and DCMS reviews are so vital. They
must make sure policy and regulation
continue to support the market
structures that will minimise risks and
maximise opportunities for the UK.
Broadband universal service
We’re committed to improving the
UK’s digital infrastructure, bringing
the benefits of good connectivity to
all parts of the country. According
to Ofcom, superfast broadband
is now available to 96% of UK
premises, with full fibre broadband
now available in 28% of premises.
While our investment in faster and
more reliable networks will continue
to deliver connectivity for the vast
majority of communities across the UK,
some areas are unlikely to benefit from
commercial rollout in the short term.
In these areas, we are proud to act as a
partner to Government in addressing the
connectivity challenge. As the designated
universal service provider for broadband,
for example, we supply faster connections
for those unable to get decent broadband
if the cost of doing so is less than the
threshold of £3,400 set by Government.
In October 2020, Ofcom started an
investigation into whether we were in
compliance with our obligations as a
broadband universal service provider.
Following discussions with Ofcom, we
subsequently introduced a new payment
option for customers to share any
additional costs of upgrading the network
to ensure the costs of getting connected
can be shared predictably and fairly.
Ofcom closed the case in November
2021. More broadly, we continue to
support the Government as it considers
how to address the connectivity challenge
for communities unable to benefit from
the broadband universal service.
BT Group plc Annual Report 2022
Strategic report 18
Our strategic framework
Long-term value creation
Our strategic framework, based on three
pillars, explains what we will do to create
value for all our stakeholders and deliver
our ambition.
Purpose
Why we exist
We connect for good
2030 Ambition
Who we must become
Values
What will guide us
To be the world’s most
trusted connector of people,
devices and machines
Personal, simple, brilliant
Our purpose is simple and drives
everything we do.
Our 2030 ambition is who we
must become.
We let people and organisations harness
the power of technology – removing limits
and unlocking potential. From helping
organisations share ideas that shape the
future, to connecting friends and family
across the world, to supporting life-
saving emergency services in the UK, the
pandemic demonstrated our purpose’s
relevance and importance.
Businesses, governments, and millions
of people already trust BT Group every
day to connect them to who and what
they need.
As technology evolves and becomes an
ever more vital part of our customers’
lives, we must do more to keep and
grow their trust. Customers and all our
stakeholders have to know we’re on their
side. We must keep proving that they can
depend on us to help them thrive in the
digital world.
BT Group plc Annual Report 2022
Our values are what guide us
to deliver on our purpose and
ambition.
And alongside them, in September 2021
we launched ‘Being trusted: our code’ –
a guide to help remind colleagues of our
responsibility to society.
The code is ten simple statements setting
out the high standards we expect from
our business, colleagues and suppliers.
It will help us meet legal and regulatory
obligations, create a fair environment and
welcome, hear and value all voices. And it
will help us be a force for good:
• We support, respect and appreciate
each other
• We always put wellbeing and
safety first
• We create standout customer
experiences
• We keep information safe
• We are trusted with our finances
• We compete to win fairly
• We don’t cut corners
• We take a responsible approach to tech
• We love our planet
• We speak up
Purpose
Why we exist
We connect for good
2030 Ambition
Who we must become
To be the world’s most
trusted connector of people,
devices and machines
Values
What will guide us
Values drive our behaviour:
Personal, simple, brilliant
Being trusted: our code
helps us to do the right thing
19
Strategy
How we’ll grow value for all our stakeholders
Looking in
Build the
strongest
foundations
Looking out
Create
standout
customer
experiences
Looking to the future
Lead the way
to a bright,
sustainable
future
1
2
3
Build the strongest
foundations
Create standout
customer experiences
Lead the way to a bright,
sustainable future
We’re investing in the best converged
network. ‘Best’ means reliable new full
fibre and 5G networks, with the broadest
reach and enhanced network capabilities.
These will give our customers superior
connectivity experiences.
We’re providing outstanding service
and experience. That means market-
leading customer service and brilliant
digital touchpoints. And it means giving
experiences to customers that are
personalised, trusted and secure.
We’re creating a simpler, more efficient,
and dynamic BT Group. We’re simplifying
our product portfolio and processes and
modernising our digital and network
technology. We want to be easier to work
with, deliver more efficiently and be more
responsive to customers’ needs.
We’re building a culture where people
can be their best. This means cutting
complexity, transforming our workplaces,
giving colleagues every chance to
learn and grow and creating a future-
ready, agile organisation. We want all
our colleagues to have an outstanding
experience working for us – and feel free
to be themselves.
We’re creating smarter, differentiated
solutions and outcomes for customers.
We don’t just sell products, we provide
next generation converged connectivity
solutions and integrated services. And for
our large enterprise customers we also
offer differentiated service management
and expertise. We want to make sure
that the solutions we offer make our
customers’ lives better and deliver the
outcomes that they need.
We’re creating value through commercial
excellence – with leading sales
effectiveness and superior marketing and
pricing capabilities. We want customers
to recognise that our solutions make their
lives better, create value for them and
deliver the outcomes they need.
We’re positioning our corporate portfolio
for growth. That means reviewing what
we own, where we partner and where we
invest. We want all parts of our business to
create as much value as possible.
We’re exploring new tech-driven
growth engines. We’re seeking out
opportunities to build new connectivity-
related businesses based on our assets,
capabilities and expertise. We want the
businesses we grow to deliver outstanding
outcomes to our customers and country.
We’re creating a responsible, inclusive
and sustainable business – investing in
digital skills, championing responsible
technology and tackling climate change,
environmental challenges and inequality
problems. We want to lead the way for
businesses and show customers that
we’re contributing to a better world.
We’re building trusted partnering
relationships with stakeholders. We’re
a diverse business. We have many
relationships with colleagues, customers,
governments, regulators, shareholders,
suppliers and communities. We take
these relationships seriously. We want
to continue to build trust with all our
stakeholders as we grow.
BT Group plc Annual Report 2022
Strategic report 20
Progress against our
strategic framework
1
Build the
strongest
foundations
50,000+
homes and businesses built
to with our full fibre network
every week
c. 1.8m
customers connected to our
full fibre network (up 96% on
last year)
7.2m
5G ready customers, 120%
more than a year ago
50%
our 5G network now covers
over half of the UK population
The first year of
our Digital unit –
a key enabler for
process efficiency
and innovation
BT Group plc Annual Report 2022
21
By working with partners to harness the
power of 5G we’ve achieved a number of
firsts. We’ve travelled through rainforests
via an EE 5G and BBC Green Planet
augmented reality experience which
went live in February. And with North
Lanarkshire Council we created the UK’s
first 5G immersive classroom in Scotland.
Overall EE’s outstanding network
continues to be recognised. This year we
kept our RootMetrics #1 UK network
status for the 8th consecutive year. We
were also #1 overall, in voice, in data, and
in crowd in London according to Umlaut.
Overall performance
Rootscore award winner
We’re building the strongest foundation for our
future. That means transforming what we sell,
what we do and how we do it. To do that, we must
invest in the best converged network, create
a simpler, more efficient and more dynamic
BT Group and build a culture where people
can be their best.
The best converged network
Market leader in full fibre
This year we expanded and accelerated
our ambition to reach 25m premises with
full fibre by December 2026. The target
includes committing to build to 6.2m
homes and businesses in hard-to-reach
rural communities so they too can benefit
from our next generation network.
Our investment of approximately £15bn
in full fibre will support the UK’s digital
economy into the future. Thanks to our
engineers and network partners that are
using the latest innovations in tools and
processes, we’re rolling it out at low cost
and at an unrivalled pace. In total we’ve
now passed over 7m homes and
businesses, including over 2m in rural
areas. And every quarter our build rate
improves – with the fourth quarter of
FY22 being our best yet.
Right now, our engineers are building to
over 50,000 homes and businesses every
week. That’s nearly 300 an hour – faster
than every other major fibre builder
combined. And we’re doing it at lower
cost. Because of productivity
improvements, earlier this year we
announced our expected build cost per
premises was £50 (c. 15% on average)
lower than we initially planned.
42
CPs have signed up to the
Equinox pricing deal on our
full fibre platform
a EE consumer customers receiving or capable of
receiving 5G network connection using one or both
of a 5G-enabled handset and a 5G-enabled SIM.
Almost 1.8m customers are already
connected to our full fibre network (up
96% on last year). Our Consumer unit
leads in full fibre uptake, with over 1m
total connections and 20,000 new full
fibre connections every week.
Importantly, 42 of our CP customers have
already signed up to the Equinox pricing
deal on our full fibre platform. And we
continue to strengthen our CP
relationships. For example, Sky’s
engineers can now connect their
customers to our network directly.
EE
Vodafone
Three
O2
95.3
90.9
88.6
87.6
Market leader in 5G
We were first to launch 5G in the UK in
2019 and we’re rolling it out further and
faster. Our 5G network is now available in
hundreds of towns and cities across the
UK, and we offer 5G in more places than
any other network.
This year we announced our 5G rollout
now reaches over half the UK population,
five years ahead of the Government’s
ambition, and we’re aiming to cover
c. 90% of the UK geography by 2028. To
support this, we are utilising the 700MHz
and 3.7 GHz spectrum we bought in 2021.
And we’ve been doing all of this while
implementing the Government’s directive
to remove equipment from high-risk
vendors in the network.
The new network will give customers
faster speeds, more reliable service,
and near-instant connectivity. Our 5G
customer base keeps growing. We now
have 7.2m 5G readyª customers, 120%
more than a year ago.
Enhanced network capabilities
and broadest reach
Starting with the core network, we’re
upgrading our technology to make our
network intelligent, converged and
virtualised. We’ve hit major milestones in
our Mobile Cloud Core project this year as
we move to a single converged IP network
starting with a standalone 5G core.
This year we signed a partnership
agreement with a major cloud provider to
deploy an edge platform in our network.
This will improve customers’ connectivity
by reducing latency, optimising data
traffic, enhancing security and meeting
data residency needs for applications
hosted in the BT network edge.
Our Adastral Park R&D facilities continue
to push network boundaries. For example,
this year, together with partners we ran a
world first trial of Quantum Key Distribution
(an ultra-secure communication method
over hollow core fibre cables).
We want customers to be able to connect
wherever they go. That’s why our network
coverage is the UK’s broadest. Our mobile
network reaches 99% of the UK’s
population and Openreach’s fixed network
reaches over 31m homes and businesses.
BT Group plc Annual Report 2022
Strategic report 22
Progress against our strategic framework continued
Build the strongest foundations
This year we deployed 200 new small cells
into existing street assets like lamp posts
and telephone boxes around cities such as
London, Leeds and Manchester. These
small cells boost capacity in high demand
areas, allowing customers to benefit from
download speeds up to 300Mbps.
To have the broadest reach we’re not
just building in towns and cities. With
Government and operators, we’re
increasing EE’s network ambition to grow
rural coverage by 4,500 square miles.
That’s more than the Lake District,
Snowdonia, Peak District, Dartmoor and
Cairngorms National Parks combined.
On top of our fixed and mobile networks
we provide the UK’s most extensive
public wi-fi network. It has more than
500 hotspots and extra coverage in
cities through our digital street hubs.
The latest versions of our street hubs
include environmental monitoring,
rapid mobile device charging, an
emergency call button as well as free
gigabit capable wi-fi.
We’ve also rolled out 4G in Glasgow’s
subway stations and have announced
a partnership to provide mobile
connectivity throughout the London
Underground.
We are also working to cover more
hard-to-reach places with things like
portable cells and low earth orbit
satellites. This year we announced a
partnership with OneWeb to offer
satellite connectivity to consumers and
businesses. The first trials are happening
in 2022.
c. 50%
of EE mobile journeys in digital channels
have been automated
4,500
we’re increasing EE’s network ambition to
grow rural coverage by 4,500 square miles
BT Group plc Annual Report 2022
A simpler, more efficient and
dynamic BT Group
Simplified product portfolios
We’re simplifying and refining our
product portfolio. We’re retiring old
products to create a new streamlined
portfolio of solutions that deliver brilliant
experiences and serve our customers’
future needs. We’re also withdrawing
products with outdated features, slow
speeds and data caps to reduce the
complexity of our business.
In the last 12 months we’ve made big
progress. In line with our aim to close
the PSTN network by December 2025,
Openreach has started the process to
stop selling legacy products to c. 5m
premises across over 550 exchanges as
of March 2022.
52% of our legacy Global portfolio has
been or is currently being withdrawn. And
in Consumer we’ve halved the number of
broadband propositions by cutting old
promotional tiers.
Transformed customer journeys
We want the best customer engagement
in our industry. So, we’re redefining our
digital journeys to be simple, omnichannel
and with customer-led design. We’re also
automating our processes and using AI
capabilities for better experiences.
In Consumer, we’ve automated c. 50% of
the EE mobile journey in digital channels,
reducing the amount of manual
interventions.
We’ve simplified the EE website by
cutting back the number of links in the
online shop from 50 to less than 15. We’ve
also improved EE’s digital upgrade
journey, boosting customer satisfaction
and increasing order volume by 23%.
By transforming our Consumer customer
journeys and call centre operations we’ve
seen 14% fewer broadband customers
and 5% fewer mobile customers needing
to call us to fix an issue. This has reduced
our service costs by 9% year on year.
In SME we have improved broadband
acquisition journeys for small businesses.
We’ve seen a 3.1pp increase in the digital
channel share, a 53% increase in
conversions, a £15 higher average
order value and 18% of orders wanting
extra lines.
23
For corporate and public sector
customers we have enhanced our EE
digital self-serve capabilities for mobile
customers with the volume of monthly
online service transactions increasing by
over 40% in the year. For customers this
means they can keep track of their costs
and manage more aspects of their
accounts quickly and efficiently online,
without needing to contact an agent.
In Global, we have rolled out AI-based
solutions across almost 700 customer
queues. It’s cut the effort needed to
monitor and manage incidents where
no fault is found by 45% – and freed our
agents to spend more time on issues
that really matter to customers.
In Openreach we have a new systemic
treatment for repeat faults, helping a
specialist team investigate and find
permanent fixes. It’s driven down the
number of complex customer faults
repeated three or more times by 50%.
We’ve also put in a new automated
scheduling system which is helping our
colleagues in the field complete 14%
more tasks a week.
Modern, modular IT architecture
By embracing integrated platforms, data-
driven analytics and AI, we’re radically
simplifying and modernising our IT
architecture. It’s helping us be more agile,
make better decisions and create better
outcomes for us and our customers.
We are implementing Google’s powerful
Cloud Platform to become smarter in our
data analysis and AI capabilities across
the group. Our new cloud-based decision
engine is already using network and
premises data to optimise routes for
our engineers.
We have announced our intention to
accelerate moving data into our Cloud
Data Platform and aim to have 60% of
core data in the cloud by the end of 2023.
Using AI techniques, we have already
successfully used the platform to train
our in-app messaging and automated
assistant, Aimee, and have unlocked over
£100m in potential benefits from our
existing data in the next five years –
in terms of revenue potential and
savings opportunities.
Simultaneously, we are dramatically
simplifying our technology estate,
having announced the aim to reduce
our application count from over 2,420
in 58 stacks to fewer than 500 strategic
applications in 14 stacks in the next
five years.
We’re changing how we develop products
and services, with new digital processes
making it faster and simpler to add new
features and build new solutions. This
includes simplifying our service and
change management processes, and
implementing our new, modular,
event-oriented architecture.
Our Salesforce Evolution is rationalising
and upgrading our sales processes, so we
are better-placed to deploy changes and
launch products and services on an
efficient customer-focused platform.
Across the group, our transformation
programmes Making Finance Brilliant
and iConnect are streamlining complex
finance and HR systems and data, to
make them easier to use and automate.
Customers on strategic networks
So everyone gets the most reliable
connectivity, we’re investing in next-
generation strategic networks. This also
unlocks commercial benefits by letting us
gradually retire old networks with high
running costs.
We’ve made good progress on moving
customers off our legacy networks and
this year we switched off Featurenet
– the first of eight networks targeted
for closure – saving us approximately
£1.8m in run-rate energy costs.
We take care to minimise disruption
when gradually moving customers
off these old networks and this year
we paused managed migrations off
our PSTN network for our consumer
customers, as we develop alternative
solutions to protect vulnerable users.
As we look to recover and reuse scarce
resources, in line with our commitment to
sustainability, this year we estimated that
as we replace old copper networks with
fibre, we’ll be able to recover and sell up
to 200k tonnes of copper through the
2030s in line with customer migrations.
Competitive cost base
We’re saving money as we modernise –
through better ways of working, improved
processes and productivity and by getting
rid of old systems and networks.
We reached our target of £1bn gross
annualised cost savings earlier this year
and 18 months earlier than planned. We
have now extended our gross annualised
cost savings target to £2.5bn by the end
of FY25, all within the original expected
cost to achieve of £1.3bn.
You can read about costs savings achieved to
date on page 48.
We’re also finding better ways of doing
business. ‘Digital Garage’ is a suite of
tools which automates high-volume,
low-level procurement activities.
Our new procurement company, BT
Sourced, is fundamentally shifting
our costing and sourcing models –
streamlining the way we buy goods
and services and driving innovative
partnerships with suppliers.
£1bn
we’ve reached our target of £1bn gross
annualised cost savings earlier this year
and 18 months earlier than planned
BT Group plc Annual Report 2022
Strategic report 24
Progress against our strategic framework continued
Build the strongest foundations
A culture where people
can be their best
We can’t deliver our ambition without
our colleagues. So our people strategy
aims to make BT Group a brilliant place to
work. This year, we focused on continued
skills development, diversity and
inclusion, and health, safety
and wellbeing.
Skills and organisational
development
Continually nurturing future skills creates
a culture where people always want to be
at their best. So we continue to invest in
colleagues’ development – in things like
technical skills, agile working, resilience
and adaptability.
It’s crucial to match skill supply to future
demand. So we’re integrating workforce
and skills planning capabilities, combined
with AI, to bring data-driven external
benchmarks into skills development. This
is going to help us find ways of matching
reskilled colleagues with areas of demand.
We’re also building up flexibility between
retail store and contact centre
colleagues, which will help to support
customers where and when they need.
BT Group plc Annual Report 2022
This year we hired over 15,200
colleagues, c. 10,800 of them in the UK.
Graduate and apprentice programmes
play a big part in attracting fresh talent,
and we hired more than 3,400
apprentices and close to 300 graduates.
At the same time c. 17,000 colleagues
left the organisation – c. 13,700 through
natural attrition and c. 3,100 through paid
leaver programmes. During the year,
Openreach announced a plan to add
4,000 new jobs to support full fibre
rollout, 3,000 of which will be apprentices.
We champion flexible, continuous
professional development. Our future-
ready programme equips colleagues with
skills and knowledge to future-proof their
career and achieve our ambition. On top
of that, 25,000 engineers passed through
our 11 world class training schools last
year – reskilling for the full fibre world.
In July our Consumer unit was placed 9th
in the Best Big Companies to work for and
won a special award for ‘giving back’. The
award focused on simplicity, leadership
and wellbeing and gave us a world class
3-star score.
Our new Digital unit went live on 1 April
2021. As well as building our digital
capability it will lead our broader cultural
transformation to more flexible and agile
working. We intend to significantly reduce
our dependency on costly external
contractors and bring more digital
capabilities in-house over the coming
years to boost our productivity and reduce
our costs. This year we also signed a new
agreement with Distributed that will
enable flexible resourcing via freelancers
with high demand digital skills. This model
is a sustainable way of meeting short-term
demand and provides new routes to
work regularly with BT or become a
permanent employee.
Diversity and inclusion (D&I)
Diversity, inclusion, accessibility and
equality are everyone’s business. That’s
why they’re core elements of our people
strategy.
This year we rolled out mandatory anti-
racism training to all colleagues, helping
them challenge racism if they discover it
anywhere in our business. And the reverse
mentoring programme we started in 2020
for our Executive Committee and senior
leaders has helped shape our D&I plans.
We also announced stretching targets
to attract, recruit, promote and keep
women, people from ethnic minority
groups and disabled people. By 2030,
we want our workforce (excl. Openreach)
to be made up of 50% womena, 25%
ethnic minorityb and 17% disabledb
colleagues. And we are making progress
toward these goals. As an example,
this year Openreach recruited over
530 female trainee engineers. As
of 31 March 2022, nearly 11% of UK
employees said they were of Black,
Asian or minority ethnic backgroundc.
The things we’re doing and the targets
we’re setting show our commitment to
making BT Group a fully diverse and
inclusive workplace.
Read more on diversity and inclusion, including
our Diversity and Inclusion Report, at
bt.com/diversity-and-inclusion
You can find out about our Board’s diversity
and inclusion on page 87.
Health, safety and wellbeing
Covid-19 continued to have a real impact.
We focused most on supporting our
colleagues, preventing illness through
limiting workplace transmission,
communicating with colleagues on
managing safety during the pandemic
and reinforcing testing and vaccination
programmes.
Working with the Department for Health
and Social Care, we piloted workplace
testing and test click and collect schemes,
and supported home asymptomatic
testing. During the year we distributed
c. 250,000 rapid lateral flow tests to
colleagues, aiming to protect the most
vulnerable and safely return things to as
normal as possible.
a Global workforce.
b UK workforce only due to data limitations and based
on declared data only.
c 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
Gender pay gap
Our 2021 median and mean gender
pay gaps are well below national and
industry averages. As we build a more
diverse company we’ve seen more
women joining our engineering
apprenticeship programmes. Because
these are in our lowest pay quartile, this
has contributed to a slight increase in
our median pay gap from last year.
Our peopleª
36%
64%
You can find details of progress on our
gender pay gap at bt.com/genderpaygap
31%
69%
6.7%
(2020: 5.0%)
our overall median gender
pay gap (UK colleagues)
5.0%
(2020: 4.9%)
our mean gender pay gap
(UK colleagues)
34%
66%
26%
74%
BT Group plc Board
Male
Female
Total
Leadershipb
Male
Female
Total
7
4
11
75
34
109
Senior managementc
515
264
779
Male
Female
Total
Employees
Male
74,503
Female
25,972
Total
100,475
With the pandemic’s ongoing challenges
– and physical and mental health effects
in and out of work – we launched a series
of evidence-based programmes to
support our colleagues’ wellbeing. These
included a campaign on resilience during
the social restrictions which more than
3,500 colleagues participated in.
Another campaign encouraged less
stigma and more conversations around
mental health.
More than 700 managers had mental
health training to help them support their
teams with knowledge, practical skills and
the confidence to respond in the right way
to anyone struggling. 90% of them
agreed or strongly agreed the training
gave them more confidence to deal with
mental health problems at work.
When colleagues need mental health and
wellbeing support and want to talk with
someone, they have lots of options.
Our Employee Assistance Programme
is a free, 24/7 confidential service for
everyone in the organisation, with experts
there to help on a range of issues. We
have a mental health service with phone
or face-to-face cognitive behavioural
therapy, and our wellbeing portal has lots
of self-guided help and support.
Sickness absence rose this year, with
3.69% calendar days lost per colleague
(up from 3.02% last yeard).
a Colleague headcount at 31 March 2022. Excludes approximately 500 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 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). Numbers presented include 47 subsidiary directors (35 male and 12
female) who are not otherwise members of our leadership or senior management teams.
d 2.85% as presented in last year’s annual report; restated following review of calculation methodology in FY22.
To improve how we report and investigate
accidents or ‘near-misses’, we now
include supervisors and contractors in our
reporting. This year we had 258 lost time
injuries as a result of accidents (up from
203 last year). If and when our colleagues
need support after an injury, BT-funded
rehabilitation returns nearly 95% of them
to full duties.
Improving our workspaces
We continued to transform our
workplaces. In London, we finally bade
farewell to our old Newgate Street home
and moved into a brand new, state of the
art HQ at One Braham in Aldgate. We also
opened new sites in Birmingham and
Warrington, and we completed major
refurbishments in Bangor, Doncaster
and Gosforth. And we’re now starting
developments in Belfast, Bristol,
Glasgow, Manchester, Newcastle,
Dundee and Plymouth.
Our investment in better working
environments is definitely improving
colleague satisfaction. In our Birmingham
office there’s been a 45% rise, taking
the overall score to 81%. We’re getting
similar scores for all our new buildings,
demonstrating that we’re building
strong foundations for the future.
Pay and benefits
To attract and keep the best talent,
and reward colleagues for their work,
we regularly review pay and benefits
against competitiveness, sustainability
and fairness.
For BT Group managers eligible for a
bonus, we use a scorecard with a mix of
financial and non-financial measures.
It helps make sure bonuses match our
strategic priorities and responsibilities
to those of our stakeholders. And, in line
with the Commitments, Openreach
colleagues’ bonuses are linked to
Openreach’s performance only.
We’ve also redesigned our colleague
products so that all eligible colleagues
get brilliant discounts for themselves and
loved ones across all our brands.
Colleagues also have the opportunity to
join our all-employee share plans; save
as you earn and the share incentive plan,
to the extent that these are operated
each year.
BT Group plc Annual Report 2022
Strategic report 26
Progress against our strategic
framework continued
2
Create standout
customer
experiences
Record
NPS
across Consumer, BT SME and Global
BT Group plc Annual Report 2022
#1
EE is Rootmetrics’ #1 mobile
network eight years running
230,000+
Home Tech Expert visits to support
our customers
We know that the connectivity solutions we
provide are critical to our customers’ lives and
businesses. To surpass their expectations we want
to deliver outstanding service and experience
and offer smarter, differentiated solutions
and outcomes.
Outstanding service
and experience
Market-leading customer
satisfaction
This year we hit a new all-time high Net
Promoter Score (NPS) across the group
– with best-ever scores in Consumer,
BT SME and Global.
Consumer saw a +5.3 rise in the last 12
months. This was driven by improvements
in our BT brand and ongoing strength in
EE, and is one of the reasons for
Consumer’s low churn rate. BT SME saw
a +3 NPS improvement in the year. And
Global has seen a 20 point increase over
the last two years.
We’re cutting complaints too. In the latest
Ofcom published report, all BT Group
brands saw complaints equal to or lower
than the industry average for the first time
ever across landlines, broadband and
mobile. EE continues to have the equal
lowest complaints for a mobile company
at just 1 complaint per 100,000 customers.
In addition, BT broadband recorded an
all-time lowest complaint rate for the brand
with a year-on-year reduction of 50%.
Every single Consumer customer call is
now answered in the UK and Ireland. EE
remains #1 for broadband call centre
satisfaction with Plusnet ranked second.
EE also remains #1 for mobile call centres
with BT mobile second.
In the latest Uswitch Telecoms awards,
announced in February 2022, the BT and
EE brands won five of the seven
broadband and TV awards as voted by the
public, including ‘Broadband Provider of
the Year’ and ‘Most Reliable Broadband
Provider’, with EE picking up the ‘Best
Provider for Customer Service’.
Home Tech Experts
Our partnership with Enjoy offers a
delivery and set-up service to our
customers across BT broadband and EE
mobile products. This year we completed
over 230,000 visits to support our
customers and saw very high customer
satisfaction with NPS above +70.
Openreach success
Openreach tirelessly kept millions of UK
connections running at a critical moment
in history so customers around the
27
country could work-from-home, attend
online lessons and communicate with
loved ones.
This year we achieved our best ever
service across copper and fibre for
Openreach – exceeding all of Ofcom’s
Quality of Service measures. NPS for our
copper and fibre products, as measured
by CPs, reached an all-time high during
the year and improved by over 5 points.
Overall satisfaction, as measured by end
users, ended the year at 91.2% – up from
88.4% last year.
Despite the twin pandemic challenges of
sickness and delays and a number of
significant storms that affected much of
the UK in February, we delivered our best-
ever year for on-time repair at 86% with
the highest ever proportion of customers
seeing services restored within service
level agreements (SLA).
For new copper and fibre services we
offered customers a first appointment
date within 12 working days 98.9% of the
time (up from 96.2% last year). Only 2.3%
of missed appointments were down to
Openreach (lower than last year’s 2.8%).
And we want to do even better. We’ll
continue to work with CPs to improve our
processes and trial new ways of working
to improve end customers’ experience.
A new SoHo focus
We’re more dedicated than ever to
helping the UK’s smallest businesses –
and in July launched our new SoHo unit
within Enterprise.
Microbusinesses are essential for the
UK economy. And recognising the need
for specialist microbusiness services,
our new unit will serve their digital and
connectivity needs. It will offer tailored
connectivity, plus solutions around cyber
security, digital advertising and digital
skills training.
Brilliant digital customer
touchpoints
This year we launched Aimee, an in-app
messaging and automated assistant, to
Android customers. It’s answered c. 60%
of customer queries with great customer
satisfaction (NPS of c. 60).
BT Group plc Annual Report 2022
Strategic report 28
Progress against our strategic framework continued
Create standout customer experiences
Smarter, differentiated solutions
and outcomes
Smart and Full Works plans
In Consumer we enriched our Smart and
Full Works plans by introducing Netflix
and Microsoft 365. We now have 1.2m
customers on our premium plans.
Halo 3+
In February 2021 we launched
‘unbreakable’ Halo 3+ for our home
customers. Halo 3+ has unrivalled
reliability – seamlessly switching between
BT’s broadband and EE’s 4G mobile
network if there’s any disruption to the
fixed network.
Overall, approximately 50% of our
broadband base is now on one of our
Halo products and these customers have
on average a 9 point higher NPS than
non-Halo customers.
We’ve also expanded our ‘unbreakable’
offers for Enterprise customers. As part of
our SoHo launch in June 2021 we offered
Halo 3+ to microbusinesses. It comes with
business grade security, complete wi-fi
coverage across the workplace and free
24/7 support from our Tech Experts.
BT Group plc Annual Report 2022
BT TV Box Pro
Supporting the next generation of TV
viewing, this year we launched our newest
set-top box.
It includes crystal clear 4K HDR viewing
and Dolby Atmos (offering an immersive
audio experience) plus up to 600 hours of
recording. We also rolled out a new more
intuitive TV interface.
Webex collaboration
Businesses now work differently,
whatever their size. In response, we
now offer Cisco’s integrated Webex
collaboration service to small businesses
(we were the first big European CP to
do so). It’s improving customers’
productivity, making hybrid working
easier and helping us help small
businesses bounce back after the
pandemic.
Digital marketing hub
To help UK businesses take advantage of
the ‘digital first’ world, we launched our
powerful, all-in-one digital marketing
hub in October. Many small business
customers told us they struggled with
digital advertising. So our digital
marketing hub lets them create digital
adverts, run multi-channel marketing
campaigns and optimise results through
a simple dashboard with bespoke
recommendations and support.
Enterprise Managed Services
In October, Enterprise’s Managed
Services offering was appraised at
maturity level 3 of ISACA’s Capability
Maturity Model Integration framework.
This marks BT Group as the only
organisation in the UK to successfully
publish an appraisal at this level and
recognises our Managed Services unit as
having high performing work practices.
We have over 2,000 managed service
experts providing 24/7 support to
approximately 2,500 customers across
the UK and Ireland.
999
Our six call centres handle all 999 calls in
Northern Ireland, Scotland, Wales and
England, passing calls to the relevant
emergency service. The number of 999
calls handled by BT has jumped from 29m
in 2017 to over 39m last year including
180 consecutive days of over 100,000
calls answered. We also saw the busiest
New Year’s Day ever with our 999 agents
handling over 140,000 emergency calls.
Partnering with Microsoft
In July we announced a strategic
partnership with Microsoft. It’s focused
on cloud-enabled communications
solutions – including in industry-specific
areas like digital manufacturing and
health. By integrating Microsoft
applications and Microsoft Azure cloud
29
Halo 3+ has unrivalled
reliability – seamlessly
switching between BT’s
broadband and EE’s
4G mobile network if
there’s any disruption
to the fixed network.”
50%
of our broadband base is now
on one of our Halo products
with our connectivity and security
solutions we can optimise business
customers’ experience using
collaboration tools.
As part of this partnership, we’ve also
launched a new BT-branded global
managed voice service – Operator
Connect for Microsoft Teams. This
integrates networking and voice to
provide customers with a seamless
and secure collaboration service that
supports hybrid working.
Global next generation
Global has continued to develop a next
generation service portfolio – particularly
focused on cloud managed services for
multinational customers.
This year we announced Rackspace
Technology, Inc. (a leading end-to-end
multi-cloud technology company) as a
new cloud partner. Customers will benefit
from us combining our network and
security capabilities with Rackspace’s
cloud management expertise. The
partnership will uniquely position us to
support customers’ cloud journeys.
In September we launched our industry-
specific managed cloud solution – BT
Cloud Control for Financial Services
offering finance customers a secure
BT-managed multi-cloud solution.
Working with long-standing partner
Cisco, we launched the ThousandEyes
Cloud and Internet Intelligence managed
services to help customers identify faults
in their network before they cause
disruption.
Virtual Media Connect
In broadcasting, security, flexibility
and reliability are vital. In October we
launched Virtual Media Connect. It lets
broadcasters deliver live video in hard to
reach ‘off-net’ locations.
Combining BT Tower, the internet and
Amazon Web Services it’s a secure, high
availability way of transmitting stable
video streaming wherever it’s needed.
BT Group plc Annual Report 2022
Strategic report 30
Progress against our strategic
framework continued
3
Lead the way
to a bright
sustainable
future
14m+
people reached with help to
improve their digital skills
since FY15
BT Group plc Annual Report 2022
6,500
every day we protect our
infrastructure, networks
and customers against
6,500 cyber attacks
55%
cut in our operational carbon
emissions since FY17
31
Our growth plans help us lead the way to a bright,
sustainable future. We want to position our
portfolio for growth, incubate new tech-driven
growth engines and be a leader in responsible,
inclusive and sustainable business.
A portfolio positioned for growth
We’re continuing to strengthen our
portfolio to create long-term, sustainable
value and better outcomes for our
colleagues and customers.
In May 2022 we reached an agreement
with Warner Bros. Discovery to form a
50:50 joint venture company to create a
new premium sport offering for the UK
& Ireland – combining BT Sport and
Eurosport UK. We think this is the best
option for our customers and the best
future for BT Sport.
We have award-winning broadcasting
capabilities, production expertise and
sports rights – including our access to the
Premier League until 2025. Warner Bros.
Discovery has unique content assets and
capabilities. Combining them should
boost investment and deliver bigger
and better sporting content for our
customers.
As we simplify our business and sharpen
our focus we’re continuing to divest areas
where we believe there’s a better owner.
In June 2021, we sold the Public
Administration and Small Medium
Enterprise divisions of BT Italia to
Telecom Italia. This disposal was an
important step to end our domestic
operations in Italy, alongside the ending
of our domestic operations in Latin
America, Spain and France last year.
In February 2022, we completed the
sale of Diamond IP, a non-core software
business and provider of proprietary
IP Address Management software
and services.
We’ve partnered with market leading
logistics firm GXO to outsource our supply
chain activities. That includes transferring
around 300 colleagues. GXO’s expertise
will transform our warehouse and
transport capabilities, improve customer
service, cut costs and give our colleagues
better career opportunities.
Incubating new tech-driven
growth engines
We’re driving the future of connectivity.
And part of that is investing in
breakthrough tech-driven growth
engines in areas where we have a
strong right to play. By incubating new
innovation opportunities we create a
pipeline of sustainable revenue streams.
Security
Protecting the group, our customers and
the UK from cyber threats is a vital part
of what we do. Every day we protect our
infrastructure, networks and customers
against 6,500 cyber attacks.
Security is a big part of our future growth
too. Last year we added to our security
armoury which includes a team of 3,000
specialists, 13 global security operations
centres and unique network threat
intelligence.
In January, IDC Market Scape named
us as a leader in its European Managed
Security Services Vendor Assessment
report. They recognised our market-
leading innovation and partnerships –
coupled with proven experience and
integrated security, network and
cloud solutions.
In October, we launched a cloud-based,
self-learning security platform called
Eagle-i. It boosts our managed portfolio
by improving proactive threat response.
The AI-driven solution works with existing
controls in real-time to predict, detect
and neutralise security threats before
they can make an impact.
We’ve invested in Silicon Valley cyber
security company SAFE Security to help
customers better measure and manage
cyber risks. The SAFE platform expresses
security risks in financial terms, pinpoints
vulnerabilities and suggests mitigations.
Our multi-million dollar investment gives
us exclusive access to use and sell SAFE in
the UK.
For UK business customers, we’ve made
our market-leading Managed Security
Services available in Enterprise. The new
offers will help them navigate and
manage the rapidly evolving cyber
security landscape more easily.
Digital Incubation and Division X
To boost innovation, this year we created
two new teams.
In Digital, an incubation team is building
new digital businesses with a rigorous
innovation approach to create new
revenue opportunities.
Supporting it, our new start-up
partnerships team provides a systematic
approach to scouting, vetting and
securing deals with start-ups – combining
their products with our platforms and
go-to-market channels. For example,
Feebris, who create AI-guided tools that
support care workers to capture and
share precise health measurements, are
one of four health start-ups onboarded by
BT to date.
In Enterprise, our new Division X team is
encouraging next-generation growth for
customers. Division X will co-create, scale
and commercialise unique solutions in
areas such as 5G private networks and IoT.
We want it to help businesses benefit
from these pioneering technologies.
BT Group plc Annual Report 2022
Strategic report 32
Progress against our strategic framework continued
Lead the way to a bright sustainable future
Our Manifesto
In December, we launched the
BT Group Manifesto (Manifesto)
which outlines how we will
accelerate growth through
technology that is responsible,
inclusive and sustainable. It’s
not only a sustainability plan.
It’s a growth plan rooted in our
purpose to connect for good.
Our Manifesto commitments
are key to realising growth in our
connectivity solutions and new
tech-driven growth engines.
Data and AI solutions
We continue to unlock opportunities
around our data assets.
Creating anonymised, crowd movement
insights from our mobile network, our
AI solutions have grown more than 90%
in a year. They’ve given customers rich
behavioural insights like understanding
catchment areas for regional airport
passengers.
We were also proud to support the
Department for Health and Social Care
with objective, evidence-based analysis
that informed the local and national
response to Covid-19.
Healthcare
In digital healthcare, our Division X team
has created a Clinical Advisory Board
of eight top NHS clinicians. Their insight
and perspective will be invaluable as we
develop solutions that use technology to
create better outcomes and experiences
for the NHS and its patients.
Drones
In September, we ran an automated drone
trial in Southampton with Associated
British Ports and RoboK. It used drones to
automatically identify, track and analyse
the number of vehicles in the port at any
given time.
Project XCelerate, delivered in
partnership with award-winning unified
traffic management software provider
Altitude Angel, is the UK’s first
commercial drone area in open and
unrestricted airspace. Supported by
the Government and aviation industry,
we’re bringing together expertise to test
drones’ capabilities and showcase
potential benefits.
BT Group plc Annual Report 2022
33
Accelerating growth through technology that is…
Responsible
Inclusive
Sustainable
New tech must earn people’s
trust and transform lives for
the better
The future of tech must be
diverse and inclusive for
everyone to benefit
Tech must accelerate our journey
to net zero emissions and to a
circular economy
We will
• invest in new growth tech to help
us live and work better
• apply responsible tech principles
across our value chain
• partner to build a diverse talent
pipeline to drive the UK’s digital
economy and growth.
We will
• pass 25m homes and businesses
with full fibre by December 2026
• expand 4G and 5G
• help 25m people with digital skills
by the end of March 2026
• build a diverse workforce through our
diversity and inclusion targets.
We will
• be a net zero business by the end
of March 2031, with suppliers and
customers being net zero by the
end of March 2041
• help customers avoid 60m tonnes
of CO2e by 2030
• build towards a circular BT Group by
2030, and a circular tech and telco
ecosystem by 2040.
We contribute to the UN Sustainable Development Goals
We’ve been on this journey a long time
and take our role in society incredibly
seriously. The Manifesto recognises that
we’ll only succeed by helping solve actual
problems faced by our customers and
society. It’s about using our scale and
technology to grow and catalyse the
changes desperately needed in the world.
The Manifesto includes measurable
commitments to amplify our positive
impact for people and planet –
combined with a clear commercial
agenda.
BT Group plc
Manifesto Report
2022
We connect
for good
Growth through tech that’s
responsible, inclusive and sustainable
To read more download our BT Group Manifesto
Report at bt.com/manifestoreport
BT Group plc Annual Report 2022
Strategic report 34
Progress against our strategic framework continued
Lead the way to a bright sustainable future
Inclusive
Future tech must be diverse and
inclusive so that everyone benefits.
Championing digital inclusion
We’re working to make our networks and
tech affordable and accessible to all.
We’re helping more low-income
households benefit from our networks.
Our social tariff BT Home Essentials
offers broadband and calls at around half
the price of our standard fibre package.
It’s available to all customers on Universal
Credit and other means-tested benefits.
And Openreach’s Connect the
Unconnected initiative waives connection
fees for eligible customers on Universal
Credit.
More than one in five British adults say
unexpected life changes during the
pandemic mean they now need extra
support. So we’ve launched our Here for
You website – putting all our customer
support in one easy-to-navigate place.
We’ve also given extra training to
customer service colleagues to support
these customers.
We’re also expanding digital access to more
rural areas – read more about our UK network
investment on page 21.
Upskilling the nation
High-speed connectivity through our
networks will make a huge difference to
people and businesses in the UK. But only
if they have the skills to make the most of
the digital world.
We’ve helped 4.6m more people improve
their digital skills this year – from small
businesses and jobseekers to kids getting
their first phone. We’ve helped 14.7m
people since FY15 and we’re on track to
reach our target of 25m by the end of
March 2026.
Together with Google, we’ve given small
businesses free, one-to-one mentoring
sessions to help them harness digital skills
to grow. We’ve also run webinars with
Small Business Britain and invited
entrepreneurs to share advice and
practical tips.
This year we reached over 33,000
jobseekers through our Work Ready
virtual training sessions and ran a summer
Stand Out Skills campaign to help them
be more confident when applying for jobs.
Our colleagues have mentored 1,000 of
the 2,800 18 to 24-year-olds who’ve
completed Avado’s FastFutures training
programme since it began in 2020.
We’ve created the UK’s first phone
licence, to help prepare kids for life online.
EE’s PhoneSmart Licence is a fun and
educational online resource to help young
people learn how to stay safe and be kind
A responsible, inclusive,
sustainable business
Responsible
New tech must earn people’s trust
and transform lives for the better.
Applying responsible tech principles
across our value chain
Our responsible tech principles help us
think about benefiting people and
minimising harm every time we develop,
buy, use and sell tech. They’re grounded
in the UN Guiding Principles on Business
and Human Rights and are part of our risk
management framework.
We apply the principles right from the
start when we design new tech. We’ve
strengthened our privacy impact
assessment process with a new online
tool that integrates responsible tech
and human rights considerations into
business decisions.
Our responsible tech steering group
oversees the implementation of the
principles. The group continued its deep
dive into emerging risks and strategic
growth areas for BT Group this year,
inviting external experts to debate the
benefits and risks of topics such as data
monetisation and custodianship.
BT Sourced, our new procurement
company, has responsible and sustainable
criteria embedded in its processes –
giving our buyers a clear view of related
supplier risks and opportunities. We’ve
upped the weighting of these criteria from
10% to 15% in initially assessing who to
buy from.
You can read more about BT Sourced
on page 39.
We’ve continued working with others
to protect privacy and free expression
and prevent online harms – from
misinformation to online hate. We’re
currently being assessed against the
Global Network Initiative Principles on
Freedom of Expression and Privacy.
We’ve also expanded the scope of our
global sales due diligence process. This
will help us better identify and address
the potential human rights impacts of
our products and services.
BT Group plc Annual Report 2022
35
online. And targeting online hate, our
Hope United campaign was led by a
diverse team of top footballers, to help
give people the digital skills they need to
beat online hate and be a good team
player on social media.
In India, our partnership with the British
Asian Trust has helped bring skills and
education to 738,000 young people, and
in doing so we’ve exceeded our target of
enabling 100,000 teenage girls to stay in
school and develop better resilience and
employability skills.
Sustainable
Tech must accelerate our journey
to net zero emissions and to a
circular economy.
Reaching net zero
We’ve led on climate action for 30 years.
And now we’re acting faster than ever
before, bringing forward our net zero goal
by 15 years. That means we’ll be a net
zero carbon emissions business by the
end of March 2031 and a net zero
business for our supply chain and
customers by the end of March 2041.
Since FY17 we’ve cut our carbon
emissions intensity by 55% – slightly down
on last year’s 57%, as a result of the
rebound effect from the pandemic and an
increase in vehicle emissions to support
our full fibre rollout.
We’re on track to reach our 87% target by 2031
(a group KPI) – see page 45.
All of the electricity we consume
worldwide is renewably sourceda. This has
helped us cut our operational carbon
emissions by 55% since FY17.
We’ve continued making our networks
more energy efficient and investments in
our new offices have all been done with
sustainability in mind. Our newly opened
Birmingham and London offices are
BREEAMb Excellent buildings which
minimise environmental impact. Our One
Braham London HQ alone should save
over 3m kWh of energy a year.
We’re encouraging consumer climate
action with campaigns like the BT Big
Sofa Summit, BT Sport’s Green Routine
and ‘Not Tomorrow. Today.’ Our three-
month Smarter Living Challenge with
Hubbub found in June 2021 that a series
of over 400 tech solutions and small
actions could save 1.7 tonnes of CO2e and
potentially over £900 a year in an average
household.
Towards a circular BT Group and beyond
We aim to be a circular business by 2030
and part of a circular tech and telco
ecosystem by 2040. Our network build
activities, and initiatives like EE’s phone
repair service to extend handset
lifecycles, are just the start.
This year, over 1.35m home hubs and
set-top boxes have been collected for
reuse or recycling, as well as over 170k
mobile phones through the EE Trade-In
scheme. We recovered or recycled 97%
of our operational waste worldwide
(99.4% in the UK). We’re looking for more
ways to reduce waste, repair, refurbish
and recycle.
For our detailed environmental data,
see page 69.
Our Task Force on Climate-related Financial
Disclosures statement can be found on page 66.
Overall, we’ve cut our global energy
consumption by a further 9 GWh this year.
We’ve added 700 more electric vehicles
to our commercial fleet (now over 1,000
in total), we’ve increased the number of
charging points at our sites and
engineers’ homes, and continued to push
for policy measures to support the wider
transition to electric vehicles. We’re
aiming to transition the majority of our
vehicles to electric or zero carbon
emissions by 2030.
We continue to work with suppliers to cut
carbon. Since FY17 we’ve cut our supply
chain emissions by 28%, making good
progress towards our 42% reduction
target by 2031. Our pioneering ‘climate
clause’ commits 10 of our key suppliers to
make measurable carbon savings during
the life of their contracts with us.
Helping customers cut carbon
This year around £5bn (25%) of our
revenue came from carbon-cutting
solutions. We’ve set a new goal to help
customers avoid 60m tonnes of CO2ec
by 2030 – by adopting new products,
services and tech like FTTP, 5G and IoT.
Through our Green Tech Innovation
Platform, we’re working with tech
scale-up partners on solutions to help
public sector customers get to net zero.
Examples include use of IoT in social
housing, and sensors giving local councils
real-time data on CO2 emissions and
air pollution.
25%
of our FY22 revenue came from
carbon-cutting solutions
a 99.9% of the global electricity BT Group consumes is from renewable sources. The remaining 0.1% is where renewable electricity is not available in the market.
b Building Research Establishment’s Environmental Assessment Method, the world’s leading sustainability assessment for infrastructure.
c Carbon dioxide equivalent emissions.
BT Group plc Annual Report 2022
Strategic report 36
Our stakeholders
Our internal and external stakeholders play a crucial
part in our strategy of building the strongest foundations,
creating standout customer experiences and leading the
way to a bright, sustainable future.
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, CFUs, CUs
and TUs, senior leadership, the Executive
Committee and the Board and its
committees.
We engage with them in lots of different
ways – from meetings and conferences
to reviews, forums and webcasts. To
understand how well we’re engaging
with different groups, the Board and its
committees get regular updates. They
use them to make better decisions, and
give feedback and constructive challenge
on activities, programmes and initiatives
being considered.
Our stakeholder management group risk
category recognises just how important they are
to our business. You can read more on page 58.
Our Section 172 statement on pages 82
to 83 gives examples of how the Board
and its committees took our stakeholders’
interests into account in decision-making
during the year.
Colleagues
Our ambition is only as strong
as our foundations, and our
colleagues are absolutely
central to this.
Engaging with colleagues is critical to
creating a culture where they can be their
best and contribute towards our purpose,
ambition, strategy and long-term success.
We employ around 98,400 full-time
equivalent colleagues in 43 countries.
c. 79,900 are in the UK. We also engage
with c. 1,600 colleagues through agencies
and just over 68,400 other non-regular
colleagues.
BT Group plc Annual Report 2022
Our colleagues need us to:
• share their personal values
• give them flexible and agile ways of
working
• provide brilliant training, development
and career opportunities
• 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 HR director on
our colleagues, how key people strategy
initiatives are going, and culture and
overall sentiment in the organisation. The
pandemic – combined with our ongoing
cultural change programme – meant that
colleague wellbeing continued to be a
priority for Board discussions this year.
Given our focus on D&I, the Board also
spent time discussing this and how it
influences strategy, external targets,
commitments and progress.
The Board uses the Colleague Board as its
chosen method of engagement with our
workforce under the UK Corporate
Governance Code 2018. As designated
non-executive director for workforce
engagement, Isabel Hudson is the main
liaison. She has formal meetings and
informal discussions with Colleague
Board members.
Read more on the work of the Colleague Board
in the corporate governance report on pages 80
to 81.
Once a year our colleagues tell us how it
feels to work here through our Your Say
survey. Around 81% of them took part this
year, with the results going to our
Executive Committee members and
senior leadership.
We got a clear picture of how our
colleagues were feeling and a good
understanding of what more we can do to
make BT Group a brilliant place to work.
We included questions on the pandemic.
87% felt we were managing the response
to it well and 90% said we cared about
their personal safety.
We’re continually reviewing and
improving our approach. So this year we
also conducted a mid-year pulse survey
which went to a quarter of the business.
Our People Networks are colleague-led
groups that share thoughts, opinions and
opportunities with our leadership team to
help make BT Group truly diverse and
inclusive. They’re supported by an
executive sponsor who champions their
purpose and work and provide counsel to
the network chairs and deputy chairs.
As well as listening directly to colleagues,
we also hear concerns through more
formal engagement channels. In 2021 we
renewed our employee relations
framework with the CWU. We also
established a partnership agreement with
Prospect on how we’ll work together with
recognised trade unions on modernising
BT over the coming years. We also
continue to formally engage our
European Consultative Council and EE
employee representatives in the UK.
When we act on colleague feedback, we
try to pick things with the biggest impact.
Longer term, we inform and shape our
strategy based on creating a culture
where colleagues can be their best. We
focus particularly on skills development,
diversity and inclusion, and health, safety
and wellbeing.
You can read more about activities during the
year on pages 24 to 25.
The Remuneration Committee, on behalf
of the Board, reviewed the pay, conditions
and HR policies across the wider
workforce during the year, considering
market conditions and the financial
impacts of the Covid-19 pandemic.
Further to the committee’s consideration,
we have subsequently committed to
paying UK colleagues at least the Real
Living Wage and recently increased our
minimum salary across the board to
reflect that.
37
Customers
We want to give customers
standout experiences by
delivering brilliant service,
solutions and outcomes.
We have a big and broad customer base.
Consumers, small and large businesses,
multinationals, the public sector and CPs
all want different things. Engaging with
them to understand their current and
future needs is fundamental to delivering
our strategy, ambition and purpose.
Our customers need us to:
• connect them to their digital worlds
with reliable, high quality solutions
• give them brilliant experiences and
outcomes that match their needs
• provide excellent service, whether in
stores, through support teams, via call
centres or digital channels
• keep them secure and protect their
data
• do all of this at a price that represents
brilliant value for money.
How we engage with customers
and the result
We actively engage with our customers
all the way from initial product
development to ongoing billing and
service management. It helps us make
sure we’re offering the right propositions
in the best way to meet their ongoing
needs.
Our insight centre of excellence serves all
parts of the group to help us understand
customers better. It provides research
and analysis to give us a deeper
knowledge of customer segments and
their specific needs.
Across different customers and channels,
we use different methodologies and data
sources – like focus groups – to
understand perceptions, expectations,
needs and behaviours. The insights we
get influence how we set strategy, design
customer-driven improvements,
refine solutions and pricing and develop
our brands.
We invest a lot of time to understand our
customers’ perspectives. This year we ran
sessions for our senior management team
where they listened directly to customers
about their experience with BT Group –
focusing as much on where we got things
wrong as what we did well.
We also have two panels which support
our customer engagement and include
representation from the Board. The
Customer Inclusion Panel represents
different sections of society with different
needs (such as customers with physical
disabilities) to help us understand and
respond to the range of challenges faced
by our customers. The Customer Fairness
Panel focuses on ensuring we are treating
different customer groups fairly. As an
example, it supported our Consumer
unit’s launch of its social tariff – Home
Essentials.
Our Global Advisory Board allows us to
meet regularly with top executives from
large multinational customers. Similarly,
our Security Advisory Board invites senior
security clients to discuss cyber security
risks and challenges. This helps us
understand their priorities, needs and
challenges so we can design solutions
that deliver the outcomes they’re
looking for.
Openreach makes sure all its customers
get equal access to our fixed network.
It does that through an industry
consultation process that is
straightforward and compliant – with
strong governance controls. All CPs also
have the opportunity to engage with
Openreach confidentially during initial
consultation stages.
Our CFUs monitor how they’re doing on
delivering for our customers. We track
and review customer metrics every
month, including NPS. The chief
executive, Executive Committee and
senior management teams regularly
review progress on our customer
experience metrics to assess and agree
appropriate actions for ongoing
improvements.
The chief executive, Executive Committee
and senior leadership also regularly
review and discuss complaints directly
with customers. The opportunity to
actively connect and understand the
experiences of our customers helps us to
better identify and problem-solve
challenges at a high level, benefiting
everyone.
Whether it is defining our strategy,
approving investment decisions or
creating new propositions, the impact on
the end customer is always a core
consideration to any decisions we make.
The Board are regularly updated on
market trends and customer experiences
including NPS. There are detailed
discussions at the Board with the CEO of
each of the CFUs, including Openreach,
on how we are performing and how we
can drive improvements for our
customers.
The Board understands the importance
of protecting consumers’ interests and
meeting Government and regulator
expectations of a consumer fairness
culture, at all levels. The BT Compliance
Committee provides Board-level
oversight of consumer fairness and
discusses this at each of its meetings.
Read more about steps we’ve taken to ensure
consumer fairness on page 16.
BT Group plc Annual Report 2022
Strategic report 38
Our stakeholders continued
Shareholders
We have both equity and
debt investors.
Our equity investors comprise
institutional investors, who hold the
biggest volume of shares, and c. 671,000
individual shareholders.
We have a good relationship with debt
investors (mainly financial institutions
who invest in our publicly-traded bonds).
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, alongside our scale, strong
market position, and integrated business
profile.
Our shareholders need us to:
• deliver a return on their investment
through dividends and capital growth
• perform well against our long-term
strategy and outlook.
How we engage with shareholders,
and the result
We communicate regularly with
shareholders through our investor
relations programme, the Annual Report
and our quarterly financial results and
trading statements, and other key
shareholder documents and briefings.
We have also substantially improved our
website this year to improve our digital
communication.
Our AGM is a chance for the Board to
meet and engage with shareholders. The
AGM 2021 was a hybrid event, held in line
with Government pandemic restrictions
at the time. Shareholders were provided
with the opportunity to ask questions in
advance or in the meeting itself. All
resolutions put to the meeting received
overwhelming support of investors.
The results of the voting at all general
meetings are published on our website:
bt.com/agm
We will publish the arrangements for the
AGM 2022 in the Notice of meeting (see
page 119).
The company secretary or her delegate
communicates with individual investors,
making sure we respond properly to
questions about their shareholding. Our
share registrar Equiniti also liaises with
our shareholders in relation to any
specific shareholder queries.
We manage relationships with
institutional investors and debt investors
through our investor relations
programme. It includes one-to-one
conversations, roadshows, group
meetings, conferences and industry
events. The chairman, senior independent
director and other directors, as
appropriate, also liaise with investors.
During the year, the chairman (current
and previous) also met investors to
discuss their views on the business.
This year the directors, chief executive,
chief financial officer, other executives
and the investor relations team held 248
meetings with investors. Key topics
included:
• BT Group’s strategy and competitive
position in key markets
• financial and operational performance
(particularly the impact of a higher
inflationary environment on the
business, and medium- to long-term
cash flow)
• appointment of our new chairman
• capital investment
• capital allocation policy
• prospective governmental and
regulatory policy decisions
• pension fund valuation.
The Board gets regular reports on our top
shareholders, movements in the share
register, share price performance and
how we’re engaging with institutional
investors and analysts. It also discusses
shareholder issues with management and
advisers and considers these as part of its
decision-making.
Communities
We’re at the heart of the
communities we operate in,
and help bring them together.
We need all the communities we serve to
trust us. Without that, we cannot deliver
our growth plans – or our purpose to
connect for good.
Communities rely on us to:
• give them reliable and secure
connections
• help local people and SMEs get more
from the digital world
• protect the environment and help
tackle issues like climate change
• do business ethically and responsibly.
How we engage with communities,
and the result
We touch communities across the UK
every day through customer interactions
at EE/BT retail stores, home visits to set
up broadband and mobile services, and
through people using our products and
services to connect, live, work, learn
and play.
To understand what matters most to our
communities, we engage with them and
use the insights to inform our focus areas,
targets and programmes.
This year, our Hope United campaign
responded to experiences of online hate
and our new Here For You website helped
people get the additional support they
told us they needed as a result of
Covid-19. We’re also using insights to find
ways to build trust in new technology.
For more details on these, see pages 34 to 35.
BT Group plc Annual Report 2022
39
Suppliers
Good supplier relationships are
essential for our success. They
help us deliver solutions and
propositions that create standout
customer experiences.
We source from all over the world, with
suppliers in nearly 100 countries.
Suppliers need us to:
• pay them in line with our agreed terms
• help them optimise their own
supply chains
• act ethically and transparently.
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 suppliers
before and after we sign a contract,
which covers financial health, anti-
bribery and corruption, 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.
During the year we launched BT
Sourced, a new standalone procurement
company based in Dublin which has
established itself as a hub for many ‘Big
Tech’ businesses as well as technology
start-ups. BT Sourced has been
established to challenge the traditional
ways of buying goods and services by
simplifying processes and introducing
new technology and partnership-
based approaches to the way we
work with suppliers and start-ups.
BT Group plc Annual Report 2022
In response to the Ukraine crisis, we’ve
made mobile and landline calls, data and
texts on BT, EE and Plusnet to and from
Ukrainian mobiles free. We’re also
sending thousands of powerbanks to
people displaced by the situation, and
working closely with relevant government
and industry partners. Our international
charity partner, UNICEF, is at the forefront
of the humanitarian response – BT
colleagues are donating to the children’s
emergency fund run by UNICEF, who
distribute aid to affected children.
We have a group KPI to reach 25m people
in the UK with help to improve their digital
skills by the end of March 2026. We also
measure reputational performance and
trust to track how we’re perceived across
communities.
More on how we’ve supported communities
and the environment this year can be found on
pages 34 to 35.
Our Manifesto will help us accelerate
growth through tech that is responsible,
inclusive and sustainable – communities
will benefit from this either directly or
indirectly as we aim to provide solutions
to societal problems.
On behalf of the Board, the Digital Impact
& Sustainability Committee had input into
the objectives of the draft Manifesto
ahead of launch and continues to review
our activities and performance under the
three pillars of the Manifesto, in line with
our commitments to being a responsible,
inclusive and sustainable business.
Read more on the Manifesto on pages 32 to 33.
Connectivity opens up opportunities
in education, employment and social
inclusion, and can transform access to
healthcare and vital local services. So
we’ve continued to roll out our networks
faster this year and cut the cost of
broadband for eligible low-income
households.
Boosting digital skills through
partnerships and volunteering, and
working with charities, demonstrates our
investment in communities and society.
This year, we helped 4.6m people improve
their digital skills, including thousands of
small business owners and their
employees.
Colleagues voted for Home-Start UK as
our new UK charity partner. It tackles the
digital divide affecting vulnerable people
by helping families improve their digital
skills, through fundraising and
volunteering.
Strategic report 40
Our stakeholders continued
This is a key part of our digital impact
and sustainability strategy, so the Digital
Impact & Sustainability Committee
regularly discuss initiatives. Feedback
is used to continually enhance
our approach.
During the year, the Digital Impact &
Sustainability Committee discussed
programmes and initiatives in place
across the group to manage risks within
our supply chain, including how we
mitigate these risks and ensure that we
continue to be a responsible, inclusive
and sustainable business.
We are actively encouraging and helping
our suppliers to meet and match our own
D&I commitments. We’ve also taken
more diversity-led steps in our dealings
with suppliers, such as systematically
assessing diversity when taking on
new suppliers.
UK Government
We add over £24bn to the UK
economyª, supporting critical
services and working with more
than 1,200 public sector focused
customers.
Our networks support the functioning of
vital public services like welfare, tax,
health, social care, police and defence,
while protecting citizens’ personal data.
Our relationship with Government bodies
supports our strategic priorities – as well
as enabling us to contribute to policies
and initiatives that benefit our
stakeholders.
Government stakeholders need us to:
• keep investing in network infrastructure
• provide the fastest, most reliable and
secure connection possible, to the
widest possible range of communities
• create fairly-priced products and
services, backed by brilliant customer
service.
which generates more opportunities,
particularly for smaller suppliers,
while also creating more capacity for
human-to-human interaction that can
focus on tackling the most important
issues across our supply base.
During the year, we joined the
Joint Audit Cooperation (JAC) of
telecommunications operators,
which conducts and share corporate
social responsibility audits of
suppliers. JAC aims to verify, assess
and develop the implementation
of corporate social responsibility
across the manufacturing centres of
important multinational suppliers
to the information communications
and technology (ICT) industry.
JAC members share resources and best
practices to develop long-term CSR
implementation in the ICT supply chain at
an international level. This should make
sure BT Group’s growth is responsible,
inclusive and sustainable.
We also continue to 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.
During the year, we also announced
a partnership with GXO Logistics to
outsource and transform part of BT
Group’s supply chain across the UK as part
of a new long-term relationship. This new
partnership forms part of our ongoing
strategy to simplify and modernise
our business, which continues to make
strong progress. We will be outsourcing
our core warehouse and transport
capabilities, while ensuring that the
group’s market-leading next generation
network build plans remain on track.
During the year, we have faced significant
inflationary headwinds from a range of
factors such as a global shortage of
chipsets, rising energy prices and higher
shipping costs, which we have worked
with our suppliers to mitigate as much
as possible.
To further strengthen our capacity to
deal with such challenges, BT Sourced
will also accelerate the adoption of new
technology that can challenge some
traditional ways of buying and encourage
more collaboration.
For example, we have introduced tools
that make it easier for suppliers to deal
with us and that automatically engage
several suppliers simultaneously.
These tools are encouraging greater
competition within our supplier base
BT Group plc Annual Report 2022
41
In 2017, we put in place the
Commitments. It provides Openreach
with a greater degree of strategic and
operational independence, in line with
objectives set out in Ofcom’s Digital
Communications Review.
In December 2021, Ofcom noted that
Openreach continues to operate with a
“high degree of independence from BT”b
and that there were “strong structures
and processes” in place at both BT Group
and Openreach which helped support
compliance.
Ofcom says that BT Group and
Openreach are still making good progress
to safeguard Openreach’s independence.
We continue to engage with Ofcom and
CPs to maintain their confidence that
we’re following both the letter and spirit
of the Commitments.
On behalf of the Board, the BT
Compliance Committee monitors our
compliance with the Commitments,
including our culture and behaviours of
our colleagues.
Ofcom attended a BT Compliance
Committee meeting during the year and
discussed feedback on the Commitments
and Ofcom’s relationship with us. The
Board are also regularly updated on any
key meetings between Ofcom and the
chairman, chief executive and others.
You can read more on the work of the BT
Compliance Committee in the corporate
governance report on page 96.
a Based on an independently prepared study by Hatch
Urban Solutions in December 2020 study. A new
study is due in FY23.
b Quoted from Ofcom’s annual Openreach monitoring
report, published 8 December 2021.
BT Group plc Annual Report 2022
How we engage with the
Government, and the result
Our networks are part of 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 Enterprise unit delivers and looks
after public sector contracts and services
like the Emergency Services Network
(see page 28). We’ve also continued to
support the Government and NHS teams
dealing with the Covid-19 pandemic.
Our policy and public affairs team
manages our relationships with
Government and other politicians.
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 it 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 remit, from infrastructure
investment to national security, from
regulating online harms to trade and
economic policy.
In the past year we have contributed
to a range of Government initiatives –
for example on wireless infrastructure
strategy, supply chain diversification,
data strategy, drones and AI.
We continue to make good progress in
delivering against our SRN obligations
(see page 16), supporting this key
industry-government initiative and
maintaining EE’s 4G coverage leadership.
We’ve also provided input into
consultations on key legislation including
the Telecommunications (Security)
Act 2021, the Product Safety and
Telecommunications Infrastructure Bill
and the Online Safety Bill.
The Board gets regular updates 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
makes sure rules and standards
are consistent in each jurisdiction,
which in turn protects consumers
and promotes 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 economic and consumer
regulatory powers for the sector.
We also engage with other regulatory
bodies like the Competition and Markets
Authority and the Financial Conduct
Authority (FCA).
Ofcom needs to:
• advance citizens’ and consumers’
interests, often by promoting
competition
• encourage investment and innovation
• support investment in the UK’s critical
digital infrastructure.
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 Ofcom’s ambition
for a world class UK digital infrastructure
and allow efficient investment, while
keeping the market fair and competitive.
For more details of the main regulatory topics
we cover with Ofcom see pages 16 to 17.
Strategic report 42
Non-financial information
The table below (and the sections it refers to)
form our non-financial information statement –
as required by sections 414CA and 414CB of the
Companies Act 2006 (2006 Act).
Colleagues
(See pages 24 to 25, 36, 64 and 80 to 82)
Our policies
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 by integrating
health, safety and wellbeing
considerations into our work with
colleagues, contractors and the public.
Our Diversity and Inclusion Strategy
sets out a programmatic, evidence-
based approach to understanding
and removing bias and other cognitive
barriers from our policies, processes,
systems and decision-making.
It supports our aim to build the
strongest foundations by making sure
we apply an inclusion lens to everything
we do and promoting a culture where
colleagues can thrive.
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
Our due
diligence
We put resources behind building a safe
and healthy workplace. That includes
policies, training, processes and
effective risk controls.
We have established an effective
governance process to make sure we
consistently integrate D&I into key
decisions and policy development.
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 track sickness
absence trends, adapting processes
to better support colleagues.
We review policies annually and update
them when needed.
The Executive Committee and the
Board are regularly updated on health,
safety and wellbeing matters.
We regularly report to the Executive
Committee on the progress we are
making to achieve our diversity
targets and whether our strategy is
still effective and relevant. The Board
is also updated on progress.
All of our People Networks that
champion the concerns and priorities
of their members are sponsored by the
members of the Executive Committee
or the CEO, Openreach.
Our Colleague Board helps shape and
influence our D&I plans. Read more
about the Colleague Board on pages 80
to 81, and other ways we engage
with colleagues on page 36.
Outcomes
There are details of what we’ve done
to apply 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 D&I
and incorporates it into our decision-
making.
There are details of the things we’ve
done this year to support our strategy,
together with our latest D&I statistics,
on pages 24 to 25.
Risks
We track health, safety and wellbeing
risks in its corresponding group risk
category, on page 64.
We reflect D&I risks in our people group
risk category, on page 63.
Environment
(See pages 35, 45, 64, 66 to 69
and 82)
Our Environmental Policy sets out
guiding principles that will get us to net
zero carbon emissions by the end of
March 2031 for our operations, and by
the end of March 2041 for our customers
and supply chain.
It supports our strategy by explaining
how we’ll realise our ambition to create
a more sustainable future for ourselves
and our customers by cutting our
environmental impact, and helping
customers and suppliers cut theirs.
The policy describes how we engage with
stakeholders on environmental issues
and monitor and report on progress.
The Manifesto also reinforces our net
zero commitments.
Our Environmental Policy can be found
at bt.com/ourpolicies
We monitor and manage our
environment strategy and risks through
the Digital Impact & Sustainability
Committee. We also do it through
our Group Environment Board, which
reports to the Executive Committee.
We measure progress on different
environment goals, one of which is a
group KPI (page 45).
We review and update the policy
every year.
Read more about our plans and
performance on the environment and
tackling climate change, including
progress on becoming a net zero carbon
emissions business, on page 35.
There are also details of our
performance against our group KPI
target to cut the carbon emissions
intensity of our operations by 87%
by the end of March 2031 on page 45.
We consider the impacts of climate-
related risks across our whole
business – for example in stakeholder
management, supply management
and service interruption group risk
categories on pages 62 and 65.
We’re acting to mitigate key physical
climate risks and our impact on the
environment in a number of areas. Read
more on page 35 and in our Task Force
on Climate-related Financial Disclosures
statement on pages 66 to 69.
BT Group plc Annual Report 2022
Social and community
Human rights
(See pages 32 to 35, 38 to 39, 45 and 82)
(See page 34)
Anti-bribery and corruption
Our Manifesto is rooted in our purpose,
‘we connect for good’, and backed up
by commitments under the themes of
Responsible, Inclusive and Sustainable.
It recognises that we will only succeed if we
help to solve some of the problems faced by the
societies and customers we serve.
Wider society will benefit from us delivering on
our Manifesto, in particular on our commitment
to help give people the skills they need to
succeed in a digital world.
The BT Group charity approach sets out how
we work with our key charity partners and how
we support our colleagues’ volunteer work.
Our Human Rights Policy Commitment
explains our commitment to respect and
Being trusted: our code sets out our promises
which include our zero-tolerance approach
champion human rights across BT Group and
to bribery and corruption. It’s supported
in our relationships with others. It describes our
by a specific Anti-Bribery and Corruption
approach to respecting rights and freedoms,
(ABC) Standard.
especially in the digital world. And it’s
supported by our responsible tech principles.
Our code describes our values and behaviours,
how we expect everyone who works for us
Being a human rights leader and having strong
(or on our behalf) to do business. It also
ethical standards builds trust. This is key to
us achieving our ambition to be the world’s
covers extra policy areas like human rights,
and equality and diversity. And it provides an
most trusted connector of people, devices and
ethical framework for our ambition to become
machines.
The Manifesto also reinforces our responsible
tech principles and BT Group’s respect for
human rights.
the world’s most trusted connector of people,
devices and machines.
It demonstrates, through our commitment to
doing the right thing, how our stakeholders can
depend on us.
The BT Group charity approach can be found at
bt.com/modernslavery
be found at bt.com/ourpolicies
Our Modern Slavery Statement can be found at
Our Anti-Bribery and Corruption Standard can
Our Human Rights Policy Commitment can be
Being trusted: our code can be found
found at bt.com/ourpolicies
at bt.com/ethics
Our Manifesto can be found at bt.com/
btmanifesto, and you can read more about
it on pages 32 to 33
bt.com/ourpolicies
The Digital Impact & Sustainability Committee:
We have processes to identify and address
All our colleagues are required to do mandatory
• oversees our Manifesto commitments and
progress
• reviews our strategy and progress on societal
programmes and targets
• monitors progress against the group KPI of
reaching 25m people with help to improve
their digital skills by the end of March 2026.
Read more about the committee’s role on
page 97.
potential and actual human rights impacts
training on our code. We also publish
across our business.
communications that reinforce policies.
They include checks to make sure we apply our
Our annual Your Say employee engagement
responsible tech principles when we develop,
survey includes questions on ethical
buy, sell and use tech.
perception, with results shared with senior
Our responsible tech steering group oversees
management.
implementing the principles. It reports to the
Our Speak Up whistleblowing service
Executive Committee.
Respecting people’s rights is covered in
mandatory annual training. We also provide
targeted training for teams most likely to
encounter human rights issues.
We identify, measure and tackle human rights
impacts in our operations and supply chain
through the Speak Up whistleblowing service,
and through risk assessment surveys and on-
site audits.
lets anyone who works for (or with) us to
confidentially report anything that goes against
our 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 report on how we invest in communities on
Following a self-assessment last year, we’re
This year, 96% of our colleagues completed
pages 38 to 39. Read more about our Manifesto
now being externally assessed against the
training on our code. We also introduced a new
and what we’ve achieved this year on pages 32
Global Network Initiative principles. We’ve
system to better manage our ABC high risk
to 35, including our progress on helping people
enhanced our sales due diligence process and
third parties and completed a bottom-up ABC
improve their digital skills (a group KPI).
expanded the scope.
risk assessment.
We report on implementing our responsible
tech principles on page 34.
Our Speak Up whistleblowing service received
517 reports this year. You can find more details
on these in our Modern Slavery Statement at
bt.com/modernslavery.
We consider digital inclusion risks as part of our
We consider human rights risk as part of our
We consider ABC and ethical conduct risks
stakeholder management group risk category
stakeholder management group risk category
within the legal compliance group risk category
on page 58.
on page 58.
where risks apply across our operations
generally. See page 61.
43
Our policies
Colleagues
(See pages 24 to 25, 36, 64 and 80 to 82)
Environment
(See pages 35, 45, 64, 66 to 69
and 82)
Our Health, Safety and Wellbeing
Our Diversity and Inclusion Strategy
Our Environmental Policy sets out
Policy Statement promotes a safe and
sets out a programmatic, evidence-
guiding principles that will get us to net
healthy workplace and aims to prevent
based approach to understanding
zero carbon emissions by the end of
work-related injuries, ill health and
and removing bias and other cognitive
March 2031 for our operations, and by
diseases.
barriers from our policies, processes,
the end of March 2041 for our customers
It supports our strategy to build the
systems and decision-making.
and supply chain.
strongest foundations by integrating
It supports our aim to build the
It supports our strategy by explaining
health, safety and wellbeing
strongest foundations by making sure
how we’ll realise our ambition to create
considerations into our work with
we apply an inclusion lens to everything
a more sustainable future for ourselves
colleagues, contractors and the public.
we do and promoting a culture where
and our customers by cutting our
colleagues can thrive.
environmental impact, and helping
customers and suppliers cut theirs.
The policy describes how we engage with
stakeholders on environmental issues
and monitor and report on progress.
The Manifesto also reinforces our net
zero commitments.
Social and community
(See pages 32 to 35, 38 to 39, 45 and 82)
Human rights
(See page 34)
Anti-bribery and corruption
Our Manifesto is rooted in our purpose,
‘we connect for good’, and backed up
by commitments under the themes of
Responsible, Inclusive and Sustainable.
It recognises that we will only succeed if we
help to solve some of the problems faced by the
societies and customers we serve.
Wider society will benefit from us delivering on
our Manifesto, in particular on our commitment
to help give people the skills they need to
succeed in a digital world.
The BT Group charity approach sets out how
we work with our key charity partners and how
we support our colleagues’ volunteer work.
Our Human Rights Policy Commitment
explains our commitment to respect and
champion human rights across BT Group and
in our relationships with others. It describes our
approach to respecting rights and freedoms,
especially in the digital world. And it’s
supported by our responsible tech principles.
Being a human rights leader and having strong
ethical standards builds trust. This is key to
us achieving our ambition to be the world’s
most trusted connector of people, devices and
machines.
The Manifesto also reinforces our responsible
tech principles and BT Group’s respect for
human rights.
Being trusted: our code sets out our promises
which include our zero-tolerance approach
to bribery and corruption. It’s supported
by a specific Anti-Bribery and Corruption
(ABC) Standard.
Our code describes our values and behaviours,
how we expect everyone who works for us
(or on our behalf) to do business. It also
covers extra policy areas like human rights,
and equality and diversity. And it 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, how our stakeholders can
depend on us.
Our Health, Safety and Wellbeing
Our Diversity and Inclusion Strategy
Our Environmental Policy can be found
Policy Statement can be found at
can be found at bt.com/diversity-and-
at bt.com/ourpolicies
bt.com/ourpolicies
inclusion
Our Manifesto can be found at bt.com/
btmanifesto, and you can read more about
it on pages 32 to 33
Our Human Rights Policy Commitment can be
Being trusted: our code can be found
found at bt.com/ourpolicies
at bt.com/ethics
The BT Group charity approach can be found at
bt.com/modernslavery
be found at bt.com/ourpolicies
Our Modern Slavery Statement can be found at
Our Anti-Bribery and Corruption Standard can
bt.com/ourpolicies
Our due
diligence
We put resources behind building a safe
We have established an effective
We monitor and manage our
and healthy workplace. That includes
governance process to make sure we
environment strategy and risks through
policies, training, processes and
effective risk controls.
consistently integrate D&I into key
decisions and policy development.
We monitor safety and wellbeing with a
We regularly report to the Executive
‘three lines of defence’ model. We track
Committee on the progress we are
and review accidents, near misses and
making to achieve our diversity
reasons for sickness absence.
targets and whether our strategy is
the Digital Impact & Sustainability
Committee. We also do it through
our Group Environment Board, which
reports to the Executive Committee.
We measure progress on different
environment goals, one of which is a
We look at why accidents, injuries and
near misses happen, to stop them
is also updated on progress.
still effective and relevant. The Board
group KPI (page 45).
We review and update the policy
happening again. We track sickness
All of our People Networks that
every year.
absence trends, adapting processes
champion the concerns and priorities
to better support colleagues.
We review policies annually and update
them when needed.
The Executive Committee and the
Board are regularly updated on health,
safety and wellbeing matters.
of their members are sponsored by the
members of the Executive Committee
or the CEO, Openreach.
Our Colleague Board helps shape and
influence our D&I plans. Read more
about the Colleague Board on pages 80
to 81, and other ways we engage
with colleagues on page 36.
Outcomes
There are details of what we’ve done
Our strategy creates an environment
Read more about our plans and
to apply our policy, along with sickness
and workplace that embraces D&I
performance on the environment and
absence rates and time lost from
and incorporates it into our decision-
tackling climate change, including
injuries, on pages 24 to 25.
making.
There are details of the things we’ve
done this year to support our strategy,
There are also details of our
together with our latest D&I statistics,
performance against our group KPI
progress on becoming a net zero carbon
emissions business, on page 35.
on pages 24 to 25.
target to cut the carbon emissions
intensity of our operations by 87%
by the end of March 2031 on page 45.
related risks across our whole
business – for example in stakeholder
management, supply management
and service interruption group risk
categories on pages 62 and 65.
We’re acting to mitigate key physical
climate risks and our impact on the
environment in a number of areas. Read
more on page 35 and in our Task Force
on Climate-related Financial Disclosures
statement on pages 66 to 69.
The Digital Impact & Sustainability Committee:
• oversees our Manifesto commitments and
progress
• reviews our strategy and progress on societal
programmes and targets
• monitors progress against the group KPI of
reaching 25m people with help to improve
their digital skills by the end of March 2026.
Read more about the committee’s role on
page 97.
We have processes to identify and address
potential and actual human rights impacts
across our business.
All our colleagues are required to do mandatory
training on our code. We also publish
communications that reinforce policies.
They include checks to make sure we apply our
responsible tech principles when we develop,
buy, sell and use tech.
Our responsible tech steering group oversees
implementing the principles. It reports to the
Executive Committee.
Respecting people’s rights is covered in
mandatory annual training. We also provide
targeted training for teams most likely to
encounter human rights issues.
We identify, measure and tackle human rights
impacts in our operations and supply chain
through the Speak Up whistleblowing service,
and through risk assessment surveys and on-
site audits.
Our annual Your Say employee engagement
survey includes questions on ethical
perception, with results shared with senior
management.
Our Speak Up whistleblowing service
lets anyone who works for (or with) us to
confidentially report anything that goes against
our 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.
Risks
risks in its corresponding group risk
risk category, on page 63.
category, on page 64.
We track health, safety and wellbeing
We reflect D&I risks in our people group
We consider the impacts of climate-
We consider digital inclusion risks as part of our
stakeholder management group risk category
on page 58.
We consider human rights risk as part of our
stakeholder management group risk category
on page 58.
We report on how we invest in communities on
pages 38 to 39. Read more about our Manifesto
and what we’ve achieved this year on pages 32
to 35, including our progress on helping people
improve their digital skills (a group KPI).
Following a self-assessment last year, we’re
now being externally assessed against the
Global Network Initiative principles. We’ve
enhanced our sales due diligence process and
expanded the scope.
We report on implementing our responsible
tech principles on page 34.
This year, 96% of our colleagues completed
training on our code. We also introduced a new
system to better manage our ABC high risk
third parties and completed a bottom-up ABC
risk assessment.
Our Speak Up whistleblowing service received
517 reports this year. You can find more details
on these in our Modern Slavery Statement at
bt.com/modernslavery.
We consider ABC and ethical conduct risks
within the legal compliance group risk category
where risks apply across our operations
generally. See page 61.
BT Group plc Annual Report 2022
Strategic report 44
Our key performance
indicators (KPIs)
We delivered robust operational
performance in FY22. Financial
performance was broadly in line
with guidancea.
We use eleven KPIs – five operational and
six financial.
We reconcile the financial measures to the
closest IFRS measure on pages 209 to 211.
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 page 102.
a We gave our original financial outlook in May 2021
and subsequently adjusted our revenue outlook in
February 2022. You can read more on page 46.
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 210.
c Adjusted measures exclude specific items, as
explained on page 209.
d Normalised free cash flow as defined on page 211.
e The number of EE consumer customers receiving or
capable of receiving a 5G network connection using
one or both of a 5G-enabled handset and a
5G-enabled SIM.
BT Group Net Promoter Score (NPS)
pp improvement
Total Openreach FTTP connections
m
(1.7) 5.0
8.3
6.5
5.5
7.8
2.3
0.3
0.5
0.9
1.8
FY16 FY17
FY18
FY19
FY20
FY21
FY22
FY19
FY20
FY21
FY22
Definition
Definition
This tracks changes in our customers’
perceptions of BT Group since we launched the
measure in April 2016. It’s a combined measure
of ‘promoters’ minus ‘detractors’ across our
business units. BT Group NPS measures the net
promoter score in our retail business and net
satisfaction in our wholesale business.
Link to strategy
Performance
2
BT Group NPS increased by 2.3 percentage
points (FY21: up 7.8 percentage points), a new
all-time high supported by strong results in
year for Consumer, BT SME and Global. You can
read more about these and our approach to
customer experience on page 27.
This tracks how many premises are connected
to Openreach’s full fibre (FTTP) network.
Link to strategy
Performance
1
Almost 1.8m customers were connected to
Openreach’s FTTP network at 31 March 2022
(FY21: 0.9m). Openreach’s full fibre footprint
reaches more than 7m homes and businesses
– more than our competitors combined – and
we’re on track to get to 25m premises by the
end of 2026. You can read more about the full
fibre rollout on page 21.
Financial Year ended 31 March
Reported revenue
£m
Adjustedb EBITDA
£m
Adjustedb EBITDA margin
%
23,723
23,428
22,905
21,331 20,850
7,505
7,392
7,907
7,415
7,577
32%
32%
35%
35% 36%
FY18
FY19
FY20
FY21
FY22
FY18
FY19
FY20
FY21
FY22
FY18
FY19
FY20
FY21
FY22
Definition
Definition
Definition
This is our revenue as reported in our income
statement.
Link to strategy
Performance
1
2
3
Reported revenue was £20,850m (FY21:
£21,331m). The decrease was primarily due to
revenue declines in our Enterprise and Global
units offset by growth in Openreach, with
revenue in Consumer flat. You can read more
about CFU performance on pages 52 to 53.
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
Performance
1
2
3
Adjustedb EBITDA was £7,577m (FY21:
£7,415m). Growth was driven by savings from
our modernisation programmes, tight cost
management and lower indirect commissions,
which more than offset revenue decline. You
can read more on page 48. Lease payments
are not included in adjustedb EBITDA following
adoption of IFRS 16 Leases in FY20.
This measures our margin, calculated using our
adjustedb EBITDA and adjustedc revenue.
Link to strategy
Performance
1
2
3
Adjustedb EBITDA margin improved 1pp to 36%
(FY21: 35%). The increase is mainly driven by
improved adjustedb EBITDA which more than
offset the impact of the decline in revenue. You
can read more on page 48. Adjustedb EBITDA
margin from FY20 is benefited by the adoption
of IFRS 16.
BT Group plc Annual Report 2022
45
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 18.
1
2
3
Build the strongest
foundations
Create standout
customer experiences
Lead the way to a bright,
sustainable future
Total 5G connections
m
Percentage reduction in carbon
emissions intensity % reduction
Cumulative number of people reached
to help improve their digital skills m
0.1
1.6
5.3
7%
26%
43%
57% 55%
87%
2.8
10.1
14.7
25
FY20
FY21
FY22
FY18
FY19
FY20
FY21
FY22
Definition
Definition
FY31
(target)
FY20
FY21
FY22
Definition
FY26
(target)
This measures the number of EE customers
connected to our 5G products.
Link to strategy
Performance
1
Our 5G customer base keeps growing, with
5.3m EE customers able to connect to our
5G network at 31 March 2022 (FY21: 1.6m).
We now have 7.2m 5G readye customers.
We continue to expand our 5G network which
now covers over half of the UK population.
You can read more on our 5G coverage and
rollout on page 21.
This measures performance against our target
to cut carbon emissions intensity by 87% by the
end of March 2031 compared to FY17 levels.
It’s measured by reference to tonnes of CO2e
(carbon dioxide equivalent) per £m value added
(adjusted EBITDAb plus employee costs).
Link to strategy
Performance
3
Against our carbon emission intensity
reduction target this year we achieved a 55%
reduction from our baseline year (FY17). This
was down slightly on last year’s result of 57%,
as a result of the rebound effect from the
pandemic and due to an increase in vehicle
emissions to support fibre rollout. You can find
more information on what we’re doing to tackle
environmental challenges and our journey to
net zero emissions on page 35.
This measures the number of people we’ve
reached with help to improve their digital skills.
Link to strategy
Performance
3
At 31 March 2022 we had helped 14.7m people
improve their digital skills (FY21: 10.1m) and
we’re on track to reach our target of 25m by the
end of March 2026. You can read more about
what we’re doing to achieve this on page 34.
Normalised free cash flowd
£m
Reported capital expenditure
£m
Return On Capital Employed (ROCE)
%
2,973
2,440
2,011
1,459 1,392
3,522
3,963
3,960
4,216 5,286
10.2%
8.6%
8.7%
FY18
FY19
FY20
FY21
FY22
FY18
FY19
FY20
FY21
FY22
FY20
FY21
FY22
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
Performance
1
2
3
We generated £1,392m of normalised free
cash flowd. This was down 5% from last year and
mainly reflects higher cash capital expenditure,
partially offset by higher adjustedb EBITDA and
lower tax and lease payments.
This measures additions to property, plant and
equipment and intangible assets during the
year.
Link to strategy
Performance
1
2
3
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 210.
Reported capital expenditure was £5,286m
(FY21: £4,216m). This was primarily driven
by investment in spectrum of £479m, and
increased full fibre and mobile network
investment.
Link to strategy
Performance
1
2
3
ROCE for the year was 8.7% (FY21: 8.6%). The
increase was mainly attributable to a higher
return for the period driven by increased
operating profit, partly offset by an increase in
capital employed attributable to our continued
investment in full fibre.
BT Group plc Annual Report 2022
Strategic report
46
Group performance
Introduction from our Chief Financial Officer
Performance
Overall our results for the year
were in line with our guidance.
Reported revenue was £20,850m,
down 2% and adjustedb revenue was
£20,845m, down 2%. Revenue has grown
in Openreach, was flat in Consumer, but
declined in Enterprise and Global as a
result of challenging market conditions.
Adjusteda EBITDA of £7,577m was up 2%,
with revenue decline more than offset
by lower costs from our modernisation
programmes, tight cost management,
and lower indirect commissions.
Reported profit before tax was £1,963m,
up 9% with higher adjusteda EBITDA
offsetting higher finance expenses.
Capital expenditurec of £4,807m
was up 14% primarily due to
continued higher spend on our fibre
infrastructure and mobile networks.
Normalised free cash flowd was
£1,392m, down 5% primarily due
to higher cash capital expenditure,
partially offset by higher adjusteda
EBITDA and lower tax payments.
Financial outlook
We face a challenging external
environment. However, we currently have
index linked pricing across around two-
thirds of our revenue before eliminations,
primarily in Consumer and Openreach,
which will help to mitigate the impact
of inflationary cost pressures in labour,
energy and the supply chain in FY23.
We continue to expect to deliver growth
in revenue and at least £7.9bn adjusteda
EBITDA in FY23, with stronger Consumer
and Openreach financials offsetting
challenges in our enterprise businesses.
As we have said previously, capital
expenditurec in FY23 will remain
at its peak level of around £4.8bn
before spectrum costs.
Normalised free cash flowd is
expected to be £1.3bn to £1.5bn.
Change in adjustedb
revenue
FY23 outlook
Growth
Adjusteda EBITDA
At least £7.9bn
Capital expenditurec
Around £4.8bn
Normalised free
cash flowd
£1.3bn – £1.5bn
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 209 to
211. The alternative performance measures we use may not be directly
comparable with similarly-titled measures used by other companies.
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 210.
b Adjusted measures exclude specific items, as explained on page 209.
c Additions to property, plant and equipment and intangible assets in the period, excluding spectrum.
d Normalised free cash flow as defined on page 211.
e Financial outlook originally provided in May 2021 was updated in February 2022 to reduce the
adjusted revenue outlook from broadly flat to down c.2% as a result of the ongoing impact of Covid-19
and supply chain issues.
f 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 the balance sheet. Currency denominated balances within net debt are translated to sterling at
swapped rates where hedged. Fair value adjustments and accrued interest applied to reflect the
effective interest method are removed. Please refer to note 26 of the consolidated financial
statements for reconciliation from nearest IFRS measure.
BT Group plc Annual Report 2022
Following completion of our sports joint
venture with Warner Bros. Discovery,
expected by the end of 2022, we expect
group revenues to reduce by £0.5bn –
£0.6bn per annum relative to FY22. We
do not expect a material impact on our
FY23 adjusteda EBITDA outlook. We
will confirm the full impact on all our
outlook metrics following completion.
Excluding the impact of the
above joint venture, on a like-for-
like basis we expect sustainable
revenue and adjustedª EBITDA
growth beyond FY23.
As mentioned on page 23 we have
now extended our gross annualised
cost savings target to £2.5bn
by FY25, within the expected
cost to achieve of £1.3bn.
We remain confident in the delivery of
long-term normalised free cash flowd
growth. By the end of the decade we
expect an expansion of at least £1.5bn
in normalised free cash flowd compared
to FY22, solely from lower capital
expenditure and operating costs as
we move towards an all-fibre, all-IP
network. In addition, the move to FTTP
will enable us to recover copper from
our legacy network. Initial estimates
indicate that around 200k tonnes of
copper could be recovered from our
network through the 2030s. We are
currently undertaking trials to better
understand the costs associated
with recovering this valuable asset.
These benefits are structural upsides
as the business changes, on top
of the free cash flow arising from
organic growth in revenue and the
benefit of further transformation
efficiencies, including the additional
cost savings target, net of tax.
Dividend
We have declared a final dividend
for FY22 of 5.39 pence per share,
bringing the full year FY22 total, as
promised, to 7.70 pence per share,
and our intention is to continue with
a progressive dividend policy. Our
progressive dividend policy is to
maintain or grow the dividend each
year whilst taking into consideration a
number of factors including underlying
medium-term earnings expectations
and levels of business reinvestment.
The Board expects to continue with
this policy 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.
Simon Lowth
Chief Financial Officer
11 May 2022
47
Financial outlooke
Result
Performance in line
with or better than
financial outlook
Change in adjustedb revenue
Down c.(2)% Down (2)%
Adjusteda EBITDA
£7.5bn – £7.7bn
Capital expenditurec
c.£4.9bn
Normalised free cash flowd
£1.1bn – £1.3bn
£7.6bn
£4.8bn
£1.4bn
Revenue
£m
Adjusteda EBITDA
£m
£20,850m (2)%
£7,577m 2%
21,331
20,850
7,415
7,577
FY21
FY22
FY21
FY22
Profit before tax
£m
£1,963m 9%
1,804
1,963
FY22 Capital expenditurec
£4,807m
Network investment
53%
Customer driven
investment 23%
Systems and IT 19%
Non-network
investment 5%
Normalised free cash flowd
£m
£1,392m (5)%
FY21
FY22
Net debtf
£m
£18,009m £207m
1,459
1,392
17,802
18,009
FY21
FY22
FY21
FY22
Operating cash flow
£m
£5,910m (1)%
Earnings per share
pence
5,963
5,910
18.9
20.3
14.8
12.9
FY21
FY22
FY21
FY22
FY21
FY22
Adjustedb EPS
Reported EPS
BT Group plc Annual Report 2022
Strategic report
48
Group performance continued
Summarised income statement
Year ended 31 March
Revenue
Operating costsa
2022
£m
2021
£m
20,850
21,331
(13,560)
(14,397)
Depreciation and amortisation
(4,405)
(4,347)
Operating profit
Net finance expense
Share of post tax profit/(loss) of
associates and ventures
Profit before tax
Tax
Profit for the period
2,885
2,587
(922)
(791)
–
8
1,963
1,804
(689)
(332)
1,274
1,472
Revenue
Reported revenue was down 2%, primarily due to declines in
legacy products, tougher trading in our Enterprise and Global
divisions, handset to SIM migration in Consumer, the impact of
prior year divestments and foreign exchange. This was partially
offset by higher rental bases in fibre-enabled products,
relationship-driven equipment sales in Global and stronger
recurring BT Sport revenue as a result of the prior year Covid-19
induced cancellations.
You can find details of revenue by CFU on pages 52 and 53.
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%, primarily due to
savings from our modernisation programmes, tight cost control
and lower indirect commissions.
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.
During FY22 we delivered gross annualised savings of £0.7bn
with a cost to achieve of £0.3bn, bringing total gross annualised
savings over the past two years to £1.5bn with a cost to achieve
of £0.8bn. You can read more about how we’re transforming our
cost base and our new savings targets on page 23.
Note 6 to the consolidated financial statements shows a detailed
breakdown of our operating costs.
Adjustedc EBITDA
Adjustedc EBITDA of £7,577m increased by 2% with the reduced
operating costs more than offsetting revenue decline.
You can find details of adjustedc EBITDA by CFU on pages 52
and 53.
Profit before tax
Reported profit before tax of £1,963m was up 9%, reflecting
increased adjustedc EBITDA and despite increased finance
expense from pension deficit movements.
Specific items
As we explain on page 209, 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
13,955
(351)
(171)
(276)
93
18
13,268
14,000
13,500
13,000
12,500
12,000
FY21
Labour
costs
Payments to
telecommunications
operators
Product
costs & sales
commissions
Programme
rights charges
Other
FY22
BT Group plc Annual Report 2022
Specific items resulted in a net charge after tax of £728m
(FY21: £403m). The main components were a net tax charge
on remeasurement of deferred tax of £420m (FY21: £nil) and
restructuring charges of £347m (FY21: £421m). Note 9 to the
consolidated financial statements shows the full details of all
revenues and costs that we have treated as specific items.
Taxation
Our effective tax rate was 35.1% (FY21: 18.4%) on reported
profit which mainly reflects the remeasurement of our deferred
tax balances following the enactment of the new UK corporation
tax rate of 25% from April 2023. The corresponding adjustment
comprises a net tax charge of £420m in the income statement
and a non-recurring tax credit of £298m in the statement of
comprehensive income.
The effective tax rate on adjustedb profit was 14.8%. This is lower
than FY21 (18.6%) as we expect a large proportion of our capital
spend on fibre rollout to be eligible for the Government’s
super-deduction regime, which allows for enhanced tax relief on
qualifying capital expenditure. The super-deduction regime is
available for FY22 and FY23, driving a projected UK tax loss for
these periods, with around £5bn of tax losses expected to be
carried forward from FY23. A net UK deferred tax charge has
been recorded, reflecting the deferred tax liability arising on
qualifying capital expenditure, offset in part by a deferred tax
asset on the current period tax loss.
We paid income taxes globally of £52m (FY21: £288m). We paid
UK corporation tax of £nil, benefiting from the super-deduction
noted above (FY21: £229m). We benefited £nil from tax
deductions on employees’ pension and share schemes
(FY21: £181m).
Our tax expense recognised in the income statement before
specific items was £349m (FY21: £428m). We also recognised a
£430m tax charge (FY21: £1,051m tax credit) 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.
49
Earnings per share
Reported earnings per share was 12.9p, down 1.9p, while
adjustedb earnings per share increased 1.4p to 20.3p.
Capital expenditure
Capital expenditure was £5,286m (FY21: £4,216m). The increase
was primarily due to investment in spectrum of £479m, along
with increased investment in our full fibre and mobile network.
Capital expenditure excluding spectrum was £4,807m.
Capital expenditure contracted but not yet spent was £1,596m
at 31 March 2022 (FY21: £1,370m).
Cash flow
Net cash inflow from operating activities was down 1% to
£5,910m, mainly as a result of working capital movements.
Normalised free cash flowd was down 5% to £1,392m due to
higher cash capital expenditure partially offset by higher
adjusted EBITDAc and lower tax and lease payments.
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 211.
The net cash cost of specific items adjusted from normalised
free cash flowd was £610m (FY21: £390m), primarily relating to
restructuring payments of £370m (FY21: £428m) and the Dixons
Carphone settlement (refer to note 9 of the consolidated
financial statements for more details). In addition, net cash
proceeds from divestments were £76m (FY21: £164m).
a Excluding depreciation and amortisation.
b Adjusted measures exclude specific items, as explained on page 209.
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 210.
d Normalised free cash flow as defined on page 211.
BT Group plc Annual Report 2022
Strategic report 50
Group performance continued
Summarised balance sheet
Year ended 31 March
Intangible assets
2022
£m
2021
£m
13,809
13,357
The movements in the deficit for the group’s defined benefit
plans are shown below:
£bn
4.2
0.9
0.1
(1.2)
(0.8)
(3.7)
1.6
1.0
0.1
Property, plant and equipment
20,599
19,397
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
4,429
1,091
777
2,713
2,961
1,915
289
1,191
4,863
1,235
1,000
3,683
3,571
1,859
989
923
Total assets
49,774
50,877
6
5
4
3
2
1
0
(1)
Deficit at
1 April 2021
Contributions
from BT
Costs
recognised
in income
statement
Higher
than
expected
return on
plan assets
Decrease
in liabilities
due to
changes in
assumptions
Net of deferred tax asset
Deficit at
31 March
2022
Increase
in liabilities
due to
higher than
expected
inflationa
Loans and other borrowings
16,185
16,685
Deferred tax asset
Derivative financial instruments
Trade and other payables
Contract liabilities
Lease liabilities
Provisions
Retirement benefit obligations
Deferred tax liabilities
870
6,766
1,003
5,760
661
1,143
1,960
Other current and non-current liabilities
130
1,283
6,662
1,092
6,152
715
5,096
1,429
84
Total liabilities
Total equity
34,478
39,198
15,296
11,679
Pensions
The IAS 19 gross deficit has decreased from £5.1bn at 31 March
2021 to £1.1bn at 31 March 2022. Net of deferred tax, the deficit
has decreased from £4.2bn to £1.0bn.
The decrease in the gross deficit of £4.0bn since 31 March 2021
mainly reflects an increase in the real discount rate, £1.1bn of
deficit contributions paid over the period, lower assumed future
life expectancies due to an allowance for the impact of the
Covid-19 pandemic and positive asset returns. This has been
partially offset by higher inflation over the year than assumed at
31 March 2021.
Note 20 to the consolidated financial statements gives more
information on our pension arrangements.
Net debtb and net financial debt
Net financial debt (which excludes lease liabilities) at 31 March
2022 was £12.2bn, £0.6bn higher than at 31 March 2021
(£11.7bn), with net capital expenditure (after spectrum refund),
pension contributions, net interest payments, payments of lease
liabilities and share purchases more than offsetting net cash
inflow from operating activities.
Net debtb (which includes lease liabilities) was £18.0bn at
31 March 2022, £0.2bn higher than at 31 March 2021 (£17.8bn).
The difference to the movement in net financial debt reflects
lease movements.
At 31 March 2022 the group held cash and current investment
balances of £3.5bn. The current portion of loans and other
borrowings is £0.9bn; we have no term debt repayable during
FY23. Our £2.1bn facility, which matures in March 2027, remains
undrawn at 31 March 2022.
Gross debt translated at swap rates and excluding accrued
interest and fair value adjustments was £21.5bn at 31 March
2022. This comprises term debt of £15.1bn, lease liabilities of
£5.8bn and other loans of £0.6bn.
a There has been a broadly equivalent benefit to inflation-linked assets from higher
inflation.
b 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 the balance sheet. Currency
denominated balances within net debt are translated to sterling at swapped rates
where hedged. Fair value adjustments and accrued interest applied to reflect the
effective interest method are removed. Please refer to note 26 of the consolidated
financial statements for reconciliation to the nearest IFRS measure.
BT Group plc Annual Report 2022
51
Contractual obligations and commitments
The table below shows our principal undiscounted contractual
financial obligations and commitments at 31 March 2022.
Less
than 1
year
£m
Between
1 and 3
years
£m
Between
3 and 5
years
£m
More
than 5
years
£m
Total
£m
15,700
640
2,469
2,844
9,747
7,688
6,499
994
788
1,572
1,562
3,560
1,513
1,215
2,983
997
498
496
1,596
1,430
163
295
295
–
3
2
–
–
1
–
As at 31 March 2022
Loans and other
borrowingsb
Pension deficit
obligations
Lease liabilities
Programme rights
commitments
Capital
commitments
Other
commitments
Total
32,775
4,645
6,213
5,626 16,291
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 £184m (FY21: £14m) on our share buyback
programme. We received proceeds of £13m (FY21: £1m)
from colleagues exercising their share options.
Debt maturity
The graph below shows the maturity profile of our term debt.
Currency denominated balances are translated to sterling at
swapped rates where hedged:
£m
FY23
FY24
FY25
528
450
1,492
FY26a
461
FY27a
372
FY28
FY29
FY30
FY31
1,013
599
548
446
777
673
1,604
FY32a
497
372
498
688
688
709
FY33
FY34
FY35
FY36
FY37
FY38
FY39
FY40
FY41
FY42
FY43
FY44
FY45
FY46
FY47
FY48
247
FY49
FY50
389
£ debt
$ debt swapped to £
€ swapped to £
2.8%
2.2%
2,012
3.8%
4.2%
2.5%
3.8%
2.7%
9.6%
3.8%
4.8%
6.4%
5.0%
5.0%
3.7%
3.2%
Note 26 to the consolidated financial statements gives more
information on our debt arrangements.
a Reflects exercise of call options attached to bonds maturing between 2080 and
2081. See note 26 to the consolidated financial statements for more details.
b Principal repayments at hedged rates.
BT Group plc Annual Report 2022
Strategic report
52
Group performance continued
Our customer-facing units
Consumer
Year ended 31 March
2022
£m
2021
£m
Change
£m
Change
%
Enterprise
Year ended 31 March
2022
£m
2021
£m
Change
£m
Change
%
Adjusteda revenue
9,858
9,885
(27)
–
Adjusteda revenue
5,157
5,449
(292)
Adjusteda operating costs
7,596
7,757
(161)
(2)
Adjusteda operating costs
3,521
3,745
(224)
Adjustedb EBITDA
2,262
2,128
134
6
Adjustedb EBITDA
1,636
1,704
(68)
Depreciation &
amortisation
1,421
1,281
140
11
Depreciation &
amortisation
Adjusteda operating profit
841
847
(6)
(1)
Adjusteda operating profit
Capital expenditure
1,198
1,082
Normalised free cash flowc
917
714
116
203
11
28
Capital expenditure
Normalised free cash flowc
724
912
569
791
740
964
492
(16)
(52)
77
1,352
(561)
(5)
(6)
(4)
(2)
(5)
16
(41)
Adjusteda revenue
Adjusteda operating profit
Adjusteda revenue
Adjusteda operating profit
£9,858m
–%
£841m
(1)%
£5,157m
(5)%
£912m
(5)%
Revenuea was broadly flat. Broadband base growth and year
on year improved sport revenue following the cancellation of
sporting fixtures last year due to Covid-19 was offset by the
ongoing decline of our legacy BT voice product and lower
postpaid mobile revenue as a consequence of reduced market
activity and continued handset to SIM-only migration.
Revenuea decline was driven by legacy contract exits, declines
in legacy products and the ongoing migration of an MVNO
customer. There will be no further revenue from this MVNO
contract in FY23. This was partially offset by upfront and one-off
revenues from new contracts as well as continued growth across
VOIP and Retail mobile revenues.
The year showed strong EBITDAb growth reflecting our direct
channel focus with lower indirect commissions and tight cost
management. Our overall growth in the year more than offset
the benefit of sports rights rebates in the prior year.
EBITDAb was down 4%, reflecting the revenue decline, partially
offset by tight cost control and the benefits of our modernisation
programme. Depreciation and amortisation was down 2% for
the year.
Depreciation and amortisation was up driven by higher mobile
network and customer equipment investment.
Capital expenditure was up due to higher mobile network,
equipment and digital investment.
Normalised free cash flowc was up, driven by lower mobile
handset spend, reduced sports rights payments in the current
year and higher EBITDAb, partly offset by higher capital
expenditure.
We achieved our highest ever NPS results for both BT and EE
consumer brands. This strong customer focus has resulted in
churn staying near record lows across fixed, broadband
and mobile.
Our revenue growth in the fourth quarter of the year, growing
FTTP and 5G bases, award-winning mobile network, low churn,
index linked contracts, strong brand NPS and continued
converged growth, provide us with strong foundations heading
into FY23.
Capital expenditure increased due to increased investment
in product development as well as in our modernisation
programme.
Normalised free cash flowc has declined, reflecting the increase
in capital expenditure as well as reduced EBITDAb, adverse
working capital and the prior year benefit from the monetisation
of a non-strategic revenue stream.
Retail order intake increased 3% to £2.7bn despite challenging
market conditions. Wholesale order intake increased 15% to
£1.0bn, including a significant multi-data centre deal with BAI
Communications to support their contract to deliver
connectivity solutions for the London Underground. Despite
growth in both our Retail and Wholesale order intake, the
ongoing challenges in the economic environment continue to
present a level of uncertainty in the UK B2B environment.
BT Group plc Annual Report 2022
53
Global
Year ended 31 March
2022
£m
2021
£m
Change
£m
Change
%
Openreach
Year ended 31 March
2022
£m
2021
£m
Change
£m
Change
%
Adjusteda revenue
3,362
3,731
(369)
(10)
Adjusteda revenue
5,441
5,244
Adjusteda operating costs
2,906
3,135
(229)
(7)
Adjusteda operating costs
2,262
2,307
197
(45)
Adjustedb EBITDA
456
596
(140)
(23)
Adjustedb EBITDA
3,179
2,937
242
Depreciation &
amortisation
Adjusteda operating profit
Capital expenditure
Normalised free cash flowc
355
101
201
131
405
191
188
187
(50)
(90)
13
Depreciation &
amortisation
(12)
1,876
1,707
(47)
Adjusteda operating profit 1,303
1,230
7
Capital expenditure
2,548
2,249
169
73
299
(56)
(30)
Normalised free cash flowc
448
486
(38)
(8)
4
(2)
8
10
6
13
Adjusteda revenue
Adjusteda operating profit
Adjusteda revenue
Adjusteda operating profit
£3,362m
(10)%
£101m
(47)%
£5,441m
4%
£1,303m
6%
Revenuea declined by 10% primarily due to continued
challenging market conditions, the impact of prior year
divestments, and a £106m negative foreign exchange
movement, partly offset by relationship-driven lower margin
equipment sales. Revenuea excluding divestments and foreign
exchange declined by 3% reflecting reduced customer business
activity, resulting in lower project-based spend and higher
margin change control sales.
EBITDAb declined by 23% reflecting lower revenues, the impact
of prior year divestments and a £35m negative impact from
foreign exchange, partially offset by lower operating costs from
ongoing modernisation and rigorous cost control. EBITDAb,
excluding divestments, one-offs and foreign exchange was
down by 14%.
Depreciation and amortisation declined by 12%, mainly due to
reductions in capital investment over the last few years.
Operating profit decreased by £90m.
Capital expenditure was up 7%. Normalised free cash flowc
declined by £56m mainly reflecting lower EBITDAb and higher
capital expenditure offset by improved working capital.
Order intake was £3.6bn, down 1% year on year. Our growth
product portfolio has continued to increase, now representing
around half of the order intake this year and revenue from our
growth portfolio, excluding divestments and foreign exchange,
increased by 7% year on year.
Revenuea growth was driven by better trading in fibre-enabledd
products, up 9% and Ethernet, up 6%. This was partially offset
by declines in legacy products including 183k reductions in WLR
voice lines supporting FTTP lines and a decrease in chargeable
repairs, driven by lower repair volumes.
EBITDAb grew 8% driven by revenuea growth and lower costs
reflecting lower repair volumes, ongoing efficiency programmes
and a £10m one-off, partially offset by higher FTTP provision
volume and recruitment.
Depreciation and amortisation grew £169m driven by increased
fixed assets, including network and leased vehicles.
Capital expenditure grew 13%, driven by FTTP, with more
customers connected and higher network build, partly offset by
efficiency savings and lower non-FTTP spend. FTTP now
accounts for over half of our capital expenditure.
Normalised free cash flowc declined by 8% driven by higher
capital investment, payment of the one-off team member bonus
in FY21, timing of working capital and lease payables.
We continue to see good traction on our Equinox FTTP long-
term pricing offer, with 42 CPs now onboard. The CPs operating
since October are currently performing well against the ‘fibre
only’ take up measure.
a Adjusted measures exclude specific items, as explained on page 209.
b 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 210.
c Free cash flow after net interest paid and payment of lease liabilities, before
pension deficit payments (including their cash tax benefit) and specific items as
explained on page 211.
d FTTP, FTTC and Gfast, including Single Order Migration.
BT Group plc Annual Report 2022
Strategic report
54
A letter from the Chair of Openreach
homes is tough, expensive and complex,
but we don’t want to leave anyone behind.
We’ve always gone the extra mile to
connect isolated communities with
inventive engineering and funding
solutions – and that will continue.
Our plans include a big commitment to
rural Britain, and are fundamental to
the UK Government bringing ‘gigabit
capable’ broadband to 85% of the
country by 2025.
communities we serve better and attract
brilliant and diverse talent to boost our
creativity and innovation.
Around 16% of our trainee recruits were
women last year – up from 12% the
previous year, partly thanks to us making
the language of job adverts less gendered.
And we’re going further. We have an
ambitious new set of goals, including
targets on ethnic minority representation,
in our D&I commitments.
Driving take-up
Building our full fibre network is pointless
if customers don’t upgrade to it.
So we’re working with CPs to drive rapid
take-up. Our commercial offer, Equinox,
gives long-term pricing certainty for those
that commit to selling full fibre where it’s
available. So far 42 CPs have signed up
– including all our largest customers.
In total, almost 1.8m homes and
businesses are now reaping the benefits
of full fibre. We’re now breaking records
on order volumes and provisioning
activity every week, so the strong
customer demand we’re seeing
should continue.
Upgrading the UK
to digital phone lines
At more than a quarter of the way through
our build and with more customers
upgrading than ever, we are starting to
speed up work on withdrawing our old
copper-based network.
We need to get customers switched to
all-digital quickly as we work with CPs to
close down analogue services by the end
of 2025.
Educating consumers about full fibre’s
benefits will be vital, and we know we
must help drive digital awareness and
take-up to make sure no one is left behind.
Investing in people,
diversity and inclusion
We employ 37,000 people across the
UK and we’re proud to be the largest
apprenticeship provider in the
private sector.
This year, we announced we’d be creating
another 4,000 jobs building and
maintaining our networks. We’re also
aiming to retrain an extra 3,000 existing
engineers to support customers on our
new platform.
We’ve been making progress on being
more inclusive and diverse. Engineering
has historically been dominated by white
men. But we want to represent the
Building responsibly and safely
As one of Britain’s largest businesses,
we know we have a duty to society that’s
continually under review – and we take
that responsibility seriously.
There are lots of ways we can make
positive changes, but perhaps the biggest
opportunity is through our fleet.
With more than 29,000 vehicles, we run the
UK’s second largest commercial van fleet.
It helps our engineers serve customers
in every corner of the country. But it has a
negative impact on the environment too. So
we’re aiming to switch the majority of our
fleet to electric or zero emissions by 2030.
We’ve already bought more than 1,000
electric vans but there are some big
challenges to overcome to reach our
target. There needs to be a national
charging infrastructure to support people
travelling around the country. Incentives
for converting major fleets like ours need
to stay. They’ll have a big effect on the
second-hand market and help the UK
meet its net zero target.
Safety is also a big priority. We reached an
important goal this year with all of our
engineers now using new, safer ladder
equipment which is dramatically reducing
falls from height.
All eyes forward
Like nothing before, the pandemic has
underlined that internet access and
decent broadband are no longer a luxury
but a necessity and showed that no one
should be left behind.
The research agrees. Full fibre is faster
and more reliable, and will deliver huge
economic, social and environmental
benefits right across the UK.
It’s the right thing for our business,
shareholder, colleagues, customers and
the nation. Our priorities are crystal clear.
So you’ll continue to see us in execution
mode next year and beyond.
Mike McTighe
Chair, Openreach
11 May 2022
It’s fair to say it’s been another
challenging year
The pandemic continued causing
complexity and concern, while increasingly
extreme winter weather seriously tested
both our engineers and customers.
Our purpose hasn’t changed; we’re the
UK’s broadband network and we’re
keeping the nation connected during
these challenging times.
With all this in mind, I’m hugely proud that
we had our best service performance for
copper and fibre products this year –
meeting or exceeding all of Ofcom’s
quality of service standards – and driven
customer satisfaction to a record high.
We’ve also built our new ultrafast,
ultra-reliable full fibre network at a
record pace, reaching 50,000 premises
every week.
In execution mode
One of the main reasons for recent success
is our crystal clear priorities.
With Ofcom’s long-term regulatory
framework now firmly established, we’re no
longer in planning or investment case mode.
It’s now all eyes forward on execution.
We’ve been operationalising our plan
– building and upgrading millions of
customers to our new network – and
doing that while delivering the very best
customer experience.
It’s our job to stay stable and sustainable
for our shareholder BT Group plc,
Openreach colleagues and customers,
and the nation. And I’m pleased we’ve
made such good progress.
Build, build, build
Today we’re building full fibre faster and
cheaper than ever before, reaching more
than 7m premises and counting (more
than our competitors combined). We’re
on track to get to 25m premises by the
end of 2026.
Openreach will never be just a city fibre
builder. Of course, connecting rural
BT Group plc Annual Report 2022
55
Risk management
Building trust across BT Group
Risk management taken seriously and done simply and consistently helps
us make the best decisions for our colleagues, customers, shareholders and
wider stakeholders in the face of uncertainty. This not only helps us protect
BT Group, but helps drive our growth.
Strong foundations built on trust
We’ve built our business to thrive based
on stakeholder trust. This means we must
manage risks smartly to achieve our
ambition, deliver our strategy, support
our business model, and protect our
assets while leading the way to a bright,
sustainable future.
Our approach to risk is simple and
consistent: we have our risk mindset and
culture, which encapsulates our risk
process and activities and is brought
together by risk leadership and
governance. Collectively, this is our
risk management framework.
Risk mindset and culture
We engender a set of behaviours and
expectations that drive risk awareness
throughout our business activities.
It is driven by the tone from the top and
supported by our people management
systems and promotes timely and
sensible risk interventions and actions
that improve operational integrity and
help make smart choices about risks –
being bold without being reckless.
We communicate expected behaviours to
every colleague through our code to get
risk awareness woven into the fabric of our
culture. We have an ongoing programme of
training and communication, and defined
roles to formalise risk management, while
continuing to integrate risk thinking and
procedures into key areas of decision-
making.
We have our risk
mindset and culture,
which encapsulates our
risk process and activities
and is brought together
by risk leadership and
governance.”
The Art of Risk Management
A
R
T
Appetite
Rules
Three Lines of Defence
We then have a clear
and simple set of Rules,
which are encoded in the
key policies, standards
and controls required to
manage our risks.
We have a risk Appetite
statement setting out
the group’s attitude to
how much risk we are
willing to take in each
GRC. These are
underpinned by appetite
metrics with upper and
lower boundaries that
set tolerances for risk.
The Three Lines of
Defence model
establishes the roles and
responsibilities of those
that own and manage
risks in the business (1st
line), specialist support
and assurance functions
(2nd line) and
independent assurance
providers (3rd line). This
clarity and co-ordination
helps provide assurance
that these risks are
managed effectively
giving confidence to
relevant stakeholders.
Risk process and activities
Our approach to risk management has
evolved over the last few years with a
focus on making it clear and simple across
all business areas, facilitating learning,
aggregation, shared responses,
consistent and efficient activities;
and effective dot-joining.
We divide our risk landscape into group
risk categories (GRCs) of our enduring
risks – like communications regulation
and financial control – that will continue
to be important to us over time and can
be managed consistently.
We are also constantly aware of and deal
with specific risks and uncertainties that
arise which are significant and dynamic in
nature, our point risks and emerging risks.
For each GRC, we have developed an
approach that we call The ART of Risk
Management. This year we’ve made good
progress in establishing the ART of Risk
Management across each GRC, which is
driving improved accountability, helping
to monitor exposures; delivering
assurance over the design and operation
of key controls; and providing clarity on
actionable steps to take the right
decisions at the right times.
BT Group plc Annual Report 2022
Strategic report 56
Risk management continued
Building trust across BT Group
Risk leadership and governance
A key factor for great risk management
is tone from the top. Our leaders visibly
believe in, support and are constantly
engaged in risk management throughout
their activities, ensuring risk is considered
in key business processes and decisions.
There is an Executive Committee sponsor
for each GRC. They set out how we
measure our exposure to that category of
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 GRC are
continuously reviewed and managed.
Each GRC and the corresponding
Executive Committee sponsorship is
group-wide, with the aim of ensuring we
join dots across the business and think
about our risks in a non-siloed manner.
Each of our units (CFUs, TUs and CUs) also
reviews, on a periodic basis, its exposure
in all these categories and identifies and
manages 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 are managing them at the right
times. This promotes robust discussion
and prioritisation, the right monitoring,
and better decision-making.
Continuous learning and
improvement
Whether it’s reviewing and adjusting risk
appetite, managing new or emerging risks,
implementing action plans, working with
new stakeholders or managing risks in new
programmes and change initiatives, risk
management is a continuous process.
We’re also always evolving, learning and
adapting to help build the right mindset and
culture, value-adding process and activities
and effective leadership and governance.
The goal however remains constant: to help
the organisation make smarter decisions to
protect BT Group and help drive growth.
Simon Lowth
Chief financial officer
“The leadership of the
group understands the
critical role that great
risk management, great
assurance and great
controls play in our
long-term health
and success”
Sabine Chalmers
General counsel,
company secretary &
director regulatory affairs
“Risk management
underpinned by our
code sets out the
principles of how we
expect our people to
behave, do business
and connect for good”
Philip Jansen
Chief executive
“BT Group is forward
looking and innovative
but also built on trust,
which is about being
smart in the risks we
take to transform”
Marc Allera
CEO, Consumer
“Trust is not letting our
customers down, ever.
We think about the
balance, how we can
be smart about risk and
make sure we don’t let
our customers down”
Bas Burger
CEO, Global
“We deliver trust
by delivering perfect
predictability, not just
on network, cloud
and cyber security but
predominantly on the
business outcomes
that customers are
expecting of us”
Our governance
structures ensure that
different oversight
bodies and leadership
teams get the right
level of information
on our risk exposures
and how we are
managing them
at the right times.”
What our leaders
say about risk
BT Group plc Annual Report 2022
57
Risk management forms
the foundation of trust
which is fundamental
to our ambition and
strategy.”
Geopolitical uncertainty
The situation is dynamic and fast moving
but the Russian invasion of Ukraine poses
a serious threat to the global security
order and liberal democracy. This raises
and intensifies many specific areas of risk
including but not limited to:
Geopolitics
• the safety and security of our
colleagues in the region
• the possibility that retaliatory cyber
attacks could affect our networks and
data, or those of our customers
• the impact on our direct and indirect
supply chain
• the wider economic uncertainty,
particularly on inflation and cost
of living.
As well as standing up teams to manage
the coordination of operational activities
and ensure compliance with the new
sanctions, the Executive Committee is
meeting regularly to review potential
second order and longer term impacts,
agree policy positions and consider
strategic issues.
Climate &
environment
Responsible
technology
Policy and
regulation
Disruptive
technology
How risk aligns to strategy
Risk management forms the foundation
of trust which is fundamental to our
purpose, ambition and strategy. This is
demonstrated by the way the GRCs align
with our assets (see pages 12 to 13) and
the strong synergies resulting from
aligning risk management to our internal
strategic framework and business
planning and performance management
processes. Strategy and risk management
form a strong partnership to ensure
information is shared and disseminated
through the business in a joined-up way to
have the greatest impact, management
consideration and engagement while
reducing duplication of effort.
Emerging risk hubs
We define emerging risks as
uncertainties that have the potential
to be materially significant, but whose
causes and impacts cannot be fully
defined at present. These tend to have
more external drivers and may manifest
over longer time horizons. Some
examples are also shown under each
GRC in the next section.
To address the more ambiguous and
cross-group impacting nature of
emerging risks, we’ve developed a
group of small cross-functional teams,
or hubs, involving representatives from
risk management, strategy, finance,
operations, subject matter experts and
representatives from relevant CFUs,
TUs and CUs. These teams share
intelligence, identify potential
trade-offs or conflicts, and agree
specific actions. Actions could include
enhancing our preparedness,
monitoring specific developments or
investigating information gaps.
Joining the dots
It is essential that risks are owned and
managed by those closest to the business
operations and there is leadership
accountability. As such, each CFU
Leadership Team regularly brings
together their risks for review, discussion,
prioritisation, ownership and action.
These risks are then categorised by GRC
to give a line of sight and enable broader
themes and trends to be identified. This
helps us join the dots and understand the
potential overall impact and enable a
consistent and coordinated response.
To help facilitate this dot joining, we have
rolled out a new digital risk management
tool which we call ARTEMIS. This provides
real-time access to risk and assurance
information and minimises our reporting
burden so that we can focus on the right
behaviours, have the right conversations
and take the right actions.
BT Group plc Annual Report 2022
Strategic report 58
Our principal risks and uncertainties
Our principal risks set out in the following pages align with our GRCs.
While these categories are enduring, each contains numerous point and
emerging risks, examples of which are noted. GRCs are further categorised
as Strategic, Financial, Compliance or Operational.
Strategic
Strategy, technology, and competition
Sponsor: Chief financial officer
Stakeholder management
Sponsor: Corporate affairs director
What this category covers
What this category covers
Whilst developing and executing a strategy that meets changing
customer expectations and grows value for all our stakeholders,
we must manage risks around an uncertain economic context,
intensifying competition, and rapid technological change.
Stakeholder management is essential for us to achieve our
ambition built on trust. We must listen, and communicate with
our key stakeholder groups in a fair and transparent way, to
establish and maintain strong, sustainable relationships.
Key factors we consider in this category
• Changes in the economic context, competitive and technology
Key factors we consider in this category
• The management of our reputation and perceived
landscape or in customer needs could impact our market
share, revenue, profit, shareholder value and reputation.
• Pursuing the wrong strategy or not having the strategy
reflected in the business plan would impact our ability to
compete in the market.
• Not executing against the strategy could limit our ability to
transform and create sustainable value over the long term.
Some of the things we do to manage it
• Extensive monitoring, research and analysis of economic,
market, competitor and technology trends combined with
listening and engaging with customers for meaningful trends
and insights.
• Ongoing investment in our networks, solutions and customer
service to provide the best possible outcomes and experience
for our customers.
• Frequent Executive Committee and Board reviews of
performance against strategic priorities and targets.
Example point risks in this category
• Drop in consumer and business confidence as a result of the
escalating geopolitical situation, pressure on the economy and
cost of living and potential resurgence in Covid-19.
• Slower than expected recovery in the enterprise and global
markets adding pressure on revenue.
• Increasing competition, particularly in the fixed infrastructure
market.
Example emerging risks in this category
• New disruptive technologies which substitute our networks/
products.
• Significant changes in the market structure which could limit
our ability to compete.
trustworthiness is a broad topic, within which certain
stakeholder relationships may require additional focus.
• Ineffective management of stakeholders’ expectations or
failure to anticipate potential impacts upon them and the
communities we serve might damage their trust in us.
• Particularly sensitive topics considered include network plans,
customer fairness, net neutrality, responsible use of
technology, environment, social and governance factors,
human rights and industrial relations.
Some of the things we do to manage it
• Media monitoring, evaluation and tracking our reputation
across our main stakeholder groups to inform our plans.
• Proactively engaging with key stakeholders to build stronger
relationships, better understanding of risks and exploring
more positive outcomes for BT Group in a fair and transparent
way.
• Centralised coordination of media, political and speaking
engagements, and press releases and market announcements
which are overseen by the Disclosure Committee.
• Our Manifesto (see pages 32 to 33) sets out our priorities and
commitment to enabling growth through technology that is
responsible, sustainable and inclusive. This has Board-level
governance provided by the Digital Impact & Sustainability
Committee.
Example point risks in this category
• Full fibre build commitments and rural connectivity.
• Impact of inflation and cost of living on consumers.
• Growing focus on the digital divide and its implications.
• Managing the interests of all investors and giving due regard to
all stakeholders.
Example emerging risks in this category
• Climate change agenda and perceptions of our sector’s role in
carbon emissions.
• Misinformation on 5G health concerns.
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Financial
Financing
Sponsor: Chief financial officer
Financial control
Sponsor: Chief financial officer
What this category covers
What this category covers
We rely on cash generated by business performance
supplemented by capital markets, credit facilities and cash
balances to finance operations, pension scheme, dividends and
debt repayment.
Key factors we consider in this category
• Financing is the risk that we cannot fund our business cash
flows or meet our payment commitments.
• This could be caused by not generating enough cash, inability
to refinance existing debt, being unable to access capital
markets, or a big increase in our pension scheme obligations.
Some of the things we do to manage it
• Regularly reviewing actual and forecast cash flow performance.
• Undertaking treasury risk management processes, Board
oversight, delegated approvals, and lender relationship
management.
• Performing regular viability assessments and conducting
scenario analyses.
• Analysing our pension schemes’ funding position and
investment performance regularly, negotiating funding
valuations and reviewing de-risking opportunities.
Example point risks in this category
• Market disruption and economic downturn caused by Covid-19
and the geopolitical situation.
• Our credit rating being downgraded.
• An increase in our pension deficit.
Example emerging risks in this category
• Review of pension funding legislation and 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.
We have in place financial controls to prevent fraud (including
misappropriation of assets) and to report accurately; failure to
do this could result in material financial losses or cause us to
misrepresent our financial position, undermining trust and
damaging our reputation.
Key factors we consider in this category
• Our financial controls provide financial planning and
budgetary discipline, transaction processing efficiency, and
reporting accuracy while reducing the risk of fraud, leakage
and errors.
• We could fail to apply the correct accounting principles
and treatment in producing the income statement, balance
sheet and equity statement which could result in financial
misstatement, fines, legal disputes and damage
our reputation.
• Failure to apply appropriate tax processes could result in BT
Group missing its tax compliance or reporting obligations and
facing challenge and fines from tax authorities.
Some of the things we do to manage it
• Maintaining an internal controls framework with clear
accountability and delegations across the three lines
of defence.
• Performing quarterly control attestations.
• Conducting annual testing covering all key controls, including
relevant IT general controls.
• Tax risk management processes and training.
• Continuing to enhance processes, systems, controls, and the
operating model, for instance by investing in enterprise-wide
platforms to deliver improved and automated accounting
and controls.
Example point risks in this category
• Failing to simplify and modernise our finance processes and
operating model could make it harder for us to be agile,
proactive and customer centric.
• Sophisticated or cumulative low-level fraud schemes could
remain undetected.
• Impact of complex legacy systems on our internal controls.
• Complex and changing international tax regulations and
requirements from different tax authorities.
Example emerging risks in this category
• Changes to controls framework requirements resulting from
changes in regulation and legislation.
• Opportunities and risks associated with Robotic Process
Automation applied to financial controls.
• Higher propensity for fraudulent behaviour caused by
increasing cost of living.
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Our principal risks and uncertainties continued
Compliance
Communications regulation
Sponsor: General counsel, company secretary & director
regulatory affairs
Data
Sponsor: Chief digital and innovation officer
What this category covers
Our data strategy seeks to create value and enable efficiency
while providing a robust framework for data governance and
regulatory compliance. We must ensure the entire organisation
follows applicable data regulations while anticipating and
adequately preparing for future ones.
Key factors we consider in this category
• We must be vigilant in protecting all types of data including
high volumes of sensitive customer data, colleague and
personal data. All must all be appropriately risk assessed,
classified and managed.
• Failing to comply with global data protection laws or
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 fines
and penalties.
Some of the things we do to manage it
• Continuously operating and enhancing our data governance
programme to 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.
Example point risks in this category
• The UK losing data adequacy status from the EU.
• Preventing data loss in remote working environments.
• Complying with data protection laws and regulations, while
seeking innovative uses for data.
Example emerging risks in this category
• Changes to data protection laws and regulations that apply to
us wherever we operate.
• Increased regulatory focus on governance and ethics around
data propositions and processes.
What this category covers
We work with key regulators as they define clear, predictable,
and proportionate regulations that protect customers and
society while ensuring service providers can compete fairly.
We then must work in compliance with these regulations,
maintain trust and strong relationships while delivering
on our vision and sustainable value growth.
Key factors we consider in this category
• Areas of non-compliance or weak controls could result in
increased regulatory challenge and formal investigations
which could lead to reputational damage, fines and/or loss
of licences.
• Strained regulatory relationships reduce our ability to
influence regulatory decisions which could position BT Group
at a disadvantage relative to competitors.
• Unsupportive regulation could impact our ability to invest
at pace and scale in our full fibre rollout, 5G, and converged
connectivity; and restrict our ability to innovate whilst doing so.
• Key areas that could result in regulatory scrutiny include billing
accuracy, major system resilience, customer complaints,
support for vulnerable customers, migration away from legacy
services, and effectiveness dealing with major incidents.
Some of the things we do to manage it
• Proactively engaging with our regulators at different levels and
on different policy topics.
• Ensuring fairness in customer experiences, for example when
moving customers on to our new networks and interacting with
vulnerable customers.
• Maintaining processes so that we follow regulations carefully,
building trust and enabling positive future dialogue with
policymakers.
• Making sure the Commitments are always front of mind for all
colleagues, including training those in high-risk roles.
• Supplying timely and accurate information to our regulators
where required.
Example point risks in this category
• Inability to demonstrate compliance to new commitments and
regulations such as customer fairness.
• The regulatory environment shifts to favour or support
expansion of new market participants.
• Challenges in shutting down our legacy networks.
Example emerging risks in this category
• Regulation not keeping pace with the changing economics in
the value chain affecting our ability to compete.
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Legal compliance
Sponsor: General counsel, company secretary & director
regulatory affairs
Financial services
Sponsor: CEO, Consumer
What this category covers
What this category covers
We seek to remain compliant with all substantive laws. Key areas
of compliance activity surround laws relating to anti-bribery and
corruption, competition, trade sanctions, export controls and
corporate governance obligations.
Key factors we consider in this category
• Serious breaches of legal compliance can take place in many
forms and can arise anywhere including but not limited to
higher risk regions, countries and transactions as well as
on complex matters and those where there is high pressure
to deliver.
• Serious breaches could lead to prosecution, litigation or to a
regulator stepping in, all of which might lead to fines or affect
our ability to operate, especially if the breaches were deemed
criminal and could adversely impact our reputation.
• This means, where appropriate, we take bold, evidenced, and
defensible decisions around how we comply to applicable laws
while empowering the business to take advantage of
commercial opportunities.
Some of the things we do to manage it
• Through our code we foster a culture where colleagues know
the standards expected and can speak up if something’s
not right.
• Assessing risks regularly when providing legal or compliance
advice on strategic projects, signing new business, and
commercial operations.
• Scanning the horizon to prepare for legislative changes and
developing policies to address them.
• Providing training to colleagues so they know where legal and
compliance risks come from, and how to handle them or to get
expert help to handle them.
• Carrying out monitoring and assurance on day-to-day
operations, regions, partners, projects and suppliers.
Anomalies are investigated and remedied with learnings
shared, where appropriate.
Example point risks in this category
• Rapidly changing international trade sanctions arising due to
the Russian invasion of Ukraine.
• New technologies being exploited in multiple countries.
• Working with third parties in multiple jurisdictions.
Example emerging risks in this category
• Changes to existing or potential new laws which may be put in
place in response to geopolitical dynamics (for example new
trade sanctions) or to address concerns in a particular area
of law.
BT Group has had very limited exposure to financial services
regulation, but it recently launched, through EE, a mass-market
proposition regulated by the FCA. This is expected to scale-up
and broaden out in the coming years. As such EE must meet all
applicable FCA principles, rules and requirements.
Key factors we consider in this category
• Our products, services and activities including those provided
by subsidiaries, local business partners and franchisees could
lead to poor outcomes for customers.
• Establishing new organisational and operational capabilities
that understand, interpret, and manage compliance with
regulatory requirements to enable launch of new FCA
regulated services.
• Operating outside FCA rules, requirements or permissions
could lead to customer harm, fines, loss of FCA permissions,
poor adoption of new services and broader reputational
damage.
Some of the things we do to manage it
• Operate a second line compliance team to provide support
and oversight.
• Review and update relevant policies and standards annually
with controls implemented into operational procedures.
• Mandatory colleague training of relevant FCA and other
regulatory requirements aligned to job roles.
• Operate a breach reporting process to review, investigate and
report events within required timelines.
• Undertake new and existing financial services product reviews
and financial product promotion reviews as part of the
development cycle and annually thereafter.
• Horizon scanning and interpretation of new regulatory
requirements, maintaining regular communication with
the regulator.
• Applying a proportionate governance framework to provide
clear responsibility, accountability and reporting.
Example point risks in this category
• Project resources and operational capability to deliver planned
rollout of compliant financial service products.
• Organisation design to support financial services strategy
across BT Group.
• Additional operational requirements expected from new FCA
requirements around Consumer Duty.
Example emerging risks in this category
• Potential changes to regulatory perimeter relating to Buy Now
Pay Later and short-term interest-free credit.
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Our principal risks and uncertainties continued
Operational
Service interruption
Sponsor: Chief technology officer
Cyber security
Sponsor: Chief technology officer
What this category covers
What this category covers
Our aim is to deliver best in class network performance across
fixed and mobile networks and IT. This involves managing all
risks that could disrupt the services we provide.
Key factors we consider in this category
• Service interruptions may be caused by various external
factors such as, but not limited to, adverse weather conditions
and accidental or intentional damage to our assets.
• The impact of poorly planned or executed maintenance and
upgrade changes on our networks and IT can contribute to
service interruptions.
• Some service interruptions may depend on the reliability of our
suppliers and partners, highlighting the importance of
selecting the right partners and maintaining effective
relationships.
• The quality of our incident response and recovery helps us
minimise the effect of service interruptions. A risk-based
approach is needed to minimise customer impacts (for
example prioritising essential services).
Some of the things we do to manage it
• Continuous capacity planning, asset lifecycle management,
monitoring of our network, assets and services.
• Responding quickly and professionally to incidents and
reducing their impact through geographically dispersed
emergency response teams while communicating effectively
with customers.
• Comprehensive testing and change management processes.
• Regularly conducting business impact assessments that feed
into business continuity and disaster recovery plans which are
tested and kept up to date.
• Operational planning to improve network and IT resilience,
including our ability to mitigate for a greater frequency of more
severe weather events.
Example point risks in this category
• Global shortage of silicon chips and other key components
affected by Covid-19 and geopolitics.
• Managing service impacts of wider strategic decisions to alter
the makeup of vendors (for example adapting to governmental
decisions around Huawei).
• Ability to transform BT Group and our technology without
disrupting service to our customers.
Example emerging risks in this category
• Longer-term climate change causing increased frequency and
severity of flooding across the UK, impacting service reliability.
Our aim is to protect BT Group, our colleagues and our customers
from harm and financial loss caused by cyber security events.
We adapt our security posture and controls accordingly to
detect and respond robustly to the evolving threat.
Key factors we consider in this category
• As a provider of critical national infrastructure, a cyber attack
could lead to disruption for our customers and the country and
data could be compromised.
• A poorly managed cyber event could lead to financial loss and
reputational harm followed by a sustained loss of market share
and could prompt intervention by a regulator who could
impose fines or penalties.
• Failure to live up to regulatory, customer and other stakeholder
expectations related to cyber security could weaken our
reputation in the marketplace.
Some of the things we do to manage it
• Implementing best practice security policies, tools and
processes to protect our applications, systems and networks.
• Monitoring external threats and gathering intelligence on
evolving cyber techniques, tactics and capabilities.
• Maintaining a vigilant security posture to quickly detect and
respond to cyber risks 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,
fostering effective partnerships with industry, government and
customers, and empowering our first line of defence to
discharge their responsibilities.
Example point risks in this category
• Cyber attacks from nation states, including Russia, targeting
critical national infrastructure.
• Being exposed to suppliers with security vulnerabilities.
• Relying on externally hosted cloud services.
• Requirement to comply with the Telecommunications
(Security) Act 2021.
Example emerging risks in this category
• AI and machine learning being weaponised as security threats.
• Growing numbers of connected home devices need more
focus on protecting customers.
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Transformation delivery
Sponsor: Chief financial officer
People
Sponsor: HR director
What this category covers
What this category covers
We are accelerating transformation delivery to build a simpler,
more efficient and dynamic BT Group through radically
modernising and simplifying our IT architecture; simplifying and
refining our product portfolio; migrating to next-generation
strategic networks; unlocking cost efficiencies by implementing
better, more agile ways of working; being customer-obsessed and
redefining our digital journeys, automating our processes and using
AI capabilities.
Key factors we consider in this category
• Failing to deliver our externally communicated transformation
ambitions will adversely impact our efficiency, financial
performance, and customer experience while impacting
reputation.
• Our challenge is to simplify and modernise our product
portfolio, reduce dependence on out-of-date products and
deliver smart, differentiated solutions and outcomes.
• Transforming our customer journeys reduces the risk of us
being a laggard on customer and colleague experiences,
ensuring we are providing outstanding digital channels,
services and experiences.
• Delivering automated, digitised and AI-driven processes
reduces the risk of us not being able to realise efficiencies and
reduce the cost base.
• Shutting down legacy IT and migrating customers onto
strategic networks allows us to operate on modern digital
platforms and be the market leader in FTTP and 5G.
Some of the things we do to manage it
• We are reinvesting in building digital and data capability, to
reduce costs and drive revenue growth – ensuring that we have
the right resources to deliver change effectively.
• Having a strong governance model with clear ownership by
senior leaders of the operational and financial outcomes that
need to be delivered.
• Robust tracking and reporting using financial and non-
financial measures to make sure we generate value.
• Quarterly performance governance model to ensure funding is
being prioritised to those programmes delivering the most
strategic value.
• Collaborating across the group in a way that properly reflects
our customers’ end-to-end journeys.
Example point risks in this category
• Delivery of enablers such as strategic architecture.
• Managing complex interdependencies and the migration of
the final customers in order to close legacy IT and networks.
• Delivering the volume of change at pace whilst remaining
focussed on reducing the cost base.
Example emerging risks in this category
• Changing external environment impacting the size, scale and
speed of transformation required to deliver our strategy.
Our colleagues are central to delivering our ambition and
our people strategy aims to enable a culture where everyone
can be their best. This means we must manage risk around our
organisational structure, skills and capabilities, engagement
and culture, wellbeing and the diversity of our workforce.
Key factors we consider in this category
• To attract and retain the right talent in the right places for an
organisation as large and complex as BT Group, we need to
have effective strategic workforce planning.
• Day-to-day people management activities include managing
a high quantum of recruitment, onboarding and terminations,
processing payroll and provisioning access to relevant training
and development opportunities.
• Failure to engage the workforce, ensure their health and
wellbeing, manage industrial relations and create a diverse and
inclusive workplace could impact our performance, customer
service and transformation ambitions.
Some of the things we do to manage it
• A group people strategy underpinned by a workforce plan.
• Aligned performance goals and performance management
review processes cascaded through clear organisation
structures, roles and job descriptions.
• Skills and capabilities assessment, investing in group-wide
workforce and talent planning, providing wellbeing support
and unlimited training and development, with both role-
specific and future skills in mind and a succession planning
process.
• A D&I strategy to raise awareness, address bias and promote
People Networks and support.
• Listening to colleagues through employee engagement and
surveys, town halls or social platforms, and maintaining close
relationships with formal employee representative groups
and unions.
• Providing fair, competitive, and sustainable remuneration to
colleagues that promotes smart risk taking, supports
engagement and retention and aligns colleagues’ interests
with those of shareholders.
Example point risks in this category
• Social disruption and challenges around post-pandemic return
to workplaces.
• Skills gaps arising from changes towards a digital organisation.
• Widening gap between cost of living and wage inflation
potentially leading to industrial action.
Example emerging risks in this category
• Long-term social and workplace changes.
• Growing colleague activism on social or environmental topics.
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Our principal risks and uncertainties continued
Operational
Health, safety and environment
Sponsor: Chief technology officer
Major customer contracts
Sponsor: Chief executive
What this category covers
What this category covers
BT Group has diverse operations in various locations and working
environments that can pose a health, safety and environment
risk to our colleagues, partners, or the public. We have a duty of
care to make sure our colleagues and partners are safe and
healthy, and perform at their best while managing hazards that
could cause harm.
Key factors we consider in this category
• Certain high hazard operations such as occupational road risk,
working with high voltage electricity, electro-magnetic fields,
lasers, aerial rigging, civil engineering works (road works and
construction), highway and railway operations, high pressure
pipelines, manual handling and hazardous substances.
• Not promoting and embedding suitable safety management
and environmental management systems incorporating
continual improvement will impact our ability to establish
and maintain a safe and compliant business, protecting our
colleagues at work.
• Ineffective health and safety and environmental standards
could result in legal and financial penalties, subsequent
reputational and commercial damage with the potential to
restrict future enterprise projects.
Some of the things we do to manage it
• Group Policy Statements which are underpinned by minimum
standards, and a safety framework, which are reflected in
our code.
• Training our colleagues and ensuring they are clear on their
role and accountabilities with regards to health, safety and
environmental practices.
• Monitoring our colleagues’ health and safety through surveys
and focus groups, supported by a dedicated portal.
BT Group offers and delivers a diverse mix of major contracts
that contribute to our business performance and growth. These
include winning and retaining major private and public sector
contracts in a highly competitive and dynamic environment,
while navigating customer relationships and risk around complex
agreements, delivering highly sensitive, critical or essential
services globally.
Key factors we consider in this category
• BT Group’s strategy, products, services and target markets
must align with the needs of our major customers to pursue
and win new customer contracts in a dynamic and fiercely
competitive environment.
• Customer contractual terms can be onerous and unfavourable
if they are challenging to meet, and could lead to delays,
penalties and disputes. This is particularly prevalent in public
sector contracts.
• Delivery and service failures against obligations and
commitments could damage our brand and reputation,
particularly if they affected critical infrastructure contracts or
security and data protection services.
• Failure to effectively manage contract exits, migrations,
renewals and disputes can erode profit margins and affect
future customer relationships.
Some of the things we do to manage it
• A clear governance framework to assess new business
opportunities, manage the bid process, and monitor in-life
contract risks.
• As part of the bid process, non-standard unfavourable terms
and conditions are assessed and mitigations put in place where
appropriate.
• Using an electronic incident reporting system to monitor and
• A cycle of regular contract reviews led by senior management
evaluate our performance on health and safety.
and a separate review team.
Example point risks in this category
• Covid-19 related risks.
• Civil and construction work supporting fibre rollout.
• Inspection and replacement programme for defective
telegraph poles.
• Keeping our sites clean, tidy and environmentally safe.
Example emerging risks in this category
• The long-term health effects of lengthy periods of social
restriction and limited mobility as we emerge from the
pandemic.
• Future compliance with developing regulation related to
commercial use of drones.
• Using advanced contract and obligation management tools to
support frontline contract managers.
Example point risks in this category
• Customer investment and procurement delays due to
Covid-19, macroeconomic and geopolitical conflicts.
• Specific project execution especially when involving complex,
sensitive, or new technologies.
Example emerging risks in this category
• Inability to pivot if macroeconomic factors affect government
and other customers’ IT budgets.
• Legislative changes to be made to procurement regulations
following Brexit.
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Customer service
Sponsor: CEO, Consumer
Supply management
Sponsor: Chief financial officer
What this category covers
What this category covers
Our aim is to provide our customers with stand out service so we
can build personal and enduring relationships while taking extra
care with our vulnerable customers. We aim to maintain
customer satisfaction while continuing to migrate customers
from legacy products to newer products and services, while
maintaining billing accuracy.
Key factors we consider in this category
• Failing to continuously digitise and improve our customer
experience could negatively affect customer satisfaction and
retention, colleague pride and advocacy, our group revenues
and brand value.
• Central to this is being accurate and competitive with our
pricing, billing, and collection, managing the lifecycle of all our
products and services, managing inventory and supply chain,
and operating in compliance with customer obligations and
product and service standards.
• We must also take particular care for vulnerable customers
and handle customer complaints empathetically.
Some of the things we do to manage it
• Delivering on our promises about the service levels customers
should expect from us and tracking a range of customer
experience performance metrics.
• Planning with all our suppliers how we’ll manage ongoing
relationships and risks (for example the impact of a potential
future pandemic resurgence).
• 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.
Example point risks in this category
• Ability to fully migrate from legacy services to new service
platforms.
• Challenges in retaining and recruiting current and future
skill sets.
Example emerging risks in this category
• Long-term changes in customer needs and expectations.
The successful selection, onboarding and in-life management of
suppliers is essential to our delivery of quality products and
services. We use a large quantum of suppliers and must make
decisions on concentration, capability, resilience, security, costs
and broader issues that could impact our reputation.
Key factors we consider in this category
• Our reputation is entrusted to our suppliers. We must make
sustainable and strategic sourcing decisions that affect the
value and quality of the products and services we provide to
our customers.
• As such, we must select and onboard the right suppliers across
a spectrum of decision criteria including financial, operational,
security, environmental, ethical, diversity and reputational
perspectives.
• This risk includes in-life management of complex contracts,
performance and obligation delivery, compliance, payments,
supplier records and relationship management.
Some of the things we do to manage it
• A sourcing strategy with different approaches by category,
standard terms and conditions and controls to ensure
purchase decisions are made efficiently and effectively.
• Comprehensive supplier due diligence process, contract
management, on-boarding and in-life assessment systems.
• Supplier risk management, performance monitoring, renewals,
and terminations processes.
• Demand planning and forecasting, inventory management
and stock counts to ensure supplies are available as needed.
• Assurance over whether the goods and services we buy are
made, delivered and disposed of in a responsible way including
monitoring energy use, labour standards and environmental,
social and governance impacts.
Example point risks in this category
• Inflationary pressure through the entire supply chain.
• Disruption due to worldwide shortages of critical supplies
driven by Covid-19, geopolitics or other localised events.
• Resilience and market power of single-source vendors.
• Supplier-related cyber and data security threats.
Example emerging risks in this category
• Being sure of ethical business practices across our whole
supply chain.
• Reliance and exposure to China market volatility and
geopolitics.
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Task Force on Climate-related Financial Disclosures
We analyse and report on what we’re doing to understand and manage
the impact of climate-related risks and opportunities on BT Group.
This section contains details of our compliance with the recommendations
of the Task Force on Climate-related Financial Disclosures (TCFD)
in this area (our ‘TCFD statement’).
As a premium listed company, we’re
required to report under FCA Listing Rule
LR 9.8.6(8) on our compliance with the
TCFD framework on a ‘comply or explain’
basis. This year is the first year of
mandatory disclosure, but we’ve been
making voluntary statements since FY20.
We consider the climate-related
financial disclosures that follow to be
consistent with the TCFD framework
and therefore compliant with Listing
Rule 9.8.6(8), save for certain items
which we summarise on page 68.
Where relevant our disclosures have
taken into account TCFD guidance on
materiality of information in regard to
Strategy and Metrics and Targetsª.
Climate-related disclosures are
integrated throughout the Annual
Report, so in some areas we’ve cross-
referenced to another section
containing the relevant information.
Our 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 and is 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 Group Environment Board manages
day-to-day climate-related compliance
and risk issues on behalf of the Executive
Committee, reporting back regularly.
Read more on our climate governance on
page 97.
Risk management
A structured and consistent
approach to risk management
Our risk management framework helps us
assess, manage, monitor and act on risks
around us successfully delivering our
strategic objectives.
We look at potential impacts using
quantitative and qualitative measures.
These include our revenues and market
capitalisation, customer experience,
stakeholder perception, and/or the
amount of senior management time we
have to divert to address an issue. This
enables us to determine the relative
materiality of a risk.
Identifying, assessing and
integrating climate-related risks
We include risks around climate change in
our risk management framework. We’ve
included them in several GRCs, including
service interruption (physical assets),
supply management (supply chain) and
stakeholder management (reputation).
You can read more about these GRCs on
pages 62, 65 and 58 respectively.
We regularly review and report on risks in
each category. The Executive Committee
and Audit & Risk Committee regularly
review reports on risks in each GRC on a
rotational basis. Our internal audit team
assesses the effectiveness of our risk
management and internal controls on a
risk-assessed basis and report findings to
the Audit & Risk Committee.
This year we brought in an external senior
climate expert to discuss climate change
with our senior management team.
We also had a briefing session with a
number of risk owners to deepen their
understanding of climate change risks.
The session was part of a risk ‘hub’ looking
at the emerging climate-related risks and
opportunities we could face and including
the findings in our GRCs and advancing
this work in the year ahead.
Managing the different risks of
climate change
Day-to-day, we manage climate-related
risks in the parts of our business they
might affect. As an example, BT Sourced
carries out checks to measure suppliers’
energy use and environmental impact.
Deciding how to mitigate or control a risk
depends on its impact and likelihood.
So for example we’re investing in flood
defences because increased flooding
could have a big effect on us.
You can read more on our risk management
framework on pages 55 to 57.
BT Group plc Annual Report 2022
67
Climate change strategy
Considering climate risks along
different time horizons
We think about climate-related risks
along short (0–3 years), medium
(3–5 years) and long-term (5–20 years)
time horizons.
Short-term, we factor physical risks like
flooding and higher temperatures into our
plans each year (and often over many
years). This helps us adapt and reduce
their impact on our business and
value chain.
Our medium-term horizon is aligned to
our financial planning process, enabling
us to invest in things like adopting electric
vehicles into our fleet.
Our long-term horizon ties into the
investment timeframes for strategic
assets like our networks. It also influences
our strategy, targets and plans on how to
respond to the bigger risks and bigger
transition implications of climate change.
We also undertake scenario planning for
climate risks over longer timeframes –
up to 2050 and beyond.
There are a lot of physical and transition
risks which could apply to us, which we
track closely. Based on how we’ve
responded to physical and transition risks
we don’t deem these risks to be material
at present, but we keep this under review
as part of our ongoing review and
assessment of climate risks.
Embedding climate-related risks
and opportunities into our strategy
Climate is a core part of our strategic
framework, covered in our ‘Lead the way
to a bright, sustainable future’ pillar.
Of course, external legal and regulatory
changes play a part in our climate
strategy – like phasing out new petrol
and diesel vehicle sales in the UK.
We have some ambitious strategic
and financial targets, all aiming to
decarbonise our operations and value
chain and ultimately reach net zero.
With Accenture, we published research
which decouples ICT sector carbon
emissions from expected growth in data
trafficb. It also looked at opportunities
for sustainable technologies to drive big
cuts in other sectors’ carbon footprints
(which will be more critical than ever in
the next decade).
To show our commitment to this, we
set a new target to help customers avoid
60m tonnes of CO2e by 2030, based on
shifting them to technologies like FTTP,
5G, cloud computing and IoT.
and maintenance activities, and plan our
location strategy and future defence
investments. We’re going to extend this
analysis to other critical sites over the
next few years.
For more on our climate strategy, see page 35.
Being resilient to
climate-related risks
We use TCFD’s different reference
scenarios to review climate-related risks
around transitioning to a lower-carbon
economy and the physical impacts of
climate change.
Our analysis is based on a core scenario
(2°C to 3°C heating) that we think is most
likely. We’ve also reviewed more extreme
‘what if?’ transition and physical scenarios
(1.5°C and 4°C heating) to assess the
potential financial impact of climate
change on us in 2030 and 2050c.
Responding to our
main physical risks
Flooding: Last year we analysed possible
risks from large-scale flooding at 150
business-critical sites (based on the
Environment Agency’s Extreme Flood
Outline). In the scenarios we explored,
potential financial impacts weren’t
material. This is due to the flood defence
programme we’ve now completed in all
large and critical sites that were classified
as high-risk locations. We’ve invested
around £6m in these defences since the
programme began.
We’ve made good progress in our
understanding of – and action in response
to – the main flood risks our business
faces. This year, we continued to analyse
the potential effects of flooding in our UK
estate and in line with our future location
strategy. We ran a pilot covering 27
operational sites, using additional flood
risk data and across a number of heating
scenarios to provide a more extreme
view of potential flood impacts in 2030
and 2050c.
The pilot tracked fluvial, pluvial and tidal
risk. We tested the likelihood and severity
of flooding based on single and combined
causes (for example, river flooding with
high levels of surface water from rainfall).
This method helped us to identify
potential flood sources more precisely,
and how they’d affect our building or
asset. And that lets us target mitigation
Heat: In most scenarios in 2030 and 2050,
the UK will see more extreme heat days.
The risk of these days damaging our
network sites is low – mainly because of
the cooling system upgrades in our large
metronode sites which enable the rooms
to operate effectively in up to 45°C
external temperatures. We expect this
upgrades programme to cost around
£60m once complete.
We’ve also finished upgrades in our
strategic data centres and are now doing
the same at core mobile sites. So higher
UK temperatures should not materially
affect our repair or cooling costs.
To minimise the impact of global warming,
all cooling plant installed within our
exchanges is manufactured and tested to
confirm it can operate effectively up to a
45°C ambient temperature. Since 2015,
we’ve invested over £102m on cooling
system upgrades for our exchanges,
covering the remainder of the estate.
The new adiabatic units cool through
fresh air and water evaporation, making
us less reliant on refrigerant gases. They
work best on the hottest days of the year
– well suited to the rising ambient
temperatures of different heating
scenarios in 2030 and 2050.
Longer term, our FTTP rollout and the
closure of the PSTN network will mean
fewer physical network sites. That cuts our
exposure to physical climate change risks
like flooding and hotter temperatures. But
it does mean more customers and services
going through fewer operational locations.
Our flood and temperature mitigations
reduce the risks associated with that. And
because FTTP services are more ‘passive’
(with no electronics between exchanges
and connected properties), we expect the
rollout to reduce our exposure to climate-
related risks.
Outside the UK, extreme weather could
disrupt service and affect customers and
colleagues in key operational sites. In
particular, our India sites are still seeing
high temperatures and instances of very
heavy rainfall. There were no immediate
impacts on office operations this year,
but we’ll continue to monitor the
situation closely.
a Task Force on Climate-related Financial Disclosures: Implementing the Recommendations of the Task Force on
Climate-related Financial Disclosures, October 2021.
b Harnessing data to empower a sustainable future.
c We use Representation Concentration Pathways 2.6, 4.5, 6.0 and 8.5 to show future emissions scenarios across a
different range of mean temperature increases.
BT Group plc Annual Report 2022
Strategic report 68
Task Force on Climate-related Financial Disclosures continued
This year, Openreach grew its fleet of
electric vehicles to over 1,000. Subsidies,
and there being enough vehicles and
charging points, are some of the barriers
that we and other businesses face.
Previously we stated the aim of switching
a third of the fleet to electric vehicles by
2025. Due to these challenges, we’re
reviewing our short-term plans and the
operational and financial implications,
which may result in us procuring less
electric vehicles over the next few years.
We remain committed to our 2030 fleet
plans and are partnering with other
companies through EV100, the UK
Electric Fleets Coalition (both led by the
Climate Group) and the new Electric
Vehicle Fleet Accelerator to advocate for
progressive public policies to push the
shift to electric.
Decarbonising our buildings: This year,
we continued our energy efficiency and
workplace transformation programmes,
with a move to fewer, more sustainable
and efficient buildings. Longer term,
FTTP migration will cut the number of
operational buildings like exchanges that
we’ll need. These steps, together with our
renewables commitments, lower risks
around carbon pricing.
For further details on our workplace
transformation programmes, see page 25.
Helping suppliers cut carbon: If suppliers
don’t reduce their emissions, they could
pass on carbon costs to us by 2030 under
a 2°C heating scenario (this is a risk for our
whole sector). Our supply chain targets
and procurement approach respond to
this risk – see the progress against our
strategic priorities section (page 35)
and stakeholder section (page 39)
for further details.
We’ll keep monitoring possible carbon
pricing risks and policy and regulation
changes under our risk management
framework. This helps us understand the
effects of things like growing numbers of
company net zero targets and actions
taken by governments to cut carbon
emissions.
As reported under the climate change
strategy heading on page 67, we also see
opportunities to support customers to
achieve their own transition to net zero by
using our products and services.
Our targets, metrics and
measurement
There are details of our climate-related
targets, programmes and performance in
the strategic progress section on page 35.
They form a core part of our strategy and
risk management approach.
During the year, we brought forward our
net zero goal by 15 years. That means
we’ll be a net zero carbon emissions
business by the end of March 2031 –
and net zero for our supply chain and
customers by the end of March 2041.
As reported earlier on this page, we’re
reviewing our short-term plans on electric
vehicles and will update on our climate
transition plans in the year ahead.
Because of these uncertainties, we’re
continuing to develop our interim targets,
covering the short and medium term. We
plan to include these within our climate
transition plans and will provide an
update in the TCFD disclosures we make
in the Annual Report 2023.
Five per cent of our annual bonus
available to eligible managers is based
on our science-based target to cut the
carbon emissions intensity of our
operations by 87% by the end of March
2031. Our Remuneration Committee
determines whether this target has
been met, based on input and
recommendations from the Digital
Impact & Sustainability Committee.
And our commitment to tackling climate
change extends beyond BT Group.
During the year, Standard Life (and its
parent company Phoenix Group), which
provides pension benefits to around
66,000 colleagues, announced ambitious
new targets to cut the carbon emissions
intensity of its £250bn investment
portfolio by at least 50% by 2030.
The BT Pension Scheme, which runs our
defined benefit scheme, has also set a
goal of becoming net zero for its entire
£55bn portfolio by 2035. We continue to
work with all our pensions schemes’
trustees and providers as part of their
transition towards sustainable
investments.
Supply chain: Our supply chain reaches
nearly 100 countries. But most of our
products’ raw materials are concentrated
in China – where flood risks are predicted
to increase under future warming
scenarios. This is a shared concern across
our whole sector.
We monitor supply chain risks and try
to minimise them. We use monitoring
tools to identify environmental risks
then map them to larger suppliers and
up to four tiers down in our supply chain.
Our supplier teams get alerts if we detect
any potential issues. This can also inform
any longer-term plans to diversify
our supply base as we consider risks,
such as flooding, heat and other
weather-related threats.
Managing transition risks and
reaching net zero
We face a number of risks relating
to potential market, policy, regulatory
and technological changes intended
to transition society to a low carbon
economy. Our new net zero targets – and
supporting plans – aim to cut the potential
impact of transition risks and support the
UK’s commitment to becoming a net zero
economy by 2050. We’re doing lots of
different things to try and hit our
new targets.
100% renewable electricity: All our
electricity worldwide is renewablea.
We know there are risks from potential
gaps in UK renewable electricity supply,
as well as more energy market volatility
(like we’re seeing this year). Most of the
electricity we use comes from green
tariffs. But we’re also taking steps to
increase the amount of electricity we buy
through longer-term power purchase
agreements. These give us better pricing
predictability and help to grow the overall
supply of renewable electricity.
Developments in carbon offsetting:
We track developments and prices in the
voluntary carbon offsets market to inform
our strategy (especially for setting our net
zero targets).
Moving to a low carbon fleet: We’re
aiming to switch the majority of our fleet
to run on electric or zero emissions by
2030, which forms part of our goal to
reduce our carbon emissions intensity by
87% by end of March 2031 (a group KPI
– see page 45). This reduces the risks
associated with policies that aim to cut
vehicle carbon emissions (like banning
new UK petrol and diesel vehicle sales
by 2030).
a 99.9% of the global electricity BT Group consumes is from renewable sources. The remaining 0.1% is where renewable electricity is not available in the market.
BT Group plc Annual Report 2022
69
Our worldwide energy use and greenhouse gas emissionsa
In the table below, we provide an overview of Scope 1, 2 and 3 greenhouse gas emissions. We report in line with the Greenhouse Gas
Protocol (ghgprotocol.org).
We will continue to develop our metrics and measurement approach to help us track climate-related risks and opportunities.
Year ended 31 March
FY20
FY21
FY22
UK
Non-UK
UK
Non-UK
UK
Non-UK
Energy
GWhe
CO2ef
Tonnes
Energy
GWh
CO2e
Tonnes
Energy
GWh
CO2e
Tonnes
Energy
GWh
CO2e
Tonnes
Energy
GWh
CO2e
Tonnes
Energy
GWh
CO2e
Tonnes
Scope 1b (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)
Total scope 1
Scope 2c (electricity incl. nuclear
& CHPg)
Total consumption (LBMh)
MBMi renewable consumption
CO2e adjustments
General consumption
Commercial fleet EVj consumption
Company car EV consumption
198
22
37,120
5,126
1,571
2
1
419
172
628
174
36
32,624
8,318
1,150
512
125,263
3
723
506
121,732
2
0.4
3
8
326
96
2,433
179
30
33,279
6,842
3,087
723
553
130,971
1,805
11
2,836
2
0.4
2
5
9
301
86
1,501
575
1,300
3,763
29
7,298
761 176,378
20
26
4,848
9
2,207
6,790
725 166,031
13
5,383
773 177,015
2,371 605,976
319 112,007
2,334 544,280
248
82,353
2,313 491,152
216
63,091
Total scope 2 CO2e MBM adjusted
28,304
29,117
2,260 (577,672)
228 (82,890) 2,334 (544,279)
–
–
–
–
–
–
–
–
–
0.005
N/A
(1)
–
247
–
–
(82,151) 2,311 (490,819)
(298)
(35)
2
0.2
–
–
216 (62,936)
–
–
–
–
202
–
155
Total scopes 1 & 2 (MBM)
3,132
204,682
345
35,907
3,059
166,031
261
5,585
3,086
177,015
225
3,918
Worldwide scopes 1 & 2 CO2e
(MBM)
% change from baseline year FY17
(baseline 404,780)
Scope 3d: Worldwide emissions
CO2e tonnes
Key climate targets
Intensity metric scope 1 & 2
worldwide emissions tonnes
CO2e per £m value added
% change from baseline year FY17
(baseline 31.5)
SBTI supply chain emissions GHG
scope 3 Upstream + Operational
(GHG category 1–8) kt
% change from baseline year FY17
(baseline 3,217 kt)
N/A: Not available or not applicable
240,589
(41)%
171,616
(58)%
180,933
(55)%
3,233,007
3,137,330
3,075,045
17.9
(43)%
2,495
(22)%
13.5
(57)%
2,347
(27)%
14.3
(55)%
2,318
(28)%
Target
March 2031
(87)%
Target
March 2031
(42)%
a Data presented has been reviewed to a high level of assurance by Lloyd’s Register Quality Assurance Limited against Accountability’s AA1000AS v3 assurance standard. We
restate historical years’ data when we think subsequent information is materially significant (e.g. replacing estimates with measured figures).
b Scope 1: direct emissions from our own operations (e.g. fleet/heating fuel combustion).
c Scope 2: indirect emissions from the generation of our consumed energy (mainly electricity) (excludes third-party consumption).
d Scope 3: including supply chain, customer use of our products, and other indirect emissions (such as employee commuting).
e For gas & oil based on GWh equivalent input value before combustion and GROSS calorific value.
f CO2e: carbon dioxide equivalent emissions.
g CHP: combined heat and power.
h LBM: location-based method for scope 2 emissions accounting – as defined in the Scope 2 Guidance amendment to the Corporate Standard (ghgprotocol.org).
i MBM: market-based method for Scope 2 emissions accounting – as defined in the Scope 2 Guidance amendment to the Corporate Standard (ghgprotocol.org).
j EV: electric vehicle.
You’ll find more information and data in our Manifesto Report and ESG Addendum at bt.com/manifestoreport
BT Group plc Annual Report 2022
Strategic report 70
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.
Scenarios included in our combined severe but plausible stress test
Our hypothetical combined downside scenario is based on a continued escalation
of the current geopolitical situation in Ukraine and Russia triggering a severe split of the
global economy resulting in several major events impacting BT 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 2027, and the
potential impact of ‘Our principal risks
and uncertainties’ (pages 58 to 65).
The Board has chosen to conduct its
review for a period of five years to
31 March 2027. This is a change from the
Annual Report 2021 where we performed
a three-year review. The Board believe
that this is an appropriate timeframe
as it aligns with the primary focus of
our business and financial planning.
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 CFUs,
supplemented by items managed at a
group level and assumptions such as
macroeconomic activity and exchange
rates. The performance of the group and
our CFUs against these forecasts is
monitored monthly and this
is supplemented each quarter through
a series of quarterly business reviews
of each 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.
Approach
Our medium term plan has been stress
tested in a series of individual severe
but plausible downside scenarios, each
aligned to our group risk categories as set
out on pages 58 to 65. This was followed
by stress testing our forecasts against a
combined scenario of correlated risks
using a stochastic model. Finally, we then
identified several mitigations that could
realistically be taken by the business to
avoid or reduce the impact of the
underlying risk.
BT Group plc Annual Report 2022
Scenario
Risk category
Assumption
Prolonged
stagflation
Strategy, Technology
& Competition,
Financing, People
Driven by geopolitical factors and Covid-19
persistence, the UK and global markets
experience prolonged stagflation with assumed
0% UK and Global GDP growth and UK inflation
remaining above 10% over 5 years. This impacts
our planned price increases as well as various
impacts on our cost base.
Legal compliance
Despite the controls in place we discover
breaches of sanctions imposed by UK,
US or EU nations.
Supplier
management
Geopolitical uncertainty widens and there
is wholesale impact on the China supply chain.
International
trade
sanction
breach
China supply
chain
disruption
Cyber attack
followed by
a class action
Cyber security
Pension
deficit
Financing
BT Group falls victim to cyber attacks and
experiences major loss of customer data. A class
action is subsequently filed against BT Group
which requires substantial compensation
payments.
An increase in BT Group’s funding obligations
due to a worsening of the BT Pension Scheme
(BTPS) deficit caused by a combination of
financial market volatility (e.g. fall in BTPS
assets) and/or deterioration of BT’s covenant
to the BTPS (e.g. fall in EBITDA).
The Board believe that it is reasonable
to expect that it could continue to access
debt capital markets to refinance a
portion of our outstanding debt as it falls
due, or to renew our undrawn committed
facility (which expires in March 2027,
before the end of the viability period).
If access to debt markets wasn’t available,
then equity capital markets would be
considered as an alternative to raise funds.
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 five-year period
of their assessment.
We have considered directly relevant
mitigations that we would employ if these
events occurred and included those
impacts in our calculations.
A summation of the full impact of each of
the individual scenarios in this stress test
would be an extremely unlikely outcome;
therefore a stochastic model was used
to develop a more realistic combined
scenario with a 5% probability.
Result
Applying our severe but plausible
combined scenario with related
mitigations indicates that BT Group
would experience a liquidity shortage
commencing in the third year. However,
there are further mitigations, including
planned debt issuance, that could be
applied to reduce this liquidity shortage.
We would need to adopt around two-
thirds of the mitigations we have identified
to maintain positive cash flow over the
full five-year period of the assessment.
The mitigations directly in our control
primarily revolve around reducing cash
outflow from the group. In addition, there
are also several mitigations which are
outside of our control like raising debt.
Corporate governance report
We are committed to delivering on
our ambition to be the world’s most
trusted connector of people,
devices and machines. We are
focused on growing sustainable
value for our stakeholders and the
communities we operate in, through
effective Board leadership, strong
corporate governance and building
the strongest foundations.
Compliance with the 2018 UK Corporate Governance
Code (the Code)
In respect of the year ended 31 March 2022, BT Group plc
was subject to the Code, which was published by the
Financial Reporting Council (FRC) in July 2018 (available
at frc.org.uk). BT Group has applied all the principles and
complied with all the provisions of the Code throughout
the year:
* Further details on the split of responsibilities of the Board can be found
on our website bt.com/governance
Contents
Chairman’s governance letter
Our governance framework
Board leadership and company purpose
• Board of directors and division of responsibilities
• Role of the Board
• Board focus in FY22
• The Colleague Board and Board engagement
with colleagues
Section 172 statement
Board composition, succession and evaluation
• FY22 Board and committee evaluation
• Board induction
• Nominations Committee chair’s report
Audit, risk and internal control
• Audit & Risk Committee chair’s report
BT Compliance Committee chair’s report
Digital Impact & Sustainability Committee chair’s report
Report on directors’ remuneration
• Remuneration Committee chair’s letter
• Focus on remuneration
• Annual remuneration report
• Remuneration in context
Statement of directors’ responsibilities
Report of the directors
71
72
73
74
76
77
80
82
84
85
86
89
96
97
98
101
104
112
114
115
1. Board leadership and company purpose
A: Leadership, long-term sustainable success, generating
value for shareholders and contributing to wider society
66–69, 72–76, 97
30–35,
B: Purpose, values, strategy and culture
72, 76–78, 82–83, 87, 93, 97
C: Resources and prudent and effective controls 44–45, 55–57, 78, 83,
92, 97
D: Effective engagement with stakeholders
E: Workforce policies and practices
36–41, 72, 80–81, 97
24–25, 42, 78, 80–81, 93
2. Division of responsibilities
72, 74, 76, 88
F: Leadership of the chairman*
73–76, 84
G: Board composition and clear division of responsibilities*
H: Role and time commitment of non-executive directors 74–76, 87, 111
I: Policies, processes, information, time and resources,
and support of the company secretary
73, 74, 76, 87–88
3. Composition, succession and evaluation
J: Board appointment process and effective succession planning 85–88
K: Board and committee skills, experience and knowledge 74–75, 87–88
84, 88
L: Annual Board and individual director evaluation
4. Audit, risk and internal control
M: Independence and effectiveness of internal and external audit
functions
93–95
N: Fair, balanced and understandable assessment of company’s
position and prospects
78, 90, 114
O. Procedures to manage risk, oversee internal control framework
and determine nature and extent of principal risks 55–57, 89–95, 116
5. Remuneration
P: Remuneration policies and practices
Q: Procedure for developing policy on executive, director and
senior management remuneration
R: Independent judgement and discretion in
101
98–113
remuneration outcomes
99, 102, 105
BT Group plc Annual Report 2022
Corporate governance report 72
Chairman’s governance letter
This will be addressed as part of our
search for additional non-executive
directors as a priority and in any event
within FY23.
Stakeholders
The Board values its engagement
with all our key stakeholders, including
shareholders, and we continue to
ensure that our mechanisms are
effective in enabling the continuous
flow of information between the Board,
senior management and the wider
organisation. Details of our engagement
with stakeholders during the year
and the impact of this engagement
on the Board’s decision-making
process can be found on pages 36 to
41 and 80 to 81 and in our Section
172 statement on pages 82 and 83.
Since my appointment, I have met with
a number of our top investors to gain
an understanding of their views.
The first cohort of the Colleague Board
has strengthened the voice of our
colleagues at Board-level and provided
the Board with valuable insights into
colleague sentiment through Isabel
Hudson in her role as the designated
non-executive director for workforce
engagement. We built on this success and
appointed the new cohort of members for
their two-year term at the start of 2022
(see pages 80 and 81).
We have a diverse range of customers
with different needs, and meeting these
needs effectively is key to our success in
delivering on our strategy, ambition and
purpose (see pages 18 and 19). As part of
our Board-level oversight of consumer
fairness, from April 2021, the Board
decided to widen the remit of the BT
Compliance Committee to monitor how
we are living up to the Consumer Fairness
principles (see page 96).
Evaluation
This year, we undertook an internal Board
and committee evaluation, the results of
which demonstrate that the Board as a
whole continues to be effective and seeks
to constructively challenge and support
management. We have agreed on a set of
actions to strengthen how we operate for
the future (see page 84).
I would like to thank my fellow Board
members and the Executive Committee
for their warm welcome and efforts this
year.
Adam Crozier
Chairman
11 May 2022
I would like to thank my predecessor,
Sir Jan du Plessis, for the support and
guidance he gave me before I became
chairman on 1 December 2021.
The Board recognises the value of having
strong corporate governance at the centre
of our decision-making on how we
generate long-term sustainable value for
all our stakeholders, including investors,
colleagues, customers, regulators,
suppliers, the Government and the
communities in which we operate. A key
area of focus for the Board is oversight of
the execution of our transformation
agenda, which seeks to create a simpler,
more efficient and dynamic BT Group.
Our colleagues and culture are integral to
our ability to successfully deliver on this
agenda and to the future success of the
group. This year we launched ‘Being
trusted: our code’, to guide colleagues into
behaving in the right way, supporting our
ambition to be the most trusted connector
of people, devices and machines.
This corporate governance report 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,
whilst considering the interests of our
stakeholders and our contribution to
society.
Board changes
In addition to Jan’s retirement from the
Board on 30 November 2021, Mike Inglis
stepped down from the Board at the
conclusion of the 2021 AGM and Leena
Nair will step down at the conclusion of
the 2022 AGM. I’d like to thank Mike and
Leena for their contribution to the Board
and to the BT Group. From the conclusion
of the 2022 AGM, Sara Weller will
succeed Leena as chair of the Digital
Impact & Sustainability Committee.
The primary focus of the Nominations
BT Group plc Annual Report 2022
Committee during 2021 has been the
search for a new chairman, culminating in
my appointment.
As part of ongoing succession planning
and in light of the tenure of our longer
serving non-executive directors and the
changes to the Board over the last few
years, I have undertaken a comprehensive
review of the Board’s composition in
line with the group’s strategy and the
opportunities and challenges we face,
to examine how we can strengthen
the Board for the future (see page 86).
Reflecting on this review and feedback
from the FY22 Board and committee
evaluation, it is recognised that we need
to enhance the Board’s technology and
digital capabilities given the group’s
focus on digital and legacy platform
transformation. We are therefore in
the process of searching for additional
non-executive directors, with at least
one director with digital and technology
capabilities and transformation expertise.
Having a diverse Board, as set out
in our Board Diversity and Inclusion
Policy, is a priority and therefore,
a key element of any search brief.
Diversity and inclusion
The development of a diverse and
inclusive organisation is central to our
people strategy and is embedded within
the inclusive pillar of our Manifesto, which
we launched in December 2021. The
Board’s commitment to diversity and
inclusion and the related targets are set
out in our Board Diversity and Inclusion
Policy (see page 87). Our Board currently
comprises 36% female directors, two
directors from an ethnic minority
background, and one who has a disability.
The Board is cognisant that Leena’s
departure will reduce the female
membership of the Board from 36% to
27%, which is below our own Board
Diversity and Inclusion Policy targets.
73
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 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 and company purpose on page 76 to 79
Audit & Risk Committee
Oversees, assesses and reviews our
financial and narrative reporting,
internal controls and risk
management. This includes internal
and external audit and pan-BT
finance, control and compliance-
related transformation programmes.
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.
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.
Audit & Risk Committee chair’s report on
Nominations Committee chair’s report on
pages 89 to 95
pages 86 to 88
Remuneration Committee chair’s letter
and Report on directors’ remuneration on
pages 98 to 100
BT Compliance Committee
Oversees our adherence to the
Commitments we made as part of
the 2017 Digital Communications
Review (DCR) with Ofcom and
adherence to consumer fairness
principles.
Digital Impact & Sustainability
Committee
Provides oversight and direction to
bring the Manifesto to life through
our digital impact and sustainability
strategy.
Colleague Board
Discusses and provides advisory
feedback on key proposals and
initiatives impacting our colleagues
and flags any hot topic areas raised
by them. Our designated non-
executive director for workforce
engagement reports back to the
Board on its activities.
BT Compliance Committee chair’s report
Digital Impact & Sustainability Committee
on page 96
chair’s report on page 97
Colleague Board on pages 80 and 81
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.
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 Group 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 2022
Corporate governance reportDisclosure CommitteeEnsures BT Group meets its disclosure obligations and reviews and approves regulatory and other announcements before publication. 74
Board of
directors
and division of
responsibilities
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
Adam Crozier
Chairman
Philip Jansen
Chief executive
Simon Lowth
Chief financial officer
Appointed chief executive in February
2019 and to the Board in January 2019.
Age: 55
Appointed chief financial officer and to
the Board in July 2016.
Age: 60
Experience
From April 2013 until joining BT Group,
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 02) 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 advisor at Bain Capital and
trustee of Wellbeing of Women.
Experience
Simon was CFO of BG Group
before its 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.
Simon has experience and a track
record of implementing cost
transformation and performance
improvement programmes.
External appointments
None.
Appointed chairman in December 2021
and to the Board and as chairman
designate in November 2021.
Age: 58
Experience
Adam was previously chairman of
ASOS, Stage Entertainment BV and
Vue International Cinema Group,
and a non-executive director of Sony
Corporation. He has had over 20
years’ experience as a CEO across four
different industries, most recently
as the CEO of ITV from 2010 to 2017.
Before joining ITV, Adam was chief
executive of Royal Mail, where over
seven years he led its modernisation
and transformation. Prior to Royal Mail
he was CEO of the Football Association
between 2000 and 2002 and Joint CEO
of Saatchi & Saatchi from 1995 to 2000.
Relevant skills and contribution to
the Board
Significant experience in leading public
company boards, developing teams
and managing stakeholders and brings
a strong transformational and
operational track record in large-scale
executive roles. He has also built a
strong track record in turning around
troubled organisations and in building
and leading successful management
teams.
External appointments
Chairman of Whitbread and Kantar
Group.
Isabel Hudson
Independent non-executive director
and designated non-executive director
for workforce engagement
Appointed to the Board in November
2014.
Age: 62
Experience
Isabel was previously non-executive
chair of National House Building
Council until May 2020. She 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. and
an ambassador for the disability
charity, SCOPE.
Matthew Key
Independent non-executive director
Allison Kirkby
Independent non-executive director
Appointed to the Board in October
2018.
Age: 59
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
previously 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, Grand Metropolitan
and Dallaglio Rugbyworks.
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.
Appointed to the Board in March 2019.
Age: 54
Experience
Allison was appointed President &
CEO of Telia Company in May 2020.
She 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
Strong 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.
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 under the Code.
The responsibilities of the
chairman, chief executive,
chief financial officer
and senior independent
director and other key
roles within BT Group,
along with the matters
reserved to the Board, are
set out on our website at:
bt.com/governance
BT Group plc Annual Report 2022
75
Adel Al-Saleh
Non-independent,
non-executive director
Appointed to the Board in May 2020.
Age: 58
Experience
Adel has been chief executive officer
of T-Systems International GmbH
(a subsidiary of Deutsche Telekom
AG) since 2018 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 posts at
both IMS Health (now IQVIA) 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: 62
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
Chairman of Channel 4 and Spire
Healthcare Group. Also chairman of
Menhaden Resource Efficiency, a UK
investment trust.
Iain Conn
Senior independent
non-executive director
Appointed to the Board in June 2014.
Age: 59
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 Enterprises. Advisory
Board member of Columbia University
Center on Global Energy Policy.
Leena Nair
Independent non-executive director
Sara Weller
Independent non-executive director
Appointed to the Board in July 2019.
Age: 52
Appointed to the Board in July 2020.
Age: 60
Experience
Leena was appointed Global CEO
of Chanel in January 2022. She was
previously chief human resources
officer at Unilever from 2016 to 2022,
where she was 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
Global CEO of Chanel.
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 a non-
executive director of Lloyds Banking
Group until May 2021 and United
Utilities Group until July 2020. She
was also 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
None.
Sabine Chalmers
General counsel,
company secretary & director
regulatory affairs
Sabine joined BT Group in April
2018 as general counsel and was
appointed as company secretary in
September 2021.
See page 9 for Sabine’s full
biography.
BT Group plc Annual Report 2022
Corporate governance report
76
Board leadership and company purpose
Role of the Board
The Board is responsible for establishing the group’s purpose,
values, strategy and culture, and for setting the tone at the top.
The Board ensures that our culture is aligned with the group’s
purpose, values and strategy.
Further details on our purpose, values and strategy are on pages 18 and 19
In light of changing restrictions, the Board was able to resume
pre-Board dinners as part of informal interactions and also had
the opportunity to meet colleagues across different levels of the
organisation during its offsite visit to our Birmingham Snowhill
office in September 2021.
The Board monitors the indicators of our culture through:
• discussions with the chief executive
• reports from the HR director, including progress on our
people and cultural dashboard
• insights from our annual Your Say colleague engagement
survey
• direct feedback and insights from our Colleague Board via our
designated non-executive director for workforce
engagement.
More information on the Colleague Board and how the Board is
kept informed of colleague perspectives and the culture of the
organisation can be found on pages 80 and 81, and in the
Strategic report on page 36.
The Board also maintains oversight of the group’s operations,
performance and governance and compliance with statutory
and regulatory obligations. It determines the group’s risk
appetite, ensures that we have robust systems of risk
management and internal controls in place, and is responsible
for ensuring that the group has an effective leadership team to
efficiently execute the group’s strategy.
A number of key decisions and matters are reserved for the
Board and are not delegated to any of the committees, the chief
executive or management. These are set out in the matters
reserved to the Board and are available on our website:
bt.com/governance
Meetings and attendance
We held nine scheduled Board meetings and two strategy
meetings in FY22. The chairman (or his predecessor) also held
private sessions with the non-executive directors during the
year. The company secretary or her nominated delegate is
secretary to the Board, and they attend all meetings and provide
advice, guidance and support as required.
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 by prior
commitments, illness or a conflict of interest. If a director is
unable to attend a meeting, they usually give their comments to
the chairman or the committee chair in advance so that these
can be duly considered as part of the discussion at the meeting.
As a result of the continuing Covid-19 pandemic, some Board
and committee meetings during the year were held remotely by
video conference or took place as hybrid meetings. These
meetings were organised to allow us to maintain constructive
levels of engagement and discussion, to challenge management
and have robust debates as part of decision-making.
BT Group plc Annual Report 2022
Adam Crozier (chairman)a
Jan du Plessis (previous chairman)b
Philip Jansen
Simon Lowth
Adel Al-Saleh
Ian Cheshire
Iain Conn
Isabel Hudsonc
Mike Inglisd
Matthew Key
Allison Kirkby
Leena Naire
Sara Wellerf
Meetings
attended
4/4
6/6
9/9
9/9
9/9
9/9
9/9
8/9
3/3
9/9
9/9
7/9
8/9
a Adam joined the Board as a non-executive director and chairman designate on
1 November 2021 and became chairman on 1 December 2021.
b Jan stepped down from the Board as chairman and a director on 30 November
2021.
c Isabel gave apologies for one meeting during the year due to other business
commitments.
d Mike stepped down from the Board at the conclusion of the AGM on 15 July 2021.
e Leena gave apologies for two meetings during the year due to other business
commitments.
f Sara gave apologies for one meeting during the year due to illness.
Section 172 statement and stakeholders
The Board focus in FY22 section set out on the following
pages includes our Section 172 statement on pages 82
and 83.
Our Section 172 statement demonstrates our directors’
regard to the matters in section 172 of the Companies Act
2006 (2006 Act) in performing their duties.
See the Strategic report on pages 36 to 41 for additional
details of how we engage with our key stakeholders.
The Board and each of its committees always have regard to
wider stakeholder interests including and beyond those of our
shareholders as part of discussions and decision-making. 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 stakeholder
management group risk category (GRC). The committee
considered engagement with our key stakeholder groups in
light of broader developments in the emerging risk landscape
and new technologies.
For details of how our directors have engaged with our
colleagues during the year, and how they have had regard to
their interests and the need to foster business relationships
with suppliers, customers and others, together with a
summary including the Board’s principal decisions, see pages
36 to 41 and 80 to 83.
77
Board focus in FY22
Group strategy
During the year, the Board:
approved strategic initiatives and items of significant
strategic importance in line with the matters reserved
to the Board including:
• the 50:50 joint venture company with Warner Bros. Discovery,
Inc. to create a new premium sport offering for the UK &
Ireland bringing together the sports content offering of
BT Sport and Eurosport UK (see page 31)
• a new longer-term reciprocal channel supply deal with Sky
beyond 2030
• the increase and acceleration of our FTTP build target by an
additional 5m from 20m to 25m premises by December 2026,
to be self-funded by BT Group (see page 21)
• an outsourcing and partnering arrangement with Rackspace
Technology, Inc. (see page 29)
• BT Group’s brand strategy, including that EE would be our
flagship brand for Consumer customers, focusing on
convergence and future services, and that BT would be the
flagship brand for our Enterprise and Global units, continuing
its pivotal role in helping businesses of all sizes unlock their
potential through embracing digital technologies.
held two full-day strategy meetings where it
considered with management:
• the group’s strategy and long-term growth opportunities
• strategic priorities and how these are built into the group’s
medium-term plan
• progress on key initiatives
• key challenges and risks to delivering our priorities and plans
to address or mitigate these.
received and discussed the chief executive’s report
at each meeting, which focused on:
• the group’s overall performance and operations
• progress against our strategic pillars and priorities
• the competitive and regulatory environment that the group is
operating in
• engagement with, and the views of, our stakeholders including
our investors, our colleagues, Ofcom and Government
• key business operations including matters which are
important to the group’s reputation, as well as colleague,
customer, supplier and community considerations.
Performance and execution of strategy
During the year, the Board discussed, reviewed and, as appropriate, approved:
• the financial statements at full and half year and trading
updates at each quarter, including any external guidance. It also
discussed the feedback from investor meetings, including
those post-publication of each set of results. At each meeting,
the Board reviewed the current 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 unit
• the going concern and viability statements and the
group’s tax strategy
• reports, on a monthly basis, outlining share register
movement, our share price performance relative to the
market, investor relations activities and engagement with
shareholders. The Board also spent time discussing the
changing nature of our shareholder register
• the triennial valuation agreement as at 30 June 2020 for the
BTPS which included a new deficit repair plan
• the dividend policy for FY22 and the reinstated interim and
final dividend in line with this, having considered the
BT Pension Scheme (BTPS) and requirements under new
pension legislation
• the medium-term plan, having considered the main
opportunities and challenges, our strategic priorities and KPIs
• the delivery of the group’s transformation programmes against
the objectives to drive pan-BT efficiencies, opportunities,
continued cost reduction and our plan to reskill colleagues
with the skills required for the future needs of the business
• customer experience for each CFU and the continued
improvements across our group and individual brand and
customer segment NPS, in particular the progress against our
related ambitions. As part of this, the Board was updated on
the initiatives and customer insights used to drive
improvement for our customers. Further details on customer
experience can be found on pages 26 to 29
• any regulatory/competition investigations and litigation
claims, including our response and the stakeholder and
reputational impact of these.
BT Group plc Annual Report 2022
Corporate governance report 78
Board leadership and company purpose continued
Board focus in FY22 continued
People and culture agenda
During the year, the Board discussed:
• the progress made against our people and cultural strategy.
Our ambition is to build a culture where people can be their
best and make BT Group a brilliant place to work. To deliver
this, our people strategy focuses on key strategic goals.
During the year, the Board monitored delivery against our
cultural ambition and the related goals through the people
and cultural dashboard with the group HR director and her
team. Each of the committees also monitored areas within
their remit that are important indicators of the group’s culture,
on which the Board is updated by the committee chairs. For
example, the Audit & Risk Committee discussed the
behaviours and expectations that drive risk awareness
through our business activities and ethics and compliance
updates (see pages 92 and 93)
• the health, safety and wellbeing of our colleagues, including
those in Openreach, with updates on the measures and
systems designed to mitigate against incidents, as well as our
continued compliance with Covid-19 measures. Colleague
wellbeing has been a key consideration of our continued
efforts to transform our workplaces. Discussions were held at
both the Board and the Audit & Risk Committee on our safety
culture and behaviours, in particular at Openreach, given the
increased risks in relation to the complexity of the fibre build
• diversity and inclusion, including attracting, recruiting,
promoting and retaining women, people from ethnic minority
backgrounds and people with disabilities (see pages 24 and
25 for more details on our approach to diversity and inclusion)
• employee relations matters, including engagement with trade
unions. Broader workforce remuneration was also discussed
by the Remuneration Committee
• the feedback shared by Isabel Hudson as the designated
non-executive director for workforce engagement on
colleague views and discussions at the formal meetings and
informal check-ins with the Colleague Board.
Risks, controls and governance
During the year, the Board discussed:
• the group risk management framework twice, with in-depth
discussions on certain GRCs, including the point and emerging
risks and uncertainties facing the group and our risk appetite
for each (see pages 55 to 65). The Board also received
regular updates from the Audit & Risk Committee, who
undertakes detailed reviews of the group’s risk management
and internal controls systems, including key controls and their
effectiveness (see page 92), as well as GRCs not discussed by
the Board
• our approach to the Russian invasion of Ukraine, especially its
impact on our stakeholders and any directly or indirectly
affected colleagues, as well as operational and reputational
considerations, key risks and mitigations. The Board continues
to keep our approach under review
• the format for the 2021 AGM. To enable shareholders to
engage with the Board at the AGM, despite the ongoing
Covid-19 pandemic and broader public health considerations,
a hybrid meeting was held with shareholders being strongly
BT Group plc Annual Report 2022
encouraged to attend the AGM electronically and the meeting
broadcast via a live webcast. Shareholders were able to
pre-register their questions ahead of the meeting or ask
questions through the electronic platform during the AGM
itself. Building on the success of the 2021 AGM, we will once
again be holding a hybrid meeting for the 2022 AGM (see the
Notice of meeting at bt.com/agm for further details)
• the Annual Report, which was subsequently approved on the
recommendation of the Audit & Risk Committee (see page
90), on the basis that, taken as a whole, it is fair, balanced and
understandable and provides the information necessary for
shareholders to accurately assess the group’s position and
performance, business model and strategy
• the themes and actions agreed as a result of the internal
Board and committee evaluation (see page 84).
Board visit to Birmingham
Snowhill office
79
We held our Board and committee meetings in
September 2021 at our new building, Birmingham
Snowhill. This provided the Board with an
opportunity to visit another office and meet
with a number of our colleagues.
The Board received an informal presentation from key members
of the team engaged in workplace transformation, on the
progress to date and the specific features of our new offices,
including the environmental and sustainability features (see
pages 25 and 35). The Board discussed progress with the team,
including any adjustments to the plan that had been made as a
result of the Covid-19 pandemic and the resulting new ways of
working. It was highlighted that the programme has had input
from colleagues across the organisation, including:
• Executive Committee members on decision-making, updates
on the programme and cultural direction
• Colleague Board members on the programme vision
and helping to shape the key measures of success
• senior leaders on the delivery of key milestones and
supporting other colleagues
• colleagues who would be based in the new offices to whom
updates were provided and to drive up interest and
excitement
• our People Networks, with a focus on building facilities
and providing accessibility for colleagues of diverse
backgrounds and needs.
“Meet the Board” engagement session
The Board also had the opportunity to spend time with a variety
of colleagues in small group tours of the new building to
showcase the facilities led by the dedicated building host teams
and Digital tech specialists, and a “Meet the Board” informal
engagement session with colleagues from across all business
units and Colleague Board members based in the Midlands. This
provided the Board with the opportunity to understand
first-hand the views of our colleagues on the new workspaces
and the culture of the office, as well as to more broadly get a feel
for current colleague sentiment. Colleagues remarked that they
felt that the new workplaces encourage collaborative ways of
working and modern technology enables colleagues to connect
across the UK and globally, optimising ways of working
regardless of location.
BT Group plc Annual Report 2022
Corporate governance report 80
Board leadership and company purpose continued
The Colleague Board and Board engagement with colleagues
Colleague Board
Who is the Colleague Board
The Colleague Board continues to be the Board’s chosen
workforce engagement mechanism under the Code. We feel this
is the most effective option for the BT Group, given the structure
of the business. Its aim is to bring colleagues from across the
group closer to the decision-making process by providing the
Board with an invaluable, direct insight into colleague sentiment
and feedback on key initiatives, programmes and
communications to help shape them to be more beneficial for
our colleagues.
The Colleague Board is chaired by the chief executive, and Isabel
Hudson, our designated non-executive director for workforce
engagement, is a member. Isabel was selected for this role due
to her breadth of understanding of, and interest in, employee
and wider stakeholder matters.
Sabine Chalmers, general counsel, company secretary &
director regulatory affairs, and Debbie White, HR director, are
also invited and attend all formal meetings. Other members of
the Executive Committee attend meetings on a rotational basis.
The deputy company secretary is secretary to the Colleague
Board and she or her delegate attends all meetings and provides
support, guidance and advice as required. The chairman and
other non-executive directors are also able to attend meetings
as observers.
New Colleague Board members:
appointment process
The first cohort of Colleague Board members finished their
two-year tenure at the end of 2021. Subsequently, we ran an
application process to select the new Colleague Board
members/invitees. In line with the previous appointment
process, all BT Group and Openreach colleagues could apply
to join the Colleague Board.
Applicants were required to submit:
• a manifesto and a summary of why they wanted to be on
the Colleague Board
• the topics they felt the Colleague Board should be
prioritising for discussion
• endorsement from at least ten colleagues.
A shortlist of candidates were interviewed and asked to
produce video answers to a couple of questions.
Openreach’s shortlist was provided by Openreach.
Being part of the Colleague Board has provided
me with a unique insight into the culture of the
organisation and how colleagues are feeling, which
the first cohort of members shared candidly. Sharing
these perspectives with the Board as part of its own
deliberations has been invaluable. I am excited about
working with the new members – we have got off to a
great start with a highly engaging first meeting!”
Isabel Hudson, designated non-executive director for
workforce engagement and a member of the Colleague Board
BT Group plc Annual Report 2022
The Colleague Board Nominations Committee comprising
Philip Jansen, Isabel Hudson, Sara Weller, Sabine Chalmers
and Debbie White decided on the final members, with
representatives from different levels, across the CFUs, TUs
and CUs, and the two invitees from Openreach. We were
keen to ensure that the Colleague Board reflects our
diversity and inclusion aspirations, and it is positive that the
members comprise a variety of backgrounds, experience,
gender, disabilities, ethnicities, locations and frontline
versus corporate colleagues.
The new Colleague Board members will serve a two-year
term up to the end of 2023.
81
Despite the challenges of the Covid-19 pandemic
throughout their tenure, the Colleague Board
adapted rapidly and embraced new ways of
working. I’d like to thank them for their brilliant
collaboration and success in ensuring colleagues’
views were heard loud and clear. I am very much
looking forward to working with the new cohort of
members in the coming year and continuing to give
the voices of our colleagues a direct channel to my
executive team and the Board.”
Philip Jansen, chief executive and chair of the Colleague Board
Colleague engagement with the Board
At each formal meeting of the Colleague Board, management
and/or the Board (via Isabel Hudson) have the opportunity to
discuss areas that they would like the Colleague Board members’
perspectives on, as well as the members advising on Hot Topics
raised by colleagues that they feel should be brought to the
attention of the Board and/or management. Isabel reports back to
the Board and its committees, as appropriate, on discussions with
the Colleague Board. The meeting materials and notes are also
made available to the full Board. Isabel also spent time engaging
with the members outside of the formal meetings during the year,
and was invited to, and attended, members’ team meetings.
Whilst the Colleague Board is the Board’s formal chosen
workforce engagement method, it is used alongside other
colleague engagement mechanisms by the Board. Directors
liaise with colleagues outside of Board and committee meetings
through visits to other offices and sites (see page 79 for the
“Meet the Board” engagement session in Birmingham). The
chief executive also holds quarterly PJ Live events which provide
all colleagues the opportunity to ask the chief executive
questions on any subject in an informal forum. See page 36 for
more information on how we engage with colleagues.
Colleague Board communications
with our colleagues
Colleague Board members feedback on the discussions from the
formal meetings to the wider workforce, as well as highlighting
points at Colleague Board meetings that have been raised by
other colleagues. Members are encouraged to connect with
other internal engagement channels including the People
Networks and accessing the Your Say engagement survey
results to gain an increased understanding of the views of our
colleagues on key issues. The chief executive also invites
Colleague Board members to join his senior management calls.
I believe there are big things coming in the future
for BT Group, which can only be bigger and better
when we listen to the voice of our people. I want
to be an enabler for making that happen.”
Emma Lee, current Colleague Board member
Each Colleague Board member is supported by their respective
unit internal communications team, enabling a good rapport to
be built in-unit. The director of internal communications attends
Colleague Board meetings and members are encouraged to give
their views on key internal communications.
Colleague Board focus in FY22
The Colleague Board held four formal meetings this year and a
number of informal sessions with internal teams. Through both
the Board and the senior leadership team, the Colleague Board’s
views were sought on pan-BT programmes (including how they
align with our values and culture) and how we communicate
these with our colleagues. The Colleague Board has continued
to successfully contribute to, and shape, some of our key
initiatives this year, by sharing their different views and
perspectives.
The best thing about being a Colleague Board
member is collaborating with colleagues across
all the different units and sharing their insights
at the meetings.”
Steve Tucker, Colleague Board member, 2020/21
The Colleague Board’s highlights this year include:
• helping the Board to understand the perspectives of our
colleagues on a range of different topics, including the
progress of our digital transformation and diversity and
inclusion initiatives, and the communications and support
available for colleagues throughout the pandemic. The
members participated in two-way discussions, sharing their
own views to help refine approaches
• working closely with the HR director and her team to identify
improvements to our recruitment assessor inclusion champion
training, including delivering an interactive session on
unconscious bias
• providing input on our communications engagement plan in
relation to ‘Being trusted: our code’ (see page 18), ahead of its
launch to help embed this throughout the organisation
• providing views on the Manifesto ahead of its launch in
December 2021, including how this could be used to engage
and inspire our colleagues to bring it to life (see pages 32
to 35)
• providing views on our approach to hybrid working and the
return to workplaces, by sharing their own experiences and
suggestions for how we could successfully transition to our
new smart working model.
The first cohort also spent time towards the end of their tenure
reflecting on the effectiveness of the Colleague Board over its
first two years. The feedback has been used to make
improvements to strengthen it for the next cohort.
BT Group plc Annual Report 2022
Corporate governance report 82
Section 172 statement
In their discussions and decisions
during FY22, 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 group 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 2006 Act).
The Board considers the matters set out in section 172 of the 2006
Act in all its discussions and decision-making, including:
The likely consequence of any decision in the long term:
The directors recognise that the decisions they make today will
affect the group’s long-term success. During the year, the Board
had particular regard to the long-term success of the group in its
discussions on group strategy (see page 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. 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 pages 18 and 19.
The impact of the group’s operations on the
community and environment:
The Digital Impact & Sustainability Committee reviewed and
endorsed the Manifesto for a bright, sustainable future, which
aims to accelerate growth through technology that’s
responsible, inclusive and sustainable, ensuring the group can
continue to build trust and create value for its stakeholders. The
committee also monitors progress on the digital impact and
sustainability strategy and oversees the progress of our related
goals, including those in respect of climate and the environment.
In line with the ambitions we have in this area, the committee
approved the acceleration of BT Group’s net zero target for its
own operations from 2045 to the end of March 2031 and a new
net zero target for supply chain and customer emissions to be
achieved by the end of March 2041.
For more information on this see page 45.
Information as to how we have addressed the recommendations of the TCFD
framework can be found on pages 66 to 69.
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 group.
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 the group’s culture in
its decision-making and discussions; further details on this
can be found on pages 76 and 78.
During the year, we launched ‘Being trusted: our code’ which
sets out the principles of how we expect our colleagues, and
anyone who represents or works with the group, to behave,
do business and connect for good. It demonstrates our
commitment to high standards of business conduct, directly
links with BT Group’s purpose: we connect for good, and aims to
support our ambition to be the world’s most trusted connector
of people, devices and machines. It provides a guide to ensure
colleagues live up to our values, set highest standards, meet
legal and regulatory obligations, create the fairest environment,
and welcome, respect and hear diverse opinions. The new code
was discussed with the Audit & Risk Committee ahead of launch.
Information on ‘Being trusted: our code’ can be found on page 18 and
at bt.com/ethics
The Audit & Risk Committee also considered regular reports
from the ethics and compliance director on our ethics and
compliance policies and programmes and reports on issues
raised through Speak Up, BT Group’s confidential,
whistleblowing hotline (see page 93).
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 our 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, so the Board must balance competing interests in
reaching its decisions.
While the Board engages directly with stakeholders on some
issues, the size and distribution of the BT Group 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.
More details on how we engage with key stakeholders (including customers
and suppliers) on pages 36 to 41.
Our colleagues are key to our success, and they are always
considered as part of the Board’s discussions and decision-
making. The Board and its committees have considered
colleague wellbeing, our diversity and inclusion ambitions,
organisational culture and the impact of our transformation
programme on them, as well as on employee relations
(see page 78 for more details). The Board engages with
colleagues primarily through the Colleague Board and
through our designated non-executive director for workforce
engagement (see pages 80 and 81). In this role, Isabel provides
feedback after each formal Colleague Board meeting and also
discusses any topics raised by members at relevant Board and
committee meetings.
Other colleague engagement channels are set out on page 36.
The need to act fairly as between
BT Group’s shareholders:
During FY22, the chairman, chief executive, 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
BT Group plc Annual Report 2022
83
investors the opportunity to discuss views on financial and
operational performance, capital investment, pensions, capital
allocation policy and environmental, social and governance
matters. The Board is mindful of having two significant
shareholders but considers any decisions it makes in the
interests of all shareholders.
Decisions made during the year
The following are some of the decisions made by the Board
this year which demonstrate how section 172 matters have
been taken into account as part of Board discussions and
decision-making:
Decision
What happened
50:50 joint venture company
with Warner Bros. Discovery,
Inc. bringing together the
sports content offering of
both BT Sport and Eurosport
UK
In line with our announcement in April 2021 and in light of our broader strategy, the Board with management
considered a number of different options for the future of BT Sport, and the key opportunities and risks of each
of these, as well as the financial implications and the impact on key stakeholders, including our customers,
investors and colleagues. As part of this, it also explored a number of strategic partners during the year, to
consider ways to generate investment and strengthen our sports business, to help take it to the next stage in its
growth. Accordingly, the Board recognised the benefits that a 50:50 joint venture company with Warner Bros.
Discovery, Inc., bringing together the sports content offering of both BT Sport and Eurosport UK, would bring
for our BT Sport customers who would get access to Discovery’s sport and entertainment content, including the
discovery+ app.
In May 2022, the Board approved the 50:50 joint venture with Warner Bros. Discovery, Inc., bringing together
the sports content offering of both BT Sport and Eurosport UK.
BT Pension Scheme (BTPS)
triennial valuation
The Board was kept updated on discussions with the BTPS Trustee on the triennial valuation as at 30 June 2020
and considered the possible range of valuation outcomes and different approaches to future contribution and
investment strategy.
The Board reviewed potential outcomes in the context of our overall business objectives and both the current
and expected future regulatory and legislative environment. The Board considered the expected deficit,
associated deficit recovery payments and details of how the previously endorsed asset-backed finance structure
and co-investment vehicle arrangements are expected to be used, and the impact of this on our stakeholders.
The Board considered the upside benefits of the valuation package for our shareholders, the BTPS Trustee
and its members (current and previous colleagues), as well as guidance from the Pensions Regulator.
In May 2021, the Board approved the overall valuation agreement, after considering the impact on its key
stakeholders including colleagues that are members of the BTPS. The agreement included a deficit repair plan,
asset-backed funding and a new “stabiliser” mechanism. The stabiliser mechanism 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. This provides an enduring solution for the group and the BTPS,
enabling the group’s transformation and investment programmes and helping to protect the BTPS as it
progresses towards a low risk, long-term investment strategy.
Outsourcing and partnering
arrangement with Rackspace
Technology, Inc.
The Board considered the proposal to enter into an outsourcing and partnering arrangement with Rackspace
Technology, Inc. The benefits and the risks of the arrangement within the context of the hybrid cloud market
and alignment with our broader strategy and transformation plans were discussed. In approving the decision,
the Board also reviewed the impact of the proposed arrangement on colleagues, customers, communities and
shareholders, as well as on our key financial metrics. It recognised that this would offer enhanced capabilities,
products and expertise to meet our customers’ business needs, as well as providing an improved digital
experience for them. It was also noted that it would deliver substantial cost benefits, digital growth and an
enhanced digitally managed services portfolio.
Funding of our increased and
accelerated FTTP build plan
from 20m to 25m premises by
December 2026
Over the last few years, the Board has held a number of in-depth discussions with management on the level and
pace of our full fibre build and the advantages and disadvantages of accelerating this with a particular focus on
our ability to fund the related large capital expenditure investment, the regulatory framework and the impact of
this on our stakeholders.
In 2020, the Board approved the increase of our FTTP build to 20m premises, subject to the required critical
enablers. The regulatory clarity provided by Ofcom’s Wholesale Fixed Telecoms Market Review (WFTMR)
published in March 2021, coupled with the Government’s announced cash tax super-deduction in the same
month and the positive outcome from the 5G spectrum auction, meant that having considered the capital
expenditure required, the risks involved and impact to our medium term plan, in May 2021, the Board further
approved an increased and accelerated FTTP build to 25m premises by the end of December 2026. In making
this decision, the Board considered the impact on our stakeholders, which included the benefits to our
customers, colleagues and shareholders, as well as the impact on the BTPS, our credit rating and subsequent
impact on our bond holders, and the desire to support the UK Government’s fibre ambitions and our own
purpose, we connect for good.
For the additional 5m build, the Board agreed to consider whether this should be built entirely from internal
resources or funded through a joint venture with a third party. In November 2021, having considered a number
of factors including the further reduction in the FTTP build costs by Openreach, take-up being ahead of
expectations, and the impact on our stakeholders, in particular our shareholders who would retain 100% of the
ownership and accordingly the returns, the Board decided that the BT Group should fund the full 25m FTTP
build itself.
BT Group plc Annual Report 2022
Corporate governance report 84
Board composition, succession and evaluation
FY22 Board and committee evaluation
In line with the Code, we annually undertake a formal and
rigorous evaluation of the performance of the Board and its
committees, the chairman and individual directors, which
considers the Board’s composition, diversity and effectiveness.
Given an external evaluation was completed in FY21,
we undertook an internal evaluation in FY22.
Process
Tailored questionnaires were circulated to members and
attendees of the Board and each of its committees. The
evaluations focused on composition, succession 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 well it considers stakeholders
as part of its decisions and discussions.
Given the recent appointment of the chairman, he held
individual discussions with each director to understand their
views on the workings of the Board and Executive Committee,
their relationship with management, the organisation and how
effectively they feel they are contributing and are supported as
individual directors. The senior independent director undertook
a discussion with the full Board (without the chairman) and the
company secretary on initial views of the new chairman.
The non-executive directors also reviewed the performance
of the chief executive during the year.
Agreed areas of focus and actions
Overall, the Board and its committees are considered to be
effective. There were certain areas of focus which the Board felt
would continue to improve its performance and effectiveness.
Accordingly, the directors agreed on the following areas of focus
and action for FY23; progress shall be reviewed by the Board
and/or its committees as appropriate during the year, with any
ongoing areas feeding into next year’s evaluation process.
Key areas of focus
Agreed actions
Board and committee
agenda and time
Stakeholder focus
People strategy and
culture
Board composition
Executive succession
planning
Review how the Board and its committees
can spend their time more effectively with
a specific focus on the execution of our
transformation programme and priorities, in
particular in relation to pan-BT programmes.
Consider how we can increase the entire
Board’s understanding of the views of all our
stakeholders.
Increase the time that the Board spends
discussing our people/HR strategy with a
specific focus on organisational talent and
succession planning and how this underpins
the transformation agenda. Develop a better
understanding of the key measures and
deliverables in relation to culture.
The Nominations Committee, on behalf of the
Board, will carry out a comprehensive review
of the skills, experience and diversity needed
on the Board to best support management in
executing the strategy of the business and
ensure effective succession planning. It is
recognised that we need to enhance the
Board’s technology and digital capabilities
given the group’s focus on growth and digital
transformation.
The Nominations Committee will focus on the
search for the permanent group HR director,
Executive Committee succession planning
and the related talent pipeline.
Committee composition Further to any potential Board changes, a full
Focus on key risks
External auditor
review of the composition and size of the
committees will be undertaken by the
Nominations Committee.
The Audit & Risk Committee will continue to
focus on the GRCs, ensuring that we are
tracking the progress of any actions required
to mitigate and manage these risks. There will
be enhanced monitoring of the global risks
and the associated audit coverage, as well as
identified emerging risks and the plans to
mitigate these.
The Audit & Risk Committee will continue to
focus on monitoring the quality of the external
auditor and oversee and manage the change
in the lead audit partner, when he rotates off
the BT Group audit at the end of FY23.
Continue to
improve papers –
Remuneration
Committee
The Remuneration Committee will continue to
focus on ensuring that papers are clear and
concise, providing all necessary information
to enable the committee to make decisions.
Directors’ remuneration
policy review
Consumer fairness
matters
Oversight of the
Manifesto
Given the upcoming directors’ remuneration
policy review, the Remuneration Committee
will undertake a comprehensive review to
consider whether this continues to be
appropriate and aligned with our strategy.
The BT Compliance Committee will continue
to oversee immediate and longer-term
customer fairness matters and how we look to
measure progress, including how we are
supporting vulnerable and less technically
able customers.
The Board will consider aligning the role of the
Digital Impact & Sustainability Committee to
oversight/monitoring of all aspects of the
Manifesto.
BT Group plc Annual Report 2022
85
Board induction
On appointment, directors undertake 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, other members of the Board and the company
secretary (or her delegate), as well as members of the Executive
Committee and senior management. Directors also receive key
information on our strategy and KPIs, governance framework,
recent financial performance, risk management and internal
control systems and the policies supporting our business
practices.
Directors are encouraged to visit our different offices, contact
centres and BT/EE retail shops, as well as spending a day with an
Openreach engineer.
Chairman’s induction
programme
Adam joined the Board on 1 November 2021 as a non-
executive director and chairman designate and became
chairman on 1 December 2021. Ahead of his appointment,
Adam received an induction pack with key reference
materials that provided a thorough understanding of the
BT Group, including the most recent financial results,
information on our strategy and each of our business units,
governance framework, director responsibilities, ethical
policies and the Commitments. Ahead of joining the Board,
Adam observed Board meetings in September and
October 2021.
Adam also held a number of other induction meetings
including with the chief executive, Jan du Plessis
(as the incumbent chairman), chief financial officer,
members of the Executive Committee and the other
non-executive directors.
He also met with other key senior leaders including the
director of risk, compliance & assurance, the director of
investor relations, as well as the chair of the Openreach
Board and our external auditor, KPMG.
Furthermore, Adam has held meetings with our key
stakeholders. He has met with nine of our top shareholders
since his appointment, as well as with Ofcom, the
Government, the chairman of the BTPS and colleagues
throughout BT Group, including the Colleague Board
members, to get a better understanding of their views.
Adam has also observed all Board committee meetings.
During FY23, Adam plans to visit Adastral Park, our BT/EE
retail shops and customer contact centres, and to shadow an
Openreach field visit to gain a broader insight into customer
journeys and experiences, and into the work of our frontline
colleagues.
BT Group plc Annual Report 2022
In my first few months I have
been impressed with the level
of commitment throughout
the business to the BT Group
transformation strategy.
Colleagues at every level of the
organisation have been open,
transparent and helpful in
supporting my induction.”
Adam Crozier, Chairman
Corporate governance report 86
Board composition, succession and evaluation continued
Nominations Committee chair’s report
Adam Crozier
Chair of the Nominations
Committee
11 May 2022
The committee’s priority last year was the
search for a new chairman. The focus for
the year ahead is on Board and Executive
Committee succession planning and seeking
to strengthen the capabilities and experience
of the Board in line with the group’s strategy.”
Committee role
The committee is responsible, on behalf of the Board, for:
• reviewing the structure, size and composition of the Board
and its committees to ensure an appropriate balance of
skills, experience, diversity, independence and knowledge
• reviewing succession planning for the Board and
recommending the appointment of executive and
non-executive directors and the chairman
• reviewing succession planning and performance of the
Executive Committee.
The committee’s key responsibilities are set out in its terms of reference
available at bt.com/governance
Committee membership and attendance
All non-executive directors are members, with the chief
executive attending meetings where appropriate. The
deputy company secretary is secretary to the committee,
and she or her delegate attends all meetings and provides
guidance, advice and support as required.
Committee members and attendees do not attend
committee discussions where a conflict exists. During the
year, five scheduled committee meetings were held and
given the search for a new chairman, six additional meetings
were held which were chaired by Iain Conn as our senior
independent director. All members, with the exception of
Jan du Plessis and Ian Cheshire, due to their respective
conflicts, attended these meetings. Any member unable to
attend a meeting held a separate meeting with Iain.
Meetings attended
Adam Crozier (chair)a
Jan du Plessisb
Adel Al-Saleh
Ian Cheshire
Iain Conn
Isabel Hudson
Mike Inglisc
Matthew Key
Allison Kirkby
Leena Nair
Sara Weller
3/3
3/3
5/5
5/5
5/5
5/5
5/5
5/5
5/5
5/5
5/5
a Adam became a member on 1 November 2021 and committee chair on
1 December 2021.
b Jan stepped down from the Board and the committee on 30 November 2021.
c Mike stepped down from the Board and the committee at the conclusion of
the AGM on 15 July 2021.
BT Group plc Annual Report 2022
Committee focus in FY22
After each meeting, the chair reported back to the Board on the
committee’s activities.
Board succession and appointments
The committee focused on searching for a new chairman which
ultimately culminated in my appointment.
Chairman: search and appointment
Further to the announcement last March of Jan du Plessis’
intention to retire from the Board, we commenced an
appointment process to find a successor.
Iain Conn, our senior independent director, led the search
process and chaired the committee meetings in relation to
this. Jan recused himself from these discussions and Ian
Cheshire, who had expressed an interest in being considered
as a potential candidate for the role, was also not present.
After a formal tender process for a search agency, MWM
Consulting, an independent external search agency, who
has no other connection to the BT Group, 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).
Iain engaged with a number of our major shareholders on
their views on the type of candidate we should consider.
Further to a committee discussion on the capabilities, skills
and experience required, and having considered the future
needs of the business and the feedback from investors, 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 agreed a shortlist of candidates who were
formally approached by MWM Consulting for consideration
of the role and assessment. Further to a comprehensive
assessment and interview process, feedback was discussed
by the committee at each stage to shortlist candidates based
on the relative criteria and brief. The committee challenged
itself throughout the process on ensuring it continued to
think about a diverse range of candidates for the role.
The committee subsequently identified Adam Crozier as
the preferred candidate to chair the BT Group given his
significant operational and transformational experience in
both public and private businesses across a range of
industries, leading public company boards, developing
teams and managing stakeholders. Further to the
committee’s recommendation, the Board appointed Adam
as an independent non-executive director and chairman
designate with effect from 1 November 2021 and as
chairman with effect from 1 December 2021. Adam was
judged to be independent on appointment.
Given the tenure of longer serving directors and Board changes
over the last couple of years, the committee’s focus for the year
ahead is on searching for additional non-executive directors. It
has engaged an independent, external search consultant to
assist with this. Accordingly, the committee, on behalf of the
87
Board, has carried out a comprehensive review of the skills,
experience and diversity needed on the Board, in line with the
group’s strategy and the opportunities and challenges we face,
as well as the experience needed for the succession planning of
key roles. Reflecting on feedback from the FY22 evaluation and
this review, it is recognised that we need to enhance the Board’s
technology and digital capabilities given the group’s focus on
digital and legacy platform transformation. We are therefore in
the process of searching for additional non-executive directors,
with at least one director with digital and technology capabilities
and transformation expertise. As part of these searches (and any
new director searches), diversity is a key consideration. Our
external search consultants are asked to ensure they produce
diverse candidate longlists, with a particular focus on gender
and ethnicity, and work with us to appoint directors that meet
the aims and targets of our Board Diversity and Inclusion Policy.
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 Board offsites. Directors are also expected to
devote sufficient time to prepare for each meeting and to
participate in other site or office visits to understand the business
better. Before accepting new external appointments, directors
are required to obtain the prior approval of the Board.
Before recommending the Board approve the appointment of
Adam Crozier as chairman, the committee considered Adam’s
other commitments and whether he would be able to allocate
sufficient time to the role. This was also discussed with Adam.
Adam advised that he planned to step down as chairman of
ASOS (in November 2021) and as a non-executive director of
Sony Corporation (in December 2021). He would remain as chair
of Kantar and Whitbread and the committee was comfortable
that these positions would not be detrimental to his ability to
perform his duties as chairman of BT Group. Adam has already
spent significant time outside of the scheduled Board and
committee meetings in his first few months familiarising himself
with the group and the business as well as meeting with
management and our stakeholders to understand their views.
The Board is satisfied with the time he is dedicating to the role
and this will continue to be kept under review by the senior
independent director as part of the review of the chairman.
Ahead of Ian Cheshire becoming chair of Channel 4 in April 2022,
the Board considered the proposed appointment in line with the
time commitment required for BT Group and Ian’s other roles. On
balance, the Board felt this would not be detrimental to his ability
to perform his duties as a non-executive director of BT Group.
Election and re-election of directors
The committee considered, in respect of each director, their
skills and experience, time commitment and tenure as part of its
recommendation to the Board in relation to the directors put
forward for election and re-election. The Board believes that
each director it has recommended to shareholders for election
or re-election at the 2022 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.
On recommendation from the committee, the Board also
considered the continued independence of non-executive
directors as part of its consideration of the re-election
recommendations. 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 directors’ contracts or letters of appointment are in the Annual
remuneration report on page 111
Diversity and inclusion
The Board Diversity and Inclusion Policy sets out our approach
to diversity on the Board and our aim to have a well-balanced
Board with the appropriate skills, knowledge, experience and
diversity to meet our business needs and support our strategic
aim of building the strongest foundations (see bt.com/
governance). In light of recent publications and the changes to
the Listing Rules, we will review and update this policy during
FY23, but we are already considering how we will meet our
targets as part of current director searches. The policy
ensures we:
• apply an inclusion lens to all our decision-making processes
• monitor the impact of our decisions on diverse populations
• value and communicate the benefits that difference brings
and are unapologetic in our pursuit of a diverse workforce at
all levels
• actively seek out opportunities across the business to enhance
and strengthen our approach to inclusion.
As at 31 March 2022, in line with our current target, four of
our 11 Board directors were female (36%) and two directors
were from an ethnic minority background (18%), and in addition,
one director has a disability. Whilst we appoint candidates
based on merit, 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
lists and this is a key consideration for our current searches.
The Board is cognisant that Leena’s departure from the Board
at the conclusion of the 2022 AGM will reduce the female
membership of the Board from 36% to 27%, which is below
our own Board Diversity and Inclusion Policy targets and
other external expectations. The diversity of the Board will
be addressed as a priority as part of our search for additional
non-executive directors.
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,
are appropriately balanced. We believe a key driver in delivering
our diversity commitments across the organisation is through
a Board which has this balance of skills, experience, diversity
and knowledge.
Details of our diversity and inclusion strategy, including its objectives, link to
strategy, implementation and progress can be found on page 24
Training and development
The chairman and the company secretary keep the training and
development needs of directors under review. 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 and its committees at each respective meeting,
as relevant, on any key legal, regulatory and corporate
BT Group plc Annual Report 2022
Corporate governance report 88
Board composition, succession and evaluation continued
Nominations Committee chair’s report continued
Chairman and non-executive directors’ tenure
As at 31 March 2022
0–2 years
2–4 years
4–6 years
7–9 years
9+ years
3 33%
4 45%
0
0%
2 22%
0
0%
Diversity and independence
As at 31 March 2022
Male
Female
D Disability
E Ethnic minority background
Board
Chairman
(independent on appointment)
Non-independent
executive director
Independent
non-executive director
Non-independent,
non-executive director
D E
E
Executive Committee
(including CEO, Openreach and executive directors on
the Board)
As at 31 March 2022
8 (73%) 3 (27%)
Executive Committee, company secretary and direct reports
(including CEO, Openreach and excluding executive
directors on the Board)
As at 31 March 2022
75 (69%) 34 (31%)
governance developments. During the year, these briefings
included updates on the institutional investor guidelines,
environmental, social and governance considerations and
governance publications. 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 as necessary, for example during
the year an update was provided on the Health and Safety
legislation and directors’ responsibilities thereunder and the
National Security and Investment Act 2021.
Each director may obtain independent professional advice at
the group’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.
Openreach Limited board succession
Under its remit, the committee has a responsibility to consider
changes to the Openreach Limited board and recommend any
changes to the BT Group Board for approval. Given Liz Benison’s
indication of her intention to step down from the Openreach
Limited Board in 2022, a search for her successor was commenced.
In March 2022, the proposed appointment of Natalie Ceeney
effective as of 1 May 2022 was considered by the committee and
subsequently recommended to the Board for approval.
Executive Committee succession planning and talent
Throughout the year, the committee has kept under review:
• the performance and succession planning of Executive
Committee members. In particular, the committee discussed
with the chief executive potential successor candidates to the
HR director. Given the transformation and people agenda,
and the group’s key priorities, the committee considered the
impact of the different options on the organisation and its
stakeholders, and which candidate would best support this.
After careful consideration, the committee approved the
appointment of Debbie White as the interim HR director. The
committee continues to focus on the search for a permanent
HR director and broader Executive Committee succession
planning, including having oversight of the talent pipeline
with a focus on diversity
• key talent at senior leadership level. 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 through our
internal talent pipeline
• the 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. Under this policy, proposed external
directorships and other significant external interests must
not be to an organisation that is a BT Group competitor/major
supplier to BT Group, create a conflict of interest for the
individual with their role at BT Group, involve significant
amounts of BT Group working hours or impede the ability of
the individual to perform their BT Group 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.
BT Group plc Annual Report 2022
Audit, risk and internal control
Audit & Risk Committee chair’s report
Matthew Key
Chair of the Audit & Risk
Committee
11 May 2022
Committee role
The committee is responsible, on behalf of the Board, for:
• monitoring the integrity of the financial statements and
overseeing the financial reporting process
• reviewing the effectiveness of the group’s systems of risk
management and internal control
• reviewing the effectiveness of the internal audit function
• approving the appointment, reappointment, remuneration
and removal of the external auditor, as well as the terms of
the engagement and the provision of any non-audit
services, overseeing the external auditor’s independence
and effectiveness in delivering a quality audit.
The committee’s key responsibilities are set out in its terms of reference
available at bt.com/governance
Committee membership and attendance
The committee 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 management. Allison and I have recent
and relevant business and financial experience (as set out in
our biographies on page 74) in line with the Code. The
deputy company secretary is secretary to this committee,
and she or her delegate attends all meetings and provides
guidance, advice and support as required. The chairman,
chief executive and chief financial officer attend committee
meetings as required.
Private committee sessions with the internal and external
auditor 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.
Meetings attended
Matthew Key (chair)
Ian Cheshirea
Iain Conn
6/6
4/4
6/6
Mike Inglisb
Allison Kirkby
Sara Weller
2/2
6/6
6/6
a Ian joined the committee on 1 September 2021.
b Mike stepped down from the Board and this committee at the conclusion
of the AGM on 15 July 2021.
Other attendees (× Regular attendee • Attends as required)
×
Chief executive
×
Chief financial officer
×
Director, group finance
×
Director of risk, compliance & assurance
General counsel, company secretary & director regulatory affairs ×
•
Director of external reporting and financial control
•
Risk director
•
Internal audit director
•
Ethics and compliance director
Details on the FY22 evaluation of the committee’s effectiveness can be
found on page 84
89
This year, the committee continued to focus on
reviewing our systems of risk management and
internal control, particularly on the enhancements
to our risk management framework, and the
implementation of our finance transformation
programme.”
Committee focus in FY22
The committee met six times this year. As committee chair,
I met with the KPMG lead audit partner, the internal auditor
and management as appropriate ahead of meetings to discuss
specific items of focus to report to the committee. After each
meeting, I also reported 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
meeting papers and minutes.
Financial reporting
During the year, the committee considered the full year and half
year results, and the Q1 and Q3 trading updates. It reviewed the
quality of accounting policies and practices, as well as critical
accounting estimates and judgements.
The committee considered, and was satisfied with:
• the processes supporting the preparation and consolidation
of the financial statements, including consistent application of
the accounting policies, and the ongoing verification by
management and the external auditor
• management’s accounting judgements and the appropriate
application of the accounting policies, having also discussed
these with the external auditor.
More information on BT Group’s significant accounting policies is set out on
page 135
The committee exercised its judgement when considering
matters related to the financial statements, and recommended
approval by the Board of each of our full year and half year
results, Q1 and Q3 trading updates and the Annual Report.
BT Group plc Annual Report 2022
Corporate governance report Considered by the committee
2021
2022
May Jul Oct Nov
Jan Mar
90
Audit, risk and internal control continued
Audit & Risk Committee chair’s report continued
Overview of the year
Focus
Financial reporting:
• Results/trading updates and accounting judgements
• Annual Report 2021
• Regulatory financial statements 2021
• Going concern assessment
• Viability statement
Major contentious matters
Internal controls over financial reporting
Finance transformation programme
GRCs and CFU risk reviews: point and emerging risks
Report from Openreach board, audit, risk & compliance committee chair on the risks in
Openreach
Compliance with Code requirements – risk management framework
Ethics & compliance:
• Ethics & compliance programmes
• Speak Up (whistleblowing) reports
• Being trusted: our codea
Internal audit:
• Internal audit report
• FY23 group internal audit plan
• Group internal audit charter
• International audits coverage and analysis
External audit – KPMG:
• External audit report
• External audit plan
• Audit and non-audit fees
• Effectiveness
• Independence and reappointment
a The draft code was also shared with the committee ahead of launch in September 2021.
Fair, balanced and understandable
In May 2022, the committee reviewed the Annual Report 2022,
having previously fed back on earlier drafts. The committee
concluded that the Annual Report 2022, taken as a whole, was
fair, balanced and understandable and provided the
information necessary for shareholders to assess the group’s
position, performance, business model and strategy. It also
considered the TCFD (see pages 66 to 69), and the potential
impact on forward-looking assumptions supporting going
concern and viability assessments. In its assessment, it
BT Group plc Annual Report 2022
considered that the following had been carried out and this
formed the basis of its recommendation to the Board:
• a verification process covering the factual content reviewed
by the internal audit team
• comprehensive reviews by different levels of management,
including the Executive Committee, to consider the
messaging and ensure consistency and overall balance.
91
Significant matters related to the financial statements
and how these were addressed
Group accounting policies, critical estimates and judgements
The committee considered the accounting policies and
disclosures in the consolidated financial statements regarding
critical and key accounting estimates and significant judgements,
including the valuation of our pensions assets and obligations,
taxation, and contingent liabilities associated with litigation,
provisions and our goodwill impairment model.
Going concern assessment
The committee considered management’s forecasts of group cash
flows and net debt, as well as the group’s liquidity requirements
and borrowing facilities, including downside scenarios from the
viability model as discussed below. Following this review and a
discussion of the sensitivities, it confirmed that the going concern
basis of accounting continues to be an appropriate basis of
preparation for the financial statements and recommended it for
approval by the Board.
See page 115
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 group’s
current position and principal risks. The committee also
considered the group risks in management’s stress testing
model, including the review of downside scenarios and a
combined ‘severe but plausible’ scenario where multiple
inter-connected risks materialise. The committee was satisfied
that the viability statement could be provided and endorsed the
selection of a five-year time horizon as a basis for the statement
and the approach to its development, and recommended it for
approval by the Board.
Goodwill impairment
The committee received and discussed the key assumptions,
including operating cash flow forecasts, resulting headroom and
the sensitivity analysis performed by management. The committee
considered and was satisfied with the key assumptions and agreed
that no goodwill impairment charges were required for FY22.
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. 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, the judgements involved in
accounting for the BT Sport 50:50 joint venture, disclosed as a
post balance sheet event, 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. It also
considered management’s view of the quality of earnings and of
the effective tax rate. At each quarter, it considered a detailed
assessment of provisions, and the committee was satisfied with
the analysis provided in relation to the results.
See page 70
Finance transformation
Regulatory financial reporting
The committee supported the processes and systems
enhancements that were implemented to ensure that the group
met its 2021 regulatory financial reporting obligations.
Throughout the year, the committee was regularly updated on
the implementation of a new central finance system and group
accounting book of record and considered in particular the
impact on published financial information and the group’s
control environment.
Pensions
FRC review
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 consolidated
financial statements, the sensitivities around the assumptions
and the impact of the assumptions on the balance sheet, income
statement and related disclosures. In May 2021, the committee
was updated on the triennial funding valuation for BTPS, the
possible range of valuation outcomes and our funding position
ahead of the Board’s approval of the funding valuation.
In February 2022, the Corporate Reporting Review department
of the FRC advised that our Annual Report 2021 had been
subject to its review. It did not raise any questions or queries on
our accounts. It did note a number of matters where it believed
that users of the accounts would benefit from improvements to
our existing disclosures. This feedback has been reflected within
this Annual Report. The FRC review does not provide any
assurance that the Annual Report are correct in all material
respects; the FRC’s role is not to verify the information provided,
but to consider compliance with reporting requirements.
BT Group plc Annual Report 2022
Corporate governance report 92
Audit, risk and internal control continued
Audit & Risk Committee chair’s report continued
Risk management and internal controls systems
The group has enhanced its framework of risk management,
controls and assurance for dealing with its landscape of risks.
This framework provides the tools to enable us to be smart with
risk and improve operational and ethical discipline. The risk
management processes identify and monitor the risks facing the
group and the risk landscape is divided into areas of enduring
risk called GRCs, which cover strategic, financial, operational
and compliance risks.
manage or mitigate these risks effectively. The committee
oversaw the preparations required to ensure compliance ahead
of the launch of the group’s hardware financing offering. It
discussed the systems, processes, controls and capabilities in
place to ensure the necessary assurances ahead of the go live.
The committee considered the go/no go criteria, reviewed and
assured by an independent third party and internal audit and
was comfortable that the criteria had been met, subsequently
approving proceeding to launch.
Given the legal and security risks associated with the data we
manage, the importance to our colleagues, customers and the
group’s ambition, as well as the ever-increasing regulatory
scrutiny in this space, the committee has received a number of
updates on the management of this GRC, and monitored
progress against any agreed enhancements.
The committee continues to monitor cyber security risk closely.
An independent strategic cyber security assessment has been
undertaken, as well as a separate external review of our security
strategy. A cyber security remediation plan has also been
established which has identified key initiatives required to
achieve risk appetite targets.
The committee considered management’s approach to
managing emerging risks within the risk management framework
and in each of the GRCs. The committee held in-depth
discussions on the emerging risk profile and landscape,
particularly the key disruptive technology-related emerging risks.
In addition, with the CFU CEOs, the committee now undertakes
unit risk reviews, which cover how the GRCs are being managed in
the respective units, and the significant point and emerging risks.
In FY22, we commenced with a review of the Enterprise unit.
In addition, the committee monitored the operation of
management’s assurance approach to internal controls over
financial reporting (ICOFR) and considered the implications of
management’s conclusions for the purposes of the preparation
of the Annual Report 2022. The committee was satisfied that the
necessary ICOFR testing had been carried out, and that any
related control deficiencies identified were appropriately
addressed, or are in the process of being addressed.
The committee continued to monitor the finance transformation
programme which supports the ongoing improvement of
controls identified through management’s testing and
compliance monitoring programme. The committee received
updates on the progress of the execution of the programme,
which aims to deliver a more automated, preventative controls
environment over the medium term. Ahead of the committee’s
endorsement of the go-live, the committee considered how the
specific go-live criteria and programme governance processes
were met.
The committee also monitors the outcome of the Department
for Business, Energy & Industrial Strategy (BEIS) consultation
paper and how this may impact our current controls
development strategy.
Further information on our risk management framework and principal risks
can be found on pages 55 to 65
Management continues to build a more robust controls
landscape through the ongoing finance transformation
programme, and a rigorous financial controls assurance
approach has been followed in line with previous years.
Management has undertaken testing of the design and
implementation of all key financial controls and effective
reliance on the systems tested was confirmed.
In line with the Code, the Board monitored the effectiveness of
the group’s systems of risk management and internal controls
through detailed reviews of the GRCs and consideration of
reports from management, as well as from internal audit and
other assurance functions. Much of this work was undertaken
by this committee on the Board’s behalf. Given that the Board
is ultimately responsible for the group’s systems of risk
management and internal controls, as chair, I subsequently
reported the key matters from each of these sessions to
the Board.
The activities listed below collectively enable the committee
to confirm that the group’s systems of risk management and
internal controls have been appropriately reviewed. The
committee considered these systems throughout the year.
Where required, it proactively discussed the suggested
improvement actions and monitored their progress. Further
information on improvements being made to the overall risk
management framework, as well as specific actions taken to
manage our principal risks can be found on pages 55 to 57.
In addition to the significant improvements in the “wiring”
of our approach to risk and control, the committee discussed
the improvements made to the risk and control “mindset” across
the group. Led by the chief executive, programmes to improve
operational integrity – robust operations and smart decisions in
an ethical way – are aimed at improving our management of risk
at all levels. These programmes aim to make our requirements
simpler, ensure colleagues hold themselves and others to
account, listen for initial signals of emerging problems, and think
smartly through potential consequences when making decisions.
Activities carried out during the year:
The committee held open and honest discussions on the
GRCs with the Executive Committee risk owners to understand
current and anticipated risk developments, and reviewed how
effectively the risks are being mitigated and managed. It
considered the definition of risk appetite and supporting metrics
within the GRCs, the effectiveness of the controls, mitigation
activities and any areas for improvement. The committee
robustly assessed both current, specific concerns (point risks)
and uncertainties that may materialise in the future (emerging
risks), particularly as a consequence of adverse changes to the
economic, social, regulatory, political or technology
environment, or as an unintended consequence of new products
and services being offered or developed by the group. The
committee agreed with management any actions required to
BT Group plc Annual Report 2022
93
Internal audit
Internal audit provides independent, objective and timely
assurance to senior management and the Board, through this
committee, over the design and operational effectiveness of key
processes and controls that manage the risks across the
organisation.
During the year, the committee:
• reviewed and approved the group internal audit annual plan,
ensuring it aligned to the principal risks of the business
• reviewed and, taking into account the current needs of the
group, approved the internal audit charter, which establishes
internal audit’s independence, authority, remit and reporting
lines to conduct its work
• received regular reports from internal audit on its activities
and progress against the group internal audit plan, allowing
the committee to monitor delivery against the plan
• held in-depth discussions with management on all internal
audit reports where controls were assessed as “inadequate”,
and action plans to address these. The actions were tracked
by the committee, including the responsiveness of
management to the findings and recommendations,
and the progress of closing any overdue actions.
During the year, the committee carried out its annual
assessment of the performance and effectiveness of internal
audit, including whether the activities, structure, expertise,
objectivity and quality of the function were appropriate for
the business. The committee concluded that internal audit
continues to add value in the context of the group’s overall
assurance framework. An external effectiveness review of
internal audit was previously conducted in FY19 by the
Chartered Institute of Internal Auditors in accordance with
our five-year cycle of such reviews.
Ethics and compliance
This year, the group launched ‘Being trusted: our code’
which sets out the principles of how we expect our colleagues,
and anyone who represents or works with us, to behave, do
business and connect for good. The committee discussed
its background and purpose ahead of launch. ‘Being trusted:
our code’ demonstrates our commitment to high standards
of business conduct. It provides a set of statements and
promises about what it means to be part of the group, covering
how we treat our colleagues, customers, suppliers, and our
responsibilities in respect of meeting our legal and regulatory
obligations especially in respect of data privacy and security,
finance, the environment and the responsible use of technology
and setting high standards of operational integrity.
More information on this can be found on page 18
bt.com/ethics
The committee considered regular reports on our ethics and
compliance policies, and programmes and related learnings and
culture. It spent time discussing the enhancement programme in
relation to international trade, anti-bribery and corruption, as
well as communications regulation compliance in line with the
respective GRC.
Each quarter, the committee received and considered reports
on issues raised through Speak Up, BT Group’s confidential,
whistleblowing services operated by an independent company,
24 hours a day, in multiple languages, for both written and
telephone reports. The committee ensures that arrangements
are in place for the proportionate and independent investigation
of these and other matters via the ethics and compliance team.
The procedures for Speak Up are reviewed annually with input
from the specialists in Speak Up, HR and legal, to ensure best
practice is maintained and that procedures remain compliant.
On receipt, any whistleblowing reports are triaged by specialist
resource, assigned a priority and, where appropriate, are directed
to an investigator from security, HR or legal with appropriate
assistance from subject matter experts and/or independent line
management. On completion of any investigation, the Speak Up
team ensures the investigation has been thorough and fair. High
priority cases are reviewed by a multi-disciplinary panel for
completeness before closure. The committee discussed any
themes identified across the cases received, the outcomes of
these cases and the overall rates of substantiation. The
committee was also kept up to date on the introduction of a new
HR helpline to enable colleagues to access “in the moment”
assistance with any issues.
BT Group plc Annual Report 2022
Corporate governance report 94
Audit, risk and internal control continued
Audit & Risk Committee chair’s report continued
External audit
The committee is responsible for making recommendations
to the Board on the reappointment of the external auditor,
determining their independence from the group and its
management and agreeing the scope and fee for the audit.
Following its review of KPMG’s performance, the committee
concluded that the reappointment of KPMG should be
recommended to shareholders at the 2022 AGM.
Following the audit tender in FY17, KPMG was appointed as
BT Group’s external auditor from the conclusion of the 2018
AGM. The FY22 audit is KPMG’s fourth audit of BT Group.
John Luke was appointed as the KPMG lead audit partner
for the BT Group in FY21, having been the audit partner for
Openreach Limited since FY19. Recognising the rotational
requirements for the lead audit partner and taking into account
both his tenure at Openreach and BT Group, FY23 will be John
Luke’s final year as lead audit partner. The committee chair has
discussed John Luke’s succession with the chief executive of
KPMG in the UK, and the committee is currently reviewing
potential candidates put forward by KPMG to succeed John
and to ensure a smooth handover.
During the year, the committee:
• considered and approved the proposed external audit fees for
the year ended 31 March 2022, 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
122 to 128 for more details)
• reviewed with the external auditor, and subsequently
approved, the external auditor’s scope of work, audit plan and
strategy for FY22
• approved the engagement letter of the external auditor
• recommended approval by the Board of management’s
letters of representation
• reviewed the annual findings of the FRC’s Audit Quality
Review in respect of KPMG’s audits. The committee discussed
the findings and the applicability to the BT Group and are
discussing this further with KPMG.
As part of my year-end report to the Board, I informed the Board
of the outcome of the external audit.
BT Group confirms that it complies with the EU Regulation on
Audit Reform and the Competition and Markets Authority’s
Statutory Audit Services Order with regard to mandatory auditor
rotation and tendering.
Independence and non-audit services
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. BT Group’s
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, and these
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. The committee
will continue to keep under review BT Group’s non-audit
services policy.
Our non-audit services policy can be found at bt.com/governance
The committee reviewed the confirmation and information
received from the external auditor on the arrangements that it has
in place to safeguard auditor independence and objectivity, which
are consistent with the ethical standards published by the FRC,
including specific safeguards where they provide permissible
non-audit services to the group. The nature of the non-audit
services carried out by the external auditor during the year are
described in note 8 to the consolidated financial statements on
page 146. These were carried out due to either 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 any
approved non-audit services performed by KPMG, are considered
a low threat to auditor independence. The largest non-audit
service included work auditing BT Sport’s carved out financial
statements. This work fell within the scope of limited permissible
services, which are closely related to existing audit work that
KPMG provide. 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 0.6% of the total fees (FY21: 0.8%).
BT Group plc Annual Report 2022
95
External auditor effectiveness and quality
Scope
The committee assesses the
effectiveness of the external audit
process and the qualifications,
expertise, resources, independence
and objectivity of the external
auditor, including the nature and
extent of non-audit services
throughout the year, focusing on:
• the quality of the audit and the
financial reporting process,
including how effective the
external auditor is at identifying
and addressing matters that could
compromise the quality of BT
Group’s reporting
• the service of the external auditor
and the relationships with the
committee, key members of
management and the internal
auditor
• whether the external auditor has
demonstrated professional
scepticism
• whether the external auditor has
challenged management’s
assumptions where necessary.
perspectives on the effectiveness and
quality of the external auditor’s work.
The committee also reviewed the key
findings from the FRC’s Audit Quality
Review in respect of KPMG’s audits.
Whilst the FRC review did not cover the
BT Group audit, the report provided a
basis for the committee to challenge
KPMG over any actions proposed as a
result of the report, and any weakness
identified in audit quality. The
committee discussed the findings and
the applicability to the BT Group (with
and without KPMG) and will continue to
keep this under review.
Review process
The committee reviewed the audit scope
and plan at the start of the year and
received regular audit reports from the
external auditor. This enabled the
committee to assess the quality of audit
work. The committee had the opportunity
to interact with the external auditor at
meetings as well as to observe the
communication and interactions between
the external auditor with management
and the internal auditor. The committee
reviewed and monitored management’s
responsiveness to the external auditor’s
requests for information, and its findings
and recommendations. The committee
chair also regularly met with the lead
audit partner.
During the year, a questionnaire was also
completed by the committee members
and management to gather their
Conclusion
In conclusion, the committee agreed that:
• the audit contributed to the integrity of the group’s financial reporting
• the relationship between KPMG and both the committee and management
continues to be effective
• KPMG demonstrated an appropriate degree of professional scepticism and
deployed a team with the required level of skill and expertise to enable an
effective audit
• the audit strategy and plan was appropriately scoped, communicated
and executed
• KPMG continues to be independent, and recommended to the Board that the
reappointment of KPMG, as our external auditor, be put to our shareholders for
approval at the 2022 AGM (this was subsequently approved by the Board).
BT Group plc Annual Report 2022
Corporate governance report 96
BT Compliance Committee chair’s report
Isabel Hudson
Chair of the BT Compliance
Committee
11 May 2022
Committee role
The committee is responsible on behalf of the Board for:
• monitoring BT Group’s compliance with the letter and
spirit of the Commitments made as part of the 2017
Digital Communications Review with Ofcom.
• assessing whether Openreach can act with appropriate
independence while BT Group is able to fulfil its parent
company duties
• overseeing consumer fairness matters on behalf of the
Board by monitoring whether BT Group is living up to
Ofcom’s Fairness for Customers commitments
• reviewing, in both cases, how BT Group is delivering
appropriate outcomes for stakeholders.
The committee’s key responsibilities are set out in its terms of reference
available at bt.com/governance
Committee membership and attendance
During the year, the committee met four times and
comprises independent non-executive directors only. The
deputy company secretary is secretary to this committee,
and she or her delegate attends all meetings and provides
guidance, advice and support as required. The chairman,
general counsel, company secretary & director regulatory
affairs, commitments assurance office (CAO) director and
Openreach’s commitments monitoring office director also
attend meetings as invitees.
Meetings attended
Isabel Hudson (chair)
Ian Cheshire
Mike Inglisa
4/4
4/4
1/1
Allison Kirkby
Sara Wellerb
4/4
3/3
a Mike stepped down from the Board and the committee at the conclusion of
the AGM on 15 July 2021.
b Sara joined the committee on 10 May 2021.
I report to the Board after each meeting on the committee’s
activities and the main issues discussed, with the Board
receiving copies of the committee’s meeting papers and
minutes. Ofcom also receives copies of minutes and each
year we publish an annual review (available at bt.com/btcc).
Details on how we engage with Ofcom can be found on page 41
Details on the FY22 evaluation of the committee’s effectiveness can be
found on page 84
It is positive that the spirit and letter of the
Commitments are seen to be well-embedded,
even as the BT Group continues to evolve and
make organisational changes, with inductions
and training focusing on this area. We will continue
to monitor the culture and behaviours across BT.
The committee has also embraced its new oversight
role on consumer fairness, challenging as required.”
Committee focus in FY22
Compliance with the Commitments
The committee has been pleased to observe that the
Commitments are well-embedded across the group as
recognised by Ofcom’s annual Openreach monitoring report*.
It has continued to monitor:
• the adherence of BT Group’s leadership with the Commitments
in light of senior leadership changes and the creation of the
Digital unit
• the CAO’s reviews of the annual financial planning, strategy
development and commercial pricing and product processes
• the finance transformation programme and how Openreach
information is ringfenced and access to it controlled. The
committee noted the effective dialogue between BT and
Openreach throughout this transition
• stakeholder perceptions by engagement with industry
stakeholders, including CPs, as well as Ofcom and Openreach
• BT Group senior leadership views on how the efforts of both
BT and Openreach have continued to strengthen the
relationship between them
• the implementation of recommended enhancements from
last year’s independent assessment of the effectiveness of
BT Group’s monitoring framework have made monitoring
processes more efficient in managing any Commitments risks
• the outcomes of CAO compliance “quick checks”, made
decisions on potential Commitments breaches and, where
appropriate, discussed remedial actions. Breaches continue
to remain at a low level in nature and number.
Consumer fairness matters
In its first year of monitoring consumer fairness (see page 16),
the committee focused on:
• the proposed transition to All IP and the introduction of Digital
Voice (see page 16). The committee spent significant time
addressing key issues of the programme with management
including customer impacts and the related communications
• the decision to proceed with our planned consumer price
increase in March 2022 (announced in 2020) noting current
inflation rates and the continued engagement with key
stakeholders and customers ahead of this
• the introduction and provision of social tariffs, how the group
is addressing loyalty-related issues, the cap on out-of-
contract price rises, and the broader efforts to support
vulnerable and less technically able customers
* Ofcom’s annual Openreach monitoring report (December 2021) can be
found at https://www.ofcom.org.uk/__data/assets/pdf_
file/0024/229236/annual-openreach-monitoring-report.pdf
• year-on-year consumer fairness trends as well as outputs from
the group’s consumer fairness panel meetings.
BT Group plc Annual Report 2022
97
Digital Impact & Sustainability Committee chair’s report
Leena Nair
Chair of the Digital Impact &
Sustainability Committee
11 May 2022
Committee role
The committee is responsible, on behalf of the Board, for:
• agreeing the digital impact and sustainability strategy for
the group
• oversight of the progress of our related external targets
with a particular focus on how these are being executed
through the group’s activities in areas such as digital
skills, responsible tech, human rights, climate change and
the environment.
The committee’s key responsibilities are set out in its terms of reference
available at bt.com/governance
During what continues to be a difficult time for so many, it
has been encouraging to see the BT Group step up to the
challenge to support our colleagues, communities, the
country and internationally. We continue to focus on
tackling climate change and environmental challenges,
championing responsible tech and human rights and giving
people the skills they need to thrive in the digital world. Our
strategy in these areas has evolved under the Manifesto,
which aims to accelerate growth through tech that’s
responsible, inclusive and sustainable. It is a core part of our
strategy and is reflected in two elements of the annual
bonus non-financial measures. As I step down as chair, I am
pleased to see our ongoing commitment to this, which will
continue to build trust and create value for all stakeholders.
Committee membership and attendance
The committee members are all independent non-executive
directors. The deputy company secretary is secretary to this
committee, and she or her delegate attends all meetings
and provides guidance, advice and support as required.
The HR director, corporate affairs director, CEO Consumer,
CEO Enterprise, sustainability & corporate affairs strategy
director, and director of external communications & digital
impact also attend meetings as invitees.
During the year, the committee held four scheduled
meetings and one ad hoc meeting.
Meetings attended
Leena Nair (chair)
Jan du Plessisa
Isabel Hudsonb
Mike Inglisc
Sara Weller
4/4
2/2
3/4
1/1
4/4
a Jan stepped down from the Board and the committee on 30 November 2021.
b Isabel gave apologies for one meeting due to prior business commitments.
c Mike stepped down from the Board and the committee at the conclusion of
the AGM on 15 July 2021.
I report to the Board after each meeting on the committee’s
activities and the main issues discussed, with the Board
receiving copies of the committee’s meeting papers
and minutes.
Details on the FY22 evaluation of the committee’s effectiveness can be found
on page 84
The launch of the Manifesto for a bright, sustainable
future this year further demonstrates the group’s
commitment to being a responsible, inclusive and
sustainable business, and the importance of this
to our strategy.”
Committee focus in FY22
Manifesto for a bright, sustainable future
Ahead of its launch, the committee inputted and shared views
on the draft Manifesto, its objectives and the activities
thereunder (see pages 32 to 35 for more details on this).
Responsible: Responsible tech and human rights
The committee considered progress in healthcare technology,
technology partnering and procurement, data monetisation,
and external perspectives on data and technology usage.
It also discussed our human rights programme and endorsed
BT Group’s human rights policy.
Inclusive: Digital skills
The committee received updates on the Skills for Tomorrow
programme, Consumer’s activities and campaigns and
Enterprise’s work to help small businesses. It continued to
monitor performance against our digital skills KPI.
Sustainable: Climate and the environment
The committee considered:
• BT Group’s climate strategy and related KPIs. It approved the
acceleration of our net zero target for its own operations from
2045 to the end of March 2031, and a new net zero target for
supply chain and customer emissions to be achieved by the
end of March 2041
• progress in decarbonising our operations including the
adoption of electric vehicles into the group’s commercial
vehicle fleet, noting some of the challenges faced in respect of
this given a lack of vehicle supply and charging infrastructure
• the introduction of new goals, to help customers cut 60m
tonnes of CO2e by 2030, and to be a circular business by 2030,
and part of a circular tech and telco ecosystem by 2040
• how we would address the recommendations of TCFD
(see pages 66 to 69).
Stakeholder engagement
The committee discussed the group’s approach to understanding
the interests of our key stakeholders and how this is reflected in
our digital impact and sustainability strategy, external reporting,
and engagement with stakeholders (including our shareholders)
in a landscape of increasing focus on environmental, social and
governance factors.
Supply chain
The committee was kept updated on the programmes and
initiatives in place across the group to manage risks within our
supply chain, including how we mitigate these risks and ensure
that the group remains a responsible, inclusive and sustainable
business.
See pages 32 to 35 for more detail on our digital impact and sustainability
strategy and KPIs
BT Group plc Annual Report 2022
Corporate governance report 98
Report on directors’ remuneration
Committee chair’s letter
Sir Ian Cheshire
Chair of the Remuneration
Committee
11 May 2022
Contents
Committee chair’s letter
Review of the year; committee decisions; key outturns and
plans for the year ahead – pages 98 to 100.
Focus on remuneration
The key aspects of our remuneration structure, outcomes
for FY22 and implementation of the Directors’
Remuneration Policy (Policy) in FY23 – pages 101 to 103.
Annual remuneration report
More detail on how we have implemented the Policy during
FY22 including the single figure of remuneration for each
director – pages 104 to 111.
Remuneration in context
How we take account of remuneration conditions across the
group – pages 112 to 113.
Committee membership and attendance
The committee members are all independent non-executive
directors only. The deputy company secretary or her
appointed delegate acts as secretary to the committee,
and they attend all meetings and provide advice, guidance
and support as required.
The chairman, chief executive, group HR director and
director of reward are typically invited to attend meetings.
They do not attend 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 five scheduled meetings during the
year and three ad hoc meetings. The ad hoc meetings have
predominantly been focused on remuneration arrangements
for the Executive Committee.
Meetings attended
Ian Cheshire (chair)
Iain Conn
Isabel Hudsona
5/5
5/5
4/5
Matthew Key
Leena Nairb
5/5
4/5
a Isabel gave apologies for one meeting during the year due to other business
commitments.
b Leena gave apologies for one meeting during the year due to other business
commitments.
BT Group plc Annual Report 2022
The Committee has recognised the hard work
and dedication of our workforce and how that has
enabled us to continue to deliver for the country.
We’ve have continued to ensure that any
remuneration decisions taken during the year were
in line with our Directors’ Remuneration Policy.”
Committee role
• Determines the salary and benefits for the chairman,
executive directors, members of the Executive Committee
including the company secretary, and monitors remuneration
practices and policies for the wider workforce
• Sets the performance targets for the annual bonus scheme for
senior executives for the year ahead
• Determines awards under the annual bonus scheme and the
group’s long-term incentive plans for senior executives
• Reviews and approves the Report on directors’ remuneration
• 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
I am immensely proud of our colleagues who have continued to
improve customer service and deliver vital connectivity, as we
extended and strengthened our networks to support the
country’s recovery despite continued disruption to our business
and the wider economy.
This report sets out information on the committee’s activities
during the year, our remuneration framework and its
implementation. I have also provided further context on the
performance of the business throughout the year and the
environment in which the committee made decisions on
executive pay.
Wider workforce context
Supporting our workforce throughout the pandemic has been
a key priority. No colleagues lost their jobs as a result of the
pandemic, and we did not make use of the Government’s
furlough scheme; instead we created new jobs in Openreach
and expanded our investment in UK fibre infrastructure at
a time in which other companies cut pay, reduced hours and
made redundancies.
However, we were not immune to the financial impact of the
pandemic: although we have continued to support our UK
frontline colleagues each year (through a 1.5% increase in 2020
and a £1,000 one-off bonus in 2021), our UK management
colleagues have not received an annual salary increase since
June 2019.
This year we committed that all eligible colleagues would receive
an annual salary increase. Given the rising cost-of-living
pressure faced by many of our colleagues, we have worked hard
99
to maximise the impact of this year’s pay increase budget,
focused our efforts on our lowest-paid colleagues, and sought to
deliver the increase as soon as possible.
Although we regretfully were not able to reach agreement
with the CWU, this year’s pay rise of £1,500 for our UK frontline
colleagues and key workers is the biggest investment we’ve
made in more than two decades. We have also voluntarily
committed to paying UK colleagues at least the Real Living
Wage and recently increased our minimum salary across the
board to reflect that.
For our UK management population a total salary increase
budget of 3% was confirmed, but again we targeted this toward
our lower-paid managers. A lower budget of 2% was available
for the UK senior management team.
However, we acknowledge that this remains a sensitive and
challenging time, and the committee has borne that in mind
throughout the year when considering remuneration matters
within its remit.
Performance and executive remuneration outcomes
for FY22
FY22 annual bonus plan
Annual bonus performance was based on a scorecard of seven
key financial and non-financial measures that align to our
strategic priorities.
Financial performance accounts for 70% of the bonus scorecard
and comprises the following measures:
• Adjusted EBITDA (35%) – the outcome was in line with our
expectations at £7,577m, just below target. Despite pressures
on our revenue, we continued to see benefits from our
modernisation programme.
• Normalised free cash flow (35%) – cash flow performance
was strong through the second half of the year, and the final
outcome of £1,392m was between target and stretch.
Our non-financial measures account for 30% of the bonus
scorecard and comprise the following:
• Customer (10%) – although there was some volatility during
the year as the impact of the pandemic dropped off, we saw
strong group NPS performance and finished the year just
above target. This reflected record NPS results in Consumer,
BT SME and Global.
• Converged networks (10%) – we have continued to drive
sales and delivery of the latest network technologies
throughout the year. The number of FTTP connections was
just above target, while performance against our 5G
customers measure was close to stretch.
• Digital impact & sustainability (10%)
– Skills for tomorrow (5%) – during the year we launched
multiple wide-reaching campaigns with targeted support
for jobseekers, SMEs and families, reaching 893,000 people
across the country. Performance was between target
and stretch.
– Carbon emissions (5%) – performance against the carbon
emissions intensity metric was close to stretch.
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. Despite the formulaic outcome of the
final bonus scorecard being 123%, the committee exercised its
discretion to cap the bonuses of our executive directors at 100%
of target, in line with the chief executive’s recommendation.
Although we have met our financial goals, held to our
commitment to reinstate the dividend in FY22, and delivered
a competitive salary review for our colleagues, the committee
believes that this is a better reflection of the overall performance
of the business and the wider stakeholder experience.
Accordingly, Philip and Simon will be awarded bonuses of
£1,320,000 and £882,526 respectively. In line with the Policy,
50% of the bonus will be deferred into shares for three years.
2019 Incentive Share Plan (ISP) award
The final award under our legacy ISP was granted in 2019, with
performance measured over the three years to 31 March 2022.
Vesting is based on three performance measures: relative total
shareholder return (40%) (TSR), normalised free cash flow (40%)
and growth in underlying revenue (including transit) (20%).
Since the performance targets were set, we have made a
number of critical strategic decisions which were not foreseen
in our original business plan. Most notably, this includes our
commitment to expand the rollout of our full-fibre capability,
and the implications for capital expenditure and cash flow. These
decisions were being made against an uncertain backdrop given
the pandemic, and the level of our commitment and its impact
on normalised free cash flow evolved materially. We committed
in 2020 to increase our FTTP build to 20m premises by the
mid-to-late 2020s and began mobilising to do so. Then in
2021 we increased and accelerated this to 25m premises by
December 2026, and made the decision to fully fund the rollout
at this level in November 2021. Our increased investment
supports the Government’s full-fibre ambitions and will be
instrumental in delivering further value to our shareholders, but
has meant an additional £1.3bn of capital expenditure during
the 2019 ISP performance period; something which was not
envisaged at the time the targets were set. While this investment
will create significant value for the business and our
shareholders, the return on investment will not be seen until
after the 2019 ISP performance period has ended.
It is not the committee’s intention to penalise management for
making strategic decisions that are in the best interests of the
business, our shareholders, our customers, and the country as a
whole. Following a consultation with our largest shareholders,
the committee approved an adjustment to the cash flow
measure to reflect the increased investment. In addition, in line
with our usual practice, we have made appropriate adjustments
to both the cash flow and revenue measures to reflect
acquisitions and divestments during the period, to ensure
performance is being measured on a like-for-like basis.
No adjustments were made to the TSR measure.
In aggregate, these adjustments ensure that the targets are
no more or less stretching than originally intended. These
adjustments reflect major Board decisions with significant
impact on our targets, but no adjustments have been made for
other adverse external impacts including the Government’s
decision on the use of Huawei equipment.
BT Group plc Annual Report 2022
Corporate governance report 100
Report on directors’ remuneration continued
Committee chair’s letter continued
e) Chairman and non-executive director fees
As part of the annual compensation cycle the Board has
reviewed the fees payable to our non-executive directors. Given
these fees have also remained unchanged since 1 June 2019,
on the recommendation of the chairman and the executive
directors, the Board has agreed that the base fee will be
increased by 2%, effective 1 June 2022, in line with the increase
offered to the UK senior management team.
In FY22, the committee agreed a fee of £700,000 per annum
for Adam Crozier who joined as a non-executive director and
chairman designate on 1 November 2021, and became chairman
on 1 December 2021. No review of the chairman’s fee took place
as he voluntarily waived any increase this year.
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 published this year’s gender pay gap statistics at the end of
March in our gender pay gap statement. For the second year
running, we have also elected to voluntarily publish similar
analysis of our ethnicity pay gap. Both analyses, alongside more
detail on how we are addressing inequality and championing
diversity across our business, can be found in our Diversity and
Inclusion Report. The recently launched BT Group Manifesto,
also reaffirms our bold targets for gender, ethnicity and
disability across the organisation.
See pages 32 to 33.
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
11 May 2022
Performance against the adjusted cash flow measure was
mid-way between target and stretch, while performance against
both TSR and adjusted revenue measures was below threshold.
Accordingly, 19.1% of the total 2019 ISP award will vest in
August 2022.
Further detail is set out on pages 105 to 106.
Policy implementation in FY23
a) Salary
Philip’s salary was fixed for five years on appointment and
therefore no increase will be made in FY23. Simon’s salary will be
increased by 2% on 1 June 2022, in line with the increase offered
to our UK senior management team.
b) Pension
In line with that previously agreed when the Policy was approved
at the 2020 AGM, Simon’s pension allowance was reduced to
10% of salary from 1 April 2022 which now fully aligns him with
the rate offered to the majority of our UK workforce. Philip’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 with
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, used in tandem with divisional scorecards for
colleagues in each CFU. Group and divisional measures are
aligned to ensure a consistent focus across the business.
Openreach managers have a similar bonus scorecard but
it is based on Openreach performance only, to maintain
independence and to reflect the Commitments.
For FY23, we have also introduced two underpins, based on
health and safety and EBITDA performance. If either of the
underpins are triggered, the committee retains the discretion to
reduce the pay-out as it considers appropriate.
No changes are proposed to the structure of the annual bonus
plan for FY23: the on-target and maximum opportunity will
remain at 120% and 200% of salary for both Philip and Simon,
with 50% deferred into shares for a period of three years.
d) Long-term incentives
In line with the Policy, awards will be made to both Philip and
Simon in June 2022 under our Restricted Share Plan (RSP) to the
value of 200% of salary. These 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 109), and the committee
retains ultimate discretion to adjust the vesting outcome as it
considers appropriate, including to nil.
BT Group plc Annual Report 2022
101
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 group, 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
• The same annual performance framework applies to all our
management colleagues, including executive directors,
with aligned group and divisional metrics to ensure a
consistent focus.
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 line of sight for management and
shareholders.
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 Remuneration 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 BT Group plc (or
another person to whom the Policy applied) and that, in the
Risk
• Our incentives are structured to align with the group’s risk
management framework
• Three-year deferral under the annual bonus and a five-year
release period on RSP awards 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
Remuneration Committee discretion to adjust formulaic
outcomes.
Proportionality
• There is clear alignment between group performance,
strategic progress, and remuneration outcomes for our
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, maximum total
compensation levels are set lower than typical market
practice to reflect the narrower and more predictable range
of performance outcomes for BT Group
• Formulaic incentive outcomes are reviewed by the
Remuneration Committee and may be adjusted having
consideration to overall group performance and wider
workforce remuneration policies and practices.
Alignment to culture
• When considering performance, the Remuneration
Committee takes account of BT Group’s values
• The Remuneration Committee receives regular updates on
remuneration practices and policies for the wider workforce,
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 encourage our colleagues to
become shareholders in the business.
opinion of the Remuneration Committee, the payment was
not in consideration for the individual becoming a director of
BT Group plc (or taking on such other applicable position).
This includes the exercise of any discretion available to the
Remuneration Committee in connection with such payments.
For these purposes, payments include the Remuneration
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 Remuneration 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 2022
Corporate governance report 102
Focus on remuneration continued
Focus on remuneration continued
Remuneration earned in FY22
Philip Jansen
Chief executive
£000
3,500
3,000
2,500
2,000
1,500
1,000
500
0
F
F
Base salary
Pension allowance
Benefits
Total fixed pay
V
V
Annual bonus (shares)a
Annual bonus (cash)
ISP (shares)b,c
Total variable pay
Total
1,310
1,308
Simon Lowth
Chief financial officer
£000
2,150
1,320
FY22
£000
1,100
110
100
FY21
£000
1,100
110
98
F
Base salary
Pension allowance
Benefits
1,310
1,308
Total fixed pay
FY22
£000
660
660
830
2,150
3,460
FY21
£000
1,320
0
0
1,320
2,628
V
Annual bonus (shares)a
Annual bonus (cash)
ISP (shares) b,c
Total variable pay
Total
3,500
3,000
2,500
2,000
1,500
1,000
500
0
867
905
1,368
883
FY22
£000
735
110
22
867
FY22
£000
441
442
485
1,368
2,235
FY21
£000
735
147
23
905
FY21
£000
883
0
0
883
1,788
a In line with the Policy, 50% of the FY22 bonus will be deferred into shares for
three years. Both executive directors voluntarily agreed to defer all their FY21
bonus into shares for three years.
b The group returned below threshold performance against all the performance
measures for the 2018 ISP. The awards lapsed in full in May 2021.
c Performance against the adjusted cash flow measure was mid-way between
target and stretch, whilst performance against both the TSR and adjusted
revenue measures was below threshold. Accordingly, 19.1% of the total award
will vest in August 2022. Further detail is set out on pages 105 to 106.
Performance outcomes in FY22
Annual bonus FY22
• Bonus was subject to seven measures of financial and
non-financial performance
• Adjusted EBITDA performance was in line with our
expectations and cash flow performance was strong
through the second half of the year
• Performance under each of our non-financial targets was
either in line with or above target, with our 5G customers
measure and carbon emissions performance close to stretch
• This resulted in a formulaic outcome of 123% 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 Policy, 50% of the bonus will be deferred into
shares for three years.
2019 ISP
• Awards are subject to three performance measures
• Performance against the adjusted cash flow targets was
mid-way between target and stretch, whilst performance
against both the TSR and adjusted revenue measures was
below threshold. Accordingly, 19.1% of the total award will
vest in August 2022. For more details see pages 105 to 106.
BT Group plc Annual Report 2022
Payout (% of max)
Measure
Adjusted EBITDA
Normalised free cash flow
Group Net Promoter Score (NPS)
5G customers
FTTP connections
Carbon emissions
Skills for Tomorrow
Measure
Payout (% of max)
Relative total shareholder return
(TSR)
Normalised free cash flow
Underlying revenue growth
(including transit)
59%
87%
69%
93%
65%
94%
69%
0%
47.7%
0%
103
Look out for these icons in the Report on directors’
remuneration to distinguish the different types of pay.
F
Fixed pay
Base salary
Pension allowance
Benefits
V
Variable pay
Annual bonus
RSP awards
ISP awards
Implementation of the Policy in FY23
F Fixed pay
V Annual bonus
V RSP
Max. opportunity – 200% of salary
Target opportunity – 120% of salary
2022 award – 200% of salary
Max. opportunity – 200% of salary
Target opportunity – 120% of salary
2022 award – 200% of salary
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.
Adjusted EBITDA (35%)
Normalised free cash flow (35%)
Customer (10%)
Converged networks (10%)
Digital impact & sustainability (10%)
Two underpins apply which allow the
committee to exercise its discretion
to reduce the scorecard result if:
• there is a significant breach in
health and safety
• our group adjusted EBITDA target
is not met.
• 50% of any bonus payment for
FY23 will be deferred into shares
for three years
• Malus and clawback provisions
• 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
apply
• Full committee discretion
• Full committee discretion available.
available.
FY23
FY24
FY25
FY26
FY27
FY28
FY29
FY30
Philip Jansen
Chief executive
Simon Lowth
Chief financial officer
Salary – £1,100,000
Benefits
Pension allowance
– 10% of salary
Salary – £750,147
Benefits
Pension allowance
– 10% of salary
Performance measures
n/a
Framework
n/a
Illustration of Policy
Fixed pay
Base salary
Pension allowance
Benefits
Annual bonusa
50% cash
50% deferred shares
50% of the bonus deferred for three years
RSP awards
Tranche 1
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 44 to 45.
BT Group plc Annual Report 2022
Corporate governance report 104
Annual remuneration report
This section summarises all elements of the directors’ remuneration in FY22.
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 FY22 and FY21, 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
FY22
FY21
FY22
FY21
FY22
FY21
FY22
FY21
FY22
FY21
FY22d,e
FY21
FY22
FY21
FY22
FY21
Chairman
Adam Crozierf
292
0
1
293
293
0
Executive directors
Philip Jansen
1,100
1,100
Simon Lowth
735
735
100
22
98
23
110
110
110
147
1,310
1,308
1,320
1,320
867
905
883
883
830
485
–
–
2,150
1,320
3,460
2,628
1,368
883
2,235
1,788
Non-executive directors
Adel Al-Salehg
Ian Cheshire
Iain Conn
Isabel Hudsonh
Matthew Key
Allison Kirkby
Leena Nair
Sara Weller
0
144
162
145
137
124
116
131
–
121
150
145
134
124
116
85
1
1
144
162
146
137
124
116
131
121
150
146
134
124
116
85
–
–
–
–
–
–
–
–
–
–
–
–
–
–
144
162
146
137
124
116
131
121
150
146
134
124
116
85
Sub-total
3,086
2,710
124
122
220
257
3,430 3,089
2,203 2,203
1,315
0
3,518 2,203
6,948
5,292
Former directors
Jan du Plessisj
Mike Inglisk
467
38
700
136
3
8
470
38
718
136
Total
3,591 3,546
127
130
220
257
3,938
3,933
2,203 2,203
1,315
470
38
718
136
3,518 2,203
6,986 5,428
–
0
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 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) a year. For Philip, the value includes a company
provided car and personal driver to the value of c. £70,000 (FY21 £63,000).
b Pension allowance paid in cash for the financial year – see ‘Total pension allowance’ on page 105.
c Annual bonus shown includes both the cash and deferred share element. The deferred element of the FY22 bonus includes the value of deferred shares to be granted in
June 2022. The FY21 bonus was deferred in full into shares for three years. Further details of the deferred element are set out on page 105.
d Value shown represents the estimated value of ISP awards granted in 2019 that will vest in August 2022. The estimate is based on a three-month average share price from
1 January 2022 to 31 March 2022 of 185.03p. Further details are provided on pages 105 to 106.
e The ISP 2018 granted in June 2018 to Simon, and February 2019 to Philip lapsed in full in May 2021.
f Adam was appointed as a director and chairman designate on 1 November 2021 and became chairman on 1 December 2021. The figure represents his pro-rated
remuneration during the year.
g Adel was appointed as a director on 15 May 2020. Under the terms of the Relationship Agreement between BT Group plc 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.
j Jan stepped down as a director and chairman on 30 November 2021 and the figure represents his pro-rated remuneration during the year.
k Mike stepped down as a director on 15 July 2021 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 2021 and accordingly Simon’s base salary remained at £735,438. Philip’s salary of
£1,100,000 was fixed for five years at the time of his appointment in January 2019.
Adam joined on 1 November 2021 as a non-executive director and chairman designate and became chairman on 1 December 2021.
The committee agreed a fee of £700,000 per year on appointment.
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. A full breakdown of non-executive director fees is set out on page 109.
BT Group plc Annual Report 2022
105
Pension allowance
Executive directors receive an annual cash allowance, which can be put towards the provision of retirement benefits.
Philip received an annual allowance of 10% of salary. This is aligned with the contribution rate available to the majority of our UK
employees. We also provide death in service cover consisting of a lump sum equal to four times his salary.
In line with that previously agreed when the Policy was approved at the 2020 AGM, in FY22, Simon received an annual allowance of
15% of salary, which was reduced to 10% of salary effective 1 April 2022 to align with the rate for majority of UK employees. We also
provide 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 FY22 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
linked to our KPIs as set out on pages 44 to 45.
Category
Measure
Weighting Threshold
Target
Stretch
Actual
Payout (% of max)
Financial
Adjusted EBITDA (£m)
35%
7,385
7,585
7,785
7,577
Normalised free cash flow (£m) 35%
1,142
1,292
1,442
1,392
Customer
NPS
10%
0
100
200
122
Converged
networks
5G customers (000s)
FTTP connections (000s)
Digital impact
& sustainability
Carbon emissions (%)
Skills for Tomorrow (000s)
5%
5%
5%
5%
4,418
4,909
5,384
5,299
1,574
1,749
1,924
1,772
(51)
600
(53)
800
(55)
(54.7)
1,200
893
59%
87%
69%
93%
65%
94%
69%
Formulaic outcome
74% of max (123% of target)
When determining the 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. Despite the formulaic outcome of the
final bonus scorecard being 123%, the committee exercised its
discretion to cap the bonuses of our executive directors at 100%,
in line with the chief executive’s recommendation. Although we
have delivered against our financial goals, held to our
commitment to reinstate the dividend in FY22, and delivered a
competitive salary review for our colleagues, the committee
believes that this is a better reflection of the overall performance
of the business and the wider stakeholder experience.
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
123% of
target
123% of
target
100% of
target
100% of
target
60% £1,320,000
60%
£882,526
As per the Policy, 50% of the FY22 annual bonus will be deferred
into shares for three years.
2019 ISP
The ISP is a conditional share award. The committee assesses
the performance conditions to 31 March 2022 and the awards
would ordinarily vest in June 2022. The performance conditions
are based 40% on relative TSR, 40% on normalised free cash
flow, and 20% on growth in underlying revenue (including
transit) over a three-year performance period from 1 April 2019
to 31 March 2022.
Since the performance targets were set, we have made a
number of critical strategic decisions which were not foreseen
in our original business plan. Most notably, this includes our
commitment to expand the rollout of our full-fibre capability to
20m premises (in 2020) and then further to 25m premises by
December 2026 (in 2021) with the decision to fully fund this
being made in November 2021. Our increased investment
supports the Government’s full fibre ambitions and will be
instrumental in delivering further value to our shareholders,
but has meant an additional £1.3bn of capital expenditure during
the 2019 ISP performance period; something which was not
envisaged at the time the targets were set. While this investment
will create significant value for the business and our
shareholders, the return on investment will not be seen until
after the 2019 ISP performance period has ended.
Following a consultation with our largest shareholders, the
committee approved an adjustment to the cash flow measure
to reflect the increased investment. In addition, in line with our
usual practice, we have made appropriate adjustments to both
the cash flow and revenue measures to reflect acquisitions and
divestments during the period to ensure performance is being
measured on a like-for-like basis. No adjustments were made to
the TSR measure. In aggregate, this ensures that the targets are
no more or less stretching than originally intended.
As set out in the table overleaf, performance against the
adjusted cash flow targets was mid-way between target and
stretch, while performance against both the TSR and adjusted
revenue measures was below threshold. Accordingly, 19.1% of
the total award will vest in August 2022.
BT Group plc Annual Report 2022
Corporate governance report 106
Annual remuneration report continued
Measure
Relative TSR (rank)
Adjusted normalised free cash flow (£bn)
Adjusted underlying revenue growth (including transit) (%)
Vesting outcome
Awards granted during the year (audited)
2021 RSP
The 2021 RSP awards were made in June 2021 as set out below
and on page 108. An award of 200% of salary was made to both
executive directors in line with the normal Policy level. The face
value was based on the BT Group plc share price at the date of
grant of 203.16p. The grant price is calculated using the average
middle-market price of a BT Group plc share for the three
dealing days prior to grant.
Director
Date of award
RSP award
(shares)
Face value
of award
Philip Jansen
24 June 2021
1,082,854
£2,200,000
Simon Lowth
24 June 2021
723,974
£1,470,825
These awards are conditional share awards. Two underpins apply
over the initial three-year vesting period:
• 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 group.
Should one or both underpins not be met, the committee may
at its discretion reduce the number of shares vesting, including
to nil.
Awards will vest in three equal tranches after three, four and five
years, with an additional holding period such that no shares may
be sold until year five. At vesting, additional shares representing
the value of reinvested dividends on the underlying shares
are added.
Malus and clawback provisions apply as set out in the Policy, and
the committee retains the ultimate discretion to adjust vesting
levels to ensure alignment with our overall performance.
Details of all interests under the RSP are set out on page 108.
2021 deferred shares
The full bonus awarded for FY21 was deferred into shares as
voluntarily agreed by the executive directors. The awards were
made under the deferred bonus plan (DBP) in June 2021 as set
out below and on page 108. The face value was based on the BT
Group plc share price at the date of grant of 203.16p. The grant
price is calculated using the average middle-market price of a
BT Group plc share for the three dealing days prior to grant.
Director
Date of award
Number of
deferred
shares
Face value
of award
Philip Jansen
24 June 2021
649,712
£1,320,000
Simon Lowth
24 June 2021
434,384
£882,526
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 108.
At vesting, additional shares representing the value of
reinvested dividends on the underlying shares are added.
BT Group plc Annual Report 2022
Weighting
Threshold Maximum
Actual
Payout
(% of max)
40%
40%
20
8th
£4.47
(3.5)
4th
£5.78
(0.5)
12th
0%
£4.86
47.7%
(11)
0%
19.1%
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 BT Group plc over time by retaining net shares
received through the executive share plans or from market
purchases.
The shareholding requirement for both executive directors under
the Policy is 500% of salary. Executive directors are expected to
meet this requirement 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 continues to apply in full for two
years post-cessation of employment (or the total number of
shares held at cessation, if lower). The post-cessation
shareholding requirement will be calculated and expressed as a
fixed number of shares by reference to the closing BT Group plc
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 which we will hold in trust until such time that
they no longer need to be retained.
We encourage the chairman and independent non-executive
directors to purchase, on a voluntary basis, BT Group plc
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. They are
asked to hold these shares until they cease being a member of
the Board.
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.
107
Directors’ interests at 31 March 2022 or on cessation
(audited)
The following tables show the beneficial interests in BT Group plc
shares of directors and persons closely associated as at 31 March
2022 (or at the point of leaving for directors who left during
the year).
of all DBP, RSP and ISP awards, including performance periods
and vesting conditions, are set out on page 108.
For executive directors we use the average BT Group plc 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.
The first table includes interests held by the executive directors
under the BT Group plc’s share plans. The numbers represent the
maximum possible vesting levels. As set out on pages 105 to 106,
19.1% of the 2019 ISP awards will vest in August 2022. Full details
During the period 1 April 2022 to 11 May 2022, there were no
movements in directors’ beneficial holdings or other interests in
shares. The directors, as a group, beneficially own less than 1% of
BT Group plc’s shares.
Executive directors
Number of shares
owned outright
at 31 March 2022
RSP and DBPa
ISPb
Optionsc
Shareholding
requirement
(% of salary)
Current
shareholding
(% of salary)
Philip Jansen
6,146,227
2,389,562
2,347,782
Simon Lowth
698,492
1,672,964
1,373,469
247
11,222
500%
500%
1,330%
585%
a Subject to continued employment and, for the RSP, two underpins over the initial three year period.
b Subject to performance.
c Includes interests in saveshare, a HMRC-approved all-employee plan and yourshare, a HMRC-approved share incentive plan.
Philip
Jansen
Simon
Lowth
Shareholding guideline (500% of salary)
585%
1,330%
0%
200%
400%
600%
800%
1,000%
1,200%
1,400%
Shareholding (% of salary)
• Beneficial holding
•DBP awards (net)
•RSP awards (net) • Options unvested and subject to continued employment
Beneficial holding owned outright at 1 April 2021 Beneficial holding owned outright at 31 March 2022
Chairman
Adam Croziera
Non-executive directors
Adel Al-Saleh
Ian Cheshire
Iain Conn
Isabel Hudson
Matthew Key
Allison Kirkby
Leena Nair
Sara Weller
Former directors
Jan du Plessisb
Mike Inglisc
Total
–
0
19,646
69,442
24,090
161,686
75,000
50,000
7,000
1,004,138
29,091
1,440,093
62,500
0
19,646
69,442
24,090
161,686
75,000
50,000
37,000
1,005,222
29,091
1,533,677
a Adam was appointed as a director on 1 November 2021.
b Jan stepped down as a director on 30 November 2021 and the number reflects his holding at that date.
c Mike stepped down as a director on 15 July 2021 and the number reflects his holding at that date.
BT Group plc Annual Report 2022
Corporate governance report
108
Annual remuneration report continued
Outstanding share awards at 31 March 2022 (audited)
1 April
2021
Awarded/
granted
Dividends
re-invested
Vested
Lapsed
Total
number
of award
shares @
31 March
2022
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 2020
DBP 2021a
ISP 2018b
ISP 2019c
RSP 2020d
RSP 2021e
yourshare 2021f
Simon Lowth
DBP 2018
DBP 2019
DBP 2020
DBP 2021a
ISP 2018g
ISP 2019c
RSP 2020d
RSP 2021e
1,576,404
2,320,036
1,658,656
–
–
167,480
172,515
754,759
64,959
1,106,763
–
–
776
13,236
–
649,712
7,770
–
–
–
–
27,746
19,836
1,082,854
12,950
247
–
–
–
–
–
2,063
9,026
5,195
–
16,232
13,262
–
434,384
1,390,845
1,357,237
1,108,944
–
–
–
–
723,974
8,658
saveshare (2019)h
10,975
yourshare 2021f
–
–
247
–
–
–
–
–
–
–
–
–
–
167,480
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
65,735 01/08/2022
207.45p
1,119,999 01/08/2023
119.27p
657,482 24/06/2024
203.16p
1,576,404
– 31/03/2021
233.56p
2,347,782 31/03/2022
207.45p
1,678,492 03/08/2023
106.11p
1,095,804 24/06/2024
203.16p
247 24/06/2024
202.70p
– 01/08/2021
211.01p
172.54p
174,578 01/08/2022
207.45p
763,785 01/08/2023
119.27p
439,579 24/06/2024
203.16p
1,390,845
– 31/03/2021
211.01p
–
–
–
–
–
1,373,469 31/03/2022
207.45p
1,122,206 03/08/2023
106.11p
732,632 24/06/2024
203.16p
10,975 01/08/2024
163.92p
247 24/06/2024
202.70p
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
289
–
–
–
–
–
–
–
–
–
a Awards granted on 24 June 2021. The number of shares subject to awards was calculated using the average middle market price of a BT Group plc share for the three days
prior to grant. Awards of deferred shares in respect of 2022 will be calculated using the average middle market price of a BT Group plc 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 Group plc 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 resulted in the threshold targets not being and met and none of the shares vesting under the 2018 ISP. The award lapsed 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 Group plc 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 measures
and 20% to a measure of underlying revenue growth (including transit) over three years. The award will vest at 19.1% in August 2022 as set out on pages 105 to 106.
d Awards granted on 3 August 2020. The number of shares subject to awards was calculated using the average middle market price of a BT Group plc share for the three
dealing days prior to grant. 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 109.
e Awards granted on 24 June 2021. The number of shares subject to awards was calculated using the average middle market price of a BT Group plc share for the three dealing
days prior to grant. 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 109.
f Awards granted on 24 June 2021 under the free share element of the BT Group plc Employee Share Investment Plan in which all eligible employees of the group were
granted £500 worth of shares.
g Award granted on 19 June 2018. The number of shares subject to award was calculated using the average middle-market price of a BT Group plc 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 measures
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 and met and none of the shares vesting under the 2018 ISP. The award lapsed in full in May 2021.
h Option granted on 14 June 2019 under the employee saveshare scheme, in which all eligible employees of the group are entitled to participate.
Implementation of Policy in FY23
Base salary
Philips 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 FY23.
In line with our UK senior management population, Simon will
receive a 2% salary increase effective 1 June 2022.
Director
Philip Jansen
Simon Lowth
FY23
Base salary % change
£1,100,000
£750,147
0%
2%
Benefits
For executive directors, the committee has set benefits in line
with the Policy. No changes are proposed to the benefit
framework for FY23.
BT Group plc Annual Report 2022
Pension allowance
In line with the rate offered to the majority of our UK workforce,
both executive directors will receive an annual allowance equal
to 10% of salary in lieu of pension provision for FY23.
Annual bonus
Both executive directors are eligible for an on-target and
maximum bonus payment of 120% and 200% of salary. In line
with 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 FY23.
The FY23 annual bonus structure measures and weightings are
set out below.
Measure
Weighting
Category
Financial
Adjusted EBITDA
Normalised free cash flow
Customer
NPS
Converged networks 5G customers – the number
Digital impact &
sustainability
of customers on our 5G
network
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%
109
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 group.
Should one or both underpins not be met, the committee may
at its discretion reduce the number of shares vesting, including
to nil.
Awards will vest in three equal tranches after three, four and five
years, with an additional holding period such that no shares may
be sold until year five. At vesting, additional shares representing
the value of reinvested dividends on the underlying shares
are added.
Malus and clawback provisions and overarching committee
discretion applies, as set out in the Policy.
Chairman and non-executive director remuneration
The fees for non-executive directors have been reviewed by the
Board, taking into consideration the role and requirements of
the group, together with the fees paid to non-executive
directors at companies of a similar size and complexity and any
salary increases for the UK management population. In line with
the increase for the UK senior management population, on the
recommendation of the chairman and the executive directors,
the Board agreed to increase the base fee for non-executive
directors by 2% to £78,540 per year (from £77,000) effective
as of 1 June 2022. No other fee changes were agreed as part
of the review.
There are additional fees for membership and chairing a board
committee, details of which are set out in the table below:
Committee
Audit & Risk
BT Compliance
Chair’s
fee
Member’s
fee
£35,000
£25,000
£25,000
£12,000
Digital Impact & Sustainability
£14,000
£8,000
Investigatory Powers Governance
n/aa
n/aa
£8,000
£10,000
£30,000
£15,000
All seven of the annual bonus measures are linked to our KPIs as
set out on pages 44 to 45.
Nominations
Remuneration
In addition to the annual bonus scorecard, two underpins apply,
which allow the committee to exercise its discretion to reduce
the pay-out result if:
• there is a significant breach in health and safety
• our group Adjusted EBITDA target is not met.
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 2023 Report on directors’ remuneration so shareholders can
evaluate performance against the targets.
RSP
Both executive directors will be granted an award under the RSP
in June 2022 to the value of 200% of salary.
When considering grant levels each year, the committee takes
account of share price performance over the preceding year. In
2021, the level of awards granted was in line with the normal
Policy level of 200% of salary. Following review, the committee
has agreed that awards will be granted to both executive
directors this year at the normal Policy level of 200% of salary.
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.
The committee agreed a fee of £700,000 per year, on the
chairman’s appointment as chairman designate on 1 November
2021. The chairman has voluntarily decided to waive any fee
increase for FY23.
No element of non-executive director remuneration is
performance related. Neither the chairman nor the non-
executive directors participate in our bonus or employee
share plans and nor are they members of any of the group
pension schemes.
BT Group plc Annual Report 2022
Corporate governance report 110
Annual remuneration report continued
Other remuneration matters
Advisers
During the year, the committee received independent advice on
executive remuneration matters from Deloitte LLP. Deloitte
received £98,155 (excluding VAT) in fees for these services.
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 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 FY22, Deloitte provided the group with
advice on corporate and indirect taxes, assistance with
regulatory, risk and compliance issues and additional
consultancy services.
Dilution
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 2022, shares equivalent to 4.16% (FY21: 5.12%)
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 FY23, shares equivalent to
approximately 0.53% (FY22: 0.26%) of the issued share capital
(excluding treasury shares) will be required to satisfy the
all-employee share plans.
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
Report on directors’
remuneration at the
15 July 2021 AGM 6,634,876,487 282,321,890 1,975,431
95.92
4.08
95.04
Policy at the
16 July 2020 AGM 6,036,920,089
4.96
315,057,559 4,101,574
Withheld votes are not counted when calculating voting
outcomes.
Committee evaluation FY22
This year we undertook an internal Board and committee
evaluation, details of which can be found on page 84.
BT Group plc Annual Report 2022
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 Group plc has been a member of
the FTSE 100 throughout the ten-year period.
BT Group plc’s TSR performance vs the FTSE 100
250
200
150
100
50
0
Apr
12
Apr
13
Apr
14
Apr
15
Apr
16
Apr
17
Apr
18
Apr
19
Apr
20
Apr
21
Apr
22
BT
FTSE 100
Source: Datastream.
History of chief executive remuneration
Total
remuneration
£000
Annual
bonus
(% of
max)
ISP
vesting
(% of
max)
3,460
60% 19.1%
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%
Year end
Chief executive
Philip Jansen
Philip Jansen
Philip Jansen
Philip Jansena
Gavin Pattersonb
Gavin Patterson
Gavin Patterson
2022
2021
2020
2019
2018
2017
2016
2015
2014
Gavin Patterson
5,396
45% 82.0%
Gavin Pattersonb
4,562
58% 67.4%
Gavin Pattersonc
2,901
62% 78.7%
Ian Livingstond
4,236
35% 63.4%
2013
Ian Livingston
9,402
65% 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.
111
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:
Executive directors
Commencement date
Termination provisions
Philip Jansen
1 January 2019
Simon Lowth
6 July 2016
Directors’ service agreements do not contain fixed term
periods and are terminable by BT Group plc on 12 months’
notice and by the director on six months’ notice.
Chairman and independent non-executive directors
Commencement date
Termination provisions
Adam Crozier
1 November 2021
The letter of appointment does not contain a fixed term period and is terminable
by BT Group plc on 12 months’ notice and by the director on six months’ notice.
Ian Cheshire
16 March 2020
Iain Conn
1 June 2014
Isabel Hudson
1 November 2014
Matthew Key
25 October 2018
Allison Kirkby
15 March 2019
Leena Nair
10 July 2019
Sara Weller
16 July 2020
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 Group plc 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 BT Group plc
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.
Independent 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 BT Group plc’s registered office.
BT Group plc Annual Report 2022
Corporate governance report
112
Remuneration in context
Consideration of colleague and stakeholder views
Our colleagues are vital to our business and 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, using a
consistent framework for our senior management team 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, a
strong commitment to diversity and inclusion and wellbeing.
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.
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 2022, as well as those reported in respect of the prior
three 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 UK 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 and in
2022 due to the partial vesting of the 2019 ISP 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.
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.
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.
Total remuneration
2019
2020
2021
2022
Base salary
2019
2020
2021
2022
Chief executive
£2,444,000
£3,248,012
£2,628,107
£3,459,514
Chief executive
£1,222,000
£1,100,000
£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
£35,722
£40,059
£49,488
P25
71:1
93:1
74:1
97:1
P50
59:1
77:1
63:1
86:1
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
£31,637
£35,017
£43,908
P25
37:1
35:1
35:1
35:1
P50
31:1
29:1
31:1
31:1
P75
47:1
63:1
52:1
70:1
P75
27:1
26:1
26:1
25:1
The P25, P50 and P75 employees were identified from our
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.
BT Group plc Annual Report 2022
113
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.
Percentage change in remuneration of the executive
and non-executive directors and all employees
BT Group plc, our parent company, employs our chairman,
executive and non-executive directors 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. Any increase in benefits is as a
result of travel and other expenses further to returning to
face-to-face Board and committee meetings for the majority of
FY22 whereas in FY21 these were all held remotely by video
conference due to the pandemic.
Chairman
Adam Croziera
Executive directors
Philip Jansen
Simon Lowthb
Non-executive directors
Adel Al-Salehc
Ian Cheshire
Iain Conn
Isabel Hudson
Matthew Key
Allison Kirkby
Leena Nair
Sara Wellerd
UK management colleagues
FY22 (% change)
FY21 (% change)
Salary/
fees
Benefits
Annual
bonus
Salary/
fees
Benefits
Annual
bonus
–
0%
0%
–
8%
0%
0%
2%
0%
0%
0%
0%
–
2%
(4)%
–
0%
0%
0%
0%
0%
0%
0%
0%
–
0%
0%
–
–
–
–
–
–
–
–
0%
0%
0%
–
19%
33%
4%
13%
6%
3%
–
0%
(14)%
(5)%
0%
(2)%
–
–
–
(66)%
–
–
–
–
–
–
–
–
–
–
–
–
0%
18%
a Adam joined during FY22 and so no relevant comparison can be presented.
b Simon’s reduction in benefits reflects the year on year reduction in pension allowance.
c Under the terms of the Relationship Agreement between BT Group plc and Deutsche Telekom and Adel’s letter of appointment, no remuneration is payable for this position.
d Sara joined during the prior financial year and so any increase has been determined on a full-year equivalent basis.
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.
workforce and progress towards our diversity and inclusion targets
and ambitions including detailed information on our initiatives and
activities to reduce any gap. It also details the breadth of work
taking place across the group to increase all forms of diversity
within our workforce and to ensure we have an inclusive culture.
Area
Remuneration paid to all
employees
FY22
(£m)
FY21
(£m)
%
change
4,845
5,162
(6)%
Dividends/share buybacksa
184
14
1,214%
a Includes share purchases by the Trust as set out in note 21 to the consolidated
financial statements.
Diversity and inclusion
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 Expertise, 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.
Our 2022 Diversity and Inclusion Report includes details of our UK
gender and ethnicity pay gaps, as well as the demographics of our
Our Diversity and Inclusion Report is available on our website
bt.com/diversity-and-inclusion
Gender pay gap reporting
At a group-level, our median hourly pay gap between male and
female colleagues has increased to 6.7% (5% in 2020). This
remains below the telecommunications industry median of
19.6% (ONS provisional), and the UK national median of 15.4%.
Our Gender Pay Gap statement sets out the key information required under
legislation and is available on our website bt.com/genderpaygap
Sir Ian Cheshire
Chair of the Remuneration Committee
11 May 2022
BT Group plc Annual Report 2022
Corporate governance report 114
Statement of directors’ responsibilities in respect
of the Annual Report and the financial statements
Under applicable law and regulations, the directors are also
responsible for preparing an annual strategic report, directors’
report, report on directors’ remuneration 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 BT
Group 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 group 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 group 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 that 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
11 May 2022 and was signed on its behalf by:
Philip Jansen
Chief Executive
Simon Lowth
Chief Financial Officer
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 UK-adopted international accounting
standards and with the requirements of the Companies
Act 2006.
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 apply them consistently
• make judgements and estimates that are reasonable,
relevant, reliable and prudent
• state whether the group financial statements have been
prepared in accordance with international accounting
standards, as adopted by the UK
• state whether applicable UK accounting standards have been
followed with regards to the parent company financial
statements, 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 and disclose, 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. They 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.
BT Group plc Annual Report 2022
Report of the directors
The directors present the Report of the directors, together with
audited financial information for the year ended 31 March 2022.
The Report of the directors also encompasses the entirety of
our Corporate governance report on pages 71 to 120 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 70 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 135 and 136
of the consolidated financial statements. The directors have
reviewed these policies and applicable estimation techniques
and have confirmed that they are appropriate for the
preparation of the FY22 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 70 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 46 to 53 includes information on our group financial
results, financial outlook, cash flow and net debt, and balance
sheet position. Notes 24, 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 58 to
65 including details of each risk and how we manage and
mitigate them. The directors carried out a robust assessment of
the 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 70, in estimating the financial impact
for a severe but plausible outcome for each risk, both individually
and in combination through stochastic 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.
115
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 2023, which is consistent
with the FRC guidance. When reaching this conclusion, the
directors took into account the group’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 (including severe but plausible downsides, refer
to the Viability statement on page 70).
At 31 March 2022, the group had cash and cash equivalents of
£0.8bn and current asset investments of £2.7bn. 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 2027.
Independent advice
The Board has a procedure that allows directors to seek
independent professional advice at our 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, we have 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 the group’s request. The insurance protects the
directors and officers directly in circumstances where, by law,
BT Group plc cannot provide an indemnity. It also provides the
group, subject to a retention, with cover against the cost of
indemnifying a director or officer. One layer of insurance is
ringfenced for the directors of BT Group plc.
As at 11 May 2022, and throughout FY22, BT Group plc’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 BT Group plc’s Articles of Association, and to
the extent permitted by law, the group indemnifies each of its
directors and other officers against certain liabilities that may
be incurred as a result of their positions within the group. The
indemnity was in force throughout the tenure of each director
during the last financial year, and remains in force.
Interest of management in certain transactions
During and at the end of FY22, none of BT Group plc’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.
BT Group plc Annual Report 2022
Corporate governance report 116
Report of the directors continued
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
group. BT Group plc’s Articles of Association include provisions
for dealing with directors’ conflicts of interest in accordance with
the 2006 Act. The group 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 Group plc 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 Group plc 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 for
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 from
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 is simple and consistent,
and defines our (1) risk mindset and culture, (2) risk process and
activities; and finally (3) governance. 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
• is an integral part of BT Group’s annual strategic review cycle.
The framework was designed in accordance with the FRC
guidance on risk management, internal control and related
financial and business reporting and has been in operation
throughout the year and up to the date on which this document
was approved. The framework was reviewed in FY22 and
deemed effective, with continuous enhancements around
supporting smarter decision-making, expansion of emerging
risk hubs and further embedding of the framework.
BT Group plc Annual Report 2022
More information on our group risk management framework can
be found under the section Risk Management – Building Trust
across BT Group on pages 55 to 57.
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 group 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 89 to 95.
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 our pension schemes
and meeting our distribution policy.
The Board regularly reviews the group’s capital structure.
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 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.
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.
Legal proceedings
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 to, please see note 19 to
the consolidated financial statements.
Apart from the information disclosed in note 19 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 19, 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
46
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 Group plc shares it holds for
satisfying awards under the group’s executive share plans.
Under the rules of these share plans, the dividends are
reinvested in BT Group plc shares that are added to the
relevant share awards.
No other information is required to be disclosed pursuant to
LR 9.8.4R.
117
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 BT
Group or any of its subsidiary undertakings which
have occurred since the end of the financial year
Research and development activities
Page
1 to 70
198
13 and 21
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
36 and
80 to 81
37 to 41
and
82 to 83
Greenhouse gas emissions, energy consumption
and energy efficiency action
35 and 69
Structure of BT Group plc’s share capital (including
the rights and obligations attaching to the shares)
Significant agreements to which BT Group plc is a
party that take effect, alter or terminate upon a
change of control following a takeover
132
n/a
Branches
203 to 208
The following disclosures are not covered elsewhere in this
Annual Report:
• BT Group has two employee share ownership trusts that hold
BT Group plc 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, 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. The
trustee 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 that it
thinks is fair
• EasyShare is the group’s corporate sponsored nominee
service, which allows UK and European Economic Area
resident shareholders to hold BT Group plc shares
electronically. EasyShare is administered by Equiniti Financial
Services Limited. As at 11 May 2022, 386m shares were held
in EasyShare (3.87% of the issued share capital (3.89%
excluding treasury shares)) on behalf of BT Group plc
shareholders
• no person holds securities carrying special rights with regard
to control of the group
BT Group plc Annual Report 2022
Corporate governance report (b) Variation of rights
Whenever the share capital of BT Group plc 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. BT Group plc 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.
BT Group plc currently has one class of shares.
Transfer of shares
There is no specific restriction on the transfer of BT Group plc
shares in the group, which is governed by the Articles of
Association and prevailing legislation.
Colleague engagement
Engaging with our colleagues takes many forms, including
through:
• our annual Your Say employee engagement survey and pulse
survey
• union/employee representative engagement
• the Colleague Board, our workforce engagement mechanism
• 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 results and trading updates. Please see
further details of the Colleague Board’s activities on pages 80 to
81 and the other means by which we engage with our colleagues
on page 36.
Share plans are used to encourage colleagues to have a stake in
the future of the group. We annually consider which all-
employee plans to offer, both within the UK and globally. In June
2021, we again operated the yourshare plan granting £500
worth of BT Group plc shares (or a cash equivalent where there
were geographical restrictions) to all eligible colleagues. This
utilised the free share element of the share incentive plan in the
UK and conditional share awards internationally. Colleagues also
have the opportunity to join our all-employee share plans; save
as you earn (saveshare) and the share incentive plan
(directshare), to the extent these are operated each year.
118
Report of the directors continued
• our share registrar, Equiniti, must receive proxy appointment
and voting instructions not less than 48 hours before any
general meeting (see also page 119)
• the business of BT Group is managed by the Board.
The directors may exercise all the powers of BT Group plc,
subject to the Articles of Association, legislation and
regulation. This includes the ability to exercise the authority
to allot or purchase BT Group plc shares pursuant to
shareholders passing an ordinary resolution at the annual
general meeting (AGM)
• 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
BT Group plc’s current Articles of Association were adopted
pursuant to a resolution passed at the AGM of BT Group plc held
on 15 July 2021 and contain, amongst others, provisions on the
rights and obligations attaching to BT Group plc’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.
A copy of the current Articles of Association is available at bt.com/articles
Directors’ appointment, retirement and removal
The 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 Group plc 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 BT Group plc is legally entitled to impose such a
restriction (for example where a notice under section 793 of the
2006 Act has been served).
BT Group plc Annual Report 2022
Employees with disabilities
We are an inclusive employer and actively encourage the
recruitment, development, promotion and retention of disabled
people.
We are a member of Valuable 500, a global business collective
made up of 500 CEOs and their companies that are committed
to disability inclusion. In 2021, we launched our Disability Rapid
Action Plan (DRAP). This plan is our Valuable 500 commitment
to accelerate the pace of progress we are making to support
disabled and neurodiverse colleagues, and those that have an
impairment, or a long-term health condition.
We renewed our status as a Disability Confident Leader and
worked with several teams across the business, our Able2 People
Network and external partner the Business Disability Forum, to
focus on four key DRAP areas; attraction and recruitment,
diversifying our talent by broadening our Accelerate fast stream
talent programme, end-to-end reviews of our workplace
adjustment processes, and training and awareness initiatives.
Read more on diversity and inclusion, including our Diversity and Inclusion
Report, at bt.com/diversity-and-inclusion
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 significantly broader than the sense in which
these words are ordinarily used. The 2006 Act’s remit could
cover making members of Parliament and others in the political
world aware of key industry issues and matters affecting
BT Group plc, and enhancing their understanding of the group.
The authority for political donations requested at the 2022 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 FY22, BT Group plc’s wholly
owned subsidiary, British Telecommunications plc, paid the
costs of attending events at (i) the Labour party conference;
(ii) the Conservative party conference; and (iii) the Welsh
Labour party conference. These costs totalled £6,205 (FY21:
£922) which were greater than last year, as events were
attended in person rather than virtually. No company in the
BT Group made any loans to any political party.
Substantial shareholdings
As at 31 March 2022, BT Group plc had received notice, under
the DTRs, in respect of the following holdings of 3% or more of
the voting rights in its issued ordinary share capital:
Date of notification
Shares
%
of total
voting
rights
Altice UK S.à r.l.
13 December 2021 1,785,476,188 18.0%
T-Mobile Holdings 23 March 2018
1,196,175,322 12.06%
BlackRock, Inc.
1 February 2022
611,646,054
6.15%
In the period 31 March to 11 May 2022, BT Group plc received
three further notifications from BlackRock, Inc., the most
recent of which was on 20 April 2022 disclosing a holding of
670,942,065 BT Group plc shares equating to 6.74% of the total
voting rights.
119
AGM
Resolutions
At the 2022 AGM, shareholders will be asked to vote on all
resolutions including the Annual Report, the Report on
directors’ remuneration, the election/re-election of directors,
the reappointment of KPMG LLP as our external auditor and to
authorise the Audit & Risk Committee to agree its remuneration,
giving authority to the directors to allot BT Group plc shares and
disapply pre-emption rights.
Before the AGM, we count the proxy votes for and against each
resolution, as well as votes withheld, and make the results
available as soon as reasonably practicable following the
conclusion of the meeting. As at previous AGMs, we will take
votes on all matters at the 2022 AGM on a poll.
The separate Notice of meeting 2022, 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 2022 AGM on 14 July 2022. We notify all
shareholders of the publication of these documents which are
available on our website at bt.com/annualreport
Authority to purchase shares
The authority given at the 2021 AGM for BT Group plc to
purchase in the market 991m of its shares, representing 10% of
BT Group plc’s issued share capital (excluding treasury shares),
expires at the conclusion of the 2022 AGM. We will ask
shareholders to give a similar authority at the 2022 AGM.
During FY22 and up to 11 May 2022, no shares were purchased
under this authority.
At the start of the year, 50.7m shares (having a total nominal
value of £2.5m, and constituting 0.5% of the issued share capital
(0.5% excluding treasury shares)) were held as treasury shares.
During FY22, 9.3m treasury shares (having a nominal value of
£465,000, and constituting 0.09% of the issued share capital
(0.09% excluding treasury shares)) were transferred to meet
BT Group plc’s obligations under its employee share plans. At
31 March 2022, a total of 41.4m shares (having a total nominal
value of £2.1m, and constituting 0.41% of the issued share
capital (0.41% excluding treasury shares)) were held as
treasury shares.
Since 31 March 2022 (up to and including 11 May 2022), 784,038
treasury shares (having a nominal value of £39,200, and
constituting 0.007% of the issued share capital (0.007%
excluding treasury shares)) have been transferred to meet
BT Group plc’s obligations under its employee share plans.
At 11 May 2022, a total of 40.6m shares (having a nominal value
of £2m, and constituting 0.4% of the issued share capital (0.4%
excluding treasury shares)) were held as treasury shares.
In addition, the Trust purchased 98.8m BT Group plc shares for a
total consideration of £182m. The Trust held 79.1m shares both
at 31 March 2022 and 11 May 2022.
BT Group plc Annual Report 2022
Corporate governance report 120
Report of the directors continued
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):
• the final dividend proposed by the Board (page 47)
• an indication of likely future developments in the business of
BT Group plc and its group (pages 1 to 70)
• an indication of our research and development activities
(pages 13 and 21)
• information about how the directors engaged with UK
employees, had regard to UK employee interests, and the
effect of that regard, including on principal decisions during
the year (pages 36 and 80 to 81)
• 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 41 and 82
to 83)
• information about greenhouse gas emissions, energy
consumption and energy efficiency action (pages 35 and 69).
By order of the Board
Sabine Chalmers
Group General Counsel, Company Secretary & Director
Regulatory Affairs
11 May 2022
BT Group plc Annual Report 2022
Financial Statements
Look out for these throughout
the financial statements:
Significant accounting policies
Critical & key accounting estimates and
significant judgements
Financial statements
121
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 & contingent liabilities
Retirement benefit plans
Own shares
Share-based payments
122
129
130
131
132
133
134
135
135
137
140
144
145
145
146
148
151
151
152
155
157
161
162
164
165
167
179
180
Divestments and assets & liabilities classified as held for sale 182
Investments
Cash and cash equivalents
Loans and other borrowings
Finance expense
Financial instruments and risk management
Other reserves
Related party transactions
Financial commitments
Post balance sheet events
Financial statements of BT Group plc
Related undertakings
Additional information
184
185
186
189
190
197
198
198
198
199
203
209
BT Group plc Annual Report 2022
122
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 2022 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 2022 and of the Group’s profit for the year
then ended;
• the Group financial statements have been properly
prepared in accordance with UK- adopted international
accounting standards;
• 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.
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 four financial years ended 31 March 2022. 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 (unchanged from 2021),
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.
Valuation of certain unquoted investments in the
BT Pension Scheme (BTPS)
Certain unquoted investments in the BTPS: included within
unquoted BTPS plan assets of £18.6 billion (2021: £18.0 billion)
Risk vs 2021: decrease
Refer to page 89 Audit & Risk Committee Report), page 168
(note 20 accounting policy Retirement benefit plans) and
pages 167 to 179 (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 to determine the value of a portion of
these unquoted investments, which are valued based on inputs
that are not directly observable. Furthermore, the geo-political
events in 2022, which directly affect market conditions,
have resulted in some risk of volatility in asset valuation.
Notwithstanding this, the overall risk has decreased in the
current year compared to the prior period.
The key unobservable inputs used to determine the fair value of
these plan assets includes estimated rental value for the UK and
overseas property, discount rates and comparable transactions
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 as part of
sensitivities of growth assets the key sensitivities of key
assumptions for the valuation of unquoted plan assets.
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.
BT Group plc Annual Report 2022
123
Comparing valuations: Developing, with the support of our own
valuation specialists, 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.
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.
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 (2021: acceptable).
Valuation of defined benefit obligation of the
BT Pension Scheme (BTPS)
BTPS obligation: £54.3 billion (2021: £57.7 billion)
Risk vs 2021: increase
Refer to page 89 (Audit & Risk Committee Report), page 168
(note 20 accounting policy Retirement benefits) and pages 167
to 179 (disclosures note 20 Retirement benefit plans).
The risk
Subjective estimate:
The valuation of the BTPS defined benefit obligation is
complex and requires significant judgements and assumptions.
A change in the methodology applied or small changes in the
key actuarial assumptions over the life expectancy of members,
price inflation, and discount rates can significantly impact
the valuation of the BTPS defined benefit obligation in the
financial statements.
The impacts of the Covid pandemic and the recent geo-political
events have resulted in an increased level of uncertainty across
various indices, thus impacting the assumptions and
methodologies used in forecasting the inflation and life
expectancy of members for future years.
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.
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.
Our results
We found the resulting estimate of the BTPS defined benefit
obligation to be acceptable (2021: acceptable).
Accuracy of revenue due to the complexity of the
billing systems
Certain revenue streams: included within total revenue of
£20.9billion (2021: £21.3 billion)
Risk vs 2021: same
Refer to pages 140 to 143 (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:
Process understanding: Obtaining an understanding of the
revenue processes by observing transactions from customer
initiation to cash received for certain material revenue streams.
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.
BT Group plc Annual Report 2022
Financial statements 124
Independent auditor’s report to the members of BT Group plc continued
Our results
We considered revenue relating to non-long-term contract
revenue to be acceptable (2021: acceptable).
Recoverability of parent company investment in
subsidiaries and loans to group undertakings
Investment in subsidiary £11,201 million (2021: £11,096 million)
Refer to page 201 (accounting policy Investments) and page
201 (financial disclosures note 2 Investments).
Loans to group undertakings £nil million (2021: £972 million)
Refer to page 201 (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 93% and 7% respectively (2021: 92% and 8%
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.
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
(2021: acceptable).
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 £100 million (2021: £105 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 £2,265 million
(2021: benchmark of group profit before tax from continuing
operations of £2,359 million), of which it represents 4.4%
(2021: 4.5%).
Materiality for the parent company financial statements as a
whole was set at £95 million (2021: £95 million), determined with
reference to a benchmark of total assets, of which it represents
0.8% (2021: 0.8%), 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% (2021: 65%) of
materiality for the financial statements as a whole, which
equates to £65 million (2021: £68 million) for the Group and
£61.75 million (2021: £61.75 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 years.
We agreed to report the Audit Committee any corrected or
uncorrected identified misstatements exceeding £5 million
(2021: £5.25 million), in addition to other identified
misstatements that warranted reporting on qualitative grounds.
Consistent with prior year, we define components of the Group
based on legal entity and have determined our audit scope
predominately on the same basis. Of the Group’s 234 (2021:
233) reporting components, we subjected 5 (2021: 4) 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
Group
profit
before tax
Group
total
assets
Audits for group reporting
purposes
2021
90%
87%
83%
78%
97%
95%
The remaining 10% (2021: 13%) of total Group revenue, 17%
(2021: 22%) of Group profit before tax and 3% (2021: 5%) of
total Group assets is represented by 229 (2021: 229) reporting
components, none of which individually represented more than
6% (2021: 6%) 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.
BT Group plc Annual Report 2022
125
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 £20 million to £85 million (2021: £25 million to £90
million), having regard to the mix and size and risk profile of the
Group across components.
5. 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”).
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 component auditors, 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.
The scope of the audit work performed was predominately
substantive as we placed limited reliance upon the Group’s
internal control over financial reporting.
4. The impact of climate change on our audit
In planning our audit, we considered the potential impacts of
climate change on the Group’s business and its financial
statements.
The Group has pledged in the Strategic reports to be a net-zero
business by 2030 and has also outlined several shorter-term
climate change targets. Furthermore, the Group has mentioned
its commitment to implementing the recommendations of the
Task Force on Climate-related Financial Disclosures (TCFD).
Further information has been provided in the Group’s Strategic
Report on page 66.
As a part of our audit, we have performed a risk assessment,
including enquiries of management, to understand how the
impact of commitments made by the Group in respect of climate
change, as well as the physical and transition risks of climate
change, may affect the financial statements and our audit.
The potential impacts of these matters relate to the forward-
looking estimates, which include projections for impairment
assessment of goodwill, useful economic life of vehicle fleet and
infrastructure impacting on future depreciation charges, and
significant assumptions used in pension asset valuations. Taking
into account our risk assessment procedures, the headroom on
goodwill, the remaining useful economic lives of relevant assets
and the nature of the assumptions used in the pension asset
valuation, we have assessed that there is not a significant risk to
the balances in the financial statements as a result of climate
change. Therefore, there was no material impact on the Group’s
critical accounting estimates and our key audit matters.
We have read the disclosures of climate related information in
the annual report and considered their consistency with the
financial statements and our audit knowledge. We have not
been engaged to provide assurance over the accuracy of the
climate risk disclosures in the Annual Report.
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 prolonged stagflation driven by geo-political
factors and Covid-19 persistence;
• The impact of an industrial action and international
trade sanctions;
• The impact of a significant supply chain disruptions driven by
the geo-political factors;
• The impact of an increased level of financial market volatility
and deterioration of BT’s covenant triggers on the funding
obligation of BT Pension Scheme;
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
115 is materially consistent with the financial statements and
our audit knowledge.
BT Group plc Annual Report 2022
Financial statements 126
Independent auditor’s report to the members of BT Group plc continued
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 Group’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.
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 licence 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.
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.
6. 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 performed 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;
• assessing whether the judgements made in making
accounting estimates are indicative of a potential bias;
• evaluating the business purpose for significant
unusual transactions.
BT Group plc Annual Report 2022
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.
7. 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.
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.
127
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 70 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 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 70 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.
BT Group plc Annual Report 2022
Financial statements 128
Independent auditor’s report to the members of BT Group plc continued
10. 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
12 May 2022
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.
8. 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.
9. Respective responsibilities
Directors’ responsibilities
As explained more fully in their statement set out on page 114,
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.
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.
BT Group plc Annual Report 2022
Group income statement
Year ended 31 March 2022
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
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
a For a definition of specific items, see page 209. An analysis of specific items is provided in note 9.
129
Before
specific
items
(‘Adjusted’)
£m
Specific
itemsa
£m
Total
(Reported)
£m
20,845
(17,673)
5
(292)
20,850
(17,965)
3,172
(287)
2,885
(833)
12
(821)
–
2,351
(349)
2,002
(101)
–
(101)
–
(388)
(340)
(728)
(934)
12
(922)
–
1,963
(689)
1,274
20.3p
19.7p
(7.4)p
(7.2)p
12.9p
12.5p
Notes
4, 5
6
4
27
10
11
Before
specific
items
(‘Adjusted’)
£m
21,370
(18,302)
3,068
(785)
12
(773)
8
2,303
(428)
1,875
Notes
4, 5
6
4
27
10
11
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
BT Group plc Annual Report 2022
Financial statements 130
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 income (loss) for the year, net of tax
Total comprehensive income (loss) for the year
Notes
20
10
29
29
29
29
10, 29
2022
£m
2021
£m
1,274
1,472
2,865
(399)
(4,856)
918
65
6
204
(54)
(31)
2,656
3,930
(189)
–
(1,468)
850
133
(4,612)
(3,140)
BT Group plc Annual Report 2022
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
131
Notes
2022
£m
2021
£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
13,809
20,599
4,429
1,003
34
5
337
361
289
13,357
19,397
4,863
1,165
31
17
314
344
989
40,866
40,477
310
300
2,624
1,554
80
496
88
2,679
777
328
297
3,257
1,515
–
281
70
3,652
1,000
8,908
10,400
873
51
6,142
833
795
40
90
222
9,046
911
88
5,980
925
730
–
84
288
9,006
40,728
41,871
15,312
819
170
4,965
1,143
624
1,960
439
15,774
1,195
167
5,422
5,096
682
1,429
427
25,432
30,192
499
1,051
(274)
998
619
12,403
499
1,051
(143)
998
436
8,838
15,296
11,679
40,728
41,871
The consolidated financial statements on pages 129 to 208 were approved by the Board of Directors on 11 May 2022 and were
signed on its behalf by:
Adam Crozier
Chairman
Philip Jansen
Chief Executive
Simon Lowth
Chief Financial Officer
BT Group plc Annual Report 2022
Financial statements 132
Group statement of changes in equity
At 1 April 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
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 2021
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 movementsf
Notes
Share
capitala
£m
Share
premiumb
£m
499
–
1,051
–
Own
sharesc
£m
(237)
–
Merger
reserved
£m
2,572
–
Other
reservese
£m
1,119
–
Retained
(loss)
earnings
£m
9,759
1,472
Total
equity
(deficit)
£m
14,763
1,472
10
12
22
10
21
10
12
22
10
21
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
94
–
–
499
–
1,051
–
(143)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(131)
–
–
–
–
–
–
–
–
–
–
–
(1,574)
–
998
–
–
–
–
–
–
–
–
–
–
–
–
(1,657)
(4,856)
(6,513)
133
850
(674)
–
–
–
–
–
(9)
–
436
–
275
918
1,051
–
850
(2,466)
–
–
72
5
(107)
1,583
(8)
8,838
1,274
(3,140)
–
–
72
5
(13)
–
(8)
11,679
1,274
2,865
3,140
(31)
(399)
(430)
(54)
–
(54)
190
–
–
–
–
–
(7)
–
3,740
(227)
2
108
11
(65)
7
(11)
3,930
(227)
2
108
11
(196)
–
(11)
At 31 March 2022
499
1,051
(274)
998
619
12,403
15,296
a The allotted, called up, and fully paid ordinary share capital of BT Group plc at 31 March 2022 was £499m comprising 9,968,127,681 ordinary shares of 5p each
(FY21: £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 2020 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. In FY21,
following settlement of intercompany loans by qualifying consideration of £1,574m, equivalent balances were transferred from merger reserve to realised profit.
e For further analysis of other reserves, see note 29.
f In June 2021, BT exercised an option to purchase the minority shareholding in a subsidiary (BT Communications South Africa). The obligation to purchase the subsidiary’s
equity instruments is accounted for as a financial liability with a corresponding debit to equity. Non-controlling interests are not material to the Group so are not accounted
for separately.
BT Group plc Annual Report 2022
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 charges
(Profit) loss on disposal of businesses
(Profit) loss on disposal of property, plant and equipment and intangible assets
Depreciation and amortisation
(Increase) decrease in inventories
(Increase) decrease in programme rights
(Increase) decrease in trade and other receivables
(Increase) decrease in contract assets
Increase (decrease) in trade and other payables
(Decrease) increase in contract liabilities
(Decrease) increase in other liabilitiesa
(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
Proceeds on disposal of current financial assetsb
Purchases of current financial assetsb
Net (purchase) disposal of non-current asset investments
Proceeds on disposal of property, plant and equipment and intangible assets
Purchases of property, plant and equipment and intangible assetsc
Net cash outflow from investing activities
Cash flow from financing activities
Equity dividends paid
Interest paid
Repayment of borrowingsd
Proceeds from bank loans and bonds
Payment of lease liabilities
Cash flows from collateral received
Changes in ownership interests in subsidiariese
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 equivalentsf
Net decrease in cash and cash equivalents
Effect of exchange rate changes
Closing cash and cash equivalentsf
133
Notes
2022
£m
2021
£m
1,963
–
922
2,885
76
(37)
–
4,405
(3)
(17)
(53)
(51)
99
(93)
(1,169)
(80)
1,804
(8)
791
2,587
267
(65)
(66)
4,347
2
13
327
(141)
(43)
(48)
(927)
(2)
5,962
6,251
(52)
(288)
5,910
5,963
6
1
–
76
13,402
(12,432)
(8)
2
(4,607)
6
5
(7)
164
13,506
(12,085)
(11)
85
(4,903)
(3,560)
(3,240)
(228)
(755)
(1,374)
744
(659)
(29)
(86)
13
(184)
(2)
(770)
(1,162)
–
(782)
(490)
–
1
(14)
(2,558)
(3,219)
(208)
896
(208)
4
692
(496)
1,409
(496)
(17)
896
25
a Includes pension deficit payments of £1,121m (FY21: £955m).
b Primarily consists of investment in and redemption of amounts held in liquidity funds.
c Consists of additions to property, plant and equipment, engineering stores and software of £4,807m (FY21: £4,197m) and movements in capital accruals of £23m (FY21: £4m)
less net refund in respect of spectrum acquisition of £223m (FY21: £702m prepayment).
d Repayment of borrowings includes the impact of hedging.
e Relates to the acquisition of the remaining 30% of the share capital of BT OnePhone Limited. As part of the accounting for the acquisition, we revisited our original
assessment of control under IFRS 10 and concluded that it should have been classified as a subsidiary instead of a joint venture. The current period accounting reflects
this assessment.
f Net of bank overdrafts of £85m (FY21: £104m).
BT Group plc Annual Report 2022
Financial statements 134
Notes to the consolidated financial statements
1. Basis of preparation
Preparation of the financial statements
The consolidated financial statements have been prepared
in accordance with UK-adopted international accounting
standards and with the requirements of the Companies
Act 2006.
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 70, in estimating the financial impact
of 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
2023, 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.
These financial statements cover the financial year from 1 April
2021 to 31 March 2022 (‘FY22’), with comparative figures for the
financial year from 1 April 2020 to 31 March 2021 (‘FY21’).
New and amended accounting standards effective
during the year
The following amended standards and interpretations were
effective during the year, however, they have not had a
significant impact on our consolidated financial statements.
• Interest Rate Benchmark Reform – Phase 2 (Amendments to
IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16)
• Covid-19-Related Rent Concessions (Amendment to IFRS 16)
Software as a Service
We previously capitalised certain configuration and
customisation costs associated with software as a service
arrangements as intangible assets. In its April 2021 agenda
decision, the IFRS Interpretations Committee (IFRIC) clarified
that such costs should be expensed where the entity does not
control the software being configured. We have adopted the
treatment set out by the IFRIC in its agenda decision. The impact
of this on the group was not material.
BT Group plc Annual Report 2022
Interest Rate Benchmark Reform
The replacement of Interbank Offered Rates (IBORs) with
Alternative Reference Rates (ARRs) began from December
2021. Where floating interest bearing receivables and payables
exist, and where IBOR was previously applicable, the Group
began applying suitable replacement benchmark rates and now
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 ARRs will not have a material financial impact. The
implications on the trading results of our segments from the
IBOR reform have also been assessed and the expected impact
is not material. The Group will move to the new benchmark rates
in accordance with timelines as per the regulatory guidelines.
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:
Amendments to IAS 37 for onerous contracts
The amendments to IAS 37 specify which costs an entity
includes in determining the cost of fulfilling a contract for the
purpose of assessing whether the contract is onerous. The
amendments apply for annual reporting periods beginning on or
after 1 January 2022 to contracts existing at the date when the
amendments are first applied. For BT this will be from next
financial year. At the date of initial application, the cumulative
effect of applying the amendments will be recognised as an
opening balance adjustment to retained earnings as at 1 April
2022. The comparatives will not be restated. The Group is in the
process of finalising the impact of the standard. We do not
expect the impact on adoption to be material.
IFRS 17 ‘Insurance Contracts’
We are in the process of assessing the impact of adopting this
standard which is effective for BT from 1 April 2023.
Other
The following are not expected to have a significant impact on
the consolidated financial statements:
• Disclosure of Accounting Policies (amendments to IAS 1 and
IFRS practice statement 2)
• Definition of Accounting Estimate (amendments to IAS 8)
• Deferred Tax Related to Assets and Liabilities Arising from
a Single Transaction (amendments to IAS 12 Income Taxes)
• Classification of liabilities as current or non-current
(Amendments to IAS 1)
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.
135
1. Basis of preparation continued
Specific items may not be comparable to similarly titled
measures used by other companies. Examples of charges or
credits which meet the above definition include acquisitions
or disposals of businesses and investments, historical
regulatory penalties or litigation claims, business restructuring
programmes including our current group-wide modernisation
programme, asset impairment charges, property rationalisation
programmes including our Better Workplace programme, 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.
2. Critical & key accounting estimates and
significant judgements
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 and 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
.
Critical
estimate
Key
estimate
Significant
judgement
Note
10. Current and deferred
income tax
13. Goodwill impairment
15. Reasonable certainty
and determination of
lease terms
19. Contingent liabilities
associated with litigation
19. Other provisions and
contingent liabilities
20. Pension obligations
3. Significant accounting policies that apply to the
overall financial statements
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.
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.
BT Group plc Annual Report 2022
Financial statements 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.
136
3. Significant accounting policies that apply to the
overall financial statements continued
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 BDUK 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 the
rates prevailing on the transaction dates (unless it is not a
reasonable approximation of the cumulative effects, in which
case income and expenses are translated at average rates of
exchange for the year). 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 2022
Notes to the consolidated financial statements continued 137
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 CFUs are supported by technology
units (TUs) comprising Digital and Networks; and corporate units (CUs) including procurement and property management.
The CFUs are our reportable segments and generate substantially all of our revenue. TUs and CUs 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 TU costs and our CUs.
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 CFU 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 TUs and CUs are recharged to the CFUs to reflect the services it provides to them. Depreciation and
amortisation incurred by TUs in relation to the networks and systems they manage and operate on behalf of the CFUs is
allocated to the CFUs based on their respective utilisation. Capital expenditure incurred by TUs for specific projects undertaken
on behalf of the CFUs is allocated based on the value of the directly attributable expenditure incurred. Where projects are not
directly attributable to a particular CFU, 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 CFUs 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 Note 5.
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 CFUs, including the use of BT Ireland’s network. This occurs both
directly, and also indirectly, through TUs which are included within the ‘Other’ segment. Enterprise internal revenue arises from
Consumer for mobile Ethernet access and TUs 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 CFUs and therefore the profitability of CFUs 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 2022
Financial statements 138
4. Segment information continued
Segment revenue and profit
Year ended 31 March 2022
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 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
a Before specific items.
Consumer
£m
Enterprise
£m
Global
£m
Openreach
£m
Other
£m
9,858
(83)
5,157
(105)
9,775
5,052
2,262
(1,421)
1,636
(724)
3,362
–
3,362
456
(355)
5,441
(2,812)
2,629
3,179
(1,876)
841
912
101
1,303
27
–
27
44
(29)
15
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
23,845
(3,000)
20,845
7,577
(4,405)
3,172
(287)
2,885
(922)
–
1,963
Total
£m
24,332
(2,962)
21,370
7,415
(4,347)
847
964
191
1,230
(164)
3,068
(481)
2,587
(791)
8
1,804
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 £101m (FY21): £18m. See note 9.
Internal revenue and costs
Year ended 31 March 2022
Internal revenue recorded by
Consumer
Enterprise
Global
Openreach
Total
Year ended 31 March 2021
Internal revenue recorded by
Consumer
Enterprise
Global
Openreach
Total
BT Group plc Annual Report 2022
Internal cost recorded by
Consumer
£m
Enterprise
£m
Global
£m
Openreach
£m
Other
£m
Total
£m
–
19
–
1,649
1,668
47
–
–
937
984
18
26
–
212
256
–
–
–
–
–
18
60
–
14
92
83
105
–
2,812
3,000
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
Notes to the consolidated financial statements continued 139
4. Segment information continued
Capital expenditure
Year ended 31 March 2022
Intangible assetsa
Property, plant and equipmentb
Capital expenditure excluding spectrum
Purchase of spectruma
Capital expenditure
Year ended 31 March 2021
Intangible assetsa
Property, plant and equipmentb
Capital expenditure
Consumer
£m
Enterprise
£m
Global
£m
Openreach
£m
Other
£m
444
754
1,198
388
1,586
249
320
569
91
660
82
119
201
–
201
99
2,449
2,548
–
2,548
Consumer
£m
Enterprise
£m
Global
£m
Openreach
£m
311
771
1,082
192
300
492
95
93
101
2,148
188
2,249
70
221
291
–
291
Other
£m
84
121
205
Total
£m
944
3,863
4,807
479
5,286
Total
£m
783
3,433
4,216
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.
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 assetsb
2022
£m
18,470
1,315
620
440
2021
£m
18,524
1,599
739
508
20,845
21,370
2022
£m
38,378
741
269
152
2021
(Restated)a
£m
36,996
858
277
161
39,540
38,292
a Prior year comparatives have been restated to reclassify a £1.3bn impairment of goodwill to more accurately reflect the region of the entity that the charge relates to. As a
result the carrying amount of assets recorded in the UK region in the 2021 comparative has increased by £1.3bn, with an equal and opposite decrease in the Europe, Middle
East and Africa region. This adjustment relates to the regional segmentation only and there is no impact on the initial measurement of the impairment charge or on amounts
historically disclosed in note 13 Intangible Assets in respect of goodwill.
b 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 2022
Financial statements 140
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 2022 that contain unsatisfied performance obligations.
Service line
Performance obligations
Revenue recognition policy
Information and
communications
technology (ICT)
and managed
networks
Fixed access
subscriptions
Mobile
subscriptions
Equipment and
other services
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.
Provision of broadband, TV and fixed telephony
services including 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 materials 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 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 2022
Notes to the consolidated financial statements continued 141
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 are 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.
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 Openreach’s fixed-network telecommunications infrastructure meet the definition of operating leases under IFRS 16.
At inception of a contract, we determine whether the contract 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 2022
Financial statements 142
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 2022
ICT and managed networks
Fixed access subscriptions
Mobile subscriptions
Equipment and other services
Revenue before specific items
Specific itemsa (note 9)
Revenue
Year ended 31 March 2021
ICT and managed networks
Fixed access subscriptions
Mobile subscriptions
Equipment and other services
Revenue before specific items
Specific itemsa (note 9)
Revenue
Consumer
£m
Enterprise
£m
Global
£m
Openreach
£m
Other
£m
–
3,991
3,247
2,537
9,775
1,715
1,696
1,176
465
5,052
1,672
268
87
1,335
3,362
–
2,564
–
65
2,629
–
–
–
27
27
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
Total
£m
3,387
8,519
4,510
4,429
20,845
5
20,850
Total
£m
3,970
8,598
4,841
3,961
21,370
(39)
21,331
a 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 2022 is £13,502m (FY21: £13,317m). Of this, £7,108m (FY21: £7,415m) 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 £6,394m (FY21: £5,902m) 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 £2,745m (FY21: £2,496m) 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 £33m (FY21: £36m) 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.
We did not enter into any material finance lease arrangements during the year. In FY21 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. As no further amounts were due, no finance lease
receivable was recognised.
BT Group plc Annual Report 2022
Notes to the consolidated financial statements continued 143
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 are as follows:
Year ended 31 March
Contract assets
Current
Non-current
Contract liabilities
Current
Non-current
2022
£m
1,554
361
1,915
833
170
2021
£m
1,515
344
1,859
925
167
1,003
1,092
£880m of the contract liability at 31 March 2021 was recognised as revenue during the year (FY21: £886m). Impairment losses of
£48m were recognised on contract assets during the year (FY21: £47m).
The expected credit loss provisions recognised against contract assets vary across the group due to the nature of our customers; the
expected loss rate at 31 March 2022 was 3% (FY21: 4%).
BT Group plc Annual Report 2022
Financial statements 144
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 costsb
Sales commissionsb
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 assetsc
Other operating costs
Other operating income
Depreciation and amortisationd
Property, plant and equipment
Right-of-use assets
Intangible assets
Total operating costs before specific items
Specific items
Total operating costs
Operating costs before specific items include the following:
Leaver costse
Research and development expendituref
Foreign currency losses/(gains)
Inventories recognised as an expense
a Net of capitalised indirect labour costs of £871m (FY21: £748m).
Notes
2022
£m
2021
£m
20
22
14
15
13
9
3,746
400
591
108
4,845
(989)
3,856
354
4,210
3,166
628
1,346
1,028
904
879
678
312
102
256
(241)
2,669
688
1,048
4,096
403
591
72
5,162
(895)
4,267
294
4,561
3,387
683
1,517
1,025
916
786
558
255
150
343
(226)
2,460
690
1,197
17,673
18,302
292
442
17,965
18,744
15
604
3
2,297
11
720
(9)
2,315
b Product costs and sales commissions now presented as separate line items having historically been combined. FY21 comparatives have been re-presented for consistency
c Consists of net impairment losses on trade receivables and contract assets in Consumer of £86m (FY21: £115m), in Enterprise of £5m (FY21: £33m), in Global of £7m
(FY21: £nil), in Openreach of £3m (FY21: £2m) and in Other of £1m (FY21: £nil).
d FY22 depreciation and amortisation charges include impairment of £13m on intangible assets, £11m on owned assets and £12m on right-of-use assets.
e Leaver costs are included within wages and salaries, except for leaver costs of £170m (FY21: £270m) associated with restructuring costs, which have been recorded as
specific items.
f Research and development expenditure includes amortisation of £543m (FY21: £650m) in respect of capitalised development costs and operating expenses of £61m
(FY21: £69m). In addition, the group capitalised software development costs of £601m (FY21: £519m).
During the year we implemented a new accounting system along with a new chart of accounts that has provided improved visibility of
the group’s cost base. As a result we have refined the classification of costs within the operating costs disclosure for FY22. Improved
data has allowed us to better allocate subcontractor costs to indirect labour costs, and allocate more costs to named cost categories
as opposed to within other operating costs. Following detailed analysis of the underlying causes of reallocations we have concluded
they are not indicative of material errors in previously published financial data including the FY21 comparatives.
BT Group plc Annual Report 2022
Notes to the consolidated financial statements continued 145
6. Operating costs continued
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
2022
£m
17.7
0.7
6.7
–
25.1
2021
£m
9.3
0.9
4.9
0.2
15.3
a Post employment benefits include 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.
7. Employees
Number of employees in the groupa
UK
Non-UK
Total employees
Number of employees in the groupa
Consumer
Enterprise
Global
Openreach
Other
Total employees
2022
2021
Year end
000
Average
000
Year end
000
Average
000
79.9
18.5
98.4
80.2
18.8
99.0
80.4
19.3
99.7
81.3
20.9
102.2
2022
2021
Year end
000
Average
000
Year end
000
Average
000
16.6
11.5
13.2
37.3
19.8
98.4
17.2
11.4
13.8
36.4
20.2
99.0
18.5
11.3
12.8
35.4
21.7
99.7
19.2
11.4
14.4
34.8
22.4
102.2
a These reflect the full-time equivalent of full and part-time employees.
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.
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
Total services
2022
£000
2021
£000
11,400
6,009
17,409
3,169
10,482
6,280
16,762
1,993
127
155
20,705
18,910
a Services in relation to the audit of the parent company and the consolidated financial statements. 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
£22,000 (FY21: £21,000).
b Includes services that are required by law or regulation to be carried out by an appointed auditor and services that support us to fulfil obligations required by law or
regulation. This includes fees for the review of interim results and the accrued fee for the audit of the group’s regulatory financial statements. In FY22 this included fees of
£789,000 to support divestment transactions (FY21: £nil).
BT Group plc Annual Report 2022
Financial statements 146
8. Audit, audit related and other non-audit services continued
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 FY22 KPMG LLP received total fees from the BT Pension
Scheme of £1.6m (FY21: £1.5m) in respect of the following services:
Year ended 31 March
Audit of financial statements of associates
Audit-related assurance services
Total services
9. Specific items
2022
£000
1,602
16
1,618
2021
£000
1,494
9
1,503
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 business restructuring programmes, acquisitions and disposals of businesses and investments,
charges or credits relating to retrospective regulatory matters, property rationalisation programmes, significant out of period
contract settlements, net interest on our pension obligation, and the impact of remeasuring deferred tax balances. In the event
that items meet the criteria, which are applied consistently from year to year, they are treated as specific items. Any releases to
provisions originally booked as a specific item are also classified as specific.
In FY20 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 FY21 and FY22. 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
Restructuring charges
Divestment-related items
Covid-19
Retrospective regulatory matters
Settlement with Dixons Carphone
Sale of spectrum
Property rationalisation
Operating loss
Net finance expense
Divestment-related items
Interest expense on retirement benefit obligation
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
BT Group plc Annual Report 2022
2022
£m
2021
£m
(5)
(5)
347
(36)
(19)
–
–
–
–
292
287
8
93
101
388
(80)
420
340
728
39
39
421
(60)
(17)
(4)
149
(66)
19
442
481
–
18
18
499
(96)
–
(96)
403
Notes to the consolidated financial statements continued 147
9. Specific items continued
Retrospective regulatory matters
We recognised a net credit of £5m (FY21: net charge of £35m)
in relation to historic regulatory matters, recognised in
revenue. This reflects the movement in provisions relating to
various matters.
Restructuring charges
In the year we have incurred charges of £347m (FY21: £421m),
primarily relating to leaver costs, staff costs where colleagues
are working exclusively on transformation programmes, and
consultancy costs. These costs reflect projects within our
Group-wide modernisation programme, first announced in
May 2020, which will deliver gross annualised cost benefits of
£2.5bn by FY25, at an expected cost of £1.3bn. £0.8bn costs
have been incurred to date.
Divestment-related items
We recognised a credit of £36m (FY21: £60m). This primarily
relates to a gain on disposal of £43m relating to the sale of
Diamond IP, a non-core software business in America. This was
offset by an £8m loss on disposal of business units in Italy
serving customers in the public administration and SME
sectors. There were also some small true-up charges on
previous transactions and costs relating to ongoing divestment
projects. A charge of £8m (FY21: £nil) was also recognised in
finance expense relating to a hedge which became ineffective
due to divestment activity.
In FY21 we completed the sale of our domestic operations in
Spain and recorded a net gain of £80m. We also incurred net
losses on the disposal of our domestic operations in Latin
America and France of £11m and recognised £9m of other
divestment related costs, including an additional £4m loss on
disposal of a number of other businesses.
Covid-19
In FY20 we recognised one-off charges of £95m relating to
the impact of Covid-19 on various balance sheet items. Any
releases of this provision have also been booked as a specific
item. During FY22 we released £19m (FY21: £17m) of these
provisions which were not needed. At 31 March 2022 we
retained £12m (31 March 2021: £55m) of provisions related
to Covid-19.
Settlement with Dixons Carphone
In FY21, following the expiry of the retail agreement between
Dixons Carphone and EE Limited, 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 was treated as a specific item in
the FY21 results. The associated cash payment was made in
April 2021.
Sale of spectrum
In FY21 we sold 25 MHz of unpaired 2.6 GHz spectrum and
recognised a gain on disposal of £66m as a specific item.
Property rationalisation costs
In FY21, we recognised costs of £19m relating to rationalisation
of our property portfolio under our Better Workplace
programme. In FY22, property rationalisation costs have been
classified as restructuring charges where they fall under the
previously announced transformation programme.
Interest expense on retirement benefit obligation
During the year we incurred £93m (FY21: £18m) of interest costs
in relation to our defined benefit pension obligations.
Tax on specific items
A tax credit of £80m (FY21: £96m) was recognised in relation to
specific items.
Remeasurement of deferred tax balances
We have remeasured our deferred tax balances following the
enactment of the new UK corporation tax rate of 25% from April
2023. The corresponding adjustment comprises a net tax charge
of £420m in the income statement and a non-recurring tax
credit of £298m in the statement of comprehensive income. This
is classified as a specific item due to its size and the out of period
nature of this charge.
BT Group plc Annual Report 2022
Financial statements 148
10. Taxation
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.
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 81% 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. £194m (FY21: £200m) is included in current tax
liabilities or offset against current tax assets where netting is appropriate.
Under a downside case an additional amount of £543m could be required to be paid, of which £444m 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. 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% (FY21: 19%)
Adjustments in respect of earlier yearsa
Non-UK taxation
Current
Adjustments in respect of earlier years
Total current taxation (expense)
Deferred taxation
Origination and reversal of temporary differences
Adjustments in respect of earlier yearsa
Impact of change in UK corporation tax rate to 25% (FY21: 19%)
Remeasurement of temporary differences
Total deferred taxation (expense) / credit
Total taxation (expense)
2022
£m
–
223
(78)
7
152
(102)
(190)
(420)
(129)
(841)
(689)
2021
£m
(300)
6
(65)
6
(353)
6
12
–
3
21
(332)
a During the period certain prior period tax issues were resolved at a net tax cost of £69m, comprising a £263m deferred tax charge and a £194m current tax credit.
BT Group plc Annual Report 2022
Notes to the consolidated financial statements continued 149
10. Taxation continued
Factors affecting our taxation expense for the year
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% (FY21: 19%)
Effects of:
(Higher)/lower 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
2022
£m
2021
£m
1,963
1,804
(373)
(343)
(4)
179
40
20
(2)
(549)
(689)
340
(349)
15
(34)
24
12
(9)
3
(332)
(96)
(428)
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, the benefit of R&D tax incentives and super-deduction on capital expenditure. The most significant element of this amount is the benefit from the
super-deduction (£172m).
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.
Tax components of other comprehensive income
Year ended 31 March
Taxation 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 £nil (FY21: £181m) 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
2022
Tax credit
(expense)
£m
2021
Tax credit
(expense)
£m
(399)
–
(31)
–
(430)
8
(438)
(430)
918
22
111
–
1,051
203
848
1,051
2022
£m
11
2021
£m
5
BT Group plc Annual Report 2022
Financial statements 150
10. Taxation continued
Deferred taxation
At 1 April 2020
Expense (credit) recognised in the
income statement
Expense (credit) recognised in other
comprehensive income
Exchange differences
Transfer to held for sale (note 23)
At 31 March 2021
Non-current
Deferred tax asset
Deferred tax liability
At 31 March 2021
Expense (credit) recognised in the
income statement
Expense (credit) recognised in other
comprehensive income
Expense (credit) recognised in equity
Acquisition of subsidiary
Transfer from current tax
At 31 March 2022
Non-current
Deferred tax asset
Deferred tax liability
At 31 March 2022
Fixed asset
temporary
differences
£m
Retirement
benefit
obligationsa
£m
Share-
based
payments
£m
Tax
losses
£m
Other
£m
Jurisdictional
offset
£m
1,590
(11)
–
–
8
1,587
–
1,587
1,587
(176)
(13)
(737)
–
–
(926)
(926)
–
(926)
(7)
(8)
–
(5)
–
(66)
(33)
2
–
–
(2)
9
(111)
–
–
(20)
(66)
(135)
(20)
–
(20)
(66)
–
(66)
1,326
(33)
(5)
(434)
–
–
–
–
764
–
–
–
2,913
(195)
–
2,913
2,913
(195)
–
(195)
–
(11)
–
–
(36)
(36)
–
(36)
(354)
–
(3)
–
(857)
(857)
–
(857)
(135)
–
(135)
(13)
28
–
–
(34)
(154)
(154)
–
(154)
Total
£m
1,308
(21)
(848)
(5)
6
440
(989)
1,429
440
841
438
(11)
(3)
(34)
1,671
–
–
–
–
–
–
158
(158)
–
–
–
–
–
–
–
953
(953)
(289)
1,960
–
1,671
a Includes a deferred tax asset of £5m (FY21: £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.
What factors affect our future tax charges?
We expect a large proportion of our capital spend on fibre roll-out to be eligible for the Government’s super-deduction regime,
which allows for enhanced and accelerated tax relief for qualifying capital expenditure. These enhanced deductions are available
for FY22 and FY23, driving a projected UK tax loss and no UK tax payments for these periods. These deductions together with
accelerated deductions relating to pension contributions result in c.£5bn of tax losses expected to be carried forward from FY23.
What are our unrecognised tax losses and other temporary differences?
At 31 March 2022 we had operating losses and other temporary differences carried forward in respect of which no deferred tax
assets were recognised amounting to £3.8bn (FY21: £4.1bn). 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 2022
Restricted losses
Europe
Americas
Other
Total restricted losses
Unrestricted operating losses
Other temporary differences
Total
BT Group plc Annual Report 2022
£m
Expiry
2022 – 2025
2022 – 2045
2022 – 2030
1
368
3
372
3,095
No expiry
313
No expiry
3,780
Notes to the consolidated financial statements continued 151
10. Taxation continued
At 31 March 2022 we had UK capital losses carried forward in respect of which no deferred tax assets were recognised amounting
to £16.8bn (FY21: £16.8bn). These losses have no expiry date, but we consider the future utilisation of significant amounts of these
losses to be remote.
At 31 March 2022 the undistributed earnings of non-UK subsidiaries were £1.9bn (FY21: £1.8bn). 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 £35m (FY21: £43m) 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
2022
9,866
105
165
2021
9,905
30
137
10,136
10,072
12.9p
12.5p
14.8p
14.6p
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 £1,274m (FY21: £1,472m) and profit after tax attributable to non-controlling
interests was £2m (FY21: £3m). Profit attributable to non-controlling interests is not presented separately in the financial
statements as it is not material.
12. Dividends
What is the group’s dividend policy?
We have a progressive dividend policy to maintain or grow the dividend each year whilst taking into consideration a number of
factors including underlying medium-term earnings expectations and levels of business reinvestment.
What dividends have been paid?
A final dividend of 5.39p per share amounting to approximately £528m is proposed in respect of the year ended 31 March 2022
(FY21: no final dividend paid). An interim dividend of 2.31p per share amounting to £227m was paid on 7 February 2022 (FY21: no
interim dividend paid). 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.
No dividends were paid in the year ended 31 March 2021.
Year ended 31 March
Interim dividend in respect of the current year
2022
2021
pence per
share
2.31
£m
227
pence per
share
–
£m
–
BT Group plc Annual Report 2022
Financial statements 152
13. Intangible assets
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
Impairment of intangible assets
2 to 10 years
2 to 20 years
1 to 15 years
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 2022
Notes to the consolidated financial statements continued 13. Intangible assets continued
Customer
relationships
and brandsa
£m
Telecoms
licences
and otherb
£m
Internally
developed
softwarec
£m
Purchased
softwarec
£m
Goodwill
£m
153
Total
£m
19,846
783
(380)
9
(136)
20,122
1,423
96
(521)
2
43
(58)
7,945
–
1
–
(108)
7,838
–
94
(7)
–
43
(51)
7,917
–
–
–
–
–
–
–
–
–
–
–
–
3,397
–
–
–
(14)
3,383
–
–
–
–
–
–
3,383
1,930
322
–
–
(14)
2,238
231
–
–
–
–
2,469
3,032
–
(19)
–
–
3,013
479
–
(3)
1
–
–
4,354
596
(240)
46
(3)
4,753
793
–
(239)
45
1
(7)
1,118
187
(122)
(37)
(11)
1,135
151
2
(272)
(44)
(1)
–
3,490
5,346
971
21,107
574
162
(2)
–
–
734
179
(5)
–
–
–
2,951
593
(242)
(1)
(2)
3,299
529
(229)
(2)
1
(3)
908
3,595
502
120
(119)
1
(10)
494
109
(278)
2
(1)
–
326
5,957
1,197
(363)
–
(26)
6,765
1,048
(512)
–
–
(3)
7,298
7,838
7,917
1,145
914
2,279
2,582
1,454
1,751
641
645
13,357
13,809
Cost
At 1 April 2020
Additions
Disposals and adjustmentsd
Transfers
Exchange differences
At 31 March 2021
Additionse
Acquisitions
Disposals and adjustmentsd
Transfers
Exchange differences
Transfer to assets held for salef
At 31 March 2022
Accumulated amortisation
At 1 April 2020
Charge for the year
Disposals and adjustmentsd
Transfers
Exchange differences
At 31 March 2021
Charge for the yearg
Disposals and adjustmentsd
Transfers
Exchange differences
Transfer to assets held for salef
At 31 March 2022
Carrying amount
At 31 March 2021
At 31 March 2022
a The remaining unamortised balance of customer relationships and brands relates to customer relationships recognised on acquisition of EE.
b Telecoms licences and other primarily represents spectrum licences. These include 2100 MHz licence with book value of £693m (FY21: £744m), 1800 MHz with book value
of £636m (FY21: £682m), 700Mhz with book value of £297m (FY21: £nil), 3400 MHz with book value of £258m (FY21: £274m) and 2600 MHz with book value of £227m
(FY21: £247m). Spectrum licences are being amortised over a period between 14 and 20 years.
c Includes a carrying amount of £1,046m (FY21: £608m) in respect of assets under construction, which are not yet amortised.
d 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 £0.4bn (FY21: £0.3bn).
e Additions to telecoms licences and other assets include £479m recognised in relation to spectrum which represents the amount paid to Ofcom to secure the spectrum
bands together with the related interference mitigation provision.
f Assets transferred to held for sale during FY22 relate to our BT Sport operations. See note 23.
g Amortisation charge for FY22 includes impairment charges of £13m.
BT Group plc Annual Report 2022
Financial statements 154
13. Intangible assets continued
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 Consumer, 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.
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. During the year we have reviewed our CGUs and have brought together
the Legacy BT Consumer and Legacy EE CGUs into a combined ‘Consumer’ CGU, aligning our CGUs to our CFUs, due to
increased convergence between the prior CGUs such that cash inflows are no longer independent.
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 2022. 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 2020
Exchange differences
Acquisitions and disposals
At 31 March 2021
Transfer
Exchange differences
Acquisitions and disposals
Transfer to assets held for salea
At 31 March 2022
Consumer
£m
Legacy BT
Consumer
£m
Legacy EE
£m
Enterprise
£m
Global
£m
–
–
–
–
3,951
–
–
(51)
3,900
1,183
–
–
1,183
(1,183)
–
–
–
2,768
–
–
2,768
(2,768)
–
–
–
–
–
3,483
(8)
–
3,475
–
4
94
–
3,573
Total
£m
7,945
(108)
1
7,838
–
43
87
(51)
511
(100)
1
412
–
39
(7)
–
444
7,917
a Assets transferred to held for sale during FY22 relate to our BT Sport operations. See note 23.
The increase in goodwill is driven primarily by the acquisition of the remaining 30% of the share capital of BT OnePhone Limited.
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 FY22 was 7.6% (FY21: 8.1%). We have used the same
discount rate for all CGUs except Global where we have used 7.9% (FY21: 8.5%) reflecting higher risk in some of the countries in
which Global operates.
BT Group plc Annual Report 2022
Notes to the consolidated financial statements continued 155
13. Intangible assets continued
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% (FY21: 2.3%) for Global and 2.0% (FY21: 2.0%) for Enterprise
and Consumer.
What sensitivities have we applied?
There is significant headroom in all of our CGUs, such that at this point in time there are no reasonably possible changes to key
assumptions that would result in an impairment.
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
• Leasehold land and buildings
Network infrastructure
Transmission equipment
• Duct
• Cable
• Fibre
Exchange equipment
Other network equipment
Other assets
• Motor vehicles
• Computers and office equipment
14 to 50 years
Shorter of 10 years or lease term
Unexpired portion of lease or 40 years, whichever is the shorter
40 years
3 to 25 years
5 to 20 years
2 to 13 years
2 to 20 years
2 to 10 years
3 to 7 years
Residual values and useful lives are reassessed annually and, if necessary, changes are recognised prospectively. In FY22 we
have updated the useful lives of motor vehicles from 2–9 to 2–10 years following a review of our specialised vehicle fleet.
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 2022
Financial statements 156
14. Property, plant and equipment continued
Building Digital UK (BDUK) government grants
We receive government grants in relation to BDUK 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.
Cost
At 1 April 2020
Additionsb
Transfers
Disposals and adjustmentsc
Exchange differences
At 31 March 2021
Additionsb
Transfers
Disposals and adjustmentsc
Transfer to assets held for saled
Exchange differences
At 31 March 2022
Accumulated depreciation
At 1 April 2020
Charge for the year
Transfers
Disposals and adjustmentsc
Transfer to assets held for saled
Exchange differences
At 31 March 2021
Charge for the yeare
Transfers
Disposals and adjustmentsc
Transfer to assets held for saled
Exchange differences
At 31 March 2022
Carrying amount
At 31 March 2021
Engineering stores
Total at 31 March 2021
At 31 March 2022
Engineering stores
Total at 31 March 2022
Network infrastructure
Land and
buildings
£m
Held by
Openreach
£m
Held by
other units
£m
Othera
£m
Assets under
construction
£m
945
10
32
(19)
(22)
946
87
18
(28)
–
(1)
27,152
(179)
2,151
(16)
–
29,108
–
2,128
40
–
–
26,741
114
972
(2,193)
(146)
25,488
111
813
(1,974)
(50)
1
1,662
69
141
(333)
(19)
1,520
89
156
(271)
(4)
–
916
3,401
(3,305)
(21)
(1)
990
3,548
(3,117)
29
(54)
–
Total
£m
57,416
3,415
(9)
(2,582)
(188)
58,052
3,835
(2)
(2,204)
–
1,022
31,276
24,439
1,444
1,446
59,627
610
41
(1)
(20)
–
(18)
612
37
–
(28)
–
–
14,867
1,232
–
(23)
–
–
16,076
1,372
–
28
–
–
22,213
1,050
2
(2,186)
–
(133)
20,946
1,092
(1)
(1,985)
–
(2)
1,350
137
(1)
(332)
–
(17)
1,137
168
1
(240)
(41)
–
621
17,476
20,050
1,025
–
–
–
–
–
–
–
–
–
–
–
–
–
39,040
2,460
–
(2,561)
–
(168)
38,771
2,669
–
(2,225)
(41)
(2)
39,172
334
–
334
401
–
401
13,032
–
13,032
13,800
–
13,800
4,542
–
4,542
4,389
–
4,389
383
–
383
419
–
419
990
116
19,281
116
1,106
19,397
1,446
144
20,455
144
1,590
20,599
a Other mainly comprises motor vehicles, computers and fixtures and fittings.
b Net of government grants of £78m (FY21: £21m).
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 £2.0bn (FY21: £2.3bn). 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 the year relate to our BT Sport operations, see note 23.
e Depreciation charge for FY22 includes impairment charges of £11m.
BT Group plc Annual Report 2022
Notes to the consolidated financial statements continued 157
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:
• £13,800m (FY21: £13,032m) 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. Network infrastructure held by
Openreach is presented separately in the table above however it is not practicable to separate out infrastructure not used in
operating lease arrangements.
• Other assets includes devices with a carrying amount of £169m (FY21: £128m) that are made available to retail customers under
arrangements that contain operating leases. These are not presented separately in the table above as they are not material
relative to the group’s overall asset base.
The carrying amount of land and buildings, including leasehold improvements, comprised:
At 31 March
Freehold
Leasehold
Total land and buildings
2022
£m
92
309
401
2021
£m
123
211
334
Network infrastructure
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 £562m (FY21: £625m) and is recorded within network infrastructure. Included within this is £73m (FY21: £95m), 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 (FY21: £9.8bn) which have useful economic lives of
more than 18 years. The prior year comparative has been restated from £10.3bn to exclude intangible licences associated with
our network infrastructure.
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.
BT Group plc Annual Report 2022
Financial statements 158
15. Leases continued
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
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.
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.
Key judgements exercised in setting the lease term
The quantum of the lease liability and right-of-use asset currently recognised on our balance sheet is most significantly affected
by the judgement exercised in setting the lease term for the arrangement under which the bulk of our operational UK property
estate is held. Setting the lease term for our leased cell sites has also involved the use of judgement albeit to a lesser degree.
BT Group plc Annual Report 2022
Notes to the consolidated financial statements continued 159
15. Leases continued
UK operational property portfolio
Substantially all of our leased property estate is held under an arrangement which can be terminated in 2031, at which point we
may either vacate some or all properties; or purchase the entire estate. If neither option is taken the lease continues to the next
unilaterally available break point in 2041. 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 the termination option or that we would exercise the purchase
option. 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 for any properties we will continue to occupy, or the cost of purchasing the estate.
On remeasurement there would be an adjustment to both the lease liability and right-of-use asset, with no overall impact on
net assets.
• Exercising the purchase option would lead to an estimated increase in the lease liability and right-of-use asset of between
£3bn and £5bn
• Continuing to lease the estate beyond 2031 until the next available break in 2041 would lead to an estimated increase in the
lease liability and right-of-use asset of between £1bn and £2bn
Our assessment will be directly linked to future strategic decisions, which will be resolved at some time prior to 2031, around the
development of the fixed network and the associated rationalisation of our exchange estate. The breadth of the ranges reflects
the significant uncertainty around key variables used to determine cash outflows, especially future inflation and which
properties the group will be able to exit prior to or in 2031.
Estimates are based on discounted cash outflows and do not reflect the likely and significant impact of cash inflows generated
from the disposal, repurposing or subleasing of properties retained post-2031.
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. Where the arrangements offer extension options we have been required to conclude whether the options are
reasonably certain to be exercised. Although the balance sheet could be materially affected by the conclusion reached in regard
to these options, we have not been required to exercise a significant degree of judgement in arriving at the lease term having
regard to the period of time covered by the options, the difficulty in predicting the group’s long-term network requirements,
and the relatively high threshold that ‘reasonably certain’ represents.
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.
Although significant judgement has been exercised in determining the lease term, reaching an alternative conclusion would not
have a material impact on the balance sheet having regard to the most feasible alternative lease terms.
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.
BT Group plc Annual Report 2022
Financial statements 160
15. Leases continued
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 2020
Additionsa
Depreciation charge for the year
Other movementsb,c
At 31 March 2021
Additionsa
Depreciation charge for the yeard
Transfer to assets held for salee
Other movementsb
At 31 March 2022
Land and
buildings
£m
Network
infrastructure
£m
Motor
vehicles
£m
Other
£m
4,829
361
(546)
(312)
4,332
249
(532)
(2)
(106)
3,941
179
6
(30)
(10)
145
13
(37)
–
(11)
110
377
116
(110)
(8)
375
110
(115)
–
(1)
369
6
11
(4)
(2)
11
1
(4)
–
1
9
Total
5,391
494
(690)
(332)
4,863
373
(688)
(2)
(117)
4,429
a 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.
b 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.
c Other movements in FY21 include derecognition of right-of-use assets with a carrying amount of £208m associated with a finance sub-lease arrangement, see note 5.
d Depreciation charge for FY22 includes impairment charges of £12m.
e Assets transferred to held for sale during the year relate to our BT Sport operations, see note 23.
Lease liabilities
Lease liabilities recognised are as follows:
Year ended 31 March
Current
Non-current
2022
£m
795
4,965
5,760
2021
£m
730
5,422
6,152
The following amounts relating to the group’s obligations under lease arrangements were recognised in the income statement in
the year:
• Interest expense of £133m (FY21: £142m) accrued on lease liabilities.
• Variable lease payments of £24m (FY21: £27m) 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 £792m (FY21: £924m). Our cash flow statement and normalised free cash flow
reconciliation present £659m (FY21: £782m) of the cash outflow as relating to the principal element of lease liability payments, with
the remaining balance of £133m (FY21: £142m) 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.
BT Group plc Annual Report 2022
Notes to the consolidated financial statements continued 161
15. Leases continued
Other information relating to leases
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 2022.
At 31 March 2022 the group was committed to future minimum lease payments of £39m in respect of leases which have not yet
commenced and for which no lease liability has been recognised (31 March 2021: £4m).
The following table analyses cash payments to be received across the remaining term of operating lease arrangements where BT
is lessor:
At 31 March 2022
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 2021 (re-presenteda)
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
To be
recognised as
revenue
(note 5)
£m
To be
recognised
as other
operating
income
(note 6)
£m
446
148
40
3
3
–
640
20
13
12
12
12
24
93
To be
recognised as
revenue
(note 5)
£m
To be
recognised
as other
operating
income
(note 6)
£m
336
144
37
1
1
–
519
27
13
10
10
10
30
100
Total
£m
466
161
52
15
15
24
733
Total
£m
363
157
47
11
11
30
619
a From FY22 this disclosure includes only outstanding and future cash payments to be received across the remaining term of operating lease arrangements, and excludes
future revenue to be recognised on deferred income balances. This is considered to better align with the purpose of the disclosure and provides a clearer view of the group’s
liquidity risk disclosure. FY21 comparatives have been re-presented to exclude a total of £163m deferred connection fees on Openreach’s ‘last mile’ products.
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 accounted for as inventory and held at the lower of cost and net realisable value. They are initially recognised at cost
and are consumed 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.
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).
BT Group plc Annual Report 2022
Financial statements 162
16. Programme rights continued
At 1 April 2020
Additions
Credits received on prepaid programme rightsa
Release
At 1 April 2021
Additions
Release
At 31 March 2022
Total
£m
310
903
(99)
(786)
328
861
(879)
310
a Credits received in FY21 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.
Allowances are calculated by individual CFUs in order to reflect the specific nature of the customers relevant to that CFU.
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.
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 in FY21 included £702m relating to funds prepaid to Ofcom for the recent Spectrum auction.
b Other assets comprise prepayments and leasing debtors.
BT Group plc Annual Report 2022
2022
£m
2021
£m
1,339
523
150
336
276
2,624
2022
£m
111
226
337
1,209
1,357
130
348
213
3,257
2021
£m
103
211
314
Notes to the consolidated financial statements continued 17. Trade and other receivables continued
Trade receivables are stated after deducting allowances for doubtful debts, as follows:
At 1 April (restateda)
Expense
Utilised
Exchange differences
At 31 March (restateda)
163
2022
£m
378
35
(189)
(1)
223
2021
£m
423
95
(131)
(9)
378
a The opening bad debt allowance at 1 April 2020 has been restated to include £94m bad debt provision recognised by EE Limited at the time of acquisition by the group but
excluded from this disclosure in error in FY16 with a follow-on impact on subsequent years’ opening and closing balances. This affects the bad debt disclosure in isolation
and the trade receivables balance presented in the FY16 financial statements was accurately stated net of the acquired £94m provision.
Included within the movements above are certain items which have been classified as a specific item (see note 9). In FY22, £19m of
expected credit loss provisions recognised as a specific item were released (FY21: £7m release) reflecting lower than expected
credit losses.
Note 28 provides further disclosure regarding the credit quality of our gross trade receivables. Trade receivables are due as follows:
At 31 March
2022
2021
Trade
receivables
specifically
impaired net
of provision
£m
Past due and not specifically impaired
Between
0 and 3
months
£m
Between
3 and 6
months
£m
Between
6 and 12
months
£m
Over
12 months
£m
3
36
246
205
48
40
47
51
57
32
Not past
due
£m
938
845
Gross trade receivables which have been specifically impaired amounted to £20m (FY21: £51m).
The expected credit loss allowance for trade receivables was determined as follows:
At 31 March
2022
Expected loss rate %
Gross carrying amount
Loss allowance
Net carrying amount
2021
Expected loss rate %
Gross carrying amount
Loss allowance
Net carrying amount
Trade
receivables
specifically
impaired net
of provision
£m
Not past
due
£m
Past due and not specifically impaired
Between 0
and 3
months
£m
Between 3
and 6
months
£m
Between 6
and 12
months
£m
Over 12
months
£m
1%
946
(8)
938
4%
880
(35)
845
84%
20
(17)
3
29%
51
(15)
36
12%
280
(34)
246
15%
240
(35)
205
24%
63
(15)
48
38%
65
(25)
40
33%
70
(23)
47
47%
97
(46)
51
69%
183
(126)
57
87%
254
(222)
32
Total
£m
1,339
1,209
Total
£m
14%
1,562
(223)
1,339
24%
1,587
(378)
1,209
Trade receivables not past due and accrued income are analysed below by CFU.
At 31 March
Consumer
Enterprise
Global
Openreach
Other
Total
Trade receivables
not past due
2022
£m
324
168
446
–
–
938
2021
£m
319
144
380
–
2
845
Accrued income
2022
£m
2021
£m
76
–
–
71
3
50
–
–
78
2
150
130
Given the broad and varied nature of our customer base, the analysis of trade receivables not past due and accrued income by CFU is
considered the most appropriate disclosure of credit concentrations.
BT Group plc Annual Report 2022
Financial statements 164
17. Trade and other receivables continued
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.
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
32
10
(9)
(1)
–
32
17
(14)
(1)
(10)
24
94
76
(68)
(4)
(4)
94
98
(78)
(5)
15
124
449
301
(391)
(11)
–
348
291
(308)
(10)
3
324
106
26
(19)
(15)
(13)
85
50
(33)
(11)
(1)
90
Total
£m
681
413
(487)
(31)
(17)
559
456
(433)
(27)
7
562
At 1 April 2020
Additions
Amortisation
Impairment
Other
At 31 March 2021
Additions
Amortisation
Impairment
Other
At 31 March 2022
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
2022
£m
4,143
573
532
549
345
6,142
2021
£m
4,024
491
495
634
336
5,980
a Deferred income includes £96m (FY21: £96m) current and £392m (FY21: £472m) non-current liabilities relating to Building Digital UK, for which grants received by the
group may be subject to re-investment or repayment depending on the level of take-up.
BT Group plc Annual Report 2022
Notes to the consolidated financial statements continued 18. Trade and other payables continued
At 31 March
Non-current
Other payables
Deferred incomea
165
2022
£m
30
594
624
2021
£m
12
670
682
a Deferred income includes £96m (FY21: £96m) current and £392m (FY21: £472m) non-current liabilities relating to Building Digital UK, 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 2022 include £89m of trade payables that have been factored by suppliers in a supply
chain financing programme (31 March 2021: £45m). These programmes are used with a limited number of suppliers with short
payment terms to extend them to a more typical payment term.
19. Provisions & contingent liabilities
Our provisions principally relate to obligations arising from property rationalisation programmes, restructuring programmes, asset
retirement obligations, network assets, insurance claims, litigation and regulatory risks. Contingent liabilities primarily arise from
litigation and regulatory matters that are not sufficiently certain to meet the criteria for recognition as provisions.
Significant accounting policies that apply to provisions & contingent liabilities
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.
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 & contingent liabilities
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. 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.
Critical accounting estimates applied in accounting for contingent liabilities
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 relation to specific matters in the ‘contingent liabilities’ section below.
Key accounting estimates applied in accounting for provisions and contingent liabilities
Other provisions may involve the use of key (but not critical) estimates as explained below.
Property provisions relate to obligations arising in relation to our property portfolio, in particular costs to restore leased
properties on vacation where this is required under the lease agreement. In measuring property provisions, we have made
estimates of the costs association with the restoration of properties by reference to any relevant guidance such as rate cards.
Cash outflows occur as and when properties are vacated and the obligations are settled.
Asset retirement obligations (AROs) relate to obligations to dismantle equipment and restore network sites on vacation of the
site. The provision represents the group’s best estimate of the costs to dismantle equipment and restore the sites. Obligations
are settled as and when sites are vacated and the timing is largely influenced by the group’s network strategy.
Network share 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.
BT Group plc Annual Report 2022
Financial statements 166
19. Provisions & contingent liabilities continued
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. 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.
Litigation provisions represent the best estimate to settle present obligations recognised in respect of claims brought against
the group. The estimate reflects the specific facts and circumstances of each individual matter and any relevant external advice
received. Provisions recognised are inherently judgemental and could change over time as matters progress.
Our insurance provision is based on our gross exposure to latent disease claims from former colleagues. A third party reviews
our exposure and provides an estimate of the most likely outcome.
Other provisions do not include any individually material provisions.
For all risks, the ultimate liability may vary materially from the amounts provided and will be dependent upon the eventual
outcome of any settlement.
At 1 April 2020
Additions
Unwind of discount
Utilised
Released
Transfers
At 31 March 2021
Additions
Unwind of discount
Utilised
Released
Transfersb
31 March 2022
Propertya
£m
Network
AROa
£m
Network
share
£m
Regulatory
£m
Litigation
£m
Insurance
£m
Other
£m
Total
£m
144
9
1
(7)
(9)
–
138
17
–
(9)
(2)
(2)
142
179
–
–
(4)
(17)
–
158
25
1
(3)
–
–
181
12
1
–
(1)
–
–
12
7
–
(6)
(8)
–
5
79
32
–
(15)
–
–
96
14
–
(26)
(18)
(1)
65
88
17
–
–
–
4
109
7
–
–
(31)
–
85
89
7
–
(5)
–
–
91
6
–
(5)
–
–
92
128
50
–
(7)
(56)
(4)
111
15
–
(5)
(30)
–
91
719
116
1
(39)
(82)
–
715
91
1
(54)
(89)
(3)
661
a Timing of expected cash flows associated with property and network ARO provisions varies depending on the exit dates of individual properties and sites. During FY22 there
has been no material change in the judgements or assumptions applied in the measurement of our existing obligations.
b Transfers in FY22 are due to reclassification to other payables during the period.
At 31 March
Analysed as:
Current
Non-current
2022
£m
222
439
661
2021
£m
288
427
715
Included within ‘Other’ provisions are contract loss provisions of £1m (FY21: £2m) relating to the anticipated total losses in respect
of certain contracts.
Contingent liabilities
In the ordinary course of business, we are periodically notified of actual or threatened litigation, and 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 are reflected in the table above.
Where an outflow is not probable but is possible a contingent liability exists. 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.
BT Group plc Annual Report 2022
Notes to the consolidated financial statements continued 167
19. Provisions & contingent liabilities continued
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 they estimated at £608m (inclusive of compound interest) or £589m (inclusive of simple interest) on behalf of our landline
customers alleging anti-competitive behaviour through excessive pricing by BT to customers with certain residential landline
services. Ofcom considered this topic more than four 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. In September 2021 the Competition Appeal Tribunal certified the claim to proceed to a substantive trial on an opt-out
basis (class members are automatically included in the claim unless they choose to opt-out). We appealed the opt-out nature of that
decision and in May 2022 the Court of Appeal determined that the claim should proceed on an opt-out basis. The next procedural
hearing is listed on 13 May 2022. 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: (a) BT Italia did not gain any interest or benefit from the
conduct in question; and (b) 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.
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 first trial, on the question of breach, is due to start on 16 May 2022, and
the second trial, on quantum (if necessary), would be listed after that. We continue to dispute these allegations vigorously.
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 future benefit accrual in
2018 for over 99% of the active membership at the time. The BT Hybrid Scheme (BTHS), which combines elements of both defined
benefit and defined contribution plans, was set up for non-management employees impacted by the closure of the BTPS and was
closed to new entrants in 2019.
New entrants to BT in the UK are eligible to join a defined contribution plan, currently the BT Retirement Saving Scheme (BTRSS),
a contract-based arrangement operated by Standard Life.
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.
The group also has 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:
• 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 has no exposure to investment and other
experience risks.
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 2022
Financial statements 168
20. Retirement benefit plans continued
Significant accounting policies that apply to retirement benefit plans
Defined benefit plans
The net defined benefit liability, or deficit, in respect of the defined benefit plans is 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 (also known as the Defined Benefit Obligation (DBO) or liabilities) less the fair value of the plan assets.
The income statement expense is allocated between an operating charge and net finance expense.
• The operating charge reflects the increase in the liability resulting from the pension benefit earned by active employees in the
current period, the cost of administering the plans and any past service costs/credits such as those arising from curtailments
or settlements.
• The net finance expense reflects the interest on the net defined benefit liability recognised in the group balance sheet, based
on the discount rate at the start of the year.
Remeasurements of the net defined benefit liability 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 balance sheet
date, and demographic assumptions, such as life expectancy, compared with those adopted at the start of the year;
• The impact on the liabilities of actual experience over the year being different compared to the assumptions made at the start
of the year, for example, from members choosing different benefit options at retirement or actual pension 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 expense.
Defined contribution plans
The operating charge for the defined contribution pension plans represents the contributions payable for the year.
Amounts in the financial statements
Group income statement
The expense 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 (note 6)
– 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 BTPS and provide transition paymentsa for affected employees
– Interest on pensions deficit
Subtotal
Total recognised in the income statement
2022
£m
2021
£m
67
525
(1)
591
14
93
107
698
63
527
1
591
21
18
39
630
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.
Group balance sheet
The net defined benefit liability in respect of defined benefit plans reported in the group balance sheet are set out below.
At 31 March
BTPS
EEPS
Other plansb
Total (gross of tax)
Deferred tax asset
Total (net of tax)
2022
Assets
£m
Liabilities
£m
53,465
1,004
468
54,937
(54,309)
(1,017)
(754)
(56,080)
2021
Assets
£m
Liabilities
£m
53,172
934
506
54,612
(57,737)
(1,127)
(844)
(59,708)
Deficita
£m
(844)
(13)
(286)
(1,143)
190
(953)
Deficita
£m
(4,565)
(193)
(338)
(5,096)
925
(4,171)
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. In particular, a refund of surplus is available following the gradual settlement of the liabilities over time until there are no
members remaining in the BTPS or EEPS.
b Included in the liabilities of other plans is £115m (FY21: £146m) related to unfunded pension arrangements.
BT Group plc Annual Report 2022
Notes to the consolidated financial statements continued 169
20. Retirement benefit plans continued
Movements in defined benefit plan assets and liabilities
The table below shows the movements in the defined benefit plan assets and liabilities and shows where they are reflected in the
financial statements.
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
Service cost (including administration expenses and PPF levy)
Past service credit
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 (loss) arising from experience adjustmentsa
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 2022
Assets
£m
Liabilities
£m
53,471
(44)
–
1,281
(54,611)
(19)
(1)
(1,299)
1,766
–
–
–
17
955
–
(8,504)
1,746
136
–
–
1
(2,822)
(13)
(1)
2,822
23
Deficit
£m
(1,140)
(63)
(1)
(18)
(82)
1,766
(8,504)
1,746
136
(4,856)
17
955
972
–
–
10
10
54,612
(59,708)
(5,096)
(47)
–
1,095
(20)
1
(1,188)
780
–
–
–
114
1,121
–
2,932
804
(1,651)
–
–
1
(2,748)
9
(1)
2,748
3
(67)
1
(93)
(159)
780
2,932
804
(1,651)
2,865
114
1,121
1,235
–
–
12
12
54,937
(56,080)
(1,143)
a Primarily reflects the impact on the liabilities of actual inflation being higher than assumed at the prior reporting date. There has been a broadly equivalent benefit to
inflation-linked assets from higher inflation.
Overview and governance of the BTPS
What are the benefits under the BTPS?
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.
For Section A members, benefits earned for pensionable service up to 30 June 2018 are all based upon a member’s final salary and a
normal pensionable age of 60.
BT Group plc Annual Report 2022
Financial statements 170
20. Retirement benefit plans continued
Under the BTPS rules, increases for the majority of benefits are linked to either the Retail Price Index (RPI) or the Consumer Price
Index (CPI) as summarised in the table below.
Sections A & Ba
Section C
Before retirement
After retirement
Preserved benefits increase before
retirement based on CPI
Increases to benefits in payment are
currently based on CPI
Increases to benefits in payment are
currently based on 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 Trustee directors
Appointed by BT after consultation
with, and with the agreement of,
the relevant trade unions.
Member nominated Trustee directors
Appointed by BT based on
nominations by trade unions.
Employer nominated Trustee directors
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 IAS 19 assets
Critical accounting estimates and significant judgements made when valuing our pension assets
Under IAS 19, plan assets should be measured at fair value at the balance sheet date.
The 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 £5.6bn of these unquoted investments are formally valued periodically by the investment manager and the latest
valuation precedes the balance sheet date. These valuations have been adjusted for cash movements between the previous
valuation date and 31 March 2022. The valuation approach and inputs for these investments would only be approximately
updated where there were indications of significant market movements, which was not the case at 31 March 2022 or in 2021.
The BTPS exposure to Russian assets is less than 0.1% of the BTPS assets.
The asset-backed funding arrangement, issued to the BTPS in May 2021, which has a fair value of £1.4bn at 31 March 2022,
is not recognised as a pension asset when measuring the group’s IAS 19 net defined benefit liability as it is a non-transferable
financial instrument issued by the reporting entity.
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.
BT Group plc Annual Report 2022
Notes to the consolidated financial statements continued 171
20. Retirement benefit plans continued
Valuation of main unquoted investments
• Equities are valued using the International Private Equity and Venture Capital (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 using RICS guidelines. The
significant assumptions used in the valuation are rental yields and occupancy rates.
• Bonds, including those issued by BT, 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 cash flows discounted at market rates. The significant
assumptions used in the valuation are the yield curves and cost of carry.
• Holdings in investment funds are typically valued at 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, or at the price of recent market transactions if they represent fair value. Where a discounted cash flow model is
used, 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.
How are the BTPS assets invested?
The Trustee regularly reviews the allocation of assets between different investment classes, taking into account current market
conditions and trends. 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.
The table below shows the fair value of the BTPS assets analysed by asset category, subdivided by valuations based on a quoted
market price in an active market, and those that are not (such as investment funds).
UK
Overseas developed
Emerging markets
UK
Overseas
Absolute Returnc
Non Core Creditd
Mature Infrastructure
UK
Global
At 31 March
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
2022a
of which
quotedb
£bn
Total
%
Total
assets
£bn
2021a
of which
quotedb
£bn
Total
%
0.3
6.5
1.0
1.2
3.4
0.8
1.0
4.7
1.4
15.1
13.9
2.6
2.9
(1.0)
(0.3)
0.2
5.6
0.9
–
–
–
–
1.4
–
15.1
11.7
–
–
–
–
1
12
2
2
6
2
2
9
3
28
26
5
5
(2)
(1)
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
53.5
34.9
100
53.2
35.3
100
a At 31 March 2022, the BTPS did not hold any equity issued by the group (FY21: nil). The BTPS held £1,930m (FY21: £2,216m) 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 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 This allocation includes property, infrastructure and credit investments which provide a stable income to the BTPS.
f The Trustee has hedged some of BTPS’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 BTPS’s liabilities over the same period.
g Includes collateral posted in relation to derivatives held by the BTPS.
BT Group plc Annual Report 2022
Financial statements 172
20. Retirement benefit plans continued
BTPS IAS 19 Liabilities
Critical accounting estimates and significant judgements made when valuing our pension liabilities
The measurement of the service cost and the liabilities involves judgement about uncertain events including the life expectancy
of members, price inflation and the discount rate 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, actuarial advice and our
judgement regarding future expectations at the balance sheet date.
What are the forecast benefits payable from the BTPS?
There were 274,000 members in the BTPS at 30 June 2021, 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 expected 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 2022 (unaudited)
)
n
b
£
(
s
t
n
e
m
y
a
p
t
i
f
e
n
e
B
3.0
2.5
2.0
1.5
1.0
0.5
0
2022
2042
2062
2082
60
50
40
30
20
10
0
)
n
b
£
(
s
e
i
t
i
l
i
b
a
i
l
9
1
S
A
I
Forecast benefit payments (left axis)
IAS 19 liabilities (right axis)
The estimated duration of the BTPS liabilities, which is an indicator of the weighted average term of the liabilities, is 14 years using
the IAS 19 assumptions.
What is the breakdown of the membership and IAS 19 liabilities?
Sections A and B liabilities (£bn)
Section C liabilities (£bn)
Total IAS 19 liabilities (£bn)
Total number of members (000’s)
Active
members
Deferred
members Pensioners
–
–
–
–
5.5
12.4
17.9
67
30.7
5.7
36.4
207
Total
36.2
18.1
54.3
274
What are the key assumptions and how have they been set?
The key financial assumptions used to measure the IAS 19 liabilities of the BTPS, where the nominal rates have been rounded to the
nearest 0.05%, are shown below.
At 31 March
Discount rate
Inflation – average increase in RPI
Inflation – average increase in CPI
a The real rate is calculated relative to RPI inflation.
BT Group plc Annual Report 2022
Nominal rates (per year)
Real rates (per year)a
2022
2021
2022
2021
2.75%
3.70%
3.25%
2.05%
3.20%
2.75%
(0.92)%
–
(0.43)%
(1.11)%
–
(0.44)%
Notes to the consolidated financial statements continued
173
20. Retirement benefit plans continued
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%).
The key demographic assumptions used to measure the IAS 19 liabilities of the BTPS relate to how long members are expected to
live. Based on these assumptions, the forecast life expectancies for BTPS members aged 60 are as follows:
At 31 March
Male in lower pension bracket (below £20,300 p.a.)
Male in higher pension bracket (above £20,300 p.a.)
Female
Average additional life expectancy for a male member retiring at age 60 in 10 years’ time
2022
2021
Number of
years
Number of
years
25.2
27.3
27.8
0.4
25.5
27.6
27.9
0.4
The table below summarises the approach used to set the key IAS 19 assumptions for the BTPS and key drivers for the movement in
the assumptions.
Detail
Discount rate
IAS 19 requires that the discount rate is determined by reference to market yields at the balance sheet date on
high quality corporate bonds. The currency and term of these should be consistent with the currency and
estimated term of the pension liabilities.
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 increase in the discount rate over the year reflects changes in the market yield of corporate bonds.
RPI and CPI
inflation
The RPI inflation assumption is calculated by applying the projected BTPS benefit cash flows to an inflation
curve derived from market yields on government bonds, and making an adjustment for an inflation risk premium
(to reflect the extra premium paid by investors for inflation linked assets).
The CPI inflation assumption is calculated with reference to the RPI inflation assumption 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. Therefore, CPI inflation
is assumed to be in line with RPI inflation after 2030, as historically CPI and CPIH inflation have been
broadly comparable.
Before 2030, CPI inflation is assumed to be 1% lower than RPI inflation, reflecting the latest published inflation
forecasts. At the prior reporting date CPI inflation was assumed to be 0.9% lower than RPI inflation before 2030.
This change reduced the BTPS IAS 19 liabilities by £0.2bn.
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.
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 (CMI) (updating to use the CMI 2020 Mortality Projections model, with a long-term
improvement parameter of 1% per year).
There is significant uncertainty on the impact of the Covid-19 pandemic on mortality. The default CMI 2020 model
makes no allowance for deaths in 2020, when there were higher deaths due to the Covid-19 pandemic, but
provides an additional parameter to allow users to make their own judgement of the extent to which deaths in
2020 will impact future improvements. We have assumed a short-term slow down in life expectancy
improvements, with a neutral impact over the longer-term. Based on analysis carried out by the CMI, this scenario
is equivalent to applying a 15% weighting on 2020 data and has reduced the BTPS IAS 19 liabilities by £0.7bn.
BT Group plc Annual Report 2022
Financial statements 174
20. Retirement benefit plans continued
Risks underlying the BTPS deficit
Background
A large increase in our pension scheme obligations could stop us from being able to fund our business cash flows or meet our
payment commitments. 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 to BT.
Changes in external factors, such as bond yields, can have an impact on the IAS 19 and funding assumptions, impacting
the measurement of BTPS liabilities. These factors can also impact the BTPS assets. The BTPS hedges some of these risks,
including interest rates, inflation, longevity and currency using financial instruments and insurance contracts with reference
to the funding liabilities.
Some of the key financial risks, and mitigations, for the BTPS are set out in the table below.
Changes in
government
bond yields
A fall in government bond yields will lead to:
• a fall in corporate bond yields (assuming no changes in credit spreads), and therefore the IAS 19 discount
rate. A fall in the IAS 19 discount rate will increase the IAS 19 liabilities.
• an increase in the value of government bonds, interest rate derivatives, and corporate bonds held
by the BTPS.
We estimate the change in the BTPS assets will more than offset the increase in the IAS 19 liabilities,
but only partly offset an increase in the funding liabilities.
Changes in
credit spreads
A fall in credit spreads will lead to a fall in corporate bond yields, and therefore an increase in the IAS 19
liabilities and a corresponding increase in asset values.
Changes in inflation
expectations
A significant proportion of the benefits paid to members are currently increased in line with RPI or
CPI inflation.
Changes in average inflation expectations over the lifetime of the plan
An increase in average inflation expectations will lead to:
• an increase in the IAS 19 liabilities
• an increase in the value of index-linked bonds and other inflation linked assets held by the BTPS
We estimate the change in the BTPS assets will more than offset the increase in the IAS 19 liabilities,
but only partly offset an increase in the funding liabilities.
Changes in inflation over the next year
If inflation over the next year is lower or higher than assumed, it would lead to a fall or increase in the IAS 19
liabilities. We estimate the change in asset values will broadly offset the movement in the IAS 19 liabilities.
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 net defined
benefit liability.
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: 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.
BT Group plc Annual Report 2022
Notes to the consolidated financial statements continued 175
20. Retirement benefit plans continued
IAS 19 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 average inflation expectations over the lifetime of the planc
4. Fall in growth assetsd
5. Increase to life expectancy
1-in-20 events
2022
2021
0.8%
0.7%
0.6%
20.0%
1.1%
0.7%
0.7%
20.0%
1.00 years 1.00 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 Scenario assumes average RPI and CPI inflation expectations over the lifetime of the plan increase by the same amount.
d Impact includes the potential impact of temporary equity hedges held by the BTPS. Scenario considers combinations of changes to the key inputs used to value the growth
assets, leading to a 20% fall in the aggregate value of the growth assets prior to temporary hedges held by the BTPS.
The impact shown under each scenario looks at each event in isolation – in practice a combination of events could arise.
Impact of illustrative scenarios which might occur no more than once in every 20 years
Scenario analysis – IAS 19 position at 31 March 2022
(0.8)
(4.7)
6.4
3.8
3.5
7.6
0.0
(3.4)
2.7
0.6
n
b
£
10
8
6
4
2
0
(2)
(4)
(6)
0.8 percentage point
fall in bond yields
0.7 percentage point
increase in credit spreads
0.6 percentage point
increase to inflation rate
20% fall in
growth assets
1.00 year
increase in life
expectancy
Increase/(decrease) in liabilities
Increase/(decrease) in assets
The sensitivities have been prepared using the same approach as FY21 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, such as the 2004 Pensions Act, and uses a prudent approach overall.
This differs from the IAS 19 valuation, which is used for deriving the balance sheet and P&L figures in the Group accounts with
principles being set out in the IFRS standards, and uses a best-estimate approach overall (with the exception of the discount rate,
which IAS 19 requires to be based on the yields on high quality corporate bonds regardless of the investment held by the BTPS).
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.
BT Group plc Annual Report 2022
Financial statements 176
20. Retirement benefit plans continued
The results of the two most recent funding valuations are shown below.
BTPS funding liabilities
Market value of BTPS assets
Funding deficit
Percentage of accrued benefits covered by the 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%
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.
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)
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 BTPS to 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
risk-free yield curve in 2020, trending down to 0.8% per year above the risk-free yield curve from 2035. The assumption was
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
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
Changes in the funding position (unaudited)
The Scheme Actuary has carried out an interim assessment as at 30 June 2021, estimating the BTPS’s funding position to have
improved from a funding deficit of £8.0bn to £4.1bn. BT and the Trustee will agree cash contributions in the usual way at the next full
triennial funding valuation, scheduled to take place as at 30 June 2023.
Changes in market conditions can have a different impact on the funding liabilities and the IAS 19 liabilities. For example, the funding
liabilities use a discount rate linked to a risk-free rate, whereas the IAS 19 liabilities use a discount rate based on corporate bond
yields (and so are affected by changes in credit spreads). The estimated impact of the scenarios illustrated on page 175 on the
30 June 2021 interim assessment of the funding position are shown in the table below.
Scenario analysis – Funding position at 30 June 2021
(0.9)
8.4
8.6
0.0
5.6
4.1
0.0
(3.3)
3.1
0.7
n
b
£
10
8
6
4
2
0
(2)
(4)
0.8 percentage point
fall in bond yields
0.7 percentage point
increase in credit spreads
0.6 percentage point
increase to inflation rate
20% fall in
growth assets
1.00 year
increase in life
expectancy
Increase/(decrease) in liabilities
Increase/(decrease) in assets
BT Group plc Annual Report 2022
Notes to the consolidated financial statements continued 177
20. Retirement benefit plans continued
Future funding obligations and deficit repair plan
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 £8.0bn. The funding deficit was agreed to be met as follows:
• £2bn met through an Asset Backed Funding arrangement (ABF) which is structured as a Scottish Limited Partnership (SLP) with
BT and BTPS as limited partners, and BT Corporate Limited as general partner. The underlying asset is a loan note issued by EE
Group Investments Limited, with an initial face value of £1.9bn. The BTPS has an entitlement to the full value of the loan note in the
event of an insolvency of BT.
The loan note had a term of approximately 13 years. On or before 30 June each year (with a final payment in June 2033), the ABF
will distribute capital and interest amounting to £180m to the BTPS, provided that the BTPS was in deficit on a funding basis as at
30 June of the preceding year. If the BTPS reaches full funding at any 30 June, the payments to the BTPS will cease. The stream of
payments are financed through distributions from EE Limited and shares in EE Limited provide security over the payment stream.
No impact is expected on the day-to-day operations of BT or EE as a result. The fair value of the BTPS investment in the ABF at the
date of investment was £1.66bn, with BT receiving tax relief on that amount spread over four years. This is calculated as the net
present value of the annual capital and interest payments, and is less than the face value of the underlying loan note reflecting the
probability of the BTPS becoming fully funded, and therefore the annual capital and interest payments to the BTPS ending before
the underlying loan note matures. Following receipt of the first £180m capital and interest payment, the fair value of the BTPS
investment in the ABF as at 31 March 2022 was £1.4bn.
The ABF has no impact on the gross IAS 19 deficit in the BT Group plc consolidated accounts initially, but has reduced the deferred
tax asset recognised, as some tax relief has been received up-front. Annual capital and interest payments will reduce the IAS 19
net defined benefit liability.
• Cash contributions over the 10 years to 30 June 2030.
Co-investment vehicle
BT and the Trustee agreed a co-investment vehicle at the 30 June 2020 valuation which provides BT with some protection against
the risk of overfunding by allowing money to be returned to BT if not needed by the BTPS, 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 ABF), which will be invested as if part of the overall BTPS investment strategy. The value of the assets held in the
vehicle are included in the assets of the BTPS for the purposes of calculating both the funding deficit and the IAS 19 net defined
benefit liability.
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 BTPS has subsequently moved into funding deficit or the Trustee, acting prudently but reasonably, decides to defer or
reduce these payments.
At 31 March 2022, there were less than £1m of assets in the co-investment vehicle.
Future funding commitment
At the 2020 valuation, BT agreed additional contributions will be automatically payable in the event the deficit repair plan is no
longer sufficient to meet the funding deficit.
Should an annual update of the funding position reveal that the BTPS has fallen more than £1bn behind plan, BT will commence
additional payments of between £150m to £200m per year. 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 funding deficit. Payments can switch-on again if the
funding deficit position subsequently deteriorates.
The first annual test was carried out as at 30 June 2021. This showed that the deficit repair plan was still sufficient to meet the
funding deficit, and hence no additional contributions were required. The next annual test will be carried out as at 30 June 2022.
Any additional contributions under this agreement cease by 30 June 2034.
BT Group plc Annual Report 2022
Financial statements 178
20. Retirement benefit plans continued
These payments are set out in the table below.
Year to 31 March
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
Cash provided by BT
Cash provided by ABF
structure
Total
a £400m due by 30 June.
b £500m due by 30 June.
800a
610b
600c
600c
600c
600c
600c
600c
500c
–
–
–
180
980
180
790
180
780
180
780
180
780
180
780
180
780
180
780
180
680
180
180
180
180
180
180
c £490m of each payment due by 30 June. £10m is directly payable to the BTPS, and BT has the option to pay remaining amounts into the co-investment vehicle.
Other protections
BT has agreed 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, (Protections Deficit) has reduced below £2bn. A £2bn deficit on this
measure is currently broadly equivalent to a nil funding deficit. The protections include:
Feature
Detail
Shareholder
distributions
BT will provide additional payments to the BTPS by the amount that shareholder distributions exceed a
threshold. For the three years following the 2020 valuation, 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;
• it considers making any shareholder distributions in any of the next 3 years if annual normalised free cash
flow 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
Material corporate
events
• it considers making a special dividend.
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;
• it considers making disposals of more than £1.0bn;
• it considers making a Class 1 transaction (acquisition or disposal);
• 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 BTPS, 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.
BT Group plc Annual Report 2022
Notes to the consolidated financial statements continued 179
20. Retirement benefit plans continued
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.
Pension Protection
Fund (PPF)
Further protection is also provided by the PPF which is the fund responsible for paying compensation in
schemes where the employer becomes insolvent.
Other benefit plans
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 £1.0bn, and a defined contribution section with around 8,000 members.
At 31 March 2022, the defined benefit section’s assets are invested across a number of asset classes including global equities (26%),
property & illiquid alternatives (31%), an absolute return portfolio (17%) and a liability driven investment portfolio (26%).
A triennial valuation of the defined benefit section as at 31 December 2021 is currently underway. The previous triennial valuation
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 2022, £469m of contributions were payable by the group to the BTRSS.
BTHS
The BTHS combines elements of both defined benefit and defined contribution pension plans. At 31 March 2022 it had IAS 19
liabilities of around £45m and £9.9m of contributions were payable by the group to the BTHS.
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 2020
Own shares purchasedb
Yourshare issue
Share options exercisedb
Share awards vested
At 31 March 2021
Own shares purchasedb
Yourshare issue
Share options exercisedb
Share awards vested
At 31 March 2022
Treasury sharesa
Employee share
ownership trusta
Total
millions
£m
millions
£m
millions
86
–
(35)
–
–
51
–
(1)
(9)
–
41
(223)
–
90
1
–
(132)
–
2
22
–
(108)
7
11
–
–
(9)
9
114
(18)
–
(11)
94
(14)
(14)
–
–
17
(11)
(210)
34
–
21
(166)
93
11
(35)
–
(9)
60
114
(19)
(9)
(11)
135
£m
(237)
(14)
90
1
17
(143)
(210)
36
22
21
(274)
a At 31 March 2022, 41,429,938 shares (FY21: 50,724,972) with an aggregate nominal value of £2m (FY21: £3m) were held at cost as treasury shares and 94,120,883 shares
(FY21: 9,172,675) with an aggregate nominal value of £5m (FY21: £nil) were held in the Trust.
b See group cash flow statement. The cash paid for the repurchase of ordinary shares was £184m (FY21: £14m). 15m shares (FY21: nil) were purchased via a forward contract.
The cash received for proceeds on the issue of treasury shares was £13m (FY21: £1m).
BT Group plc Annual Report 2022
Financial statements 180
21. Own shares continued
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
of which 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.
Year ended 31 March
Employee saveshare plans
Yourshare
Executive share plans:
Incentive Share Plan (ISP)
Deferred Bonus Plan (DBP)
Retention and Restricted Share Plans (RSP)
2022
£m
29
28
14
11
26
108
2021
£m
38
18
(8)
10
14
72
What share incentive arrangements do we have?
Our plans include savings-related share option plans for employees and those of participating subsidiaries and several share plans
for executives. All share-based payment plans are equity-settled. Details of these plans are 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. The scheme did not operate in FY22.
Incentive Share Plan (ISP)
Participants are entitled to shares under the ISP in full at the end of a three-year period only if the group has met the relevant
pre-determined corporate performance measures and if the participants are still employed by the group. The last ISP award was
granted in 2019. For this award, 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.
The cash flow and revenue targets under the 2019 ISP were adjusted in FY22 to reflect acquisitions and divestments during the
three-year period to ensure performance is being measured on a like-for-like basis. This resulted in a charge of £14m for the year
(FY21: credit of £8m).
Deferred Bonus Plan (DBP)
Awards are granted annually to selected employees. Shares in the group 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 group 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.
BT Group plc Annual Report 2022
Notes to the consolidated financial statements continued 181
22. Share-based payments continued
Yourshare
In June 2021, all eligible employees of the group were awarded £500 of BT shares (FY21: £500). 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 overseas employees.
Under the terms of Yourshare and the executive share plans, dividends are reinvested in shares that are added to the relevant share
awards.
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
2022
millions
2021
millions
2022
pence
2021
pence
414
–
(41)
(9)
(22)
342
–
214
283
(59)
–
(24)
414
–
121
–
127
152
229
113
–
202
85
175
85
277
121
282
The weighted average share price for all options exercised during FY22 was 185p (FY21: 134p).
The following table summarises information relating to options outstanding and exercisable under Employee Saveshare plans at
31 March 2022.
Normal dates of vesting and exercise (based on calendar years)
2022
2023
2024
2025
Total
Executive share plans
Movements in executive share plan awards are shown below:
At 1 April 2020
Awards granted
Awards vested
Awards lapsed
At 1 April 2021
Awards granted
Awards vested
Awards lapsed
Dividend shares reinvested
At 31 March 2022
Exercise price
per share
164p – 243p
82p – 170p
164p
82p
Weighted
average
exercise price
Number of
outstanding
options
millions
201p
108p
164p
82p
113p
36
102
44
160
342
Weighted
average
remaining
contractual
life
(months)
10
22
34
46
34
Number of shares (millions)
DBP
RSP
Total
12
10
(2)
–
20
7
(4)
(1)
–
22
13
41
(6)
(1)
47
23
(7)
(6)
1
58
116
51
(8)
(26)
133
30
(11)
(42)
1
111
ISP
91
–
–
(25)
66
–
–
(35)
–
31
BT Group plc Annual Report 2022
Financial statements 182
22. Share-based payments continued
Fair values
The following table summarises the fair values and key assumptions used for valuing grants made under the Employee Saveshare
plans in FY21. There were no grants under Employee Saveshare in FY22.
Year ended 31 March 2021
Weighted average fair value
Weighted average share price
Weighted average exercise price of options
Expected dividend yield
Risk free rates
Expected volatility
Employee
Saveshare
23p
114p
85p
5.19% – 6.49%
-0.001% – 0.11%
28.33% – 28.39%
Employee Saveshare grants are valued using a Binomial options pricing model. Awards under the ISP were 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. There were no ISP awards granted in FY21 or FY22.
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 FY22 was 203p (FY21: 117p) and for RSP awards granted in FY22 was 201p (FY21: 103p).
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 disposals of Diamond IP, a non-core software business in America, and certain business units
in Italy serving customers in the public administration and SME sectors, recording a combined net gain of £35m.
In FY21 we recorded a net gain of £80m on disposal of our domestic operations in Spain, a combined net loss of £11m on the
disposals of our domestic operations in France and Latin America, and a net loss of £4m relating to the disposal of a number
of other businesses.
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.
BT Group plc Annual Report 2022
Notes to the consolidated financial statements continued 23. Divestments and assets & liabilities classified as held for sale continued
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 on disposalc
Net consideration
Satisfied by
Proceeds received in the year per the cash flow statement
Adjustments to non-cash considerationd
Costs of disposale
Net consideration
183
2021
£m
37
39
38
3
159
(199)
77
(23)
54
65
119
164
(25)
(20)
119
2022
£m
12
6
1
1
26
(15)
31
(1)
30
41
71
76
(2)
(3)
71
a FY21 assets are stated after impairment charge booked on held for sale classification in FY20 on the France and Latin America divestments.
b Cumulative translation differences previously held in equity and recycled to the income statement on disposal of foreign operations.
c FY22 profit on disposal includes true-ups on divestments completed in prior years. The net gain is fully recognised as specific items, see note 9.
d 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 were ongoing at the end of the year.
e £1m (FY21: £13m) disposal costs have been paid and are included within cash flows from operating activities in the cash flow statement. The remaining £2m (FY21: £7m)
costs were accrued for at the end of the year.
Assets and liabilities held for sale
At 31 March 2022, the group had one disposal group held for sale, BT Sport, which was previously held within the Consumer
segment. No other disposal groups were classified as held for sale during FY21 or FY22.
BT Sport
In May 2022 we reached an agreement with Warner Bros. Discovery (Discovery) to create a sports joint venture (JV) combining BT
Sport and Discovery’s Eurosport UK business into a separate legal entity with both BT and Discovery each holding a 50% interest and
equal voting rights. The production and operational assets of BT Sport will transfer to, and become a wholly owned subsidiary of,
Discovery who will manage and operate the production of the sport content.
Discovery will have the option to acquire BT’s 50% interest in the JV at specified points during the first four years of the JV. The price
payable under the Call Option will be 50% of the JV, at a price to be determined at the time, plus any unpaid fixed consideration and
remaining earn-out as described below. If the Call Option is not exercised, BT will have the ability to exit its shareholding in the JV
either through a sale or IPO.
At completion of the transaction, BT is expected to lose control of the BT Sport operations and the group’s interest in the combined
business is expected to be classified as a Joint Venture under IFRS 11 based on the assessment of ownership and joint control over
the key decisions of the JV (50/50 with Discovery) established through the joint venture agreement. BT will enter into a distribution
agreement with the JV to procure the sport content required to continue to supply our existing broadband, TV and mobile
customers. BT’s agreement with the JV will extend beyond 2030 and for the first four years includes a minimum revenue guarantee
of approximately £500m per annum, after which the agreement will change to a fully variable arrangement.
BT Sport’s distribution agreement with Virgin Media will transfer into the JV, and the JV will also enter into a new agreement with
Sky extending beyond 2030 to provide for its distribution of the JV’s combined sports content. BT will also enter into a distribution
agreement with Discovery to provide discovery+, the non-fiction entertainment streaming service to its direct BT TV and
BT Sport customers.
The transaction is subject to regulatory approval, but it is expected to conclude by the end of 2022 and meets the held for sale
criteria per IFRS 5. Accordingly, the asset and liabilities of the BT Sport disposal group have been classified as held for sale at
31 March 2022.
The assets of the disposal group have been tested for impairment under existing relevant standards immediately prior to
classification as held for sale with no impairment recognised.
BT Group plc Annual Report 2022
Financial statements 184
23. Divestments and assets & liabilities classified as held for sale continued
As the estimated fair value from the joint venture transaction, net of any costs incurred or liabilities recognised, is higher than the
carrying value of the disposal group, no impairment has been recognised subsequent to classification as held for sale. We used the
discounted cash flows due to BT from fixed consideration of £93m payable in four instalments over the next three years and variable
consideration whereby BT will be issued with redeemable preferred shares in the JV which will entitle BT to receive an earn out from
the JV of up to approximately £540m over the first four years post completion subject to certain conditions being met, plus a potential
exit value from the sale of the group’s 50% interest, as total gross consideration. BT’s obligation under the minimum revenue
guarantee in the distribution agreement has been treated as a reduction to the fair value of the consideration in the impairment test.
The inputs into the fair value calculation are classified as Level 3 on the fair value hierarchy and supported by internal valuation models
over which we have applied sensitivities on the future cash flows from the JV and the trading multiples for the exit valuation.
BT Sport has not been reclassified as a discontinued operation as it does not meet our definition of a separate major line of business.
The BT Sport disposal group comprises the following assets and liabilities:
At 31 March
Assets
Intangible assetsa
Property, plant and equipment
Right-of-use assets
Trade and other receivables
Assets held for saleb
Liabilities
Trade and other payables
Lease liabilities
Liabilities held for sale
2022
£m
55
13
2
10
80
38
2
40
a Intangible assets includes goodwill of £51m that has been allocated to the disposal group on a relative value approach as per IAS 36.
b £310m of programme rights relating to sports broadcasting rights acquired for the BT Sport operations have not been reclassified to held for sale as the carrying amount of
these assets is expected to be recovered principally through continuing use before completion of the transaction.
24. Investments
Significant accounting policies that apply to investments
Investments classified as amortised cost
These investments are measured at amortised cost. The carrying amount of these balances approximates to fair value. 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.
At 31 March
Non-current assets
Fair value through other comprehensive income
Fair value through profit or loss
Total non-current asset investments
Current assets
Investments held at amortised cost
Current asset investments
2022
£m
2021
£m
34
–
34
20
11
31
2,679
2,679
3,652
3,652
Investments held at amortised cost relate to money market investments denominated in sterling of £2,225m (FY21: £3,171m),
in euros of £436m (FY21: £456m) and in US dollars of £18m (FY21: £25m). Within these amounts are investments in liquidity funds
of £1,912m (FY21: £3,570m), £67m collateral paid on swaps (FY21: £82m) and repurchase agreements £700m (FY21: £nil).
BT Group plc Annual Report 2022
Notes to the consolidated financial statements continued 24. Investments continued
Fair value estimation
Fair value hierarchy
At 31 March 2022
Non-current and current investments
Fair value through other comprehensive income
Total
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
185
Level 1
£m
Level 2
£m
Level 3
£m
Total held
at fair value
£m
4
4
–
–
30
30
34
34
Level 1
£m
Level 2
£m
Level 3
£m
Total held
at fair value
£m
–
11
11
–
–
–
20
–
20
20
11
31
The three levels of valuation methodology used are:
Level 1 – uses quoted prices in active markets for identical assets or liabilities.
Level 2 – uses inputs for the asset or liability other than quoted prices that are observable either directly or indirectly.
Level 3 – uses inputs for the asset or liability that are not based on observable market data, such as internal models or other
valuation methods.
Level 3 balances consist of investments classified as fair value through other comprehensive income of £30m (FY21: £20m) which
represent investments in a number of private companies. If specific market data is not available, 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).
At 31 March
Cash at bank and in hand
Cash equivalents
UK deposits
Indian rupee deposits
Other deposits
Total cash equivalents
Total cash and cash equivalents
Bank overdrafts (note 26)
Cash and cash equivalents per the cash flow statement
2022
£m
324
353
90
10
453
777
(85)
692
2021
£m
371
601
23
5
629
1,000
(104)
896
Cash and cash equivalents include restricted cash of £24m (FY21: £38m), of which £22m (FY21: £29m) was held in countries where
local capital or exchange controls currently prevent us from accessing cash balances. The remaining balance of £2m (FY21: £9m)
was held in escrow accounts, or in commercial arrangements akin to escrow.
BT Group plc Annual Report 2022
Financial statements 186
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 accordingly to reflect 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 FY22.
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
Capital structure
a Excludes non-controlling interests of £22m (FY21: £29m).
2022
£m
18,009
15,274
2021
£m
17,802
11,650
33,283
29,452
Net debt and net financial debt
Net debt consists of loans and other borrowings and lease liabilities, 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.
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
adjustments
Net debt
Lease liabilities
Lease liabilities classified as held for saleb
Net financial debt
a Includes overdrafts of £85m at 31 March 2022 (31 March 2021: £104m).
b There are lease liabilities classified as held for sale, refer to note 23.
c The translation difference between spot rate and hedged rate of loans and borrowings denominated in foreign currency.
BT Group plc Annual Report 2022
Notes
15
23
25
24
2022
£m
16,185
5,760
2
2021
£m
16,685
6,152
–
(777)
(2,679)
(1,000)
(3,652)
18,491
18,185
(234)
(142)
(248)
(241)
18,009
17,802
(5,760)
(2)
(6,152)
–
12,247
11,650
Notes to the consolidated financial statements continued 187
26. Loans and other borrowings continued
The table below shows the key components of net debt and the increase of £207m this year.
At
31 March
2021
£m
Cash
flows
£m
Net lease
additionsa
£m
Foreign
exchange
£m
Transfer
to within
one year
£m
Other
movementsd
£m
At
31 March
2022
£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
Removal of the accrued interest
911
730
(1,421)
(792)
15,774
5,422
–
(142)
(242)
743
–
–
–
–
22,453
(1,470)
(1,000)
(3,652)
1
226
970
–
–
–
–
397
–
–
–
397
–
–
–
Net debt
17,802
(274)
397
59
–
71
3
–
(92)
–
41
(3)
3
–
41
1,341
857
(1,341)
(857)
–
–
–
–
–
–
–
–
(17)
–
65
–
2
–
(9)
41
–
–
2
873
795
15,312
4,965
2
(234)
(251)
21,462
(777)
(2,679)
3
43
18,009
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
812
(1,731)
(924)
16,492
5,748
62
(1,049)
(257)
–
–
–
–
–
24,650
(2,655)
(1,549)
(5,092)
(43)
3
532
1,421
43
–
–
–
–
543
–
–
–
543
–
–
–
–
Net debt
17,969
(659)
543
(179)
–
(742)
(27)
–
907
–
(41)
15
19
–
–
(7)
–
842
–
(842)
–
–
–
–
–
–
–
–
(21)
–
24
–
(62)
–
911
730
15,774
5,422
–
(142)
15
(242)
(44)
22,453
2
–
–
(2)
(1,000)
(3,652)
–
1
(44)
17,802
a Net lease additions are net non-cash movements in lease liabilities during the period, and primarily comprise 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 movements relating to
held for sale assets and liabilities (see note 23).
e Cash flows from gross debt of £1,470m outflow (FY21: £2,655m outflow) include repayment of borrowings £1,374m (FY21: £1,162m outflow), proceeds from bank loans and
bonds £744m inflow (FY21: nil), cash flows from collateral received £29m outflow (FY21: £490m outflow), payment of lease liabilities £659m outflow (FY21: £782m outflow),
interest paid on lease liabilities £133m outflow (FY21: £142m outflow), and change in bank overdraft £19m outflow (FY21: £79m outflow).
BT Group plc Annual Report 2022
Financial statements 188
26. Loans and other borrowings continued
The table below gives details of the listed bonds and other debt.
At 31 March
0.5% €575m bond due June 2022a,d
1.125% €1,100m bond due March 2023a,d
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 hybrid bond due August 2080a,c
4.250% $500m hybrid bond due November 2081a,c
4.875% $500m hybrid bond due November 2081a,c
Total listed bonds
Other loans
Bank overdrafts (note 25)
Total other loans and borrowings
Total loans and other borrowings
a Designated in a cash flow hedge relationship.
2022
£m
–
–
423
520
489
929
468
549
1,098
977
425
537
680
631
762
2,077
503
339
362
523
340
363
350
374
250
383
426
383
384
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
–
–
15,545
15,993
555
85
640
588
104
692
16,185
16,685
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 call options between 3.5 years and 9.5 years.
d Bond redeemed in March 2022.
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 £16,750m (FY21: £18,554m).
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 have transitioned onto Alternative Reference Rates (ARRs) where applicable.
BT Group plc Annual Report 2022
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 loans and other borrowings
189
2022
£m
233
640
873
2021
£m
219
692
911
15,312
15,774
15,312
15,774
16,185
16,685
a Includes collateral received on swaps of £555m (FY21: £588m).
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
2022 were unsecured.
The principal repayments of loans and borrowings at hedged rates amounted to £15,700m (FY21: £16,301m) and repayments fall
due as follows:
2022
Effect of
hedging
and
interest
£m
Principal
repayments
at hedged
rates
£m
(233)
43
76
(59)
(8)
(294)
640
978
1,491
2,473
371
9,747
Carrying
amount
£m
911
1,427
915
1,427
2,529
9,463
2021
Effect of
hedging
and
interest
£m
Principal
repayments
at hedged
rates
£m
(219)
(69)
63
65
(77)
(134)
692
1,358
978
1,492
2,452
9,329
(242)
15,060
15,761
(152)
15,609
(475)
15,700
16,672
(371)
16,301
13
16,685
Carrying
amount
£m
873
935
1,415
2,532
379
10,041
15,302
16,175
10
16,185
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
Total finance expense before specific items
Specific items (note 9)
Total finance expense
2022
£m
2021
£m
628
133
4
4
64
833
101
934
572
142
–
(1)
72
785
18
803
BT Group plc Annual Report 2022
Financial statements 190
28. Financial instruments and risk management
We issue or hold financial instruments mainly to finance our operations; to finance corporate transactions such as 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 2022 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, the director tax, treasury, insurance and pensions or the group treasury director who each have been
delegated such authority from the Board.
Hedging strategy
In order to manage our interest rate profile, we enter 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, however, BT has varied some terms on a bilateral basis to apply five-day lookback without
observational shift. 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, the director tax, treasury, insurance and pensions or
the group treasury director.
BT Group plc Annual Report 2022
Notes to the consolidated financial statements continued 191
28. Financial instruments and risk management continued
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 Indian
rupees. 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. 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
2022
Floating
rate
interest
£m
1,746
436
3
Fixed rate
interest
£m
13,515
–
–
Total
£m
15,261
436
3
Fixed rate
interest
£m
14,129
–
–
2021
Floating
rate
interest
£m
1,688
464
20
Total
£m
15,817
464
20
13,515
2,185
15,700
14,129
2,172
16,301
Ratio of fixed to floating
Weighted average effective fixed interest rate – sterling
86%
3.9%
14%
100%
87%
3.8%
13%
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 have 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
2022
£m
Increase
(reduce)
2021
£m
Increase
(reduce)
666
(429)
(247)
(203)
816
(438)
(349)
(255)
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 FY22 and FY21.
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 terms that require us to pay higher rates of interest when our credit ratings are 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 £2bn at 31 March 2022, 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.
BT Group plc Annual Report 2022
Financial statements 192
28. Financial instruments and risk management continued
Our credit ratings were as detailed below:
At 31 March
Rating agency
Fitch
Moody’s
Standard & Poor’s
2022
2021
Rating
Outlook
Rating
Outlook
BBB
Stable
Baa2 Negative
Stable
BBB
BBB
Stable
Baa2 Negative
Stable
BBB
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 2022 is disclosed in
note 26. We have no term debt maturities in FY23.
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 2022
we had undrawn committed borrowing facilities of £2.1bn (FY21: £2.1bn) maturing in March 2027.
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 2022 the payables met
the criteria of trade payables.
Interest Rate Benchmark reform
The group’s syndicated Revolving Credit Facility (undrawn at 31st March 2022), previously referring to IBOR rates, has been updated
to reference alternative benchmark rates for sterling (Sonia) and US dollars (SOFR). Notional cash pooling arrangements and
overdraft arrangements have transitioned onto ARRs where applicable. Any outstanding group contracts with reference to LIBOR
benchmarks include provisions for calculation of interest based on alternative benchmark rates.
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 may therefore differ from both the carrying value and fair value.
Non-derivative financial liabilities
At 31 March 2022
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
Loans
and other
borrowings
£m
Interest
on loans
and other
borrowings
£m
Trade
and other
payables
£m
Provisions
£m
Lease
liabilities
£m
640
935
1,415
2,532
379
10,041
15,942
568
564
538
515
477
2,809
5,471
–
10
–
(5,238)
–
–
5,224
–
–
–
–
–
5,224
–
–
–
4
4
3
–
–
–
788
784
729
626
589
2,983
Total
£m
7,224
2,287
2,685
3,673
1,445
15,833
11
6,499
33,147
–
–
–
–
–
(739)
(5,238)
10
(739)
Carrying value on the balance sheeta,b
15,952
233
5,224
11
5,760
27,180
BT Group plc Annual Report 2022
Notes to the consolidated financial statements continued 28. Financial instruments and risk management continued
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
Loans
and other
borrowings
£m
Interest
on loans
and other
borrowings
£m
Trade
and other
payables
£m
Provisions
£m
Lease
liabilities
£m
692
1,427
915
1,427
2,529
9,463
528
528
515
489
467
3,076
16,453
5,603
–
13
–
(5,384)
–
–
5,153
–
–
–
–
–
5,153
–
–
–
1
3
4
2
2
–
724
791
762
710
592
3,391
12
6,970
34,191
–
–
–
–
–
(818)
(5,384)
13
(818)
193
Total
£m
7,098
2,749
2,196
2,628
3,590
15,930
Carrying value on the balance sheeta,b
16,466
219
5,153
12
6,152
28,002
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 £624m (FY21: £682m) of non-current trade and other payables which relates to non-financial liabilities, and
£918m (FY21: £827m) of other taxation and social security and deferred income.
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 2022
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 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
Net
settled
£m
Gross
settled
outflows
£m
Net
settled
£m
Gross
settled
outflows
£m
Gross
settled
inflows
£m
(873)
(1,508)
(1,566)
(685)
(513)
(4,725)
Total
£m
367
354
131
68
15
129
Gross
settled
inflows
£m
(1,274)
(1,166)
(1,541)
(1,540)
(652)
(4,266)
Total
£m
221
365
390
134
79
287
940
1,615
1,679
736
511
4,789
1,365
1,248
1,663
1,646
703
4,439
300
247
18
17
17
65
664
130
283
268
28
28
114
851
Gross
settled
inflows
£m
(873)
(1,508)
(1,566)
(685)
(513)
(4,725)
Total
£m
144
184
190
128
75
343
Gross
settled
inflows
£m
(1,274)
(1,166)
(1,541)
(1,540)
(652)
(4,266)
Total
£m
181
172
212
196
141
574
940
1,615
1,679
736
511
4,789
1,365
1,248
1,663
1,646
703
4,439
77
77
77
77
77
279
664
90
90
90
90
90
401
851
10,270
(9,870)
1,064
10,270
(9,870)
1,064
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
11,064
(10,439)
1,476
11,064
(10,439)
1,476
a Certain derivative financial instruments contain break clauses whereby either the group or bank counterparty have the right to terminate the swap on certain dates. If the
break clause was exercised, the mark to market position would be settled in cash.
b Foreign currency-related cash flows were translated at closing foreign exchange 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.
BT Group plc Annual Report 2022
Financial statements 194
28. Financial instruments and risk management continued
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 (CFUs) 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.
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
2022
£m
1,091
2,713
1,489
1,915
777
7,985
2021
£m
1,235
3,683
1,339
1,859
1,000
9,116
a The carrying amount excludes £337m (FY21: £314m) of non-current trade and other receivables which relate to non-financial assets, and £1,135m (FY21: £1,918m) 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
Totala
2022
£m
1,946
1,118
768
269
122
–
–
4,223
2021
£m
3,571
656
775
334
115
65
–
5,516
a We hold cash collateral of £555m (FY21: £588m) 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 CFU. 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.
BT Group plc Annual Report 2022
Notes to the consolidated financial statements continued 195
28. Financial instruments and risk management continued
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 2022
Derivative financial assets
Derivative financial liabilities
Total
Financial assets and liabilities
At 31 March 2021
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
1,091
(870)
221
(431)
431
–
Cash
collateral
£m
(555)
67
(488)
Net
amount
£m
105
(372)
(267)
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)
Net
amount
£m
62
(616)
(554)
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.
The group targets a one-to-one hedge ratio. The economic relationship between the hedged item and the hedging instrument
is assessed on an ongoing basis. Ineffectiveness can arise from subsequent change in the forecast transactions as a result of
altered timing, cash flows or value.
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.
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.
BT Group plc Annual Report 2022
Financial statements 196
28. Financial instruments and risk management continued
At 31 March 2022
Designated in a cash flow hedge
Other
Total derivatives
At 31 March 2021
Designated in a cash flow hedge
Other
Total derivatives
Current
asset
£m
77
11
88
Current
asset
£m
56
14
70
Non-
current
asset
£m
878
125
1,003
Non-
current
asset
£m
950
215
1,165
Current
liability
£m
25
26
51
Current
liability
£m
58
30
88
Non-
current
liability
£m
712
107
819
Non-
current
liability
£m
1,023
172
1,195
All derivative financial instruments are categorised at Level 2, with the exception of the energy contracts which are categorised at
Level 3 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).
We hedge forecast foreign currency purchases, principally denominated in US dollar, euro and Indian rupees 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 2022
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 Indian rupeesc
Energy contractsd
Total cash flow hedges
Deferred tax
Derivatives not in a designated hedge
relationship
Carrying value on the balance sheet
Notional
principal
£m
11,688
122
946
12,756
Balance in
cash flow
hedge related
reserves
(gain)/loss
£m
Amount
recycled from
cash flow
hedge related
reserves
to P&L
£m
Fair value
(gain)/loss
recognised
in OCI
£m
Asset
£m
Liability
£m
889
5
30
31
955
–
136
1,091
(731)
–
(3)
(3)
(737)
–
(133)
(870)
(26)
(29)
(21)
(28)
(83)
(6)
(51)
(64)
(104)
(204)
61
3
(10)
–
54
16
–
(88)
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 operating costs and finance expense.
b Step up interest on US dollar 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 Indian rupees are hedged using forward currency contracts. Amounts recycled to profit and loss
are presented within cost of sales, operating costs or fixed assets, in line with the underlying hedged item.
d Energy contracts are hedged using contracts for difference and virtual power purchase agreements in order to provide long term power cost certainty. Amounts recycled to
profit and loss are presented within operating costs.
BT Group plc Annual Report 2022
Notes to the consolidated financial statements continued 197
28. Financial instruments and risk management continued
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 Indian rupeesc
Energy contractsd
Notional
principal
£m
12,302
147
2,145
Asset
£m
Liability
£m
999
–
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
–
–
229
(202)
1,235
(1,283)
Balance in cash
flow hedge
related
reserves
(gain)/loss
£m
Amount
recycled from
cash flow
hedge related
reserves
to P&L
£m
Fair value
(gain)/loss
recognised
in OCI
£m
1,349
16
88
15
(862)
3
9
–
1,468
(850)
(3)
(26)
40
36
47
(16)
–
31
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 operating costs and finance expense.
b Step up interest on US dollar 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 Indian rupees are hedged using forward currency contracts. Amounts recycled to profit and loss
are presented within cost of sales, operating costs or fixed assets, in line with the underlying hedged item.
d Energy contracts are hedged using contracts for difference and virtual power purchase agreements in order to provide long term power cost certainty. Amounts recycled to
profit and loss are presented within operating costs.
With the exception of one hedge which became ineffective due to divestment activity (see note 9), all cash flow hedges were fully
effective in the period.
29. Other reserves
Other comprehensive income
Capital
redemption
reserve
£m
Cash flow
reservea
£m
Fair value
reserve
£m
Cost of
hedging
reservec
£m
At 1 April 2020
Exchange differencese
Net fair value gain (loss) on cash flow hedges
Movements in relation to cash flow hedges recognised in
income and expensef
Tax recognised in other comprehensive income
Transfer to realised profit
At 31 March 2021
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 profitb
27
–
–
–
–
–
27
–
–
–
–
–
–
476
–
(1,481)
804
111
–
(90)
–
59
(86)
–
(31)
–
At 31 March 2022
27
(148)
–
–
–
–
–
–
–
–
–
–
6
–
(7)
(1)
Translation
reserved,g
£m
616
(189)
–
–
22
(9)
440
65
–
–
–
–
–
–
–
13
46
–
–
59
–
145
32
–
–
–
236
505
Total
£m
1,119
(189)
(1,468)
850
133
(9)
436
65
204
(54)
6
(31)
(7)
619
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 Realised profit includes profit on disposal of investments held at fair value through other comprehensive income.
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 and forward points on certain foreign exchange contracts. 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 £1m (FY21: £nil) of exchange differences in relation to retained earnings attributed to non-controlling interests.
f Movements in cash flow hedge related reserves recognised in income and expense include a net charge to other comprehensive income of £126m (FY21: restated credit of
£778m) which have been reclassified to operating costs, and a net credit to the cash flow reserve of £72m (FY21: credit of £72m) which have been reclassified to finance
expense (see note 27).
g Included within the £65m movement in translation reserve is £1m (FY21: £23m) which relate to disposals (see note 23).
BT Group plc Annual Report 2022
Financial statements 198
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 and joint ventures are shown below:
At 31 March
Sales of services to associates and joint ventures
Purchases from associates and joint ventures
Amounts receivable from associates and joint ventures
Amounts payable to associates and joint ventures
2022
£m
5
44
2
1
2021
£m
9
51
3
5
Other related party transactions include the purchase of energy from an entity owned by the BT Pension Scheme. Total purchases
during the year were £12m (FY21: £13m). £1m was due to the other party as at 31 March 2022 (FY21: £2m). The balance is unsecured
and no guarantees have been given.
31. Financial commitments
Financial commitments were as follows:
At 31 March
TV programme rights commitments
Capital commitments
Other commitments
Total
2022
£m
997
1,596
295
2,888
2021
£m
1,691
1,370
263
3,324
TV programme rights commitments, mainly relating to football broadcast rights, are those for which the licence period has not yet
started. A sale of our BT Sport operations to which these commitments relate is considered highly probable. The group is
contractually committed to future rights payments until the sale completes at which point the commitment will transfer to the new
established joint venture. Further details on the transaction and held for sale assets and liabilities are included in note 23.
Other than as disclosed below and in note 19, there were no contingent liabilities or guarantees at 31 March 2022 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 £600m 5.75% bonds due
in 2028.
Legal and regulatory proceedings
See note 19 for contingent liabilities associated with legal and regulatory proceedings.
32. Post balance sheet events
BT Sport
In May 2022, we reached an agreement with Warner Bros. Discovery (Discovery) to create a sports joint venture (JV) combining BT
Sport and Discovery’s Eurosport UK business into a separate legal entity with both BT and Discovery each holding a 50% interest and
equal voting rights. The production and operational assets of BT Sport will transfer to, and become a wholly owned subsidiary of,
Discovery who will manage and operate the production and distribution of the sport content. Discovery will have the option to
acquire BT’s 50% interest in the JV at specified points during the first four years of the JV. At completion of the transaction, BT is
expected to lose control of the BT Sport operations and the group’s interest in the combined business is expected to be classified as
a Joint Venture. BT will enter into a distribution agreement with the JV to procure the sport content required to continue to supply
our existing broadband, TV and mobile customers. BT’s agreement with the JV will extend beyond 2030, and for the first four years
includes a minimum revenue guarantee of approximately £500m per annum, after which the agreement will change to a fully
variable arrangement.
The transaction is subject to regulatory approval, but it is expected to conclude by the end of 2022. The transaction meets the held
for sale criteria per IFRS 5 and accordingly the asset and liabilities of the BT Sport disposal group have been classified as held for sale
at 31 March 2022. Further details are provided in note 23.
BT Group plc Annual Report 2022
Notes to the consolidated financial statements continued Financial Statements of BT Group plc
BT Group plc company balance sheet
Registered number 4190816
At 31 March
Non-current assets
Investment in subsidiary undertaking
Other investmentsa
Current assets
Cash and cash equivalents
Current liabilities
Trade and other payablesb
Total assets less current liabilities
Non-current liabilities
Trade and other payablesb
Equity
Ordinary shares
Share premium
Capital redemption reserve
Own shares
Profit and loss accountc
Total equity
199
Note
2
2022
£m
2021
£m
11,201
585
11,096
972
11,786
12,068
5
5
32
32
3
3
27
27
11,759
12,044
26
26
–
–
499
1,051
27
(274)
10,430
499
1,051
27
(143)
10,610
11,733
12,044
11,759
12,044
a Other investments consists of loan to group undertakings of £580m (FY21: £971m) and accrued interest of £5m (FY21:£1m). The loan attracts interest of LIBOR plus 37.5
basis points and will transition onto ARRs after the balance sheet date (FY21: LIBOR plus 37.5 basis points). 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. In the 2021 Annual Report, this balance sheet caption
was labelled ‘Trade and other receivables’. We have opted to change the name to ‘Other investments’ as it better represents the loan to group undertaking and aligns to how
it is classified in the British Telecommunication plc Annual Report.
b Current trade and other payables consists of loans from group undertakings of £16m (FY21: £10m) and other creditors of £16m (FY21: £17m).The non-current trade and
other payables comprises the obligation to purchase own shares into trust via a forward contract.
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 £2m (FY21: £6m).
The financial statements of the company on pages 199 to 202 were approved by the Board of Directors on 11 May 2022 and were
signed on its behalf by:
Adam Crozier
Chairman
Philip Jansen
Chief Executive
Simon Lowth
Chief Financial Officer
BT Group plc Annual Report 2022
Financial statements 200
BT Group plc company statement of changes in equity
At 1 April 2020
Profit for the financial year
Transfer to realised profit
Capital contribution in respect of
share-based payments
Net buyback of own shares
At 31 March 2021
Profit for the financial year
Dividends paid
Unclaimed dividends over
10 years
Share-based payments
Capital contribution in respect of
share-based payments
Net buyback of own shares
Note
3
Called up
share
capitala
£m
Share
premium
account
£m
Capital
redemption
reserve
£m
499
–
–
–
–
499
–
–
–
–
–
–
1,051
–
–
–
–
1,051
–
–
–
–
–
–
27
–
–
–
–
27
–
–
–
–
–
–
At 31 March 2022
499
1,051
27
Merger
reserve
£m
1,574
–
(1,574)
–
–
–
–
–
–
–
–
–
–
Own
sharesb
£m
(237)
–
–
–
94
(143)
–
–
–
–
–
(131)
Profit and
loss
accountb,c
£m
9,065
6
1,574
72
(107)
10,610
2
(227)
2
3
105
(65)
Total
£m
11,979
6
–
72
(13)
12,044
2
(227)
2
3
105
(196)
(274)
10,430
11,733
a The allotted, called up and fully paid ordinary share capital of the company at 31 March 2022 was £499m (31 March 2021: £499m), representing 9,968,127,681
(31 March 2021: 9,968,127,681) ordinary shares of 5p each.
b In FY22, 19,672,628 shares (FY21: 44,573,595) were issued from Own shares to satisfy obligations under employee share schemes and executive share awards at a cost of
£43m (FY21: £108m). At 31 March 2022, 41,429,938 shares (FY21: 50,724,972) with an aggregate nominal value of £2m (FY21: £3m) were held at cost as treasury shares
and 94,120,883 shares (FY21: 9,172,675) with an aggregate nominal value of £5m (FY21: £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 £2m (FY21: £6m).
BT Group plc Annual Report 2022
201
Notes to the company financial statements
1. BT Group plc accounting policies
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 are prepared in
accordance with Financial Reporting Standard 101 Reduced
Disclosure Framework (FRS 101). In preparing these financial
statements, the Company applies the recognition, measurement
and disclosure requirements of UK-adopted international
accounting standards, but makes amendments where necessary
in order to comply with Companies Act 2006 and has set out
below where advantage of the FRS 101 disclosure exemptions
has been taken.
Financial statements
The financial statements are prepared on a going concern basis
and under the historical cost convention. Refer to page 134 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 2022 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 2022 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 2022 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.
Investment in subsidiary undertaking
Investment in subsidiary undertaking is 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. Investment in subsidiary undertaking
Cost
At 1 April 2020
Additions
At 31 March 2021
Additions
At 31 March 2022
Total
£m
11,024
72
11,096
105
11,201
Additions of £105m (FY21: £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 FY22 and FY21.
BT Group plc Annual Report 2022
Financial statements 202
Notes to the company financial statements continued
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.
The merger reserve is now nil.
4. Other information
Dividends
An interim dividend of 2.31p per share amounting to £227m
was paid on 7 February 2022. A final dividend of 5.39p per share
amounting to approximately £528m is proposed in respect
of the year ended 31 March 2022 (FY21: no interim or final
dividend paid).
Employees and directors
The chairman and the executive and non-executive directors
of BT Group plc were the only employees and directors of the
company during FY22 and FY21. The costs relating to qualifying
services provided to the company’s principal subsidiary, British
Telecommunications plc, are recharged to that company.
BT Group plc Annual Report 2022
Related undertakings
203
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
1 Braham Street, London, E1 8EE,
United Kingdom
BT Group Investments
Limited
BT Group Nominees
Limited
100%
Held via other group companies
Algeria
100%
ordinary
ordinary
Telecomlaan 9, 1831 Diegem, Belgium
100%
ordinary
BT Global Services
Belgium BV
BT Professional
Services (Holdings) N.V.
Global Security Europe
Limited – Belgian
Branchb
Rue de L’Aêropostale 8, 4460 Grâce-Hollogne,
Belgium
ordinary
100%
100%
–
20 Micro zone d’Activités Dar El Madina,
Bloc B, Loc N01 Hydra, Alger, 16000, Algeria
IP Trade SA
Bermuda
100%
ordinary
BT Algeria
Communications SARL
Argentina
100%
ordinary
Maipu No 1210, piso 8 (C1006), Buenos Aires,
Argentina
BT Argentina S.R.L.
Australia
100%
ordinary
Level 1, 76 Berry Street, North Sydney NSW
2060, Australia
Century House, 16 Par-la-Ville Road,
Hamilton, HM08, Bermuda
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%
–
BT Australasia Pty
Limited
Austria
100%
ordinary
100% preference
Trg Heroja 10/1, 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
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%
–
UTC Building, 19th Floor, Kawran Bazar,
Dhaka-1215, Dhaka, 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
58 Voronyanskogo St, Office 89,
Minsk 220007, Belarus
BT BELRUS Foreign
Limited Liability
Company
100%
ordinary
BTIH Teleconsult
Drustvo sa
organicenom
odgovornoscu za
posredovanje i
zastupanje d.o.o.
Sarajevo
Botswana
100%
–
Deloitte House, Fairgrounds Office Park, Plot
64518, Gaborone, PO BOX 1839, Botswana
BT Global Services
Botswana (Proprietary)
Limited
Brazil
100%
ordinary
Avenida Das Naçôes Unidas, 4777 – 14 andar,
São Paulo, SP, Brazil
BT Communications do
Brasil Limitada
quotas
Avenida Das Naçôes Unidas, 4777 – 14 andar,
Pinheiros,São Paulo, SP, 05477-000, Brazil
100%
BT Global
Communications do
Brasil Limitada
Bulgaria
100%
quotas
51B Bulgaria Blvd., fl. 4, Sofia, 1404, Bulgaria
BT Bulgaria EOOD
Canada
100%
ordinary
Regus Brookfield Place, 161 Bay Street 26th
and 27th Floors, Toronto ON M5J 2S1, Canada
BT Canada Inc.
100%
common
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 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 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,Torre A Oficina 1015 Teleport
Business, Bogota, Colombia
BT Colombia Limitada
Costa Rica
100%
quotas
Heredia-Belen La Ribera, Centro Corporativo
El Cafeta, Edificio B, segundo piso, Oficinas de
Deloitte, San José, Costa Rica
BT Global Costa Rica
SRL
Côte d’Ivoire
100%
ordinary
Abidjan Plateau, Rue du commerce, Immeuble
Nabil 1er étage, 01 BP 12721 Abidjan 01,
Côte d’Ivoire
BT Cote D’Ivoire
Croatia
100%
ordinary
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
100%
–
–
BT Group plc Annual Report 2022
Financial statements 204
Related undertakings continued
Subsidiaries continued
Group
interest
in
allotted
capitala
Share
class
Company name
Czech Republic
Pujmanové 1753 / 10a, Nusle, 140 00, Prague,
4, Czech Republic
BT Limited, organizacni
slozkab
BT Global Europe B.V.,
odštěpný závodb
Denmark
100%
100%
–
–
Havneholmen 29, 1561, Kobenhavn V,
Copenhagen, Denmark
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
Group
interest
in
allotted
capitala
Share
class
Company name
Widdersdorfer Strasse 252, 50933, Cologne,
Germany
Global Security Europe
Limited – Germany
Branchb
Ghana
100%
–
5th Floor, Vivo Place, Cantonments City,
Rangoon Lane, P.O. Box MB 595, Accra, Ghana
BT Ghana Limited
Greece
100%
ordinary
75 Patision Street, Athens, 10434, Greece
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%
–
95 C st. El Sayed El Mirghany, Heliopolis 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
Colonia Pueblo Nuevo, Edificio Torre
Morazán, Torre No. 1, Piso 9, Municipio del
Distrito Central, Departamento de, Francisco
Morazán, Tegucigalpa, 10918, Honduras
BT Sociedad De
Responsabilidad
Limitada
Hong Kong
100%
–
38th Floor Dorset House, Taikoo Place,
979 King’s Road, Island East, Quarry Bay,
Hong Kong
BT Hong Kong Limited
Infonet China Limited
Hungary
100%
100%
ordinary
ordinary
100%
ordinary
Budafoki U. 91-93, Budapest, 1117, Hungary
BT El Salvador, Limitada
de Capital Variable
Estonia
A.H. Tammsaare tee 47, Tallinn, 11316,
Estonia
BT Solutions Limited
Eesti Filiaalb
Finland
100%
–
Mannerheimvägen 12 B 6, 00100 Helsinki,
Finland
BT Nordics Finland Oy
France
100%
ordinary
Tour Ariane, 5 place de la Pyramide, La
Defense Cedex, 92088 PARIS, France
BT France S.A.S.
Germany
100%
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
100%
ordinary
BT Group plc Annual Report 2022
BT Global Europe B.V.
Magyarorszagi
Fioktelepeb
BT Limited
Magyarorszagi
Fioktelepeb
BT ROC Kft
India
100%
–
100%
100%
–
business
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%
100%
100%
ordinary
equity
ordinary
ordinary
ordinary
Orange Services India
Private Limited
100%
ordinary
Group
interest
in
allotted
capitala
Share
class
Company name
Indonesia
20/F of IWG Spaces at World Trade Centre 3,
JI. Jend. Sudirman, RT.4/RW.2, Karet
Kuningan, Kota Administrasi 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
Strada Santa Margherita, 6 / A, 43123, Parma,
Italy
BT Enìa
Telecomunicazioni
S.P.A.
Via Correggio 5, San Donato Milanese, 20097,
Milan, Italy
ordinary
99%
Radianz Italia S.r.l.
Via Mario Bianchini 15, 00142 Roma, Italy
100%
ordinary
BT Global Services
Limitedb
Via Pianezza n° 123, 10151, Torino, Italy
100%
–
ordinary
Atlanet SpA
Via Tucidide 56, Torre 7, 20134, Milano, Italy
99%
Basictel SpA
BT Italia S.p.A.
BT Nederland N.V.b
Nuova Societa di
Telecomunicazioni SpA
Jamaica
99%
99%
100%
ordinary
ordinary
–
99%
ordinary
Suite #6, 9A Garelli Avenue, Half way tree,
St. Andrew, Kingston 10, Jamaica
BT Jamaica Limited
Japan
100%
ordinary
ARK Mori Building, 12-32 Akasaka, 1-Chome,
Minato-Ku, Tokyo, 107 – 6024, Japan
BT Global Japan
Corporation
BT Japan Corporation
Jersey
100%
100%
ordinary
ordinary
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
100%
ordinary
205
Group
interest
in
allotted
capitala
Share
class
Company name
New Zealand
Group
interest
in
allotted
capitala
Share
class
Level 5, Tower 3, Avenue 7, Bangsar South,
No.8, Jalan Kerinchi, 59200 Kuala Lumpur,
Malaysia
c/o Deloitte, Level 18, 80 Queen Street,
Auckland Central, Auckland, 1010, NZ,
New Zealand
BT Global Services
Solutions Sdn Bhd
BT Global Technology
(M) Sdn. Bhd.
BT Systems (Malaysia)
Sdn Bhd
Malta
100%
ordinary
100%
ordinary
100%
ordinary
Level 1, LM Complex, Brewery Street, Zone 3,
Central Business District, Birkirkara CBD,
3040, Malta
BT Solutions Limitedb
Mauritius
100%
–
c/o Deloitte, 7th Floor Standard Chartered
Tower, 19-21 Bank Street, Cybercity, Ebène,
72201, Mauritius
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 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, 2815,
Nicaragua
BT Nicaragua S.A.
Nigeria
100%
capital
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, Oslo, 0121, Norway
Subsidiaries continued
Group
interest
in
allotted
capitala
Share
class
Company name
Malaysia
Company name
Jordan
Wadi AlSer – Dahiet Prince Rashid – King
Abdullah Street, Building No. 391 – 3rd Floor,
Jordan
BT (International)
Holdings Limited
(Jordan)
Kazakhstan
100%
ordinary
No 201, 2nd Floor, Building 1a, Business
Centre Nurly-Tau, 5 Al-Farabi Avenue,
Almaty, 050057, Kazakhstan
BT Kazakhstan LLP
Kenya
100%
–
Aln House, Eldama Ravine close, off Eldama
Ravine Road, Westlands, P O Box 764, Sarit
Centre, Nairobi, 00606, Kenya
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
Muitas iela 1A, Riga, LV-1010, Latvia
BT Global Services
Korea Limited
Latvia
BT Latvia Limited,
Sabiedriba ar
ierobezotu atbildibu
Lebanon
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
Aludariu str 2-33, LT-01113 Vilnius, Lithuania
100%
common
BT LatAm México, S.A.
de C.V.
Montenegro
100%
common
BT Solutions Norway AS
Oman
100%
ordinary
Vasa Raickovica 4b, Podgorica, Podgorica,
Montenegro
100%
ordinary
BT Montenegro DOO
Morocco
100%
–
Bd. Abdelmoumen, Immeuble Atrium, n 374,
Lot. Manazyl Al Maymoune, 5eme etage,
Casablanca, 20390, Morocco
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
BT International
Holdings Limited & Co.
LLC
Pakistan
100%
ordinary
BT Solutions Limited –
Morocco Branchb
Mozambique
100%
–
Cavish Court, A-35, Block 7&8, KCHSU,
Shahrah-e-Faisal, Karachi, 75350, Pakistan
Avenida Kenneth Kaunda, number 660,
Sommershield, Maputo City, Mozambique
BT Pakistan (Private)
Limited
Panama
100%
ordinary
100%
quotas
50th and 74th Street, San Francisco, PH 909,
15th and 16th Floor, Panama City, Panama
UAB BTH Vilnius
Luxembourg
100%
ordinary
12 rue Eugene Ruppert, L 2453, Luxembourg
BT Mozambique,
Limitada
Namibia
BT Global Services
Luxembourg SARL
BT Broadband
Luxembourg Sàrl
Macao
100%
ordinary
100%
ordinary
Avenida da.Praia Grande, No. 367-371, Keng
Ou Building, 15th andar C, em Macao, Macau,
Macao
BT Hong Kong Ltd. –
Macau Branchb
Malawi
100%
–
KEZA Office Park Blocks 3, First Floor, Near
Chichiri, Shopping Mall, Blantyre, Malawi
BT Malawi Limited
100%
ordinary
Unit 3, 2nd floor, Ausspann Plaza,
Dr Agostinho Neto Road, Ausspannplatz,
Windhoek, Private Bag, 12012, Namibia
BT Solutions Limitedb
Netherlands
100%
–
Herikerbergweg 2, 1101 CM, Amsterdam,
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
100%
ordinary
100%
100%
ordinary
ordinary
100%
ordinary
100%
–
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
Urb. Jardin Av. Las Begonias No. 441, San
Isidro, Lima, Peru
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
100%
ordinary
BT Group plc Annual Report 2022
Financial statements 206
Related undertakings continued
Subsidiaries continued
Group
interest
in
allotted
capitala
Share
class
Company name
Russia
Company name
Group
interest
in
allotted
capitala
Share
class
Company name
Sweden
Group
interest
in
allotted
capitala
Share
class
40th Floor, PBCom Tower 6795, Ayala Avenue
cor. Rufino St, Makati City, 1226, Philippines
Room 62, prem xx, Floor 2, Pravdy, 26, 127137,
Moscow, Russian Federation
BT Solutions Limited
Liability Company
Serbia
100%
–
Box 30005, 104 25, Stockholm, Sweden
BT Nordics Sweden AB
Switzerland
100%
ordinary
Richtistrasse 5, 8304 Wallisellen, Switzerland
Dimitrija Georgijevica Starike 20, Belgrade,
11070, Serbia
BT Switzerland AG
Taiwan
100%
ordinary
BT Belgrade d.o.o
Sierra Leone
100%
ordinary
Shin Kong Manhattan Building, 14F, No. 8,
Sec. 5, Xinyi Road, Taipei, 11049, Taiwan
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
126/134 Marszalkowska St., Room 128,
00-008 WARSAW, Warsaw, Poland
BT Poland Spółka Z
Ograniczoną
Odpowiedzialnością
Portugal
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
Qatar
100%
–
1413, 14th Floor, Al Fardan Office Tower,
Doha, 31316, Qatar
BT Global Services
(North Gulf) LLC
Republic of Ireland
49%
ordinary
2 Grand Canal Plaza, Upper Grand Canal
Street, Dublin 4, Republic of Ireland
100%
100%
100%
ordinary
ordinary
BT Communications
Ireland Limited
BT Communications
Ireland Group Limited
BT Communications
Ireland Holdings
Limited
BT Global
Communications
(Ireland) Limited
The Faraday
Procurement Company
Limited
Whitestream Industries
Limited
BDO, Beaux Lane House, Mercer Street Lower,
Dublin 2, Ireland
ordinary
ordinary
ordinary
ordinary
100%
100%
100%
Canal Capital
Investment Limited
Romania
100%
ordinary
Cladirea A1, Biroul Nr. 52, Nr 35-37, Str.
Oltenitei, Sector 4, Bucharest, Romania
BT Global Services
Limited Londra
Sucursala Bucurestib
BT Group plc Annual Report 2022
84 Dundas Street, Freetown, Sierra Leone
BT (SL) Limited
Singapore
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.
Slovenia
100%
ordinary
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
–
C/ María Tubau, 3, 28050 de Madrid, Spain
BT Global ICT Business
Spain SLU
Sri Lanka
100%
ordinary
Level 03, No 11, Castle Lane, Colombo, 04,
Sri Lanka
BT Communications
Lanka (Private) Limited
Sudan
100%
ordinary
Alskheikh Mustafa Building, Parlman Street,
Khartoum, Sudan
BT Limited Taiwan
Branchb
Tanzania
100%
–
Region Dar Es Salaam, District Kinondoni,
Ward Msasani, Street Msasani Peninsula,
Road 1 Bains Singh Avenue, Plot number
1403/1, Ground Floor, 14111, United Republic
of Tanzania
BT Solutions Limited –
Tanzania Branchb
Thailand
100%
–
No.63 Athenee Tower, 23rd Floor (CEO Suite,
Room No.38), Wireless Road, Kwaeng
Lumpini, Khet Pathumwan, Bangkok, 10330,
Thailand
BT Siam
Communications Co.,
Ltd
BT Siam Limited
Trinidad and Tobago
49%
class B
69% preference
2nd Floor CIC Building, 122-124 Frederick
Street, Port of Spain, Trinidad and Tobago
BT Solutions Limitedb
Tunisia
100%
–
Rue de I’, Euro Immeuble Slim, 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,
Istanbul, 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
100%
ordinary
100%
–
Newgate
Communication
(Sudan) Co. Ltd
100%
ordinary
207
Group
interest
in
allotted
capitala
Share
class
Company name
Uruguay
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
Share
class
Company name
ordinary
100%
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%
ordinary
ordinary
ordinary
ordinary
ordinary
ordinary
100%
100%
100%
BT Corporate Limited
BT Falcon 1 LP
BT Falcon 2 LP
Holland House
(Northern) Limited
ordinary
BDO LLP, 55 Baker Street, London, W1U 7EU,
United Kingdom
ordinary
–
–
100%
100%
100%
BT Centre Nominee 2
Limited
BT Cornwall Limited
BT Facilities Services
Limited
BT Managed Services
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
Mainline
Communications Group
Limited
Mainline Digital
Communications
Limited
Orange Furbs Trustees
Limited
Orange Home UK
Limited
Orange Personal
Communications
Services Limited
United States
100%
100%
ordinary
ordinary
100%
ordinary
100%
ordinary
100%
ordinary
100%
ordinary
100%
ordinary
100%
ordinary
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
100%
100%
100%
100%
100%
100%
common
common
units
common
units
units
100%
common
BT Group plc Annual Report 2022
Subsidiaries continued
Group
interest
in
allotted
capitala
Share
class
Company name
Office no.206 BLOCK B, Diamond Business
Center 1, Al Barsha South Third, Dubai, P.O.
BOX 25205, United Arab Emirates
BT UAE Limited – Dubai
Branch (1)b
BT UAE Limited – Dubai
Branch (2)b
United Kingdom
100%
100%
1 Braham Street, London, E1 8EE,
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
BT Global Security
Services Limited
BT Global Services
Limited
BT Holdings Limited
BT IoT Networks
Limited
BT Lancashire Services
Limited
BT Limited
BT Ninety-Five Limited
BT Nominees Limited
BT OnePhone Limitedc
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
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%
ordinary
100%
100%
ordinary
ordinary
100%
ordinary
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
ordinary
ordinary
ordinary
ordinary
ordinary
ordinary
ordinary
ordinary
ordinary
ordinary
ordinary
ordinary
100%
–
100%
ordinary
100%
ordinary
100%
100%
ordinary
ordinary
Financial statements 208
Related undertakings continued
Associates
Joint ventures
Joint operations
Group
interest
in
allotted
capitala
Company name
Share
class
Company name
Group
interest
in
allotted
capitala
Share
class
Company name
Group
interest
in
allotted
capitala
Share
class
Held via other group companies
Mauritius
Held via other group companies
Indonesia
Held via other group companies
United Kingdom
20/F of IWG Spaces at World Trade Centre 3,
JI, Jend. Sudirman, RT.4/RW.2, Karet
Kuningan, Kota Administrasi Jakarta Selatan,
Jakarta, 12920, Indonesia
Sixth Floor, Thames Tower, Station Road,
Reading, RG1 1LX, United Kingdom
Mobile Broadband
Network Limited
50%
ordinary
PT Sun Microsystems
Indonesia
Philippines
60%
ordinary
11th Floor, Page One Building, 1215 Acacia
Avenue, Madrigal Business Park, Ayala
Alabany, Muntinlupa city, 1780 City, Manila,
1780, Philippines
Sun Microsystems
Philippines, Inc
United Kingdom
51%
common
6th Floor, One London Wall, London,
EC2Y 5EB, United Kingdom
Internet Matters
–
Limited
St Helen’s 1 Undershaft, London, EC3P 3DQ,
United Kingdom
25%
Rugby Radio Station
(General Partner)
Limited
Rugby Radio Station
(Nominee) Limited
Rugby Radio Station LP
50%
ordinary
50%
50%
ordinary
–
All joint ventures are governed by a joint
venture agreement.
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, group acquired the remaining 30%
ordinary shares of BT OnePhone Limited therefore
the company is now a wholly owned subsidiary.
IFS Court, Bank Street, TwentyEight
Cybercity, Ebene, 72201, Mauritius
Mahindra – BT
Investment Company
(Mauritius) Limited
Philippines
43%
ordinary
32F Philam Life Tower, 8767 Paseo de Roxas,
Makati City, Philippines
ePLDTSunphilcox JV,
Inc
SunPhilcox JV, Inc
United Kingdom
20%
20%
ordinary
ordinary
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
2nd Floor, Aldgate Tower, 2 Leman Street,
London, E1 8FA, United Kingdom
35%
35%
ordinary
ordinary
Youview TV Limited
14%
voting
BT Group plc Annual Report 2022
209
Net debt and net financial debt
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.
Additional information
Alternative performance measures
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. 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 business restructuring
programmes, acquisitions and disposals of businesses and
investments, charges or credits relating to retrospective
regulatory matters, property rationalisation programmes,
significant out of period contract settlements, net interest on
our pension obligation, and the impact of remeasuring deferred
tax balances. In the event that items meet the criteria, which
are applied consistently from year to year, they are treated as
specific items. Any releases to provisions originally booked as
a specific item are also classified as specific.
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 129.
BT Group plc Annual Report 2022
Financial statements 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
Adjusted EBITDA
2022
£m
1,274
689
1,963
813
4,405
7,181
287
109
2021
£m
1,472
332
1,804
773
4,347
6,924
481
18
–
(8)
7,577
7,415
210
Additional information continued
Return on Capital Employed
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
2022
£m
2021
£m
2,885
2,587
–
287
8
481
3,172
3,076
16,185
5,760
1,143
488
15,296
16,685
6,152
5,096
568
11,679
(777)
(2,713)
(221)
1,671
(406)
(1,000)
(3,683)
48
440
(197)
Capital employed
36,426
35,788
Return on capital employed
8.7%
8.6%
BT Group plc Annual Report 2022
211
Below we reconcile normalised free cash flow by unit:
Year ended 31 March
Consumer
Enterprise
Global
Openreach
Other
Intra-group items
2022
£m
917
791
131
448
(895)
–
2021
£m
714
1,352
187
486
(1,280)
–
Normalised free cash flow
1,392
1,459
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),
dividends from associates, non-current asset investments,
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
2022
£m
5,962
(52)
2021
£m
6,251
(288)
5,910
5,963
(4,607)
(4,818)
1,303
6
(755)
1,121
–
1
1,145
6
(770)
955
(181)
5
606
390
(8)
(11)
(223)
(659)
702
(782)
Normalised free cash flow
1,392
1,459
BT Group plc Annual Report 2022
Financial statements 212
Cautionary statement regarding forward-looking statements
Certain information included in this Annual Report and
Accounts 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 and Accounts are not guarantees of future
performance. All forward looking statements in this Annual
Report and Accounts are based upon information known to the
Company on the date of this Annual Report and Accounts.
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 Disclosure Guidance and Transparency Rules of the Financial
Conduct Authority), 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 and Accounts shall
exclude any liability under applicable laws that cannot be
excluded in accordance with such laws.
BT Group plc Annual Report 2022
B
T
G
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BT Group plc
Registered office: 1 Braham Street, London E1 8EE
Registered in England and Wales No. 4190816
Produced by BT Group
PHME 87406
Printed in England by Pureprint Group
Design by emperor.works
Printed on Revive 50 Silk which is made from 50%
de-inked, post-consumer waste and 50% virgin fibre
bt.com
Please recycle
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