BT Group PLC

Annual Report • Jun 6, 2024

Building

Connecting

Accelerating

BT Group plc Annual Report 2024

Every connection tells a story

The connections you make create a picture of modern life in the digital world.

of you used our services as customers.

200^m

of your devices were connected to our network.

94,722 a

Petabytes consumed

One Petabyte is one million Gigabytes. With 94,722Pb^a , you could stream 'Barbie' over 7.2 billion times. In 4K quality.

a Petabytes consumed is for calendar year 2023.

7.2+ billion

19,500

Further

We have more than 19,500 mobile sites across the UK, including 1,350 new mast sites built from scratch since 2013. That's a brand new site every three days over the past decade.

Adding over 60,000 square miles of 4G mobile coverage across the UK since 2013. That's more than 60% of the UK.

121%

Faster Our 5G infrastructure has increased average download speed by 121% since 2019.

1.5bn

You spent 1.5 billion minutes talking on voice and video calls with our EE mobile network in the last ten years. That is nearly 3,000 years of talking.

A network record peak You helped create more of these record peaks in network traffic than ever.

Online annual review To explore a year in the life of our customers and colleagues, visit our online review. bt.com/annualreview

What connects us defines us

Our network enables millions of customers to make trillions of connections between the people, places and things that matter most to them.

Each connection carries data. And it creates data too. We've collated it here to reveal a year in the life of customers who've never relied on us more.

The video calls that bring families together. The unbroken streams of shows and sports. The games, apps, deliveries and chats.

Fixed or mobile, at home, work or play, our growing network makes these connections happen. And we have the storytelling stats to show it.

Mobile coverage

We operate more than 19,500 mobile sites across the UK, including 1,350 brand new mast sites built since 2013. That's a new mobile site being built every three days for the past decade to elevate the UK's mobile connectivity.

4G

5G

75%

Our 4G population coverage in each individual nation now stands at: England (99%), Northern Ireland (98%), Scotland (99%), and Wales (98%)

Our 5G population coverage in each individual nation now stands at: England (77%), Northern Ireland (29%), Scotland (73%), and Wales (77%)

Fibre coverage

We're building our new full fibre network across the UK, from rural villages to city centres, with 13.8m premises covered, equivalent to over 40% of UK homes and businesses already able to access ultrafast, ultra-reliable broadband. We're reaching more properties every day – including one million just in the final quarter.

Our fibre geographic coverage in each individual nation now stands at: England (10.9m), Northern Ireland (0.8m), Scotland (1.2m), and Wales (0.9m)

This map is a visual representation of network coverage and should not be taken as 100% accurate.

Contents

Revenue

£20.8bn 1%

(FY23: £20.7bn)

Profit before tax

(FY23: £1.7bn)

Adjusted^a EBITDA

£8.1bn 2%

(FY23: £7.9bn)

Cash flow from operating activities

£6.0bn (11)%

(FY23: £6.7bn)

Normalised free cash flow^b

£1.3bn (4)%

(FY23: £1.3bn)

Basic earnings per share

(FY23: 19.4p)

Capital expenditure

⁽FY23: £5.1bn)

a Adjusted EBITDA is group profit or loss before specific items, net finance expense, taxation, depreciation and amortisation and share of post tax profits or losses of associates and joint ventures. See page 232. b We define normalised free cash flow on page 232.

Strategic report

A message from our Chairman	2
A message from our Chief Executive	4
Executive Committee	8
Our business model	10
Trends shaping our industry and business	16
Our strategic framework	18
Progress against our strategic framework	20
Our people	30
Our Manifesto	34
Our stakeholders	40
Non-financial and sustainability information statement	46
Our key performance indicators (KPIs)	48
Group performance	50
Regulatory update	58
A message from the Chair of Openreach	60
Risk management	61
Our principal risks and uncertainties	63
Task Force on Climate-related Financial Disclosures	71
Viability statement	81
Corporate governance report	83
Financial statements	131
Additional information	231

This Strategic report was approved by the Board on 15 May 2024 and signed on its behalf by the Chairman.

Adam Crozier Chairman 15 May 2024

• You can find our cautionary statement on forward-looking statements on page 234.
• Pages 1 to 82 are 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.
• You can find our Corporate governance report on pages 83 to 130. It includes the Directors' report and information on our directors' remuneration.

When we say 'BT Group' and 'the group' in this document we mean BT Group plc – made up of our subsidiaries, customer-facing units and internal corporate units. When we say 'FY24' we mean the financial year that ended on 31 March 2024, and we use the same approach for any other years.

Look out for these throughout the report

• Reference to another page in the report
• Reference to further reading online

A message from our Chairman

Connecting the UK while transforming our business.

BT Group has made good progress in the last few years and yet we still have an enormous transformation ahead of us if we're to truly modernise the way we operate for the benefit of all our stakeholders. As our investment expenditure reduces and as Allison's leadership brings renewed focus and accelerated delivery, I'm confident that the long-term prospects for BT Group are extremely strong.

Adam Crozier Chairman

The connections that we provide are more critical than ever, and our customers' needs and demands are constantly evolving.

Keeping the UK's homes, public services and businesses connected places a huge responsibility on BT Group – one that we've continued to meet successfully in FY24, while sustainably growing our business and continuing to transform our operations.

We've also achieved this while facing significant change across the organisation, including the appointment of our new Chief Executive.

Thank you to Philip

After five years as Chief Executive of BT Group, Philip Jansen stood down at the end of January 2024. Philip achieved a huge amount during his time, most notably setting our vision to provide full fibre connections to 25m premises across the UK by December 2026 – a target we are well over halfway towards completing.

Philip's tenure was also marked by a number of exceptional external challenges. Covid-19 caused immediate changes to everyday life and lasting shifts in how businesses and society operate, and BT Group successfully adapted to both under Philip's leadership. He also steered the business through the impacts of events such as the cost-of-living crisis, high inflation rates and the invasion of Ukraine.

I'd like to take the opportunity to again thank Philip personally, and on behalf of the Board, for everything he delivered for BT Group and the foundation he's set for our future success. I wish him all the best with his future endeavours.

Welcoming Allison

In February 2024, we welcomed Allison Kirkby as our new Chief Executive. She is a proven leader, with deep sector experience and a history of transforming businesses.

Having served as a member of our Board since 2019, Allison already has a full understanding of our long-term strategic objectives. On the following pages, she sets out how she's shaping this strategy to deliver for our customers and stakeholders better and faster.

This will be achieved by focusing on building and connecting customers to our networks, and accelerating the transformation of BT Group to improve our customer service and for the benefit of all our stakeholders. The Board and I look forward to supporting this agenda and Allison's leadership in her new executive capacity.

Moving beyond peak investment

We've steadily accelerated the delivery of our unprecedented investment programme, creating the UK's digital backbone and enabling growth in its economy and businesses. Building and connecting faster hastens the delivery of returns to our shareholders.

FY24 is the year in which we passed the peak of our capital expenditure on this programme, enabling us to see greater normalised free cash flow over the coming years. This gives us confidence to increase the full year dividend to 8.0 pence per share while reaffirming our progressive dividend policy for our loyal investors.

Enabling better outcomes for the UK

While change both inside and outside BT Group is now constant, our purpose endures: We Connect for Good. Our network investments, alongside our Manifesto commitments to deliver responsible, inclusive and sustainable technology, create a foundation for greater inclusivity and wider benefits to society.

We're committed to ensuring that the networks we provide, and the essential services they enable, are accessed and utilised as widely as possible across the UK. In 2021, we set an ambitious goal to reach 25m people in the UK with digital skills by March 2026, and we're on track to hit that target. We also continue to move forward on our wider sustainability goals, with a commitment to build towards a circular BT Group by the end of March 2030, and a circular tech ecosystem by end of March 2040.

We've continued to make clear progress on reducing our environmental impact, with a 61% reduction in operational carbon emissions intensity (compared to FY17 levels) – but we want to go further too, both in our own operations but also within the wider ecosystem we enable. That's why we've set a target to achieve net zero carbon emissions in our operations by the end of March 2031, and for supply chain and customer carbon emissions by the end of March 2041.

Engaging with our stakeholders

The massive investments we've been making, amid highly challenging economic conditions and constantly increasing data usage and demand, have created inflationary pressures on our business. This has an unavoidable impact on the prices we must charge our customers. We know these rises are never welcome, which is why it's critical that the rationale behind them is fully explained and understood.

Our Consumer business was the first in the industry to incorporate Ofcom's latest proposals on pricing, moving to a 'pounds and pence' structure so that customers have a clear view of costs across their contracted period. We've also continued to protect our social tariff and pay as you go customers from price increases, to ensure everyone is able to remain online.

We're engaging with a broad range of stakeholders, including Ofcom, UK Government, the Digital Voice Advisory Board and Telecare Action Board, as we progress the switch from analogue to digital landlines. Along with other communications providers, we paused all non-voluntary migrations in December 2023, and we now expect to have migrated all customers off the public switched telephone network (PSTN) by the end of January 2027, allowing us to align the programme with full fibre broadband customer upgrades where available. This timescale will ensure we get this right while delivering this essential programme to ensure the long-term resilience of our networks and services.

Board changes

In January 2024 we welcomed Raphael Kübler, Chief Operating Officer at Deutsche Telekom, to our Board. Raphael replaced Adel Al-Saleh as Deutsche Telekom's nominated Board representative, and we look forward to working with him going forward.

In May of this year we also welcomed Tushar Morzaria to the Board as an Independent Non-Executive Director. Tushar brings a wealth of strategic financial management experience gained over 25 years of overseeing transformation programmes and strengthening risk and control frameworks in complex global organisations.

Ian Cheshire and Iain Conn stepped down from the BT Group Board in July 2023, with Ruth Cairnie succeeding them in the roles of both Senior Independent Non-Executive Director and Chair of the Remuneration Committee.

I'm confident that the collective expertise and varied backgrounds of our Board members mean we have the right range of skills and experience to progress BT Group's ambitions, while also meeting best practice and the guidelines set out in our Board Diversity and Inclusion Policy.

Looking ahead

BT Group has made good progress in the last few years and yet we still have an enormous transformation ahead of us if we are to truly modernise the way we operate for the benefit of all our stakeholders.

While we've a long way to go, our strategy is beginning to deliver, creating the next generation networks that connect the UK, while seeing clear improvements in operational efficiency and financial returns.

As our investment expenditure reduces and as Allison's leadership brings renewed focus and accelerated delivery, I'm confident that the long-term prospects for BT Group are extremely strong.

Adam Crozier Chairman

15 May 2024

A message from our Chief Executive

Sharpening our focus.

Since her appointment as Chief Executive, Allison has visited BT Group sites across the UK, including:

BT Group built and connected customers to our next generation networks at record speed and efficiency over the past year, while continuing to grow revenue and EBITDA.

Allison Kirkby Chief Executive

Watch our CEO reflect on her first few months in office. bt.com/annualreview

Full fibre rollout: now at 13.8m premises

13.8^m

Normalised free cash flow: raising targets to c.£3.0bn by 2030

c.£3.0bn

Sharpening our focus on being the best we can be for our customers, for our shareholders and for the UK.

Having passed peak capex on our full fibre broadband rollout and achieved our £3bn cost and service transformation programme a year ahead of schedule, we've now reached the inflection point on our long-term strategy.

Early reflections

I've spent the last few months meeting as many of our customers and stakeholders as possible. Every interaction has confirmed to me that connectivity is the lifeblood of the UK's society and economy. We provide the digital backbone for the nation; without us, life as we know it stops. That might sound dramatic, but it's true – and it's why everything we do has to be focused on supporting the customers who rely on us and living up to our purpose, to connect for good.

I've now visited close to 20 BT Group sites in the UK to meet with colleagues across our operations, and it's been fantastic to see their commitment and passion for what we do. As they're the people who connect with our customers most often, hearing their perspectives on our strengths, opportunities and challenges has also been invaluable as I've shaped my thinking.

These conversations have deepened my appreciation of the fantastic assets that make us unique. We're unrivalled in our experience of operating critical national infrastructure, our breadth of private and public sector customer relationships, our research and development credentials, our partnerships with the world's leading technology firms, and above all our brilliant people who underpin everything we do.

We must harness these strengths as we move into the next phase of BT Group's transformation. We're over the peak of our investment in fibre-to-the-premises ('FTTP' or 'full fibre'); take-up of 5G and FTTP is growing; and we're seeing higher customer satisfaction across the business as our networks and services provide everimproving experiences. But we can and must go faster in utilising the full power of our networks. We'll do this by sharpening our focus on being the best we can be for our customers, for our shareholders and for the UK.

Our financial performance

Over the past year we delivered a solid operating and financial performance, with growth in both adjusted revenue and EBITDA. We passed peak capex on our full fibre broadband rollout and achieved £3bn of annualised cost savings a year ahead of schedule.

This means we've now reached the inflection point where we emerge from the most capital-intensive phase of our investment programme. It also gives us the confidence to provide new guidance that significantly increases our short-term cash flow and sets out a path to more than double our normalised free cash flow over the next five years. This enhanced cash flow allows us to increase our dividend for FY24 by 3.9% to 8.0 pence per share. We're also setting an additional £3bn of gross annualised cost savings to be reached by the end of FY29.

I know BT Group's share price has underperformed in recent years, but we now have a clear, positive path that aims to drive significant value for all stakeholders going forward.

Connecting the UK

Our full fibre rollout has delivered the UK's largest private national infrastructure programme, on time and on budget. It will deliver huge benefits to the UK, with nationwide full fibre broadband predicted to increase national GDP by £72bn – or about 2% – by 2030.

We've built at record speed and efficiency this past year, with an additional 3.5m premises passed, taking us to 13.8m premises covered – equivalent to well over 40% of UK homes. In fact, we're currently the fastest builder of fibre anywhere in Europe, and at a lower cost than our major competitors in the UK. More importantly, we're also seeing industry-leading customer take up of our FTTP networks at 34% – and this is even stronger where we built two or more years ago, with take up of over 50%.

We've continued our rollout of 5G, which now covers 75% of the UK population, and grown our 5G-ready customer base to 11m. Our overall mobile network has increased to 88% of the UK by geography, including new mobile connectivity in 33 London Underground stations. We're also the only network provider to have hit our Shared Rural Network commitment to Government, bringing mobile coverage to many parts of the country for the first time. The customer experience uplift is evident from the scale of traffic increase that we see when new locations are connected. In remote parts of Scotland, for example, we have seen this drive new commerce for businesses, enable people to use online services for the first time, and connect emergency services in the most remote locations.

We're not just providing brilliant fixed and mobile networks – we're also combining them with the key services our customers need to live, work, game and learn. For example, we launched EE Fibre 1.6Gbps, offering the fastest home broadband speeds of any major provider, and a new EE TV app and set-top box, fully integrated with Apple TV 4K. For businesses, we announced Global Fabric, which will enable organisations to seamlessly and securely connect to multiple clouds and seize the advantages of digital automation and artificial intelligence (AI), and we've also launched new customer solutions via collaborations with companies such as Google, SAP and Microsoft. These are reflected in strong customer satisfaction metrics across the business, and external accolades such as EE being named as RootMetrics' number 1 mobile network for the 21st time.

A message from our Chief Executive continued

Our strategy for growth

To deliver long-term sustainable growth, we've set ourselves five priorities within our overall strategic framework:

Grow Consumer through converged solutions

Led by EE, Consumer will win more UK households by creating deeper relationships on the back of leadership in full fibre broadband, 5G and convergence.

Capitalise on Business' unrivalled

assets to restore growth Business will help customers grow through

next generation connectivity solutions, leading managed services and outstanding customer experience.

Grow Openreach and get strong returns on full fibre broadband

Openreach is building the UK's largest full fibre broadband network. It will get cost advantage from this scale, upgrade customers to the new platform, continue to provide industry-leading service and strengthen all its communications provider relationships.

Transform our cost base and be more productive

Across BT Group we will fundamentally change what we do and how we work. We'll automate, digitise and close old systems, processes and networks. This will cut costs, help us do things faster and bring better experiences to our customers and colleagues.

Optimise our company portfolio and capital allocation We will keep strengthening our portfolio by

buying, selling or partnering to push our strategy forward. We'll invest in next generation networks and solutions to meet customers' needs and deliver shareholder returns. As we finish rolling out full fibre broadband, we'll reduce capital expenditure by c.£1bn and increase normalised free cash flow.

As we move into the next phase of BT Group's transformation, we are sharpening our focus to be better for our customers and the country, by accelerating the modernisation of our operations, and by exploring options to optimise our global business.

Strategy

This year's Annual Report provides many more examples of how our long-term strategy is delivering: we're building and connecting our customers to next generation networks at pace; we're creating standout customer experiences; and we're leading the way to a bright and sustainable future.

While building our next generation IT and network infrastructure, we're proactively moving customers off legacy platforms that don't deliver the full benefits of digital connectivity. We recently completed the sunsetting of our 3G mobile network, and we're continuing to move customers onto digital IP-based services. We now expect to have completed this shift by January 2027.

We are also radically simplifying our product and customer journeys by partnering with leading technology players and responsibly adopting new technologies such as AI to enable customer benefits and business growth.

In October, we launched our new integrated EE digital platform to drive convergence. This included new connectivity propositions, building on our FTTP and 5G leadership, improved products and services and a simpler, better set of customer journeys. Overall this is driving a better customer experience, with those that have migrated showing a higher rate of convergence and NPS.

Our strategy is delivering, and when BT Group wins, the UK wins. But the world around us is moving at pace, and so must we. I will set out more on this in the coming months, but I am already clear that my ambition for BT Group is to be the UK's most trusted connector of people, devices and machines.

The digital opportunity for the UK

Having spent the last decade running telecoms companies in Scandinavia, I've seen first-hand how much more digital and connected those nations are. For example, Sweden's equivalent FTTP take-up rate is over 80%, and they have far greater adoption of the new services that this connectivity enables. Digital platforms are embedded and aligned across all aspects of everyday life, with online banking, payment, public services and healthcare apps used at much higher rates than in the UK.

What I saw in Sweden is a clear example of how a better-connected society can unlock huge benefits for both governments and citizens. As well as reducing costs, bureaucracy, fraud and complexity, these digital services also have great potential to help society decarbonise, and to underpin the creation of new, technology-based models that empower businesses to compete in an increasingly digital, global marketplace.

That's why I'm committed to ensuring BT Group plays a key role in helping the UK catch up and realise the benefits of a fully connected society. This isn't something that's nice to do – it's critical to the UK's future.

Having made huge investments into UK infrastructure and services, we must ensure everyone now benefits from them. And all the right foundations are in place to enable this. As well as our own networks, we have regulatory stability, government policy that incentivises further investment, and strong competition spurring all of us in the industry to keep innovating.

I know from my years of experience in the industry that the most successful telcos around the world are national champions who leverage their history, their assets and technology leadership to create value for all. Building on the progress we have made, and with the transformation of BT Group now accelerating, we are moving into a phase where the full potential of our brands, networks, products and services can be realised. This will unlock benefits for UK citizens, businesses and the economy as a whole – and I personally can't wait to start delivering for all our stakeholders.

Allison Kirkby

Chief Executive 15 May 2024

Executive Committee

The Executive Committee is chaired by the Chief Executive. So that there is a single point of accountability, the Chief Executive (or a delegate) takes all the decisions.

The Executive Committee provides input and recommendations to help the Chief Executive:

• develop group strategy and budget for Board approval
• execute the strategy once the Board approves it
• assure the Board on overall performance and how we're managing risks.

Allison Kirkby

Chief Executive

Appointed Chief Executive February 2024. Appointed to the Board March 2019.

From May 2020 until becoming BT Group Chief Executive, Allison was President & CEO of Telia Company. 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.

Simon Lowth Chief Financial Officer

Appointed July 2016.

Simon was CFO of BG Group before the takeover by Royal Dutch Shell in February 2016. Before that he was CFO of AstraZeneca, and Finance Director and Executive Director of ScottishPower. Simon was also previously a Director of McKinsey & Company.

Key changes this year

The following changes to the Executive Committee took place during the year:

• Philip Jansen stood down as Chief Executive.
• Allison Kirkby was appointed as Chief Executive.
• Ed Petter stood down as Corporate Affairs Director on leaving BT Group.
• Tom Engel was appointed Corporate Affairs Director (Interim).

Harmeen Mehta Chief Digital and Innovation Officer

Appointed March 2021.

Harmeen is a global leader in incubating new businesses and creating revenue streams, with over 25 years' experience of digital transformation and running technology-led businesses.

Before joining BT Group, Harmeen was group CIO and Head of Cloud & Security business at Bharti Airtel. Before that, she was CIO at Bank of America Merrill Lynch, BBVA and HSBC. Harmeen is a Non-Executive Director of Lloyds Banking Group, and a board member of TM Forum.

Tom Engel Corporate Affairs Director (Interim)

Appointed December 2023.

Before BT Group, Tom held communications leadership positions at DFID, DWP and the Natural History Museum. He has worked in the UK and South African parliaments and served as a Special Adviser in the Blair government. Consulting roles have seen Tom work for a wide range of clients, from pop groups to multinationals, trade bodies to charities. Whilst based in Hong Kong, he helped to grow and sell a private PR company.

Marc Allera CEO, EE and Consumer

Appointed September 2017.

Marc is also Chairman and a BT appointed Director of the sports joint venture between BT Group and Warner Bros. Discovery. Marc was previously CEO of EE, and EE Chief Commercial Officer from 2011to 2015. He spent ten years at Three UK as Sales and Marketing Director and Chief Commercial Officer. Before that, Marc was General Manager of Sega UK and Europe. Marc is Chair of Jagex Limited.

Bas Burger CEO, Business

Appointed CEO, Business January 2023. Appointed CEO, Global June 2017.

Bas was formerly President, BT in the Americas, Global Services. He joined BT Group in 2008 as CEO Benelux. Before that he was Executive President and a management committee member at 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.

Sabine Chalmers

General Counsel, Company Secretary & Director Regulatory Affairs

Appointed General Counsel April 2018. Appointed 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-Busch InBev 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. She is also a member of the Court of Directors of the Bank of England.

Howard Watson Chief Security and Networks Officer

Appointed Chief Technology and Information Officer February 2016 and became Chief Technology Officer March 2021. Appointed Chief Security and Networks Officer September 2022.

Howard's expanded role puts security at the core of our business. He was formerly Chief Architect and Managing Director, global IT systems and led the technical teams behind the 2013 BT Sport launch. Howard joined BT Group in 2011 and has 40 years of telecoms experience. This includes time at Telewest Communications (now Virgin Media) and Cartesian, a telecommunications consultancy and software company.

Athalie Williams Chief Human Resources Officer

Appointed December 2022.

Before joining BT Group, Athalie was Chief People Officer for BHP, the world's largest mining and resources company. She led BHP's organisation, people and culture transformation agenda and shaped their industry-leading inclusion and diversity agenda. Before that Athalie was General Manager, Cultural Transformation for National Australia Bank. She also spent 14 years leading complex business transformation and change programmes in Australia and Asia as a consultant with Accenture (formerly Andersen Consulting).

Clive Selley CEO, Openreach

Appointed February 2016.

Clive was formerly CEO, Technology, Service & Operations, CEO Innovate & Design and before that President, Global Services Portfolio & Service Design. Under the provisions of the Commitments, Openreach's CEO cannot be a member of the Executive Committee. Clive attends Executive Committee meetings as appropriate.

Our business model

The UK's leading provider

BT Group is the UK's leading fixed and mobile communications provider. We build and run the biggest fixed and mobile networks in the country.

We operate in both wholesale and retail markets. Our customers include consumers, small, medium and large businesses, public sector organisations and other communications providers.

We create value by designing, building, marketing, selling and supporting network access, connectivity and related products to customers. We provide many of the fixed, mobile and converged connectivity solutions integral to modern life. They include broadband, mobile, TV, networking and IT services. We also sell other things – like handsets, gaming and insurance – to help our customers connect, communicate, share, be entertained and do business.

A significant amount of what we earn goes back into maintaining and enhancing our fixed and mobile networks, improving customer service and developing new connectivity solutions – which bring value to customers and returns to shareholders. Through paying tax, interest, pension contributions and shareholder dividends, we contribute financially to a wide range of stakeholders.

Our customers

We meet our customers' needs by giving them outstanding connectivity and curated solutions – often with our partners.

Our Consumer brands provide mobile, broadband, landline, and entertainment services to customers, at home and on the move. Individuals and households typically buy our services on monthly, recurring subscriptions on 12 to 36 month contracts, or as pay-as-you-go propositions.

For our business and public sector customers in the UK and around the world, we provide connectivity, networking, cyber security, collaboration tools, cloud connectivity and cloud services. Small and medium-sized businesses (SMBs) buy our solutions on 12 to 60 month contracts. Larger businesses and public sector customers usually buy managed solutions on multi-year contracts – helping them protect, run and grow their organisations and deliver their own digital transformations.

Communications providers (CPs) buy wholesale mobile network capabilities, voice services, broadband, ethernet, and other connectivity solutions on one month to five or more year contracts through our Business unit.

Through Openreach, we provide regulated wholesale access to our fixed access network infrastructure on multi-year contracts to over 700 CPs, including our own Consumer and Business units.

Our three customer-facing units (CFUs) focus on different segments. Each aims to provide outstanding customer experiences through tailored solutions which generate revenue and build long-term trusted relationships.

How we're organised

BT Group consists of customer-facing, technology, and corporate units. Our integrated model shares common platforms across our mobile network, technology, colleagues, and brands to help us to deliver the best results for our stakeholders. To comply with UK regulations and the Commitments, our Openreach customer-facing unit operates independently.

Helps individuals and households communicate, study, work, learn, play and be entertained.

Serves more than 1m organisations in the UK and 1,000 multinational corporates and government customers globally.

Runs BT Group's fixed access network infrastructure autonomously, in line with the Commitments. It connects millions of UK homes, businesses, government sites and mobile masts, while building the next generation full fibre network.

Technology units (TUs) Corporate units (CUs)

Our TUs build, maintain and run BT Group's networks, platforms and digital assets – except fixed infrastructure assets which Openreach operates and commercialises. They're also modernising our business through innovation, research and development (R&D), helping us be more agile, efficient and deliver better outcomes for customers. Our two TUs are:

Digital

Networks

Delivers our IT and digital platforms and upgrades the technology underpinning the products and services our customers need now and in the future.

Designs, builds, runs and secures the mobile, core and global networks, enabling seamless connectivity for BT Group and all our customers.

Our CUs support our other units, driving efficiency across the group through centralised platforms, capabilities and shared services. They also facilitate group-level direction setting, governance and coordination – crucial for aligning business activities. Our four CUs are:

• Finance, Strategy and Business Services
• Human Resources
• Legal, Regulatory Affairs, Compliance and Company Secretarial – Corporate Affairs.

We've announced the creation of a new Strategy and Change unit to drive the development of BT Group's corporate strategy and the next phase of our transformation.

Our business model continued

Our sources of competitive advantage

Well-established and trusted brands

Our brands help us develop and sustain millions of relationships with a wide range of customers in a wide range of markets. BT is our flagship brand for business and public sector customers in the UK and globally. EE is our flagship consumer brand. It will be the go-to place for converged connectivity, including a broader range of products and services alongside connectivity.

New EE is here. We are redefining the way our customers interact with us for all their connectivity needs, in and out of the home. A new brand that plays a bigger, more relevant and more personal role in our customers' lives.

We help people in over 13m homes to communicate, study, work, learn, play and be entertained through our EE brand.

We serve over 1m UK and global organisations with connectivity solutions to help them run, transform and grow.

We've got your back

As a Business unit under the BT brand, we connect organisations in around 180 countries worldwide.

Our business model: Our sources of competitive advantage continued

With every fibre

Rolling out our next generation full fibre network. Openreach serves over 700 CPs.

700+ CPs

Large customer base

We have over 26m consumer and business connections across our different brands. That includes nearly 50% of UK households and more than 1m UK and global businesses and public sector organisations. Openreach connects around 22.9m physical lines for over 700 CPs – 43 of whom are signed to our Equinox 2 deal on our full fibre platform.

The sheer size, scope and breadth of our customer base sets us apart for building excellent propositions and winning partnerships.

Trusted relationships across our EE, BT and Plusnet brands help us understand customers' current and future needs and create new products to meet them.

Leading networks at scale

We build, own and run the UK's largest fixed and mobile networks – covering both rural and urban areas.

Our fixed network connects homes and businesses at speeds of up to 1800Mbps. And we're also building the UK's new digital infrastructure to provide even better connectivity for all. With the fastest build rate in Europe, more than 13.8m premises have now been passed with full fibre.

We're continuing to grow our mobile network too. Our strong position on spectrum holdings and access to base station infrastructure has helped our 4G network cover over 99% of the population and 5G reach more than 75%.

People and presence

Our colleagues help us transform and achieve our ambitions. We employ over 94,000 people worldwide and almost 74,000 in the UK.

We serve business customers globally. Our on-the-ground resources worldwide include 14 global security operations centres and four global strategic service hubs. Our expert Service teams hold more than 4,100 professional industry accreditations as well as over 4,800 technology accreditations. Our widespread local presence provides responsive support, underpinned by the expertise of our customer-facing and technical teams.

More than 26,000 Openreach engineers build and run the fixed networks which power connectivity in UK homes and businesses. Their skills and commitment help us improve our networks for better connectivity and solutions that exceed customers' expectations.

Our leading retail presence – more than 430 stores – and over 15,000 support people help customers get the best from our solutions.

Strong partner and supplier relationships

We can't achieve our goals alone. Our partners and suppliers help us transform faster and create new solutions that benefit our customers.

It's because of strong partnerships that Openreach can efficiently grow its full fibre UK network. This collaboration lets us adjust our operations as we need, flexibly scaling them up or down.

Partners like Microsoft, Amazon Web Services and Nokia complement our products and services. Tightly cooperating with them makes us more agile, and more focused on customers.

R&D and innovation

Innovation has always been the key to our success – keeping us out in front in a constantly changing world.

This year we recognised £726m on R&D. We also filed 95 patent applications, bringing our portfolio to 5,385.

Openreach continues to push innovation boundaries to help cut build and maintenance costs while improving network quality. Group-wide research at Adastral Park led the development of XGSPON-capable head-ends which will let Openreach deliver up to 8Gbs symmetric services to CPs.

Vast data assets

We use our huge customer, product and network data sets for insights into what's important and where to improve.

To collect more insights we can act on, we've started to take more advantage of AI and machine learning.

They're helping us work smarter and faster to develop truly personalised solutions for customers and operate more efficiently across the group. And the better generative AI technologies get, the more valuable our vast data assets become.

Trends shaping our industry and business

Understanding the big trends in our markets helps us seize opportunities as they happen, and act quickly to reduce risks to our business.

Customer and market

Shifting customer expectations

Customers increasingly expect fairer treatment from the companies they engage with. They expect tailored, always connected digital experiences that work seamlessly across channels.

They want solutions that combine simple, reliable, anytime, anywhere connectivity with transparent pricing, flexibility and good value. This is an opportunity for us to create richer and more equitable experiences.

Geopolitical and supply chain challenges

Our industry is affected by interconnected geopolitical issues and supply chain issues. War, conflicts and volatile political relationships can all disrupt global supply chains and change rules – which can raise costs or cause delays and security risks.

The UK Government's decision to ban equipment from designated High Risk Vendors is an example of a geopolitical factor impacting our business.

Unprecedented demand for connectivity

In today's AI era, customers have a bigger demand for connectivity than ever before.

With more and more devices and machines connected, both individuals and businesses want this connectivity to be reliable, secure and resilient. This is a great opportunity for us to deliver that.

Intense competition

We're facing a wider set of competitors in many of our markets, including established, non-traditional digital and big tech players. There's more investment in fixed and mobile markets. New entrants are speeding up disruptive trends – like the blurring of boundaries between connectivity and digital services.

Economic uncertainty

Today there is widespread economic uncertainty because of inflation and high interest rates. This directly affects us through rising costs and indirectly through financial strain on our customers, lowering demand for premium connectivity.

A record 200 million devices now connect to our network every day.

200m

Technology

Data, data, data

The data explosion is helping businesses like ours optimise their networks, develop personalised services, explore new revenue streams and improve customers' experiences.

But it also creates challenges around privacy, security, data governance and preventing breaches. That means we're having to do a lot more to mitigate the associated risks.

Artificial intelligence

As AI and Generative AI get technically smarter, our industry is finding new uses for them. For example, AI can help improve customer experience to boost revenue or cut costs.

But using AI more creates challenges on data privacy, algorithm bias and disruption to organisations and teams – which must be managed sensitively.

Cyber security

When more people and devices rely on being connected, coupled with businesses and governments keeping more sensitive data, there's a bigger risk of cyber attacks, with potentially severe consequences when something goes wrong. Criminals and bad state actors are continually looking for ways to gather information for financial or geopolitical advantage. So cyber security is vitally important for us and our customers.

Technology modernisation

Full fibre broadband and 5G are spreading quickly across the world – providing reliable, high speed connectivity. The Centre for Economics and Business Research estimates that a full fibre UK will boost GDP by £72bn and cut our carbon footprint through reducing commuting. Our investment will give us a more reliable, cost-efficient network on which we can create better customer solutions.

Social

Growing environmental, social and governance (ESG) focus

Consumers, businesses, colleagues and other stakeholders want companies to be responsible, inclusive and sustainable, and act in ways that benefit society and the planet.

Concerns about matters like climate change and inequality shape stakeholders' behaviour more than ever. Ethical companies with a clear purpose – who offer solutions that help customers address these issues – will benefit.

Our strategic framework

Long-term value creation

Why we exist

We connect for good

This drives everything we do. We help people, businesses and governments to harness technology to connect, improve lives and unlock potential without limits. We believe in the power of connections – in personal lives, at work and increasingly between machines and devices.

Who we want to become

The world's most trusted connector of people, devices, and machines by 2030

We connect millions of customers across the globe to what they need – as a trusted partner helping them thrive in the digital world.

Households rely on us to stay connected with loved ones. Businesses and governments partner with us to deliver for their stakeholders.

As technology keeps evolving, we want to keep doing more to prove our dependability and build our customers' trust.

Helping guide us

Personal, simple, brilliant

Our values guide us to fulfil our purpose and achieve our ambition. They inform our culture – the collective spirit we all tune into. They're more than just what we do.

They reflect both who we are and who we aspire to be. They help us be a positive influence, win stakeholders' trust and keep us accountable to society by setting high standards for our business.

Our values guide all our decisions, at every level. They define how we work every day. They show us the right thing to do.

Our strategic framework explains our ambitions and how we aim to create value for our stakeholders. Our ambitions are bold and stretching. This year we made excellent progress against the three strategic pillars that support them.

Pillar 1: Build the strongest foundations

We're investing in the best converged network. For us that means making sure our full fibre and 5G networks aren't just the broadest, but can also deliver converged capabilities. This combination of convergence, brilliant experience and faster, more reliable connectivity lets our customers do more.

We're becoming a simpler, more efficient and dynamic company – easier to work for and with, and more responsive to customers' needs. We are simplifying our product portfolio, transforming customer journeys and modernising our digital and network technology with AI as a fundamental component.

And we're building a culture where people can be their best. That means creating a diverse, inclusive and forward-thinking workforce that has the skills we'll need in the future.

Pillar 2: Create standout customer experiences

We're focused on delivering outstanding service and experience to our customers. That means creating market-leading service, brilliant digital touchpoints and trustworthy, secure and tailored experiences.

Customers don't buy products; they buy answers to problems. So, we're creating smarter solutions based on the latest converged, intelligent connectivity services. We want our solutions to create value for our home and business customers and give them the outcomes they need.

We're building value through commercial excellence – with superior sales effectiveness and better marketing and pricing capabilities.

Pillar 3: Lead the way to a bright sustainable future

We're setting up our corporate portfolio for growth. That means optimising our assets, investments and picking our partners carefully.

The best new technologies will help us to grow sustainably. Our assets, capabilities and expertise should drive profitable growth and create brilliant outcomes for our customers and country.

We're creating a more responsible, inclusive and sustainable business. That means investing in digital skills, championing responsible technology and tackling climate challenges and inequality.

We're building trusted relationships with our stakeholders. Our diverse business can only succeed through our partnerships with customers, colleagues, governments, regulators, suppliers and communities. They are all critical to our success and we take them seriously.

Progress against our strategic framework

Pillar 1: Build the strongest foundations

The best converged network

Building the strongest foundations starts with the network. As the number of connected devices keeps growing, our customers expect the most reliable, secure and resilient connectivity.

To meet their needs, we're building the UK's digital infrastructure at pace – through our new 5G network and c. £15bn full fibre investment.

Market leader in full fibre:

• Our full fibre network now passes more than 13.8m homes and businesses including 3.9m rural premises^a . This year we passed an average of 68,000 premises per week, 15% more than last year.
• We've achieved FTTP build costs per home at the lower end of the £250 – £350 range.
• We're connecting around 42,000 customers a week. We now serve 4.7m full fibre customers – a 34% take-up rate compared to 30% last year.
• To meet demand from end customers, over 90% of Openreach's new orders from CPs are for FTTP.
• Through our co-provisioning partnership – where Openreach helps CPs to develop an 'own brand' experience for their customers, enabling them to connect around 3,000 of their own FTTP customers per week.

Market leader in mobile and 5G:

• At the end of FY24, our 5G network covered more than 75% of the UK population.
• We now expect to cover 90% by 2027, a year ahead of previous projections.
• We connected more customers to our 5G network. There were a total of 11.7m 5G devices on the EE network at the end of the year – up from 8.6m last year.
• Our mobile network now has over 88% UK geographic coverage and reaches more than 99% of the population. We added 2,920sq. km this year.
• As we continue expanding coverage, 33 London Underground stations now have mobile connectivity.
• We're still the UK's #1 network according to independent surveys from RootMetrics and Umlaut.
• In the 2023 Connected Nations report, Ofcom noted that our 5G network has the most coverage at their Very High Confidence rating.

13.8^m

Our full fibre network now passes a total of 13.8m homes and businesses including 3.9m rural premises.^a

42,000

We're also connecting around 42,000 customers every week.

75%

Our 5G network covered more than 75% of the UK population.

We continued to build the UK's digital infrastructure at pace through our new 5G network and our c. £15bn investment in full fibre.

How we connect you on the move

Our 5G network now covers more major road and rail routes than ever before, including around the UK's busiest and largest train stations. In London, upgrades throughout TfL's underground network have helped enhance the rail experience as 33 London Underground stations have mobile connectivity. This year saw high-speed coverage go live at the first West End stations, recently followed by the first four Elizabeth line stations.

We're continuing to extend mobile coverage on platforms, escalators, in ticket halls and tunnels so you can continue to stream, call and text as you travel on the London Underground.

COIIII ATCETAII STALUS
Jubilee line	30%
Central line	18%
Elizabeth line	10%
O Northern line	26%
Live Live 2024

424tb of data on Central and Northern lines in the 12 months since the first stations went live.

424tb

This equates to spending over 72,000 hours streaming 4K video, 106m hours of music streaming, or 28m hours browsing the internet.

72,000hrs

We're delighted to bring the UK's best network to the first Elizabeth line stations, marking another significant milestone in the rollout of 4G and 5G across the London Underground.

Greg McCall Chief Networks Officer, BT Group

Progress against our strategic framework Pillar 1: Build the strongest foundations continued

We merged our old Enterprise and Global CFUs to create the new 'Business' CFU. This cut duplication and contributed to £142m of savings in FY24.

A simpler, more efficient and dynamic BT Group

We're making great progress against our transformation ambitions – delivering £842m of cost savings in FY24. We've now realised our gross annualised cost savings commitment of £3bn against our May 2020 guidance. That puts us 12 months ahead of schedule.

We've simplified our product portfolio and transformed customer journeys and processes:

• We merged our old Enterprise and Global CFUs to create the new Business CFU to better connect with customers and deliver brilliant, converged experiences. This has also cut duplication and supported £142m of savings we've realised in FY24.
• But we haven't stopped there. We're continuing to make BT Group simpler and more efficient:
  • Our SAP system replaced 17 legacy finance systems, cutting licence and operating costs by £71m a year and improving group-wide access to financial data.
• We're improving our ability to serve customers across different channels:
• By streamlining our customer ordering systems, we've given our teams the information they need to deliver excellent service.
• We're moving to more modern, modular IT architecture and migrating our customers to strategic networks:
  • We partnered with Tata Consultancy Services (TCS) to simplify our legacy estate by migrating over 500 legacy applications this year.
  • We've closed our 3G network the second old network we've switched off since the start of our transformation.
  • 91% of our critical data is on the Google Cloud Platform, giving us a strong foundation to embrace the power of AI to create value from our data assets, delivering £125m of value to date and a further £76m confirmed into the future through efficiencies and new revenue against our £524m target.
  • Our rollout of AI Ops, which enables 'self-healing' of technology when issues emerge, reached 23% across our estate, reducing human effort to fix outages and cutting downtime for customers.
  • We've deployed 'Service Now' a cloud-based workflow automation platform. It's been adopted by more than 7,900 Business customers, improving their experience through automated processes.

£3bn

We've realised our gross annualised cost saving commitment of £3bn against our May 2020 guidance.

27%

We've simplified our Business product portfolio by 27%.

13%

In FY24, our decommissioning programme reduced our IT technology estate by approximately 13% versus last year.

Turned off, switched on

Retiring legacy networks and embracing modern infrastructure unlocks possibilities, enhances customer experiences, and fuels innovation. As we continue our work to upgrade the UK's connectivity infrastructure, our efforts help drive economic competitiveness through seamless connectivity and emerging technologies. Additionally, it reduces our carbon footprint, contributing to a bright sustainable future.

Since announcing our transformation in FY20, we have reduced the number of legacy connections by nearly 60% (see page 49).

£24^m 60%

We closed our 3G network, resulting in estimated annualised cost saving in the region of £24m at the end state.

We switched off 15,613 fixed legacy network elements.

15,613

Reducing emissions by 56,162 tonnes of CO2e at the end state.

56,162tCO2^e

Saving roughly 27 GWh of power consumption. Enough to boil your 1.7 litre kettle more than 140m times.

27GWh

Progress against our strategic framework: Pillar 1: Build the strongest foundations continued

We can't deliver our ambitions without dedicated colleagues. So, our people strategy aims to make BT Group a brilliant place to work. We've made progress and achieved a lot, but there is more to do.

A culture where people can be their best

Skills and organisational development

• Today's work landscape is always changing. Giving colleagues new skills doesn't only benefit them, it's essential for our success:
  • We've introduced My Campus a new AI-driven learning platform for personalised learning experiences. This year, we achieved a very promising early adoption rate of 42% among colleagues that have participated in learning via the platform.
  • We're also empowering our software engineers through new technologies like Amazon Q Developer, a generative AI-powered coding assistant.

Inclusion, equity and diversity:

• A workforce as diverse as our customer base, and inclusion by design are critical to our strategy and will help us drive productivity, innovation and growth for the UK and beyond.
  • We've made progress against our diversity goals but it's not yet enough; we are committed to improvement because we know inclusion and diversity enable company performance (see page 31).
  • Important foundations are in place; we have a strong community of People Networks and partners like 10,000 Black Interns and CyberFirst.
  • And our hard work didn't go unnoticed as the BT Group Ethnic Diversity Network was awarded "Best Network Group" at the Ethnicity Awards.
  • Our data and surveys tell us that colleagues from under-represented groups are experiencing barriers and non-inclusive behaviours.
  • Our Inclusion Plan aims to remove the barriers and improve the capability of our people managers to lead their teams inclusively (see page 31).

Occupational health and wellbeing

• Colleague engagement is still higher than external UK benchmarks. Following our March 2024 Your Say colleague engagement survey, it improved by 2 points to 75% compared to last year. This has been driven mainly by Openreach.
• All UK colleagues had a minimum of a 5.5% pay rise. Our junior frontline colleagues got bigger pay rises of up to 10%.
• Our Better Workplace programme is transforming BT Group workspaces. Since the programme started, we've closed 746 older buildings and moved over 22,000 colleagues to new facilities.

42%

This year, we achieved a very promising early adoption rate of 42% among colleagues that have participated in learning via the My Campus platform.

7,196

Engineers trained this year in new fibre skills.

AI learning with the personal touch

We're passionate about learning at BT Group, and we want to create a space where our colleagues can develop their tech skills and learn new ones too. That's why we've launched My Campus, a new learning platform powered by AI, integrating content from Pluralsight, LinkedIn Learning, and BT resources. Tailored to each colleague's role and interests, the platform provides easy access to videos, courses, articles, and podcasts for skill improvement. It also monitors mandatory training, development plans, and skills to enhance talent management.

37,335 different resources available to colleagues.

37,335

20,430 facilitated courses delivered to colleagues.

20,430

993 BT Group plans and pathways created to curate content for colleagues on relevant skills and topics.

993

Using this new knowledge helps prompt interesting discussions, the courses I've completed have encouraged open discussions with my team.

Simon Yu Senior Digital Governance Manager for Digital at BT Group

Progress against our strategic framework continued

Pillar 2: Create standout customer experiences

To go beyond our customers' expectations, we deliver outstanding service and experiences – while giving them smarter solutions and keeping them secure.

Outstanding service and experience

• By focusing on improving our customers' experience, we've made good progress on all of our customer satisfaction metrics:
  • BT Group NPS of 24.0, up one point year-on-year, further improving customer experience (see page 49).
  • Openreach has a 4.6 'Excellent' Trustpilot score, based on reviews from UK end customers.
  • EE maintained the second lowest number of Ofcom complaints per 100,000 customers for mobile 2 and broadband 9.
• BT broadband had 11 Ofcom complaints per 100,000 customers – continuing to beat the industry average.
• We aim to keep our customers safe through strong security measures that instil trust in our services:
  • Every month, we spot over 2bn malicious network events, which we use to protect our infrastructure and customers.
  • BT Group was awarded the prestigious Prime Minister's Award for Cyber – for helping customers avoid text message scams.

Smarter, differentiated solutions and outcomes

We keep on improving our portfolio to offer customers more flexibility. These evolutions also give them the latest converged, intelligent connectivity solutions to get more from their digital lives.

• Many customers are hanging onto their phones for longer. So we introduced 'Flex plans'. The new service separates handsets and connection payments so customers can choose to pay off their phones over longer periods.
• We launched 'New EE' a modern digital platform giving customers a broader range of products and more options on payments, technology and subscription management.
• 'New EE' is powered by an EE ID identity management system. Anyone in the UK can create an EE ID and buy products and services without having to be an EE customer. The EE ID user base exceeds 9.5m customers.
• We've introduced EE TV a complete service of flexible premium content. This UK first features an Apple TV 4K app and a free multi-room option.
• Our new Smart Hub gives full fibre speed of 1.6Gbps and includes mobile back-up and next-generation wi-fi controls to make sure they're always connected.
• For business customers, we announced Global Fabric. This brand-new cloudready global network is flexible, scalable and offers pay-as-you-use connectivity – to help them get the best from a multi-cloud environment.
• With cyber security company Fortinet we're providing a new networking and security service to help businesses manage multi-site connections. Fully managed by our experts, it minimises cyber risks and supports cloud migration.
• In collaboration with Johnson Controls, we're providing smart building technology to optimise energy usage in workplaces, cut cost and accelerate the path to net zero emissions.
• Over EE's network, we're offering the UK's first Drone SIM. It comes with unlimited data and connectivity in the sky – enabling safer drone flights, better control and live HD video streaming.

BT Group handles 999 calls in the UK, providing support to the emergency services round the clock, every day of the year.

In June 2023, for only the second instance in history the teams handled over 1 million calls in a week.

Read more at bt.com/ annualreview.

Our 999 call centres managed the highest annual call volumes ever recorded, totalling 41 million calls.

Bigging up our network

We're dealing with more data, faster than ever before, as an increasing number of devices and machines are connected. Both individuals and businesses rely on this connectivity to be reliable, secure, and resilient and our fixed network enables this.

Online gaming is still having a big impact. For example, the release of Call of Duty: Modern Warfare 3 in November 2023 saw an 89.9% surge in gaming traffic compared to Call of Duty Modern Warfare 2's release.

Broadband traffic on Openreach's network throughout the UK increased by around 9% in 2023.

The busiest day of 2023 for the BT/EE network was Tuesday 26 December (Boxing Day), when traffic peaked at ~25TBps and more than 147Pb of data was consumed.

147Pb

More than 55,000 international roamers used more than 3Tb of data during Eurovision week, the equivalent of 750,000 hours of music streaming.

750,000 hours

in November 2023 saw an 89.9% surge in gaming traffic compared to Call of Duty Modern Warfare 2's release.

The release of Call of Duty: Modern Warfare 3

Pillar 3: Lead the way to a bright, sustainable future

A portfolio positioned for growth

This year we continued simplifying our portfolio and removing non-core assets to streamline the group and position us for growth:

• For example, we divested Pelipod a secure collection point service for UK field service engineers.
• Continuing our asset-light strategy outside of the UK, we sold BT Enia, a regional Italian telecommunications business.

Incubating new tech-driven growth engines

We're investing in the future by focusing innovation efforts on tech-driven growth areas that match our strengths. This will deliver better, smarter outcomes for customers.

• Our Adastral Park R&D centre continues innovating around network technology. Our experts are pioneering the next generation of communications capabilities to help transform how people live and work.
• The Adastral Park team also developed Multicast Assisted Unicast Delivery. It delivers more reliable, better-quality online video streaming – while cutting energy and bandwidth use during peak events by over 50%.
• In East Lothian we're piloting the UK's first Electric Vehicle (EV) chargers powered by our street cabinets. This could revolutionise EV charging across the country.
• Our remote healthcare solution uses a patient app to give them early access to health monitoring, resources to manage their conditions and instant remote access to clinicians. We're currently piloting it in 26 GP practices.

A responsible, inclusive, sustainable business

Our Manifesto describes our long-term commitments to contributing positively to country and community.

• We're creating a more inclusive society to help drive UK productivity, innovation and growth:
  • This year we helped 3.7m people and more than 200,000 business owners and employees, improve their digital skills – a total of 23m people helped since FY15 (see page 35).
  • We partnered with AbilityNet to help around 3,000 digitally excluded over-65s build confidence and skills through various campaigns – including a series of free 'BTea Room' digital workshops.
  • To support small business customers we organised 120 Netwalks. This initiative provides self-care, mental health support, early intervention and networking opportunities to small businesses.
• Over 80% of UK children play games online at least a few times a week. So we launched an online resource called 'GameSmart' to give parents safety tips for managing children's gaming without being overly restrictive.
• We created EE Hope United to combat online hate. This year we lobbied the House of Lords to amend the Online Safety Bill to better protect women and girls.
• We're pushing further to become a net zero carbon emissions business by March 2031:
  • We've cut our carbon emissions intensity by 61% since FY17. And our transition from copper to full fibre networks will speed up our carbon emissions cuts – as fibre is 80% more energy efficient than copper.
  • We're also switching our commercial fleet to EVs. We added more than 1,700 EVs to the fleet this year, bringing the total to over 4,100.

– This year we cut our global energy consumption by 140GWh – a 4% drop.

• Our customers avoided more than 1.5m tonnes of carbon emissions this year through our products and services, including full fibre broadband.
• Openreach brought full fibre broadband to Fair Isle, one of the UK's most geographically remote islands. To avoid protected landscapes and bird nesting season, they had to reroute the build by 100km. That's the longest continuous fibre transmission distance ever deployed in the UK.

3.7^m

This year we helped 3.7m people and over 200,000 small business owners and their employees improve their digital skills.

Your future in the tech industry

We worked with local science, technology, engineering, and mathematics (STEM) enrichment experts Graphic Science for our National Careers Week 2024. We hosted a diverse group of secondary school students to help them think about what their future could look like in digital, data, innovation, and technology. Through interactive workplace activities and mentoring from colleagues, pupils gained hands-on experience with problem-solving challenges balancing people, planet and profit, developing inclusive technology solutions for mental wellbeing, interactive demos on fibre splicing, cyber security, data monitoring and VR simulations.

We hosted a diverse group of over 190 secondary school students at our National Careers Week 2024.

190⁺ 96%

96% of pupils said that the day had helped them discover more about the tech industry and the role that they could play.

The day aimed to inspire students about future careers in digital, data, innovation, and technology fields while helping them identify transferable skills using our Get Work Ready toolkit. 94%

94% of pupils said that the day had helped them understand the links between their studies and the skills employers look for.

Our people

We never stop investing in our people

We're creating a culture where everyone sees the value of curiosity and lifelong learning – and has the skills and capabilities they need to evolve with our business.

This year we hired around 12,000 people. Roughly 8,000 were in the UK, including around 1,000 apprentices and 200 graduates.

Roughly 17,000 colleagues left the business – around 14,000 through natural attrition and 2,000 through paid leaver programmes.

Building tomorrow's skills and capabilities

As our business evolves, so too will the skills and capabilities we need – resulting in a smaller, but more skilled, diverse and tech-savvy future team.

We're now clear on what's needed to deliver on the workforce reduction targets we announced in May 2023, and to make the right changes to our mix of skills.

Safer and more inclusive leadership

Building an inclusive environment starts with our leaders. This year we launched a 10 month learning programme for our senior leaders to build more inclusive leadership practices, with 87% enrolled so far.

The programme focuses on creating an inclusive climate, building psychological safety, developing a sense of belonging

and learning how to have conversations about inclusion. The training is also helping build the right habits and better accountability – with tools for leaders to apply what they've learned with their teams.

BT Business school

We created and ran a CEO-sponsored mini-MBA style programme for senior leaders in our Business unit. It helped our senior management team build a stronger community, fill in skills and knowledge gaps around effective commercial leadership and address cultural challenges.

Talent attraction, inclusion, equity and diversity

We partnered with Women Returners on the 'Restart' project to attract and retain career returners. The widespread social media campaign generated significant interest and resulted in over 300 applications for 18 places.

Launched in September 2023, our 'Business as Unusual' campaign aimed to disrupt the market around hiring talent. It generated significant social media interest which helped us find 202 talented people, identify 24 exceptionally talented people for future hire, and hire eight.

During the campaign we also got an overall increase in job applications. September 2023 saw the year's highest number of applicants (a 26% uplift vs August). We had more external applications from women, and overall women external hires in the UK also rose to 45% in September and October last year.

EE's attraction programme kicked off in 2023. Aiming to reach a more diverse audience, it included a new EE brand campaign, industry partnerships and new candidate profiles.

We're already seeing a positive impact in terms of colleague retention. We also hired more apprentices than last year with recent cohorts 8% more likely to stay at least three months compared to our normal hiring process.

My Campus – a personal learning platform

Upskilling and reskilling colleagues across the group will boost our performance and help transformation happen. Making learning easier and more habitual gives us the best chance of giving our colleagues the right skills for the future.

Ethnic diversity is based on voluntary disclosure. In 2023, 77% of our UK colleaguesdisclosed their ethnicity.

77%

31 March 2024 31 March 2023 2025 Targets

Inclusion, equity and diversity

We're encouraging more inclusive thinking through understanding barriers to inclusion and taking action to make sure all our people can be their best at work. Our Manifesto has bold targets for diversity. While we're making progress in ethnic minority representation, there's much more to do in other areas.

Our UK declaration rates are now 81%. More colleagues are feeling comfortable to declare their personal information, giving us better demographic data to help us focus on areas of concern.

Our 2025 Manifesto targets for gender, ethnic minority and disability at various levels of the organisation are listed in the table opposite against the progress made in FY24.

Whilst we have made progress towards some of our goals, we have work to do to make BT Group a more inclusive workplace for everyone as we strive to achieve our inclusion, equity and diversity ambitions. We are focused on improving inclusion in the way our jobs are designed and how our workplaces operate, underpinned by an unwavering focus on inclusive leadership capability – all of which are required for BT Group to have a workforce that reflects our customers and the communities we operate in.

We collect diversity data for protected characteristics (as per UK employment law) and special category data (as per GDPR, or local laws in other geographies). This is done voluntarily, directly into our HR system (SAP SuccessFactors).

We store, use and report on data in line with local laws and our advertised employee privacy notices. Due to local restrictions on capture and reporting of ethnicity and disability, the information opposite only relates to the UK.

More diversity in digital skills will drive productivity, innovation and growth in our business and for the whole of the UK (see our Manifesto on pages 34 to 39).

Our focus on targeting under-represented ethnic minority communities in the UK meant that in FY24 29% of new UK-based roles in Digital were filled by people from ethnic minority backgrounds.

We have a broad ecosystem of partners (including Career Returners, Code First Girls and 10,000 Black Interns) to help us reach into the community, create awareness, and invest in, develop and open up opportunities for future digital talent.

We have engaged with colleagues through the Colleague Board (see the Corporate governance report on pages 90 to 91) and we have worked with our highly active and awardwinning People Networks. These colleagueled groups raise awareness and advocate for change inside and outside BT Group.

BT Group (excluding Openreach)

Men	65%	65%
Women	35%	35%	46%
Ethnic minoritya	16%	13%	16%
Disableda	9%	8%	14%

Openreach

Men	90%	90%
Women	10%	10%	12%
Ethnic minoritya	9%	9%	10%
Disableda	6%	6%	6%

BT Group

Men	74%	74%
Women	26%	26%	32%
Ethnic minoritya	13%	12%	13%
Disableda	8%	7%	10%

Board

Men	50%	67%
Women	50%	33%	33%
Ethnic minoritya	2 members	2 members	2 members
Disableda	1 member	1 member

Executive Committee^b

Men	60%	70%
Women	40%	30%	33%
Ethnic minoritya	2 members	2 members	2 members
Disableda	1 member	0 members

Senior leadership team b & c

Men	74%	78%
Women	26%	23%	41%
Ethnic minoritya	11%	14%	15%
Black/black heritagea	—%	1%	5%
Disabilitya	14%	8%	10%

Senior management team^c

Men	65%	65%
Women	35%	35%	41%
Ethnic minoritya	9%	9%	15%
Black/black heritagea	3%	2%	5%
Disabilitya	14%	9%	10%

a UK population only.

• 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 Executive Committee direct reports (excluding admin roles). This totals 28 women (33%) and 56 men (67%).
• c For the purposes 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 (members of our senior leadership and senior management teams, and directors of the group's subsidiaries but excluding directors on the Board). This totals 196 women (35%) and 355 men (65%). Numbers presented include 70 subsidiary directors (50 men and 20 women) who are not otherwise members of our leadership or senior management teams.

Our people continued

Pay gap reporting Gender

This is the seventh year we've reported our gender pay gap. Our UK gender pay gap is broadly the same as last year – we continue to track lower than the national average gender pay gaps:

• Our median gender pay gap narrowed slightly to 5.6% (-0.5%).
• Our mean gender pay gap widened slightly to 4.0% (+0.3%).

Median pay gap %

• Our gender gap is still lower than the UK average of 14.3% (median) and 13.2% (mean) and our female representation in the upper pay quarter has improved.
• Despite an increase in female hires between 2022 and 2023, female representation remains unbalanced at 23%, with a higher attrition rate among women. This is reflected in the pay quartile distribution, with a higher proportion of women in lower pay quartiles and little improvement in the upper pay quartiles.
• You can read our full statement including all the entities in scope at bt.com/genderpaygap

Ethnicity

This is the fourth year we've voluntarily reported our ethnicity pay gap (which is not a legal requirement).

Ethnicity pay gap %

	2023			2022
	Mean	Median	Mean	Median
Ethnic minority		(0.8)% (1.8)%		(0.3)% (1.2)%
Asian		(3.4)% (2.9)%		(3.6)% (2.4)%
Black		5.1% (0.9)%		6.6% (0.3)%
Multi ethnic	0.1%	4.0%	3.3%	5.2%
Other ethnic		(3.7)% (8.7)%		(6.2)% (9.3)%

Ethnicity bonus gap %

	2023			2022
	Mean	Median	Mean	Median
Ethnic minority	7.4%	4.2%	8.4%	14.2%
Asian	4.2%	2.5%	(2.1)%	1.3%
Black	41.4%	11.9%	37.7%	53.9%
Multi ethnic	(27.7)%	2.3%		0.7% (14.9)%
Other ethnic		(6.0)% (3.5)%	(1.5)%	40.1%

Ethnic diversity is based on voluntary disclosure. In 2023,77% of UK colleaguesdisclosed their ethnicity.

Aggregated ethnicity pay gap analyses can often mask wider issues that people of different ethnicities face at work and in society. So each year we look at our data very carefully to get a more nuanced picture.

In 2023 ethnicity pay gaps stayed low and favourable – with an overall median pay gap of -1.8% and a mean of -0.8%. But they do vary by different ethnic group.

The figures above detail the movement in pay and bonus gaps to the majority by ethnic group from FY23 to FY24.

– The Black/African/Caribbean/Black British mean pay gap is still largest of all the ethnic groups – although it did narrow slightly this year and the Asian pay gap is the narrowest. This is reflected in the fact there are more Asian colleagues in higher-paid roles like management, and more Black colleagues in frontline roles like engineering.

Disability

This is the first year we've voluntarily reported our disability pay gap (which is not a legal requirement). It reflects our drive for equal opportunity across all characteristics.

Disability is based on voluntary disclosure. At the time of the snapshot date in April 2023,68% of UK colleaguesdisclosed their disability status. Improving this rate is the biggest lever to help us understand and improve our disability pay gap.

	2023
	Mean	Median
Pay	0.7%	0.0%
Bonus	(6.5)%	(0.2)%

• At group level, mean and median pay gaps are low – with a small mean gap of 0.7% and a zero median gap.
• The overall bonus gap is negative. This shows our disabled employees getting slightly higher bonuses – influenced by the higher declaration rate in our senior leader population.
• You can find more examples of BT Group's initiatives to improve representation (as well as pay quartile analysis, bonus information and entity breakdowns) in our ESG Addendum at bt.com/esgaddendum

Inclusive health

We know how inclusive health affects our workforce and colleagues – so we listen to our People Networks closely. We partnered with our:

• Ethnic Diversity Network around mental health care disparities and to enhance our mental health services.
• Able2 Network on matters like occupational health, BT passports, living with disabilities and mental health.
• Jewish and Muslim Networks on coping with the impact of the situation in Israel and Gaza.
• Gender Equality, Carers, Pride, Peer to Peer Support and Armed Forces Networks on topics like cancer and suicide prevention.
• Carers Network to apply for Carer Confident Level 3 – Ambassador Status (The Employers for Carers Benchmarking Scheme).

Adjustments for everyone who needs them

We're committed to making sure any colleague who needs a workplace adjustment gets one. These are positive adaptations which help colleagues with a disability, health condition or change in personal circumstances that might stop them working at their full potential.

This year we initiated 1,146 referral cases, the most common being adjustments for back or neck issues (338 cases).

Where specialist advice is needed, a workplace adjustments referral service is provided by our third party team, Health Management Limited. Using empowER to raise cases for each referral provides Managers with a guided journey to follow and each case is supported by HR Services.

Occupational health and wellbeing

Absences across BT Group from sickness fell to an average of 3.67% calendar days lost per colleague (down from 3.87% last year).

And when our colleagues need extra help getting back to work, our fully funded rehabilitation programme for musculoskeletal and mental health services returns 97% of them to full duties.

Better mental and physical health

Today's world is psychologically challenging. In a Volatile Uncertain Complex Ambiguous world we continue to be at the forefront of innovative approaches to improve the wellbeing of our colleagues and help them maintain optimum mental health. We continue to promote our Employee Assistance Programme and CBT Mental Health Service as well as online guided self help modules.

In FY24 we started the process of getting BSI ISO 45003 certification for psychological health and safety in the workplace. We achieved the stage 1 audit objectives and the BSI auditor has recommended we now move to stage 2 audits.

As well as strengthening our fitness for work medicals for our most critical roles, we continue to do statutory health surveillance for all our poling and civil engineers.

Putting musculoskeletal health and safety first

We've been getting more sophisticated insights from our health and safety data. We have moved from reactive use of data to earlier and more active intervention.

The insights are helping us understand where to best focus our attention to make sure everyone at BT Group can work safely, and return home safe at the end of the day. Earlier intervention helps people stay in (or return to) work after injury or illness – helping work become more of a part of the rehabilitation process.

In response to rising musculoskeletal related absences in our Openreach field engineering colleagues, using a data led, evidence-based approach we launched two new clinical intervention pilots this year to optimise colleagues' health – the Musculoskeletal Specialist Assessment and Medical Assistance Programme.

They include structured pathways to clinical support services, earlier categorisation based on the risk of long term sickness absence, and help for people to return to contractual work.

In FY24 we reduced musculoskeletalrelated absences by around 24,000 days equating to £500,000 in savings.

Taking care of our team

Running the 999 emergency service

We are the first, calming voice heard every time someone in the UK calls the 999 emergency services. In FY24 we took 41 million calls – answering on average in less than a second.

In 2023, we reviewed our attendance rules for the 999 service. Our aim was to make shift patterns fairer and more consistent. The changes we're making include 'bunched' days off and a guaranteed weekend off every month. These will make our colleagues' shift schedules more predictable and structured, while allowing more flexibility and making it easier for them to plan around their working weeks.

1,000⁺

To help out teams across the whole group, this year we launched My EV – our electric vehicle salary sacrifice scheme, which generated more than 1,000 applications in the first week.

£139,000

Introduction of My Discounts – new discount scheme for colleagues. Almost £139,000 worth of savings for colleagues in the first four months.

Our Manifesto

Launched in 2021, BT Group's Manifesto is our plan to accelerate growth through responsible, inclusive and sustainable technology. Our Manifesto is rooted in our purpose, to connect for good. And it will help us achieve our ambition – of becoming the world's most trusted connector of people, devices and machines. It combines a clear commercial agenda with measurable promises to make a bigger positive impact on people and planet.

Responsible

New tech must earn people's trust and transform lives for the better.

So we'll:

• invest in new growth tech to help us live and work better
• apply responsible tech principles across our value chain
• partner to build a responsible tech ecosystem that builds trust and drives growth.

Inclusive

The future of tech must be diverse and inclusive for everyone to benefit.

So we'll:

• build a diverse workforce through our inclusion, equity and diversity targets
• pass 6.2m rural premises with full fibre by the end of 2026 (as part of our 25m build target)
• expand our 4G/5G mobile networks across the UK, including in rural locations
• help 25m people with digital skills by the end of March 2026.

Sustainable

Tech must accelerate our journey to net zero emissions and a circular economy.

So we'll:

• be a net zero business by the end of FY31, and net zero on all Scope 3 emissions by FY41
• 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, while protecting nature and biodiversity.

We contribute to the UN Sustainable Development Goals

Responsible

New tech must earn people's trust and transform lives for the better.

We apply our responsible tech principles across our value chain. They help us consider how to minimise harm and benefit people every time we develop, buy, use or sell tech. They're grounded in the UN Guiding Principles on Business and Human Rights, and are part of our risk management framework.

Our responsible tech principles are:

For Good: We design and deliver tech to empower people and improve their lives. Accountable: We're accountable for our actions and take care to avoid, and protect against, tech misuse.

Fair: We work hard to ensure everyone is treated fairly and with respect. Open: We listen, collaborate and are transparent about our actions.

Our Responsible Tech and Human Rights Sub-Committee oversees how we implement the principles. This year it continued looking at emerging risks and strategic growth areas. We used external experts to help define our approach on topics like high-risk markets, AI and new products and innovation.

Developing new tech

We apply the principles right from the start when we design and develop new tech. This year we:

• completed a human rights impact assessment of wi-fi controls to help us identify, understand and assess the risks of the product
• conducted user research to understand how our responsible tech principles could build trust and differentiate us
• published our approach to children's digital rights.

Buying tech

Our procurement company, BT Sourced, has responsibility and sustainability criteria set into its processes. They give our buyers clarity on supplier risks and opportunities. This year we:

• reviewed human rights risks in our supply chain, to better understand these risks and identify any gaps in our policies and processes
• launched a 'worker's voice' pilot in five supplier factories, to understand the experience of people working in our supply chain
• carried on doing due diligence on our direct tier 1 manufacturing supply chain (visit bt.com/modernslavery for more).

Using tech

We want to make sure our products and services are used for good. So we focus on protecting privacy and free expression and preventing online harms.

This year we published an AI standard for colleagues, to ensure our use, development, purchase and sale of AI is consistent with the responsible tech principles, thereby helping to reduce risk at every stage of the AI life cycle.

Selling tech

We sell to customers around the world. This year we:

• enhanced sales due diligence in Business by adding checks for negative media coverage. This helps us assess any potential human rights risks through the life of a customer's contract
• conducted a human rights impact assessment in a high-risk country, which we'll use to steer future business strategy.

The 2023 Global Child Forum Benchmark Report looked at companies' policies, approach and commitment to children's rights. It rated BT Group as one of Europe's top performing companies and as a global leader in the telecoms sector.

EE GameSmart helps demystify the world of gaming for parents, helping you to create positive shared experiences with your children. With game trailers, information and guides, parents feel ready to embrace the world of gaming. We've worked with Internet Matters creating content to help parents feel confident as their child enters the gaming world.

Read more at eegamesmart.co.uk

Inclusive

The future of tech must be diverse and inclusive for everyone to benefit.

Embracing inclusion, equity and diversity is core to our people strategy and key to our growth. We want to be champions for digital inclusion too.

Many families and vulnerable groups have been badly hit by the cost of living increases of recent years. We want to support them.

We're market leader in social tariffs, currently helping around 1m low-income and vulnerable customers through affordable fibre broadband and calls. And we've frozen these tariffs this year to protect them from inflationary price rises.

Our Home Essentials social tariff gives discounted broadband to customers on Universal Credit. Our EE Basics tariff does similar for eligible mobile customers. And Openreach's 'Connect the Unconnected' scheme waives connection fees for vulnerable customers, via their CP.

Working with charity partner Home-Start UK, we're also supporting the most socially excluded households through gift-in-kind contributions, fundraising and donations, which totalled more than £134,000 this year. And our digital skills help is giving more people the benefits of being online – particularly vulnerable groups in society, like children and over-65s.

We're developing the right digital infrastructure so no one gets left behind. Our full fibre broadband already passes 13.8m homes and businesses, including 3.9m in rural areas. Our 4G mobile network reaches 99% of the UK population, while our 5G network now reaches 75%, as we continue the rollout of 5G across the country.

You can read more on page 20.

Help with digital skills

This year we helped 3.7m more UK people and businesses improve their digital skills. Since FY15, the total is 23m people. And we're on track to hit our target of 25m by the end of FY26.

Tackling online hate

Hope United is part of EE's ongoing commitment to deliver positive societal change. It features a team of elite professional football players – representing all four home nations – coming together to tackle online hate.

So far, it's helped educate 10.9m people on being good digital citizens.

Our Manifesto continued

During the 2023 Women's Football World Cup, the 'Play on' campaign reached 3.5m people, encouraging young people not to drop out of sport due to hate. One of the EE Hope United squad also visited 10 Downing Street to support amendments to the Online Safety Bill, helping to protect women and girls.

Supporting small businesses

Our free digital skills programme helps businesses unlock their potential. This year we reached 200,000 more business owners and employees. We gave them:

• help on everything from digital marketing and social media to GenAI via our LinkedIn Live webinar series with partner Upskill
• practical tips and advice from successful entrepreneurs through our 'Let's Talk About' video series
• access to live webinars, recordings and in-person mentoring through our partnership with the National Startup and Great British Entrepreneur Awards
• a UK-wide tour, webinars and mentoring sessions (working with Small Business Britain).

Employability and digital skills for young people

We're bridging the gap between education and employment by making sure children and young people are part of the UK's digital skills agenda.

Over 1,000 secondary school children from disadvantaged backgrounds came to our 'Get Work Ready' days at our UK workplaces. The days gave a window into the types of STEM roles and skills needed in modern business – linking what they were learning at school to the skills employers look for.

With the national STEM Learning Centre and seven state schools in the Bristol Education Partnership, we helped launch the ENTHUSE programme. It supports teachers with essential continuous professional development and industry insights – and with workplace events to inspire students to consider roles in data, digital, engineering, innovation and technology.

We're lead sponsor of the FastFutures programme to promote and grow digital talent in support of the Government's skills agenda. Partnering with Avado and other businesses, we're helping a diverse range of 18-24 year olds get into digital roles. So far, we've helped over 7,400 young people build their networks, get experience and accelerate their careers. We're currently funding two cohorts – a total of 500 learners – on a Digital Analyst Boot Camp. Eightyseven BT Group colleagues were actively involved in mentoring 138 learners this year.

We also support the National Cyber Security Centre's CyberFirst programme. Aiming to encourage school pupils into cyber and tech careers, the programme hosted events for more than 2,000 pupils last year.

And it's our 24th year organising and sponsoring the BT Young Scientist & Technology Exhibition, which is now one of Europe's leading science and technology exhibitions, celebrating STEM research and innovation. This year's event included 550 projects from more than 1,100 students from 219 schools across Ireland.

Child online safety

We're helping to protect children online through a number of initiatives. This year we:

• relaunched PhoneSmart with better new functionality to help minimise online harm risks, as more and more youngsters own mobile phones
• launched GameSmart featuring online safety information for parents on their child's use of games and gaming devices
• ran a campaign with Internet Matters for parents of under-fives on healthy technology use
• launched an online safety hub on the Internet Matters website.

Senior skills

We have a long-standing history of helping UK citizens learn new digital skills. But today 7% of the population are still offline.

Older people are one of the key groups in this population. They're also more likely to suffer from social isolation, worries around living costs and losing their landline in the Digital Voice switchover.

So far, in partnership with AbilityNet, we've helped around 3,000 digitally excluded over-65s build their confidence and develop digital skills. Together, we ran several 'BTea Room' sessions across the UK this year. Hosted in cafes, these free digital skills workshops covered a range of skills – from getting started with devices, to social media and staying safe online.

We teamed up with lexicographer Susie Dent to create a Digital Dictionary. It breaks down common digital terms that younger people take for granted but that are often confusing for older people.

In today's digital age, many essential tasks require internet access, yet 22% of seniors still do not use the internet. To bridge this gap, BT Group partnered with AbilityNet to offer tailored digital training for those aged 65 and above, boosting their skills and confidence online while promoting safety awareness.

Read more at bt.com/seniorskills

We've helped 3,000 digitally excluded over-65s build their confidence and develop digital skills.

3,000

And we've also been targeting the networks of older and digitally excluded people to encourage them to help get their loved ones more online.

India skills partnership

Since 2019, BT India, with partner the British Asian Trust, has helped around 1.1m young people with digital skills, STEM career guidance and job opportunities. This year they launched an Outdoor School for Girls, which will provide digital, life, sustainability and entrepreneurial skills to 180,000 girls over the next three years.

With our support, education company Katha is working with the Municipal Corporation of Delhi to teach more than 4,000 girls, through setting up robotics labs, refurbishing IT labs and training teachers.

Sustainable

Tech must accelerate our journey to net zero emissions and a circular economy.

We've led on climate action for more than 30 years. We've been 'A' rated on climate by CDP for the past eight years running. But as the climate crisis worsens, we all need to speed up the transition to a low carbon economy.

This year we refreshed our Carbon Reduction Plan. It provides stakeholders with a clear view of the actions we're taking to shift BT Group and our value chain to a net zero economy.

We'll be net zero for our operations by the end of March 2031 – and for our full value chain by the end of March 2041. We also aim to help customers avoid 60m tonnes of CO2e and build towards being a circular business by the end of March 2030.

Reducing carbon emissions in our operations

We've cut our carbon emissions intensity by 61%. This is against our science-based target of an 87% cut by the end of March 2031 (compared to FY17 levels).

All of the electricity we purchase to power our buildings estate, shops and networks worldwide is certified as renewable^a through our procurement of energy from sources that include power purchase agreements (PPAs) and green tariffs, supported by renewable energy certificates (RECs).

Long term renewable PPAs met 24% of our UK electricity demand this year, supporting additional renewable electricity infrastructure across the UK grid. Where we don't control the supply of electricity or where we can't guarantee the origin of the electricity, we purchase additional RECs to cover the proportion of our consumption (for example, at landlord controlled sites).

We have more to do to get to net zero. But we know how to get there – by electrifying our vehicle fleet, decarbonising our estate and building more energy-efficient networks.

Switching our vehicle fleet to electric

Nearly 80% of our operational emissions (Scopes 1 and 2) come from our commercial fleet of over 33,000 vehicles.

We're working hard and investing to convert the majority of this fleet to electric or zero emission vehicles by the end of FY31. In total we have over 4,100 electric vehicles (EVs) in our fleet, including more than 1,700 that we added this year.

As a founding member of the UK Electric Fleets Coalition, we'll keep on pushing for policy measures to drive a UK EV switch. This year, the coalition published a new document to encourage more policy momentum on EVs.

Our start-up and digital incubation arm, Etc., has developed an EV charging unit built from a street cabinet (traditionally used to store broadband and phone cabling). We're exploring the potential to turn up to 60,000 cabinets into EV charging points. This would increase the availability of charging infrastructure on the UK's roads and support Government sustainability targets and plans to decarbonise the UK transport system.

This year, we introduced a salary-sacrifice scheme for UK colleagues to buy EVs through personal lease arrangements. And for colleagues in India, we're introducing EVs as part of our transport and shuttle passenger services. Today there are 94 EVs in use and we'll keep growing that number.

Decarbonising our buildings

We cut our global energy consumption by around 140GWh this year – a 4% drop on FY23. This was mainly achieved through rationalising and upgrading our buildings and networks, and reducing our fuel consumption as we continue to migrate our fleet to EVs.

Our Better Workplace Programme is consolidating hundreds of BT Group buildings to around 30. The new or refurbished buildings have environmental impact firmly in mind. New builds meet the BREEAM^b - Excellent standard.

A rated

A rated on climate by CDP.

4,100+

In total we have over 4,100 EVs in our fleet.

a 99.9% of the global electricity that BT Group purchases is certified as renewable. The remaining 0.1% is where renewable electricity is not available for purchase in the market. b Building Research Establishment's Environmental Assessment Method, which is the world's leading sustainability assessment for infrastructure.

Our Manifesto continued

Building energy-efficient networks

We're building more energy-efficient fixed and 4G/5G networks, while switching off our old legacy ones. As well as saving energy, full fibre networks are better at handling the effects of physical risks like flooding and higher temperatures. That means fewer faults or engineering visits.

Cutting carbon emissions across our value chain

Our Scope 3 carbon emissions account for 95% of our overall emissions. They come mainly from purchased goods in our supply chain and from customers using our products and services.

Since FY17, we've cut our Scope 3 net emissions by 26%, to 3,000,873 tonnes of CO2e this year. This is a decrease of around 4% on FY23.

Helping suppliers cut carbon

We'll keep working with suppliers on cutting carbon. We've cut supply chain emissions by 25% since FY17. Our target is a 42% reduction by the end of March 2031.

This year, we've refreshed our climate change policy, which forms part of our expectations and generic standards applicable to suppliers working with us. It requires them to conduct climate risk assessments, set 1.5ºC aligned sciencebased targets and to report on progress annually. And we continue to engage with key suppliers on carbon reduction through contract clauses, for example, we've seen savings from Circet that reduced over 100t CO2e in 2023 under its contract with BT Group and Openreach.

Also this year we:

• launched a campaign asking suppliers to set 1.5°C aligned science-based targets, make them public and report on progress annually
• encouraged more key suppliers to report to CDP to improve visibility and action on emissions. Today, over 300 of them are doing that
• continued working with the Exponential Roadmap Initiative and 1.5°C Supply Chain Leaders to drive climate action across global supply chains – while supporting small and medium-sized enterprises through the SME Climate Hub and UK Business Climate Hub

– joined the JAC (Joint Alliance for CSR) Board of Directors. It's an association of 27 communications providers working together to sustainably transform supply chains across the ICT sector.

Cutting our customers' carbon

There's huge potential to use our networks, products and services to help customers cut their emissions – for example through decarbonising the grid and improving our products' energy efficiency.

We'll help customers avoid 60m tonnes of carbon by the end of March 2030 – which they'll do through technologies like full fibre broadband, mobile solutions and cloud computing. This year we:

• helped customers avoid more than 1.5m tonnes of carbon (nearly 3.8m tonnes in total since 2021), mainly through our full fibre rollout that enables reductions in personal or work-related travel
• published a new carbon abatement methodology, to be transparent on how we calculate savings (bt.com/carbonabatement)
• expanded our Digital Carbon Calculator to include compute and end point devices. The calculator helps our larger customers measure, track and cut carbon footprints across their networks. Today, it shows customers are cutting their CO2e by 15% on average when transforming their networks with us
• enhanced our Carbon Network Dashboard to include an energy optimisation recommendation feature, which helps our larger customers use their networks more efficiently. It enables them to measure, monitor and reduce energy consumption and carbon emissions
• hosted a Sustainability Festival at Adastral Park. More than 1,100 people came, including big customers, climateleaders, start-ups and BT Group representatives. The event showcased cutting-edge technologies and how to drive sustainability and achieve net zero emissions in various industries.

Circularity

Developing a circular economy is vital for achieving a net zero world. Around 70% of global greenhouse gas emissions come from material use and handling^a .

We want to build towards being a circular business by 2030, and a circular tech ecosystem by 2040.

Products & Services

This year, we collected nearly 2.6m devices from consumers and businesses through our returns and take back processes.

Plusnet Hub 2 routers, instead of making new routers, which usually creates a lot of carbon emissions.

This effort saved around 3,900 tonnes of CO2e.

By reusing all the electronics from the Smart Hub 2, we prevented over 80,000 kilograms of new electronics from being produced.

Read more at bt.com/ annualreview

4%

cut in our energy use this year.

1.5˚C

Launched a new supplier engagement campaign asking our suppliers to set 1.5°C aligned science-based targets.

60^m

We've set a target to help customers avoid 60m tonnes of carbon by the end of March 2030.

Through our EE Trade-In service we collected 166,000 mobile devices, pushing past the milestone of 1m devices traded in since its launch. For FY24, 96% of collected devices went for reuse and a second life. The rest we recycled responsibly. For distributed mobile devices our take back rate is 5%. We want to increase this to at least 20% by 2030.

For 2023, our return rate for customer premises equipment was 67%. Our target is a 75% return rate by FY26^a . Customers returned over 2.36m hubs and set-top boxes. Through our refurbishment process, we reused 71% and recycled the rest. We also began scaling up refurbishment of our business hubs.

To extend the lives of our customers' devices, our EE repair service (approved by Apple, Samsung and Google) fixed 58,000 devices this year (up 94% on FY23).

To measure circularity in a more integrated way, we've started a pilot using the Circular Transition Indicator Tool on some of our own brand consumer devices. We're now reviewing the inflows and outflows of those devices. We aim to expand the pilot to other business areas to implement a common measurement approach.

Operational waste – our networks and estate

We want to put zero waste into landfill by 2030. That means increasing the number of things we reuse and recycle. Globally, we generated 69,000 tonnes of operational waste this year – 14% less than in FY23. Our UK recycling, reuse and recovery rate was 92.1% (90.4% globally).

As part of modernising our network, we continued recovering old or end-of-life network equipment to reuse or recycle, much of which was through our Exchange Clearance Operations programme. This year, we recovered 3,300 tonnes. We also agreed a deal with a leading bank and global recycler EMR to support the extraction and recycling of copper cable from our network until 2028.

Within our business, we reused 10,000 pieces of network equipment. And our catering partner Lexington, working with CauliBox, has been trialling new reusable cups and containers to reduce the number of disposables we use.

Biodiversity

We continued working to understand our impacts on nature and biodiversity, in line with the draft Taskforce on Nature-related Financial Disclosures (TNFD) framework. This year, we ran an impact assessment of our operations and procurement.

As part of our focus on conservation, BT Group has partnered with The Royal Society of Wildlife Trusts. We provide financial contributions to the charity and volunteering opportunities for colleagues.

Openreach created a Business Conservation Partnership with the RSPB, to make sure that, moving forward, they are better placed to implement naturepositive actions as part of the overall fibre build programme.

Openreach has also worked closely with NatureScot and National Trust for Scotland in providing fibre to Fair Isle (between Orkney and Shetland). They scheduled their build to make sure that nesting birds were undisturbed during the breeding season, and worked together to protect native plant species.

Water consumption

Our UK water use fell by 12% this year to 1,349,324m³ , mainly from operating adiabatic cooling units more efficiently within network equipment operating limits, and the pinpointing and fixing of leaks in our water supply.

Advocacy on climate action

Corporations must advocate on climate action. But limiting global warming to 1.5 degrees – in line with the Paris Agreement – will need supportive policies too.

During the year we continued participating in initiatives like RE100, the UK Electric Fleets Coalition and EV100, Race to Zero and the We Mean Business Coalition. We also supported the Fossil to Clean campaign to advocate for speeding up the shift from fossil fuels to clean energy.

2030

We want to become a circular business by 2030 – and build towards a circular tech ecosystem by 2040.

20%

We have a 5% take back rate for distributed mobile devices – we've set a target to increase this to 20% by 2030.

Our stakeholders

Our 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 from relevant parts of the business and from stakeholders themselves. They use them to make better decisions, give feedback and constructively challenge activities, programmes and initiatives being considered.

Colleagues

To create a culture where colleagues can be their best and contribute to our purpose, ambition, strategy and success, they need to be engaged.

So we must provide work environments that help them flourish, give them flexible and agile ways of working, deliver brilliant training, development and career opportunities, and reward performance with fair and competitive pay and benefits.

How we engage with colleagues

Our Board gets regular updates from the Chief Executive and Chief Human Resources Officer. Topics range from people strategy initiatives to culture and overall sentiment in the organisation.

This year the Board used both our Colleague Board and our Designated Non-Executive Director for Workforce Engagement to engage with our workforce (under the UK Corporate Governance Code 2018).

You can read more on pages 90 to 91 of the Corporate governance report.

In September 2023, we changed the way we measure engagement. We did this to bring it up to date with best practice and give us better external benchmarks for BT Group and our units.

We introduced quarterly colleague engagement surveys. And to compare old and new surveys we asked both old and new engagement index questions in the first September survey. Engagement scored pretty consistently between old and new measures – at 72% and 71% respectively.

Across the year engagement improved by two points. We closed the year on 75% in line with our target. The measure 'Getting things done here is straightforward' is not making enough progress. We're investigating why.

Initiatives to improve our colleagues' experience seem to be making a difference. We've focused on leadership, making things simpler for colleagues and inclusion and diversity. We'll continue with this in the coming months.

Customers

We want our customers to have standout experiences. For that, we must deliver outstanding service and differentiated solutions and outcomes.

We have a large and diverse customer base, from individuals to multinational businesses and governments. And they all need different things. So engaging with our customers is critical to properly understand those varied current and future needs.

Our customers want us to:

• give them an outstanding experience and deliver outcomes that match their needs
• deliver consistent, high-quality solutions to keep them connected
• protect their security and data
• offer all the above at a price that's great value for money.

How we engage with customers:

• Our service, sales, and contact centre colleagues regularly talk to customers to understand what they need and help them stay connected.
• Our insight centre of excellence gives us a deeper understanding of our customers' needs through research techniques and extensive internal and external data sources.
• Our CFUs, Executive Committee and the Board monitor how well we're providing standout customer experiences by regularly reviewing metrics like NPS.
• Our Chief Executive, Executive Committee and senior leaders regularly review and discuss customer complaints.
• Our Customer Fairness Panel, Customer Inclusion Panel, Security Advisory Board and Global Advisory Board help us better understand customers' needs and experiences through direct conversations with them.
• Openreach makes sure every CP gets equal access to our fixed network by engaging them through a transparent and compliant consultation process.

The results:

• We're simplifying our contract communication and charges by expressing changes in pounds and pence instead of percentages, making it clearer for customers.
• We're visiting every UK region to raise awareness and to make sure all customers understand the simple steps needed to make the move to Digital Voice.

BT Group saw a surge in SMS Smishing scams. In response, we formed the BT SMS Scam Squad in 2022 to ensure #TrustinSMS.

Read more at bt.com/ annualreview

Prevented more than 76 million SMS scams over the last year from reaching victims.

76.1m

72/71%

Engagement scored consistently between old and new measures – at 72% and 71% respectively.

75%

We closed the year with an engagement score of 75%, in line with our target.

5,700

Interacting with over 5,700 customers every year to better understand how to meet their needs.

Our stakeholders continued

Communities

We make a significant economic contribution to the UK communities we serve. But we're also at the heart of those communities, helping to bring them together.

We need communities to trust us. Without that we couldn't deliver our growth plans or our purpose – to connect for good.

The communities we serve want us to:

• give them reliable and secure connections
• help local people and businesses get more from the digital world
• provide direct and indirect employment – do business ethically and responsibly
• and protect the environment.

How we engage with communities:

• Community members use our products and services as part of their daily life and work.
• We provide support through retail stores and contact centres – and through home visits to set up, install and maintain our services.
• Our digital inclusion and wider societal programmes bring digital skills training to millions of UK people (including children, older and more vulnerable groups, and small businesses).
• We use customer surveys and reputation tracking to understand community perceptions of us and inform our focus areas and targets. Our Executive Committee reviews this feedback monthly and it's shared with the Board quarterly.
• The Responsible Business Committee oversees our societal programmes – tracking feedback and performance through a dashboard discussed at each meeting.

The results:

• Based on a report commissioned in 2023, in one year we spent more than £9.3bn with UK-based suppliers, we supported £1 in every £80 of UK Gross Value-Added^a and supported a total of 284,000 UK full-time jobs indirectly^a .
• We're one of the UK's biggest private sector apprenticeship employers. We've hired over 3,000 apprentices and graduates over the past five years and we're planning to hire over 500 more in 2024. In 2023, we were ranked second in the UK's Top 100 Apprenticeship Employers.
• We've expanded our full fibre network to 3.9m rural homes and businesses as part of our 6.2m aim by December 2026 (see page 20).
• We're extending 4G coverage to rural areas through the shared rural network initiative. And we aim to reach 90% of the UK's geography with our 5G network by 2027 (see page 20).
• We give extra support to around 1m low-income and vulnerable customers through our social tariffs and subsidised products (see page 35).
• Our gift-in-kind contributions, colleague fundraising and donations provided over £134,000 to our charity partners Home-Start UK, to support the most socially excluded UK households.
• We helped fund UNICEF's 'digital learning passport' tech platform, while colleagues raised over £35,000 to support their Children's Emergency Fund and other humanitarian relief programmes.
• Colleagues donated over £1.3m to more than 1,100 charities through payroll giving.
• Colleagues volunteered more than 53,000 hours of their time to our charity partners and communities – including sharing skills and expertise through mentoring and digital skills training programmes.
• We also support communities through our Manifesto commitments. They include our digital skills goal, which this year reached a further 3.7m people and has helped a total of 23m people since FY15 (see pages 34 to 39).

Openreach brought ultrafast full fibre broadband to the remote Scottish island of Fair Isle which required an innovative engineering solution. Our engineers built the UK's first fibre repeater terminal to boost the signal enabling lifechanging connectivity as part of the Scottish Government's R100 programme.

Read more at bt.com/ annualreview

£9.3bn

We've spent more than £9.3bn in one year with UK-based suppliers and supported £1 in every £80 of UK Gross Value-Added^a .

284,000

We supported a total of 284,000 UK fulltime jobs indirectly^a .

Shareholders

We have both equity and debt investors.

Our equity investors are corporates and institutions – who hold the biggest volume of shares – plus around 614,000 individuals.

Our debt investors are mainly financial institutions who buy 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, our scale and competitive market position.

Our shareholders want 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 results:

• We engage with shareholders through our investor relations activities, Annual Report, financial results, AGM and other documents and briefings.
• Our AGM is a chance for Board directors to meet shareholders. In 2023 it was held in Birmingham with all resolutions passed and published on bt.com/agm. We'll publish arrangements for the 2024 AGM in the Notice of meeting (see page 130).
• Individual shareholders interact with the Company Secretary (or their delegate) and also our share registrar Equiniti.
• Institutional and debt investors engage via our investor relations team – through one-to-one conversations, roadshows, group meetings, conferences and industry events.
• Through this engagement, the Chairman, Directors, Chief Executive, Chief Financial Officer, other executives and our investor relations team had 222 investor meetings this year. Topics included:
  • our strategy and competitive position in key markets
  • our financial and operational performance (particularly in the context of inflation, energy and pay costs and CPI-linked pricing)
  • capital investment (including FTTP and 5G)
  • our capital allocation policy
  • prospective governmental and regulatory policy decisions
• our pension fund valuation. – The Board gets regular reports on top shareholders, movements in the share register, share price performance and engagement with investors and analysts. It discusses and considers issues with management as part of its decision making.

The Chairman, directors, Chief Executive, Chief Financial Officer, other executives and our investor relations team had 222 investor meetings this year.

Our equity investors are corporates and institutions – who hold the biggest volume of shares - plus around 614,000 individuals.

614,000

Our stakeholders continued

Suppliers

Good supplier relationships are essential for our success. They help us deliver the solutions and propositions that create standout customer experiences.

Our suppliers want us to:

• pay them in line with our agreed terms
• help them optimise their own supply
• chains and cash flow management – act ethically and transparently.

How we engage with suppliers:

We need to know who we're doing business with and who's acting on our behalf.

So we:

• select suppliers based on principles around acting ethically and responsibly
• do due diligence on suppliers before and after we sign a contract – covering financial health, anti-bribery and corruption and whether they meet our standards on areas like 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.

Operating from its Dublin base since April 2021, BT Sourced is our standalone procurement company. It's focused on challenging the traditional ways of buying goods and services by simplifying processes, introducing new technology and working more in partnership with suppliers and start-ups.

More than 1,000 of our suppliers have signed up to C2FO and in 2023 we facilitated £1.25bn in early payments.

BT Sourced delivered some key initiatives this year:

• With start-up Nnamu we developed and piloted a 'negotiation bot' based on game theory. It recommends optimum negotiation strategies and tactics, and negotiates autonomously.
• Autonomous AI-powered platform Globality is being widely adopted. Its generative AI features are speeding up our scoping processes and streamlining how we define what we need. Plus its new E-Negotiation and online NDA features are simplifying the whole sourcing process.
• Specialist macro risk partner PRISM has developed a digitised platform. It shares risk reports, giving us instant access to strategic risk information and a useful archive. It's a valuable resource which is helping us make better, faster procurement decisions.
• Our in-house negotiation analytics team continued expanding their AI and machine learning capabilities. To give us a 360-degree view of our suppliers, they combined existing internally developed solutions with summaries of earnings reports, news feeds, projected spend and ESG position.
• Responding to inflationary challenges, we strengthened our partnership with C2FO to give suppliers better access to competitive working capital. We also made C2FO's early payment solution more widely available to thousands of our suppliers.
• As part of BT Group's ESG supply chain assurance, we worked with Labor Solutions to run a 'worker's voice' survey with five key Asia-based suppliers. Supported by strong identity safeguards, the survey got around 1,500 responses. For more on ESG, see the ESG Addendum (bt.com/esgaddendum).

The results:

• Partnering with start-ups like Nnamu will help us scale our digital procurement innovations and benefit stakeholders, buyers and suppliers.
• Buyers have so far launched more than 1,000 projects on the Globality platform, with a total spend of roughly £7.9bn. In December 2023, the platform hit a 1.1 working day time-to-market, a big improvement on the typical seven to ten working days with traditional sourcing processes.
• Findings from our 'worker's voice' survey gave no major concerns. But they did give us the chance to strengthen relationships with the suppliers we surveyed. We will continue and expand the programme into FY25.
• More than 1,000 of our suppliers have signed up to C2FO, including many small and medium-sized businesses. In 2023 we facilitated £1.25bn in early payments.
• We're building a more resilient supply chain by adding our new supplier management risk framework (including internal controls) into our wider group key controls framework.
• Responding to changing geopolitics, we're improving our crisis management capabilities. We're also investing in risk intelligence to help us get a clearer view of the macroeconomic landscape to inform our decisions. You can read more on our risk focus on page 61.

Government

We added more than £24bn to the UK economy based on a report commissioned last year^a , supporting critical services and working with more than 1,100 public sector customers.

Our networks support vital public services like welfare, tax, health, social care, police and defence – while protecting citizens' personal data.

Our relationship with Government bodies underpins our three strategic pillars and lets us contribute to policies and initiatives that promote the best results for stakeholders.  

Government stakeholders want us to:

• keep investing in our network infrastructure
• provide the fastest, most reliable and secure connection possible, to the widest possible range of communities
• invest in the best products and services, at fair prices, with high levels of customer service
• support vulnerable customers through tough economic times.

How we engage with Government, and the results:

• Our policy and public affairs team manages our relationships with Government and other politicians.
• We operate part of the UK's Critical National Infrastructure and support national security.
• Our Business unit delivers and looks after public sector contracts like the Emergency Services Network.
• Under the Communications Act 2003, the government can ask us (and others) to run or restore services during disasters. The Civil Contingencies Act 2004 also says that they 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.
• The Board comments on discussions with Government through updates from the Chairman, Chief Executive and Executive Committee members.
• Our public policy work with Government covers everything from infrastructure investment to national security, from regulating online harms to trade and economic policy.
• This year, we contributed to government initiatives including its wireless infrastructure strategy, supply chain resilience, data policy, drones, quantum technologies and AI.
• We've given input and evidence into legislation including the Digital Markets, Competition and Consumer Bill, Data Protection and Digital Information Bill, and Online Safety Bill.

Regulators

Regulation helps protect consumers and promote healthy competition.

Our main regulatory relationship is with Ofcom who regulate UK communications and TV services. We also work with other regulatory bodies like the Financial Conduct Authority, Competition and Markets Authority and the Information Commissioner's Office.

Our regulators want us to:

• act fairly and transparently with customers
• compete fairly in the markets we operate in
• invest in the UK's critical digital infrastructure
• promote investment and innovation.

How we engage with regulators:

• We have a constructive, open dialogue with Ofcom through our Chairman, Chief Executive and senior leaders. Conversations focus on how regulation can support investment in world class digital infrastructure, while keeping the market competitive and fair.
• At a working level we regularly engage with Ofcom and other regulators through industry consultations and information requests – helping them analyse and understand the impact of proposed regulatory changes.

The results:

• In 2017, we put the Commitments in place. They give Openreach a degree of strategic and operational independence. We regularly engage with Ofcom and other CPs to reassure them that we're following the letter and spirit of the Commitments.
• During the year, and on the Board's behalf, the BT Compliance Committee monitored compliance with the Commitments through both our culture and colleagues' behaviour. Ofcom and other stakeholders attended BT Compliance Committee meetings by invitation. The responsibilities previously held by this Committee have transitioned to both the Audit & Risk and Responsible Business Committees for FY25 onwards. See pages 99 and 105 for more details.

Our public policy work with Government covers a wide territory, from infrastructure investment to national security, from regulating online harms to trade and economic policy.

Non-financial and sustainability information

Environment

See pages 28 to 29, 37 to 39, 49, 71 to 80, 92 and 105.

Policies

Our Health, Safety and Environment Group Policy explains how we're protecting the environment and building a more sustainable future. Our main priorities are cutting carbon emissions (our biggest environmental impact) and being more energy efficient.

It also sets out our commitment to partnering with stakeholders. And it's supported by our environmental strategy and goals of becoming a net zero and circular business.

Every year we report on how we're doing in our operations and wider value chain (see pages 37 to 39).

Due diligence

The Group Health, Safety & Environment Sub-Committee monitors and manages our environment strategy and risks, acting on the Executive Committee's behalf.

The Responsible Business Committee oversees progress against our environmental goals. We review and update our policies every year.

Results

You can read more on our plans and performance – including progress on net zero – on pages 37 to 39 and in our ESG Addendum at bt.com/esgaddendum.

Risks

We consider environmental and climate-related risks across our whole business – including stakeholder and supplier management, health, safety and environment, and operational resilience. There's more on our group risk categories on pages 63 to 70. We're mitigating our environmental impact and key physical climate risks in lots of ways.

You can read more on pages 37 to 39 and in our Task Force on Climaterelated Financial Disclosures statement on pages 71 to 80.

Colleagues

See pages 24, 30 to 33, 41, 90 to 91 and 92.

Policies

Our people's wellbeing will always be at the heart of our business.

It's in our code: We always put wellbeing and safety first. It's also written into our Health, Safety and Environment Group Policy.

Our strategy is to build a fulfilled, safe, happy and healthy team in a culture where everyone can thrive. We do this through wellbeing programmes to boost colleagues' performance, resilience, happiness and engagement.

International standard ISO 45003 'Psychological health and safety at work' says that psychosocial risk management must have needs from all levels and functions – especially top management.

We agree with the concepts raised in the standard. We apply them to help prevent work-related injuries or ill-health in colleagues and to promote positive wellbeing at work.

Our Inclusion, Equity and Diversity (IED) strategy takes a programmatic, evidencebased approach.

It helps us understand and remove bias and other cognitive barriers from 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 by promoting a healthy culture.

Due diligence

We plan against three goals – Promote, Support and Restore.

From these we create focused, evidencebased interventions and campaigns. They promote the importance of wellbeing and ensure all our people can access wellbeing support and services.

We also work with stakeholders across the business to make sure our wellbeing approach is consistent, integrated and part of our culture.

We review policies every year, updating them when needed. We update the Board and Executive Committee regularly. We coordinate health and safety through our Group Health, Safety & Environment Sub-Committee and with our unions through the Good Work Forum.

Well-established governance processes make sure we integrate IED into decisions and policy development. We report to the Executive Committee on our strategy's relevance and effectiveness and on progress against our diversity targets. We also update the Board. Our People Networks champion members' concerns and are sponsored by Executive Committee members or by the CEO, Openreach. Our Colleague Board also helped shape and influence IED plans. We review policies every year, updating them when needed. You can read more about the Colleague Board on pages 90 to 91 – and about other ways we engage with colleagues on page 41.

Results

There are details of what we've done to apply our policy on page 33. You'll find information on absence rates and other wellbeing metrics in our ESG Addendum at bt.com/esgaddendum.

Our strategy creates a culture that embraces IED and embeds it into our decisions.

There are details of what we've done this year to support our strategy – together with the latest IED statistics – on page 24.

Risks

We reflect wellbeing as part of the people and health, safety and environment group risk categories on page 68.

We reflect IED risks in our people group risk category on page 68.

Social and community

See pages 26 to 27, 34 to 39, 42, 49 and 92.

Policies

Our Manifesto is rooted in our purpose. It's supported by commitments on three themes – responsible, inclusive and sustainable.

It recognises we'll only succeed if we help solve some of the problems faced by the societies and customers we serve. In particular, our commitment to help give people digital skills will benefit wider society.

Our 'BT Group charity approach' explains how we partner with charities and support our people's volunteering work.

Due diligence

• The Responsible Business Committee: – oversees our Manifesto commitments
• and progress – reviews our strategy and progress on societal programmes and targets
• monitors progress against the goal of reaching 25m UK people with help to improve their digital skills by FY26.

Results

We report on how we invest in communities on page 42.

You can read more on our Manifesto and what we've achieved this year on pages 34 to 39. That includes progress on helping people improve their digital skills.

Risks

We consider digital inclusion risks as part of our stakeholder management group risk category on page 63.

Human rights

See page 35

Policies

Our Human Rights Policy explains how we respect and champion human rights in our business – and through our relationships with others. It's supported by our responsible tech principles. Our Manifesto reinforces these principles and our respect for human rights.

Due diligence

We have processes to identify and tackle potential and actual human rights impacts across our business. That includes checking we're applying responsible tech principles when we develop, buy, sell and use tech. Our Responsible Tech and Human Rights Sub-Committee oversees how we implement the principles, giving updates to the Responsible Business Committee.

Respecting human rights is part of mandatory annual training for all colleagues.

We identify, measure and tackle human rights impacts through our Speak Up whistleblowing service, and through risk assessments and on-site audits.

Results

We've improved our Business sales due diligence to help us better identify and tackle potential human rights impacts from our products and services. We report on our responsible tech principles on page 35.

Risks

We consider human rights risks as part of our stakeholder management and supply management Group risk categories on pages 63 and 70.

Anti-bribery and corruption

Policies

Being trusted: our code sets out promises including zero-tolerance of bribery and corruption. It's supported by specific standards on Anti-Bribery and Corruption (ABC), gifts and hospitality, conflicts of interest and high risk third parties.

The code describes how we expect everyone who works here – 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.

Through our commitment to doing the right thing, it shows how stakeholders can depend on us.

Due diligence

We do 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 take a risk-based approach to thirdparty due diligence. We also have enhanced approval, due diligence and monitoring processes in place for higher risk third parties.

In 2024, we're launching a new system to better manage gifts and hospitality and conflicts of interest disclosures.

Results

All colleagues get mandatory training on our code. We also publish communications that reinforce policies. Two of our quarterly colleague engagement surveys include questions

on ethical perception, with results shared with senior management.

Speak Up, our whistleblowing service, lets anyone who works for (or with) us to confidentially report anything that goes against our code. This includes bribery, corruption, human rights violations, bullying or harassment. It had 744 reports this year.

Risks

We consider ABC and ethical conduct risks within the legal compliance group risk category – where risks apply across our operations generally. See page 66 for more.

Our key performance indicators (KPIs)

We use ten KPIs - five operational and five financial. We reconcile the financial measures to the closest IFRS measure on pages 230 to 233.

Financial

Year ended 31 March

Changes to our KPIs

We continue to monitor and evolve our KPIs to ensure those reported are the best measures against our strategy. During FY24 we have updated our KPIs to more accurately reflect our strategic priorities.

We now recognise 'units on legacy' as a KPI, which monitors customer migration from legacy to our strategic network platforms.

We no longer recognise the cumulative number of people trained on digital skills as a KPI, but we still recognise it as an important metric and track progress – see page 35 for more details.

Adjusted^a EBITDA margin has been discontinued as a KPI, although revenue and adjusted^a EBITDA remain KPIs.

Definition

Performance

on pages 56 to 57.

This is our revenue as reported in our income statement.

Reported revenue was £20,797m (FY23: £20,681m). The increase was driven by price increases and fibreenabled product sales in Openreach, increased service revenue in Consumer with annual contractual price rises being aided by higher roaming and increased FTTP connections, partly offset by legacy product declines and a one-off revenue adjustment in Business. You can read more details about CFU performance

Link to strategy 1,2,3

Definition

This measures our earnings before specific items, net finance expense, taxation, depreciation and amortisation and share of post tax profits or losses of associates and joint ventures.

Performance

Adjusted EBITDA was £8,100m (FY23: £7,928m). The increase was primarily due to revenue flow through and cost control more than offsetting cost inflation and one-off items; Openreach and Consumer delivered strong EBITDA growth, partially offset by EBITDA decline in Business due to increased input costs and legacy high-margin managed contract declines.

You can read more on page 52.

Link to strategy		1,2,3
------------------	--	-------

Normalised free cash flowb (£m)
		1,280
		1,328
		1,392
		1,459

Definition

This measures free cash flow (net cash inflow from operating activities after capital expenditure) after adjusting for a number of measures, the largest being net interest paid, payments of lease liabilities, pension deficit payments, specific items and net cash flows related to the sale of contracts assets. For a full definition refer to page 232.

Performance

We generated £1,280m of normalised free cash flow (FY23: £1,328m). This was down 4% from last year and reflects working capital timing and a prior year tax refund, offset by EBITDA growth and lower capital expenditure.

Link to strategy 1,2,3

2,011

Reported capital expenditure

(£m)

Definition

This measures additions to property, plant and equipment and intangible assets during the year. See note 4 to the consolidated financial statements for a reconciliation to the measures reported the group accounts.

Performance

Reported capital expenditure was £4,880m (FY23: £5,056m). The decrease was the result of lower networks spend despite higher FTTP build in the year due to reduced unit costs and efficiencies.

Link to strategy 1,2,3

Return on capital employed (ROCE) (%)

	8.5 %
	8.3 %
	8.7 %
	8.6 %
	10.2 %

Definition

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 232.

Performance

ROCE for the year was 8.5% (FY23: 8.3%). This is primarily due to slightly higher adjusted earnings offset by increased capital employed which reflects higher debt to fund our fibre build programme.

Link to strategy 1,2,3

Operational

At 31 March

BT Group Net Promoter Score (NPS) point increase/(decrease)

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^c and net satisfaction in our wholesale business.

Performance

BT Group NPS increased by 1.0 point, (FY23: down 1.0 point) as we continue to focus on creating standout customer experiences with perceptions improving for Consumer, Business and Openreach. You can read more about these and our approach to customer experience on pages 26 to 27.

Link to strategy	2
Percentage reduction in carbon emissions intensity (% reduction)

61 % 55 % 55 % 57 % 43 %

Definition

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^a EBITDA plus employee costs).

Performance

Against our carbon emission intensity reduction target this year we achieved a 61% reduction from our baseline year (FY17) (FY23^d : 55%). You can find more information on what we're doing to tackle environmental challenges and our journey to net zero emissions on pages 37 to 39.

Link to strategy	3
------------------	---

Total Openreach FTTP connections (m)

Definition

This tracks how many premises are connected to Openreach's full fibre (FTTP) network.

Total 5G subscriptions

(m)

Definition

Performance

This measures the number of BT retail customers who have a 5G subscription.

11.1m BT retail customers are able to connect to our 5G network at 31 March 2024 (FY23: 8.6m). We continue to expand our 5G network which now covers 75% of the UK population. You can read more on our 5G coverage and rollout on page 20.

Performance

4.7m customers were connected to Openreach's FTTP network at 31 March 2024 (FY23: 3.1m). Openreach's full fibre footprint reaches nearly 14m homes with a further 6m where initial build is underway, and we're heading towards 25m premises by the end of 2026. You can read more about the full fibre rollout on page 20.

Link to strategy		1
------------------	--	---

Units on legacy

(m)

Definition

This tracks customer migrations from legacy to strategic network platforms, which enables our legacy platforms to be decommissioned. A 'unit' is a circuit within, or a connection to our network.

Performance

Since announcing our transformation in FY20, we have reduced the number of legacy connections by nearly 60% by migrating customers to Digital Voice, 4/5G and Fibre broadband.

Link to strategy 2,3

Link to strategy 1

Link to strategy

Each KPI measures how we're doing against at least one of our strategic pillars. You can read more about these, and our progress against them, from page 19.

1_Build the strongest foundations

2_Create standout customer experiences

3_Lead the way to a bright, sustainable future

Link to directors' remuneration The annual bonus and long-term incentive plans that comprise our directors' remuneration are each linked to certain KPIs. See the Report on directors' remuneration on pages 106 to 124.

• a Adjusted EBITDA is defined as the group profit or loss before specific items, net finance expense, taxation, depreciation and amortisation and share of post tax profits or losses of associates and joint ventures, as explained on page 232.
• b Normalised free cash flow as defined on page 232. c Includes our Consumer brands as well as Business unit excluding Wholesale.
• d Restated from 56% as presented in the FY23 Annual Report following review of our carbon emissions.

Group performance

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 231 to 233. The alternative performance measures we use may not be directly comparable with similarly titled measures used by other companies.

FY24 Capital expenditure^d £4,880m

Revenue £m

£20,797m 1%

Profit before tax £m

£1,186m (31)%

	1,186
	1,729

Adjusted^a EBITDA £m

£8,100m 2%

	8,100
	7,928

Operating cash flow £m

£5,953m (11)%

	5,953
	6,724

Normalised free cash flow^b £m

£1,280m (4)%

	1,280
	1,328

Net debt^c £m

£19,479m £620m

Performance

We delivered growth in revenue and adjusted^a EBITDA; normalised free cash flow^b was delivered ahead of our guidance range; and capital expenditure was down 3%.

	Financial outlookf	Result	Performance against financial outlook
Change in adjustede revenue	Growth on a Sport JV pro formag basis	Up 2%	In line
Adjusteda EBITDA	Growth on a Sport JV pro formag basis	Up 1%	In line
Capital expenditured	c.£5.0bn	£4.9bn	Better
Normalised free cash flowb	Toward the top end of £1.0-1.2bn	£1.3bn	Better

Reported revenue was £20,797m, up 1%; and adjusted^e revenue was up 2% on a Sports JV pro forma^g basis due to price increases and fibre-enabled product sales in Openreach, increased service revenue in Consumer with annual contractual price rises being aided by higher roaming and increased FTTP connections, partly offset by legacy product declines and a one-off revenue adjustment in Business (see note 5 to the consolidated financial statements).

Adjusted^a EBITDA of £8,100m was up 2%; adjusted^a EBITDA was up 1% on a Sports JV pro forma^g basis, with revenue flow through and cost control more than offsetting cost inflation and one-off items.

We have recognised a non-cash impairment of goodwill allocated to Business of £488m as a specific item, reflecting a decline in profitability in recent years.

Reported profit before tax of £1,186m was down 31%, primarily due to impairment of goodwill, increased depreciation, amortisation and pension interest expense, partially offset by adjusted^a EBITDA growth.

Capital expenditure^d of £4,880m was down 3%, primarily driven by lower networks spend despite higher FTTP build in the year due to reduced unit costs and efficiencies; cash capex of £4,969m was down 6%.

Normalised free cash flow^b was £1,280m, down 4% due to working capital timing and a prior year tax refund, partly offset by EBITDA growth and lower capital expenditure.

Financial outlook

Despite challenging macroeconomic conditions, cost of living challenges and a highly competitive market for connectivity services, we are still well positioned to deliver consistent and predictable growth and value through delivery of our focused strategy. Our outlook is underpinned by confidence in our unrivalled assets, leading network position, strong brands, everimproving customer experience and continued focus on transformation.

In FY25 we expect adjusted^e revenue growth of 0-1.0% and EBITDA of around £8.2bn. Capital expenditure excluding spectrum will be less than £4.8bn, with normalised free cash flow of around £1.5bn.

From FY26 to FY30, we expect consistent and predictable revenue growth and EBITDA growth ahead of revenue, enhanced by cost transformation. Capital expenditure will remain at less than £4.8bn until FY26 before reducing by c.£1bn post peak FTTP build. We expect to deliver c.£2.0bn in normalised free cash flow in FY27 and c.£3.0bn by the end of the decade.

	FY25 outlook	End of decade
Change in adjustede revenue	0 - 1.0%	Consistent and predictable growth
Adjusteda EBITDA	c.£8.2bn	Consistent and predictable growth ahead of revenue enhanced by cost transformation
Capital expenditured	<£4.8bn	<£4.8bn to FY26 Reduces by c.£1bn post peak FTTP build rate
Normalised free cash flowb	c.£1.5bn	c.£2.0bn in FY27 c.£3.0bn by end of decade

Dividend

We have declared a final dividend of 5.69 pence per share (pps), increasing the full year dividend to 8.00pps, a year-on-year increase of 3.9% (FY23: 7.70pps).

We reconfirm our progressive dividend policy which 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 15 May 2024

• c Net debt as defined on page 231.
• d Additions to property, plant and equipment and intangible assets in the period. See note 4 to the consolidated financial statements for a reconciliation.
• e Adjusted measures exclude specific items, as explained on page 231.
• f Financial outlook originally provided in May 2023 was updated in November 2023 to clarify capital expenditure of c£5.0bn and normalised free cash flow at the top end of the £1.0-£1.2bn range.
• g On 1 September 2022 BT Group and Warner Bros. Discovery announced completion of their transaction to form a 50:50 joint venture (JV) combining the assets of BT Sport and Eurosport UK. Financial information stated as pro forma is unaudited and is presented to estimate the impact on the group as if trading in relation to BT Sport had been equity accounted for in previous periods, akin to the JV being in place historically. Please refer to Additional Information on page 233 for a bridge between financial information on a reported basis and a Sports JV pro forma basis, which shows a decrease of £238m to adjusted revenue and increase of £71m to adjusted EBITDA.

a Adjusted EBITDA is defined as the group profit or loss before specific items, net finance expense, taxation, depreciation and amortisation and share of post tax profits or losses of associates and joint ventures, as explained on page 232.

b Normalised free cash flow as defined on page 232.

Group performance continued

Summarised income statement

	2024	2023
Year ended 31 March	£m	£m
Revenue	20,797	20,681
Operating costsa	(13,185)	(13,244)
Depreciation and amortisation	(5,398)	(4,818)
Operating profit	2,214	2,619
Net finance expense	(1,007)	(831)
Share of post tax profit/(loss) of associates and ventures	(21)	(59)
Profit before tax	1,186	1,729
Tax	(331)	176
Profit for the period	855	1,905

Revenue

Reported revenue was £20,797m, up 1% due to fibre-enabled product sales and price increases in Openreach, increased service revenue in Consumer driven by contractual price rises, partly offset by the prior year removal of BT Sport revenue and legacy product declines and a one off revenue adjustment in Business (see note 5 to the consolidated financial statements). Revenue was up 2% on a Sports JV pro forma^e basis.

You can find details of revenue by CFU on pages 56 to 57. 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 £18,583m, up 3% year-on-year due to the goodwill impairment (see page 53), excluding this costs are flat with tight cost control and the removal of BT Sport rights and production costs, partly offset by cost inflation and one-off items.

We have now achieved our £3bn cost savings target 12 months early at a cost to achieve of £1.5bn, £0.1bn lower than target (FY23: achieved gross annualised savings of £2.1bn and costs of £1.1bn).The cumulative cash costs incurred amount to £1.5bn (FY23: £1.1bn).

Note 6 to the consolidated financial statements shows a detailed breakdown of our operating costs.

Adjusted EBITDA

Adjusted^c EBITDA of £8,100m, up 2%, primarily driven by revenue flow through and cost control more than offsetting cost inflation and one-off items; Openreach and Consumer delivered strong EBITDA growth, partially offset by EBITDA decline in Business due to increased input costs and legacy high-margin managed contract declines. Adjusted^c EBITDA was up 1% on a Sports JV pro forma^e basis.

You can find details of adjusted EBITDA by CFU on pages 56 to 57.

Profit before tax

Reported profit before tax of £1,186m was down 31%, primarily due to impairment of goodwill, increased depreciation, amortisation and pension interest expense, partially offset by adjusted^b EBITDA growth.

Specific items

As we explain on page 230, 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.

Specific items resulted in a net charge after tax of £963m (FY23: £253m). The main components were goodwill impairment of £488m (FY23: £nil), restructuring charges of £388m (FY23: £300m) and interest expense on retirement benefit obligation of £121m (FY23: £18m); partly offset by a tax credit on specific items of £145m (FY23: credit of £308m).

Note 9 to the consolidated financial statements shows the full details of all revenues and costs that we have treated as specific items.

Adjusted^b operating costs Year ended 31 March (£m)

Taxation

The effective tax rate on reported profit was 27.9% (FY23: negative 10.2%) which is higher than the UK corporation tax rate of 25% primarily due to a non-deductible goodwill impairment, partly offset by the UK patent box regime, which taxes some of our UK profits at 10%. The FY23 rate was lower due to the previous super deduction regime, the non-taxable gain on the revaluation and disposal of the BT Sports business and the lower UK corporation tax rate of 19%.

The effective tax rate on adjusted^b profit was 20.7% (FY23: 5.8%) for the same reasons.

At the end of FY24, we had c.£11bn (FY23: c.£8bn) of carried forward UK tax losses.

We made income tax payments of £59m (FY23: £136m refund).

Our tax expense recognised in the income statement before specific items was £476m (FY23: £132m). We also recognised a £678m tax credit (FY23: £642m tax credit) in the statement of comprehensive income, mainly relating to the increase in our IAS 19 deficit.

We expect our sustainable 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.

Earnings per share

Reported earnings per share was 8.7p, down 10.7p, while adjusted^b earnings per share was 18.5p, down 3.5p.

Capital expenditure

Capital expenditure was £4,880m (FY23: £5,056m), down 3% primarily driven by lower network spend despite higher FTTP build in the year, due to reduced unit costs and efficiencies.

Cash capital expenditure was down 6% at £4,969m, with the difference to reported capital expenditure primarily representing the timing of government grant funding repayments.

Cash flow

Net cash inflow from operating activities was £5,953m, down 11%.

Normalised free cash flow^d was £1,280m, down 4% primarily due to working capital timing and a prior year tax refund, offsetting EBITDA growth and lower cash capital expenditure. Year-on-year net working capital includes £(506)m from lower utilisation of a supply chain financing programme offset by £305m from the sale of cash flows of contract assets relating to mobile handsets and £105m as a prepayment for the forward sale of copper.

You can see a reconciliation to normalised free cash flow^d from net cash inflow from operating activities (the most directly comparable IFRS measure) on page 232.

The net cash cost of specific items adjusted from normalised free cash flow^d was £439m (FY23: £404m), primarily relating to restructuring payments.

Sports JV performance

Our joint venture with Warner Bros. Discovery ('Sports JV'), which has been rebranded to TNT Sports during the year, continues to deliver a compelling sports offering after extending Premier League rights and adding the FA Cup to its comprehensive line-up of premium content. Underlying trading operations in FY24 were profitable but we recognised a share of losses after tax of £41m after adjustments made to align with the group's accounting policies.

Goodwill impairment

We perform an annual goodwill impairment review by reference to the value in use of our cash generating units (CGUs) which represent the smallest identifiable groups of assets that generate independent cash inflows. Our CGUs are deemed to be Consumer and Business.

Our FY24 impairment testing exercise concluded that there is significant headroom in our Consumer CGU, consistent with FY23. The carrying amount of goodwill allocated to this CGU at 31 March 2024 was £3.9bn (FY23: £3.9bn).

The carrying value of the Business CGU exceeded its value in use by £488m. We have therefore booked an impairment charge equivalent to this amount (FY23: £nil). The charge has been recognised as a specific item.

After impairment, the carrying amount of goodwill allocated to the Business CGU at 31 March 2024 was £3.6bn (FY23: £4.1bn). Of the £4.1bn in FY23, £2.6bn relates to the acquisition of EE in 2016 with the rest relating to historical small acquisitions.

For more information see note 13 to the consolidated financial statements.

b Adjusted measures exclude specific items, as explained on page 230.

c Adjusted EBITDA is defined as the group profit or loss before specific items, net finance expense, taxation, depreciation and amortisation and share of post tax profits or losses of associates and joint ventures, as explained on page 231.

d Normalised free cash flow as defined on page 232.

e On 1 September 2022 BT Group and Warner Bros. Discovery announced completion of their transaction to form a 50:50 joint venture (JV) combining the assets of BT Sport and Eurosport UK. Financial information stated as pro forma is unaudited and is presented to estimate the impact on the group as if trading in relation to BT Sport had been equity accounted for in previous periods, akin to the JV being in place historically. Please refer to Additional Information on page 233 for a bridge between financial information on a reported basis and a Sports JV pro forma basis, which shows a decrease of £238m to adjusted revenue and increase of £71m to adjusted EBITDA.

a Excluding depreciation and amortisation.

Group performance continued

Summarised balance sheet

	2024	2023
Year ended 31 March	£m	£m
Intangible assets	12,920	13,687
Property, plant and equipment	22,562	21,667
Right-of-use assets	3,642	3,981
Derivative financial instruments	1,070	1,479
Joint ventures and associates	307	359
Preference shares in joint ventures	533	555
Cash and cash equivalents	414	392
Investments	2,395	3,577
Trade and other receivables	4,206	3,563
Contract assets	1,740	1,934
Deferred tax assets	1,048	709
Other current and non-current assets	902	849
Total assets	51,739	52,752
Loans and other borrowings	18,526	18,521
Derivative financial instruments	539	383
Trade and other payables	6,964	7,484
Contract liabilities	1,081	1,052
Lease liabilities	4,955	5,359
Provisions	649	598
Retirement benefit obligations	4,882	3,139
Deferred tax liabilities	1,533	1,620
Other current and non-current
liabilities	92	82
Total liabilities	39,221	38,238

Movements in the deficit for BT Group's defined benefit plans

Pensions

The IAS 19 deficit has increased to £4.8bn at 31 March 2024, net of tax £3.8bn (FY23: £3.1bn, net of tax £2.5bn), mainly due to the increase in real interest rates and narrowing of credit spreads over the period, partly offset by our scheduled contributions.

The BT Pension Scheme (BTPS) hedges inflation and interest rate risk with reference to the funding deficit, which has resulted in the BTPS being over hedged on an IAS 19 measure. In addition, the IAS 19 liabilities are set by reference to corporate bond yields. The increase in real yields and narrowing of credit spreads over the period have therefore led to an increase in the IAS 19 deficit, partly offset by scheduled contributions of £0.8bn. The impact of these factors is different for the funding valuation deficit.

The 2023 BTPS funding valuation included a future funding commitment for BT to provide additional deficit contributions should the funding deficit be more than £1bn behind plan at two consecutive semi-annual assessment dates. At the 31 December 2023 assessment date, the funding position was within this limit.

Further details of the BTPS triennial review can be found in note 19 – Retirement benefit plans on page 185 and in the Section 172 statement on page 93.

The movements in the deficit for the group's defined benefit plans are shown below:

Net debt^b and financial debt

Net financial debt (which excludes lease liabilities) at 31 March 2024 was £14.5bn (31 March 2023: £13.5bn), increasing mainly due to our scheduled pension scheme contributions of £0.8bn.

Net debt^b (which includes lease liabilities) was £19.5bn (31 March 2023: £18.9bn). The difference to the movement in net financial debt reflects lease movements.

BT Group holds cash and current investment balances of £2.8bn; the current portion of loans and other borrowings is £1.4bn.

Our £2.1bn revolving credit facility, which matures in March 2027, remains undrawn at 31 March 2024.

We remain committed to our credit rating target of BBB+ and minimum rating of BBB.

During FY24 all of the major agencies confirmed their ratings at BBB or equivalent with stable outlook

Contractual obligations and commitments

Our principal undiscounted contractual financial obligations as at 31 March 2024 are as follows:

• Loans and other borrowings of £17,728m (FY23: £17,442m)
• Lease liabilities of £5,591m (FY23: £6,031m)
• Pension deficit obligations of £5,942m (FY23: £6,755m)
• Capital commitments of £1,049m (FY23: £1,480m)
• Device purchase commitments of £171m (FY23: £217m).

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, 19, 26 and 31 to the consolidated financial statements give further information on these items.

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.

Note 26 to the consolidated financial statements gives more information on our debt arrangements.

(£m)	Debt maturity profile
FY25		740
FY26	566					2,012
FY27	372
FY28				1,611
FY29				1,293	548	447
FY30		777		673
FY31				1,604
FY32	498	372		716
FY33			1,155
FY34		719
FY35
FY36
FY37
FY38	498
FY39
FY40		719
FY41	442
FY42
FY43		741	64
FY44
FY45
FY46
FY47
FY48	247
FY49
FY50	389

£ debt € swapped to £ \$ debt swapped to £ JPY swapped to £

Share buyback

We spent £133m (FY23: £138m) on our share buyback programme. We received proceeds of £57m (FY23: £5m) from colleagues exercising their share options.

a Primarily reflects the impact on the liabilities of actual inflation being higher than assumed at the prior reporting date, which has been broadly offset by increases 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. Amounts due to joint ventures held within loans and borrowings are also excluded. Please refer to note 26 of the consolidated financial statements for reconciliation from nearest IFRS measure.

Our customer-facing units

BT Group consists of customer-facing units (CFUs), technology units, and corporate units, as described on page 11.

We have three CFUs – Consumer, Business and Openreach. Business started reporting as a combined unit from the start of the financial year.

The comparative results for the year ended 31 March 2023 have been re-presented for the impact of the creation of our Business CFU and for changes to the methodology we use to allocate shared central costs. See note 1 to the consolidated financial statements for more information, and note 32 for a bridge to previously presented financial information.

Consumer

Adjusteda revenue			Adjusteda operating profit
£9,833m	1%	£934m	8%

	2024	2023	Change
Year ended 31 March	£m	£m	£m	%
Adjusteda revenue	9,833	9,737	96	1
Adjusteda operating
costs	7,161	7,268	(107)	(1)
Adjustedb EBITDA	2,672	2,469	203	8
Depreciation & amortisationa	1,738	1,603	135	8
Adjusteda operating profit	934	866	68	8
Capital expenditure	1,175	1,221	(46)	(4)
Normalised free cash flowc	1,023	963	60	6
Pro formad adjusted revenue	9,833	9,499	334	4
Pro formad adjusted EBITDA	2,672	2,540	132	5
Pro formad adjusted capital expenditure	1,175	1,221	(46)	(4)
Pro formad adjusted normalised free cash flow	1,023	1,086	(63)	(6)

Adjusted^a revenue growth of 4% on a pro forma^d basis was driven by service revenue growth from the annual contractual price rise, increased roaming and increased FTTP connections. This was partially offset by a decline in voice revenues and continued handset to SIM-only migration. Adjusted^a revenue was up 1% as per above offset by the BT Sport disposal in the prior year.

Adjusted^bEBITDA growth of 5% on a pro forma^d basis with the growth in service revenue offset by higher input costs and prior year one-off items. Adjusted^b EBITDA was up 8% due to revenue growth and rights and production cost savings from the BT Sport disposal.

Depreciation and amortisation^a was up, driven by higher mobile network, digital and customer equipment investment.

Capital expenditure was down due to lower digital spend.

Normalised free cash flow^c was down on a pro forma^d adjusted basis, with £(506)m from lower utilisation of a supply chain financing programme partly offset by £305m from the sale of cash flows of contract assets relating to mobile handsets along with higher EBITDA and lower capital expenditure.

ARPU growth was strong in FY24. Broadband ARPU of £41.2 was up 5% year-on-year and postpaid mobile ARPU of £19.4 was up 9% year-on-year.

Churn remains low despite competitive markets, with broadband and postpaid mobile churn both 1.1%.

Business

Adjusteda revenue		Adjusteda	operating profit
£8,128m	(2)%	£646m	(28)%

	2024	2023	Change
Year ended 31 March	£m	£m	£m	%
Adjusteda revenue	8,128	8,258	(130)	(2)
Adjusteda operating costs	6,498	6,313	185	3
Adjustedb EBITDA	1,630	1,945	(315)	(16)
Depreciation & amortisationa	984	1,047	(63)	(6)
Adjusteda operating profit	646	898	(252)	(28)
Capital expenditure	775	886	(111)	(13)
Normalised free cash flowc	431	648	(217)	(33)

Adjusted^a revenue decline of 2% was driven by declines in legacy products and managed contracts, adverse foreign exchange, a one-off revenue adjustment and prior year one-offs. This was partially offset by continued trading momentum further enhanced by inflation-linked price rises in Small and Medium Business (SMB), and growth in Security.

Adjusted^b EBITDA decline of 16% was due to higher input costs driven by inflation, the flow through of high margin legacy declines and oneoffs. This was partially offset by the ongoing benefit of cost transformation and revenue growth in SMB and Security.

Depreciation and amortisation^a decline was driven primarily by the timing of asset recognition in the prior year.

Capital expenditure was down due to higher customer project spend in the prior year.

Normalised free cash flow^c declined mainly due to lower adjusted^b EBITDA and the timing of working capital, partially offset by lower capital expenditure.

Retail order intake was £6.2bn on a 12-month rolling basis, down 1%.

Openreach

Adjusted^a revenue Adjusted^a operating profit £6,077m 7% £1,775m 15%

	2024	2023	Change
Year ended 31 March	£m	£m	£m	%
Adjusteda revenue	6,077	5,675	402	7
Adjusteda operating costs	2,250	2,165	85	4
Adjustedb EBITDA	3,827	3,510	317	9
Depreciation & amortisationa	2,052	1,965	87	4
Adjusteda operating profit	1,775	1,545	230	15
Capital expenditure	2,845	2,847	(2)	—
Normalised free cash flowc	590	219	371	169

Adjusted^a revenue growth of 7% was driven by CPI linked price increases, growth in FTTP broadband base and growth in the Ethernet base. This was partially offset by declines in the base of broadband and voice only lines. The fibre-enabled base grew; offset by declines in the copper base.

Adjusted^b EBITDA growth of 9% was driven by revenue flow through, improved cost transformation including lower staff numbers, partially offset by pay inflation, higher energy costs and higher FTTP provision volumes.

Depreciation and amortisation^a was up driven by increased network build.

Capital expenditure was broadly flat with lower FTTP build unit cost partially offset by higher FTTP build and provision volumes.

Normalised free cash flow^c increase was driven by higher adjusted^b EBITDA and copper forward sales, partially offset by the timing of working capital.

Openreach broadband ARPU grew by 10% year-on-year due to price rises and increased volumes of FTTP.

a Adjusted measures exclude specific items, as explained on page 231.

b Adjusted EBITDA is defined as the group profit or loss before specific items, net finance expense, taxation, depreciation and amortisation and share of post tax profits or losses of associates and joint ventures, as explained on page 232.

c Normalised free cash flow as defined on page 232.

d On 1 September 2022 BT Group and Warner Bros. Discovery announced completion of their transaction to form a 50:50 joint venture (JV) combining the assets of BT Sport and Eurosport UK. Financial information stated as pro forma is unaudited and is presented to estimate the impact on the group as if trading in relation to BT Sport had been equity accounted for in previous periods, akin to the JV being in place historically. Please refer to Additional Information on page 233 for a bridge between financial information on a reported basis and a Sports JV pro forma basis, which shows a decrease of £238m to adjusted revenue, an increase of £71m to adjusted EBITDA and an increase of £123m to normalised free cash flow.

Regulatory update

Today's regulation is enabling us to build the network of the future, while protecting and supporting our customers. We're working with Ofcom and Government on how to effectively regulate the market in future.

Building networks for the future

Openreach continue to build full fibre at pace – creating the next generation of UK telecommunications. Ofcom continue to monitor these activities as they start work on reviewing the regulatory framework for 2026-31.

We believe the current approach is working well. It's delivering a competitive market and good outcomes for customers.

In May 2023 Ofcom approved our Equinox 2 pricing offer. The next stage of regulation must consider how to achieve the full benefits of fibre investment through closing the old, copper networks it replaces.

Our more regional focus to rolling out Digital Voice services is helping us work closer with customers to support them with this switch. A successful rollout has to work for everyone – as shown by industry's recent commitments on telecare and vulnerable customers.

Orders for broadband Universal Service are falling as we connect more eligible homes. The Government is currently consulting on how to serve 'very hard to reach' customers as well as the overall future of Universal Service.

We recognise Universal Service is a vital safety net for some customers. But we think its scope and detail isn't always proportionate to the number of homes it applies to.

The continued transformation of UK networks means increased scrutiny from Government and Ofcom on security and resilience. We're continuing to work with all parties to apply the 2018 Telecoms Security Act and remove high-risk vendors from our core network.

On 25 June 2023 we had a technical fault with the 999 service and there was a short time when calls couldn't get through. We were – and still are – sincerely sorry for the distress this caused and are working closely with the ongoing investigation.

We're proud of our networks' reliability. We welcome the chance to work with Ofcom as they consider resilience needs for the future. It's important to our customers that we keep providing very reliable services at affordable prices.

Pricing and competing fairly

In December 2023 Ofcom closed their enforcement programme into in-contract price variation terms, with no action taken on us. But recent inflation rises have raised concerns over the 'CPI+' pricing models our industry uses. Ofcom feel this can be confusing for customers. We've listened and are introducing a new consumer pricing model, switching from % figures and CPI to a clear and simple 'pounds and pence' view.

Work on implementing one-touch switching continues across the industry. This will make it easier for customers to change providers.

We always try to look after customers who have difficulty paying for services. We'll continue providing affordable broadband and EE Mobile Basics products to eligible customers – and support vulnerable customers through careful judgements on debt and disconnection. We still have more customers on subsidised or social tariffs than the rest of the industry combined^a .

We're proud of our networks' reliability. We welcome the chance to work with Ofcom as they consider resilience needs for the future. It's important to our customers that we keep providing very reliable services at affordable prices.

Looking to the future: market and regulation

Over the coming months and years, we look forward to working with Ofcom and Government on some of the wider questions about how to regulate our network and industry.

We welcomed the conclusion of Ofcom's Net Neutrality Review. It gave new guidance on traffic management and using network resources efficiently, giving us more flexibility in the products and services we can offer customers.

There's still more to be done – particularly on better sharing the cost of developing our network to handle significant volumes of content.

As Vodafone and Three announce details of their proposed merger, we continue to watch developments and feed our views into the process. It's important the UK mobile market is effective and competitive, especially around upcoming spectrum auctions.

We support the Department for Business and Trade's work on 'Smarter regulation' in the energy, water and telecoms sectors.

In general we feel that our sector is well regulated – evidenced by big investment and competition over the past few years. But there's always room to improve. We support introducing a 'growth duty' to make sure all regulatory interventions are considered (and reviewed) holistically.

We provide broadband for 72% of those in the UK who take social tariffs.

72%

A message from the Chair of Openreach

Reflecting on the year, it's clear that Openreach is doing exactly what we set out to do for all our stakeholders. Underpinned by government policy and regulation, we're upgrading the UK's broadband infrastructure at record pace.

Competitors have made progress. Market growth and inflation have been challenging. Yet Openreach's performance has again been strong.

As the UK's largest wholesale broadband company, we're continuing to invest in Ultrafast Full Fibre technology. From rural villages to city centres, we've now passed more than13.8 million homes and businesses. We're still heading towards 25 million by the end of 2026 – and we plan to keep going, reaching up to 30m by the end of the decade.

But we've always said that building the network isn't the end goal. We need customers to connect to it and get the benefits. That's why I'm really pleased to see 4.7m customers already upgraded and enjoying our new platform while we continue to drive down costs and improve the service we give them.

Delivering for our customers

People are spending more time than ever online, and what we deliver is important to them.

We have a clear focus: delivering great service, building full fibre at pace across the UK and upgrading customers to our best available network.

Openreach isn't just meeting the high bar Ofcom has set – we're setting our own, even higher, standards.

Our Net Promoter Score (an assessment direct from customers) has improved by 19.5% to 50.2% over the past year, while our Trustpilot score is now 'Excellent' at 4.6.

With fibre fault rates also lower than copper, there's strong momentum in improving customer experience, but there's always more to do.

Building efficiently and pricing competitively

We sped up our build rate again this year, to a peak of one million homes and businesses in the final quarter.

By harnessing innovation and efficiencies in our supply chain, we've also been driving down the cost of reaching each premises^a achieving FTTP build costs per home at the lower end of the £250 – £350 range.

To that end, the value and quality of our product helps us stand out in a competitive market. Our Equinox 2 pricing offer has now been taken up by all our major customers – with the ability to fulfil over 36,000 orders every week. A brilliant start.

Prioritising our people

Openreach will always be a people business, and our investment in ensuring our people have the right skills to deliver for our customers continues.

As more customers move to reliable full fibre services, we'll need fewer engineers to support them because it's a more dependable platform. To that end, we've stopped backfilling certain roles when people leave or retire and we're continuing to flex our reliance on subcontractors. We're also retraining copper engineers with fibre skills and our desk-based teams are exploiting new systems and AI applications.

We're also becoming more inclusive as we try to better represent the communities we serve.

Our People Networks are growing, continuing to create a safe space for minority colleagues and challenge us on the environment we create for all colleagues.

Acting sustainably and safely

We know our operations affect the environment. We've distilled our sustainability objectives into three aims to help us focus.

We want to lower our carbon footprint, use fewer materials and cut waste, and make a positive impact on nature.

We're progressing well. We're converting our diesel van fleet to electric vehicles – with more than 4,100 already on the road. And last year we recycled around 4,300 tons of copper. But there is still a long way to go.

Keeping colleagues, partners and the public safe is paramount. Almost everyone at

Openreach has now completed our daylong 'Hearts and Minds' safety programme – a massive investment to refocus our culture on physical and mental wellbeing. We're also keeping up our work to move network assets away from high voltage poles, with the project now completed.

Digital transformation

As BT Group's deadline for retiring the analogue PSTN approaches, we've become more aware that wholesale customers need support and encouragement to switch to Digital Voice services.

We welcome new industry commitments on better protecting vulnerable customers and will carry on facilitating upgrades.

As more people move to full fibre we'll also need fewer exchanges across the UK. Exiting these buildings is challenging and will take many years. But it will help the industry be more cost and energy efficient so we're working closely with CPs to plan and manage this change.

An environment set for success

Finally, it's worth reflecting on the success of the sector.

A combination of UK Government tax policy and Ofcom's Wholesale Fixed Telecoms Market Review (WFTMR) have driven investment and fierce competition across our industry.

An alt-net community – with access to our ducts and poles – has added to an already strong retail market. This is leading to better outcomes and giving customers an even wider choice of offers, products and services.

The framework is working. But the business case for full fibre investments still stretches to nearly 20 years, so what everyone needs is a continued period of regulatory and Government policy stability.

Meanwhile, technology change keeps getting faster and there'll be increasing challenges to reach more rural, isolated communities. Our focus will be on upgrading as many customers as possible. And – with our unrivalled track record in rural connectivity – we're looking forward to playing our part in the Government's Project Gigabit programme.

We're doing well, and that wouldn't be possible without our people. So I want to thank all of our colleagues who've worked tirelessly to maintain that momentum this year.

Mike McTighe

Chair, Openreach 15 May 2024

Risk management

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. It is fundamental to our strategy and performance.

Our risk management framework

Risk management is integral to our business and to achieving our strategic priorities. Our risk management framework makes sure that we manage risks in a smart and structured way. It helps us reach our goals, deliver our strategy, support our business model and protect our assets – while leading the way to a bright, sustainable future.

We align risk management activities with our strategic framework, business planning and performance management. This helps integrate risk thinking into key decisionmaking areas. It also makes sure we share information in a joined-up way for the biggest impact.

How we manage risks

We divide our risk landscape into 16 Group Risk Categories (GRCs) of enduring risks – like People and Cyber Security – that will not change significantly over time and can be managed consistently across the organisation.

For each GRC we set our risk appetite. That is how much risk we're willing to take, underpinned by metrics with upper and lower limits which set our tolerance. We manage enduring risks within each GRC through clear policies complemented by standards and a group-wide Key Control Framework.

We use a 'three lines of defence' model to define clear roles and responsibilities, coordinate assurance activities and give confidence to stakeholders that we're managing risks effectively.

We're also aware of – and act on – current, specific risks and uncertainties which are important at a point in time and dynamic in nature. We categorise these as:

• 1. Point risks: Risks we can't manage effectively through the key control framework, or that are materially significant to us and need to be managed separately.
• 1. Emerging risks: Uncertainties which might be materially significant but whose causes and impacts we can't presently fully define.

We align these types of risks to a GRC based on their causes and consequences.

For point risks, we assess their potential impacts and likelihood, assign management ownership and decide how to best manage the risks. We keep monitoring risks and action plans – making changes like agreeing new actions as needed.

We also assess emerging risks but with different criteria. We look at potential impacts, level of preparedness and the time horizon. Reflecting that emerging risks are uncertain, we also consider those that may occur in the longer term (more than three years).

Some emerging risks are more ambiguous and broader than others, needing coordinated, cross-group assessment and action. We use our emerging risk hubs when considering these risks. They bring together cross-functional representatives to share intelligence, identify potential trade-offs and agree actions.

Our risk governance and culture

Ultimately, the Board has overall responsibility for risk management. On the Board's behalf, the Audit and Risk Committee provides oversight of and monitors the effectiveness of our risk management and internal controls systems.

Twice a year, the Board gets a summary of how we're managing key risks across all GRCs. The Audit and Risk Committee also holds discussions with Executive Committee members to conduct deep dives into specific GRCs across the year.

Each GRC has an Executive Committee sponsor. They set our risk appetite, how we measure our exposure to that risk, and how we manage it within our target tolerance. This provides accountability, 'tone from the top' and joined-up risk thinking.

Each unit leadership team regularly reviews, discusses, prioritises and acts on risks, aligned to GRCs. This drives conversations about risk management across every part of the organisation leading to risk-informed decisions and better business outcomes.

We have oversight bodies in place at both unit and group level – where key risk information gets reported regularly.

Our leaders promote a mindset of being smart with risk when making decisions. Our code sets expected behaviours for all our colleagues. Ongoing training and formally defined risk management roles also help weave risk awareness into our culture.

Our risk management tool, ARTEMIS, helps us consistently apply our risk, control and assurance frameworks across BT Group. It links risks with the relevant controls and assurance outcomes. It also simplifies and standardises reporting. This helps us to make sure we're managing risks in a joined-up and consistent way.

Our leaders promote a mindset of being smart with risk when making decisions. Our code sets expected behaviours for all our colleagues. Ongoing training and formally defined risk management roles also help weave risk awareness into our culture.

Risk management continued

Enhancing our risk management framework

We keep strengthening how we apply our risk management framework, in step with our changing business and risk landscape.

This year we launched two new training modules covering the basics of our framework and the behaviours we expect from our leaders. We rolled them out across our senior leadership team and everyone involved in making our framework a success. The training helped everyone understand the expectations and benefits risk management brings to BT Group.

We continue to develop our key control framework, and this year was about embedding it consistently across the units with our leaders taking active ownership for the controls in their area, making it core to operations, decision making and mindset.

We focused on two things:

• 1. Identifying and prioritising areas that needed strengthening.
• 1. Reviewing our overall approach to how we assess control effectiveness, including second line assurance activities across the GRCs to make sure they are sufficient and proportionate to the risks and their impact.

An ever-changing risk landscape

We operate in a challenging external environment. Economic uncertainty, adverse market conditions, growing geopolitical tensions and more regulatory scrutiny are all impacting our risk exposure – meaning more focus and management.

Below, we discuss some of the key changes to our risk landscape during the past 12 months.

Data and AI

AI and data use are growing fast and changing the way businesses operate. The regulatory landscape, technological advancements and public awareness are quickly evolving in step – with hard to predict outcomes. Generative AI has the potential to change the way we serve our customers and how our workplace looks.

Whilst there is a lot of opportunity, it also means we need to carefully manage risks relating to procuring, developing, using and selling AI solutions.

Managing AI risks cuts across many of our GRCs. For example, we need to ensure we invest in the right AI skills and capabilities. We must also apply responsible technology principles that maintain our stakeholders' trust.

The growing use of AI also means relying even more on data, which creates new challenges and risks. Given the synergies between the two, we've expanded our

Data GRC to include both data and AI. This will let us use our risk management framework to make sure we have the right risk appetite, standards and key controls for increasingly material AI risks.

Market dynamics

The market is filled with challenges around the macroeconomic environment, competitor movements, regulatory pressures and technological advances.

We're managing risks related to increasing competition in the broadband and mobile markets, while also navigating retail pricing pressures and making sure we treat all our customers fairly.

We're also closely monitoring and acting on the risks of disintermediation by hyperscalers as they introduce alternative technology solutions.

The geopolitical risk landscape

Geopolitical tensions and wars across the world – like in the South China Sea or Ukraine – create risks to businesses like ours. This year the conflict in the Middle East region has amplified a wide range of potential impacts, including disruption to suppliers, higher energy costs and increased cyber security threats.

Geopolitical risks can change fast and affect various parts of our organisation. We use our emerging risk hub to bring together the right people to make action plans as these risks evolve.

Generative AI has the potential to change the way we serve our customers and how our workplace looks.

Our principal risks and uncertainties

The risks set out in the following pages align with our enduring Group Risk Categories (GRCs). Each GRC contains enduring risks, as well as examples of the current point and emerging risks. We also include the scenarios we've used for our viability analyses for each GRC.

Strategic

Strategy, technology and competition

Sponsor: Chief Financial Officer

What this category covers

To deliver value to our stakeholders and achieve our strategic objectives, we must carefully manage risks around economic uncertainty, intensifying competition and rapidly changing customer and technology trends. If we adopt the wrong strategy, fail to incorporate our strategy into our business plans or don't effectively implement it, we could become less competitive and hinder the creation of long-term sustainable value.

Our risk appetite

Our risk appetite sets our tolerance for managing 'internal' risks associated with this category. We measure and track this through specific metrics. We also qualitatively assess the clarity of our strategy, robustness of our strategic analysis and whether our business and financial plans align with our strategy. Doing this helps us make robust strategic choices and effectively implement them – to stay competitive and grow value for our stakeholders.

Examples of dynamic risks Point risks:

• Macroeconomic environment factors like high inflation, high interest rates and reduced customer confidence may lower demand, increase customers' price sensitivity and drive up costs.
• Intensifying competition in retail and wholesale markets could increase churn and affect our market share.
• Disintermediation by hyperscalers could result in loss of market share and weakened customer relationships.
• Slower than planned progress on key programmes could limit our ability to deliver our strategy and growth ambitions.

Emerging risk:

– Failing to harness AI technologies to drive efficiencies and generate value could make us less competitive.

Examples of what we do to manage these risks

• We research, analyse and monitor economic, customer,
• competitor and technology trends to inform our strategy. – The Executive Committee and Board regularly review
• performance against our strategic priorities and targets. – The Executive Committee and Board discuss key strategic topics
• throughout the year. – BT Investment Sub-Committee considers our investments to
• make sure they are aligned to our strategy.

Scenarios considered in viability analysis

Hyperscalers strategically entering our markets through direct initiatives.

Competitive pressures from alternative FTTP network providers continue to intensify.

Stakeholder management

Sponsor: Corporate Affairs Director

What this category covers

Stakeholder management, built on trust, is essential to us achieving our ambitions. We engage with stakeholders fairly and transparently to maintain strong, sustainable relationships and manage reputational risks. We also consider risks around using and selling emerging technologies, environment, social and governance factors, and customer fairness.

Our risk appetite

We recognise the importance of strong stakeholder relationships and consider them when setting strategy and making decisions. We aim to balance our purpose and ambition with commercial choices we think are reasonable. At times this creates tensions when weighing up options: price rises to sustain investment, the markets we operate in, who we buy from and sell to, the way we use and develop technology and how we use data.

We want to keep being sector leader on reputation and trust among professional opinion formers, and stay in our top quartile position on ESG.

Examples of dynamic risks

Point risks:

• Protecting our customers' interests while migrating to digital products and closing legacy networks.
• Continued geopolitical tensions needing extra focus on reputational risks associated with our global operations.

Emerging risks:

• Rapid advances in AI with associated stakeholder scrutiny on things like data ethics and reskilling.
• Climate change, and perceptions of our sector's role in carbon emissions. See our Task Force on Climate-related Financial Disclosures (pages 71 to 80).

Examples of what we do to manage these risks

• Our Manifesto (pages 34 to 39) sets out our commitment to growth through responsible, inclusive and sustainable technology. The Responsible Business Committee provides Board-level governance.
• We monitor the media, and track our reputation across our main stakeholder groups.
• We engage with stakeholders to build strong relationships. See pages 40 to 45 for details.
• We have robust product, services and communication plans to improve customer outcomes.

Scenario considered in viability analysis

Potential changes in Government policy affecting our investment and commercial ambitions.

Our principal risks and uncertainties continued

Financial

Financing

Sponsor: Chief Financial Officer

What this category covers

We rely on the cash we generate as a business. We supplement this through capital markets, credit facilities and cash balances to finance our operations, pension contributions, dividends and debt repayments.

We also focus on defining and executing the right insurance strategy.

Our risk appetite

We fund our business based on the performance forecasts in our medium-term plans.

We rely on debt capital markets being open to investment grade borrowers. We set our minimum credit rating at BBB. We invest cash resources to preserve capital, not generate returns.

We have an agreed plan to reduce investment risk in the BT Pension Scheme by 2034, and also plan to reduce longevity risk.

Examples of dynamic risks

Point risk:

– An uncertain macroeconomic or geopolitical environment could increase the cost of new long-term debt or trigger contingent deficit contributions to the BT Pension Scheme before the 2026 valuation.

Examples of what we do to manage these risks

• We review our forecasted and actual business performance.
• We have formal treasury risk management processes, Board oversight, delegated approvals and lender relationship management.
• We review our pension schemes' funding positions and investment performance and agree funding valuations.

Scenarios considered in viability analysis

The BT Pension Scheme deficit worsening as a result of macroeconomic development.

UK experiences a significant recession.

Dependence on accelerated tax depreciation to reduce cash tax in the short term.

Financial control

Sponsor: Chief Financial Officer

What this category covers

Our financial controls help us to prevent fraud and report accurately. If these failed it could result in financial losses or cause us to materially misrepresent our financial position.

We might fail to apply the correct accounting principles and treatment, or to meet tax compliance. This could result in financial misstatement, fines, legal disputes and reputational damage.

Our risk appetite

We want our overall financial control framework to be effective so that there's less-than-remote likelihood of material financial misstatement in our reported numbers.

We've defined the proportion of our financial controls that we aim to be preventative rather than detective, and automated rather than manual.

We take a risk-based approach to compliance monitoring – combining sample testing and financial data analytics.

Examples of dynamic risks Point risks:

• Not delivering our transformation programmes could affect our control performance, efficiency and effectiveness.
• Complex and legacy systems in the lead to order process in Business not consistently delivering expected outcomes.

Emerging risks:

• Rapidly growing ESG reporting requirements.
• Greater responsibility to prevent fraud under the
• Economic Crime and Corporate Transparency act. – Higher chance of internal and external fraudulent behaviour caused by the increased living costs.

Examples of what we do to manage these risks

• We have financial and operational controls for planning and budgetary discipline, efficient and accurate reporting, and for reducing the risk of fraud, leakage or errors.
• We continually enhance processes, systems and our operating model to improve and automate accounting, financial reporting and fraud controls.
• We proactively identify, manage, investigate and report on potentially fraudulent activities.
• We periodically provide fraud training to colleagues that need it.
• We work with third-party experts to assess and improve our readiness to comply with new and evolving legislation.

Scenario considered in viability analysis

A material financial misstatement leading to regulatory fines, lawsuits and reputational damage.

Compliance

Communications regulation

Sponsor: General Counsel, Company Secretary & Director Regulatory Affairs

What this category covers

We work with our regulators as they define clear, predictable and proportionate regulations to protect customers and society – while making sure service providers can compete fairly. We must comply with those regulations, maintain trust and strong relationships while delivering our vision and sustainable value growth.

Our risk appetite

We're committed to adhering to regulations and having a strong compliance culture. It's a fundamental part of connecting for good. We make decisions based on regulatory obligations. These include protecting our customers and network, while making sure we meet key stakeholders' wider strategic business needs. We focus on maintaining long-term predictable and stable regulation.

Examples of dynamic risks

Point risks:

• Digital voice migration fails to deliver in line with regulatory obligations or expectations.
• Additional obligations from the Broadband Universal Service Obligation review could increase costs.
• Complexities delivering the Telecommunications (Security) Act 2021 requirements.

Emerging risk:

– Ofcom's next Telecoms Access Review could result in less certainty on fibre regulation.

Examples of what we do to manage these risks

• We proactively engage with regulators, giving them timely and accurate information when required.
• We try to understand our customers' experiences for example when moving them on to new networks or protecting vulnerable customers.
• Our processes help us follow regulations, build trust and enable future dialogue with policymakers.
• We continually scan the horizon to identify regulatory changes which may impact us, so we can put plans in place to respond.
• Our compliance and assurance programme gives our people advice, guidance and training on regulatory requirements and tests our regulatory controls.

Scenario considered in viability analysis

Potential regulatory changes affecting our pricing arrangements.

Data and AI

Sponsor: Chief Digital and Innovation Officer

What this category covers

We must follow today's global data regulations while anticipating and preparing for tomorrow's.

Our data and AI strategy aims to create value and enable efficiency, while giving us a robust framework for us to comply with data and AI governance and regulation. It also includes managing risks as we build AI solutions.

Not following data protection laws or regulations or taking a responsible approach to AI could damage our reputation and stakeholder trust, harm colleagues, customers or suppliers and/ or lead to litigation, fines and penalties.

Our risk appetite

We want to protect BT Group, colleagues, customers, partners and suppliers from breaches of data protection laws and regulations. We also want to harness our data to support and drive our objectives and realise opportunities.

We can only achieve these aims with the right data ethics, governance, security, protection, responsible technology and compliance systems, processes and practices. Achieving our data goals may require appropriate interpretation of the varied global data protection laws, regulations and standards.

Examples of dynamic risks Point risks:

• Recent European legislation imposing new data obligations on data sharing and re-use.
• Using AI inappropriately could lead to a potential breach in AI and/or data regulations and compromise sensitive data.
• New EU cyber security legislation for the telecommunications industry may be hard to implement.

Emerging risks:

• The regulatory landscape, technology, and public awareness of AI and use of data are rapidly evolving, leading to unpredictable outcomes and potential new obligations or reputational impact.
• Heightened concern over harm from data use and publication leading to increase in policies to protect consumers.

Examples of what we do to manage these risks

• We continuously run and improve our data governance programme to tackle existing and future data regulatory risks.
• To make sure we follow our own data protection standards we review how we use personal data across the business.
• We continue to improve our approach to managing risks around AI (see page 62 for more).
• We horizon-scan for evolving regulations, sector developments and new technologies that could affect our data risks, controls and processes.
• We provide data protection and handling training and tools to help colleagues make more risk-aware day-to-day decisions.

Scenario considered in viability analysis

An AI-related data breach, leading to regulatory investigation, enforcement action and reputational damage.

Our principal risks and uncertainties continued

Compliance

Legal compliance

Sponsor: General Counsel, Company Secretary & Director Regulatory Affairs

What this category covers

Our main focus areas are anti-bribery and corruption, competition law, trade sanctions, export controls and corporate governance obligations. Other GRCs focus on complying with other areas of law. Across all Group Risk Categories we focus on remaining in compliance with all substantive laws.

Our risk appetite

We want to take advantage of commercial opportunities. So we take considered, evidenced, defensible decisions on complying with applicable laws.

We assess risks to help us decide on proposed actions. That means looking at the nature of the risk, the cost of compliance, the value of the proposed actions and the steps we'd need to take to bring them within our risk appetite.

In corporate governance, we determine the risks for a position we take based on things like our rules and policies, market practice, investor expectations and our stakeholders' views.

Examples of dynamic risks Point risks:

• Sales practices that because of living costs or tricky market conditions – could potentially be seen as inappropriate.
• Failing to effectively manage third-parties, leading to fines or reputational damage.
• Evolving regulatory and litigation environment may lead to financial and reputational impact.

Emerging risks:

• Increased regulatory burden around corporate governance and reporting.
• New laws, changes to existing ones, or trade sanctions responding to geopolitical dynamics or concerns in a particular area of law.

Examples of what we do to manage these risks

• Through our Code we foster a culture where colleagues know the standards we expect and speak up if something's not right.
• We regularly assess risks when we give legal or compliance advice on strategic projects, new business or commercial operations.
• We train colleagues to know where legal and compliance risks come from, how to handle them and when to get expert help.
• We carry out assurance on day-to-day operations, regions, partners, projects and suppliers. We investigate and fix anomalies and share what we learn, where needed.

Scenarios considered in viability analysis

A breach of sanctions or export controls – leading to regulatory investigation, fines, debarring from public contracts and reputational damage.

We fail to successfully defend the high value claims brought against the group.

Financial services

Sponsor: CEO, Consumer

What this category covers

We're exposed to more financial services regulation as we attract new consumer credit and insurance customers. We expect to continue scaling-up and broadening these products and services in the coming years. That means meeting all applicable Financial Conduct Authority (FCA) principles, rules and requirements.

Operating outside FCA rules, requirements or permissions could harm customers and lead to fines, loss of FCA permissions, slow service take-up and broader reputational damage.

Our risk appetite

We aim to minimise regulatory risk in two ways. First, by building operational capabilities that help us develop our financial services activities compliantly. Second, by maintaining a trusted relationship with the FCA.

We monitor a range of conduct risk metrics. We focus on meeting Consumer Duty outcomes including compliance monitoring, complaints data and customers in collections. These are early warning indicators of potential customer harm which we can act on.

Examples of dynamic risks Point risks:

– Failing to get extra FCA permissions in time to support a planned entry into a new market.

• Failing to meet the additional requirements of Insurance Regulatory Framework could result in revenue loss and regulatory fines.
• Challenges complying with the Payment Services Directive regulation because of potential delays in us addressing Electronic Communications Exclusion cap breaches.

Emerging risk:

– There might be a mismatch between our business strategy and additional FCA regulatory permissions.

Examples of what we do to manage these risks

• We scan the horizon, interpret new regulations and regularly communicate with the regulator.
• We run mandatory training on FCA regulations, aligned to job roles.
• We check our financial services products and promotions are compliant before we launch them, and every year afterward.
• We have processes in place to make sure customers get the right outcomes.
• Our governance framework provides clear responsibility, accountability and reporting.

Scenario considered in viability analysis

Failing to get additional FCA permissions may result in adverse impact on product rollout and projected revenues.

Operational

Operational resilience

Sponsor: Chief Security and Networks Officer

What this category covers

We want to deliver best-in-class performance across our fixed and mobile networks and IT. That means being operationally resilient and managing any risk that could disrupt our services.

Service disruptions could be caused by things like bad weather, accidental or deliberate damage to our assets.

Some service disruptions might depend on suppliers' and partners' reliability – making it important to pick the right ones.

Our risk appetite

We want customers to get market-leading services, underpinned by best-in-class network performance. To achieve that we must prioritise resources to give the best possible service and customer experience, while aligning with our strategy.

We aim to deliver exceptional performance for Critical National Infrastructure, high volume (FTTC/4G) and strategic (FTTP/5G) products whilst maintaining acceptable performance for legacy services.

Examples of dynamic risks Point risks:

• Power cuts, caused by energy shortages, might lead to service disruptions.
• Increasing flood risk at non-protected sites could disrupt services.
• Weak contracts or badly managed third-party relationships might lead to gaps in support arrangements and extended fix times.

Emerging risk:

– More frequent extreme weather events due to climate change could impact our business operations.

Examples of what we do to manage these risks

• We have standardised processes to keep our assets resilient across the asset lifecycle.
• We respond quickly to incidents. We reduce their impact through geographically dispersed emergency response teams and give customers regular updates.
• We have comprehensive testing and change management processes.
• We do regular business impact assessments that feed into tested, up-to-date business continuity and restoration plans.
• We make sure our operational estate has the right levels of physical security controls in place to keep our services running.

Scenario considered in viability analysis

Crisis in the energy sector leading to winter power shortages.

Cyber security

Sponsor: Chief Security and Networks Officer

What this category covers

Our aim is to protect BT Group, colleagues and customers from harm and financial loss from cyber security events.

We run critical national infrastructure. So a cyber attack – from an external or internal threat or a third party – could disrupt both customers and the country, and compromise data.

A poorly managed cyber security event might cost us money, damage our reputation and impact our market share. The regulator might also impose fines or penalties.

Our risk appetite

Cyber risk is inherent to our business, and we could suffer significant reputational damage from a major cyber event. But we acknowledge that we can't eradicate all cyber risks.

Cyber security events could be deliberate or accidental, coming from inside or outside the group. So we adapt our security position and controls accordingly to detect and respond to evolving threats.

We prioritise protecting our critical systems and networks, and the data and information they contain.

Examples of dynamic risks Point risks:

• State-sponsored cyber attacks could target critical national infrastructure and lead to service disruption, data loss, regulatory action and reputational damage.
• Being exposed to suppliers with security vulnerabilities might lead to data loss, interrupted services or reputational damage.
• Faster organisational change could create conditions where people didn't follow our policies, leading to a cyber security incident.

Emerging risks:

• AI and machine learning create opportunities, but they could also be weaponised as security threats.
• Quantum technologies could present a threat to how we protect sensitive digital information.

Examples of what we do to manage these risks

• We have security standards, tools and processes in place to protect our applications, systems and networks.
• We monitor external threats and gather intelligence on evolving cyber techniques, tactics and capabilities.
• So we can quickly detect, assess and respond to cyber risks we keep a vigilant security stance.
• We run communications, engagement and training for our colleagues.
• We continue to invest in our cyber defences and security tools, shifting to automation where appropriate.

Scenario considered in viability analysis

We fall victim to a widely publicised cyber attack. It leads to loss of customer data, compensation claims and enduring reputational damage.

Our principal risks and uncertainties continued

Operational

People

Sponsor: Chief Human Resources Officer

What this category covers

Our people strategy is to enable a culture where every colleague can be their best and help achieve our ambitions.

This means we must manage risk around our organisational structure, skills and capabilities, engagement, culture, wellbeing and diversity.

Our risk appetite

Our highest priority is making sure colleagues can work and perform at their best. We'll seek to avoid risks that could compromise key business priorities, and minimise any that can't be avoided to as low as reasonably practicable. We avoid risks that could lead us to not complying with applicable employment legislation.

A relatively small number of roles have a disproportionate effect on our success. For those, we have a much lower risk tolerance of not having the right capabilities.

To deliver our transformation and achieve our ambitions, we're prepared to take carefully managed short-term employee relations risks.

Examples of dynamic risks Point risks:

• Changes to our strategy, technology or business model could affect what skills we need. Combined with tightened talent markets and potentially higher attrition, that could create skills gaps.
• Failing to drive an inclusive culture might affect our ability to achieve our targets, and subsequently affect business results.
• Failing to make the organisational and cultural changes we need to drive long-term success.

Emerging risk:

– Changes in working patterns, or increased financial uncertainty, could have a negative effect on colleagues' mental health.

Examples of what we do to manage these risks

• We have consistent performance management review processes and goals – shared through clear organisational structures, roles and job descriptions.
• We continually assess skills and capabilities and invest in groupwide workforce and talent planning.
• We provide training and development opportunities for specific roles, as well as for the future skills we need.
• Our Inclusion, Equity and Diversity strategy raises awareness, addresses bias and promotes our People Networks and support (more on pages 24 and 30 to 33).
• We monitor and try to improve employee engagement and maintain close relationships with formal representative groups and unions.
• We offer fair, competitive and sustainable remuneration to promote smart risk taking, boost engagement and retention and align colleagues' and shareholders' interests.

Scenario considered in viability analysis

A widespread lack of availability of frontline colleagues affecting service delivery and leading to poor customer experience and reputational harm.

Health, safety and environment

Sponsor: Chief Security and Networks Officer

What this category covers

We have diverse working environments in various locations, some of which pose a health or safety risk. We're committed to ensuring the health, safety and wellbeing of our colleagues, contractors, suppliers, customers, visitors and members of the public.

We are committed to protecting the environment and building a sustainable future, with effective environment and energy management – and particular focus on reducing our carbon emissions.

Our risk appetite

Health, Safety and Environment (HSE) is a key priority for the business and is the foundation on which we operate. Our strategy is to maintain effective HSE risk management to make sure our employees (and others who are affected by our undertaking) and the environment are properly protected.

We apply proactive risk management to identify, control and mitigate significant risks across the business to a level deemed as low as reasonably practicable.

We consider legal, regulatory and other requirements as the minimum obligation. We want to go beyond that – aiming for zero avoidable harm and the prevention of pollution.

Examples of dynamic risks Point risks:

– Heightened risks from the additional civil and construction work to support the full fibre rollout including harm to colleagues, increased regulatory scrutiny, legal claims and reputational damage.

• Failing to ensure effective in-life contractor management, which may result in increased risks through sub-optimal working practices, and subsequent enforcement action, legal claims and reputational damage.
• Failing to effectively manage waste could lead to material financial loss and reputational damage.

Examples of what we do to manage these risks

• Our group policy is underpinned by our standards and key controls and the HSE framework is reflected in our code.
• We train colleagues and make sure they're clear on their responsibilities and are competent to undertake their activities.
• We make sure that colleagues and their representatives participate in (and are consulted on) HSE matters.
• We adopt a leadership role with our contractors, helping them improve their own HSE performance.
• We allocate appropriate resources to develop, maintain and continually improve our HSE management system.

Scenario considered in viability analysis

A new pandemic as severe as Covid-19 causes harm to colleagues and disrupts service delivery and business operations.

Major customer contracts

Sponsor: CEO, Business^a

What this category covers

We offer and deliver a diverse mix of major contracts which contribute to our business performance and growth.

In a highly competitive and dynamic environment, we seek to win and retain major private and public sector contracts. We do that while navigating customer relationships and risk in complex agreements – delivering highly sensitive, critical or essential services globally.

Customer contractual terms can be onerous and challenging to meet, which can lead to delays, penalties and disputes. Delivery or service failures against obligations and commitments could damage our brand and reputation, particularly for critical infrastructure contracts or security and data protection services.

Not managing contract exits, migrations, renewals or disputes could erode profit margins and affect future customer relationships.

Our risk appetite

We want a diverse mix of major contracts to help our business grow. To do that, we must build our market share, target the right customers, make beneficial commercial and legal agreements and deliver services successfully.

As markets change, we need to proactively adjust our portfolio of services, countries and customers to avoid concentration risk, stagnation and legacy dependency.

We know this involves taking on higher risk – for example, complex customer agreements with obligations not fully covered by our standard portfolio, terms and conditions and/or delivery processes. We must manage this risk in the bid process and contract lifecycle to minimise the overall impact.

Examples of dynamic risks Point risks:

• Failing to deliver on bespoke customer data requirements could lead to potential breaches, fines and reputational harm.
• New IT infrastructure challenges, skills shortages, scale or complexity could stop us delivering our digital portfolio transformation.

Emerging risks:

– The changing competitor landscape might affect market dynamics and competition.

Examples of what we do to manage these risks

• We have a clear governance framework to assess new business opportunities, manage bids and monitor in-life contract risks.
• As part of bids, we check non-standard unfavourable terms and conditions and mitigate them where we can.
• Our senior management, and a dedicated team, regularly review our contracts.
• We support frontline contract managers with contract and obligation management tools.

Scenario considered in viability analysis

A major incident causes reputational damage, leading to us losing major public services contracts.

Customers, brand and product

Sponsor: CEO, Consumer ^a

What this category covers

We want to give customers standout service, build personal and enduring relationships, and take extra care of vulnerable customers and customers with differing needs. We aim to keep customer satisfaction high as we continue to migrate customers from legacy products and services to new ones.

If we didn't continually improve and personalise our customer experience, it could affect customer satisfaction and retention, our colleagues' pride and advocacy, revenues and brand value.

Accurate and competitive pricing is important. We must also manage product and service lifecycles, inventory and supply chain, and meet our customer obligations and product and service standards.

Our risk appetite

We want to be below the industry average for Ofcom complaints and keep improving our customer NPS. We aim to maintain customer satisfaction, launch new products and services that benefit them and minimise issues.

We must serve customers through modern, cost-effective platforms and minimise the number of them on expensive, old and labour-intensive legacy products and services. We also want customers to feel we give them personalised service through frictionless channels.

Examples of dynamic risks Point risks:

• Failing to switch customers (including those who are vulnerable or have differing needs) from old to new service platforms could interrupt their service, cause customer churn and/or lead to regulatory intervention.
• Failing to make sure we have the right current and future skills to serve our customers could lead us to not meet customer expectations, lose customers or market share and harm our reputation.

Emerging risk:

– Customer trust and confidence in future AI solutions.

Examples of what we do to manage these risks

• We keep our promises on the service levels customers should expect and we track a range of customer experience performance metrics while continuing to improve service.
• We have processes in place to identify and serve vulnerable and differing needs customers.
• We have clear and comprehensive brand guidelines.
• We work with suppliers to manage relationships and risks.
• We design new products and services (and pilot them where possible) to make sure they benefit customers.
• We have a colleague retention and skills development plan to make sure we're not short on key skills.

Scenario considered in viability analysis

A defect in a customer's device – leading to a full product recall and a significant service disruption.

a Excluding Openreach, which has separate GRC sponsorship and management.

Our principal risks and uncertainties continued

Operational

Supply management

Sponsor: Chief Financial Officer

What this category covers

We have a lot of suppliers. Successfully selecting, bringing on board and managing them is essential for us to deliver quality products and services.

We must make decisions about suppliers on concentration, capability, resilience, security, costs and broader issues that could impact our business and reputation.

Our risk appetite

Our appetite guides buying decisions. That includes sole or dual sourcing for products or services that support key business aims or activities – or where alternative sources aren't economically viable. To get the best commercial rates and operational resilience we continuously engage with and challenge key suppliers on pricing, without introducing service and/or delivery risks.

Properly managing so many third parties needs effective governance. So we have a low appetite for dealing with suppliers outside of our defined policies or processes.

We have to make sure third parties don't expose our brands to damage. That means avoiding – or stopping working with – any that don't meet our standards on key areas like human rights.

Examples of dynamic risks Point risks:

• Increased energy prices, supply shortages and inflation could affect cost-cutting targets and future investments.
• Geopolitical tensions (like the Russia-Ukraine war and escalations in the Middle East) could disrupt supply chain, raise costs and inflation, and increase cyber security threats.

Emerging risks:

• A difficult economic environment could put pressure on smaller suppliers.
• Extreme climate conditions might disrupt supply chains.

Examples of what we do to manage these risks

• Our sourcing strategy uses different approaches to managing risk by category. That includes standard terms and conditions and controls so we can make purchasing decisions efficiently and effectively.
• We have comprehensive supplier due diligence, contract management, on-boarding processes and are reviewing and improving our in-life assessment process.
• We have robust supplier risk management, performance, renewal and termination processes.
• We do demand planning and forecasting, stock counts and inventory management so we have supplies available.
• We get assurance that the goods and services we buy are made, delivered and disposed of responsibly. That includes monitoring energy use, labour standards and environmental, social and governance impacts.

Scenario considered in viability analysis

Increasing geopolitical tensions lead to supply chain disruptions and cost inflation.

Transformation delivery

Sponsor: Chief Financial Officer

What this category covers

We're accelerating transformation delivery to build a simpler, more efficient and dynamic BT Group.

We're modernising our IT, automating processes with AI, streamlining our product portfolio and migrating to nextgeneration strategic networks. All this will deliver significant cost efficiencies – while also improving our customers' and colleagues' digital experiences.

Failing to manage transformation execution risks could make us less efficient and damage our financial performance and customer experience.

Our risk appetite

We've defined the risk level we're willing to tolerate for transforming our products, customer journeys and technology. We track specific metrics to check we're achieving genuine, sustainable transformation outcomes and not just cutting costs.

Delivering within our risk appetite will give us competitive advantage, enable faster delivery, improve customer experience and make sure our costs benchmark favourably with peers.

Examples of dynamic risks Point risks:

• Failure to manage complex interdependencies to complete the migration of customers and close legacy IT and networks.
• The volume and complexity of our transformational activities across different parts of the group, combined with day-to-day business, could dilute our efforts and stop us reaching our sustainable transformation goals.

Emerging risk:

– Delays in switching customers onto new, strategic products could slow or stop us closing our copper network and exchanges.

Examples of what we do to manage these risks

• We review transformation performance at monthly Executive Committee meetings – managing dependencies, making informed decisions and removing blockers.
• We have strong governance, with senior leaders owning specific operational and financial outcomes. Each quarter we assess our performance – allocating funding to the programmes delivering the most strategic value.
• We invest in digital and data capabilities to cut costs, grow revenue and make sure we have the right resources to deliver sustainable change effectively.
• We invest in our people strategy to make sure we have the right skills and culture needed to deliver transformation.

Scenario considered in viability analysis

We are not able to execute the transformation plans we need to deliver savings initiatives.

Task Force on Climate-related Financial Disclosures

We assess and report on how we manage the impact of climate-related risks and opportunities on the group. We detail here how we're complying with the Task Force on Climate-related Financial Disclosures (TCFD) recommendations – our 'TCFD disclosure'.

• Under FCA Listing Rule LR 9.8.6(8) as a premium listed company we have to explain how we're complying (or not) with the TCFD framework. We also have to comply with requirements of the Companies Act 2006, as amended by the Companies (Strategic Report) (Climate-related Financial Disclosure) Regulations 2022.
• We believe the following climate-related financial disclosures are consistent with the TCFD framework and therefore comply with Listing Rule 9.8.6(8) and Companies Act requirements – summarised in Table 1: TCFD Compliance Summary.
• Where relevant, we've accounted for TCFD guidance and the Financial Reporting Council's recent recommendations on materiality around governance, strategy, risk management, and metrics and targets.
• We've integrated climate-related disclosures throughout this report. So in some areas we've cross-referenced to another section with the relevant information.
• The information in this TCFD section has been reviewed to a high level of assurance against AccountAbility's AA1000AS v3 assurance standard.
• In this year's TCFD disclosure, we've:
• updated our scenario analysis by expanding our assessment of physical climate risks to our global sites and global suppliers and by calculating the financial opportunity from our carbon abatement solutions
• disclosed the metrics and targets we use to monitor performance on our climate risks and opportunities
• updated our disclosure of our remuneration policy which was updated in FY24, describing how we consider our climate performance in remuneration.

We have cut our operational carbon emissions intensity by 61% since FY17.

Task Force on Climate – related Financial Disclosures continued

Table 1: TCFD Compliance Summary

	TCFD Recommendation	Compliance Status	Section reference
	Governance
1	Board's oversight of climate-related risks and opportunities	Full	TCFD section: Our climate change governance – Board oversight on climate change (page 73) Corporate governance report: Our governance structure (page 85) and climate governance (page 105)
2	Management's role in assessing and managing climate-related risks and opportunities	Full	TCFD section: Our climate change governance – Management's roles and responsibilities (page 73) Corporate governance report: Our governance structure (page 85) and climate governance (page 105)
	Strategy
3	Climate-related risks and opportunities (short, medium, long term)	Full	TCFD section: Climate change strategy – Planning climate risks and opportunities across different time horizons, Analysing our strategy using climate scenarios (page 74 to 76)
4	Impact of climate-related risks and opportunities on the business, strategy, and financial planning	Full	TCFD section: Climate change strategy – Embedding climate change into our strategy (page 77 to 78) Strategic report: Our Manifesto - Sustainable (pages 37 to 39)
5	Resilience of the organisation's strategy, considering different climate-related scenarios, including a 2°C or lower scenario	Full	TCFD section: Climate change strategy – Analysing our strategy using climate scenarios (pages 74 to 78)
	Risk management
6	Processes for identifying and assessing climate-related risks	Full	TCFD section: How we manage climate risks (page 78) Strategic report: Risk management framework (pages 61 to 70) and climate-related GRCs (pages 63, 67 and 70)
7	Processes for managing climate-related risks	Full	TCFD section: How we manage climate risks (page 78) Strategic report: Risk management framework (pages 61 to 70) and climate-related GRCs (pages 63, 67 and 70)
8	Identifying, assessing, and managing climate-related risks, and integration into overall risk management	Full	TCFD section: How we manage climate risks (page 78) Strategic report: Risk management framework (pages 61 to 70) and climate-related GRCs (pages 63, 67 and 70)
	Metrics and targets
9	Metrics to assess climate-related risks and opportunities in line with strategy and risk management processes	Full	TCFD section: Our climate metrics and targets – Metrics and targets to measure and monitor risks and opportunities (page 79)
10	Disclose Scope 1, Scope 2, and, if appropriate, Scope 3 GHG emissions, and the related risks	Full	TCFD section: Our climate metrics and targets – Our worldwide energy use and greenhouse gas emissions (page 80) Strategic report: ESG Addendum at bt.com/esgaddendum
11	Targets used to manage climate-related risks and opportunities, and performance against targets	Full	TCFD section: Our climate metrics and targets – Metrics and targets to measure and monitor risks and opportunities, Our worldwide energy use and greenhouse gas emissions (pages 79 to 80) Strategic report: Our Manifesto - Sustainable (pages 37 to 39) and ESG Addendum at bt.com/esgaddendum

Our climate change governance

We set out here the internal governance bodies, processes and ways in which we identify and manage climate-related risks and opportunities.

Board oversight on climate change

The Board

The Board is responsible for how we identify and manage climate-related risks. Matters reserved to the Board include items of big strategic importance – things that directly impact the group's funding position, reputation, integrity or ethical standards.

Responsible Business Committee

This Committee oversees our climate change strategy, programme and goals. It meets at least three times a year to monitor progress on our long‐ term responsible business goals – including climate change. It also assesses the sustainability underpin relative to our Restricted Share Plan, and makes recommendations to the Remuneration Committee. The Chair reports to the Board after each meeting. There's more about the Responsible Business Committee on page 105.

Audit & Risk Committee

This Committee monitors and assesses our risk management and internal control systems' effectiveness on the Board's behalf. That includes climate change risks which span a number of different group risk categories (GRCs). You can read more about this Committee on pages 99 to 103 and more about our GRCs on pages 63 to 70.

Remuneration Committee

This Committee agrees the remuneration framework for the Chairman, Executive Directors, and members of the Executive Committee. It also monitors remuneration practices and policies for the wider workforce. In FY24 we updated our sustainability-linked remuneration. We have a sustainability underpin relative to our Restricted Share Plan for Executive Directors, which you can read more about on page 106.

Management's roles and responsibilities

Chief Executive

The Chief Executive is responsible for our environmental policy and performance. That includes climate-related issues. The Chief Executive approves our targets – including those on net zero, circular economy and customer carbon avoidance.

Group Health, Safety & Environment Sub-Committee

Our Group Health, Safety & Environment (GHSE) Sub-Committee meets quarterly and manages a range of risk and compliance issues – including climate change – on the Executive Committee's behalf and reports back regularly. It's chaired by our Chief Security and Networks Officer – an Executive Committee member – and made up of senior leaders from across the business. The GHSE Sub-Committee reports Health, Safety, and Environmental performance to the Board monthly, including our energy consumption.

Executive Committee

The Executive Committee sets our operational strategy on climate change and sustainability. It also monitors associated progress, performance and risks – supported by our responsible business team.

Task Force on Climate – related Financial Disclosures continued

Climate change strategy

Planning climate risks and opportunities across different time horizons

We think about climate risks and opportunities over the short, medium and long term. Our timeframes consider our risk management framework, financial planning processes, external legal and regulatory changes and the longer-term nature of physical climate changes.

Short-term (0-3 years)

This timeframe considers the chance of events exposing us to risk over the next three years, in line with our risk management framework. We factor in acute physical risks like flooding and higher temperatures into our annual plans. This helps us to adapt and reduce the impact on our business or value chain.

Medium-term (3-5 years)

This timeframe aligns to our financial planning process, which uses a five-year horizon.

Long-term (5-20+ years)

This timeframe matches our investment timeframes for strategic assets like networks that we plan over longer periods – sometimes up to 20 years. It also influences our strategy, targets and plans for responding to climate change's bigger risks and transitional implications. Our scenario analysis considers risks in 2050 and beyond, and our long-term climate targets extend to FY41.

Analysing our strategy using climate scenarios

We use scenario analysis to understand what risks and opportunities could affect us in the long term. This year we focused on advancing our financial impact modelling, and establishing metrics to monitor our progress in managing these risks and opportunities.

Our scenario analysis process

We try to identify and assess the risks and opportunities likely to have the most material financial impact on our business – like on revenues, current and future potential costs, including capital.

We use different scenarios to assess our climate risks and opportunities from physical impacts and the move to a low-carbon economy. We've based our scenarios on the Intergovernmental Panel on Climate Change (IPCC)^a , Network for Greening the Financial System (NGFS) and International Energy Agency (IEA), among other sources^b .

The table below shows the different climate-related scenarios we've considered to help test our organisational strategy's resilience. Shared Socioeconomic Pathways (SSPs) are IPCC's climate scenarios.

Table 2: BT Group's Climate Scenarios

Transition scenarios			Physical scenarios
Name	Temperature equivalent scenarios (°C warming by 2100 above preindustrial levels)	Description	Name	Temperature equivalent scenarios (°C warming by 2100 above preindustrial levels)	Description
Current Policies (CP)	3	High emissions Emissions keep rising as no extra climate policies are implemented from today.	SSP5-8.5	4.4	High emissions Emissions keep rising at current rates with no policy changes.
Delayed Transition (DT)	1.6	Low emissions Emissions keep rising until 2030. After 2030, climate policies are put in place and are scaled rapidly to hit net zero by 2050.	SSP2-4.5	2.7	Intermediate emissions Emissions peak around 2060 and then fall.
Net Zero (NZ)	1.5	Low emissions Climate policies are implemented from today and become more stringent over time, allowing society to hit net zero by 2050.	SSP1-2.6	1.8	Low emissions Emissions halved by 2050, achieving net zero around 2075.

a We derived projections from the World Climate Research Programme's Coupled Model Intercomparison Project (version 5 and 6/ CMIP5 and 6) and the Coordinated Regional Climate Downscaling Experiment. Other data sets include high precision flood data and country-level climate data from the NGFS.

b We modelled transition risks and opportunities using data from NGFS phase 4. Carbon prices are derived from equivalent scenarios from the IEA, to represent an explicit carbon tax.

In line with TCFD guidance and requirements^a , we modelled the impact on our current strategy and business plan – using current decarbonisation plans and the commitments in our medium term plan.

For some transition risks and opportunities, we present the financial impacts of different action we could take – to show worst and best case scenarios.

For physical risks, we present the financial impacts for our UK and global sites, considering our most critical network building assets such as our telephone exchanges and data centres. This does not include mobile phone masts, telephone cabinets, or cable infrastructure.

This year, we assessed physical risks in our supply chain, looking at 28 critical suppliers. We assessed this with country-level climate data considering our suppliers' main country of operation. We assessed the impact of more flooding, more intense, longer and more frequent heatwaves and extreme weather events. As we collect more accurate locations of our suppliers and logistics network, we plan to refine this analysis and expand to other climate hazards such as drought.

We've presented the final outputs in annualised nominal terms. We haven't applied social discount factors to avoid double counting with our financial models. We categorised the financial effects using our risk management framework, and treated each risk and opportunity as mutually exclusive events.

The results of our analysis

We think our strategy is resilient to climate risks and is well positioned to capture climate opportunities in the modelled scenarios. The tables below summarises our prioritised climate risks and opportunities for the different scenarios we considered. We've concluded that climate risks and opportunities don't have a material effect on our FY24 financial statements disclosures. As we anticipate that the magnitude of climate risks and opportunities will change over time, we'll closely monitor our risks and opportunities and expand the assessment as part of continually assessing climate risks.

In high emissions scenarios (CP and SSP5-8.5), physical risks have a greater impact than transition risks, as these are driven by more frequent and severe weather, particularly in the longer term. Our analysis looks at direct climate change impacts on the most material areas of our business. It doesn't include secondary effects – like forced migration or geopolitical tensions – resulting from climate change.

We recognise the very severe consequences this scenario could have globally. We're working to play our part in decarbonising our own operations and value chain to help avoid it.

At the same time, we're making sure we prepare for increasingly severe and frequent climate-related hazards. We're investing in flood defences, cooling upgrades and better analytics data to make sure that our network is resilient.

Conversely, we expect transition risks to have a greater impact under low emissions scenarios (DT and NZ). That's because they're driven by changes in policy and regulation as well as stakeholders' behaviour (including customers).

There are also opportunities linked to the low-carbon transition – like developing carbon abatement solutions to help customers cut emissions, and cutting energy costs through efficiency measures. DT scenario trends are similar to NZ – but with the impact on the business happening sooner under NZ.

We're acting to reduce risk across the various climate-related scenarios, with an emphasis on long-term resilience.

Relative impact Prioritised risk or opportunity Time horizon^b Description Potential financial impacts 2030 2040 2050 More flooding^c Long More frequent and severe flooding, increasing damage to BT Group infrastructure. – Higher costs to repair damaged assets. – Lower revenue from network disruption. SSP5-8.5 SSP2-4.5 SSP1-2.6 More intense, longer and more frequent heatwaves Long Higher temperatures and more frequent heatwaves, affecting BT Group operations and leading to increased energy consumption for cooling. – Higher energy costs from extra cooling demands for equipment and operations during high temperature periods. – Lower productivity from labour hours lost through heat stress. SSP5-8.5 SSP2-4.5 SSP1-2.6 More intense, longer and more frequent extreme weather events Long Storms and extreme wind damaging assets that then need repairing – affecting our service, increasing maintenance costs and reducing revenue. – Higher costs to repair damaged assets. – Lower revenue from network disruption. SSP5-8.5 SSP2-4.5 SSP1-2.6 Supply chain disruption from physical climate risks Long More extreme, frequent and severe flooding, heat and weather events disrupting our supply chain. – Pass through costs from suppliers dealing with physical hazards. SSP5-8.5 SSP2-4.5 SSP1-2.6

Table 3: Summary of our physical risks from climate change

a TCFD: Implementing the Recommendations on the Task Force on Climate-related Financial Disclosures.

b The time horizon where impact is potentially the greatest.

c We produced high precision flood data for two epochs: 2030s (2021 to 2040) and 2050s (2041 to 2070) to capture the potential range of flood effects in the future. The results presented show the effects of flooding for an average year in each of these epochs. 2040 results are an average of 2030 and 2050 to aid comparison with the other risks and opportunities that we've explored.

Task Force on Climate – related Financial Disclosures continued

Table 4: Summary of our transition risks and opportunities from the transition to net zero

						Relative impact
Transition risk / opportunity	Time horizon	Description	BT Group scenario	Potential financial impacts		2030	2040	2050
Changing customer	Long	Risk: Customers have rising expectations on corporate climate action. If we lag behind peers on	Our emissions decline slowly, following a current policies scenario	Lower revenue from customer churn	CP
expectations and how they					DT
see us		decarbonisation, we could lose customers.			NZ
		Opportunity: By differentiating ourselves as a climate change leader and hitting our net zero targets, our revenues could go up.	We hit our net zero targets	Higher revenue from our improved reputation on climate change	CP
					DT
					NZ
Carbon pricing and taxation	Medium	Risk: Regulatory and governmental policy changes could introduce carbon pricing and taxation. Carbon pricing might hit some suppliers hard and early. Those suppliers might pass on extra costs to us.	Our emissions decline slowly, following a current policies scenario	Higher operating costs	CP
					DT
					NZ
			We hit our net zero targets		CP
					DT
					NZ
Cost of capital	Long	Risk / opportunity: Our debt interest rate might change – depending on our net zero progress. Long term interest rates could also change due to climate policy and investment. On the equity side, shareholders could	Our emissions decline slowly, following a current policies scenario	Higher or lower cost of capital	CP
					DT
					NZ
	choose to invest or withdraw funds depending on our net zero progress.		We hit our net zero targets		CP
					DT
				NZ
Carbon abatement	Short Opportunity: There might be increased demand for our carbon abatement solutions, telematics and carbon dashboards.	We roll out our current plans to grow revenue for these products	Higher revenue from abatement products	CP
solutions				DT
					NZ
Energy pricing and efficiency	Short efficiency could lower our operating costs (even with higher energy prices in the scenario).	Opportunity: Improving our networks' and sites' energy	We roll out our current energy efficiency plans	Lower operational costs	CP
					DT
					NZ

Relative financial impact key

Risk	Limited	Low	Moderate	High	Very high
Opportunity	Limited	Low	Moderate	High	Very high
Financial impact	< £5m	£5m-£50m	£50m-£250m	£250m-£1bn	>£1bn

Embedding climate change into our strategy

Responding to our main physical risks

Our exposure to physical risks changes over time. Rolling out full fibre and closing our legacy networks will mean fewer physical network sites. That will cut our exposure to physical climate change risks (but does mean more services going through fewer operational locations).

On top of that, full fibre is more 'passive' (with no electronics between exchanges and connected properties) – further mitigating the risk of flooding, or extreme heat or weather damaging our equipment.

Our insurance policies cover claims on asset loss and damage which also lessens any potential financial impact of climate and weather events.

More flooding

In line with our future location strategy, last year we completed an analysis of possible flood risks from climate change across different climate change scenarios.

This year we used that analysis to decide where to invest in measures to help us minimise – or respond faster to flooding. These include installing and upgrading sump pumps and bulkheads at our sites. We also updated the site analysis with the latest data to keep it accurate and up-to-date.

We're expanding our climate change flood risk assessments to help us make decisions on future strategic locations. This year we trialled using drones to survey potential risks around water getting into the fabric of our buildings.

More intense, longer and more frequent heatwaves

In most scenarios from 2030-2050 the UK will see more extreme heat days. We have been undertaking a programme of cooling upgrades at our core network and mobile sites, which allow them to operate effectively in up to 45°C external temperatures.

This year we've invested nearly £3m in these upgrades at our larger core metronode sites. We've also finished upgrades in our strategic data centres and upgraded cooling plants at our mobile core sites.

In our local exchanges, we're installing and upgrading cooling plants with adiabatic units, which use fresh air and water evaporation, making us less reliant on refrigerant gases. They work best on the hottest days – well suited to the rising ambient temperatures of different warming scenarios from 2030-2050. This year we've invested £5m on cooling system upgrades for local exchanges.

To reduce energy costs from cooling, we've increased the base temperature in sites across our network while maintaining optimal temperatures for our equipment.

More intense, longer and more frequent extreme weather events

Our extreme weather processes minimise service disruption. We continually scan the weather horizon to get early warning of potential weather-related risks, allowing us to prepare and launch defences. In extreme weather, our processes help us manage risks and prioritise restoring services – so customer impacts are minimised.

We had ten extreme weather events in the winter of 2023/24. Our preparation, management and strong infrastructure made sure they caused no major service disruptions.

We track storm, temperature, rainfall and impact data. We use it alongside climate projections to calculate current and future risks.

Supply chain disruption from physical climate risks

This year we assessed physical climate risks in our supply chain. We have strong supply management risk processes in place. They include comprehensive supplier due diligence, engaging with and challenging key suppliers on pricing and supply chain diversity, and demand planning and forecasting.

Managing our transition risks and opportunities

Cutting emissions in our value chain and hitting our net zero targets should mitigate the impact of carbon pricing, cost of capital, energy pricing volatility and reputation risks. It will also support the UK's commitment to becoming a net zero economy by 2050. Our carbon reduction plan explains what we're doing to cut our operational and value chain emissions.

See bt.com/carbonreductionplan for more information.

Changing consumer preferences and how they see us

We track changing customer preferences. We reflect this in how we engage with them and how we talk about our climate progress in customer communications and bids.

As well as opportunities around strategy and targets, our climate change actions help us stand out from the competition. We were one of the first companies to join initiatives like RE100, the CDP supply chain programme, and 1.5°C Supply Chain Leaders.

Supportive policies are critical to both our group and wider society to keep within the 1.5°C warming limit. So we work with regulators and policymakers to advocate for regulation to create this policy environment.

We also work with peers through associations like GSMA, techUK, Joint Audit Cooperation and the European Green Digital Coalition to build knowledge and expertise on ICT's potential to help decarbonise other sectors. We work with policymakers too – to inspire others (like small and medium-sized enterprises) – to take climate action.

Carbon pricing and taxation

We're not directly in the scope of a carbon pricing scheme. But we track developments and prices in the UK and other relevant jurisdictions.

Task Force on Climate – related Financial Disclosures continued

Cost of capital

The Board oversees our debt status. We also have formal treasury risk management processes, delegated approvals and lender relationship management to manage credit risk across the group – including climate-related risks.

On the equity side, we engage regularly with shareholders through our investor relations team – including discussions on our ESG performance.

Carbon abatement solutions

There are lots of ways for customers to cut their carbon emissions (and associated climate risks) through our products and services. Most of our solutions reduce the need to travel, lower energy use and cut material and manufacturing needs.

Partnering with sustainability tech company QiO, we've launched an AI-powered edge computing solution to help our business customers cut carbon by optimising their energy use.

We've also introduced real-time energy and carbon dashboards for bigger customers to help them estimate their networks' carbon footprints and cut emissions. We're collaborating with Johnson Controls to help customers digitalise their buildings and optimise their heating, ventilation and cooling systems to reduce energy and carbon.

Energy pricing and efficiency

Transforming our operating model includes making the group as energy efficient as possible. And we've already done a lot to cut our energy consumption.

We've decommissioned redundant or underused network infrastructure and upgraded existing infrastructure to boost capacity with less energy. We've used machine learning to make incremental energy savings, and replaced supporting mechanical and electrical infrastructure (heating, cooling, and lighting) with more energy-efficient alternatives.

We're also moving to fewer, more efficient buildings. And longerterm, the switch to full fibre will need fewer exchanges and other network sites – cutting our network's overall energy consumption.

Climate change, and other macroeconomic factors like war in Ukraine, expose us to fluctuating energy prices that we must manage. So our target is for UK (excluding Northern Ireland) energy demand to be at least 80% hedged a quarter before the start of the next financial year – and 50% hedged for the following financial year.

In each financial year, we aim to build our Power Purchase Agreement (PPA) and virtual Power Purchase Agreement (vPPA) portfolio and explore five to ten year contract opportunities. We complement that by monitoring markets and forward purchasing electricity when the market is right.

The impact of climate-related risks and opportunities on our financial planning

Our medium term plan considers both capital and operating expenditure over a rolling five-year timeframe.

The plan includes our investments on renewable electricity, transforming our buildings estate, making our network more resilient, energy efficiency and switching to a low carbon fleet. This helps us mitigate the potential impact of the bigger risks affecting our business and support our Manifesto goals. We also include projected revenue from carbon abatement solutions in our medium term plan.

How we manage climate risks

A structured and consistent approach to risk management

We identify, assess, manage, and monitor climate-related risks through our risk management framework.

We consider three types of risk:

• 1. Enduring risks that won't change much over time.
• 1. Point dynamic risks which change quickly over time.
• 1. Emerging uncertainties that might emerge over longer timeframes.

We could face climate-related risks in all these risk types, which we track and report to the Audit & Risk Committee and Executive Committee.

You can read more about all of our overall GRCs on pages 63 to 70.

Identifying and assessing risks

We've identified climate-related risks in several GRCs.

They include operational resilience (like more flooding, more intense, longer and more frequent heatwaves), stakeholder management (like changing consumer preferences, and how they see us), supply management (like supply chain disruption from physical climate risks) and health, safety & environment. We identify those risks through bottom-up and top-down discussions in our units – and across the whole group. This includes existing and emerging regulatory requirements relating to sustainability, such as upcoming reporting requirements from the EU's Corporate Sustainability Reporting Directive (CSRD).

We judge point risks based on their potential impact and how likely they are to happen in the next three years. We judge emerging risks based on their potential impact, the timeframe over which a risk could manifest (which could be beyond the three-year horizon of point risks) and our level of preparedness.

We calculate the impact for both risk types with quantitative and qualitative measures around financial impact, customer experience and stakeholder perception. This helps us decide the relative weight we give each risk.

Managing and reporting on risks

Once we've identified and assessed risks we give them an owner, depending on their priority. These owners decide the things we need to do to respond – like assigning controls, contingencies and monitoring activities.

Owners also regularly improve their action plans by checking metrics and other monitoring activities. This helps them understand future changes that might be needed – like taking new actions, escalating issues or updating assessment processes.

For emerging climate risks that are more uncertain and apply across several parts of the business, we have an established climate change emerging risk hub. It brings together people from across the group in a forum to discuss developments and agree actions.

Our climate metrics and targets

Measuring and monitoring climate risks and opportunities

In line with our risk management processes and strategic objectives, we track a number of metrics to measure and manage our climate-related risks and opportunities set out in Table 5 below. We will continue to review our metrics and targets in line with potential regulatory changes and guidance from the International Sustainability Standards Board (ISSB).

We have a sustainability underpin for awards made under our Restricted Share Plan for Executive Directors. This means that we must have made sufficient progress towards our sustainability commitments for awards to be made. This could include progress on carbon emissions, carbon avoidance and circularity goals. You can read more about the sustainability underpin on page 109.

Table 5: Climate-related risk and opportunity metrics, targets, and performance

Risk/ Opportunity name	Metric	Target	FY24 performance
More flooding More intense, longer and more frequent heatwaves More intense, longer and more frequent extreme weather	Network disruption (weighted for weather events) (%)a	Network downtime limited to 0.01%	< 0.01%
events Supply chain disruption from physical climate risks		We assessed physical climate risks to our supply chain for the first time in depth this year. We'll keep refining the assessment and develop metrics we could use to monitor this risk over time.
Changing customer expectations and how they see us		By FY31, to be a net zero carbon emissions business (Scopes 1 and 2 market-based)	164,743 (-59% vs FY17)
Carbon pricing and taxation	Scope 1, 2 and 3 emissions (tCO2e)	By FY31, to reduce our supply chain carbon emissions by 42%, compared to FY17 levels (Scope 3 categories 1 - 8)	2,425,820 (-25% vs FY17)
Cost of capital		By FY41, to be net zero for our supply chain and customer carbon emissions (Scope 3)	3,000,873 (-26% vs FY17)
	ESG index performance: CDP, EcoVadis, MSCI, Sustainalytics, Vigeo Eiris	Maintain our top quartile (Q1) place	Q1
Carbon abatement solutions	Cumulative emissions avoided by customers (tCO2e)	By FY30 help customers avoid 60m tonnes of CO2e by using our products and services	1.5m (3.8m since FY21)
Energy pricing and energy efficiency	Networks' energy consumption (GWh)b	Reduce our net networks' energy consumption annually	1,680 (-5.1% vs FY23)
	% hedged energy costs	Have energy demand at least 80% hedged one quarter before the start of the next financial year, and 50% hedged for the following financial year	85% hedged one quarter before FY25 55% hedged for FY26
	% UK electricity consumption covered by PPAs	N/A	24%

a This metric describes overall service disruption to our UK network, weighted for our technology platforms most impacted by weather.

b Refers to our UK on site electricity consumption, which excludes consumption from MBNL and tenants.

Task Force on Climate – related Financial Disclosures continued

Our worldwide energy use and greenhouse gas emissions^a

In the table below, we provide an overview of Scope 1, 2 and 3 greenhouse gas emissions and our performance against our emissions reduction targets. We report in line with the Greenhouse Gas Protocol (ghgprotocol.org).

	FY22				FY23			FY24
	UK Non-UK			UK Non-UK			UK Non-UK
	Energy GWh	f CO2e 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	170	31,595	2	301	141	26,259	1	270	123	23,024	2	288
Gas and oil – generatorse	30	6,842	–	30	32	7,264	–	7	16	3,598	–	7
Fugitive emissions – refrigerants		3,087		1,501		522		268		456		1,110
Commercial fleet (converted from litres fuel)	557	130,971	3	575	588	141,884	–	673	543	129,779	–	621
Commercial travel (converted from mileage/cost/litres fuel)	13	3,151	5	1,300	15	4,018	11	2,720	9	2,555	14	3,300
Total Scope 1	770	175,646	10	3,707	776	179,947	12	3,938	691	159,412	16	5,326
Scope 2c (electricity including nuclear & CHPg )
Total consumption (LBMh )	2,311	490,712	208	63,599	2,283	441,713	198	56,121	2,225	460,654	198	60,770
MBMi renewable consumption CO2e adjustments
General consumption	2,309	(490,371)	208	(63,397)	2,280	(440,976)	198	(56,043)	2,216	(458,915)	198	(60,765)
Commercial fleet EVj consumption	2	(298)	–	–	3	(634)	–	–	8	(1,645)	–	–
Company car EV consumption	–	(43)	–	–	0.4	(103)	–	(20)	1	(94)	–	–
Total Scope 2 CO2e MBM adjusted		–		202		–		58		–		5
Total Scopes 1 & 2 (MBM)	3,081	175,646	218	3,909	3,059	179,947	210	3,996	2,916	159,412	214	5,331
Worldwide Scopes 1 & 2 CO2e (MBM)		179,555					183,943				164,743
% change from baseline year FY17 (baseline 404,780)	(56)%				(55)%			(59)%
Scope 3d : Worldwide emissions CO2e tonnes	3,243,361			3,133,579			3,000,873
Key climate targets:
Intensity metric Scope 1 & 2 worldwide emissions tonnes CO2e per £m value added (baseline 31.50)		14.19					14.04		12.44			Target 31 March 2031
% change from baseline year FY17		(55)%					(55)%			(61)%	(87)%
SBTI supply chain emissions GHG Scope 3 Upstream + Operational (GHG Catg 1-8) kt (baseline 3,217 kt)		2,634					2,500		2,425			Target 31 March 2031
% change from baseline year FY17	(18)%			(22)%				(25)% (42)%

N/A: Not available or not applicable

a Data presented has been reviewed to a high level of assurance by LRQA Group Limited against Accountability's AA1000AS v3 assurance standard. We restate historical years' data to replace estimates with actual figures and/or when we think subsequent information is materially significant as determined during audit (typically variances greater than one percentage point at category level).

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 (like employee commuting).

e For gas and 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 section on pages 37 to 39 and the ESG Addendum (bt.com/esgaddendum).

In accordance with provision 31 of the UK Corporate Governance Code 2018, the Directors have assessed the prospects and viability of the group.

The assessment has been based on the Company's strategy, balance sheet and financing position, including our £2.1bn undrawn committed borrowing facility which matures in March 2027, and the potential impact of 'Our principal risks and uncertainties' (pages 63 to 70).

The Board has chosen to conduct its review for a period of five years to 31 March 2029. 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 business plans and financial forecasts of each of our Customer Facing Units (CFUs) and our Corporate Units (CUs) based on some central macroeconomic assumptions such as inflation and exchange rates. This is then supplemented by items managed at a group level. The macroeconomic assumptions are informed by independent third party forecasts. The performance of the group, our CFUs and our CUs 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 planning 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 63 to 70. 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.

Scenarios included in our combined severe but plausible stress test

Our hypothetical combined downside scenario is based on hostilities in the Middle East escalating into a wider conflict. US and other Western allies' involvement in the conflict increases and geopolitical relations between the West and Russia and China worsen. China increases military activities and blockades trading routes with Taiwan at the start of the five-year viability period. The combined effects on energy security and supply chain disruption lead to higher inflation, slower growth and recession which intensify cost-of-living pressures as well as increasing cyber and sanctions compliance risks. Increasing fixed infrastructure wholesale competition from alternative FTTP network providers materially impacts market share. Meanwhile, a hyperscaler makes direct moves into our markets. These impacts lead to additional pension payments being required. We fail to defend successfully the high value litigation claims brought against the group.

The individual scenarios selected for inclusion in the combined scenario were chosen based on some partial correlations and the current headwinds facing the group and the industry.

Scenario	Risk Category	Assumptions
Winter power shortages	Operational resilience	A crisis in the energy sector leads to insufficient gas supply and energy volatility Assumptions: – 35% of Britain to experience daily outages for up to 60 days – Telecommunications companies not prioritised for service
Supply chain disruption	Supply management	Supply chains are disrupted due to blockage of trading routes Assumptions: – Chinese blockades of trading routes with Taiwan slows but does not stop supply chain – Hostilities in Middle East have limited impact outside of global shipping impacts
International trade sanctions and export controls	Legal compliance	Discovery of breaches of sanctions or export controls imposed by UK, US or EU nations Assumptions: – Trigger for the scenario occurs in the first year – Widespread problem in two or more units leading to unintentional but significant breaches
Recession Financing and Communications increases unemployment rates and reduces household spend Regulations Assumptions: medium term plan period – Reduction of Consumer mobile device base		The UK market experiences a significant recession with negative GDP growth. This – Loss of proportion of managed contract new business which is not recovered over the

Viability statement continued

Scenario	Risk Category	Assumptions
Cyber security breach with customer data loss	Cyber security	BT falls victim to cyber attacks, experiencing a major loss of customer data which leads to a successful class action against BT Assumptions: – GDPR breach detected and announced followed by increased customer churn and EBITDA decline – Fine from the Information Commissioner's Office – Class action claim from customers against the group
Competitive pressures from alternative FTTP network providers continue to intensify	Strategy, technology and competition	Increased fixed infrastructure wholesale competition from alternative FTTP network providers Assumptions: – Alternative FTTP network providers make significant gains in market share even when overbuilt by Openreach at a later date – Loss of volumes and materially lower retail market share
A hyperscaler makes direct move into our markets	Strategy, technology and competition	Hyperscaler competitor directly enters consumer market Assumptions: – Official announcement in late FY25 producing immediate impact from FY26 onwards – Consumer losses enable some savings over time – All existing operators experience same level of churn
Pensions deficit	Financing	An increase to BT's funding obligations to the BT Pension Scheme (BTPS) Assumptions: – A decline in macroeconomic outlook and financial markets increases the BTPS deficit – The deficit is met through higher deficit payments over the term of the existing recovery plan
Litigation losses	Legal compliance	We fail to successfully defend the high value claims brought against the group Assumptions: – Based on publicised claim values claimed with severe outcomes

We have considered directly relevant mitigations that we would employ if these events occurred and included those impacts in our calculations.

As a summation of the full impact of each of the individual scenarios in this stress test would be an extremely unlikely outcome we used a stochastic model to develop a more realistic severe but plausible combined scenario. We applied an 80th percentile confidence interval which allows for a stress test of the medium term plan with a plausible but still severe combination of events, without assuming the worst impact happens across all scenarios at the same time. The output of the 80th percentile confidence interval is around 40% of the total sum of these individual risks.

Results

Applying our severe but plausible combined scenario with related mitigations indicates that BT would experience a liquidity shortage commencing in the second year. However, there are further mitigations, including planned debt issuance, that could be applied to eliminate this liquidity shortage. We would need to adopt around a third 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 operating and capital expenditure cash outflow from the group. In addition, there are also several mitigations which are outside of our control like raising debt. 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.

The directors also considered it appropriate to adopt the going concern basis of accounting when preparing the financial statements, as set out in the 'Report of directors' on page 126.

Corporate governance report

We're committed to delivering on our bold ambition to be the world's most trusted connector of people, devices and machines. We're focused on growing sustainable value for all our stakeholders and the communities we operate in, through effective Board leadership, strong corporate governance and a clear understanding of the broader telecommunications market.

Compliance with the 2018 UK

Corporate Governance Code (the Code) In respect of the year ended 31 March 2024, BT Group plc was subject to the Code published by the Financial Reporting Council (FRC) in July 2018 (available at frc.org.uk). The Board confirms that BT Group has applied all the principles and complied with or explained all the provisions of the Code throughout the year as seen below. BT Group is aware of the updated Code, published by the FRC in January 2024, which will apply to financial years beginning on or after 1 January 2025.

1. Board leadership and company purpose

1. Board leadership and company purpose
A: Leadership, long-term sustainable success, generating value for shareholders and contributing to wider society 19-29, 34-39, 72-80, 105
B: Purpose, values, strategy and culture	84, 88- 93, 98, 102, 105
C: Resources and prudent and effective controls 48-49, 61-62, 89, 93, 102, 105
D: Effective engagement with stakeholders	40-45, 90-91, 105
E: Workforce policies and practices	24, 30-34, 46-47, 88, 90-91, 102, 122
2. Division of responsibilities
F: Leadership of the Chairman*	84, 87, 88
G: Board composition and clear division of responsibilities	8-9, 85-88, 94
H: Role and time commitment of Non-Executive Directors	86-88, 97, 121
I: Policies, processes, information, time and resources, and support of the Company Secretary	85, 87-88, 97-98
3. Composition, succession and evaluation
J: Board appointment process and effective succession planning	85-98
K: Board and Committee skills, experience and knowledge	86-87, 96-98
L: Annual Board and individual director evaluation	94, 98
4. Audit, risk and internal control
M: Independence and effectiveness of internal and external audit functions	99-103
N: Fair, balanced and understandable assessment of company's position and prospects	89, 100, 125
O: Procedures to manage risk, oversee internal control framework and determine the nature and extent of principal risks	61-62, 99-103, 127
5. Remuneration

P: Remuneration policies and practices	110
Q: Procedure for developing policy on executive, director and senior management remuneration	106-124
R: Independent judgement and discretion in remuneration outcomes	108, 111, 114

Contents

Chairman's governance letter	84
Our governance framework	85
Board leadership and company purpose
– Board of directors and division of responsibilities	86
– Role of the Board	88
– Board focus in FY24	89
– Board engagement with colleagues	90
Section 172 statement	92
Board composition, succession and evaluation
– FY24 Board and Committee evaluation	94
– Board induction	95
– Nominations Committee Chair's report	96
Audit, risk and internal control
– Audit & Risk Committee Chair's report	99
BT Compliance Committee Chair's report	104
Responsible Business Committee Chair's report	105
Report on directors' remuneration
– Remuneration Committee Chair's letter	106
– Focus on remuneration	110
– Annual remuneration report	113
– Remuneration in context	122
Statement of directors' responsibilities	125
Report of the directors	126

\*Further details on the responsibilities of the Board can be found on our website bt.com/governance

Chairman's governance letter

The Board remains focused on ensuring it governs the group effectively, making careful decisions to generate long-term value for our stakeholders. We are cognisant of the new Code and are well placed to ensure our governance practices across the group are strengthened in line with this and evolving best practice.

The Board prioritises effective corporate governance across the group. Promoting fairness, openness and transparency in its responsibilities to stakeholders and generating long-term, sustainable success has been, and will remain, the Board's primary objective.

The Board has been educated on the key changes coming out of the new Code, published in January 2024. We're well placed to build on our corporate governance practices to comply with the Code in future years, and to ensure the Board is carrying out its role in governing the group effectively. In next year's report we'll provide an update on how the priorities of the Board and committees have been shaped by the new Code in FY25.

This Corporate governance report sets out the approach our Board takes to facilitate effective governance and how it supports our strategy and the decisions we have made, ensuring it considers the interests of our stakeholders and our contribution to society.

Board and committee changes

• Philip Jansen stepped down from the Board and as Chief Executive at the end of January. I'd like to take this time to thank Philip for the excellent job he has done during his time at BT Group and in leading our transformation.
• We welcomed Allison Kirkby to the role of Chief Executive in February, having served on the Board since 2019. We're delighted to have Allison lead the group and I look forward to supporting her as we drive our long-term strategy (see page 96 for details on Allison's appointment).
• As mentioned in last year's report, Ian Cheshire and Iain Conn stepped down from the Board at the conclusion of the 2023 AGM. Adel Al-Saleh also stepped down in December 2023 and Isabel Hudson will step down at the conclusion of the 2024 AGM in July after serving nine years on the Board. On behalf of the Board, I would like to thank them all for their valuable contributions to the Board and to the group over the years and wish them well in their future endeavours.
• Ruth Cairnie joined the Board in April 2023 and, from the conclusion of the 2023 AGM, succeeded Iain as the Senior Independent Director and Ian as Chair of the Remuneration Committee.
• Raphael Kübler was appointed to the Board in January 2024 having been put forward by Deutsche Telekom as their nominated director.
• We appointed Tushar Morzaria to the Board as an Independent Non-Executive Director with effect from 7 May 2024. Tushar brings a wealth of strategic financial management experience gained over 25 years where he has overseen transformation programmes and has strengthened risk and control frameworks.

With these Board changes, we have focused on complementing the existing skills on the Board, and ensuring the best mix of diversity of viewpoints, skills and experience. More details on succession planning and the work of the Nominations Committee during the year can be found on pages 96 to 98.

During the year, the Board has also made some changes to simplify our Board and Committee structure. After careful consideration, it was decided that it was the appropriate time to disband the BT Compliance Committee and to transition its responsibilities across the Audit & Risk and Responsible Business Committees. More detail on this can be found on pages 99 and 105.

Supporting our colleagues

This has continued to be a challenging year for our colleagues; the Board recognised this and held many colleague-focused discussions during the year.

After much deliberation, the Board decided to make changes to our colleague engagement mechanism and establish a comprehensive colleague outreach programme led by the Designated Non-Executive Director for Workforce Engagement. As part of this change, the Colleague Board was disbanded during the year. Maggie Chan Jones was appointed as our new Designated Non-Executive Director for Workforce Engagement, succeeding Isabel, who will step down from the Board at the conclusion of the 2024 AGM. Maggie's previous experience, focus on coaching, and her championship of diversity, inclusivity and other colleague matters will help ensure that the voices of our colleagues continue to be heard in the boardroom. I'd like to thank Isabel for all of her support and guidance to the Colleague Board and our colleagues, over the past four years. Further detail on how the Board made this decision and how it engages with our colleagues can be found on pages 90 to 91.

Inclusion, equity and diversity

We are committed to encouraging inclusive thinking inside and outside of our business. This year, we have made progress in ethnic minority representation, with decent gains against the bold targets set out in our Manifesto. For more information on our continued progress in this area, see pages 31 to 32 and 34 to 39.

The Board's diversity targets are set out in our Board Diversity and Inclusion Policy. As at 31 March 2024, our Board comprised 50% female directors, two directors from an ethnic minority background, and one who has a disability. Ruth Cairnie's appointment during the year as the Senior Independent Director ensured that we met the requirements of the Listing Rules to have female representation in at least one of the four senior board positions. This position was reinforced by Allison's appointment as Chief Executive from 1 February 2024, meaning that half of the four senior board positions are now held by women. From the 2024 AGM, our Board will comprise 40% female directors, three directors from an ethnic minority background, and one who has a disability.

Leading this Board and our business continues to be a privilege. I would like to thank all our BT Group teams for their continued efforts to help us deliver on our purpose and I am excited to work with a fantastic group of fellow directors over the next year.

Adam Crozier

Chairman 15 May 2024

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 pages 88 to 91

Audit & Risk Committee

Oversees, assesses and reviews our financial and narrative reporting, internal controls and risk management. It also oversees BT Group's compliance with the Commitments we made as part of the 2017 Digital Communications Review (DCR) with Ofcom and the Governance Protocol.

Audit & Risk Committee Chair's report on pages 99 to 103

Nominations Committee

Considers the structure, size and composition of the Board and its Committees and advises on succession planning for the Board and the Executive Committee. It ensures the Board is diverse, with the appropriate balance of skills, experience, independence and knowledge.

Nominations Committee Chair's report on pages 96 to 98

Remuneration Committee

Agrees the remuneration framework for the Chairman, Executive Directors and certain senior executives and monitors remuneration practices and policies for the wider workforce.

Remuneration Committee Chair's letter and Report on directors' remuneration on pages 106 to 124

Responsible Business Committee

Agrees the responsible business strategy, including its implementation through our Manifesto goals and targets, and monitors adherence to consumer fairness principles.

Responsible Business Committee Chair's report on page 105

On 6 April 2023, the Committee's name changed from the Digital Impact & Sustainability Committee to the Responsible Business Committee.

National Security and Investigatory Powers 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.

BT Investment Sub-Committee

Provides input and recommendations that support the Chief Executive's decision making on investment cases and budgets.

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.

Disclosure Sub-Committee

Ensures BT Group meets its disclosure obligations and reviews and approves regulatory and other announcements before publication.

Matters reserved to the Board and its Committees' terms of reference can be found on our website at bt.com/governance

Each Committee Chair formally reports to the Board following their meetings and makes any recommendation to the Board in line with that Committee's terms of reference. Papers and minutes are circulated to all Board and Committee members as appropriate, other than to those with a potential conflict of interest. Deutsche Telekom's nominated director 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.

Board of directors and division of responsibilities

Adam Crozier Chairman

Appointed Chairman December 2021 and to the Board and as Chairman designate November 2021.

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 over 20 years' experience as a CEO across four different industries, most recently as the CEO of ITV from 2010 to 2017. Prior to ITV, Adam was CEO of Royal Mail from 2003 to 2010. Before that he was CEO of the Football Association from 2000 to 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.

Allison Kirkby Chief Executive

Appointed Chief Executive February 2024 and to the Board March 2019.

Experience

From May 2020 until being appointed Chief Executive of BT Group, Allison was President & CEO of Telia Company. Allison was previously President & Group CEO of TDC Group until October 2019, and President & Group CEO of Tele2 AB from 2015 to 2018, having been Tele2 AB's Group CFO from 2014. She was chair of the Audit Committee and a Non-Executive Director of Greggs until May 2019. She has also held financial and operational roles within 21st Century Fox, Virgin Media, Procter & Gamble and Guinness.

Relevant skills and contribution to the Board

Valuable and recent experience in the international telecoms and media sector, combined with significant experience in transformation, driving performance, improving customer service and delivering shareholder value.

External appointments

Non-Executive Director and member of Audit Committee of Brookfield Asset Management Limited.

• Membership key Audit & Risk Committee
  • Committee Chair Executive Committee
    • National Security and Investigatory Powers Committee
    • Nominations Committee
    • Remuneration Committee
    • Responsible Business Committee

Simon Lowth

Chief Financial Officer Appointed Chief Financial Officer and to the Board July 2016.

Experience

Simon was CFO of BG Group before its takeover by Royal Dutch Shell in February 2016. Before 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

Non-Executive Director and member of the Audit and Nomination & Governance Committees of Smith & Nephew.

Isabel Hudson

Independent Non-Executive Director Appointed to the Board November 2014.

Experience

Isabel was previously Non-Executive Chair of the 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 Non-Executive Director of ISC Group, a not-for-profit organisation supporting women to bridge the gender seniority gap in insurance. Isabel is also an ambassador for the disability charity, SCOPE.

Matthew Key

Independent Non-Executive Director Appointed to the Board October 2018.

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. He was also a Non-Executive Director and Chair of the Audit Committee of Burberry from 2013 to 2023.

Relevant skills and contribution to the Board

Strong strategic skills and a wealth of experience in finance and the telecoms sector. Matthew is also a Director of the joint venture between BT Group and Warner Bros. Discovery.

External appointments None.

Raphael Kübler

Non-Independent, Non-Executive Director Appointed to the Board January 2024.

Experience

Raphael is the Chief Operating Officer of Deutsche Telekom AG. Prior to this he held the position of Senior Vice President Controlling at Deutsche Telekom AG and Chief Finance Officer of T-Mobile Deutschland GmbH. Raphael has also been a director of T-Mobile USA, Inc., since April 2013 and served on other boards of listed companies, including Ströer SE & Co. KGaA, Hellenic Telecommunications Organisation and SES Global S.A.

Relevant skills and contribution to the Board

Extensive experience in the telecommunications industry, including strategic transformation projects and mergers and acquisitions.

External appointments

Director of T-Mobile USA, Inc.

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

Ruth Cairnie Senior Independent Non-Executive Director

Appointed to the Board April 2023.

Experience

Ruth has a wealth of experience gained from a 37 year international career at Royal Dutch Shell holding senior functional and line roles, including having responsibility for group strategy and planning. She was a Non-Executive Director of Associated British Foods from 2014 to 2023 and Senior Independent Director and Remuneration Committee Chair from 2018. She was a Non-Executive Director of Rolls-Royce from 2014 to 2019 and Remuneration Committee Chair from 2016, a Non-Executive Director of ContourGlobal from 2018 to 2019 and Non-Executive Director and Remuneration Committee Chair at Keller Group from 2010 to 2017.

Relevant skills and contribution to the Board

Ruth has extensive experience gained from a broad range of executive and non-executive roles at leading industrial companies, both in the UK and internationally. She also has experience advising government departments on strategic development and capability building.

External appointments

Chair of Babcock International Group and a trustee of Windsor Leadership and the White Ensign Association.

Maggie Chan Jones

Independent Non-Executive Director and Designated Non-Executive Director for Workforce Engagement Appointed to the Board March 2023.

Experience

Maggie was the founder and served as the Chief Executive of Tenshey for seven years until February 2024. Maggie originated Tenshey's mission to elevate more women and underrepresented talent into leadership roles and the boardroom. This builds on a highly successful career in marketing at several of the world's largest technology companies, including Microsoft and SAP.

Relevant skills and contribution to the Board

Deep international marketing and brand experience. Maggie is a recognised executive in business transformation, ESG and as an industry thoughtleader in the marketing and technology sector.

External appointments

Non-Executive Director of Sage Group and the United States Tennis Association (non-profit). She is also a Non-Executive advisor to Ontinue AG.

Steven Guggenheimer Independent Non-Executive Director

Appointed to the Board October 2022.

Experience

Steven has more than 25 years of experience at Microsoft, where he held a variety of senior and large-scale leadership roles between 1993 and 2020. For the last 12 years he held the position of Corporate Vice President leading the OEM, Developer/ISV, and AI Solutions organisations. Prior to joining Microsoft, Steven worked at Spectra-Physics Lasers.

Relevant skills and contribution to the Board

Accomplished technology executive with a strong track record of advising businesses on digital transformation and extensive insight into technologies ranging from AI to cloud computing.

External appointments

Non-Executive Director of HSBC Holdings, Forrit and Leupold & Stevens. He is also an advisor to Tensility Venture Partners and Aries Software Holdings.

Sara Weller Independent Non-Executive Director Appointed to the Board July 2020.

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, Lead Non Executive at the Department of Communities and Local Government 2010 to 2015, 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 executive and nonexecutive board experience in regulated sector plcs and central Government organisations.

External appointments

Chair of The Money and Pensions Service and Non-Executive Director of Virgin Money UK and Clydesdale Bank (a subsidiary of the Virgin Money Group).

Tushar Morzaria Independent Non-Executive Director Appointed to the Board May 2024.

Tushar joined the Board on 7 May 2024 as an Independent Non-Executive Director. Tushar is a member of the Audit & Risk, Nominations and Remuneration Committees.

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.

Board changes

In line with our recent announcement, Isabel Hudson will not put herself forward for re-election at the 2024 AGM and will cease as an Independent Non-Executive Director on the Board at the conclusion of the 2024 AGM.

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 from the top. Further details on our purpose, ambition, values and strategy on pages 18 to 29.

The Board monitors the indicators of our culture through:

• discussions with the Chief Executive
• reports from the Chief Human Resources Officer, which include progress on simplifying organisational effectiveness and embedding a performance culture that rewards outcomes
• reports to the Audit & Risk Committee on any concerns raised through our Speak Up whistleblowing service, see page 102
• themes and insights from our Your Say colleague engagement surveys
• all-employee "Join Allison" live Q&A sessions
• direct feedback and insights from colleagues via our Designated Non-Executive Director for Workforce Engagement.

We believe that these indicators remain effective in providing the Board with useful insights into colleague sentiment and the wider culture across the organisation. More information on how the Board is kept informed of colleague perspectives and our culture can be found on page 90 to 91 and in the Strategic report on page 41.

The Board maintains oversight of the group's operations, performance, 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 there is an effective leadership team in place to efficiently execute the group's strategy.

A number of key decisions and matters are reserved to 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

Board meetings in FY24 were held in person in our head office in London to ensure constructive levels of engagement and discussion, to challenge management and encourage robust debate as part of decision making. Video conference was available for invited attendees who were unable to join the Board in person. Pre-Board meeting dinners were held for the Board as part of informal interactions.

	Meetings attended
Adam Crozier (Chairman)	8/8
Allison Kirkby a	8/8
Philip Jansen b	7/8
Simon Lowth	8/8
Adel Al-Saleh c	7/7
Ruth Cairnie	8/8
Maggie Chan Jones	8/8
Ian Cheshire d	2/2
Iain Conn d	2/2
Steven Guggenheimer e	7/8
Isabel Hudson f	7/8
Matthew Key	8/8
Raphael Kübler g	1/1
Sara Weller	8/8

a Allison attended all Board meetings during the year as a Non-Executive Director b Philip sent his apologies for the last meeting of the year as he stepped down from the Board and as Chief Executive on 31 January 2024

• c Adel stepped down from the Board on 31 December 2023
• d Ian and Iain stepped down from the Board at the conclusion of the 2023 AGM
• e Steven sent his apologies for the July meeting due to a pre-existing conflict
• f Isabel sent her apologies for the September meeting due to a personal matter g Raphael joined the Board on 30 January 2024

Meetings and attendance

We held eight scheduled Board meetings including one strategy meeting in FY24. The Chairman also held private sessions with the Non-Executive Directors during the year. The Company Secretary is Secretary to the Board, and she, or her delegate, attends all meetings and provides advice, guidance and support as required. Each member of the Board, individually and collectively, has access to the Company Secretary and can obtain independent professional advice if needed.

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 considered as part of the discussion at the meeting.

Section 172 statement and stakeholders

Our Section 172 statement is set out on pages 92 to 93 and demonstrates our Directors' regard to the matters in section 172 of the Companies Act 2006 (2006 Act) in performing their duties, and how they have had regard to colleagues' 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 90 to 91 for details on the Board's engagement with our colleagues and the Strategic report on pages 40 to 45 for additional details of how we engage with our key stakeholders.

Board focus in FY24

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:

• maintaining the pace of FTTP build towards the target of 25m premises by the end of 2026 against the challenging economic climate
• the sale of BT Tower to MCR London Holdings Limited for £275m (see pages 93 and 174)
• BT Pension Scheme (BTPS) triennial valuation (see pages 54, 93 and 193)
• simplification activities in relation to the merging of Enterprise and Global to create Business.

Held a full-day strategy meeting where it considered with management:

• the group's strategy and long-term growth opportunities
• the approach for Business going forward
• 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
• the macroeconomic environment and how the group should respond.

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 operates 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.

During the year, the Board also considered, discussed and agreed not to proceed with certain proposed initiatives which were determined not to be strategically important or beneficial to the group.

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 feedback received after the publication of each set of financial 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 each unit and the group as a whole
• 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 medium-term plan, having considered the main opportunities and challenges, our strategic priorities and KPIs
• the group's financing strategy, having considered different options for raising finance and managing cash flow
• the delivery of the group's transformation programmes against our objectives to drive efficiencies, opportunities and continued cost reduction across the group
• customer experience for each CFU including 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 page 26 to 27.
• any regulatory or competition investigations and significant litigation, including our response and the stakeholder and reputational impact of these.

Risks, controls and governance

During the year, the Board discussed:

• the group risk management framework twice, with in-depth discussions on certain group risk categories (GRCs), including the point and emerging risks and uncertainties facing the group and our risk appetite for each (see pages 61 to 70). The Board also received regular updates from the Chair of the Audit & Risk Committee, which undertakes detailed reviews of the group's systems of risk management and internal controls, including the effectiveness of the controls, mitigation activities and any areas for improvement (see page 102), as well as GRCs not discussed by the Board
• the progress of BT Group transformation programmes
• the Annual Report, which was subsequently approved on the recommendation of the Audit & Risk Committee (see page 100), 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 this year's Board and Committee evaluation (see page 94).

People and culture

During the year, the Board discussed:

• the succession and appointment of the Chief Executive, delegating final approval to a sub-committee of the Board. More information on Allison's appointment as Chief Executive can be found in the Nominations Committee Chair's Report on page 96
• the progress of integrating Enterprise and Global into Business, together with the related operating model changes and colleague impacts, focusing on the right diversity in the leadership teams (see page 22)
• the progress and delivery against our people and cultural strategy, ambitions and related goals. Our ambition is to build a culture where people can be their best and make BT Group a brilliant place to work
• skills and organisational development; inclusion, equity and diversity; occupational health and wellbeing, and colleague engagement.

Each of the Committee Chairs also reported back to the Board on the areas within their remit that are important indicators of the group's culture.

Board leadership and company purpose continued

Board engagement with colleagues

Colleague Board – FY24 activities

The Colleague Board was in place throughout most of FY24, and held three formal meetings, an additional meeting with Isabel Hudson, Maggie Chan Jones and Allison Kirkby, and a number of informal sessions with internal teams during the year.

The Colleague Board's views were sought on pan-BT Group programmes, including how these are aligned with our values and culture, and how we communicate these to our colleagues. The Colleague Board continued to successfully contribute to, and shape, some of our key initiatives this year by sharing different views and perspectives. This helped the Board and senior leadership to understand the perspectives of our colleagues on a range of different topics, and supported good decision-making practices. There was a Q&A session at each meeting which enabled Colleague Board members to ask questions of the Chief Executive and Isabel and provided an opportunity for Colleague Board members to further understand key issues impacting the group and our colleagues.

As in previous years, the Colleague Board was chaired by the Chief Executive. Members included Isabel and a number of colleagues from a diverse range of roles across the group. Sabine Chalmers, BT Group General Counsel, Company Secretary & Director Regulatory Affairs, and Athalie Williams, Chief Human Resources Officer, and two Openreach colleagues were also invited and attended all formal meetings. Other members of the Executive Committee attended meetings on a rotating basis and the Chairman and other Non-Executive Directors were able to attend meetings as observers. The Director of Internal Communications was invited to attend Colleague Board meetings and members were encouraged to feedback on key internal communications. The Deputy Company Secretary was secretary to the Colleague Board and he, or his delegate, attended all meetings and provided support, guidance and advice as required.

The last formal Colleague Board meeting was held in November 2023. A final meeting with members was held with Isabel, Maggie and Allison in February 2024 to thank Isabel and the Colleague Board members for their efforts over the years and to discuss the key topics for both Maggie, as the new Designated Non-Executive Director for Workforce Engagement, and Allison, as Chief Executive, to be aware of going forward.

Key topics discussed in FY24

People framework, pay and benefits	Colleague feedback on the people framework, pay and benefits and a deep dive session was hosted by the Director of Group Reward.
Inclusion, equity and diversity	The group's progress on inclusion, equity and diversity and the future priorities and insight was fed back to Isabel for future consideration during Board meetings.
Hybrid working	Colleague sentiment on the hybrid working principles and how consistently this is applied across the group.
Colleague engagement surveys	The move from annually to quarterly Your Say colleague engagement surveys. The Board asked Colleague Board members to encourage colleagues to complete the condensed surveys and communicate the importance of the results.

Business integration	The integration of Enterprise and Global forming Business, and the challenges brought about by this change, including impacts on colleagues, whilst recognising the overall benefits to the group.
'Speak Up Because We Care' campaign	Consideration of the campaign, which was a Colleague Board request to address peer to peer engagement on internal digital platforms. The Board recognised that engagement between colleagues has been positively impacted by the campaign, especially on Workplace by Meta (BT Group's internal social media platform).
Travel and expenses	Colleague feedback on the changes made to the travel and expenses policy. HR and Finance subsequently carried out a review and made the appropriate updates to ensure the policy remains suitable for colleagues.

Colleague Board engagement

With the Board

At each formal Colleague Board meeting, the Board (via Isabel) and/or management had the opportunity to discuss topics on which they would like the Colleague Board members' perspectives. Colleague Board members shared their insights on 'hot topics' in order to bring these to the attention of the Board and/or management. The Colleague Board raised and discussed a variety of topics, including those in the table above. Isabel reported back to the Board and its Committees, as appropriate, on the discussions, providing the Board with a direct insight into colleague perspectives to help inform its decision making. During the year, Isabel updated the Remuneration Committee on sentiments being raised by our colleagues in relation to the remuneration of our workforce and related discussions. The Colleague Board meeting materials and notes of the meetings were also made available to the Board.

The Chief Executive and Executive Committee members' attendance, as well as the Designated Non-Executive Director for Workforce Engagement, allowed for a mutual exchange of information, especially in relation to current 'hot topics', which was fed back into the Board and Executive Committee's discussions and decision-making process throughout the year. One example was the feedback the Colleague Board provided on the pay review during the year which was discussed at both Colleague Board and Board meetings, ahead of a decision.

Since its inception, the Colleague Board has been used alongside other colleague engagement mechanisms which will continue to be utilised and enhanced going forward. See page 41 for more information on how we engage with colleagues.

With our colleagues

Colleague Board members fed back to colleagues on the discussions from formal meetings as well as highlighting any other issues raised between meetings. Members were encouraged to connect via internal engagement channels including the People Networks and by reviewing the outputs of the Your Say engagement surveys to obtain an increased and broader understanding of colleagues' views.

Each Colleague Board member was invited to join the senior leadership team calls hosted by the Chief Executive throughout the year to give them additional perspectives on the group's performance and strategic decisions.

The Colleague Board members also delivered a series of Meetx Teams live sessions (BT Group's equivalent of TEDx talks) which aimed to increase the visibility of leadership from across the group, covering topics including leadership, culture and inclusivity, equity and diversity.

Changes to our colleague engagement mechanism

The Colleague Board has been the Board's chosen workforce engagement mechanism under the Code since 2019. During the year, as part of a review of our governance structures carried out by the Chairman, supported by the Company Secretary, the Board concluded that it was the appropriate time to re-evaluate the workforce engagement mechanism best suited to the group.

The Board considered the workforce engagement structure and found that, whilst the Colleague Board has delivered on its aims to bring the colleague voice into the boardroom, a number of alternative approaches are available. The Board considered a number of factors including the overlap of the Colleague Board's role with other colleague engagement mechanisms across the group, especially the change in frequency of the Your Say engagement surveys from annually to quarterly, and also the amount of work the Colleague Board members were undertaking to represent the colleague voice.

After deliberation, the Board concluded that the Colleague Board should be disbanded and that the Designated Non-Executive Director for Workforce Engagement should engage in a comprehensive colleague outreach programme which will utilise the existing colleague engagement mechanisms across the group. The Board recognised the key role the Colleague Board has played in bringing the colleague voice into the boardroom for the last four years, and are appreciative of the passion and commitment of Colleague Board members over the years in aiming to make BT Group a better workplace for all.

Additionally, as part of this review, and in light of Isabel's tenure on the Board, it was considered an appropriate time to appoint a new Designated Non-Executive Director for Workforce Engagement. Maggie was appointed to succeed Isabel and will bring to the role her personal experience and insight, her focus on coaching, and her championship of diversity, inclusivity and other colleague matters.

After another challenging year for our colleagues, I would like to thank the Colleague Board members for their continued contributions and valuable insight into colleague sentiment, which I have shared with the Board throughout the year. The thought-provoking questions and constructive challenges have greatly benefitted the Board's decision-making process. I would like to congratulate Maggie on her new role and I am confident she will continue to ensure the voices of colleagues are clearly heard in the boardroom.

Isabel Hudson

Designated Non-Executive Director for Workforce Engagement and a member of the Colleague Board (2019-2024)

Colleague engagement mechanism – FY25 and beyond

Maggie will be undertaking a series of colleague engagement activities throughout FY25. The purpose of this engagement is to listen and understand colleagues' views and perspectives, and enable her to communicate these back to the Board and integrate them into decision-making. Through this, the Board will continue to obtain direct insights into colleague sentiment at all stages of the decision-making process.

Maggie will receive a quarterly written report collated by the People, Ethics & Compliance team which will utilise the rich variety of data sources available on colleague sentiment across the group, including Your Say engagement survey results, inclusion, equity and diversity data, and internal communications insight reports. Whilst this report will be collated for Maggie as the Designated Non-Executive Director for Workforce Engagement, she may consider it appropriate to share this with the wider Board.

The People, Ethics & Compliance team will also schedule regular colleague engagement sessions with Maggie to take place throughout FY25, through in person visits and virtual calls. During these sessions, colleagues will be encouraged to share personal views and experiences. These sessions will include meetings with the People Network leads, Trade Union representatives, and attending internal events. Sessions will also be scheduled with members of the reward team as appropriate, and in line with colleague events and ahead of colleague-related Board discussions, to ensure Maggie has insight into the colleague sentiment on relevant topics.

In 2024, as part of Maggie's Board induction programme, Maggie visited two contact centres in Tyneside and Gosforth and listened in on customer calls and digital chats and participated in two town hall meetings with colleagues based at those locations. More information on Maggie's induction programme can be found on page 95.

The reports, together with the colleague engagement sessions, will enable Maggie to provide the Board with a holistic view of colleague sentiment across the group, and help ensure that the colleague voice is represented in the boardroom.

The effectiveness of engagement with our colleagues will be kept under review in FY25 and changes will be made where appropriate.

I have thoroughly enjoyed my first colleague engagement experiences and I am looking forward to engaging with our colleagues across the group. We are fortunate to have a wealth of insightful data available to provide an overview of our colleagues' sentiment and I shall pair this with personal experience stories to provide the Board with a well rounded picture. My goal is to ensure that the colleague voice is represented in the boardroom and is considered throughout the Board's decision-making process. Our colleagues are our most important asset and I am passionate about making sure they are able to inform the decisions we make toward success.

Maggie Chan Jones

Designated Non-Executive Director for Workforce Engagement

Section 172 statement

In their discussions and decisions during FY24, 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 its discussions and decision making, including:

The likely consequence of any decision in the longterm:

– 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 this in its discussions on group strategy (see page 89). Our purpose and strategy demonstrate how we 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 on pages 18 to 29.

The impact of the group's operations on the community and environment:

• The Responsible Business Committee continues to oversee the progress of our Manifesto. This aims to accelerate growth through technology that is 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 our sustainability goals. During the year, the Committee considered and approved the group's Carbon Abatement Methodology which formalises our goal to help our customers avoid 60m tonnes of carbon emissions through our products and services (see page 105).
• Information as to how we have addressed the recommendation of the TCFD framework can be found on pages 71 to 80.

The desirability of maintaining 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 this ambition and we're focused on 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 (see page 88).
• The Audit & Risk Committee also considered regular reports from the General Counsel People, Ethics & Compliance on our ethics and compliance policies and programmes and reports on issues raised through Speak Up, BT Group's confidential whistleblowing service (see page 102).

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 BT Group and our stakeholder groups means that stakeholder engagement often happens below Board level. However, the Board considers information from across the group 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 40 to 45.
• Our colleagues are key to our success, and they are considered as part of the Board's discussions and decision making. The Board and its Committees have reviewed colleague health and wellbeing, our inclusivity, equity and diversity ambitions, organisational culture and the impact of our transformation programmes, as well as on employee relations (see pages 30 to 33 for more details). More information on the Board's engagement with colleagues can be found on pages 90 to 91 and other colleague engagement channels are set out on page 41.

The need to act fairly between BT Group's shareholders:

• During FY24, the Chairman, Chief Executive, Chief Financial Officer, other executives and the Investor Relations team held 222 meetings with investors (see page 43 for more detail on our engagement with shareholders). These meetings gave investors the opportunity to discuss views on all matters including:
  • our strategy and competitive position in key markets
  • our financial and operational performance
  • capital investment (including FTTP and 5G)
  • our capital allocation policy
• prospective governmental and regulatory policy decisions – our pension fund valuation.
• 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 during the year which demonstrate how section 172 matters have been taken into account as part of Board discussions and decision making:

Decision	What happened
Sale of BT Tower to MCR London	During the year, the Board discussed in detail the proposal to sell the BT Tower to MCR London Holdings Limited, in particular:
Holdings Limited	– the need for future investment in the maintenance of the BT Tower – how this fits with the simplification of the group's property portfolio – the costs and timescale for exiting the BT Tower – the plans that had been put in place to mitigate risks to the network functionality of the BT Tower – the approach that would be taken to relocate impacted colleagues who are currently based at the BT Tower – the brand association element of the transaction, including the risks associated with permitting the use of the BT brand and, if permitted, ensuring that relevant brand protections are in place – the broader potential reputational impact of the sale.
	On balance, the Board considered the long-term benefits of the sale, including the reduction in property running costs, and agreed that these outweighed any risks. Having carefully considered the transaction terms, in February 2024, the Board approved the sale of the BT Tower to MCR London Holdings Limited for £275m with an anticipated completion date in FY30.
BT Pension Scheme (BTPS) triennial valuation	The Board was kept updated on negotiations with the BTPS Trustee on the triennial funding valuation as at 30 June 2023. This included consideration of the range of possible funding deficit outcomes and the associated deficit repair contributions. The Board was also reminded of its obligations under the Pension Schemes Act 2021 and the approach of the Pensions Regulator.
	The Board considered the contractual protections previously provided to the BTPS and their prospective suitability. Specifically, the Board considered the circumstances in which it would be obliged to make additional payments to the BTPS because of cash disposals, dividends or share buy-backs made. The Board also reviewed the stabiliser mechanism and co-investment vehicle established as part of the 30 June 2020 valuation, and considered the likelihood of additional payments being triggered and future refunds being received.
	The Board considered the group's capital allocation framework and the associated impact on its key stakeholders. The Board noted the need to balance its objective to invest for growth, whilst supporting the BT pension funds, maintaining a strong balance sheet and rewarding investors through its progressive dividend policy. In October 2023, after careful consideration, the Board approved the proposed package of measures which would form the 2023 valuation.

Impacts of prior Board decision: funding of increased and accelerated FTTP build plan from 20m to 25m premises by December 2026

Summary of decision: In 2020, the Board approved the increase of our FTTP build to 20m premises, subject to the outcome of Ofcom's Wholesale Fixed Telecoms Market Review (WFTMR). Post the WFTMR, in May 2021, the Board further approved an increased and accelerated FTTP build to 25m premises by the end of December 2026. This was a difficult decision and in making it, the Board considered competing stakeholder interests, including the benefits to our customers, colleagues and shareholders, the impact on communities and the desire to support the Government's fibre ambitions.

Impacts and outcomes: As a result of this Board decision, our rollout of the FTTP network now passes 13.8m homes and businesses, helping to better connect our customers. This year, we passed an average of 68,000 premises per week. 4.7m customers have now moved across and are enjoying the service and benefits of full fibre.

Our full fibre network now also passes 3.9m rural premises^a , which has added value to local communities and helped bring people together, supporting our purpose of we connect for good. We brought full fibre broadband to Fair Isle, one of the UK's most geographically remote islands and Openreach had to reroute the build by 100km, in order to avoid protected landscapes and bird nesting season.

As a result of this Board decision, our rollout of the FTTP network now passes 13.8m homes and businesses, helping to better connect our customers.

a Rural premises are defined according to Ofcom's Area 3 classification.

Board composition, succession and evaluation

FY24 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.

The last external evaluation was completed in 2021. Given the changing composition of the Board (including a new Chief Executive) we did not feel it was the right time for a once in three year external evaluation. We therefore engaged Lintstock Limited on a multi-year basis. Lintstock is an accredited Board Performance Reviewer of the Chartered Governance Institute, with no other links to the group. This year, they facilitated an evaluation of our Board and Committees via questionnaires.

A more thorough, interview-based review by Lintstock, will take place in FY25, at which point there will be a more stable foundation in our Board to review and in turn, the evaluation will provide greater value in terms of forward looking focus areas.

FY24 Evaluation Process

Tailored questionnaires were circulated to members, regular attendees and the secretary of the Board and each of its Committees. The Executive Committee and CEO, Openreach also completed an evaluation to provide their perspectives on the effectiveness of, and relationship with, the Board. The evaluations were prepared by Lintstock in line with best practice. These focused on composition, dynamics, succession and how well-placed the Board is to add value to the business, in terms of how it oversees strategy, risk management, colleagues, culture and performance. Focus was also given to core areas of governance, the Board's decision making processes, as well as how well it considers stakeholders as part of its discussions.

The Senior Independent Director undertook a discussion with the other Non-Executive Directors and Deputy Company Secretary, without the Chairman present, to obtain their feedback and views of the Chairman's performance during the year. The outcomes and recommendations were fed back to the Chairman.

Lintstock reflected on the responses and feedback, and compiled reports for the Board and each of the Committees, formulating a number of key observations and suggested priorities for the coming year, ensuring the anonymity of respondents was respected.

See the table opposite for more detail.

Key areas of focus for FY25	Agreed actions/actions in progress
Support for the Chief Executive	Support Allison Kirkby in her role as Chief Executive with a focus on culture and talent.
to focus on priorities	Talent breakfasts have been scheduled with the Board in FY25 to enhance visibility of potential Executive Committee successors in an informal setting.
Board composition	Consider and appoint additional Non Executive Directors to the Board with financial, telecommunications and regulatory experience.
	Tushar Morzaria was appointed as an Independent Non-Executive Director in May 2024. Tushar has gained strategic financial management experience over 25 years and is a member of the Audit & Risk Committee with recent and relevant financial experience in line with the Code. He will also provide additional expertise on the Remuneration Committee.
	The Board continues to consider potential Non-Executive Director appointments.
Meeting time and focus areas	Work is underway to reassess how time is dedicated at the Board and the Committees to: – allow more time for culture, performance, transformation agenda – reflect on the effectiveness of past decisions – increase oversight of non-financial risks by the Audit & Risk Committee, including Speak Up reports and what these indicate in terms of the group's culture – arrange Board meetings or off-sites in different BT Group locations – increase Non-Executive Director only sessions. The company secretarial team continues to work with the business units to improve the clarity of purpose of Board materials to best support the Board's consideration of stakeholder interests in its decision making.
Commitments compliance and consumer fairness	Effectively transition the responsibilities from the BT Compliance Committee to the Audit & Risk and Responsible Business Committee including training and support for Committee members.

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, the specific responsibilities relevant to their Committee memberships. The programme includes meetings with the Chairman, Board members, the Executive Committee and senior management. Directors also receive key information on our strategy and KPIs, governance framework, the regulatory framework in which we operate, recent financial performance, risk management and internal control systems and the policies supporting our business practices.

Directors are encouraged to visit our different hubs, contact centres and BT/EE retail shops, as well as spend a day with an Openreach engineer.

Details on the Board changes made during the year can be found in the Nominations Committee Chair's Report on page 97.

Maggie and Ruth's inductions

Maggie and Ruth joined the Board on 1 March and 6 April 2023 respectively as Independent Non-Executive Directors. Maggie is the Designated Non-Executive Director for Workforce Engagement and Ruth was appointed as Senior Independent Director and Chair of the Remuneration Committee from the conclusion of the 2023 AGM. Both Maggie and Ruth are members of the Nominations Committee, Maggie is a member of the Responsible Business Committee and Ruth is a member of the Audit & Risk Committee.

Maggie and Ruth received an induction pack with key reference materials that provided them with a thorough understanding of BT Group, including the most recent financial results, information on our strategy and each of our business units, the governance framework, director responsibilities, ethical policies and the Commitments.

Throughout their first few months on the Board, Maggie and Ruth individually held a number of induction meetings including with the Chairman, Chief Executive, Chief Financial Officer, and members of the Executive Committee and key senior leaders, including the Director of Investor Relations, the heads of the business units, as well as the CEO, Openreach. The sessions included the following areas:

• Group Strategy
• Consumer
• Business
• Openreach
• Corporate Affairs
• Digital, Data & AI
• Security & Networks
• HR & our colleagues
• Financial processes, funding and risk management
• Regulatory context
• Governance.

In addition, Ruth met with the Group Director of Reward given her role as Chair of the Remuneration Committee and Matthew Key, in his capacity as Chair of the Audit & Risk Committee.

In May 2023, Maggie and Ruth joined Clive Selley, CEO, Openreach on an Openreach field visit in different locations across London and Essex, which provided them with a deeper insight into our fibre rollout and the experiences of colleagues in these roles.

In February 2024, Maggie and Ruth visited our Tyneside and Gosforth contact centres. They met with a range of colleagues and benefitted from seeing our strategic plans for the customer facing, front line part of the business come to life. They listened in on customer calls and digital chats and were guest speakers at the two colleague town hall meetings where they had the opportunity to listen to colleagues and answer questions. For Maggie, as the new Designated Non-Executive Director for Workforce Engagement, this visit was invaluable in providing her with a better understanding of BT Group priorities and our strategy relating to colleagues. Further detail can be found in the colleague engagement section on page 90 to 91.

Maggie Chan Jones Designated Non-Executive Director for Workforce Engagement

Ruth Cairnie Senior Independent Non-Executive Director

The part that's always the most impactful for me was seeing and experiencing our teams in action.

Maggie Chan Jones Designated Non-Executive Director for Workforce Engagement

Board composition, succession and evaluation continued Nominations Committee Chair's report

This year, on behalf of the Board, the Committee led the process to appoint Allison as our new Chief Executive. We also welcomed new directors to the Board, Ruth, Raphael and Tushar. I look forward to supporting Allison and our newest Board members as we drive our long-term strategy to transform the group, ensuring it delivers for all our stakeholders.

Adam Crozier Chair of the Nominations Committee 15 May 2024

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
• succession planning for the Board and recommending the appointment of Executive and Non-Executive Directors and the Chairman
• 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 he, or his delegate, attends all meetings and provides guidance, advice and support as required.

Committee members and attendees do not attend discussions where a conflict exists. During the year, five scheduled Committee meetings were held. After each meeting, as Chair, I reported back to the Board on the Committee's activities.

Meetings attended

5/5	Steven Guggenheimer e	4/5
3/4	Isabel Hudson	5/5
4/4	Matthew Key	5/5
4/5	Allison Kirkby f	4/5
1/1	Raphael Kübler g	1/1
1/1	Sara Weller	5/5

a Adel attended all bar one meeting where he was excused and he stepped down from the Board and this Committee on 31 December 2023.

b Ruth joined the Board on 6 April 2023.

c Maggie gave apologies for the September meeting due to a pre-existing conflict. d Ian and Iain stepped down from the Board and this Committee at the conclusion of the 2023 AGM.

e Steven gave apologies for the July meeting due to a pre-existing conflict. f Allison attended all Committee meetings during the year as a Non-Executive Director

except for the July meeting where she was excused. g Raphael joined the Board and this Committee on 30 January 2024.

Details on the FY24 Board and Committee evaluation can be found on page 94.

Committee focus in FY24 Chief Executive appointment

As announced during the year, Philip Jansen informed the Board that he intended to step down from his role as BT Group Chief Executive. As a result, a sub-set of the Committee spent significant time building on the Board's succession plans and focusing on appointing the next Chief Executive, which ultimately culminated in Allison's appointment.

In the first half of the year, we commenced a formal succession process to appoint the next Chief Executive, to succeed Philip Jansen. As Chairman, I led the process, with a sub-set of the Committee. Allison was not present for any of these discussions.

Spencer Stuart, 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. Spencer Stuart is a signatory of the Voluntary Code of Conduct for Executive Search Firms (in line with our Board Diversity and Inclusion Policy).

Further to a discussion on the essential experience, leadership and personal characteristics, capabilities and skills required, and having considered the future needs of the business, a candidate profile was agreed. In line with that profile, a shortlist of appropriate, diverse candidates was considered.

A comprehensive benchmarking, assessment and interview process was conducted. The sub-committee focused on understanding candidates' approaches to the role of Chief Executive, their styles of leadership, and the culture they would foster throughout the organisation. It discussed feedback on the individuals and reflected on each of the shortlisted candidates based on their skills, capabilities and experience, against the role profile.

The Committee subsequently concluded that Allison was the preferred candidate to succeed Philip as Chief Executive, given her proven leadership, deep sector experience and history of having transformed businesses. Further to the Committee's recommendation, in which they also considered her external commitments outside of this role, a sub-committee of the Board approved the appointment of Allison as Chief Executive. Allison became Chief Executive on 1 February 2024.

Non-Executive Director appointments

The Committee also spent time considering additional Non-Executive Directors. Russell Reynolds Associates, an independent external search consultant, who has no other connection to the BT Group, and who is a signatory of the Voluntary Code of Conduct for Executive Search Firms, was engaged to assist with the search.

In light of changes to the Board over the past year, the Committee prioritised the skills, experience and background when considering new Board appointments. As such, the search was predominantly for candidates with financial experience to supplement the capabilities of the Audit & Risk Committee, especially in light of Allison stepping down from the Committee on her appointment as Chief Executive, CEO experience potentially in a transformation focused role, and regulatory experience. As in all searches, diversity continued to be a key consideration. Russell Reynolds was tasked with enabling us to make appointments that meet the aims and targets of our Board Diversity and Inclusion Policy and related targets and succession planning.

In line with the brief, the Committee agreed a shortlist of candidates with Russell Reynolds, with discussions held around ensuring the shortlist was diverse from both a gender and ethnicity perspective. A sub-set of the Committee was formed to lead the process, comprising of the Senior Independent Director (and Chair of the Remuneration Committee), and the Chairs of the Audit & Risk and Responsible Business Committees, as well as the Chief Executive.

Further to a comprehensive benchmarking, assessment and interview process, the sub-committee discussed feedback and made its recommendation to the Board. In April 2024, on recommendation from the Committee, the Board approved in principle the appointment of Tushar Morzaria as an Independent Non-Executive Director. Final approval was delegated to the Chairman and Company Secretary and they subsequently approved Tushar's appointment with effect from 7 May 2024. Tushar brings a wealth of strategic financial management experience to our Board, gained over 25 years where he has overseen transformation programmes and has strengthened risk and control frameworks. Tushar is a member of the Audit & Risk Committee and has recent and relevant financial experience in line with the Code, as well as being a member of this Committee and the Remuneration Committee. The Committee and the Board considered Tushar's other external commitments as part of this appointment process and more details on this can be found opposite.

Executive Committee succession planning and talent

Throughout the year, the Committee reviewed:

• and approved the creation of a new Executive Committee role reporting to the Chief Executive titled the Chief Strategy and Change Officer to lead a new Strategy and Change unit. The purpose of the Chief Strategy and Change Officer role is to:
  • drive the development of BT Group's corporate strategy – ensure alignment of Unit strategies with the corporate strategy
• develop a single, aligned strategic narrative and equity story for BT Group
• define, drive and integrate critical, cross-Unit change programmes to deliver against the BT Group objectives.
• the performance and succession planning of Executive Committee members. The Committee continues to focus on broader Executive Committee succession planning, including oversight of the talent pipeline with a focus on diversity
• key talent at the senior leadership level. The Committee reflected on the importance of identifying critical roles and building stronger and broader 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
• 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.

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 off-sites. 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 that the Board approve the appointment of Allison Kirkby as Chief Executive, the Committee considered her other commitments, notably her directorship of Brookfield Asset Management Limited. The Committee considered the time commitment to be reasonable and was comfortable that Allison's directorship at Brookfield would not affect her ability to dedicate sufficient time to the group in her new role as Chief Executive or create any conflicts of interest. It's also within the overboarding guidelines published by proxy agencies.

The Committee also considered Simon Lowth's proposed appointment to the Board of Smith & Nephew as an Independent Non-Executive Director and as a member of their Audit and Nomination & Governance Committees. The Committee considered the role and the time commitment it would require and was comfortable that Simon would still have sufficient time to dedicate to his role at BT Group if he was to take on this external commitment.

As part of the Committee's decision to appoint Tushar Morzaria to the Board, it thoroughly considered his other commitments, notably his roles as a Non-Executive Director of both Legal & General Group and BP. Tushar also chairs the Audit Committee for both companies. The Committee considered corporate governance guidance including the overboarding guidelines published by proxy agencies. On balance, both the Committee and the Board were comfortable that Tushar's other commitments were acceptable and would not affect his ability to dedicate sufficient time to the group in his new role as a Independent Non-Executive Director or create any conflicts of interest. The Committee and the Board were in agreement that Tushar's skills and experience would be a strong addition to the Board and proceeded to appoint him with effect from 7 May 2024.

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 or re-election at the AGM. The Board believes that each director it has recommended to shareholders for election or re-election at the 2024 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 121.

Board composition, succession and evaluation continued Nominations Committee Chair's report continued

Training and development

The Chairman and the Company Secretary keep the training and development needs of Directors under review. Non-Executive Directors regularly 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 meeting, as relevant, on any key legal, regulatory and corporate governance developments. During the year, these briefings included updates on the new Code, institutional investor guidelines, the FTSE Women Leaders Review, the Parker Review and other governance publications. Directors are updated as required on developments in the environment in which the group operates and internal and external advisers are invited to meetings to provide updates as necessary.

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. During the year, the Committee noted that the Openreach Chair and Openreach Non-Executive Directors continue to satisfy the independence criteria and should continue in their roles.

Inclusion, equity and diversity

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).

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.

Whilst we appoint candidates based on merit, we continue to challenge our external search consultants to ensure that all forms of diversity are considered when drawing up candidate lists. This is a key consideration for our searches.

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.

As at 31 March 2024, five of our ten Board directors were female (50%), two directors were from an ethnic minority background (20%), and one director has a disability.

Ruth Cairnie's appointment during the year as Senior Independent Non-Executive Director ensures that we meet the requirements of the Listing Rules to have female representation in at least one of the four senior board positions. This position was reinforced by Allison's appointment as Chief Executive from 1 February 2024, meaning that half of the four senior board positions are now held by women.

Details of the group's inclusion, equity and diversity strategy, including its objectives, implementation and progress can be found on pages 31 to 33.

a This includes the Minority-white group.

b This includes the Executive Committee, including the Company Secretary and CEO, Openreach and their direct reports (excluding the Executive Directors).

Audit & Risk Committee Chair's Report

This year, the Committee has continued to focus its oversight on the group's risk, control and assurance framework and has also spent considerable time scrutinising the major legal claims the BT Group is facing.

Matthew Key Chair of the Audit & Risk Committee 15 May 2024

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 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.

From 1 April 2024, and following the disbanding of the BT Compliance Committee, the Committee's remit expanded to include oversight of the group's compliance with the Commitments. Further detail on how the Committee has fulfilled these responsibilities will be included in next year's report.

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. Throughout the year, Allison attended all Committee meetings in her capacity as a Non-Executive Director and both she and I have recent and relevant business and financial experience, in line with the Code, as set out in our biographies. Allison stepped down from the Committee on her appointment as Chief Executive in February 2024. Tushar Morzaria was appointed to the Board and this Committee in May 2024 and has recent and relevant financial experience. The Deputy Company Secretary is secretary to the Committee and he, or his 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 Non-Executive Directors and 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)	6/6	Iain Conn b	2/2
Ruth Cairnie a	5/5	Allison Kirkby c	6/6
Ian Cheshire b	2/2	Sara Weller	6/6

a Ruth joined the Committee on her appointment to the Board on 6 April 2023. b Ian and Iain stepped down from the Board and this Committee at the conclusion of the 2023 AGM.

c Allison ceased being a member of the Committee when she became Chief Executive on 1 February 2024 but still attends meetings in her capacity as Chief Executive.

Other attendee (x Regular attendee • Attends as required)

Chief Executive	×
Chief Financial Officer	×
Director of External Reporting and Financial Control	×
Director of Group Internal Audit and Group Risk	×
General Counsel, Company Secretary & Director Regulatory Affairs	×
Group Risk Director	•
General Counsel, People, Ethics & Compliance	•

Details on the FY24 Board and Committee evaluation can be found on page 94.

Committee focus in FY24

The Committee met six times this year. As Committee Chair, I met with the KPMG lead audit partner, Director of Group Internal Audit and Group Risk, 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.

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.

Audit, risk and internal control continued Audit & Risk Committee Chair's Report continued

Overview of the year

Focus	Considered by the Committee
	2023					2024
	Apr	May	Jul	Sep	Oct	Jan
Financial reporting
– Results/trading updates and accounting judgements
– Annual Report 2023
– Regulatory financial statements
– Going concern assessment
– Viability statement
Litigation and major contentious matters
Internal controls over financial reporting
GRCs and CFU risk reviews: point and emerging risks
Report from Openreach Board, Audit, Risk & Compliance Committee chair
Compliance with Code requirements – risk management framework
Ethics & compliance
– Ethics & compliance programmes
– Speak Up (whistleblowing) reports
Internal audit
– Internal audit report
– FY24 group internal audit plan and approach
– Group internal audit charter
– Effectiveness
External audit – KPMG
– External audit report
– External audit plan
– Audit and non-audit fees
– Effectiveness
– Independence and reappointment

Fair, balanced and understandable

In May 2024, the Committee reviewed the Annual Report 2024 having previously fed back on earlier drafts. The Committee concluded that the Annual Report, 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, and the potential impact on forward-looking assumptions supporting going concern and viability assessments.

In its assessment, it 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
• independent reviews by the external auditor which did not highlight any material inconsistencies.

Significant matters related to the financial statements and how these were addressed:

Group accounting policies, critical and key accounting estimates and significant judgements

The Committee considered the accounting policies and disclosures in the consolidated financial statements regarding critical and key accounting estimates and significant judgements as summarised in note 2 of the financial statements. These include the estimate of our customer refund liability, our goodwill impairment assessment, determining the point of sale of BT Tower, the valuation of our pensions assets and liabilities, taxation, contingent liabilities associated with litigation, provisions, determination of lease terms including reasonable certainty, and valuation of investments in the Sports joint venture. More detail on the Committee's oversight of these matters is set out below where appropriate.

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 ecommended it for approval by the Board. See page 126.

Viability statement

The Committee reviewed the process and assessment of the group's prospects, 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 interconnected risks materialise. The Committee was satisfied that the viability statement could be provided and recommended it for approval by the Board. See pages 81 to 82.

Litigation provisions and contingent liabilities

The Committee reviewed contingent liabilities associated with litigation and major contentious matters throughout the year. There has been a noted increase in the value of the gross risk faced by the Group, which is largely as a result of the increasing prevalence of collective proceedings (sometimes known as class actions) in the UK. During the year, the Committee has placed particular focus on understanding and scrutinising legal assessments by the Group's external and internal legal advisers of the claims that have materialised, to ensure the adequacy of its provisions.

Business revenue

The Committee considered and discussed the risk of billing inaccuracy and control deficiencies that had been identified in Business in relation to legacy systems and processes. They discussed the impact of these including potential customer impacts. The Committee also spent time understanding the associated potential revenue risk, the root causes, the approach to prioritise a remediation plan and considered the different approaches of estimating what the potential liability may be. The Committee considered and was satisfied with the judgements for the liability.

Goodwill impairment

The Committee received and discussed the key assumptions, operating cash flow forecasts, resulting headroom or impairment and the sensitivity analysis performed by management. They spent time understanding the balance of the plans and the uncertainty around the different judgements contained within it. The Committee considered and was satisfied with the key assumptions and agreed that a goodwill impairment charge was required in FY24 for Business.

BT Tower

The Committee considered the accounting for the sale of BT Tower, including the judgement made in concluding that control of the Tower passes to the buyer on completion of the sale and transfer of legal title, rather than on exchange of contracts in FY24.

Sports joint venture

The Committee reviewed the judgements in relation to the sports joint venture with Warner Bros. Discovery, Inc., which has been in place for over 12 months, including assessments of the JV business performance, cash flow forecasts and the valuation of BT Group's interest in the JV.

Pensions

The Committee considered the assumptions and judgements underlying the valuation of the pension assets and liabilities in the financial statements, as summarised in note 19 to the consolidated financial statements. It also considered the range of reasonable assumptions and the associated impacts on the balance sheet, income statement and related disclosures.

Divestments

The Committee reviewed the judgements made in relation to the group's divestments, including on whether the held for sale criteria had been satisfied, and how goodwill should be allocated to divested or held for sale entities.

Regulatory finance reporting

The Committee supported the processes and systems enhancements that were implemented to ensure that the group met its 2024 regulatory financial reporting obligations.

Other matters

The Committee reviewed specific items quarterly, and considered and agreed that they were appropriately categorised. It considered management's view of the quality of earnings, definition of alternative performance measures and of the effective tax rate. It also challenged the phasing of working capital within normalised free cash flow. At each quarter, it considered a detailed assessment of provisions, and the Committee was satisfied with the analysis provided in relation to the results.

Audit, risk and internal control continued Audit & Risk Committee Chair's Report continued

Risk management and internal controls systems

The group has continued to enhance its risk, control and assurance framework. This framework provides the tools to enable us to be smart with risk and to manage enduring risks consistently and efficiently across the group.

Further information on our risk management framework and principal risks can be found on pages 61 to 70.

The framework divides the risk landscape into areas of enduring risk called Group Risks Categories (GRCs), which cover strategic, financial, operational and compliance risks. The Board monitored the effectiveness of the group's systems of risk management and internal controls through 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 carried out during the year, collectively enable the Committee to confirm that the group's systems of risk management and internal control have been appropriately reviewed. Where required, targeted improvements have been planned or agreed to continue to transform our control environment and to appropriately manage risks. As part of its drive for continuous improvement, the Committee has overseen ongoing enhancements to the risk management framework. 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 61 to 62.

The Committee held 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 managed. It considered the risk appetite and its supporting metrics for 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 manage or mitigate these risks effectively.

In addition, with the CFU and CU CEOs, the Committee undertook unit risk reviews of Consumer, Business and Openreach, as well as Digital and Networks, which cover how the GRCs are being managed in the respective units, and the significant point and emerging risks.

As well as the rolling programme of reviewing the GRCs and units, the Committee received updates on specific matters including supply chain and geopolitical risks in specific jurisdictions and our group-wide data programme.

Ethics and compliance

The Committee considered regular reports on our ethics and compliance policies, and programmes and related learnings and culture. It spent time discussing anti-bribery and corruption, communications regulation compliance and the enhancement programme in relation to international trade, in line with the respective GRCs.

Each quarter, the Committee received and reviewed reports on concerns raised through the Speak Up service, 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 relevant subject matter expert team.

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 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.

An internal audit effectiveness review was completed during the year by the new Director of Group Internal Audit and Group Risk with support from a third party. Actions were agreed to ensure the function continues to develop. Based on this and the Committee's annual assessment of the performance and effectiveness of the function, the Committee concluded that internal audit continues to add value in the context of the group's overall assurance framework.

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. The Committee concluded that the reappointment of KPMG should be recommended to shareholders at the 2024 AGM.

Following the audit tender in FY17, KPMG was appointed as BT Group's external auditor from the conclusion of the 2018 AGM. The FY24 audit is KPMG's sixth audit of BT Group. Following a thorough review of potential candidates put forward by KPMG to succeed John Luke as lead audit partner, the Committee approved the appointment of Jon Mills as the KPMG lead audit partner for the BT Group with effect from the start of FY24.

During the year, the Committee:

• considered and approved the proposed external audit fees for the year ended 31 March 2024, including one-off fees, 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 132 to 143 for more details)
• reviewed with the external auditor, the external auditor's scope of work, audit plan and strategy for FY24
• approved the engagement letter of the external auditor
• recommended approval by the Board of management's letters of representation.

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. In particular, the Committee considered BT's provision of network and mobile services to KPMG UK, including KPMG's assessment and conclusion of independence. The Committee considered this and confirmed its agreement that the provision of these services to KPMG is not material from an independence perspective.

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 nonaudit 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 161. These were 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, 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, as well as any approved nonaudit services performed by KPMG, are considered a low threat to auditor independence. Non-audit services are predominantly made up of audit-related assurance services, such as the audit of the regulatory financial statements, the interim review and providing comfort letters for bond issuances. This work falls within the scope of limited permissible services, which are closely related to existing audit work that KPMG provides. Therefore the proportion of 'other non-audit services' to 'total services' carried out by the external auditor is considered the most suitable measure of the non-audit services provided. These represented 0.1% of the total fees (FY23: 0.2%).

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.

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 perspectives on the effectiveness and quality of the external auditor's work.

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 2024 AGM (this was subsequently approved by the Board).

BT Compliance Committee Chair's report

We have continued to engage with scrutinising the culture and behaviour of BT Group to ensure it remains focused on living up to both the letter and spirit of the Commitments and governance protocol, as well as to ensure consumer fairness principles are considered and reflected in the delivery of key outcomes.

Isabel Hudson Chair of the BT Compliance Committee 15 May 2024

Committee role

The Committee was responsible for:

• monitoring BT Group's compliance with the letter and spirit of the Commitments made as part of the 2017 Digital Communications Review (DCR) 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 and developing internal fair pricing principles on behalf of the Board by monitoring whether BT Group is living up to Ofcom's Fairness for Customers commitments
• reviewing how BT Group is delivering appropriate outcomes for stakeholders across the Commitments and consumer fairness.

I will be stepping down from the Board in July, after serving for nine years, and this will therefore be my last report as Chair of the Committee. From 1 April 2024, the Committee's responsibilities transitioned to both the Audit & Risk and Responsible Business Committees. The Audit & Risk Committee is now responsible for overseeing compliance with the Commitments and the Responsible Business Committee's remit expanded to include consumer fairness. Next year's Annual Report will provide detail on how this has been achieved in FY25.

Committee membership and attendance

During the year, the Committee met five times. The Committee members are all Independent Non-Executive Directors. The Deputy Company Secretary was secretary to the Committee, and he, or his delegate, attended all meetings and provided guidance, advice and support as required. The Chair of the Board, General Counsel, Company Secretary & Director Regulatory Affairs, Commitments Assurance Office Director (CAO), and Openreach's Commitments Monitoring Office Director also attended meetings as invitees.

Meetings attended

Isabel Hudson (Chair)	5/5	Allison Kirkby b	5/5
Ian Cheshire a	1/1	Sara Weller	5/5

a Ian stepped down from the Board and this Committee at the conclusion of the 2023 AGM

b Allison attended all meetings during the year in her role as a Non-Executive Director

I reported 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 received copies of the minutes. Details on how we engage with Ofcom can be found on page 45.

Committee focus in FY24:

Compliance with the Commitments

• The Committee's monitoring activities focused on:
• the culture of adherence of BT Group's leadership to the Commitments
• stakeholder perceptions by engagement with industry stakeholders, including CPs, Ofcom and Openreach
• the CAO's reviews of the annual financial planning, strategy development and commercial pricing and product processes
• targeted reviews of governance for programmes across the group
• the outcomes of CAO compliance reviews, decisions on potential Commitments breaches and, where appropriate, remedial actions. Breaches continue to remain at a low level
• BT Group and Openreach's progress on wider DCR outcomes.

Consumer fairness matters

The Committee allocated significant time during the year to its consumer fairness remit, including:

• the transition to All IP and the migration of Digital Voice (see page 3)
• encouraging the formation of pricing principles for the EE brand (see page 58)
• year-on-year consumer fairness trends (see page 41) as well as outputs from the group's consumer fairness panel meetings.

Responsible Business Committee Chair's report

This year the Committee has overseen progress on our Manifesto commitments and how they are being accelerated across the business to maintain trust in BT Group.

Sara Weller

Chair of the Responsible Business Committee 15 May 2024

Committee role

The Committee is responsible on behalf of the Board for:

• agreeing the responsible business strategy for the group – overseeing the continuation of our Manifesto including progress
• against its goals and targets.
• The Committee's key responsibilities are set out in its terms of reference available at bt.com/governance

BT Group has continued to focus on how our actions as a responsible business can most effectively support customers, colleagues and businesses. Throughout the year the Committee has overseen progress on our Manifesto and its delivery across the business, providing guidance and challenge to the plans.

In April 2023, the Committee name changed to the Responsible Business Committee to reflect the full breadth of initiatives that are discussed and reported in our Manifesto. With effect from 1 April 2024, in light of the BT Compliance Committee being disbanded, the Committee has responsibility for consumer fairness. This includes monitoring the group's adherence to the consumer fairness principles. The BT Compliance Committee Chair's report can be found on page 104.

Committee membership and attendance

The Committee members are all Independent Non-Executive Directors. The Deputy Company Secretary is secretary to the Committee and he, or his delegate, attends all meetings and provides guidance, advice and support as required.

The Chief Human Resources Officer, Corporate Affairs Director, Sustainability & Corporate Affairs Strategy Director, Chief Inclusion, Equity & Diversity Officer, CEO Consumer, CEO Business and General Counsel, Corporate, Digital & Networks also attend meetings as invitees.

During the year, the Committee held four scheduled meetings.

Meetings attended
Sara Weller (Chair)	4/4	Steven Guggenheimer 4/4
Maggie Chan Jones	4/4	Isabel Hudson	4/4

I report to the Board after each meeting on the Committee's activities and the main matters discussed, with the Board receiving copies of the Committee's meeting papers and minutes.

Details on the FY24 Board and Committee evaluation can be found on page 94.

Committee focus in FY24

The Committee continued to monitor progress of our Manifesto and priorities under the core pillars: responsible, inclusive and sustainable. More information can be found on pages 34 to 39.

Responsible: new technology must earn trust and transform life for the better. The Committee:

– provided challenge to explore how generative AI can be used to build trust, support growth and reduce risk relating to its adoption

• reviewed the application of BT Group's responsible tech principles to help protect vulnerable groups such as children
• endorsed BT Group's human rights policy.

Inclusive: the future of technology must be inclusive and diverse for everyone to benefit. The Committee:

• discussed the importance of attracting and retaining diverse talent, providing input to plans to create a more inclusive culture - aided by the appointment of a Chief Inclusion, Equity & Diversity Officer
• oversaw progress on our digital skills goal and the launch of a new partnership with AbilityNet to reach older and digitallyexcluded groups. More information on our digital skills goals can be found on page 35.

Sustainable: technology must accelerate our journey to net zero emissions and a circular world. The Committee:

• reviewed progress on sustainability goals including those forming part of the Restricted Share Plan underpin – see page 109
• oversaw plans to reduce the operational emissions including risks relating to energy and an update from Openreach on electric vehicles
• discussed sustainability plans in Consumer, Business and Openreach, including the shift towards a more circular world
• explored progress on the carbon abatement methodology and how this supports customers to cut carbon emissions, with a challenge to make sure the methodology used was robust and transparent.

Regulatory reporting

The Committee considered the rapidly evolving regulatory landscape and the impact new reporting requirements will have on the group including impacts on resourcing given the increase in the scope and scale of reporting. The Committee oversaw the preparation for these requirements and the opportunity for this to be used to drive greater consistency, accuracy and transparency.

Stakeholder engagement

The Committee considered the interests and views of key stakeholders and how these are reflected in the group's approach to responsible business. The Committee will continue to focus on engaging with stakeholders in the future, especially given changes in the regulatory reporting landscape.

BT Sourced

The Committee assessed how environmental risks and human rights due diligence is being managed across the supply chain, including steps taken to positively influence suppliers' contribution to environmental and social goals.

Priorities for FY25

In the year ahead, in addition to its oversight of our Manifesto, the Committee will focus on:

• integration of, and progress on, the consumer fairness agenda
• progress in responding to new regulatory ESG reporting requirements.

Report on directors' remuneration

As well as the usual annual decisions, a key task for the Committee this year was handling the change in Chief Executive and ensuring our approach took account of all relevant angles to support the ongoing success of the business. We also remained acutely aware of the cost pressures many of our colleagues face.

Ruth Cairnie Chair of the Remuneration Committee 15 May 2024

Contents

Committee Chair's letter

Review of the year; Committee decisions; key outturns and plans for the year ahead – pages 106 to 109.

Focus on remuneration

The key aspects of our remuneration structure, outcomes for FY24 and implementation of the shareholder approved Directors' Remuneration Policy (Policy) in FY25 – pages 110 to 112.

Annual remuneration report

More detail on how we implemented the Policy during FY24 including the single figure table of remuneration for each director – pages 113 to 121.

Remuneration in context

How we take account of remuneration conditions across the group and the environment in which the Committee makes it decisions on executive pay – pages 122 to 124.

Committee membership and attendance

The Committee members are all Independent Non-Executive Directors. The Deputy Company Secretary is secretary to the Committee and he, or his delegate, attends all meetings and provides guidance, advice and support as required.

The Chairman, Chief Executive, Chief Human Resources Officer, Director of Group Reward and the Executive Remuneration & Policy Director are typically invited to attend meetings. They are not present when 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 meetings.

The Committee held five scheduled meetings during the year and one ad hoc meeting. After each meeting, I reported back to the Board on the Committee's activities and the main issues discussed.

Meetings attended
Ruth Cairnie (Chair)a	4/4	Isabel Hudsonc	4/5
Ian Cheshireb	2/2	Matthew Key	5/5
Iain Connb	2/2

a Ruth joined the Board and the Committee on 6 April 2023.

b Ian and Iain stepped down from the Board and the Committee at the conclusion of the AGM on 13 July 2023.

c Isabel sent apologies for one meeting due to a personal matter and provided comments on the papers to the Committee Chair in advance.

Tushar Morzaria joined the Board and the Committee on 7 May 2024.

Committee role

The Committee is responsible on behalf of the Board for:

• Determining the salary and benefits for the Chairman, Executive Directors, members of the Executive Committee and the Company Secretary, and monitoring remuneration practices and policies for the wider workforce
• Setting the performance targets for the annual bonus scheme for senior executives for the year ahead
• Determining awards under the annual bonus scheme and the group's long-term incentive plans for senior executives
• Reviewing and approving the Report on directors' remuneration
• Reviewing and approving the Policy including seeking shareholder approval, on a binding basis, at least every three years
• Ensuring 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.

The Committee's key responsibilities are set out in its terms of reference available at bt.com/governance

On behalf of the Committee I'd like to start by thanking Sir Ian Cheshire, the former Committee Chair, for a smooth handover and for securing shareholder support for our Policy at the 2023 Annual General Meeting (AGM). I intend to continue the work of the Committee by supporting our new Chief Executive and the executive team in realising the group's long term strategic goals.

Report on directors' remuneration continued

This report sets out information on the Committee's activities during the year, our remuneration framework and its implementation. I've 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.

Stakeholder context

Wider workforce pay and conditions

As reported last year, we accelerated part of our 2023 pay review and delivered a £1,500 pay rise in January 2023 to support 85% of our UK colleagues (all of those earning a £50,000 full-time equivalent salary or below) during the cost-of-living crisis. This cohort received a further salary increase of at least 2.5% in September 2023, while a 5.5% budget was set for all other colleagues who had received no increase in January. Combined, therefore, all UK colleagues received at least 5.5% in 2023, with our frontline colleagues receiving up to 10% and an average of 7.2%.

Further, as part of the September pay review, we also secured agreement with our unions for the 2024 review, bringing welcome certainty to both colleagues and the business. All UK frontline colleagues received a 4% increase in April 2024, while a 4% budget was available for our UK management population in June 2024.

Although inflation has fallen in recent months, the Committee understands that our colleagues continue to face cost pressures and it receives regular updates on pay and conditions across the business throughout the year. Isabel Hudson, as the Designated Non-Executive Director for Workforce Engagement, fed back any comments and sentiments on remuneration matters raised by the Colleague Board during the year. Maggie Chan Jones took on this responsibility during the year and the Committee will consult with Maggie to ensure these issues continue to be front-of-mind as it makes decisions on executive pay.

In 2022 we voluntarily committed to paying all our UK colleagues at least in line with the Real Living Wage and continue to do so. This year, we expanded our commitment to pay a fair living wage to direct employees in all countries in which we operate, in compliance with the Ethical Trading Initiative's Base Code #5.1. We're confident that we meet minimum wage requirements in all countries in which we operate. Almost 85% of our management colleagues are currently paid within or above their competitive market range, and we'll continue to focus on improving competitive pay positioning as part of our annual pay cycle.

Customer context

We accentuated our focus this year on our customers during challenging economic times, and achieved particularly strong NPS results in our Business and Openreach divisions. Customer experience remains a core pillar of our strategy, and a key part of our annual bonus scorecard for the coming financial year.

Shareholder context

Our share price performance over FY24 reflects the continued volatility in the wider market as well as the scale of the long term investment that we're undertaking. However, we remain confident in our longer term strategy and continue to deliver against it. We again paid dividends in FY24 and believe that we've appointed the right Chief Executive to realise our vision for BT Group, bringing longer term benefits for our shareholders.

Salary

2023 salary review

As outlined above, our annual salary review for senior management took place in September rather than June. Simon Lowth received a base salary increase of 5.5% in line with the minimum increase for UK senior management colleagues. As disclosed previously, Philip Jansen waived his right to any increase in his base salary which had been fixed for five years following his appointment.

2024 salary review

This year the annual salary review moves back to its usual effective date in June. UK managers are receiving an average 4% increase in salary, with an expected 2% minimum increase granted across the vast majority of our UK management population. There has been a particular focus on data-driven decision making, to target higher increases on those whose pay is less competitive versus market comparators. In line with this approach, Simon will receive a 2% increase in base salary.

Allison Kirkby's salary was set at £1,100,000 on appointment in February. No annual salary increase was awarded for 2024.

Report on directors' remuneration continued

Annual bonus

FY24 annual bonus outcomes

For FY24, annual bonus performance was based on a scorecard of five key financial and non-financial measures that align to our strategic priorities. Financial performance accounted for 70% of the bonus scorecard and comprised the following measures:

• Adjusted EBITDA (35%) despite ongoing macroeconomic challenges, we exceeded our target for the year and delivered £8.1bn in EBITDA.
• Normalised free cash flow (35%) management of free cash flow was strong in-year, and we delivered NFCF of £1.28bn, above target and our guidance for the year.

Our non-financial measures accounted for 30% of the bonus scorecard and comprised the following measures:

• Customer (20%) this year saw increased NPS scores, particularly in Business and Openreach. After a disappointing previous year, we made up ground during FY24 in a difficult environment, exceeding target in three of four quarters, and stretch in two of four. Across the full year, performance was between target and stretch.
• Inclusion, equity and diversity (10%):
  • Representation in senior management team (5%) we've set ambitious and stretching diverse representation targets across BT Group, and this metric measures progress towards meeting them. Although we made significant progress in disability representation, and some improvement in representation of black and black heritage colleagues, we failed to meet our targets on gender. Overall, therefore, the outcome was between threshold and target for the year.
  • Inclusion index (5%) defined as the average score across four key inclusion questions in our employee engagement surveys, this measure aimed to close the gap in inclusion sentiment for key under-represented groups. Unfortunately, the average gap in inclusion index score across these four groups increased from 4.6% to 5.9%, which did not meet our threshold target.

More information on the actions we are taking on inclusion, equity and diversity can be found on pages 31 to 32. Further detail on the FY24 annual bonus scorecard outcomes can be found on page 114.

The overall formulaic outcome of the bonus scorecard was 129.2% of target. The Committee considered this result in the context of the wider performance of the business, the pace of our transformation to date, and the experience of our shareholders, and exercised its discretion to reduce the bonus payout to 110% of target.

Philip and Simon will therefore be awarded bonuses of £1,452,000 and £1,044,655 respectively. Half of Simon's bonus will be deferred into shares for three years.

FY25 annual bonus scorecard

The Committee has agreed that the current bonus scorecard remains aligned with our strategic priorities for the year, and accordingly no changes are proposed to the measures and weightings, other than minor tweaks in how inclusion and diversity are measured to ensure they remain fit for purpose.

The annual bonus plan remains subject to a health and safety underpin and, if triggered, the Committee retains the discretion to reduce the payout as it considers appropriate, including to nil.

No changes are proposed to bonus opportunities: on-target and maximum will remain at 120% and 200% of salary for both Allison and Simon, with 50% deferred into shares for a period of three years.

Long term incentives

Vesting of 2021 Restricted Share Plan awards

The Committee carried out an assessment of the two underpins applying to the 2021 Restricted Share Plan (RSP) awards (relating to ROCE performance and ESG/reputational damage) and determined that neither were triggered.

The Committee also assessed whether there was any evidence of windfall gains at the point of grant or vesting of these awards and concluded there was not. The Committee therefore agreed that the expected vesting value is appropriate.

All three tranches of the 2021 RSP awards will therefore vest in full in June 2024, 2025 and 2026 respectively. Tranches one and two remain subject to a holding requirement until June 2026.

Grant of 2023 RSP awards

The grant of our 2023 RSP awards was delayed from June until September in line with the annual salary review. Simon received an award at the normal Policy opportunity of 200% of salary, whilst Philip did not receive an award in light of him stepping down from the Board. Allison received an award upon appointment in February, granted at the normal opportunity and pro-rated to reflect that she joined part-way through the vesting period. All awards will be subject to both ROCE and sustainability underpins, details of which can be found on page 115.

The Committee considered the level of awards, mindful that the share price at the time of award was lower than at the time of the 2022 RSP award.

As set out elsewhere in this report, the group is undergoing significant change as the Board-approved plan to transform and grow the business is executed. In order to build the UK's leading networks and deliver for our customers, significant and ongoing long term investment is required. The Committee considers that the current share price reflects the position of the group in this strategic journey and that future share price increases will be as a result of management taking the right actions and consistently executing our strategy over the next three to five years, rather than as a result of a more general market recovery or windfall gain. The Committee therefore decided not to make any adjustment to the award level, but to review the value of the 2023 RSP awards at the time of vesting and use its discretion to adjust the outcome at that point, should it deem this to be appropriate.

Grant of 2024 RSP awards

Both Allison and Simon will be granted an award of 200% of salary in June. As in prior years, these awards will vest in three equal tranches in June 2027, 2028 and 2029, with all tranches subject to a holding requirement until June 2029.

RSP awards will be subject to the same two underpins as the 2023 awards, measured over the initial three-year vesting period:

• 1. ROCE average return on capital employed must be at least 7%^a .
• 1. Sustainability – the business must have made sufficient progress over the vesting period towards meeting our sustainability commitments (this could include carbon emissions, carbon abatement and circularity).

Executive Director changes

Departure of Philip Jansen

Last July we announced Philip's intention to step down from the Board once a suitable successor had been identified. He stepped down as Chief Executive on 31 January 2024, and remains an employee of the group until 30 June 2024 during which time he will make himself available to Allison Kirkby on request to ensure an orderly and effective handover. He will continue to receive his contractual salary and benefits until this date.

In line with the Policy and the treatment of prior leavers, and in light of the fact that he has retired from executive life, the Committee elected to treat Philip as a good leaver. As a result, he will be eligible to receive a full-year bonus in respect of FY24, which will be paid in full in June 2024. Given his retirement, no deferral will apply, with the full bonus paid in June 2024.

Philip did not receive an RSP award in September 2023 as he had already announced his decision to step down. Outstanding shares under the RSP will be preserved, pro-rated for service, and will vest according to their normal schedule (subject to satisfaction of the relevant underpins). Outstanding shares under the Deferred Bonus Plan (DBP) will be retained fully and vest according to their usual timeframe.

Philip will also be required to maintain a minimum shareholding equivalent to 500% of his annual salary for two years post cessation of employment.

Appointment of Allison Kirkby

Allison transitioned from her role as a Non-Executive Director to Chief Executive on 1 February 2024. Allison will receive the same remuneration package as her predecessor, which is within the parameters of the Policy and aligned to the market for comparators of BT Group's size and complexity.

This includes an annual salary of £1,100,000, and on-target bonus opportunity of 120% of salary, with 50% of any bonus deferred into shares for a three-year period. Allison will also receive an annual RSP grant worth 200% of salary, and an award in respect of FY24 was granted in February pro-rated to reflect that she joined part-way through the vesting period. Subject to the satisfaction of the relevant underpins, the RSP awards will vest in three tranches after three to five years and be subject to a holding period until year five.

Full details of Allison's remuneration package can be found in the section outlining the planned implementation of the Policy for FY25 on page 112.

Chairman and Non-Executive Director (NED) fees

In line with the wider workforce increase and that offered to Simon, the NED base fee will increase from 1 June by 2%, the first increase in two years. For simplicity, the fee payable for membership of the Nominations Committee (which all NEDs receive) has been consolidated into the base fee. As Chairman, Adam Crozier waived his right to receive any increase.

Noting the changes to the structure and responsibility of our Board Committees that have been made this year, a full review of our Committee and additional responsibility fees was undertaken, to ensure they remain appropriate and market-competitive. These fees have not been increased since 2019, and accordingly the following was agreed:

• An increase from £14,000 to £25,000 for the Chair of the Responsible Business Committee, and an increase from £8,000 to £15,000 for members of said Committee
• An increase from £10,000 to £17,000 for the Designated Non-Executive Director for Workforce Engagement.

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.

Ruth Cairnie

Chair of the Remuneration Committee 15 May 2024

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're committed to transparent communication with all 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.

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
• Maximum total compensation levels are typically 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 after considering 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
• Colleagues are encouraged to become shareholders in the business through the operation of all-employee share plans.

Simplicity

• We operate a simple but effective remuneration framework which is applied on a consistent basis for all colleagues
• 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.

	Allison Kirkbya			Philip Jansen	Simon Lowth
£000	FY24	FY23	FY24	FY23	FY24	FY23
Base salary	288	n/a	917	1,100	774	748
Pension allowance	18	n/a	92	110	77	75
Benefits	35	n/a	107	113	24	23
Total fixed pay	341	n/a	1,116	1,323	875	846
Annual bonus (shares)b	n/a	n/a	n/a	481	522	328
Annual bonus (cash)	n/a	n/a	1,452	481	522	328
RSP (shares)c	n/a	n/a	1,151	670	770	448
Total variable payd	0	n/a	2,603	1,633	1,815	1,104
Total	341	n/a	3,719	2,956	2,690	1,950

a Allison was appointed as Chief Executive from 1 February 2024. The FY24 base salary figure reflects Allison's total remuneration for the year representing £105,000 received as an Independent Non-Executive Director and £183,000 received as Chief Executive. Allison was not eligible for a bonus in FY24 and her first RSP

award was granted in February 2024. b In line with the Policy, 50% of the annual bonus is deferred into shares for three years. Philip's FY24 bonus will be paid fully in cash, with no deferral into shares.

c Both underpins have been satisfied for the 2021 RSP award and therefore all three tranches of the 2021 RSP award will vest in full in June 2024, 2025 and 2026 respectively. In addition, the second tranche of the 2020 RSP will vest in August 2024. Further detail is set out on page 114.

d The total variable pay for FY23 for Philip and FY24 for Simon do not balance due to roundings.

Performance outcomes in FY24

Annual bonus FY24 Measure and weighting (%) Payout (% of max) – Bonus was subject to five measures of financial and non-financial performance – Both financial metrics and NPS were above target for the year – Our SMT representation metric finished the year below target while our inclusion index result missed threshold – This resulted in a formulaic outcome of 129.2% of target. However, the Committee exercised its discretion to reduce the overall scorecard payout to 110% of target – In line with the Policy, 50% of Simon's Adjusted EBITDA (35%) 80% Normalised free cash flow (35%) 92% Group Net Promoter Score (NPS) (20%) 73% SMT representation (5%) 53% Inclusion index (5%) 0%

annual bonus will be deferred into shares for three years.

2021 RSP – A conditional share award subject to two underpins over the initial three-year vesting period.

– The Committee assessed the two underpins at the end of the restricted period and confirmed that both had been satisfied.

– Accordingly, all three tranches of the 2021 RSP award will vest in full in June 2024, 2025 and 2026 respectively. Tranches one and two are subject to a holding period until June 2026. Further detail is set out on page 114.

Focus on remuneration continued

Implementation of the Policy in FY25

	Fixed pay	Annual bonus	RSP
Allison Kirkby Chief Executive	Salary – £1,100,000 Benefits Pension allowance – 10% of salary	Maximum opportunity – 200% of salary Target opportunity – 120% of salary	2024 award – 200% of salary
Simon Lowth Chief Financial Officer	Salary – £791,405 Benefits Pension allowance – 10% of salary	Maximum opportunity – 200% of salary Target opportunity – 120% of salary	2024 award – 200% of salary
Performance measures	n/a	– Adjusted EBITDA (35%) – Normalised free cash flow (35%) – NPS (20%) – Diversity and inclusion (10%). An underpin applies which allows the Committee to exercise its discretion to reduce the scorecard result if there is a significant breach in health and safety.	Awards subject to two underpins over the initial three-year vesting period: – Average ROCE must be at least 7% – Sufficient progress is made towards meeting our sustainability commitments.
Framework	n/a	– 50% of any bonus payment for FY25 will be deferred into shares for three years – Malus and clawback provisions apply – Full Committee discretion available.	– Awards vest in three equal tranches after three, four and five years; no shares can be sold until year five – Malus and clawback provisions apply – Full Committee discretion available.

Directors' Remuneration Policy (Policy)

The Policy as approved by shareholders at the AGM on 13 July 2023 in accordance with section 439A of the Companies Act 2006 can be found online at bt.com/annualreport

Annual remuneration report

This section summarises all elements of the directors' remuneration in FY24. 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 FY24 and FY23.

	Fixed pay									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
	FY24	FY23	FY24	FY23	FY24	FY23	FY24	FY23	FY24	FY23	FY24d	FY23e	FY24	FY23	FY24	FY23
Chairman
Adam Crozier	700	700	11	12			711	712							711	712
Executive Directors
Allison Kirkbyf,i	288	125	35	8	18		341	133							341	133
Simon Lowth	774	748	24	23	77	75	875	846	1,045	656	770	448	1,815	1,104	2,690	1,950
Non-Executive directors
Ruth Cairnieg	161						161								161
Maggie Chan Jonesh,i	99	8	35				134	8							134	8
Steven Guggenheimerh,i	97	48	36	15			133	63							133	63
Isabel Hudsoni	147	146	2	1			149	147							149	147
Matthew Keyi	163	150	2	1			165	151							165	151
Raphael Kűblerj	0						0								0
Sara Welleri	140	138					140	138							140	138
Sub-total	2,569	2,063	145	60	95	75	2,809	2,198	1,045	656	770	448	1,815	1,104	4,624	3,302
Directors who left during the year

Philip Jansenk	917	1,100	107	113	92	110	1,116	1,323	1,452	963	1,151	670	2,603	1,633	3,719	2,956
Adel Al-Salehl	0	0						0							0	0
Ian Cheshirem	44	155					44	155							44	155
Iain Connm	47	163					47	163							47	163
Total	3,577	3,481	252	173	187	185	4,016	3,839	2,497	1,619	1,921	1,118	4,418	2,737	8,434	6,576

a Benefits are provided in line with the Policy. For Allison, the figure includes one-off relocation costs to the value of £25,000. For Philip, the figure includes a company provided car and personal driver to the value of c. £79,000 (FY23: £86,000).

b Pension allowance paid in cash for the financial year – see 'Pension allowance' on page 114.

c Annual bonus shown includes both the cash and deferred share element for Simon. The deferred element of the FY24 bonus includes the value of deferred shares to be granted in June 2024. Further details of the deferred element are set on page 122. Allison will not receive a bonus in respect of FY24. Philip's FY24 bonus will be paid fully in cash, with no deferral into shares.

d Value shown represents the estimated value of the second tranche of the RSP awards granted in 2020 and the first tranche of the RSP awards granted in 2021, that will vest in August and June 2024 respectively. The estimated value is based on a three-month average share price from 1 January 2024 to 31 March 2024 of 110.46p. Further details are provided on page 118. For the 2021 award, none of the value was attributable to share price appreciation over the vesting period. The Committee did not exercise any discretion in relation to the vesting of the awards or share price change.

e The first tranche of the 2020 RSP vested in August 2023. The 2020 RSP value reported last year (£803,000 for Philip and £537,000 for Simon) was calculated on an estimated basis using the three-month average share price from 1 January 2023 to 31 March 2023 of 135.88p. The figures have been restated to reflect the actual share price on vesting of 113.43p. Further details are provided on page 118.

f Allison was appointed as a Director in March 2019 and became Chief Executive on 1 February 2024. The figure reflects Allison's total remuneration for the year representing £105,000 received as an Independent Non-Executive Director and £183,000 received as Chief Executive.

g Ruth was appointed as a Director on 6 April 2023 and the figure represents her pro-rated remuneration during the year.

h Includes an additional fee for regular intercontinental travel to attend Board and Board Committee meetings in line with the Policy.

i Value shown relates to reimbursement of reasonable travelling and other expenses (including any relevant tax) incurred in carrying out their duties. j Raphael was appointed as a Director on 30 January 2024. Under the terms of the Relationship Agreement between BT Group and Deutsche Telekom and Raphael's letter of

appointment, no remuneration is payable for this position.

k Philip stepped down as a Director and Chief Executive on 31 January 2024 and the figure represents his pro-rated remuneration during the year. l Adel stepped down as a Director on 31 December 2023. Under the terms of the Relationship Agreement between BT Group and Deutsche Telekom and Adel's letter of appointment, no remuneration is payable for this position.

m Ian and Iain stepped down as Directors at the conclusion of the AGM on13 July 2023 and the figure represents their pro-rated remuneration during the year.

Annual remuneration report continued

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. A 5.5% increase to Simon Lowth's salary was agreed from 1 September 2023 in line with increases for our UK senior management team, bringing Simon's salary to £791,405. Philip's salary of £1,100,000 was fixed for five years at the time of his appointment in January 2019. Allison was appointed as Chief Executive on 1 January 2024 and the Committee agreed a salary of £1,100,000.

Adam's annual fee has been £700,000 since his appointment as Chairman on 1 December 2021. His fee has remained at this level throughout the year as the Chairman volunteered to waive any fee increase during FY24.

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 119.

Pension allowance

Executive Directors receive an annual cash allowance, which can be put towards the provision of retirement benefits.

All Executive Directors 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 salary, and for Simon Lowth only, a dependants' pension equal to 30% of his capped salary.

Annual bonus

Philip and Simon were eligible for an on-target bonus in respect of FY24 of 120% of salary with a maximum opportunity of 200% of salary. Having joined as Chief Executive on 1 February 2024 and in accordance with the bonus plan rules, Allison was not entitled to a bonus for FY24. The annual bonus is based on performance against a scorecard of five key financial and non-financial measures linked to our KPIs as set out on pages 48 to 49.

Category	Measure	Weighting	Threshold	Target	Stretch	Actual	Payout (% of max)
Financial	Adjusted EBITDA (£m)	35%	7,959	8,075	8,191	8,100		80%
	Normalised free cash flow (£m)	35%	1,072	1,188	1,304	1,280		92%
Transformation scorecard	Group NPS	20%	0	100	200	132		73%
	SMT representation (%)	5%	76.9	84.6	92.3	82.8		53%
	Inclusion index	5%	3.5%	2.3%	1.1%	6.0%		0%
Formulaic outcome 77.3% of max (129.2% of target)

For scorecard purposes, the EBITDA result assumes an on-target bonus payout for all colleagues. Actual post-bonus EBITDA for FY24 is £8,100m.

When determining the overall performance and bonus pay-outs, the Committee also considers a number of other factors including the wider performance of the business, share price performance, the external environment and overall affordability. Despite the formulaic outcome of the final bonus scorecard being 129.2% of target, the Committee exercised its discretion to reduce the outcome to 110% of target. The Committee believes this is a fair reflection of the overall performance of the business.

The final bonus outturns for Philip and Simon are set out in the table below:

	Formulaic outcome	Following discretion	% of max	Value
Philip Jansen	129.2% of target	110% of target	65.9%	£1,452,000
Simon Lowth	129.2% of target	110% of target	65.9%	£1,044,655

2021 RSP

The RSP is a conditional share award. Two underpins applied over the initial three-year vesting period:

– ROCE is equal to or exceeds the WACC over the same period

– there must have been no ESG issues which have resulted in material reputational damage for the group.

The Committee assessed performance against the two underpins at the end of the financial year and agreed that both had been satisfied.

As a result, all three tranches of the 2021 RSP award will vest in full in June 2024, 2025 and 2026 respectively. Tranches one and two remain subject to a holding requirement until June 2026.

Awards granted during the year (audited)

2023 RSP

The 2023 RSP awards were made in September 2023 as set out below and on page 118. An RSP award was made to Simon Lowth in line with the normal Policy level. Despite serving as Chief Executive for almost a year of the performance period, no award was made to Philip Jansen on the basis of him stepping down as Chief Executive at the end of January 2024.

To reflect her joining part-way through the initial three-year vesting period, a pro-rated award was made to Allison Kirkby.

Director	Date of award	RSP award (shares)	Grant pricea	% of salary	Face value of award
Allison Kirkby	8 February 2024	1,484,942	107.00p	144	£1,588,889
Simon Lowth	7 September 2023	1,388,429	114.00p	200	£1,582,809

a 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.

These awards are conditional share awards. Two underpins apply over the initial three-year vesting period:

– average ROCE must be at least 7%

– the business must have made sufficient progress over the vesting period towards meeting our sustainability commitments (which could include carbon emissions, carbon abatement and circularity).

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 118.

2023 deferred shares

In line with the Policy, 50% of the bonus awarded for FY23 was deferred into shares. The awards were made under the deferred bonus plan (DBP) in June 2023 as set out below and on page 118.

Director	Date of award	DBP award (shares)	Grant pricea	Face value of award
Philip Jansen	15 June 2023	343,782	140.00p	£481,294
Simon Lowth	15 June 2023	234,442	140.00p	£328,218

a 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.

Deferred shares are not subject to performance conditions and have a three-year vesting period. 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 DBP are set out on page 118.

Joining arrangements for Allison Kirkby

Allison transitioned from her role as a Non-Executive Director to Chief Executive on 1 February 2024. Allison will receive the same remuneration package as her predecessor, which is within the parameters of the Policy and aligned to the market for comparators of BT Group's size and complexity.

This includes an annual salary of £1,100,000, and on-target bonus opportunity of 120% of salary, with 50% of any bonus deferred into shares for a three-years. Allison was not eligible to receive a bonus in respect of FY24. Allison's RSP opportunity under the Policy will be 200% of salary. As outlined above, Allison was granted an RSP award in respect of FY24 in February 2024 pro-rated to reflect that she joined part-way through the initial three-year vesting period. Subject to the satisfaction of relevant underpins, RSP awards will vest in three equal tranches after three, four and five years and be subject to a further two-year holding period.

Allison will be subject to our shareholding requirement, being expected to build up a shareholding of 500% of salary within five years of the date of her appointment. This requirement continues to apply for two years post-cessation.

Annual remuneration report continued

Philip Jansen leaving arrangements (audited)

Philip Jansen stood down as a director on 31 January 2024 but remains an employee of the group until 30 June 2024 continuing to support an orderly and effective handover to Allison Kirkby as required. Under the terms of his service contract, he will continue to receive his salary and contractual benefits until the end of his notice period, being 30 June 2024. These payments will total £458,333 basic salary and fees, £8,888 benefits and £45,883 pension allowance. For FY24 this amounts to £183,333 basic salary and fees, £3,555 benefits and £18,333 pension allowance. For FY25 this amounts to £275,000 basic salary and fees, £5,333 benefits and £27,500 pension allowance. Philip will receive no compensation or payment for the termination of his service contract or his ceasing to be a director of BT Group or any other group company, although BT Group will pay independent adviser fees of £45,000 (paid directly to the adviser) and £100 for reconfirmation of customary post-employment restrictions on working for competitors.

In line with the Policy and the treatment of prior leavers, and in light of the fact that he has retired from executive life, the Committee elected to treat Philip as a good leaver. As a result, he will be eligible to receive a full-year bonus in respect of FY24, which will be paid in full in June 2024. Philip will not be eligible for an annual bonus in FY25.

Philip did not receive an RSP award in September 2023 as he had already announced his decision to step down. Outstanding shares under the RSP will be preserved, pro-rated for service, and will vest according to their normal schedule (subject to satisfaction of the relevant underpins). Outstanding shares under the DBP will be retained fully and vest according to their usual timeframe.

Philip will also be required to maintain a minimum shareholding equivalent to 500% of his annual salary for two years post cessation of employment.

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 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 to be held in trust until 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 does not apply to the Deutsche Telekom nominated representative director appointed to the Board as a Non-Independent, Non-Executive Director under the terms of the EE acquisition in January 2016. This helps avoid any conflict of interest.

Directors' interests at 31 March 2024 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 2024 (or at the point of leaving for directors who left during the year).

The first table includes interests held by the Executive Directors under BT Group plc's share plans. The numbers represent the maximum possible vesting levels. Full details of all DBP and RSP awards, including restricted periods and vesting conditions, are set out on page 118.

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.

During the period 1 April 2024 to 15 May 2024, 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 2024	RSP and DBPa	Optionsb	Shareholding requirement (% of salary)	Current shareholding (% of salary)
Allison Kirkby	525,000	787,019	0	500%	161%
Simon Lowth	1,186,387	2,695,526	11,222	500%	728%

a Subject to continued employment and, for the RSP, two underpins over the initial three-year vesting period.

b Includes interests in saveshare, a HMRC-approved all-employee plan and yourshare, a HMRC-approved share incentive plan.

Beneficial holding owned outright at 1 April 2023 Beneficial holding owned outright at 31 March 2024

Chairman
Adam Crozier	62,500	62,500
Non-Executive Directors
Ruth Cairniea	n/a	25,000
Maggie Chan Jones	0	70,000
Steven Guggenheimer	0	4,700
Isabel Hudson	24,090	24,090
Matthew Key	161,686	209,586
Raphael Küblerb	0	0
Sara Weller	37,000	47,000
Directors who left during the year
Philip Jansenc	6,412,792	7,366,259
Adel Al-Salehd	0	0
Ian Cheshiree	19,646	19,646
Iain Conne	69,442	69,442
Total	6,787,156	7,898,223

a Ruth was appointed as a Director on 6 April 2023.

b Raphael was appointed as a Director on 30 January 2024. c Philip stepped down as a Director and Chief Executive on 31 January 2024 and the number reflects his holding at that date.

d Adel stepped down as a Director on 31 December 2023 and the number reflects his holding at that date.

e Ian and Iain stepped down as Directors at the conclusion of the AGM on 13 July 2023 and the number reflects their holding at that date.

Annual remuneration report continued

	1 April 2023	Awarded/ granted	Dividends reinvested	Vested	Lapsed	Total number of award shares at 31 March 2024	Vesting date	Price at grant	Market price at date of vesting	Market price at date of exercise	Monetary value of vested award £000
Allison Kirkby
RSP 2023a	–	1,484,942				1,484,942	15/06/2026	107.00p
Simon Lowth
DBP 2020	806,314			806,314		–	03/08/2023	119.27p	113.43p		915
DBP 2021	464,055		31,346			495,401	24/06/2024	203.16p
DBP 2022	253,169		17,100			270,269	24/06/2025	184.35p
DBP 2023b		234,442	15,835			250,277	15/06/2026	140.00p
RSP 2020c	1,184,694		53,349	394,899		843,144	03/08/2023	106.11p	113.43p		448
RSP 2021d	773,426		52,243			825,669	24/06/2024	203.16p
RSP 2022	860,778		58,144			918,922	24/06/2025	184.35p
RSP 2023e		1,388,429	93,787			1,482,216	15/06/2026	114.00p
saveshare (2019)f	10,975					10,975	01/08/2024	163.92p
yourshare 2021g	247					247	24/06/2024	202.70p
Former director
Philip Jansen
DBP 2020	1,182,364			1,182,364		–	03/08/2023	119.27p	113.43p		1,341
DBP 2021	694,092		46,885			740,977	24/06/2024	203.16p
DBP 2022	378,667		25,577			404,244	24/06/2025	184.35p
DBP 2023b		343,782	23,221			367,003	15/06/2026	140.00p
RSP 2020c	1,771,955		79,796	590,652		1,261,099	03/08/2023	106.11p	113.43p		670
RSP 2021d	1,156,821		78,142			1,234,963	24/06/2024	203.16p
RSP 2022	1,262,230		85,262			1,347,492	24/06/2025	184.35p
yourshare 2021g	247					247	24/06/2024	202.70p

a Award granted on 8 February 2024. 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. The award 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 115.

b Awards granted on 16 June 2023. 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.

c 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 vest in three equal tranches after three, four and five years. The Committee assessed performance against the two underpins at the end of the FY23 and agreed that both had been satisfied. Tranche one vested on 3 August 2023. Tranche two will vest on 3 August 2024 and tranche three on 3 August 2025. A holding period will apply such that no shares may be sold until year five.

d 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 114. The Committee assessed performance against the two underpins at the end of the financial year and agreed that both had been satisfied. As a result, all three tranches of the 2021 RSP award will vest in full in June 2024, 2025 and 2026 respectively. Tranches one and two remain subject to a holding requirement until June 2026.

e Award granted on 7 September 2023. 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. The award 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 115.

f Option granted on 14 June 2019 under the employee saveshare scheme, in which all eligible employees of the group are entitled to participate.

g 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.

Implementation of the Policy in FY25

Base salary

Allison's base salary of £1,100,000 was agreed on appointment in January 2024. No salary increase will be awarded for 2024.

In line with an expected minimum increase granted across our UK management population, Simon will receive a 2% salary increase effective 1 June 2024.

Benefits

For Executive Directors, the Committee has set benefits in line with the Policy. No changes are proposed to the benefit framework for FY25.

Pension allowance

In line with the rate offered to the majority of our UK workforce, both Executive Directors receive an annual allowance equal to 10% of salary in lieu of pension provision.

Annual bonus

Both Executive Directors are eligible for an on-target and maximum bonus opportunity of 120% and 200% of salary respectively. 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. The FY25 annual bonus structure measures and weightings are set out below.

Weighting
Adjusted EBITDA 35%
Normalised free cash flow 35%
20%
Inclusion & diversity 10%

All of the annual bonus measures are linked to our KPIs as set out on pages 48 to 49.

In addition to the annual bonus scorecard, a health and safety underpin applies which allows the Committee to exercise its discretion to reduce the annual bonus payout result if there is a significant breach in health and safety.

We do not publish details of the targets in advance as these are commercially confidential. Targets will be disclosed in full in the 2025 Report on directors' remuneration.

RSP

Both Executive Directors will be granted an award under the RSP in June 2024 to the value of 200% of salary.

When considering the grant levels each year, the Committee takes in account of the share price performance over the preceding year. 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.

The Committee has agreed the same two underpins will apply for the 2024 RSP awards which will be measured over the initial threeyear vesting period:

– Average ROCE must be at least 7%¹

– The business must have made sufficient progress over the vesting period towards meeting our sustainability commitments (which could include carbon emissions, carbon abatement and circularity). 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 were reviewed in the year by the Chairman and Executive Directors, taking into consideration the role and requirements of BT Group, together with the fees paid to non-executive directors at companies of a similar size and complexity. Following the review it was agreed to increase the base fee by 2% in line with the minimum expected budget for our UK management colleagues. It was also agreed to consolidate the Nominations Committee member's fee (£10,000) into the base fee. This means the base fee will increase from £78,540 to £90,000 a year effective from 1 June 2024.

The Chairman receives a single all-inclusive fee for his role. No increase has been awarded for FY25 and this will remain at £700,000.

Other changes agreed as part of the review were:

• An increase in the Responsible Business Committee chair's fee from £14,000 to £25,000
• An increase in the Responsible Business Committee member's fee from £8,000 to £15,000
• An increase in the fee for the Designated Non-Executive Director for Workforce Engagement from £10,000 to £17,000.

The table below sets out the additional fees for membership and chairing a Board Committee and reflects the changes agreed during the year.

Committee	Chair's fee	Member's fee
Audit & Risk	£35,000	£25,000
National Security & Investigatory Powers	n/aa	£8,000
Remuneration	£30,000	£15,000
Responsible Business	£25,000	£15,000

a Where the Chairman or Chief Executive acts as Chair of a Board Committee, no additional Committee Chair fee is payable.

Other fees payable include:

• an additional fee of £27,000 per annum to the Senior Independent Non-Executive Director
• an additional fee of £20,000 per annum to the Director appointed to the joint venture between BT Group and Warner Bros. Discovery.

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.

Annual remuneration report continued

Other remuneration matters

Advisers

During the year, the Committee received independent advice on executive remuneration matters from Deloitte LLP. The Committee is satisfied that the advice provided by Deloitte has been objective and independent. The Deloitte partner who provides remuneration advice to the Committee does not have any connections with BT Group plc that may impact their independence. Deloitte received £75,800 (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 its 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 FY24, Deloitte provided the group with advice on corporate and indirect taxes, assistance with regulatory, risk and compliance issues, accounting advice, 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 2024, shares equivalent to 2.31% (FY23: 3.03%) 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 FY25, shares equivalent to approximately 0.27% (FY23: 0.87%) of the issued share capital (excluding treasury shares) will be required to satisfy the allemployee 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 13 July	98.15	1.85
2023 AGM	6,801,425,259	128,049,792	1,580,860
Policy at the 13 July 2023	98.17	1.83
AGM	6,798,003,577	126,721,663	6,331,473

Withheld votes are not counted when calculating voting outcomes.

Committee evaluation FY24

Details on the FY24 Board and Committee evaluation can be found on page 94.

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

Source: Datastream

History of Chief Executive remuneration

	Year end Chief Executive	Total remuneration £000	Annual bonus (% of max)	ISP/RSP vesting (% of max)
2024	Allison Kirkbya	341	n/a	n/a
	Philip Jansenb	3,719	65.9%	100%
2023	Philip Jansen	3,089	43.7%	100%
2022	Philip Jansen	3,460	60%	19.1%
2021	Philip Jansen	2,628	60%	0%
2020	Philip Jansen	3,248	50%	n/a
2019	Philip Jansen	725	56%	n/a
	Gavin Pattersonc	1,719	28%	0%
2018	Gavin Patterson	2,307	54%	0%
2017	Gavin Patterson	1,345	0%	0%
2016	Gavin Patterson	5,396	45%	82.0%
2015	Gavin Patterson	4,562	58%	67.4%

a Allison was appointed as a Director on 15 March 2019 and became Chief Executive from 1 February 2024. Her first RSP award was granted in February 2024.

b Philip was appointed as a Director on 1 January 2019 and became Chief Executive from 1 February 2019. His first ISP award was granted in February 2019. Philip stood down as Chief Executive on 31 January 2024.

c Gavin stood down as Chief Executive on 31 January 2019 .

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
Allison Kirkby	1 February 2024	Directors' service agreements do not contain fixed term periods and are
Simon Lowth	4 July 2016	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.
Ruth Cairnie	6 April 2023
Maggie Chan Jones	1 March 2023
Steven Guggenheimer	1 October 2022	Letters of appointment do not contain fixed term periods and are terminable by
Isabel Hudson	1 November 2014	either party on three months' written notice.
Matthew Key	25 October 2018
Sara Weller	16 July 2020
Non-Independent, Non-Executive Director
	Commencement date	Termination provisions
Raphael Kübler	30 January 2024	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.

As announced on 7 May 2024, Tushar Morzaria joined the Board as an Independent Non-Executive Director with immediate effect. In addition, Isabel Hudson will step down from the Board at the conclusion of the AGM on 11 July 2024.

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.

The service agreements and letters of appointment are available for inspection by shareholders at BT Group plc's registered office.

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'll provide a competitive package with reference to the relevant market for each colleague
• We'll 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, and a strong commitment to inclusion, diversity 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.

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. 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 2024, as well as those reported in respect of the prior five 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, the highest ratio was exhibited in 2024 due to an above-target bonus payout, and the vesting of two separate tranches of RSP awards to Philip Jansen. We believe that these ratios are appropriate given the size and complexity of the business, and are a fair reflection of our remuneration principles and practices.

We have used the 'Option B' methodology (based on gender pay reporting), as the most robust way to identify the individual reference points within an organisation with multiple operating segments.

Total remuneration

			Employee remuneration		Pay ratio
	Chief Executive	P25	P50	P75	P25	P50	P75
2019	£2,444,000	£34,281	£41,477	£51,594	71:1	59:1	47:1
2020	£3,248,000	£34,881	£42,173	£51,351	93:1	77:1	63:1
2021	£2,628,000	£35,569	£41,600	£50,391	74:1	63:1	52:1
2022	£3,350,000	£35,722	£40,059	£49,488	94:1	84:1	68:1
2023	£2,956,000	£36,960	£40,095	£50,999	80:1	74:1	58:1
2024	£3,953,000	£35,794	£37,617	£53,691	110:1	105:1	74:1

Base salary

			Employee remuneration		Pay ratio
	Chief Executive	P25	P50	P75	P25	P50	P75
2019	£1,222,000	£30,090	£35,918	£41,740	37:1	31:1	27:1
2020	£1,100,000	£31,144	£37,321	£42,800	35:1	29:1	26:1
2021	£1,100,000	£31,842	£35,606	£42,836	35:1	31:1	26:1
2022	£1,100,000	£31,637	£35,017	£43,908	35:1	31:1	25:1
2023	£1,100,000	£33,144	£35,948	£44,986	33:1	31:1	24:1
2024	£1,100,000	£31,973	£34,100	£45,948	34:1	32:1	24:1

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 23,000 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 reflects both the annual fee review as well as any changes in role including additional Committee responsibilities.

		FY24 (% change)		FY23 (% change)		FY22 (% change)		FY21 (% change)
	Salary/ fees	Benefits	Annual bonus	Salary/ fees	Benefits	Annual bonus	Salary/ fees	Benefits	Annual bonus	Salary/ fees	Benefits	Annual bonus
Chairman
Adam Crozier	0%	(8%)	–	0%	1,100%	–	–	–	–	–	–	–
Executive Directors
Allison Kirkbya	130%	338%	–	1%	100%	–	0%			6%	–	–
Philip Jansenb	0%	(5) %	51%	0%	13%	(27) %	0%	2%	0%	0%	(14) %	0%
Simon Lowth	3%	4%	59%	2%	5%	(26) %	0%	(4) %	0%	0%	(5) %	(2) %
Non-Executive Directors
Adel Al-Salehc	–	–	–	–	–	–	–	–	–	–	–	–
Ruth Cairnied	–	–	–
Maggie Chan Jones	0%	0%	–	–	–	–
Ian Cheshiree	0%	0%	–	8%	–	–	8%			19%	–	–
Iain Conne	0%	0%	–	1%	–	–	0%			33%	–	–
Steve Guggenheimer	0%	140%	–	–	–	–
Isabel Hudson	1%	100%	–	1%	0%	–	0%			4%	(66) %	–
Matthew Key	9%	100%	–	9%	100%	–	2%			13%	–	–
Raphael Küblerc	–	–	–
Sara Weller	1%	0%	–	5%	–	–	0%			–	–	–
UK management colleagues	5.5%	0%	53%	3%	0%	(25) %	0%	0%	0%	0%	0%	18%

a Allison was appointed as Chief Executive during FY24 so the increase reflects her change in responsibilities and benefits in line with the Policy. b Philip received his salary and benefits until he stood down on 31 January 2024. The leaving arrangements for Philip are fully disclosed under Leaving arrangements for Philip Jansen on page 116.

c Under the terms of the Relationship Agreement between BT Group plc and Deutsche Telekom and the Directors' letter of appointment, no remuneration is payable for this position.

d Ruth joined during FY24 and so no relevant comparison can be presented. e The director left during FY24 and any reduction reflects the pro-rated remuneration.

Remuneration in context continued

Relative importance of the spend on pay

The table below shows the percentage change in total remuneration paid to all employees compared to expenditure on dividends and share buybacks.

Area	FY24 (£m)	FY23 (£m)	% change
Remuneration paid to all employees	4,921	4,952	(0.63) %
Dividends/share buybacksa	840	940	(10.6) %

a Includes share purchases by the Trust as set out in note 21 to the consolidated financial statements.

Inclusion and diversity

Embracing inclusion, diversity, accessibility and equality is core to our people strategy and critical to our growth. Our Inclusion, Equity and Diversity Strategy is a programmatic, evidence-based approach to help us understand and remove bias and other cognitive barriers from 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 by promoting a culture where colleagues can thrive.

More details on our Inclusion, Equity and Diversity Strategy can be found on pages 31 to 33.

Gender pay gap reporting

At a group-level, our median hourly pay gap between male and female colleagues has decreased to 5.6% (6.1% in 2022). This remains favourably below the high-tech industry median of 12.9%, and the UK national median of 14.3% (ONS provisional).

Our Gender Pay Gap statement sets out the key information required under legislation and is available on our website bt.com/ genderpaygap

Ruth Cairnie

Chair of the Remuneration Committee 15 May 2024

Statement of directors' responsibilities in respect of the Annual Report and the financial statements

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. The parent company meets the definition of a qualifying entity under FRS 100 and the company financial statements are prepared in accordance with United Kingdom Generally Accepted Accounting Practice (FRS 101 "Reduced disclosure framework", and applicable law).

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, in respect of the parent Company financial statements only, prudent
• state whether the group financial statements have been prepared in accordance with the UK-adopted international accounting standards
• 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.

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.

In accordance with Disclosure Guidance and Transparency Rule ("DTR") 4.1.16R, the financial statements will form part of the annual financial report prepared under DTR 4.1.17R and 4.1.18R. The auditor's report on these financial statements provides no assurance over whether the annual financial report has been prepared in accordance with those requirements.

Responsibility statement of the Board in respect of the annual financial report

We confirm, to the best of our knowledge that:

• 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 15 May 2024 and was signed on its behalf by:

Allison Kirkby Chief Executive

Simon Lowth Chief Financial Officer

Report of the directors

The directors present the Report of the directors, together with audited financial information for the year ended 31 March 2024. The Report of the directors also encompasses the entirety of our Corporate governance report on pages 83 to 130 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 82 form the Management report for the basis of DTR 4.1.5R.

In accordance with DTR 4.1.14R, the financial statements will form part of the annual financial report prepared using the single electronic reporting format under the TD ESEF Regulation. The Auditor's report on these financial statements provides no assurance over the ESEF format.

Material accounting estimates, key judgements and significant accounting policies

Our critical accounting estimates, key judgements and significant accounting policies conform with UK-adopted International Financial Reporting Standards (IFRS) and IFRSs issued by the International Accounting Standards Board (IASB) and are set out on page 150 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 FY24 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 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 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 82 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 50 to 57 includes information on our group financial results, financial outlook, cash flow and net debt, and balance sheet position. Notes 23, 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 63 to 70 including details of each risk and how we manage 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 pages 81 to 82, which 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 on pages 63 to 70; and which estimates 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.

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 2025, which is consistent with FRC guidance. When reaching this conclusion, the directors took into account the group's overall financial position (including trading results and the 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 pages 81 to 82).

At 31 March 2024, the group had cash and cash equivalents of £0.4bn and current asset investments of £2.4bn. 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

We routinely buy 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 (provided they are insurable) 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 15 May 2024, and throughout FY24, 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 FY24, 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.

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, (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 FY24 and was deemed effective. Continuous improvements were made in FY24, including the rollout of a new training programme to establish a core level of understanding of expectations across our senior leadership team and all those with roles that are key to making our framework a success. There was also focus on embedding our Key Control Framework, a set of Group requirements, defined by

subject matter experts, to be implemented consistently across all Units.

More information on our group risk management framework can be found in the Risk management section on pages 61 to 62.

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 page 102.

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 and produces analyses 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, financial market conditions 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, group treasury 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.

We use a supply chain financing programme with a limited number of suppliers with short payment terms to extend them a more typical payment term. More details are disclosed in note 17 to the consolidated financial statements.

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, please see note 18 to the consolidated financial statements.

Apart from the information disclosed in note 18 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 18, 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 the fact that some such 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	Page
LR 9.8.4R(4)	50
LR 9.8.4R(12)	See below
LR 9.8.4R(13)	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.

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	Page
Future developments	1 to 82
Particulars of any important events affecting BT Group or any of its subsidiary undertakings which have occurred since the end of the financial year	221
Research and development activities	15
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	24, 41 and 90 to 93
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	26 to 27, 40 to 45 and 90 to 93
Greenhouse gas emissions, energy consumption and energy efficiency action	38,72 and 80
Structure of BT Group plc's share capital (including the rights and obligations attaching to the shares)	147
Significant agreements to which BT Group plc is a party that take effect, alter or terminate upon a change of control following a takeover	n/a
Related undertakings	226 to 230

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 with 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 15 May 2024, 419m shares were held in EasyShare (4.21% of the issued share capital (4.22% excluding treasury shares)) on behalf of BT Group plc shareholders
• no person holds securities carrying special rights with regard to control of the group
• our share registrar, Equiniti, must receive proxy appointment and voting instructions not less than 48 hours before any general meeting (see page 130)
• 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're 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.

Raphael Kübler was appointed as a Non-Independent, Non-Executive Director under the terms of the Relationship Agreement between BT Group plc and Deutsche Telekom. His 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).

(b) Variation of rights

If the share capital of BT Group plc were to be split into different classes of shares by special resolution, 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.

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 2024 AGM is not intended to change this policy. It does, 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 FY24, BT Group plc's wholly owned subsidiary, British Telecommunications plc, paid the costs of attending events at (i) the Labour Party Conference and Business Conference; (ii) the Conservative Party Conference; and (iii) the Liberal Democrats Business Day. These costs totalled £9,343 (FY23: £5,848). No company in the BT Group made any loans to any political party.

Substantial shareholdings

As at 31 March 2024, 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.	22 May 2023	2,435,476,188	24.50%
T-Mobile Holdings	23 March 2018	1,196,175,322	12.06%
BlackRock, Inc.	13 June 2023	470,325,337	4.73%

As at 15 May 2024, BT Group had not received any further such notices under the DTRs.

Colleague engagement

Engaging with our colleagues is critical to creating a culture where they can be their best and contribute to our purpose, ambition, strategy and long term success.

Engaging with our colleagues takes many forms, including through:

• the Board receiving regular updates from the Chief Executive and Chief Human Resources Officer on colleagues, key people strategy initiatives, culture and overall sentiment in the organisation
• our Designated Non-Executive Director for Workforce Engagement and the Colleague Board. The Colleague Board was in place throughout most of FY24, however the Board made the decision to disband the Colleague Board and going forward the Designated Non-Executive Director for Workforce Engagement will engage in a comprehensive colleague outreach programme in its place (see pages 90 to 91)
• our quarterly Your Say colleague engagement surveys
• 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. We work with our highly active, engaged and award-winning People Networks. These colleague-driven groups raise awareness and advocate for change both inside and outside BT Group.

Colleague engagement is 75%, +5% vs UK external benchmarks and +4% since September. The resolution of industrial action and agreement for a two-year pay award have contributed to the improvement in sentiment.

We encourage all of our colleagues to become shareholders in the business through the operation of all-employee share plans. We annually consider which all-employee plans to offer, both in the UK and globally.

Employees with disabilities

We're an inclusive employer and actively encourage the recruitment, development, promotion and retention of disabled people.

In FY24 we focused on three areas to support our disabled colleagues:

• we committed to improving our workplace adjustments process so that colleagues can get the adjustments that they need when they need them, with a new initiative in the UK launched in July with plans to extend the rollout to India
• a development programme specifically aimed at disabled colleagues who are junior managers has been piloted, and work is under consideration for rollout to all career levels
• we want all colleagues and people managers to understand disability and how to support disabled colleagues, so we have launched three disability advocacy training pathways and published them to our internal disability hub for access by all colleagues.

This is the first year that we reported our disability pay gap; it reflects our drive for equal opportunity across all characteristics. At the time of the snapshot date in April 2023, the mean and median pay gaps were low, with a mean gap of 0.7% and a zero median gap. Further information can be found on page 32.

We continued our partnership with the Business Disability Forum, and we will be working to make sure that we are able to meet and exceed the commitments we made to obtain our Disability Confident leader status and our membership of Valuable 500.

Read more on inclusion and diversity at bt.com/inclusion-and-diversity

AGM

Resolutions

At the 2024 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, our share registrar, Equiniti, will count the proxy votes for and against each resolution, as well as votes withheld. The voting results will be announced by way of a stock exchange announcement and published on our website as soon as reasonably practicable following the conclusion of the AGM. As at previous AGMs, we will take votes on all matters at the 2024 AGM on a poll.

The separate Notice of meeting 2024, 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 2024 AGM on 11 July 2024. 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 2023 AGM for BT Group plc to purchase in the market 993m of its shares, representing 10% of BT Group plc's issued share capital (excluding treasury shares), expires at

the conclusion of the 2024 AGM. We will ask shareholders to give a similar authority at the 2024 AGM.

During FY24 and up to 15 May 2024, no shares were purchased under this authority.

At the start of the year, £36m shares (having a total nominal value of £1.8m, and constituting 0.36% of the issued share capital (0.36% excluding treasury shares)) were held as treasury shares. During FY24, 19.8m treasury shares (having a nominal value of £995,000, and constituting 0.19% of the issued share capital 0.20% excluding treasury shares)) were transferred to meet BT Group plc's obligations under its employee share plans. At 31 March 2024, a total of 16.3m shares (having a total nominal value of £815,000, and constituting 0.16% of the issued share capital 0.16% excluding treasury shares)) were held as treasury shares (see note 20 to the consolidated financial statements).

Since 31 March 2024 (up to and including 15 May 2024), 552,071 treasury shares (having a nominal value of £27,600, and constituting 0.005% of the issued share capital (0.005% excluding treasury shares)) have been transferred to meet BT Group plc's obligations under its employee share plans.

At 15 May 2024, a total of 15.7m shares (having a nominal value of £787,300, and constituting 0.16% of the issued share capital (0.16% excluding treasury shares)) were held as treasury shares.

In addition, during FY24 and up to 15 May 2024 the Trust purchased 98.2m BT Group plc shares for a total consideration of £132.5m. The Trust held 158.4m shares both at 31 March 2024 and 15 May 2024.

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 51)
• an indication of likely future developments in the business of BT Group plc and its group (pages 1 to 82)
• an indication of our research and development activities (page 15)
• 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 24, 41 and 90 to 91)
• 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 26 to 27, 40 to 45 and 90 to 91)
• information about greenhouse gas emissions, energy consumption and energy efficiency action (pages 38, 71 to 80).

By order of the Board

Sabine Chalmers

Group General Counsel, Company Secretary & Director Regulatory Affairs 15 May 2024

Look out for these throughout the report Contents

accounting policies

Critical and key accounting estimates

accounting policies
Critical and key accounting estimates	Independent auditor's report	132
and significant judgements	Group income statement	145
	Group statement of comprehensive income	146
	Group balance sheet	147
	Group statement of changes in equity	148
	Group cash flow statement	149
	Notes to the consolidated financial statements	150
	Basis of preparation	150
	Critical accounting estimates and significant judgements	151
	Material accounting policies that apply to the overall financial statements	152
	Segment information	153
	Revenue	156
	Operating costs	160
	Employees	161
	Audit, audit related and other non-audit services	162
	Specific items	162
	Taxation	164
	EPS	167
	Dividends	167
	Intangible assets	168
	Property, plant and equipment	172
	Leases	175
	Trade and other receivables	179
	Trade and other payables	182
	Provisions & contingent liabilities	183
	Retirement benefit plans	185
	Own shares (BT Group)	196
	Share-based payments	196
	Divestments & assets and liabilities classified as held for sale	198
	Investments	201
	Joint ventures and associates	202
	Cash and cash equivalents	205
	Loans and other borrowings (BT Group)	206
	Finance expense and income	210
	Financial instruments and risk management	211
	Other reserves	218
	Related party transactions	218
	Financial commitments	219
	Re-presentation of prior year comparatives	220
	Post balance sheet events	221
	BT Group – Financial Statements of BT Group plc	222
	Related undertakings	226
	BT Group Additional Information/APM	231

KPMG LLP's Independent Auditor's Report to the members of BT Group plc

1. Our opinion is unmodified

In our opinion:

• the financial statements of BT Group plc give a true and fair view of the state of the Group's and of the Parent Company's affairs as at 31 March 2024, 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 Group and Parent Company financial statements have been prepared in accordance with the requirements of the Companies Act 2006.

What our opinion covers

We have audited the Group and Parent Company financial statements of BT Group plc ("the Company") for the year ended 31 March 2024 ("FY24") included in the Annual Report, which comprise:

Group

• Group income statement,
• Group statement of comprehensive income,
• Group balance sheet,
• Group statement of changes in equity,
• Group cash flow statement
• Notes 1 to 33 to the Group financial statements, including the accounting policies in the respective notes.

Parent Company (BT Group plc)

• Company balance sheet
• Company statement of changes in equity
• Notes 1 to 3 to the Parent Company financial statements, including the accounting policies in note 1.

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 and matters included in this report are consistent with those discussed and included in our reporting to the Audit and Risk Committee ("ARC").

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.

2. Overview of our audit

Factors driving our view of risks

Our risk assessment is driven by understanding of the applicable financial reporting framework, our knowledge of the business, the industry and the wider economic environment in which BT Group plc operates.

Revenue from non-long-term contracts remains a focus area due to the complexity arising from the large number of low value transactions managed through a number of distinct billing systems, and the complex IT landscape linking the billing systems together.

In addition, the bespoke nature of the pricing structure within some of Business' contracts means that there is a higher risk of processing error and fraud in relation to a proportion of Business' revenue derived from certain billing systems and estimation uncertainty over the associated refund liabilities.

In the current year the Group recognised an impairment charge against goodwill allocated to the Business cash generating unit (CGU) of £488mn (FY23: nil), reflecting the execution risk of the CGU's business plan and increased uncertainty over the projected cashflows.

The valuation of the BT pension scheme ("BTPS") defined obligation also remains a focus area as it is complex, relying on key actuarial assumptions such as discount rates, RPI, and mortality.

We continue to have a focus on the BTPS which holds diverse unquoted assets which are valued based on inputs not directly observable. The valuation of these assets requires the involvement of experts and significant judgement over the key unobservable input.

We continue to identify the recoverability of the Parent Company investment in subsidiaries as a focus area for the Parent Company's standalone accounts. This is due to the materiality of the Parent Company's investment in subsidiaries compared to the company's total assets.

The TNT Sport Joint venture company is in its second year of operations and all significant risks associated with the initial recognition of the balances relating to the disposal of the BT sports division and subsequent re-investment in the Sports JV are no longer applicable.

Key Audit Matters	Risk FY24 vs FY23	Item
Accuracy of revenue due to complex billing systems (Group)	é	4.1
Impairment of Goodwill attributable to Business CGU (Group)	…	4.2
Valuation of defined benefit obligation of the BT pension scheme (BTPS) (Group)	çè	4.3
Valuation of unquoted investments in the BT pension scheme (BTPS) (Group)	ê	4.4
Recoverability of Parent company investment in subsidiaries (Parent Company)	çè	4.5

Audit and Risk Committee Interaction

During the year, the ARC met 6 times. KPMG are invited to attend all ARC meetings and are provided with an opportunity to meet with the ARC in private sessions without the Executive Directors being present. For each Key Audit Matter, we have set out communications with the ARC in section 4, including matters that required particular judgement for each.

The matters included in the Audit and Risk Committee Chair's report on pages 99 to 103 are materially consistent with our observations of those meetings.

Our Independence

We have fulfilled our ethical responsibilities under, and remain independent of the Group in accordance with, UK ethical requirements including the FRC Ethical Standard as applied to listed public interest entities.

We have not performed any non-audit services during the year ended 31 March 2024 or subsequently which are prohibited by the FRC Ethical Standard.

We were first appointed as auditor by the shareholders for the year ended 31 March 2019. The period of total uninterrupted engagement is for the 6 financial years ended 31 March 2024.

Jonathan Mills has succeeded John Luke as the Lead Engagement Partner for the year ended 31 March 2024. The Group Engagement partner is required to rotate every 5 years. As these are the first set of the Group's financial statements signed by Jonathan Mills, he will be required to rotate off after the FY28 audit.

The average tenure of partners responsible for component audits as set out in section 7 below is 3 years, with the shortest being 1 year and the longest being 4 years.

Total audit fee	£20.70m
Audit related fees (including interim review)	£2.54m
Other services	£0.03m
Non-audit fee as a % of total audit and audit related fee %	12%
Date first appointed	11 July 2018
Uninterrupted audit tenure	6 years
Reappointment	4 years
Next financial period which requires a tender	2029
Tenure of Group engagement partner	1 year
Average tenure of component signing partners	3 years

Materiality (Item 6 below)

The scope of our work is influenced by our view of materiality and our assessed risk of material misstatement.

Group materiality is determined with reference to a benchmark of Group Total Revenue (FY23: Profit before tax normalised by adding back the one-off operating cost arising from the BT Sport disposal). We have determined overall materiality for the Group financial statements as a whole at £135m (FY23: £95m) and for the Parent Company financial statements as a whole at £100m (FY23: £90m).

A key judgement in determining materiality was selecting the most relevant metric as the benchmark, considering which metrics have the greatest bearing on shareholder decisions. The relevant metrics considered for the current year included Revenue, Earnings before interest, taxes, depreciation and amortisation ("EBITDA"), Profit before tax from continuing operations ("PBTCO"), and Total assets. The selected benchmark for the current year is "Revenue," which represents a change from the prior period where the selected benchmark was PBTCO. The change to Revenue is deemed appropriate given shareholders' focus on revenue and cash generation and the current stage of the Fibre To The Premise ("FTTP") capital investment program. In the context of the high levels of capital investment for future growth, Revenue is considered a more representative and stable measure of performance. As such, we based our Group materiality on Total Revenue, of which it represents 0.65% (FY23: 4.95% of normalised PBTCO).

Materiality for the Parent Company financial statements as a whole was set at £100m (FY23: £90m), determined with reference to a benchmark of Parent Company total assets, limited to be less than materiality for Group materiality as a whole. It represents 0.89% (FY23: 0.80%) of the stated benchmark.

Materiality levels used in our audit

Group	Group Materiality
GPM	Group Performance Materiality
HCM	Highest Component Materiality
PLC	Parent Company Materiality
LCM	Lowest Component Materiality
AMPT	Audit Misstatement Posting Threshold

Group scope (Item 7 below)

We have performed risk assessment and planning procedures to determine which of the Group's components are likely to include risks of material misstatement to the Group financial statements, the type of procedures to be performed at these components and the extent of involvement required from our component auditors around the world.

The total number of entities in scope for FY24 is three which is consistent with FY23.

The components within the scope of our work accounted for the percentages illustrated on page 134.

In addition, we have performed Group level analysis on the remaining components to determine whether further risks of material misstatement exist in those components.

We consider the scope of our audit, as communicated to the Audit and Risk Committee, to be an appropriate basis for our audit opinion.

Coverage of Group financial statements

KPMG LLP's Independent Auditor's Report to the members of BT Group plc continued

Profit before tax

Full scope audits Remaining components

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 committed as set out in the Strategic Report to be a net-zero business by 2030 and has also outlined several shorterterm climate change targets. 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 forwardlooking estimates, which include projections for impairment assessment of goodwill, useful economic life of vehicle fleet and infrastructure assets impacting on future depreciation charges, and significant assumptions used in pension asset valuations. Taking into account our risk assessment procedures, the remaining useful economic lives of relevant assets and the nature of the assumptions used in the pension valuation, and the financial impact of climate risk and opportunities on the forecasted cashflows, 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 is 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.

3. Going concern, viability and principal risks and uncertainties

The directors have prepared the financial statements on the going concern basis as they do not intend to liquidate the Group or the Parent Company or to cease their operations, and they have concluded that the Group's and the Parent 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 the Group's 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").

Going concern

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 Parent 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 Parent Company's available financial resources over this period were:

• The impact of rising energy prices, supply shortages, and inflationary pressures;
• The impact of significant supply chain disruptions driven by geopolitical factors;
• The impact of plans to deliver new initiatives required to meet savings commitments not being realised;
• The likelihood of existing litigation crystallising within the going concern period.

We also considered less predictable but realistic second order impacts, such as a large scale cyber breach, the UK experiencing a significant recession, 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.

Our procedures also included an assessment of whether the going concern disclosure in note 1 to the financial statements gives a full and accurate description of the directors' assessment of going concern. Accordingly, based on those procedures, we found the directors' use of the going concern basis of accounting without any material uncertainty for the Group and Parent Company to be acceptable. 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 Parent Company will continue in operation.

Our conclusions

• We consider that the directors' use of the going concern basis of accounting in the preparation of the Group and Parent Company's 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 Parent 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 Parent 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 126 is materially consistent with the financial statements and our audit knowledge.

Disclosures of emerging and principal risks and longerterm viability

Our responsibility

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 81 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 81 under the Listing Rules.

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 Parent Company's longer-term viability.

Our reporting

We have nothing material to add or draw attention to in relation to these disclosures.

We have concluded that these disclosures are materially consistent with the financial statements and our audit knowledge.

4. Key audit matters (KAM)

What we mean

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 include below the key audit matters in decreasing order of audit significance together with our key audit procedures to address those matters and our results from those procedures. These matters were addressed, and our results are based on procedures undertaken, for the purpose of our audit of the financial statements as a whole. We do not provide a separate opinion on these matters.

4.1 Accuracy of revenue due to the complex billing systems (Group)

Financial Statement Elements

	FY24	FY23
Total revenue	£20.8bn	£20.7bn
Our assessment of risk vs FY23

é Increased

Our results

FY24: Acceptable FY23: Acceptable

Description of the Key Audit Matter

Processing error

The Group's non-long-term contract revenue consists of a large number of low value transactions. The Group operates a number of distinct billing and order-entry systems and the IT landscape underpinning the end-to-end revenue process is complex.

There are multiple products sold at multiple rates with varying price structures in place. These represent a combination of service-based products, such as fixed line telephony, as well as goods, such as the provision of mobile handsets.

The revenue recognition of non-long-term contract revenue is not subject to significant judgement. However, due to the large number of transactions, manual nature of order entry and complexity of the billing systems, this is considered to be an area of most significance in our audit. Within Business we have identified a significant risk of processing error in relation to some billing systems. In addition, the bespoke nature of the pricing structure within some of Business' contracts means that there is a higher risk of processing error and fraud in relation to a proportion of Business' revenue derived from certain billing systems.

Subjective estimate of refund liabilities in Business

The bespoke pricing structure results in a risk of billing inaccuracies within a proportion of Business' revenue and so over the identification of financial liabilities for associated customer refunds. The Group have estimated refund liabilities based on the

results of a sample of billing items leading to estimation uncertainty over the refund liabilities.

The effect of these matters is that, as part of our risk assessment for audit planning purposes, we determined that the quantum of refund liabilities had a high degree of estimation uncertainty, with a potential range of reasonable outcomes greater than our materiality for the financial statements as a whole. In conducting our final audit work, we reassessed the degree of estimation uncertainty to be less than materiality. The financial statements (note 5) disclose the range estimated by the Group.

Our response to the risk

Our procedures to address the risk included:

Process understanding: Obtaining an understanding of the revenue processes by observing transactions from customer initiation to cash received for material revenue streams.

Test of detail: Comparing a sample of revenue transactions, including credit adjustments, to supporting evidence e.g., customer bills, contracts, price lists and cash received (all where applicable).

Test of detail: Agreeing a sample of year end trade receivables to cash received after year end.

Test of detail: Within Business, we compared the results of our test of detail over revenue, including error rates by product, in the current and previous years' audits, to the liabilities held for customer refunds and challenged the Group's assessment of refund liabilities based on billing errors identified through our testing and the legal and regulatory risks in relation to billing errors for the products impacted.

Assessing transparency: Considering the adequacy of the Group's disclosures in respect of the sensitivity of the refund liability to error rates and legal risks.

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 them.

Communications with the Audit and Risk Committee

Our discussions with and reporting to the Audit and Risk Committee included:

• Our definition of the key audit matter and our audit approach, including the extent of our planned control reliance.
• The results from our process understanding, including controls gaps identified.
• The results from our substantive testing. We performed an assessment of whether the overstatements of revenue identified through these procedures were material, taking into account findings from other areas of the audit and qualitative aspects of the financial statements as a whole.

Areas of particular auditor judgement

We exercised judgement over the adequacy of liabilities for customer refunds in light of overstatements of revenue identified through our testing over pricing within Business. Particular judgement was needed over the applicable error rate and periods impacted.

Our results

The results of our testing were satisfactory (FY23: satisfactory) and we considered the revenue relating to non-long-term contract revenue and the estimate of refund liabilities and related disclosures to be acceptable (FY23: acceptable).

Further information in the Annual Report and Accounts: Refer to page 156 for the accounting policy on Revenue (note 5) for the financial disclosures.

4.2 Impairment of goodwill attributable to the Business CGU (Group)

Financial Statement Elements

	FY24	FY23
Goodwill allocated to Business CGU	£3.56bn	£4.08bn
Impairment charge	£0.49bn	£0.0bn
Our assessment of risk vs FY23

…

Our results
FY24: Acceptable	FY23: Acceptable

Description of the Key Audit Matter

Forecast-based assessment

The recoverability of goodwill allocated to the Business cash generating unit ("CGU") is assessed using value in use which is based on forecast future cash flows, within a discounted cashflow model.

For the Business CGU, the execution risk associated with the transition from legacy to next generation telecommunication products and services in conjunction with ongoing cost reductions and uncertainty in relation to the economic outlook renders precise forecasting of the underlying cash flows challenging. There is also estimation uncertainty over the appropriate terminal growth rate and discount rate applied to the projected cashflows.

In the current year the Group recognised an impairment charge against goodwill allocated to the Business CGU of £488mn (FY23: nil), reflecting the execution risk of the CGU's business plan and increased uncertainty over the projected cashflows.

The effect of these matters is that, as part of our risk assessment, we determined that the value in use used to support the recoverable amount of the goodwill allocated to the Business CGU has a high degree of estimation uncertainty, with a potential range of reasonable impairment outcomes greater than our materiality for the financial statements as a whole, and possibly many times that amount. The financial statements (note13) disclose the sensitivity estimated by the Group.

Our response to the risk

Our procedures to address the risk included:

Our valuation expertise: Using our own valuation specialists, assessing the methodology, principles and integrity of the value in use model.

Benchmarking assumptions: Challenging the appropriateness of the Business CGU discount rate and long-term growth rate by determining an independent discount rate and benchmarking the long term growth rate against externally derived data and analyst reports.

Our sector experience: Using our sector experience inspecting the Group's medium term strategic plans used to derive the forecast cash flows and comparing the assumptions applied by the directors in the forecast cash flows against those plans, and the forecasts approved by the Board.

Assessing consistency: Assessing the consistency of the forecasts used by the Group across different areas such as goodwill impairment testing and the viability assessment.

Historical comparison: Assessing the historical accuracy of the forecasts used in the Business CGU's impairment model by considering actual performance against prior year budgets and challenging whether the forecast cashflows were risk adjusted based on the downside risks and opportunities identified by the Group.

Sensitivity analysis: Considering the sensitivity of the recoverable amount to reasonably possible changes in the key inputs and assumptions used in determining the value in use of the Business CGU and the resulting impairment charge including the impact of changes in EBITDA compound annual growth rate in the forecast period, long term growth rate and discount rate.

Comparing valuations: Performing a stand back assessment by comparing the combined value in use of all of the CGUs of the Group to the Group's market capitalisation to assess the reasonableness of those cash flows and assessing and challenging the difference and whether the assumptions applied in the impairment test were acceptable.

Assessing transparency: Assessing whether the Group's disclosures about the sensitivity of the outcome of the impairment assessment to changes in key assumptions reflected the risks inherent in the recoverable amount of goodwill.

We performed the detailed 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.

Communications with the Audit and Risk Committee Our discussions with and reporting to the Audit and Risk Committee included:

• Our definition of the key audit matter relating to the impairment of goodwill allocated to the Business CGU.
• Our audit response to the key audit matter which included our assessment of the forecasted cashflows and the use of specialists to challenge the value in use model and key assumptions and our assessment over accuracy and completeness of the disclosures.

Areas of particular auditor judgement

We identified the following as the areas of particular auditor judgement:

• Subjective and complex auditor judgement was required in evaluating the key assumptions included in the estimation of the value in use. This includes the quantum of risk adjustments needed to be applied to forecasts to account for the underlying execution risk associated with the transition from legacy to next generation products and services, in conjunction with an ongoing project to reduce the CGU's cost base to deliver those products and services. This is in addition to the evaluation of the terminal growth rate and discount rate.
• We performed an assessment of whether an understatement of the impairment charge identified through these procedures was material.

Our results

We found the goodwill allocated to the Business CGU balance, and the related impairment charge, to be acceptable (FY23: acceptable.

Further information in the Annual Report and Accounts: See the Audit and Risk Committee Report on page 101 for details on how the Audit and Risk Committee considered impairment of goodwill as an area of significant attention, page 168 for the accounting policy on Impairment on goodwill (note 13) for the financial disclosures.

4.3 Valuation of defined benefit obligation of the BT Pension Scheme (BTPS) (Group)

Financial Statement Elements

	FY24	FY23
BTPS Obligation	£40.0bn	£41.6bn
Our assessment of risk vs FY23
çè
Our results

FY24: Acceptable FY23: Acceptable

Description of the Key Audit Matter

Subjective valuation

The valuation of the BT pension scheme ("BTPS") defined benefit obligation is complex and requires a significant degree of estimation in determining the assumptions. It is dependent on key actuarial assumptions, including the discount rate, retail price index ("RPI") and mortality assumptions. A change in the methodology applied or small changes in the key actuarial assumptions may have a significant impact on the measurement of the defined benefit pension obligation.

The effect of these matters is that, as part of our risk assessment, we determined the valuation of the BTPS defined benefit obligation had 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 19) disclose the key sensitivities of the defined benefit pension obligation to changes in key assumptions.

Our response to the risk

Our procedures to address the risk included:

Evaluation of the Group's experts: 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.

Our actuarial expertise: With the support of our own actuarial specialists, we performed the following:

• Evaluating the judgements made and the appropriateness of methodologies used by the Group and the Group's experts in determining the key actuarial assumptions;
• Comparing the assumptions used by the Group to our independently compiled expected ranges based on market observable data points and our market experience.

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.

Communications with the Audit and Risk Committee Our discussions with and reporting to the Audit and Risk

Committee included:

• Our definition of the key audit matter relating to the valuation of the defined benefit obligation of the BTPS.
• Our audit response to the key audit matter which included the use of specialists to challenge key aspects of the Group's actuarial valuation.

Areas of particular auditor judgement

We identified the following as the areas of particular auditor judgement:

– Subjective and complex auditor judgement was required in evaluating the key actuarial assumptions used by the Group (including the discount rate, retail price index and mortality assumptions).

Our results

We found the valuation of the defined benefit obligation of the BT Pension Scheme and related disclosures to be acceptable (FY23: acceptable).

Further information in the Annual Report and Accounts: See the Audit and Risk Committee Report on page 101 for details on how the Audit and Risk Committee considered the valuation of defined benefit obligation of the BTPS as an area of significant attention, page 185 for the accounting policy on the Retirement Benefit Plan (note 19) for the financial disclosures.

4.4 Valuation of unquoted assets in the BT Pension Scheme (BTPS) (Group)

Financial Statement Elements

	FY24	FY23
Longevity Insurance Contract for the BTPS: included within the unquoted BTPS plan assets	£(0.9)bn	£(0.8)bn
Our assessment of risk vs FY23
ê
Our results

FY24: Acceptable FY23: Acceptable

Description of the Key Audit Matter

Subjective valuation

The BTPS have unquoted plan assets in private equity, UK and overseas property, mature infrastructure, longevity insurance contracts, secure income and non-core credit assets which are classified as fair value level three 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. The Group engages valuation experts to value these assets.

In FY24, the most significant valuation judgement of the above is in respect of a longevity insurance contract. The key unobservable inputs used to determine the fair value of that longevity insurance contract include the discount rate and projected future mortality.

The effect of these matters is that, as part of our risk assessment, we determined that the valuation of a longevity insurance contract asset held by 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 19) disclose the key sensitivities of the valuation of plan assets to changes in key assumptions.

Our response to the risk

Our procedures to address the risk 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 the valuation of a longevity insurance contract.

Comparing valuations: Challenging, with the support of our own actuarial specialists, the fair value of a longevity insurance contract by comparing with an independently developed range of fair values using assumptions, such as the discount rate and projected future mortality, based on external data. External data included market views of the impact from COVID on future mortality, market discount rates and the demographic analysis available from the 30 June 2023 triennial funding valuation.

Assessing transparency: Considering the adequacy of the Group's disclosures in respect of the sensitivity of a longevity insurance contract asset valuation to these assumptions.

We performed the detailed tests above rather than seeking to rely on any of the Group's controls because our knowledge of the design of these controls indicated that we would not be able to obtain the required evidence to support reliance on controls.

Communications with the Audit and Risk Committee Our discussions with and reporting to the Audit and Risk

Committee included:

• Our definition of the key audit matter relating to the valuation of a longevity insurance contract.
• Our audit response to the key audit matter which included the use of specialists to challenge key aspects of the Group's valuation of a longevity insurance contract.

Areas of particular auditor judgement

We identified the following as the areas of particular auditor judgement:

– Subjective and complex auditor judgement was required in evaluating the key assumptions used by the Group (including the discount rate and projected mortality)

Our results

We found the valuation of a longevity insurance contract and related disclosures to be acceptable (FY23: acceptable).

Further information in the Annual Report and Accounts: See the Audit and Risk Committee Report on page 101 for details on how the Audit and Risk Committee considered the valuation of unquoted investments in the BTPS (including the longevity insurance contract) as an area of significant attention, page 185 for the accounting policy on Retirement benefit plans (note 19) for the financial disclosures.

4.5 Recoverability of Parent company investment in subsidiaries

Financial Statement Elements

	FY24	FY23
Investment in subsidiary	£11.3bn	£11.3bn

Our assessment of risk vs FY23

çè
Our results

FY24: Acceptable FY23: Acceptable

Description of the Key Audit Matter

Low risk, high value

The carrying amount of the Parent company investment in subsidiary represents 100% (FY23: 100%), of the Parent company's total assets.

The recoverability is not at a high risk of significant misstatement or subject to significant judgement. However, due to their materiality in the context of the Parent company financial statements, this is considered to be the area that had the greatest effect on our overall Parent company audit.

Our response to the risk

Our procedures to address the risk included:

Test of detail: Comparing the carrying amount of the Parent company's investment with the calculated value in use of the investment.

Comparing valuations: Comparing the carrying amount of the Parent company's investment with the market capitalisation of the Group.

We performed the tests above rather than seeking to rely on any of the Parent 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.

Communications with the Audit and Risk Committee Our discussions with and reporting to the Audit and Risk

Committee included:

• Our definition of the key audit matter and our findings along with the procedures performed to address the corresponding risk.
• The result of our substantive testing.

Areas of particular auditor judgement

We did not identify any areas of particular auditor judgement.

Our results

We found the Parent company's conclusion that there is no impairment of its investment in subsidiary to be acceptable (FY23: acceptable).

Further information in the Annual Report and Accounts: Refer to page 224 for the accounting policy on Investments in Subsidiaries Undertakings.

We continue to perform procedures over the ongoing measurement of balances held in relation to BT's investment in the Sports JV. However, in FY23 all significant risks were associated with the disposal accounting and subsequent re-investment in the Sports JV related to the initial recognition of balances. We have concluded there are no significant risks over the subsequent measurement of these balances in FY24 and therefore we have not identified a related KAM in our audit report in FY24.

5. Our ability to detect irregularities, and our response

Fraud – Identifying and responding to risks of material misstatement due to fraud

Fraud risk assessment

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 and Risk 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 targets for management remuneration;
• using analytical procedures to identify any unusual or unexpected relationships.

Risk communications

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 the Group level.

Fraud risks

As required by auditing standards and taking into account possible pressures to meet profit targets, recent revisions to guidance and our overall knowledge of the control environment, we perform procedures to address the risk of management override of controls, and the risk of fraudulent revenue recognition in relation to certain revenue streams in Business, in particular:

• the risk that Group and component management may be in a position to make inappropriate accounting entries; and
• the risk that certain revenue streams in Business are overstated given the bespoke nature of the pricing structure within these contracts and associated risk of processing errors.

Procedures to address fraud risks

In determining the audit procedures, we took into account the results of our evaluation and test of operating effectiveness of some of the Group-wide fraud risk management controls.

We also performed procedures including:

• Identifying journal entries to test for all full scope components based on high 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;
• Increased testing over certain revenue streams in Business.
• Evaluating the business purpose for significant unusual transactions.

Laws and regulations – Identifying and responding to risks of material misstatement relating to compliance with laws and regulations

Laws and regulations risk assessment

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.

Risk communications

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 audit team any instances of non-compliance with laws and regulations that could give rise to a material misstatement at the Group level.

The potential effect of these laws and regulations on the financial statements varies considerably.

Direct laws context and link to audit

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.

Most significant indirect law/ regulation areas

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.

Known actual or suspected matters

For the legal matters discussed in note 18 we assessed disclosures against our understanding from legal correspondence.

Significant actual or suspected breaches discussed with Audit and Risk Committee

We discussed with the Audit and Risk Committee other matters related to actual or suspected breaches of laws or regulations, for which disclosure is not necessary, and considered any implications for our audit.

Context

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 noncompliance 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 fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal controls. Our audit procedures are designed to detect material misstatement. We are not responsible for preventing non-compliance or fraud and cannot be expected to detect non-compliance with all laws and regulations.

6. Our determination of materiality

The scope of our audit was influenced by our application of materiality. We set quantitative thresholds and overlay qualitative considerations to help us determine the scope of our audit and the nature, timing and extent of our procedures, and in evaluating the effect of misstatements, both individually and in the aggregate, on the financial statements as a whole.

£135m (FY23: £95m)

Materiality for the Group financial statements as a whole

What we mean

A quantitative reference for the purpose of planning and performing our audit.

Basis for determining materiality and judgements applied

Materiality for the Group financial statements as a whole was set at £135m (FY23: £95m). This was determined with reference to a benchmark of Total Revenue (of which it represents 0.65% (FY23: 4.95% of normalised PBTCO)).

A key judgement in determining materiality was selecting the most relevant metric as the benchmark, considering which metrics have the greatest bearing on shareholder decisions. The relevant metrics considered for the current year included Revenue, Earnings before interest, taxes, depreciation and amortisation ("EBITDA"), Profit before tax from continuing operations ("PBTCO"), and Total assets. The selected benchmark for the current year is "Revenue," which represents a change from the prior period where the selected benchmark was PBTCO. The change to Revenue is deemed appropriate given shareholders' focus on revenue and cash generation and the current stage of the Fibre To The Premise ("FTTP") capital investment program. In the context of the high levels of capital investment for future growth, Revenue is considered a more representative and stable measure of performance.

Our Group materiality of £135m was determined by applying a percentage to the Total Revenue. When using a benchmark of Total Revenue to determine overall materiality, KPMG's approach for listed entities considers a guideline range 0.5% – 1% of the measure. In setting overall Group materiality, we applied a percentage of 0.65% (FY23: 4.95% of normalised PBTCO) to the benchmark.

Materiality for the Parent company financial statements as a whole at £100m (FY23: £90m), determined with reference to a benchmark of Parent Company total assets, limited to be less than materiality for Group materiality as a whole. It represents 0.89% (FY23: 0.80%) of the stated benchmark.

£87.7m (FY23: £61.7m) Performance materiality

What we mean

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.

Basis for determining performance materiality and judgements applied

We have considered performance materiality at a level of 65% (FY23: 65%) of materiality for BT Group plc's Group financial statements as a whole to be appropriate.

The Parent company performance materiality was set at £65m (FY23: £58.5m), which equates to 65% (FY23: 65%) of materiality for the Parent company financial statements as a whole.

We applied this percentage in our determination of performance materiality based on the level of identified misstatements and control deficiencies during the year and the prior year.

£5.4m (FY23: £4.75m) Audit misstatement posting threshold

What we mean

This is the amount below which identified misstatements are considered to be clearly trivial from a quantitative point of view. We may become aware of misstatements below this threshold which could alter the nature, timing and scope of our audit procedures, for example if we identify smaller misstatements which are indicators of fraud.

This is also the amount above which all misstatements identified are communicated to BT Group plc's Audit and Risk Committee.

Basis for determining the audit misstatement posting threshold and judgements applied

We set our audit misstatement posting threshold at 4% (FY23: 5%) of our materiality for the Group financial statements. We also report to the Audit and Risk Committee any other identified misstatements that warrant reporting on qualitative grounds.

The overall materiality for the Group financial statements of £135m (FY23: £95m) compares as follows to the main financial statement caption amounts:

KPMG LLP's Independent Auditor's Report to the members of BT Group plc continued

Total Group Revenue

	FY24	FY23
Financial statement Caption	£20,797m	£20,681m
Group Materiality as % of caption	0.65%	0.46%

Group Profit Before Tax

	FY24	FY23
Financial statement Caption	£1,186m	£1,729m
Group Materiality as % of caption	11.38%	5.49%

Total Group Assets

	FY24	FY23
Financial statement Caption	£51,739m	£52,752m
Group Materiality as % of caption	0.26%	0.18%

7. The scope of our audit

Group scope

What we mean

How the Group audit team determined the procedures to be performed across the Group.

The Group has 215 (FY23: 226) reporting components. In order to determine the work performed at the reporting component level, we identified those components which we considered to be of individual financial significance, those which were significant due to risk and those remaining components on which we required procedures to be performed to provide us with the evidence we required in order to conclude on the Group financial statements as a whole.

We determined individually financially significant components as those contributing at least 10% (FY23: 10%) of revenue or total assets. We selected revenue and total assets because these are the most representative of the relative size of the components. We identified 2 (FY23: 2) components as individually financially significant components and performed full scope audits on these components.

We selected 1 (FY23: 1) components for which we performed work other than audits for Group reporting purposes, that was not individually significant but were included in the scope of our Group reporting work in order to provide further coverage over the Group's results.

The components within the scope of our work accounted for the following percentages of the Group's results, with the prior year comparatives indicated in brackets:

Scope	Number of components	Range of materiality applied	Group Revenue	Group PBT	Group Total assets
Full scope audit	2 (2)	£90m – £110m (£60m – £80m)	87% (86%)	83% (78%)	96% (90%)
Specified audit procedure	1(1)	£50m (£35m)	0% (0%)	10%* (11%)	0% (0%)

*as a % of Total operating cost

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 those.

The work on 1 of the 3 in scope components (FY23: 1 of the 3 in scope components) was performed by component auditors and the rest, including the audit of the Parent company, was performed by the Group audit team.

The Group audit team has also performed audit procedures on the following areas on behalf of the components:

• Testing of IT Systems
• Litigation and claims

These items were audited by the Group team for efficiency purposes, where the Group team has direct access to the underlying information. The Group team communicated the results of these procedures to the component teams.

The Group team instructed component auditors as to the significant areas to be covered, including the relevant risks detailed above and the information to be reported back. The Group team approved the component materialities, as detailed in the table above, having regard to the mix of size and risk profile of the Group across the components.

The scope of the audit work performed was predominately substantive as we placed limited reliance upon the Group's internal control over financial reporting.

Group audit team oversight

What we mean

The extent of the Group audit team's involvement in component audits.

In working with component auditors, we:

• Held planning calls with component audit teams to discuss the significant areas of the audit relevant to the components;
• Issued Group audit instructions to component auditors on the scope of their work,
• Held risk assessment update discussions with component audit teams before the commencement of the final phases of the audit led by the Group engagement partner and engagement quality control partner;
• Inspected component audit teams' key work papers (in person and/or using remote technology capabilities) to evaluate the quality of execution of the audits of the components.

8. 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.

All other information

Our responsibility

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.

Our reporting

Based solely on that work we have not identified material misstatements or inconsistencies in the other information.

Strategic report and directors' report

Our responsibility and reporting

Based solely on our work on the other information described above we report to you as follows:

• 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

Our responsibility

We are required to form an opinion as to whether the part of the Directors' Remuneration Report to be audited has been properly prepared in accordance with the Companies Act 2006.

Our reporting

In our opinion the part of the Directors' Remuneration Report to be audited has been properly prepared in accordance with the Companies Act 2006.

Corporate governance disclosures

Our responsibility

We are required to perform procedures to identify whether there is a material inconsistency between the financial statements and our audit knowledge, and:

• 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 and Risk Committee, including the significant matters that the Audit and Risk Committee considered in relation to the financial statements, and how these issues were addressed; and
• the section of the annual report that describes the review of the effectiveness of the Group's risk management and internal control systems.

We are also 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.

Our reporting

Based on those procedures, we have concluded that each of these disclosures is materially consistent with the financial statements and our audit knowledge.

We have nothing to report in this respect.

Other matters on which we are required to report by exception

Our responsibility

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.

Our reporting

We have nothing to report in these respects.

9. Respective responsibilities

Directors' responsibilities

As explained more fully in their statement set out on page 125, 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.

KPMG LLP's Independent Auditor's Report to the members of BT Group plc continued

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.

The Company is required to include these financial statements in an annual financial report prepared under Disclosure Guidance and Transparency Rule 4.1.17R and 4.1.18R. This auditor's report provides no assurance over whether the annual financial report has been prepared in accordance with those requirements.

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. 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 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.

Jonathan Mills for and on behalf of KPMG LLP, Statutory Auditor Chartered Accountants 15 Canada Square London E14 5GL 15 May 2024

Group income statement

Year ended 31 March 2024

	Before specific items		Specific	Total
	Notes	('Adjusted') £m	itemsa £m	(Reported) £m
Revenue	4, 5	20,835	(38)	20,797
Operating costs	6	(17,634)	(949)	(18,583)
Of which net impairment losses on trade receivables and contract assets		(165)	—	(165)
Of which goodwill impairment	13	—	(488)	(488)
Operating profit (loss)	4	3,201	(987)	2,214
Finance expense	27	(1,067)	(121)	(1,188)
Finance income		181	—	181
Net finance expense		(886)	(121)	(1,007)
Share of post tax profit (loss) of associates and joint ventures	24	(21)	—	(21)
Profit (loss) before taxation		2,294	(1,108)	1,186
Taxation	10	(476)	145	(331)
Profit (loss) for the year		1,818	(963)	855
Earnings per share	11
Basic		18.5p	(9.8) p	8.7p
Diluted		18.2p	(9.6) p	8.6p

Group income statement

Year ended 31 March 2023

		Before specific items	Specific	Total
		('Adjusted')	itemsa	(Reported)
	Notes	£m	£m	£m
Revenue	4, 5	20,669	12	20,681
Operating costs	6	(17,494)	(568)	(18,062)
Of which net impairment losses on trade receivables and contract assets		(138)	—	(138)
Of which goodwill impairment	13	—	—	—
Operating profit (loss)	4	3,175	(556)	2,619
Finance expense	27	(889)	(5)	(894)
Finance income		63	—	63
Net finance expense		(826)	(5)	(831)
Share of post tax profit (loss) of associates and joint ventures	24	(59)	—	(59)
Profit (loss) before taxation		2,290	(561)	1,729
Taxation	10	(132)	308	176
Profit (loss) for the year		2,158	(253)	1,905
Earnings per share	11
Basic		22.0p	(2.6) p	19.4p
Diluted		21.4p	(2.5) p	18.9p

a Specific items are defined and analysed in note 9.

Group statement of comprehensive income

Year ended 31 March

		2024	2023
	Notes	£m	£m
Profit for the year		855	1,905
Other comprehensive income (loss)
Items that will not be reclassified to the income statement
Remeasurements of the net pension obligation	19	(2,444)	(2,876)
Tax on pension remeasurements	10	600	732
Items that have been or may be reclassified to the income statement
Exchange differences on translation of foreign operations	29	(66)	87
Fair value movements on assets at fair value through other comprehensive income	29	—	(3)
Movements in relation to cash flow hedges:
– net fair value gains (losses)	29	(642)	1,055
– recognised in income and expense	29	356	(713)
Tax on components of other comprehensive income that have been or may be reclassified	10, 29	78	(90)
Share of post tax other comprehensive loss in associates and joint ventures	24	(11)	(1)
Other comprehensive (loss) income for the year, net of tax		(2,129)	(1,809)
Total comprehensive (loss) income for the year		(1,274)	96

Group balance sheet At 31 March

	Notes	2024 £m	2023 £m
Non-current assets
Intangible assets	13	12,920	13,687
Property, plant and equipment	14	22,562	21,667
Right-of-use assets	15	3,642	3,981
Derivative financial instruments	28	1,020	1,397
Investments	23	29	29
Joint ventures and associates	24	307	359
Trade and other receivables	16	641	503
Preference shares in joint ventures	24	451	542
Contract assets	5	330	369
Retirement benefit surplus	19	70	52
Deferred tax assets	10	1,048	709
		43,020	43,295
Current assets
Inventories		409	349
Trade and other receivables	16	3,565	3,060
Preference shares in joint ventures	24	82	13
Contract assets	5	1,410	1,565
Assets classified as held for sale	22	—	21
Current tax receivable		423	427
Derivative financial instruments	28	50	82
Investments	23	2,366	3,548
Cash and cash equivalents	25	414	392
		8,719	9,457
Current liabilities Loans and other borrowings	26	1,395	1,772
Derivative financial instruments	28	94	86
Trade and other payables	17	6,327	6,564
Contract liabilities	5	906	859
Lease liabilities	15	766	800
Liabilities classified as held for sale	22	—	4
Current tax liabilities		92	78
Provisions	18	238	229
		9,818	10,392
Total assets less current liabilities		41,921	42,360
Non-current liabilities
Loans and other borrowings	26	17,131	16,749
Derivative financial instruments	28	445	297
Contract liabilities	5	175	193
Lease liabilities	15	4,189	4,559
Retirement benefit obligations	19	4,882	3,139
Other payables	17	637	920
Deferred tax liabilities	10	1,533	1,620
Provisions	18	411	369
		29,403	27,846
Equity
Share capital		499	499
Share premium		1,051	1,051
Own shares	20	(311)	(422)
Merger reserve		998	998
Other reserves	29	716	957
Retained earnings		9,565	11,431
Total equity		12,518 41,921	14,514 42,360

The consolidated financial statements on pages 145 to 221 were approved by the Board of Directors on 15 May 2024 and were signed on its behalf by:

Group statement of changes in equity

	Notes	Share capitala £m	Share premiumb £m	Own sharesc £m	Merger reserved £m	Other reservese £m	Retained earnings (loss) £m	Total equity (deficit) £m
At 1 April 2022		499	1,051	(274)	998	619	12,391	15,284
Profit for the year		—	—	—	—	—	1,905	1,905
Other comprehensive income (loss) – before tax		—	—	—	—	1,141	(2,879)	(1,738)
Tax on other comprehensive income (loss)	10	—	—	—	—	(90)	732	642
Transferred to the income statement		—	—	—	—	(713)	—	(713)
Total comprehensive income (loss) for the year		—	—	—	—	338	(242)	96
Dividends to shareholders	12	—	—	—	—	—	(753)	(753)
Share-based payments	21	—	—	—	—	—	80	80
Tax on share-based payments	10	—	—	—	—	—	(9)	(9)
Net buyback of own shares	20	—	—	(148)	—	—	(34)	(182)
Other movements		—	—	—	—	—	(2)	(2)
At 31 March 2023		499	1,051	(422)	998	957	11,431	14,514
Profit for the year		—	—	—	—	—	855	855
Other comprehensive income (loss) – before tax		—	—	—	—	(708)	(2,455)	(3,163)
Tax on other comprehensive income (loss)	10	—	—	—	—	78	600	678
Transferred to the income statement		—	—	—	—	356	—	356
Total comprehensive income (loss) for the year		—	—	—	—	(274)	(1,000)	(1,274)
Dividends to shareholders	12	—	—	—	—	—	(757)	(757)
Share-based payments	21	—	—	—	—	—	71	71
Tax on share-based payments	10	—	—	—	—	—	(12)	(12)
Net buyback of own shares	20	—	—	111	—	—	(137)	(26)
Transfer to realised profitf		—	—	—	—	33	(33)	—
Other movements		—	—	—	—	—	2	2
At 31 March 2024		499	1,051	(311)	998	716	9,565	12,518

a The allotted, called up, and fully paid ordinary share capital of BT Group plc at 31 March 2024 was £499m comprising 9,968,127,681 ordinary shares of 5p each (31 March 2023:

£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 20.

d The merger reserve balance at 1 April 2022 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.

e For further analysis of other reserves, see note 29.

f Includes amounts relating to disposal of investments, for further analysis see note 29.

Group cash flow statement

Year ended 31 March

		2024	2023
	Notes	£m	£m
Cash flow from operating activities
Profit before taxation		1,186	1,729
Share of post tax loss (profit) of associates and joint ventures		21	59
Net finance expense		1,007	831
Operating profit		2,214	2,619
Other non-cash charges		76	89
(Profit) loss on disposal of businessesa		(15)	157
Loss (profit) on disposal of property, plant and equipment and intangible assets		3	2
Depreciation and amortisation, including impairment chargesb	6	5,398	4,818
(Increase) decrease in inventories		(60)	(47)
Decrease in programme rights		—	7
(Increase) decrease in trade and other receivables		(843)	(285)
Decrease (increase) in contract assets		157	(17)
(Decrease) increase in trade and other payables		(89)	232
Increase (decrease) in contract liabilities		39	41
(Decrease) increase in other liabilitiesc		(850)	(919)
(Decrease) increase in provisions		(18)	(109)
Cash generated from operations		6,012	6,588
Income taxes (paid) refunded		(59)	136
Net cash inflow from operating activities		5,953	6,724
Cash flow from investing activities
Interest received		140	41
Dividends received from joint ventures, associates and investments		20	9
Proceeds on disposal of businesses		81	29
Proceeds on disposal of current financial assetsd		12,389	11,868
Purchases of current financial assetsd		(11,216)	(12,705)
Net (purchase) disposal of non-current asset investments		—	(5)
Proceeds on disposal of property, plant and equipment and intangible assets		2	—
Purchases of property, plant and equipment and intangible assetse		(4,969)	(5,307)
Prepayment for forward sale of copperf		105	—
Decrease (increase) in amounts owed by joint ventures		117	(265)
Settlement of minimum guarantee liability with sports joint venture	17	(211)	(61)
Net cash outflow from investing activities		(3,542)	(6,396)
Cash flow from financing activities
Equity dividends paid		(759)	(751)
Interest paid		(865)	(709)
Repayment of borrowingsg		(1,676)	(513)
Proceeds from bank loans and bonds		2,242	2,203
Payment of lease liabilities		(748)	(727)
Cash flows from collateral (paid) receivedh		(532)	(17)
Changes in ownership interests in subsidiaries		(13)	—
Proceeds from exercise of employee share options		57	5
Repurchase of ordinary share capital		(133)	(138)
Increase (decrease) in amounts owed to joint ventures	26	(1)	11
Net cash outflow from financing activities		(2,428)	(636)
Net decrease in cash and cash equivalents		(17)	(308)
Opening cash and cash equivalents		381	692
Net decrease in cash and cash equivalents		(17)	(308)
Effect of exchange rate changes		(8)	(3)
Closing cash and cash equivalentsi	25	356	381

a FY24 net profit comprises £25m profit on divestments completing in the year less £10m net transaction costs in relation to BT Sport disposal, see note 22.

b Depreciation and amortisation includes goodwill impairment charges of £488m (FY23: £nil), see note 13 for further details.

c Includes pension deficit payments of £823m (FY23: £994m).

d Primarily consists of investment in and redemption of amounts held in liquidity funds.

e Property, plant and equipment, engineering stores and software additions of £4,880m (FY23: £5,056m) (see note 4) and capital accruals movements of £89m (FY23: £251m).

f In FY24 we received an upfront prepayment of £105m from entering into a forward agreement to sell copper granules created from surplus copper cables which are currently recognised within property, plant and equipment (note 14). As this is expected to be the only cash flow that occurs as part of this transaction the cash receipt has been included as a separate line within cash flows from investing activities. See note 26 for further details.

g Repayment of borrowings includes the impact of hedging.

h Cash flows relating to cash collateral held in respect of derivative financial assets with certain counterparties, see note 28 for further details.

i Net of bank overdrafts of £58m (FY23: £11m).

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 pages 81 to 82, which 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 63 to 70); and which estimates the financial impact of a severe but plausible outcome for each risk, both individually, in combination and 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.

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 2025, 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.

In preparing the financial statements, the directors have considered the impact of climate change, particularly in the context of the risks identified in the TCFD disclosure on pages 71 to 80 this year. There has been no material impact identified in respect of the judgements and estimates reported in these financial statements. The following impacts were considered:

– Low carbon fleet – see note 14

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 2023 to 31 March 2024 ('FY24'), with comparative figures for the financial year from 1 April 2022 to 31 March 2023 ('FY23').

New and amended accounting standards effective during the year

The following amended standards were effective during the year, none of which had a material impact on the financial statements of the group:

IFRS 17 Insurance Contracts

BT adopted IFRS 17 with retrospective application on 1 April 2023. The standard establishes principles for the recognition, measurement, presentation and disclosure of insurance contracts. The measurement method for insurance contracts required by IFRS 17 is a probability weighted discounted cash flow model, including a best estimate and an adjustment for non-financial risk calculated for groups of similar contracts.

IFRS 17 primarily impacts insurance entities, however, as it applies to individual contracts it is possible that non-insurers could issue contracts that are in scope of the standard such as product breakdown contracts or warranties.

We have assessed the impact of the standard on the group, and concluded that its impact is not material. Contracts in scope of the standard entered into by the group are restricted to intragroup insurance arrangements; the group does not issue external insurance contracts.

Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2)

These amendments require the disclosure of 'material' rather than 'significant' accounting policies. The amendments have not resulted in any changes to accounting policies disclosures made in these financial statements.

International Tax Reform – Pillar Two Model Rules (Amendments to IAS 12 Income Taxes)

The IASB amended the scope of IAS 12 to introduce a temporary mandatory exception from deferred tax accounting for top-up tax arising from the implementation of the OECD Pillar Two model rules. This was endorsed in the UK in July 2023 and applies to accounting periods beginning on or after 1 January 2023.

The group applies the exception to recognising and disclosing information about deferred tax assets and liabilities related to Pillar Two income taxes, as provided in the amendments to IAS 12 issued in May 2023.

Other

The following changes have not had a significant impact on our consolidated financial statements:

• Definition of Accounting Estimate (Amendments to IAS 8)
• Deferred Tax related to Assets and Liabilities arising from a Single Transaction (Amendments to IAS 12)

IFRS Interpretations Committee agenda decisions

The IFRS Interpretations Committee (IFRIC) periodically issues agenda decisions which explain and clarify how to apply the principles and requirements of IFRS. Agenda decisions are authoritative and may require the group to revise accounting policies or practice to align with the interpretations set out in the decision.

We regularly review IFRIC updates and assess the impact of agenda decisions. No agenda decisions finalised during FY24 have been assessed as having a significant impact on the group.

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 and are not expected to have a material impact on the consolidated financial statements:

Supplier Finance Arrangements (Amendments to IAS 7 and IFRS 7)

The amendments will apply to the group from FY25 onwards and require new disclosures relating to supplier finance arrangements that assist in assessing their effects on liabilities, cash flows and exposure to liquidity risk.

We participate in supply chain financing arrangements which the amendments will apply to, see note 17. We will include the required disclosures in the FY25 financial statements.

Other

The following are not expected to have a significant impact on the consolidated financial statements:

• Classification of Liabilities as Current or Non-current (Amendments to IAS 1)
• Non-current Liabilities with Covenants (Amendments to IAS 1)
• Lease Liability in a Sale and Leaseback (Amendments to IFRS 16)
• Lack of Exchangeability (Amendments to IAS 21)

Accounting policy and operating segment changes

During FY24 we changed the methodology used to allocate certain internal costs and our Business CFU began reporting as a single unit.

Allocation of central costs

From 1 April 2023 we have revised the methodology used to allocate shared Network, Digital and support function costs across our units to more closely align the recharges received by each unit to their actual consumption and establish clearer driver-focused allocation of cost, harmonise principles for pricing and profitability, and support greater unit cost ownership and management and decision making.

This represents an accounting policy change and in line with the requirements of IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors we have re-presented FY23 comparatives to enable comparability across periods.

Creation of the Business unit

As disclosed in the FY23 financial statements, the Enterprise and Global CFUs have been combined into a single CFU, Business, which began reporting as a single unit from 1 April 2023.

In line with the requirements of IFRS 8 Operating Segments, we have re-presented FY23 comparatives to reflect the combined unit.

Re-presentation of prior year comparatives

These changes have resulted in re-presentation of prior year comparatives. Changes affect segmental disclosures only and have no impact on the overall reported group financial results.

The following disclosures are impacted by the creation of the Business unit only. Re-presentation of prior year comparatives is limited to the combination of the balances previously reported in respect of the Enterprise and Global units, with no further adjustments:

• Note 5 Revenue: disaggregation of external revenue
• Note 7 Employees: number of employees
• Note 16 Trade and other receivables: trade receivables not past due and accrued income by CFU

Note 4 Segment information is also impacted by changes to the allocation of shared costs. Re-presentation of comparatives has involved adjustments to reallocate internal costs to report on a like-for-like basis with FY24 and to remove internal trading between the Enterprise and Global units. Note 32 presents a bridge between previously published FY23 financial information and comparatives presented in these disclosures: Also presented is a bridge in respect of the CFU normalised free cash flow comparatives which are re-presented in the Additional information on page 231 .

Presentation of 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 of 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 significant business restructuring programmes such as the current group-wide cost transformation and modernisation programme, acquisitions and disposals of businesses and investments, impairment of goodwill, charges or credits relating to retrospective regulatory matters, property rationalisation programmes, historical property-related provisions, 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. Conversely, when a reversal occurs in relation to a prior year item not classified as specific, the reversal is not classified as specific in the current year.

Movements relating to the sports joint venture (Sports JV) with Warner Bros. Discovery (WBD), such as fair value gains or losses on the A and C preference shares or impairment charges on the equity-accounted investment are classified as specific. Refer to note 24 for further detail.

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 material accounting policies that have a material impact on the amounts presented in the financial statements. We may exercise significant judgement in our critical and key accounting estimates.

Our critical and key accounting estimates and significant judgements are described in the following notes to the financial statements. They can be identified by the following symbol .

Note	Critical estimate	Key estimate	Significant judgement
5. Estimate of customer refund liability		ü
10. Current and deferred income tax		ü	ü
13. Goodwill impairment	ü		ü
14. Determining the point of sale of BT Tower			ü
15. Reasonable certainty and determination of lease terms			ü
18. Identifying contingent liabilities			ü
18. Provisions		ü	ü
19. Valuation of pension assets and liabilities	ü		ü
24. Valuation of investment in A preference shares in Sports joint venture		ü

Notes to the consolidated financial statements continued

3. Material accounting policies that apply to the overall financial statements

The material accounting policies applied in the preparation of our consolidated financial statements are set out below. Other material 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.

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 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.

Associates are those entities in which the group has significant influence, but not control or joint control, over the financial and operating policies.

A joint venture is an arrangement in which the group has joint control, whereby the group has rights to the net assets of the arrangement, rather than rights to its assets and obligations for its liabilities. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the activities that significantly affect the returns of the arrangement require the unanimous consent of the parties sharing control.

Interests in associates and joint ventures are initially recognised at cost (including transaction costs) except where they relate to a retained non-controlling interest in a former subsidiary, which is initially recognised at a deemed cost being the fair value of the retained interest. Subsequent to initial recognition, the consolidated financial statements include the group's share of the profit or loss and other comprehensive income of equityaccounted investees, until the date on which significant influence or joint control ceases.

Inventories

Network maintenance equipment and equipment to be sold to customers are stated at the lower of cost or net realisable value, taking into account expected revenue from the sale of packages comprising a mobile handset and a subscription. Cost corresponds to purchase or production cost determined by either the first in first out (FIFO) or average cost method.

Government grants

Government grants are recognised when there is reasonable assurance that the conditions associated with the grants have been complied with and the grants will be received.

Grants for the purchase or production of property, plant and equipment are deducted from the cost of the related assets and reduce future depreciation expense accordingly. Grants for the reimbursement of operating expenditure are deducted from the related category of costs in the income statement. Estimates and judgements applied in accounting for government grants received in respect of Building Digital UK (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

The consolidated financial statements are presented in sterling, which is also the company's functional currency. Each group entity determines its own functional currency.

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 the group's presentation currency at year end exchange rates. The results of foreign undertakings are translated into sterling at the rates prevailing on the transaction dates. Foreign exchange differences arising on the retranslation of foreign undertakings are recognised directly in a separate component of equity, the translation reserve. There is no material exposure to companies operating in hyperinflationary economies.

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.

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.

4. Segment information

Material 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). The CFUs are our reportable segments and generate substantially all of our revenue.

During the year to 31 March 2024 the group had three CFUs: Consumer, Business and Openreach. Business was formed from the merger of the Global and Enterprise units during FY23 and has been monitored by the Executive Committee on a consolidated basis since 1 April 2023.

The CFUs are supported by technology units (TUs) comprising Digital and Networks; and corporate units (CUs) including procurement and property management. 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 them in 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, in which case they are not reflecting in the results of the reportable segment in line with how they are reported to the Executive Committee.

The costs incurred by TUs and CUs are recharged to the CFUs to reflect the services provided 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 among 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. Adjusted EBITDA is defined as the group profit or loss before specific items, net finance expense, taxation, depreciation and amortisation and share of post tax 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. We also increasingly track adjusted operating profit which reflects the growing depreciation expense arising from our elevated network investment.

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 other 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. Business internal revenue arises from Consumer for mobile Ethernet access and TUs for transmission planning 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 is where we generate the majority of our revenue from external UK customers. The geographic analysis of revenue is based on the country in which the customer is invoiced. The geographic analysis of non-current assets, which excludes derivative financial instruments, investments, preference shares in joint ventures, retirement benefit schemes in surplus and deferred tax assets, is based on the location of the assets.

Notes to the consolidated financial statements continued

4. Segment information continued

Segment revenue and profit

	Consumer	Business	Openreach	Other	Total
Year ended 31 March 2024	£m	£m	£m	£m	£m
Segment revenue	9,833	8,128	6,077	16	24,054
Internal revenue	(47)	(71)	(3,101)	—	(3,219)
Adjusteda revenue from external customers	9,786	8,057	2,976	16	20,835
Adjusted EBITDAb	2,672	1,630	3,827	(29)	8,100
Depreciation and amortisationa	(1,738)	(984)	(2,052)	(125)	(4,899)
Adjusteda operating profit (loss)	934	646	1,775	(154)	3,201
Specific operating profit (loss) – see note 9					(987)
Operating profit					2,214
Net finance expensec					(1,007)
Share of post tax (loss) profit of associates and joint ventures					(21)
Profit before tax					1,186
	Consumer	Business	Openreach	Other	Total
Year ended 31 March 2023 (re-presentedd )	£m	£m	£m	£m	£m
Segment revenue	9,737	8,258	5,675	27	23,697
Internal revenue	(57)	(81)	(2,890)	—	(3,028)
Adjusteda revenue from external customers	9,680	8,177	2,785	27	20,669
Adjusted EBITDAb	2,469	1,945	3,510	4	7,928
Depreciation and amortisationa	(1,603)	(1,047)	(1,965)	(138)	(4,753)
Adjusteda operating profit (loss)	866	898	1,545	(134)	3,175
Specific operating profit (loss) – see note 9					(556)
Operating profit					2,619
Net finance expensec					(831)
Share of post tax (loss) profit of associates and joint ventures					(59)
Profit before tax					1,729

a Before specific items.

b Adjusted EBITDA is defined as profit or loss before specific items, net finance expense, taxation, depreciation and amortisation and share of post tax profits or losses of associates and joint ventures.

c Net finance expense includes specific item expense of £121m (FY23: £5m). See note 9.

d Comparatives for the year ended 31 March 2023 have been re-presented for the impact of the creation of our Business customer-facing unit and a change in the methodology used to allocate shared central costs. For more information see note 1, and for a bridge to prior period published financial information see note 32.

Internal revenue and costs

	Internal cost recorded by
	Consumer	Business	Openreach	Other	Total
Year ended 31 March 2024	£m	£m	£m	£m	£m
Internal revenue recorded by
Consumer	—	46	—	1	47
Business	23	—	—	48	71
Openreach	2,044	1,043	—	14	3,101
Total	2,067	1,089	—	63	3,219

		Internal cost recorded by
	Consumer	Business	Openreach	Other	Total
Year ended 31 March 2023 (re-presenteda )	£m	£m	£m	£m	£m
Internal revenue recorded by
Consumer	—	56	—	1	57
Business	26	—	—	55	81
Openreach	1,805	1,072	—	13	2,890
Total	1,831	1,128	—	69	3,028

a Comparatives for the year ended 31 March 2023 have been re-presented for the impact of the creation of our Business customer-facing unit. For more information see note 1, and for a bridge to prior period published financial information see note 32.

4. Segment information continued

Capital expenditure

	Consumer	Business	Openreach	Other	Total
Year ended 31 March 2024	£m	£m	£m	£m	£m
Intangible assetsa	439	361	135	3	938
Property, plant and equipmentb	736	414	2,710	82	3,942
Capital expenditure	1,175	775	2,845	85	4,880
	Consumer	Business	Openreach	Other	Total
Year ended 31 March 2023 (re-presentedc )	£m	£m	£m	£m	£m
Intangible assetsa	552	361	101	4	1,018
Property, plant and equipmentb	669	525	2,746	98	4,038
Capital expenditure	1,221	886	2,847	102	5,056

a Additions to intangible assets as presented in note 13.

b Additions to property, plant and equipment as presented in note 14, inclusive of movement on engineering stores.

c Comparatives for the year ended 31 March 2023 have been re-presented for the impact of the creation of our Business customer-facing units. For more information see note 1, and for a bridge to prior period published financial information see note 32.

Geographic segmentation

Revenue from external customers

Adjusteda revenue	20,835	20,669
Asia Pacific	465	459
Americas	617	684
Europe, Middle East and Africa, excluding the UK	1,303	1,372
UK	18,450	18,154
Year ended 31 March	£m	£m
	2024	2023

a Before specific items.

Non-current assets

	2024	2023
At 31 March	£m	£m
UK	39,370	39,387
Europe, Middle East and Africa, excluding the UK	634	740
Americas	251	283
Asia Pacific	147	156
Non-current assetsa	40,402	40,566

a Comprising the following balances presented in the group balance sheet: intangible assets, property, plant and equipment, right-of-use assets, joint ventures and associates, trade and other receivables and contract assets.

Notes to the consolidated financial statements continued

5. Revenue

Material accounting policies that apply to revenue

Revenue from contracts with customers in scope of IFRS 15

Most revenue recognised by the group is in scope of IFRS 15, excluding Openreach where most revenue is in scope of IFRS 16. The revenue recognition policy for both is set out below.

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 2024 that contain unsatisfied performance obligations.

Service line	Performance obligations	Revenue recognition policy
Information and communications technology (ICT) and managed networks	Provision of networked IT services, managed network services, and arrangements to design and build software solutions. Performance obligations are identified for each distinct service or deliverable for which the customer has contracted, and are considered to be satisfied over the time period that we deliver these services or deliverables. Commitments to provide hardware to customers that are distinct from the other promises are considered to be satisfied at the point in time that control passes to the customer.	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 access subscriptions	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.	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.
Mobile subscriptions	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.	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.
Equipment and other services	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 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.

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. Contracts are largely inflation-linked with price increases recognised when effective. 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 adopt variable consideration to allocate the transaction price to take account of the likelihood of the customer upgrading to a new handset during the contract term. Consideration is constrained to a period shorter than the contract term and is allocated to the handset and airtime based on relative standalone selling price. Certain Business long term contracts offer rebates to our customers. Where this is the case we make an estimate of variable consideration at the outset of the contract based on assumed volumes. These rebates are normally settled monthly against service revenues.

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.

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 standalone 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. Finance lease receivables are presented in note 16. 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).

Notes to the consolidated financial statements continued

5. Revenue continued

Disaggregation of external revenue

The following table disaggregates external revenue by our major service lines and by reportable segment.

	Consumer	Business	Openreach	Other	Total
Year ended 31 March 2024	£m	£m	£m	£m	£m
ICT and managed networks	—	3,592	—	—	3,592
Fixed access subscriptions	4,333	2,149	2,900	—	9,382
Mobile subscriptions	3,557	1,187	—	—	4,744
Equipment and other services	1,896	1,129	76	16	3,117
Revenue before specific items	9,786	8,057	2,976	16	20,835
Specific itemsa (note 9)					(38)
Revenue					20,797
Year ended 31 March 2023	Consumer	Business	Openreach	Other	Total
(re-presentedb )	£m	£m	£m	£m	£m
ICT and managed networks	—	3,352	—	—	3,352
Fixed access subscriptions	4,059	1,893	2,716	—	8,668
Mobile subscriptions	3,351	1,160	—	—	4,511
Equipment and other services	2,270	1,772	69	27	4,138
Revenue before specific items	9,680	8,177	2,785	27	20,669
Specific itemsa (note 9)					12
Revenue					20,681

a Relates to regulatory matters classified as specific. See note 9.

b Comparatives for the year ended 31 March 2023 have been re-presented for the impact of the creation of our Business customer-facing unit, formed through the merger of our Enterprise and Global units, see note 1.

Revenue expected to be recognised in future periods for performance obligations that are not complete (or are partially complete) as at 31 March 2024 is £12,133m (FY23: £12,792m). Of this, £6,052m (FY23: £6,592m) 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 £6,081m (FY23: £6,200m) 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.

Key accounting estimates made in accounting for revenue Estimate of customer refunds

Revenue has been adjusted to reflect a risk of billing inaccuracy where there is a high level of manual processing through certain billing systems. This is associated with a small number of products within our Business unit which contain bespoke pricing. £41m has been recognised as an IFRS 9 financial liability and deducted from revenue, and has been derived from an estimate of the possible range of the adjustment from £24m to £64m based on the results of a sample of billing items. This is presented within Note 17 and represents our best estimate required to cover ongoing billing adjustments to products relating to both current and prior periods. If the final quantum of adjustments is less than expected, the adjustment will be released back to the income statement.

Lease income

Presented within revenue is £3,031m (FY23: £2,909m) 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:

• £26m (FY23: £29m) operating lease income from non-core business activities which is presented in other operating income (note 6). Note 15 presents an analysis of payments to be received across the remaining term of operating lease arrangements.
• £40m (FY23: £58m) revenue in relation to upfront gains from arrangements meeting the definition of a finance lease. These arrangements meet the criteria for revenue recognition as they concern leases and sub-leases of telecommunications infrastructure that represent core business activities of the group.

£38m (FY23: £69m) of this income relates to the sub-leasing of right-of-use assets. These are primarily operating sub-leases of unutilised properties, and finance sub-leases of telecommunications infrastructure.

5. Revenue continued

Contract assets and liabilities

Material 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 we have the right to bill. 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 16.

We provide for expected lifetime losses on contract assets following the policy set out in note 16.

Contract assets and liabilities are as follows:

	2024	2023
At 31 March	£m	£m
Contract assets
Current	1,410	1,565
Non-current	330	369
	1,740	1,934
Contract liabilities
Current	906	859
Non-current	175	193
	1,081	1,052

£876m of the contract liability at 31 March 2023 was recognised as revenue during the year (FY23: £903m). Impairment losses of £35m were recognised on contract assets during the year (FY23: £46m).

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 2024 was 3% (FY23: 3%).

Notes to the consolidated financial statements continued

6. Operating costs

	2024	2023
Year ended 31 March Notes	£m	£m
Operating costs by nature
Staff costs:
Wages and salariesa	3,843	3,858
Social security costs	425	424
Other pension costs 19	582	590
Share-based payment expense 21	71	80
Total staff costs	4,921	4,952
Own work capitalised	(1,432)	(1,364)
Net staff costs	3,489	3,588
Net indirect labour costsb	456	381
Net labour costs	3,945	3,969
Product costs	3,527	3,368
Sales commissions	636	589
Payments to telecommunications operators	1,227	1,354
Property and energy costs	1,338	1,242
Network operating and IT costs	930	913
TV programme rights chargesc	—	354
Provision and installation	515	591
Marketing and sales	367	363
Net impairment losses on trade receivables and contract assetsd	165	138
Other operating costs	323	103
Other operating income	(238)	(243)
Depreciation and amortisation, including impairment charges	4,899	4,753
Total operating costs before specific items	17,634	17,494
Specific items 9	949	568
Of which goodwill impairment	488	—
Total operating costs	18,583	18,062
Operating costs before specific items include the following:
Leaver costsc	9	11
Research and development expendituree	726	683
Foreign currency (gains)/losses	(2)	(9)
Inventories recognised as an expense	2,170	2,311

a Leaver costs are included within wages and salaries, except for leaver costs of £242m (FY23: £129m) associated with restructuring costs, which have been recorded as specific items.

b Net indirect labour costs relate to subcontracted labour costs net of capitalised indirect labour costs of £772m (FY23: £824m).

c TV programme rights charges relate to programme rights assets which were transferred to the sports joint venture in August 2022, see note 22.

d Consists of net impairment losses on trade receivables and contract assets in Consumer of £98m (FY23: £94m), in Business of £45m (FY23: £32m), in Openreach of £20m (FY23:

£5m) and in Other of £2m (FY23: £1m).

e Research and development expenditure includes amortisation of £679m (FY23: £632m) in respect of capitalised development costs and operating expenses of £47m (FY23: £51m). In addition, the group capitalised software development costs of £429m (FY23: £503m).

6. Operating costs continued

Depreciation and amortisation, which includes impairment charges, is analysed as follows:

		2024	2023
Year ended 31 March	Notes	£m	£m
Depreciation and amortisation before impairment charges
Intangible assets	13	1,248	1,165
Property, plant and equipment	14	2,892	2,878
Right-of-use assets	15	652	689
Impairment charges
Intangible assets	13	—	—
Property, plant and equipmenta	14	108	11
Right-of-use assetsb	15	(1)	10
Total depreciation and amortisation before specific items		4,899	4,753
Impairment charges classified as specific items	9
Intangible assetsc		488	—
Property, plant and equipment		—	—
Right-of-use assets		11	65
Total depreciation and amortisation		5,398	4,818

a Impairments of network infrastructure and engineering stores in FY24 and other assets in FY23, see note 14.

b FY24 impairment charge reflects a net reversal of impairment on properties reoccupied subsequent to initial impairment.

c FY24 impairment charge represents impairment of goodwill allocated to our Business cash generating unit, further details in note 13.

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:

	2024	2023
Year ended 31 March	£m	£m
Short-term employee benefits	16.6	23.0
Post employment benefitsa	0.7	0.7
Share-based payments	8.1	6.7
	25.4	30.4

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 FY24, one member of key management personnel (FY23: none) exercised saveshare options, see note 21.

7. Employees

	2024			2023
Number of employees in the group	Averagea '000	Averageb FTE '000	Year endb FTE '000	Averagea '000	Averageb FTE '000	Year endb FTE '000
UK	77.3	74.9	71.4	82.2	79.7	77.6
Non-UK	20.1	20.0	20.3	19.1	19.1	19.5
Total employees	97.4	94.9	91.7	101.3	98.8	97.1
Consumer	18.1	16.3	15.8	18.3	16.5	16.4
Businessc	23.6	23.3	22.6	25.0	24.6	24.0
Openreach	35.1	34.9	32.8	37.9	37.6	36.6
Other	20.6	20.4	20.5	20.1	20.1	20.1
Total employees	97.4	94.9	91.7	101.3	98.8	97.1

a Average reflecting monthly average headcount.

b Average reflecting the full-time equivalent of full- and part-time employees, excluding subcontract labour. There were 28.4k FTE agency & subcontract labour at the FY24 year-end (FY23: 33.0k).

c Comparatives for the year ended 31 March 2023 have been re-presented for the impact of the creation of our Business customer-facing unit, formed through the merger of our Enterprise and Global units, see note 1.

Notes to the consolidated financial statements continued

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.

	2024	2023
Year ended 31 March	£000	£000
Fees payable to the company's auditors and its associates for:
Audit servicesa
The audit of the parent company and the consolidated financial statements	14,473	13,558
The audit of the company's subsidiaries	6,294	6,274
	20,767	19,832
Audit related assurance servicesb	2,487	2,553
Other non-audit services	33	55
Total services	23,287	22,440

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.

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, the accrued fee for the audit of the group's regulatory financial statements and providing comfort letters for bond issuances.

Fees payable to auditors other than KPMG for audits of certain overseas subsidiaries were £164,000 (FY23: £171,000).

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 FY24 KPMG LLP received total fees from the BT Pension Scheme of £1.9m (FY23: £1.6m) in respect of the following services:

Total services	1,867	1,636
Other non-audit services	74	—
Audit-related assurance services	26	14
Audit of financial statements of associates	1,767	1,622
Year ended 31 March	£000	£000
	2024	2023

9. Specific items

Material 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 significant business restructuring programmes such as the current group-wide cost transformation and modernisation programme, acquisitions and disposals of businesses and investments, impairment of goodwill, charges or credits relating to retrospective regulatory matters, property rationalisation programmes, historical property-related provisions, 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. Conversely, when a reversal occurs in relation to a prior year item not classified as specific, the reversal is not classified as specific in the current year.

Movements relating to the sports joint venture (Sports JV) with Warner Bros. Discovery (WBD), such as fair value gains or losses on the A and C preference shares or impairment charges on the equity-accounted investment are classified as specific. Refer to note 24 for further detail.

9. Specific items continued

	2024	2023
Year ended 31 March	£m	£m
Revenue
Retrospective regulatory matters	38	(12)
Specific revenue	38	(12)
Operating costs
Restructuring charges	388	300
BT Sport disposal	—	155
Sports JV – subsequent movements	32	34
Other divestment-related items	(22)	2
Retrospective regulatory matters	18	12
Historical property-related provisions	34	—
Specific operating costs before depreciation and amortisation	450	503
Impairment charges due to property rationalisation	11	65
Impairment of goodwill	488	—
Specific operating costs	949	568
Specific operating loss	987	556
Net finance expense
Finance expense relating to the BT Sport disposal	—	(13)
Interest expense on retirement benefit obligation	121	18
Specific net finance expense	121	5
Net specific items charge before tax	1,108	561
Taxation
Tax credit on specific items above	(145)	(308)
	(145)	(308)
Net specific items charge after tax	963	253

Retrospective regulatory matters

We recognised net £56m impact in relation to historical regulatory matters, with £38m charges recognised in revenue and £18m within operating costs (FY23: net impact of £nil). These items represent movements in provisions relating to various matters.

Restructuring charges

We have incurred charges of £388m (FY23: £300m) relating to projects associated with our group-wide cost transformation and modernisation programme. Costs primarily relate to leaver costs, consultancy costs, and staff costs associated with colleagues working exclusively on programme activity. The net cash cost of restructuring activity during the year was £348m (FY23: £326m).

The programme was first announced in May 2020 and runs until the end of FY25. In response to cost inflation, during FY23 we revised the gross annualised savings target to £3.0bn (previously £2.5bn), with a cost to achieve of £1.6bn (previously £1.3bn). We have now achieved our £3bn target 12 months early at a cost to achieve of £1.5bn, £0.1bn lower than target (FY23: achieved gross annualised savings of £2.1bn and costs of £1.1bn).The cumulative cash costs incurred amount to £1.5bn (FY23: £1.1bn).

BT Sport disposal

In the prior year, we completed the disposal of BT Sport operations through forming the Sports JV with WBD. We recognised a profit on disposal of £28m in specific items, made up of £155m charges recognised within operating costs net of £183m tax credits. We also recognised a £13m credit within finance costs as specific, relating to a foreign exchange hedging arrangement with the Sports JV.

Sports JV subsequent movements

Subsequent to the BT Sport disposal, we have recorded a net fair value loss of £22m (FY23: £34m) on the A and C preference shares held in the Sports JV (see note 24), and £10m additional net costs relating to the transaction.

Other divestment-related items

We recognised a £22m credit (FY23: £2m charge) comprising a net £25m gain on disposal from the completed divestments of Pelipod Limited, BT Enia S.p.A and certain city fibre networks and associated infrastructure assets in Germany; offset by £3m charges relating to ongoing divestment activity.

Historical property-related provisions

During FY24 we recognised a provision of £34m as a specific item (FY23: nil) in relation to the cost of remediating and rectifying asbestos related property issues where we have a present obligation to do this.

Impairment charges due to property rationalisation

During FY24, we recognised a £11m impairment charge as specific (FY23: £65m), in relation to an ongoing property rationalisation programme.

Impairment of goodwill

We have recognised an impairment charge of £488m (FY23: nil) in respect of goodwill allocated to our Business cash generating unit. See note 13 for more details.

Interest expense on retirement benefit obligation

During the year we incurred £121m (FY23: £18m) of interest costs in relation to our defined benefit pension obligations.

Tax on specific items

A tax credit of £145m was recognised in relation to specific items (FY23: £308m, of which £183m relates to the BT Sport disposal).

Notes to the consolidated financial statements continued

10. Taxation

Material 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 evaluate positions taken in tax returns where tax regulation is subject to interpretation, and establish provisions if appropriate based on the amounts likely 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 and current income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred income tax assets and liabilities relate to income taxes levied by the same taxation authority 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 is probable that there will be suitable taxable profits 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.

Key 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 countryby-country and issue-by-issue bases. Our key uncertainties are 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 65% 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. £112m (FY23: £104m) is included in current tax liabilities or offset against current tax assets where netting is appropriate.

We are subject to regular tax authority review, under a downside case an additional amount of £123m could be required to be paid. 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 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

	2024	2023
Year ended 31 March	£m	£m
United Kingdom
Corporation tax at 25% (FY23: 19%)	(10)	—
Adjustments in respect of earlier years	—	63
Non-UK taxation
Current	(77)	(67)
Adjustments in respect of earlier years	(10)	9
Total current taxation (expense)	(97)	5
Deferred taxation
Origination and reversal of temporary differences	(280)	102
Adjustments in respect of earlier years	46	56
Remeasurement of temporary differences	—	13
Total deferred taxation credit (expense)	(234)	171
Total taxation (expense)	(331)	176

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:

	2024	2023
Year ended 31 March	£m	£m
Profit before taxation	1,186	1,729
Expected taxation expense at UK rate of 25% (FY23: 19%)	(297)	(328)
Effects of:
(Higher)/lower taxes on non-UK profits	25	—
Net permanent differences between tax and accountinga	(114)	352
Adjustments in respect of earlier yearsb	40	126
Prior year non-UK losses used against current year profits	10	5
Non-UK losses not recognisedc	5	9
Re-measurement of deferred tax balances	—	12
Total taxation credit (expense)	(331)	176
Exclude specific items (note 9)	(145)	(308)
Total taxation expense before specific items	(476)	(132)

a Includes income that is not taxable or UK income taxable at a different rate including the UK patent box incentive of £60m (FY23: £35m), and expenses for which no tax relief is received including a loss on goodwill impairment of £122m. In FY23 this included the benefit of the UK super-deduction of £250m and the non-taxable profit on the disposal and revaluation of BT Sport of £104m.

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

Tax credit Tax credit (expense) (expense) Year ended 31 March £m £m Taxation on items that will not be reclassified to the income statement Pension remeasurements 600 Tax on items that have been or may be reclassified subsequently to the income statement Exchange differences on translation of foreign operations 9 Fair value movements on cash flow hedges – net fair value gains or (losses) 69 – recognised in income and expense — Total tax recognised in other comprehensive income 678 Current tax credita — Deferred tax credit (expense) 678 Total tax recognised in other comprehensive income 678	2024	2023
		732
		—
		(90)
		—
		642
		8
		634
		642

a Includes £nil (FY23: £nil) relating to cash contributions made to reduce retirement benefit obligations.

Tax (expense) credit recognised directly in equity

	2024	2023
Year ended 31 March	£m	£m
Tax (expense) credit relating to share-based payments	(12)	(9)

Notes to the consolidated financial statements continued

10. Taxation continued

Deferred taxation

	Fixed asset temporary differences	Retirement benefit obligationsa	Share based payments	Tax losses	Other	Jurisdictional offset	Total
	£m	£m	£m	£m	£m	£m	£m
At 1 April 2022	2,913	(195)	(36)	(857)	(154)	—	1,671
Expense (credit) recognised in the income statement	886	(18)	(13)	(1,022)	(4)	—	(171)
Expense (credit) recognised in other comprehensive income	—	(413)	—	(311)	90	—	(634)
Expense (credit) recognised in equity	—	—	9	—	—	—	9
Exchange differences	—	—	—	(4)	(3)	—	(7)
Acquisition of subsidiary	—	—	—	—	2	—	2
Transfer from current tax	—	—	—	—	41	—	41
At 31 March 2023	3,799	(626)	(40)	(2,194)	(28)	—	911
Non-current
Deferred tax asset	—	(626)	(40)	(2,194)	(28)	2,179	(709)
Deferred tax liability	3,799	—	—	—	—	(2,179)	1,620
At 31 March 2023	3,799	(626)	(40)	(2,194)	(28)	—	911
Expense (credit) recognised in the income statement	782	(17)	2	(454)	(79)	—	234
Expense (credit) recognised in other comprehensive income	—	(325)	—	(266)	(87)	—	(678)
Expense (credit) recognised in equity	—	—	12	—	—	—	12
Exchange differences	—	—	—	3	3	—	6
At 31 March 2024	4,581	(968)	(26)	(2,911)	(191)	—	485
Non-current
Deferred tax asset	—	(968)	(26)	(2,911)	(191)	3,048	(1,048)
Deferred tax liability	4,581	—	—	—	—	(3,048)	1,533
At 31 March 2024	4,581	(968)	(26)	(2,911)	(191)	—	485

a Includes a deferred tax asset of £nil (FY23: £8m) 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 rollout to be eligible for full expensing under the UK capital allowances regime, which provides 100% tax relief in the year of spend on qualifying assets. These deductions drive a projected UK tax loss and no UK tax payments for FY24. The enhanced and accelerated tax deductions arising under the Government's super-deduction regime for qualifying capital spend during FY22 and FY23, together with full expensing in FY24 and pension deficit contribution deductions, result in c. £11.3bn of tax losses expected to be carried forward from FY24, to be utilised against future UK taxable profits. These are represented by a net c. £2.8bn deferred tax asset which is disclosed within the £2,911m deferred tax asset relating to tax losses in the table above.

The group is within the scope of the OECD Pillar Two model rules. The UK has enacted Pillar Two legislation which applies for accounting periods beginning on or after 1 January 2024. Since the Pillar Two legislation was not effective for the current period, the group has no related current tax exposure. Under the legislation, the group is liable to pay a top-up tax for the difference between its Global Anti-Base Erosion (GloBE) effective tax rate per jurisdiction and the 15% minimum rate. As the UK rate of corporation tax from FY24 will be 25%, and the group's business is primarily in the UK, the impact of these rules on the group is not expected to be material.

What are our unrecognised tax losses and other temporary differences?

At 31 March 2024 we had operating losses and other temporary differences carried forward in respect of which no deferred tax assets were recognised amounting to £3.7bn (FY23: £3.7bn). 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 2024	£m	Expiry
Restricted losses
Europe	—	2025 - 2043
Americas	372	2025 - 2033
Other	2	2025 - 2033
Total restricted losses	374
Unrestricted operating losses	3,080	No expiry
Other temporary differences	209	No expiry
Total	3,663

At 31 March 2024 we had UK capital losses carried forward in respect of which no deferred tax assets were recognised amounting to £16.8bn (FY23: £16.8bn). These losses have no expiry date, but we consider the future utilisation of significant amounts of these losses to be remote.

10. Taxation continued

At 31 March 2024 the undistributed earnings of non-UK subsidiaries were £2.6bn (FY23: £2.5bn). No deferred tax liabilities have been recognised in respect of these unremitted earnings because the group is in a position to control the timing of any dividends from subsidiaries and hence any tax consequences that may arise. Under current tax rules, tax of £44m (FY23: £41m) 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	2024	2023
Basic weighted average number of shares (millions)	9,823	9,803
Dilutive shares from share options (millions)	39	83
Dilutive shares from share awards (millions)	136	171
Diluted weighted average number of shares (millions)	9,998	10,057
Basic earnings per share	8.7 p	19.4 p
Diluted earnings per share	8.6 p	18.9 p

The earnings per share calculations are based on profit after tax attributable to equity shareholders of the parent company which excludes non-controlling interests. Profit after tax was £855m (FY23: £1,905m) and profit after tax attributable to non-controlling interests was £nil (FY23: £4m). 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 5.69p per share amounting to approximately £553m is proposed in respect of the year ended 31 March 2024 (FY23: final dividend of 5.39p per share amounting to £530m paid in respect of the year ended 31 March 2023). An interim dividend of 2.31p per share amounting to £227m was paid on 2 February 2024 (FY23: interim dividend of 2.31p per share amounting to £226m 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.

	2024	2023
Year ended 31 March	pence per share	£m	pence per share	£m
Final dividend in respect of the prior year	5.39	530	5.39	527
Interim dividend in respect of the current year	2.31	227	2.31	226
	7.70	757	7.70	753

Notes to the consolidated financial statements continued

13. Intangible assets

Material 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 capitalise costs directly associated with the production of internally developed software, including direct and indirect labour costs of development, only 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	2 to 10 years
– Telecommunications licences	2 to 20 years
– Customer relationships and brands	1 to 15 years

Impairment of intangible assets

Intangible assets with finite useful lives are tested for impairment if events or changes in circumstances (assessed at each reporting date) indicate that the carrying amount may not be recoverable. When an impairment test is performed, the recoverable amount is assessed by reference to the higher of the net present value of the expected future cash flows (value in use) of the relevant cash generating unit and the fair value less costs to dispose.

Goodwill is reviewed for impairment at least annually as described below. Impairment losses are recognised in the income statement, as a specific item. If a cash generating unit is impaired, impairment losses are allocated firstly against goodwill, and secondly on a pro-rata basis against intangible and other assets.

13. Intangible assets continued

	Goodwill	Customer relationships and brandsa	Telecoms licences and otherb	Internally developed softwarec	Purchased softwarec	Total
	£m	£m	£m	£m	£m	£m
Cost
At 1 April 2022	7,917	3,383	3,490	5,346	971	21,107
Additions	—	—	—	815	203	1,018
Disposals and adjustmentsd	(21)	—	—	(466)	151	(336)
Transfers	—	—	—	30	(38)	(8)
Exchange differences	72	—	1	2	7	82
Transfers to assets held for salee	(13)	—	—	—	—	(13)
At 31 March 2023	7,955	3,383	3,491	5,727	1,294	21,850
Additions	—	—	—	732	206	938
Disposals and adjustmentsd	(4)	(1)	(12)	(671)	298	(390)
Transfersf	—	—	—	217	(95)	122
Exchange differences	(29)	—	(1)	(1)	(5)	(36)
At 31 March 2024	7,922	3,382	3,478	6,004	1,698	22,484
Accumulated amortisation
At 1 April 2022	—	2,469	908	3,595	326	7,298
Amortisation charge for the year	—	231	185	596	153	1,165
Impairment	—	—	—	—	—	—
Disposals and adjustmentsd	—	—	1	(389)	79	(309)
Transfers	—	—	—	(56)	56	—
Exchange differences	—	—	1	1	7	9
Transfers to assets held for sale	—	—	—	—	—	—
At 31 March 2023	—	2,700	1,095	3,747	621	8,163
Amortisation charge for the year	—	231	185	762	70	1,248
Impairment	488	—	—	—	—	488
Disposals and adjustmentsd	—	—	(13)	(462)	96	(379)
Transfersf	—	—	—	(41)	90	49
Exchange differences	—	—	(1)	—	(4)	(5)
At 31 March 2024	488	2,931	1,266	4,006	873	9,564

Carrying amount

At 31 March 2023	7,955	683	2,396	1,980	673	13,687
At 31 March 2024	7,434	451	2,212	1,998	825	12,920

a Customer relationships and brands relate 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 £593m (FY23: £643m), 1800 MHz with book value of £544m (FY23: £590m), 700Mhz with book value of £266m (FY23: £281m), 3400 MHz with book value of £226m (FY23: £242m) and 2600 MHz with book value of £185m (FY23: £206m). Spectrum licences are being amortised over a period between 14 and 20 years.

c Includes a carrying amount of £623m (FY23: £1,125m) in respect of assets under construction, which are not yet amortised.

d Disposals and adjustments include the removal of assets from the group's fixed asset registers following disposals and the identification of fully amortised assets (including £0.3bn in FY24 through operation of the group's annual asset verification exercise).

e For a breakdown of assets held for sale see note 22.

f During FY24, assets with cost of £122m and accumulated depreciation of £49m were reclassified from property, plant and equipment to intangible assets following review of asset registers.

Notes to the consolidated financial statements continued

13. Intangible assets continued

Impairment of goodwill

Material 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 and Business.

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 risk-adjusted cash flow projections derived from financial plans approved by the Board covering a five-year period. They reflect management's risk-adjusted 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.

Significant judgements and critical accounting estimates 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.

In FY23 our CGUs were aligned with the Consumer, Enterprise and Global customer-facing units in existence at the time. From 1 April 2023 the Enterprise and Global units are managed and reported as a single combined unit, Business. Financial information is provided to the Executive Committee on a consolidated basis only, and there have been material changes to the structure and organisation of the combined Business unit following the merger.

During FY24 we have reviewed the identification of our CGUs in light of the creation of Business. We concluded that the Enterprise and Global CGUs have been replaced with a single Business CGU. In reaching this conclusion we considered the way in which the combined unit is monitored and the degree of integration within the combined unit, specifically in relation to revenue streams and its asset base. This conclusion also reflects the fact that the cash flows of the legacy Enterprise and Global units are no longer independent and it is no longer possible to report the performance of these units on an individual basis.

Accordingly, our CGUs are Consumer and Business from 1 April 2023, aligned with the corresponding CFUs and operating segments (note 4).

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 on a nominal basis and based on risk-adjusted projections derived from the latest Board-approved five-year financial plans, representing management's best risk-adjusted estimate of future growth. This includes the direct and indirect impacts of inflation and associated mitigations. Expectations about future growth reflect the expectations of growth in the markets to which the CGU relates and consideration of the overall variability relating to individual assumptions at the unit level. The future cash flows are discounted using a pre-tax nominal 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.

Estimating terminal growth

A long term growth rate into perpetuity is applied immediately at the end of the five year forecast period. We calculate this for each CGU as the lower of the nominal GDP growth rate forecasts and the long-term compound annual growth rate as estimated by management. Long-term compound annual growth rates may be lower than forecast nominal GDP growth rates due to marketspecific factors including inflation expectations, the regulatory environment and competition intensity.

We tested our goodwill for impairment as at 31 March 2024. The carrying value of goodwill and the key assumptions used in performing the annual impairment assessment and sensitivities are disclosed below.

13. Intangible assets continued

	Consumer	Legacy Enterprise	Legacy Global	Business	Total
Cost	£m	£m	£m	£m	£m
At 1 April 2022	3,900	3,573	444	—	7,917
Transfer	—	—	—	—	—
Acquisitions and disposals	(26)	4	1	—	(21)
Exchange differences	—	4	68	—	72
Transfer to assets held for sale	—	(4)	(9)	—	(13)
At 31 March 2023	3,874	3,577	504	—	7,955
Transfer	—	(3,577)	(504)	4,081	—
Impairment	—	—	—	(488)	(488)
Acquisitions and disposals	—	—	—	(4)	(4)
Exchange differences	—	—	—	(29)	(29)
Transfer to assets held for sale	—	—	—	—	—
At 31 March 2024	3,874	—	—	3,560	7,434

Of the £4.1bn attributable to the Business CGU at 31 March 2023, £2.6bn relates to the acquisition of EE in 2016 with the rest relating to historical small acquisitions.

Outcome of our annual impairment review

Our FY24 impairment testing exercise concluded that there is significant headroom in our Consumer CGU, consistent with FY23.

The carrying value of the Business CGU exceeded its value in use by £488m. We have therefore booked an impairment charge equivalent to this amount in the income statement, presented as a specific item (note 9). No impairment was recognised in FY23.

Historical trends including the transition from legacy products indicate risk within forecasts which we have made appropriate adjustment for in line with IAS 36, so as to arrive at a risk adjusted estimate of future economic conditions which reflects long-term viability and trading risks inherent in delivering against the group's strategic pillars.

At the same time, to acknowledge this risk we have reduced terminal growth rate applied to cash flows when calculating the terminal value. We have also excluded uncommitted restructuring costs and benefits including those that relate to the group-wide restructuring programmes. The combined impact of these adjustments has led to a value in use for IAS 36 impairment testing purposes that is indicative of an impairment. Calculating the value in use has involved the application of assumptions and estimates that have had a material impact on the impairment charge recognised. Management judge that the Board-approved forecasts used to calculate value in use support the carrying amount of the Business CGU as at 31 March 2024. We consider below the impact of reasonably possible alternatives in the next 12 months.

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 for Consumer was 9.25% in FY24 and 9.4% in FY23. We have used a slightly higher rate of 9.27% for Business. This reflects the higher risk countries in which it operates, which in FY23 were part of the Global CGU. In FY23 we used a discount rate of 9.4% for Enterprise and 9.7% for Global, again reflecting the higher risk from countries in which it operates. The reduction in discount rates in FY24 reflects that the cash flows, rather than the discount rate, have been risk adjusted.

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 and analysts' expectations. None of the growth rates applied exceed the expected average long-term growth rates for those markets or sectors. In FY24 we have used a perpetuity growth rate of 1.0% for Consumer and 0.7% for the Business CGU. In FY23 the perpetuity growth rate was 2.0% for Enterprise and Consumer, and 2.4% for Global.

Key assumptions applied to testing goodwill allocated to the Business CGU

Key assumptions that value in use is most sensitive to are EBITDA growth over the 5-year forecast period; the long term growth rate for the terminal period; and the weighted average cost of capital used to discount cash flows.

• Our value in use assumes risk-adjusted EBITDA compound annual growth of 0.7% over the 5-year forecast period. The growth rate is the projected adjusted EBITDA growth rate on the cash flow forecasts used in our goodwill impairment model and reflect the growth and maturity of the industry we operate in and historical trends. Compound annual growth rates are risk-adjusted to the compound annual growth rates used in our Board-approved forecasts.
• Application of the terminal growth rate of 0.7%, equivalent to compound annual growth within the terminal period, is viewed as a key assumption with c.75% of the value in use derived from terminal cash flows.
• Value in use is sensitive to the weighted average cost of capital used to discount future cash flows.

The table below shows the sensitivity of the £488m impairment recognised to reasonably possible changes in key assumptions:

	Low scenario	High scenario
EBITDA compound annual growth rate +/- 1%	(£1,260m) more impairment	£374m less impairment
Long term growth rate +/- 0.7%	(£478m) more impairment	£488m less impairment
Weighted average cost of capital +/- 1%	(£865m) more impairment	£488m less impairment

Notes to the consolidated financial statements continued

13. Intangible assets continued

Other sensitivities applicable to the Business CGU

Applying a severe but plausible downside scenario, reflecting a plan that we are highly confident will be achieved or exceeded, based on the same risk population would result in a further impairment charge of £2,430m in addition to the £488m recognised. Management consider that it is reasonably possible to expect that actual future cash flows will outperform the risk-adjusted cash flows modelled for the purpose of testing goodwill impairment. A less conservative view of risks and opportunities in the base case of our forecast would result in headroom of approximately £2,083m rather than the impairment charge booked.

14. Property, plant and equipment

Material 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 is 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	14 to 50 years
– Short-term leasehold improvements	Shorter of 10 years or lease term
– Leasehold land and buildings	Shorter of unexpired portion of lease or 40 years
Network infrastructure
Transmission equipment
– Duct	40 years
– Cable	3 to 25 years
– Fibre	5 to 20 years
Exchange equipment	2 to 13 years
Other network equipment	2 to 20 years
Other assets
– Motor vehicles	2 to 10 years
– Computers and office equipment	3 to 7 years

Residual values and useful lives are reassessed annually and, if necessary, changes are recognised prospectively.

Network share assets

Certain assets have been contributed to a network share arrangement by both EE and Hutchison 3G UK Limited, with legal title remaining with the contributor. This is considered to be a reciprocal arrangement. Our share of the assets on acquisition of EE was 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.

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 17.

		Network infrastructure
	Land and buildings £m	Held by Openreach £m	Held by other units £m	Othera £m	Assets under construction £m	Total £m
Cost
At 1 April 2022	1,022	31,276	24,439	1,444	1,446	59,627
Additionsb	7	—	129	7	3,947	4,090
Transfers	89	2,617	913	211	(3,822)	8
Disposals and adjustmentsc	31	(118)	(183)	(33)	(70)	(373)
Transfer to assets held for saled	—	—	(108)	(13)	—	(121)
Exchange differences	16	—	99	6	1	122
At 31 March 2023	1,165	33,775	25,289	1,622	1,502	63,353
Additionsb	6	1	73	12	3,851	3,943
Transferse	85	2,562	906	279	(3,954)	(122)
Disposals and adjustmentsc	(95)	(208)	(2,198)	(162)	137	(2,526)
Transfer to assets held for saled	—	—	—	—	—	—
Exchange differences	(11)	—	(66)	(5)	(1)	(83)
At 31 March 2024	1,150	36,130	24,004	1,746	1,535	64,565
Accumulated depreciation
At 1 April 2022	621	17,476	20,050	1,025	—	39,172
Depreciation charge for the year	50	1,466	1,144	218	—	2,878
Impairment	—	—	—	11	—	11
Transfers	—	195	(192)	(4)	—	(1)
Disposals and adjustmentsc	32	(139)	(133)	(36)	—	(276)
Transfer to assets held for saled	—	—	(106)	(11)	—	(117)
Exchange differences	13	—	91	7	—	111
At 31 March 2023	716	18,998	20,854	1,210	—	41,778
Depreciation charge for the year	55	1,489	1,085	263	—	2,892
Impairment	—	78	—	—	30	108
Transferse	—	—	(49)	—	—	(49)
Disposals and adjustmentsc	(30)	(134)	(2,222)	(174)	—	(2,560)
Transfer to assets held for saled	—	—	—	—	—	—
Exchange differences	(9)	—	(61)	(5)	—	(75)
At 31 March 2024	732	20,431	19,607	1,294	30	42,094
Carrying amount
At 31 March 2023	449	14,777	4,435	412	1,502	21,575
Engineering stores	—	—	—	—	92	92
Total at 31 March 2023	449	14,777	4,435	412	1,594	21,667
At 31 March 2024	418	15,699	4,397	452	1,505	22,471
Engineering stores	—	—	—	—	91	91
Total at 31 March 2024	418	15,699	4,397	452	1,596	22,562

a Other mainly comprises motor vehicles, computers and fixtures and fittings.

b Net of government grants of £91m (FY23: £150m).

c Disposals and adjustments include the removal of assets from the group's fixed asset registers following disposals and the identification of fully depreciated assets (including £2.2bn in FY24 through operation of the group's annual asset verification exercise). They also include adjustments between gross cost and accumulated depreciation following review of fixed asset registers, and 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 are detailed in note 22.

e During FY24, assets with cost of £122m and accumulated depreciation of £49m were reclassified from property, plant and equipment to intangible assets following review of asset registers.

Notes to the consolidated financial statements continued

14. Property, plant and equipment continued

Included within the disclosure are assets used in arrangements which represent core business activities for the group and which meet the definition of operating leases:

• £15,699m (FY23: £14,777m) 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 £160m (FY23: £163m) 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:

	2024	2023
At 31 March	£m	£m
Freehold	71	80
Leasehold	347	369
Total land and buildings	418	449

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 £759m (FY23: £721m) and is recorded within network infrastructure.

Within network infrastructure are assets with a net book value of £11.5bn (FY23: £10.9bn) which have useful economic lives of more than 18 years.

BT Tower

In FY24 we agreed to the sale of the BT Tower for headline consideration of £275m, as part of the simplification of the group's property portfolio.

The carrying amount of the BT Tower asset is £4m at 31 March 2024. It is not considered to meet the IFRS 5 criteria for classification as held for sale at the reporting date, reflecting the extent of decommissioning work needed to provide vacant possession of the site. The useful economic lives of assets associated with the BT Tower have been reassessed in light of the anticipated disposal in FY30.

Significant judgements made in accounting for the BT Tower sale

Exchange of contracts in respect of the BT Tower sale with MCR Hotels occurred during FY24, with transfer of legal title anticipated to take place in a three year window between 2028 and 2031 subject to achieving vacant possession of the site. We will continue to enjoy exclusive rights to occupy and access the site prior to completion. The delay between exchange and completion reflects the extensive work required to decommission the site.

We have exercised significant judgement in concluding that control over BT Tower passes to the buyer at the point of completion rather than exchange. In doing so we performed a detailed assessment of the restrictions placed on BT's use of the asset in the period following exchange, as well as the transaction pricing structure, and concluded that they were insufficient to represent a transfer to the buyer of sufficiently all the risks and rewards associated with ownership. We placed particular weight on the fact that legal title to the site does not transfer to the buyer until the point of completion. Had we concluded that control had passed on exchange of contracts in FY24, the transaction would have been treated as a sale and leaseback with profit on disposal recognised in the period and associated derecognition of the BT Tower asset and accounting for the leaseback.

Low carbon fleet

As reported in our TCFD statement on page 78, we're working hard and investing to convert the majority of our fleet to electric or zero emission vehicles by the end of FY31. This plan does not trigger a significant impairment of fleet assets as substantially all non-electric vehicles held by the group at 31 March 2024 will be fully depreciated ahead of FY31.

15. Leases

Material 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 the 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 that the lessee will exercise, or termination options that we are reasonably certain that the lessee will not exercise.

The incremental borrowing rate is the rate that we would have to pay for a loan of a similar term, and with similar security, to obtain an asset of similar value.

Lease payments include:

• fixed payments
• variable lease payments that depend on an index or rate
• amounts expected to be paid under residual value guarantees
• the exercise price of any purchase options that we are reasonably certain to exercise
• payments due over optional renewal periods where we are reasonably certain to renew
• penalties for early termination of the lease where we are reasonably certain to terminate early

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 payments for 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.

Notes to the consolidated financial statements continued

15. Leases continued

Lessor accounting

At inception or on modification of a contract that contains a lease component, we allocate the consideration in the contract to each lease component on the basis of their relative stand-alone prices.

When we act as a lessor, we determine at lease inception whether each lease is a finance lease or an operating lease.

To classify each lease, we make 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, then it is an operating lease. As part of this assessment, we consider certain indicators such as whether the lease is for the major part of the economic life of the asset.

When we are an intermediate lessor, we account for our interests in the headlease and the sublease separately. We assess the lease classification of a sublease with reference to the right-of-use asset arising from the headlease, not with reference to the underlying asset. If a headlease is a short-term lease to which we apply the exemption described above, then we classify the sublease as an operating lease.

If an arrangement contains lease and non-lease components, then we apply IFRS 15 to allocate the consideration in the contract.

We apply the derecognition and impairment requirements in IFRS 9 to the net investment in the lease. We further regularly review estimated unguaranteed residual values used in calculating the gross investment in the lease.

We recognise lease payments received under operating leases as income on a straight-line basis over the lease term as part of 'other revenue'.

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.

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, using an updated discount rate. There would be no overall impact on net assets.

If the assessment were to change at the balance sheet date of 31 March 2024:

• 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 with our 5G rollout and other capital refresh programmes.

Notes to the consolidated financial statements continued

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.

	Land and buildings	Network infrastructure	Motor vehicles	Other	Total
	£m	£m	£m	£m	£m
At 1 April 2022	3,941	110	369	9	4,429
Additionsa	203	16	150	2	371
Depreciation charge for the yearb	(521)	(32)	(131)	(5)	(689)
Impairmentb	(75)	—	—	—	(75)
Transfer to assets held for sale	(3)	—	—	—	(3)
Other movementsc	(49)	1	(3)	(1)	(52)
At 31 March 2023	3,496	95	385	5	3,981
Additionsa	271	40	179	1	491
Depreciation charge for the yearb	(493)	(33)	(121)	(5)	(652)
Impairmentb	(10)	—	—	—	(10)
Other movementsc	(108)	(4)	(56)	—	(168)
At 31 March 2024	3,156	98	387	1	3,642

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 Impairment charges relates primarily to the early exit of leases as a result of ongoing property rationalisation activity. c Other movements primarily relate to terminated leases and downwards remeasurements of right-of-use assets arising from reductions or reassessments of lease terms and

decreases in lease payments.

Lease liabilities

Lease liabilities recognised are as follows:

Year ended 31 March	2024 £m	2023 £m
Current	766	800
Non-current	4,189	4,559
	4,955	5,359

The following amounts relating to the group's obligations under lease arrangements were recognised in the income statement in the year:

– Interest expense of £134m (FY23: £133m) on lease liabilities.

– Variable lease payments of £39m (FY23: £38m) 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 £882m (FY23: £860m). Our cash flow statement and normalised free cash flow reconciliation present £748m (FY23: £727m) of the cash outflow as relating to the principal element of lease liability payments, with the remaining balance of £134m (FY23: £133m) 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.

15. Leases continued

Other information relating to leases

At 31 March 2024 the group was committed to future minimum lease payments of £55m (FY23: £145m) in respect of leases which have not yet commenced and for which no lease liability has been recognised.

The following table analyses cash payments to be received across the remaining term of operating lease arrangements where BT is lessor:

	To be recognised as revenue (note 5)a	To be recognised as other operating income (note 6)	Total
At 31 March 2024	£m	£m	£m
Less than one year	431	17	448
One to two years	117	11	128
Two to three years	41	11	52
Three to four years	10	9	19
Four to five years	9	3	12
More than five years	—	5	5
Total undiscounted lease payments	608	56	664
At 31 March 2023
Less than one year	416	19	435
One to two years	131	15	146
Two to three years	46	15	61
Three to four years	13	14	27

Total undiscounted lease payments 616 96 712 a Future operating lease income to be recognised as revenue primarily relates to income from Openreach's fixed access subscription services which meet the definition of leases under IFRS 16 and which typically are expected to have a lease period terms of one year or less.

Four to five years 10 13 23 More than five years — 20 20

16. Trade and other receivables

Material accounting policies that apply to trade and other receivables

Trade receivables are recognised where the right to receive payment from customers is conditional only on the passage of time. 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.

The group utilises factoring arrangements for selected trade receivables. Trade receivables that are subject to debt factoring arrangements are derecognised if they meet the conditions for derecognition detailed in IFRS 9 'Financial instruments' and the related cash flows received are presented as cash flows from operating activities.

Contingent assets such as any insurance recoveries 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.

Notes to the consolidated financial statements continued

16. Trade and other receivables continued

	2024	2023
At 31 March	£m	£m
Current
Trade receivables	1,899	1,395
Prepayments	586	545
Accrued income	162	158
Deferred contract costs	383	369
Finance lease receivables	31	29
Amounts due from joint ventures	163	268
Other assetsa	341	296
	3,565	3,060
Non-current
Deferred contract costs	229	211
Finance lease receivables	107	98
Other assetsa	305	194
	641	503

a Other assets comprise Flex Pay receivables, prepayments and £57m (FY23: £70m) of deferred cash consideration mainly relating to the disposal of BT Sport, see note 22.

Amounts due from joint ventures relates to a sterling Revolving Credit Facility (RCF) provided to the Sports JV, see note 30. The expected loss provision is immaterial.

Trade receivables are stated after deducting allowances for doubtful debts, as follows:

	2024	2023
	£m	£m
At 1 April	168	223
Expense	129	84
Utilised	(127)	(142)
Exchange differences	(1)	3
At 31 March	169	168

The expected credit loss allowance for trade receivables was determined as follows:

	Past due and not specifically impaired
At 31 March	Not past due £m	Trade receivables specifically impaired net of provision £m	Between 0 and 3 months £m	Between 3 and 6 months £m	Between 6 and 12 months £m	Over 12 months £m	Total £m
2024
Expected loss rate %	1%	50%	8%	28%	47%	65%	8%
Gross carrying amount	1,448	4	357	81	64	114	2,068
Loss allowance	(11)	(2)	(29)	(23)	(30)	(74)	(169)
Net carrying amount	1,437	2	328	58	34	40	1,899
2023
Expected loss rate %	1%	75%	10%	46%	41%	52%	11%
Gross carrying amount	1,030	20	265	48	59	141	1,563
Loss allowance	(8)	(15)	(26)	(22)	(24)	(73)	(168)
Net carrying amount	1,022	5	239	26	35	68	1,395

Trade receivables not past due and accrued income are analysed below by CFU.

	Trade receivables not past due			Accrued income
	2024 2023		2024	2023
At 31 March	£m	£m	£m	£m
Consumer	375	309	81	82
Businessa	900	713	4	2
Openreach	161	—	75	70
Other	1	—	2	4
Total	1,437	1,022	162	158

a Comparatives for the year ended 31 March 2023 have been re-presented for the impact of the creation of our Business customer-facing unit, formed through the merger of our Enterprise and Global units, see note 1.

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.

16. Trade and other receivables continued

Deferred contract costs

Material 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	Deferred contract acquisition costs – commissions	Deferred contract acquisition costs – dealer incentives	Transition and transformation	Total
	£m	£m	£m	£m	£m
At 1 April 2022	24	124	324	90	562
Additions	15	100	285	70	470
Amortisation	(15)	(94)	(276)	(67)	(452)
Impairment	—	(1)	(1)	—	(2)
Other	(2)	2	(2)	4	2
At 31 March 2023	22	131	330	97	580
Additions	10	134	315	57	516
Amortisation	(11)	(118)	(292)	(56)	(477)
Impairment	—	(2)	(7)	—	(9)
Other	(8)	2	3	5	2
At 31 March 2024	13	147	349	103	612

Notes to the consolidated financial statements continued

17. Trade and other payables

Material 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.

We use a supply chain financing programme to extend payment terms with a limited number of suppliers to a more typical payment term. We also use a separate supply chain financing programme to allow suppliers to receive funding earlier than the invoice due date. We assess these arrangements against indicators to assess if debts which vendors have sold to the funder under the supplier financing schemes continue to meet the definition of trade payables or should be classified as borrowings. At 31 March 2024 under the terms of the arrangement the funder's payment to the supplier does not legally extinguish our obligation to the supplier so it remains within trade and other payables. Cash flows only occur when the trade payable is extinguished and are therefore presented in cash flows from operating activities.

At 31 March	2024 £m	2023 £m
Current
Trade payables	4,119	4,196
Other taxation and social security	544	581
Minimum guarantee with sports joint venturea	194	195
Accrued expenses	543	458
Deferred incomeb	355	532
Other payablesc	572	602
	6,327	6,564
Non-current
Minimum guarantee with sports joint venturea	271	465
Deferred incomeb	342	403
Other payables	24	52
	637	920

a Liability recognised on the minimum revenue guarantee in BT's distribution agreement with the sports joint venture (see note 22). Movement in the liability driven by £211m payments made during the year less £16m finance cost recorded from unwinding the impact of discounting.

b Deferred income includes £106m (FY23: £258m) current and £122m (FY23: £169m) 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. c Includes £41m relating to an estimate of customer refunds, refer to note 5.

Current trade and other payables at 31 March 2024 include:

• £101m (31 March 2023: £348m) of trade payables that have been factored in a supply chain financing programme. The facility size of £350m remains consistent with prior periods. These programmes are used with a limited number of suppliers with short payment terms to extend them to a more typical payment term.
• £224m (31 March 2023: £169m) of trade payables in a separate supply chain financing programme that allows suppliers the opportunity to receive funding earlier than the invoice due date. Financial institutions are used to support this programme but we continue to recognise the underlying payables as we continue to cash settle the supplier invoices in accordance with their terms.

18. Provisions & contingent liabilities

Our provisions principally relate to obligations arising from property rationalisation programmes, restructuring programmes, asset retirement obligations, network assets, third party 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.

Material 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 nominal pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. Cash flows are adjusted for the effect of inflation where appropriate.

Significant judgements made in identifying contingent liabilities

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 identifying contingent liabilities we make key judgements in relation to applicable law and any historical and pending court rulings, and the likelihood, timing and cost of resolution.

Establishing contingent liabilities associated with litigation brought against the group may involve the use of significant judgements 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 and significant judgements made in accounting for provisions

We exercise judgement in determining the quantum of all provisions to be recognised. Our assessment includes consideration of whether we have a present obligation, whether payment is probable and if so whether the amount can be estimated reliably.

When measuring provisions we reflect the impact of inflation as appropriate, particularly in relation to our property, asset retirement obligation and third party claims provisions. Although this involves a degree of estimation, it does not represent a significant source of estimation uncertainty having regard to the quantum of the balances in question and the anticipated timing of outflows.

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 associated 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.

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.

Third party claims provisions (previously described as insurance provisions) represent our exposure to claims from third parties, with latent disease claims from former colleagues and motor vehicle claims making up the majority of the balance. We engage an independent actuary to provide an estimate of the most likely outcomes in respect of latent disease and third party motor vehicle accident claims, and our in-house insurance teams review our exposure to other risks.

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.

Notes to the consolidated financial statements continued

18. Provisions & contingent liabilities continued

		Network			Third party
	Property	ARO	Regulatory	Litigation	claims	Other	Total
	£m	£m	£m	£m	£m	£m	£m
At 1 April 2022	142	181	65	85	92	108	673
Additions	43	—	16	6	35	15	115
Unwind of discount	1	3	—	—	—	—	4
Utilised	(8)	(4)	(1)	(41)	(30)	(7)	(91)
Released	(37)	(87)	(16)	(9)	(43)	(42)	(234)
Transfersa	—	—	4	—	132	(11)	125
Exchange differences	1	—	—	3	1	1	6
At 31 March 2023	142	93	68	44	187	64	598
Additions	42	42	72	—	73	9	238
Unwind of discount	1	4	—	—	1	—	6
Utilised	(15)	(6)	(37)	(1)	(75)	(3)	(137)
Released	(17)	—	(17)	—	(32)	(3)	(69)
Transfersa	4	—	—	—	—	10	14
Exchange differences	(1)	—	—	—	—	—	(1)
At 31 March 2024	156	133	86	43	154	77	649

a Transfers relate to the reclassification of balances previously presented in other payables (note 17) following reassessment of the level of certainty over the timing and amount of any outflow of resources.

At 31 March	2024 £m	2023 £m
Analysed as:
Current	238	229
Non-current	411	369
	649	598

Contingent liabilities and legal proceedings

In the ordinary course of business, we are periodically notified of actual or threatened litigation, and regulatory and compliance matters and investigations. We have disclosed below a number of such matters including any matters where we believe a material adverse impact on the operations or financial condition of the group is possible and the likelihood of a material outflow of resources is more than remote.

Where the outflow of resources is considered probable, and a reasonable estimate can be made of the amount of that obligation, a provision is recognised for these amounts and reflected in the table above. Where an outflow is not probable but is possible, or a reasonable estimate of the obligation cannot be made, a contingent liability exists.

In respect of each of the claims below, the nature and progression of such proceedings and investigations can make it difficult to predict the impact they will have on the group. There are many reasons why we cannot make these assessments with certainty, including, among others, that they are in early stages, no damages or remedies have been specified, and/or the often slow pace of litigation.

Class action claim – landline only services

In January 2021, Justin Le Patourel, represented by 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) alleging anti-competitive behaviour through excessive pricing by BT to customers with certain residential landline services. Ofcom considered this topic in 2017. At that time, Ofcom's final statement made no finding of excessive pricing or breach of competition law more generally but 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). 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). In July 2023 Justin Le Patourel amended his claim seeking increased damages estimated at £1,338m (inclusive of compound interest) or £1,309m (inclusive of simple interest), later revised to £1,307m (inclusive of compound interest) or £1,278m (inclusive of simple interest). A hearing took place between January and March 2024 and we are awaiting judgment. At the reporting date we are not aware of any evidence to indicate that a present obligation exists such that any amount should be provided for.

Class action claim – combined mobile and handset services

In November 2023, Justin Gutmann, represented by law firm Charles Lyndon applied to the Competition Appeal Tribunal to bring a proposed class action claim for damages estimated at £1.1bn (inclusive of simple interest) on behalf of customers who purchased combined handset and airtime contracts who are outside their minimum contract terms but who continue to pay the same price as during their minimum contract terms. The claim alleges this approach was an anti-competitive abuse of a dominant position. Similar claims have also been brought against Vodafone, Three and O2 with the total damages claimed £3.285bn (inclusive of simple interest). At the reporting date we are not aware of any evidence to indicate that a present obligation exists such that any amount should be provided for. Class actions must be certified by the Competition Appeal Tribunal at a Collective Proceedings Order (CPO) hearing before proceeding to a substantive trial. A first case management conference to determine next procedural steps is scheduled for 23 May 2024. If the class action is certified the substantive trial will not conclude during FY25. BT intends to defend itself vigorously.

Italian business

Milan Public Prosecutor prosecutions: In FY20 proceedings were initiated 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 disputed this and maintained 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

18. Provisions & contingent liabilities continued

audit model that was circumvented/overridden by individuals acting in their own self-interest. The trial commenced on 26 January 2021. On 23 April 2021, the 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 were directed at certain individual defendants (which include former BT/ BT Italia employees). Those parties successfully joined BT Italia as a respondent to their civil claims ('responsabile civile') on the basis that it is vicariously responsible for the individuals' wrongdoing.

The first instance phase of the trial has now concluded with the Court handing down its decision on 25 January 2024. The Court convicted certain individuals (including certain former BT Italia employees) for manipulation of BT Italia's financial statements for the financial year ending 31 March 2016 and for fraud against an Italian company, Sed Multitel S.r.l. The Court dismissed all charges that had been brought against BT Italia but ordered that BT Italia indemnify certain individual minority shareholders in the company and Sed Multitel for their losses. The Court has not quantified the indemnification amount, such that the indemnified parties must now seek to recover these amounts from BT Italia by agreement or separate civil proceedings. The quantum of those claims, if they are pursued successfully, is not anticipated to be material.

Accounting misstatement claims: a law firm acting on behalf of a group of investors has made claims under s.90A of the Financial Services & Markets Act 2000, alleging that untrue or misleading statements were made in relation to the historical irregular accounting practices in BT's Italian business (which have been the subject of previous disclosures). No value is stated and the matter is in the early stages. As mentioned in our earlier reports, the accounting issues in Italy have previously been the subject of class actions in the US that were dismissed by the US courts.

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. The trial on the question of liability/breach ran from May to July 2022. In November 2023 the High Court dismissed Phones 4U's claim in its entirety. Phones 4U has subsequently appealed that judgment to the Court of Appeal and a hearing is expected in May 2025. We continue to dispute these allegations vigorously.

UK Competition and Markets Authority (CMA) investigation

On 12 July 2022 the CMA opened a competition law investigation into BT and other companies involved in the purchase of freelance services for the production and broadcasting of sports content in the UK. The investigation is focused on BT Sport. In February 2023, the CMA extended its investigation to include suspected breaches of competition law in relation to the employment of staff supporting the production and broadcasting of sports content in the UK however in March 2024 the CMA confirmed this limb of its investigation would not be progressed. The CMA has said no assumption should be made at this stage that competition law has been infringed. BT is cooperating with the investigation.

19. Retirement benefit plans

Background to BT Group's pension plans

The group has both Defined Benefit and Defined Contribution retirement benefit plans. The group's main plans are in the UK:

• The BT Pension Scheme (BTPS) is the largest UK Defined Benefit plan sponsored by BT Group, constituting 97% of BT Group's IAS 19 liability. It was closed to future benefit accrual in 2018 for the majority of members, and has 55,000 deferred members and 210,000 pensioners. All BTPS members receive pension benefits at retirement based on salary and years of service; some members also receive a lump sum payment at retirement. Increases for the majority of benefits are linked to either the Retail Price Index (RPI) or the Consumer Price Index (CPI).
• The EE Pension Scheme (EEPS) has a Defined Benefit section that was closed to future benefit accrual in 2014 and a Defined Contribution section which was closed to future accrual in July 2023. The Defined Benefit section constitutes 2% of BT Group's IAS 19 liability.
• The BT Retirement Saving Scheme (BTRSS) is a Defined Contribution, contract-based, plan operated by Standard Life which new UK employees join. There are around 67,000 employees currently contributing to the BTRSS.

The group also has retirement arrangements around the world in line with local markets and culture; the principal ones being in the Netherlands and Germany.

Types of retirement benefit plans

Defined Benefit (DB) plans

DB plan benefits are determined by the plan rules, typically dependent on factors such as years of service and pensionable pay, but not on the value of actual contributions made by the group or members. The group is exposed to investment and other experience risks and may need to make additional contributions where it is estimated that the benefits will not be met from assets held, regular contributions and expected investment income.

The net defined benefit liability, or deficit, 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. A net defined benefit asset, or surplus, occurs when the fair value of assets exceeds the liabilities.

Defined Contribution (DC) plans

DC plan benefits are linked to the value of each member's fund, which is based on contributions paid and the performance of each individual's chosen investments. The group has no exposure to investment and other experience risks (including longevity).

Notes to the consolidated financial statements continued

19. Retirement benefit plans continued

Amounts in the financial statements

Group income statement

The expense arising from the group's retirement benefit arrangements as recognised in the group income statement is shown below.

	2024	2023
Year ended 31 March	£m	£m
Recognised in the income statement before specific items (note 6)
– Service cost:
– DB plans	12	17
– DC plans	541	537
– Past service cost/(credit)	—	(2)
– Administration expenses and PPF levy	29	38
Subtotal	582	590
Recognised in the income statement as specific items (note 9)
– Costs to close BTPS and provide transition paymentsa for affected employees	—	13
– Interest on pensions deficit	121	18
Subtotal	121	31
Total recognised in the income statement	703	621

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 is set out below. Plans in surplus are presented within non-current assets and plans in deficit within non-current liabilities.

		2024			2023
At 31 March	Assets £m	Liabilities £m	Surplus/ (Deficit)a £m	Assets £m	Liabilities £m	Surplus/ (Deficit)a £m
Recognised in non-current liabilities
BTPS	35,391	(40,038)	(4,647)	38,673	(41,575)	(2,902)
Unfunded plans	—	(88)	(88)	—	(92)	(92)
Other funded plans	33	(180)	(147)	65	(210)	(145)
Sub-total	35,424	(40,306)	(4,882)	38,738	(41,877)	(3,139)
Recognised in non-current assets
EEPS	769	(710)	59	749	(713)	36
Funded plansa	361	(350)	11	321	(305)	16
Sub-total	1,130	(1,060)	70	1,070	(1,018)	52
Total	36,554	(41,366)	(4,812)	39,808	(42,895)	(3,087)

a Figures shown net of a £4m adjustment in relation to IFRIC 14. With the exception of some of the group's smaller plans, the group is not required to limit any pension surplus or recognise additional pension liabilities in individual plans as economic benefits are available in the form of either future refunds or reductions to future contributions. For example, a refund of surplus is available following the gradual settlement of the liabilities over time when there are no members remaining in the BTPS or EEPS.

The table below shows the group's defined benefit liability net of tax.

At 31 March	2024 £m	2023 £m
Balance sheet position (net of tax)
Surplus/(deficit)	(4,812)	(3,087)
Deferred tax asset (note 10)	968	618
Total (net of tax)	(3,844)	(2,469)

19. 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.

	Assets £m	Liabilities £m	Deficit £m
At 31 March 2022	54,937	(56,080)	(1,143)
Service cost (including administration expenses and PPF levy)	(38)	(17)	(55)
Past service credit	—	2	2
Interest on net pension deficit	1,480	(1,498)	(18)
Included in the group income statement			(71)
Return on plan assets below the amount included in the group income statement	(14,911)	—	(14,911)
Actuarial gain arising from changes in financial assumptions	—	12,279	12,279
Actuarial gain arising from changes in demographic assumptions	—	891	891
Actuarial (loss) arising from experience adjustmentsa	—	(1,135)	(1,135)
Included in the group statement of comprehensive income			(2,876)
Regular contributions by employer	22	—	22
Deficit contributions by employer	994	—	994
Included in the group cash flow statement			1,016
Contributions by employees	1	(1)	—
Benefits paid	(2,686)	2,686	—
Other (e.g. foreign exchange)	9	(22)	(13)
Other movements			(13)
At 31 March 2023	39,808	(42,895)	(3,087)
Service cost (including administration expenses and PPF levy)	(29)	(12)	(41)
Past service credit	—	—	—
Interest on net pension deficit	1,886	(2,007)	(121)
Included in the group income statement			(162)
Return on plan assets below the amount included in the group income statement	(3,140)	—	(3,140)
Actuarial gain arising from changes in financial assumptions	—	563	563
Actuarial gain arising from changes in demographic assumptions	—	652	652
Actuarial (loss) arising from experience adjustmentsa	—	(519)	(519)
Included in the group statement of comprehensive income			(2,444)
Regular contributions by employer	55	—	55
Deficit contributions by employer	823	—	823
Included in the group cash flow statement			878
Contributions by employees	—	—	—
Benefits paid	(2,840)	2,840	—
Other (e.g. foreign exchange)	(9)	12	3
Other movements			3
At 31 March 2024	36,554	(41,366)	(4,812)

a Primarily reflects the impact on the liabilities of actual inflation being higher than assumed at the prior reporting date, which has been broadly offset by increases to inflation-linked assets from higher inflation.

How is the BTPS governed and managed?

BT Pension Scheme Trustees Limited (the Trustee) has been appointed by BT Group 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). The Trustee's key powers include setting the investment strategy of BTPS (after consultation with BT Group) and agreeing with BT Group the actuarial assumptions to be used when assessing the BTPS funding position and the resulting contributions that will be paid.

There are nine Trustee directors, all of whom are appointed by BT Group, as illustrated below. Trustee directors are usually appointed for a three-year term but are then eligible for re-appointment.

Appointed by BT after consultation with, and with the agreement of, the relevant trade unions.

Appointed by BT based on nominations by trade unions.

Chair of the Trustee directors Member nominated Trustee directors 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.

Notes to the consolidated financial statements continued

19. Retirement benefit plans continued

BTPS IAS 19 assets

Critical accounting estimates and significant judgements made when valuing the BTPS assets

Under IAS 19, plan assets are measured at fair value at the balance sheet date and include quoted and unquoted investments.

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, based on sale/bid prices.
• Exchange traded derivative contracts are valued based on closing bid prices.

Valuation of main 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.

• 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 Group, 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.
• 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.
• 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.
• The BTPS entered into a longevity insurance contract in 2014, and a second in August 2023. The two longevity insurance contracts are valued by discounting the fixed cash flows payable by the BTPS and the floating cash flows payable by the insurers under the contracts (projected by an actuary, consistent with the terms of the contracts). The significant assumptions used to value the assets are the discount rate (set as a margin above a risk-free rate to reflect credit and liquidity risk) and the mortality assumptions.

£5.7bn of unquoted investments that are formally valued periodically by the investment manager have a latest valuation that precedes the balance sheet date. These assets consist of: £2.4bn non-core credit; £1.0bn mature infrastructure; £1.2bn private equity; £0.9bn secure income assets; and £0.2bn property. These valuations have been adjusted for cash movements between the previous valuation date and 31 March 2024. The valuation approach and inputs for these investments would only be approximately updated where there were indications of significant movements, for example implied by public market indicators. No such adjustment was required at 31 March 2024.

Asset-Backed Funding (ABF) arrangement

The ABF arrangement, issued to the BTPS in May 2021, has a fair value of £1.2bn at 31 March 2024 (FY23: £1.3bn) calculated as the present value of the future stream of payments, allowing for the probability of the BTPS becoming fully funded and therefore the payments to the BTPS ending early. It 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 group.

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 a range of areas, including: i) the balance between seeking returns and incurring risk; ii) the extent to which the assets should be allocated to match movements in the liabilities due to changes in interest rates, inflation and/or longevity (i.e. liability-driven investments, or LDI); iii) the extent to which the assets should provide cash flows to meet expected payments to beneficiaries; and iv) liquidity needed to meet benefit payments and collateral requirements for derivatives contracts.

Financial derivatives (e.g. swaps) are used to reduce the mismatch between movements in the liabilities and the assets from changes in interest rates, inflation, longevity, and exchange rates. This provides greater stability in the funding position, and therefore the deficit contributions that may be required from BT Group. The sensitivity chart on page 194 shows how the use of some of these derivatives adjusts outcomes for the BTPS. While the use of derivatives reduces funding risk, it increases the BTPS's liquidity requirements which is factored into the overall investment strategy. Following the impact of the September 2022 mini-budget on derivatives, the Bank of England and the Pensions Regulator issued guidance on the minimum level of collateral pension schemes should hold. At 31 March 2024 (and 31 March 2023), the BTPS held more collateral than these minimum levels.

The table below analyses the fair value of the BTPS assets 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).

19. Retirement benefit plans continued

		2024			2023
		Total	of which	Total	of which
At 31 March		assetsa £bn	quoted £bn	assetsa £bn	quoted £bn
Growth
Equities	UK	0.1	—	0.1	—
	Overseas Developed	2.3	1.1	1.7	0.6
	Emerging Markets	—	—	—	—
Private Equity		1.3	—	1.1	—
Property	UK	2.3	—	2.6	—
	Overseas	0.6	—	0.8	—
Other growth assets	Absolute Returnb	1.2	—	0.9	—
	Non-Core Creditc	4.2	0.4	4.2	0.4
	Mature Infrastructure	1.0	—	1.2	—
Liability matching
Government bondsd	UK	14.6	14.5	13.2	13.1
Investment grade credit	Global	10.3	7.7	10.4	8.2
Secure income assetse		4.0	—	3.7	—
Cash, derivatives and other
Cash balances		0.8	—	3.0	—
Financial derivative contracts		(4.9)	—	(4.2)	—
Longevity insurance contractf		(0.9)	—	(0.8)	—
Otherg		(1.5)	—	0.8	—
Totalh		35.4	23.7	38.7	22.3

a At 31 March 2024, the BTPS held nil (FY23: nil) equity issued by the group and £1.7bn (FY23: £1.6bn) of bonds issued by the group.

b This allocation seeks to generate a positive return in all market conditions. c 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. d Around 77% (FY23: 72%) of these are index-linked gilts with the remainder in conventional gilts.

e This allocation consists of assets which aim to provide the BTPS with contractual bond-like income, often inflation-protected. The assets include property, infrastructure and

investment-grade private credit.

f The value reflects experience to date on the contract from higher than expected deaths; this has partly offset a corresponding reduction in BTPS's liabilities over the same period. g Other balances comprise net amounts receivable/(payable) by the BTPS, including balances due to investment counterparties relating to repurchase agreements.

h Of which held in the co-investment vehicle: £0.1bn (FY23: <£1m).

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, market expectations (where relevant), actuarial advice and our judgement regarding future expectations at the balance sheet date. While assumptions are made for these events, actual benefit payments in a given year may be higher or lower than the assumption, for example if members retire sooner or later than assumed. The liabilities are the present value of the future expected benefit payments.

What are the forecast benefits payable from the BTPS?

There are c.265,000 members, and their dependants, who will be receiving benefits from the BTPS for the remainder of their lives. Members currently receiving pension benefits make up around 73% of the liabilities and 79% of the membership by number.

Notes to the consolidated financial statements continued

19. Retirement benefit plans continued

The chart below illustrates how the forecast benefits payable from the BTPS, and IAS 19 liabilities, projected using the IAS 19 assumptions evolve over time.

The estimated duration of the BTPS liabilities, which is an indicator of the weighted average term of the discounted future payments, is 11 years (FY23: 12 years) using the IAS 19 assumptions. The duration is sensitive to the assumptions and has reduced mainly due to the increase in bond yields, and therefore discount rate, over the year.

What are the most significant assumptions, and how have they been set?

The most significant financial assumptions used to calculate the IAS 19 liabilities for the BTPS are the discount rate and inflation. The most significant demographic assumption used is how life expectancy will evolve over time which is illustrated as forecast life expectancies in the table below.

At 31 March	2024	2023
Discount rate	4.90%	4.85%
Inflation – RPI	3.25%	3.35%
Inflation – CPI	2.80%	2.85%
Life expectancy – male aged 60 in lower pension bracket	24.9 years	24.7 years
Life expectancy – male aged 60 in higher pension bracket		26.9 years
Life expectancy – female aged 60	27.4 years	27.5 years
Average additional life expectancy for a male member retiring at age 60 in 10 years' time	0.4 years	0.4 years

While the financial assumptions are typically scheme-specific, the average financial assumptions weighted by liabilities across all schemes are within 0.05% of the figures shown in the table above.

19. Retirement benefit plans continued

The table below summarises how these assumptions have been set, including key changes over the year.

	Detail
Discount rate	The discount rate 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 £-denominated corporate bonds at the balance sheet date. 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	RPI inflation expectations are calculated by applying the projected BTPS benefit cash flows to an inflation curve derived from market yields on UK government bonds, and making a deduction for an inflation risk premium (to reflect the extra premium paid by investors for inflation linked assets) of 0.2% p.a. before 2030 and 0.3% p.a. thereafter.
	CPI inflation expectations are set with reference to the RPI inflation assumption taking into account market data and independent estimates of the expected difference. Before 2030, CPI inflation is assumed to be 1.0% lower than RPI inflation (FY23: 1.0%). RPI will be aligned with CPIH from 2030, and we assume a nil gap between CPI and CPIH inflation as historically these measures have been broadly comparable.
Pension increases	Under the BTPS rules, benefit increases prior to retirement are primarily linked to CPI capped at 5%, and the majority of benefits increase after retirement linked to either CPI for Sections A and B or RPI with a 5% cap for Section C. Benefits are assumed to increase in line with the RPI or CPI inflation assumptions.
Longevity	The longevity assumption takes into account:
	– the actual mortality experience of the BTPS pensioners, based on a formal review carried out for the 2023 triennial funding valuation; and
	– future improvements in longevity based on the CMI's 2022 Mortality Projections model published by the UK actuarial profession.
	There is significant uncertainty for future life expectancy assumptions following the Covid-19 pandemic. We continue to assume that following the pandemic there is a short-term increase in deaths compared to the assumptions adopted prior to the pandemic and we have fully allowed for population mortality data from 2022, but not data from 2020 and 2021. Allowing for the published 2022 CMI model has reduced the BTPS liabilities by £0.4bn.
	We continue to assume mortality will improve in the long-term by 1% per year.

Risks to BT Group arising from the BTPS

Background

A large increase in our pension scheme obligations could lead to an increased deficit, resulting in additional contributions being required, potentially impacting our business plans. Changes in factors, such as bond yields, life expectancy or inflation 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. A summary of changes and potential impacts is set out in the table below.

Notes to the consolidated financial statements continued

19. Retirement benefit plans continued

Change in	Impact
Government	A fall in government bond yields will:
bond yields	– increase the IAS 19 liabilities, driven by the fall in the discount rate; and
	– increase the assets, driven by an increase in the value of government bonds, corporate bonds and interest rate derivatives held by the BTPS.
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 but smaller increase in both asset values and funding liabilities.
Inflation expectations	A significant proportion of the benefits paid to members are currently increased in line with RPI or CPI inflation. The risk of high inflation is limited by caps on some of the inflationary increases under the BTPS rules e.g. benefit increases prior to retirement are primarily linked to CPI capped at 5%, and for Section C members benefits primarily increase after retirement in line with RPI with a 5% cap.
	Changes in average inflation expectations over the lifetime of the plan An increase in average inflation expectations will:
	– increase the IAS 19 liabilities; and
	– increase the value of index-linked bonds, other inflation linked assets and inflation derivatives held by the BTPS.
	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 both the IAS 19 liabilities and funding liabilities. If inflation is higher than the caps that apply to benefits, the assets will increase by more than the liabilities. Similarly, in a deflationary environment, the asset values are expected to fall by more than the IAS 19 liabilities and funding liabilities since the payments on index-linked gilts would be reduced but pensions paid by the BTPS would not necessarily fall to fully offset the fall in asset values.
	Hedging CPI benefits The BTPS primarily holds RPI inflation-linked assets and derivatives to hedge inflation-linked benefits. Around two thirds of the inflation-linked benefits increase with reference to CPI. A 0.25% a year increase in CPI inflation expectations before 2030 (with no corresponding change in RPI inflation expectations) would increase the IAS 19 deficit by around £0.3bn as at 31 March 2024.
Growth assets	A significant proportion of the BTPS assets are invested in growth assets, such as equities and property. 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 increase the IAS 19 and funding deficit.
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 IAS 19 liabilities and funding liabilities.
	The BTPS holds two longevity insurance contracts which covers around 32% 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. The scale of the BTPS means that investment changes and any future de-risking actions need to be planned and executed carefully, potentially over an extended timeframe or multiple transactions.

Scenario analysis

The potential negative impact of these risks is illustrated by the following five scenarios. These have been assessed by BT Group's independent actuary as scenarios that might occur no more than once in every 20 years. The scenarios have been updated to reflect market experience over the last year.

	1-in-20 events
Scenario	2024	2023
1. Fall in bond yieldsa	1.2%	1.2%
2. Increase in credit spreadsb	0.9%	0.9%
3. Increase to average inflation expectations over the lifetime of the planc	1.1%	1.1%
4. Fall in growth assetsd	15.0%	20.0%
5. Increase to life expectancy	1.2 years	1.3 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 dampening effect 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 15% (FY23: 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 and reflects the liabilities, assets and investment strategy at 31 March 2024. In practice a combination of events could arise, and the effects are not additive nor are they linear (e.g. doubling the change in bond yields assumed will not double the impact). The asset allocation is not fixed and changes over the year may impact the sensitivities shown.

19. Retirement benefit plans continued

Impact of illustrative scenarios which might occur no more than once in every 20 years

The sensitivities have been prepared using the same approach as FY23 which involves calculating the liabilities and assets allowing for the change in market conditions assumed under the scenario as if they had occurred at the reporting date. The change in impact from FY23 is due to a combination of: changes in the scenarios, changes in asset and liability values over the year, and changes in the scheme's investment strategy in line with the agreed de-risking plan.

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 funding valuation assesses the on-going financial health of the BTPS. If there are insufficient assets to meet the estimated future benefit payments to members (i.e. a funding deficit), BT Group and the Trustee agree the amount and timing of additional cash contributions. It is prepared using the principles set out in UK pension legislation, such as the 2004 and 2021 Pensions Acts, and uses a prudent approach overall when setting the actuarial assumptions. Some of the key differences compared to the IAS 19 deficit are set out in the table below.

	IAS 19	Funding
Purpose	Balance sheet in BT Group accounts	Assessing the on-going financial health and setting cash payments
Regulation	IFRS	UK pensions legislation
Frequency	Semi-annually	At least every three years
Key assumptions
Determined by	BT Group	BT Group and BTPS agreement
Discount rate	Yield curve based on AA corporate bonds	Yield curve reflecting prudent return expected from BTPS assets
Other assumptions	Best estimate	Prudent overall approach
Assets	BT Group accounts excludes ABF value	Includes ABF value

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 2023. The next funding valuation will have an effective date of no later than 30 June 2026.

The results of the two most recent triennial valuations are shown below.

	30 June 2023 £bn	30 June 2020 £bn
Funding liabilities	(40.9)	(65.3)
Assets	37.2	57.3
BTPS Funding deficit	(3.7)	(8.0)
Percentage of accrued benefits covered by the BTPS assets at valuation date	91 %	88 %
Key assumptions at valuation date:
Discount ratea	5.3 %	1.4 %
Inflation – RPI	3.6 %	3.2 %
Inflation – CPI	3.2 %	2.4 %
Life expectancy – male aged 60 in lower pension bracket	25.5 years	25.8 years
Life expectancy – male aged 60 in higher pension bracket	27.2 years	28.0 years
Life expectancy – female aged 60	28.0 years	28.5 years
Average additional life expectancy for a male member retiring at age 60 in 10 years' time	0.8 years	0.9 years

a The discount rate has been derived from prudent return expectations that reflect 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.

Notes to the consolidated financial statements continued

19. Retirement benefit plans continued

Scenario analysis of the funding position (unaudited)

The impact of changes in market conditions on the funding liabilities differs to the impact on the IAS 19 liabilities due to the size of the liabilities and how the assumptions are set. For example, the funding liabilities use a discount rate linked to a risk-free rate plus a margin based on the BTPS's investment strategy, whereas the IAS 19 liabilities use a discount rate based on corporate bond yields. The chart below illustrates the approximate impact of the scenarios set on page 192 on the 30 June 2023 funding position.

The figures shown in the table apply to the BTPS assets and funding liabilities as at 30 June 2023; an increase in the assets or funding liabilities will increase the impact of the scenarios shown.

Deficit payments from the Group

In November 2023, the 2023 triennial funding valuation was finalised, agreed with the Trustee, and certified by the Scheme Actuary. The funding deficit at 30 June 2023 was £3.7bn, down from £8.0bn at the 2020 funding valuation following £4.4bn of deficit contributions.

Annual contribution amounts remain unchanged, at £600m in each financial year until 31 March 2030, a final payment of £490m before 30 April 2030, and the £180m pa payments due under the ABF arrangement agreed at the 2020 valuation.

No payments are currently payable under the future funding commitment (see page 195).

These payments are summarised in the table below.

Year to 31 March (£m)	2025	2026	2027	2028	2029	2030	2031	2032	2033	2034
Payments from BT plca	600b	600b	600b	600b	600b	600b	490	—	—	—
Future funding commitment payments	—	—	—	—	—	—	—	—	—	—
Payments from ABF	180	180	180	180	180	180	180	180	180	180
Total	780	780	780	780	780	780	670	180	180	180

a Payments are due by 30 April each year.

b £10m is directly payable to the BTPS, and BT Group currently intends to pay the balance into the co-investment vehicle.

ABF

Under the ABF, £180m p.a. is paid into the BTPS until June 2033, secured on EE Limited. If the BTPS reaches full funding as calculated by the Scheme Actuary at any 30 June, the ABF payments to the BTPS will cease. BT Group received tax relief at inception of the ABF based on the original market value of £1.7bn, and will receive further tax-relief if payments are made to the BTPS in excess of this amount.

Assuming they are all paid, future payments from the ABF have a present value of £1.3bn at 31 March 2024 (FY23: £1.4bn). The fair value of the ABF is £1.2bn at 31 March 2024 (FY23: £1.3bn) which allows for the probability of the BTPS becoming fully funded, and the payments to the BTPS ending early.

The fair value of the ABF is included in the assets of the BTPS when assessing the funding deficit. Payments from the ABF to the BTPS are treated in the same way as coupon payments from bonds, and do not affect the funding deficit when they are paid.

The fair value of the ABF is not included in the assets of the BTPS when assessing the IAS 19 deficit in the group consolidated accounts, as it is a non-transferable asset issued by the group. Payments from the ABF to the BTPS are treated as deficit contributions, and reduce the IAS 19 deficit, when they are paid.

Co-investment vehicle

A co-investment vehicle was set up in 2021 which provides BT Group with some protection against the risk of overfunding and therefore enables BT Group to provide upfront funding with greater confidence. BT Group is eligible for future refunds if some or all of the coinvestment vehicle funds are surplus to the BTPS's requirements, unless the BTPS, acting prudently but reasonably, decides to defer or reduce these payments. Assessments will be carried out over a series of dates between June 2032 and June 2041.

Payments made by BT Group into the co-investment vehicle will be invested as if part of the overall BTPS investment strategy. BT Group will receive tax relief in respect of any funds paid to the BTPS from the vehicle but does not receive tax relief when payments are made to the co-investment vehicle.

19. Retirement benefit plans continued

The fair value of assets in the co-investment vehicle, £0.1bn at 31 March 2024 (FY23: <£1m), is included in the assets of the BTPS when assessing both the IAS 19 and funding deficits.

Protections for BTPS (going concern)

BT Group has agreed to provide the Trustee with certain protections to 2035.

Feature	Detail
Future funding commitment	BT Group will provide additional contributions, of between £150m p.a. and £300m p.a., should the funding deficit fall behind plan by more than an agreed threshold at any two consecutive reviews. The reviews will be carried out every June and December and until the 2026 valuation the threshold is £1bn.
	Payments are due within 12 months of the payments being switched on. Payments will stop once the semi-annual assessment shows the funding deficit is back on plan, i.e. outstanding deficit contributions are sufficient to address the funding deficit.
	At the 31 December 2023 assessment date, the funding position was within the above limit. The next test will be carried out as at 30 June 2024.
Shareholder distributions	BT Group will provide additional payments to the BTPS by the amount that shareholder distributions exceed a threshold. For the three years following the 2023 valuation, the threshold allows for 10% per year dividend per share growth based on dividends of 7.7p per share in FY23, adjusted to reflect the interim dividend declared at our half-year results.
	BT Group has agreed to implement a similar protection at each subsequent valuation, with the terms to be negotiated at the time.
	BT Group 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 three 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
	– it considers making a special dividend.
Material corporate events	In the event that BT Group generates net cash proceeds greater than a threshold from disposals (net of acquisitions) in any financial year, BT Group will make additional contributions to the BTPS. The threshold is £750m p.a. to 30 June 2026.
	The amount payable is one-third of the total net cash proceeds.
	BT Group 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 any disposal of more than £1.0bn;
	– it considers making a Class 1 transaction which will have a material impact on the BTPS (acquisition or disposal);
	– it is likely to be subject to a takeover offer; or
	– there are any other corporate or third-party events which may have a materially detrimental impact on BT Group's covenant to the BTPS (in which case BT Group will use its best endeavours to agree appropriate mitigation).
	This obligation is ongoing until otherwise terminated.
Negative pledge	A negative pledge that future creditors will not be granted superior security to the BTPS in excess of £0.5bn, to cover any member of the BT Group. Business as usual financing arrangements are not included within the £0.5bn.

No additional contributions were triggered during FY24.

Protections for BTPS (insolvency)

The Scheme Actuary assumes that in the highly unlikely event that BT Group were to become insolvent, the Trustee would continue to run the Scheme with a low-risk, closely-matched investment strategy including additional margins for risk. On this basis and assuming no further contribution from BT Group, it was estimated that at 30 June 2023 the assets of the Scheme would have met around 80% of the liabilities.

Were this to occur, BTPS members would benefit from the following additional protections.

Feature	Detail
Crown Guarantee	The Crown Guarantee was granted by the Government when BT was privatised in 1984; it would only come into effect upon the insolvency of BT plc. In July 2014, the courts established that:
	– the Crown Guarantee covers BT plc'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); and
	– the funding obligation to which the Crown Guarantee relates is measured with reference to BT plc'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 plc becomes insolvent.
Pension Protection Fund (PPF)	Further protection is also provided by the PPF which is the fund responsible for paying compensation in respect of schemes where the employer becomes insolvent.

Notes to the consolidated financial statements continued

19. Retirement benefit plans continued

EEPS funding valuation

The most recent triennial valuation of the defined benefit section was performed as at 31 December 2021 and agreed in March 2023. This showed a funding deficit of £218m. The group is scheduled to contribute £1.7m each month until 31 July 2025 and a final payment of up to £80m by 31 March 2026. £31.7m (FY23: £13.3m) of deficit contributions were paid by the group to the EEPS during the year.

At the triennial valuation date, the EEPS had a diversified investment strategy, investing scheme assets in: global equities (25%), property & illiquid alternatives (20%), an absolute return portfolio (24%) and a liability-driven investment portfolio (31%).

20. Own shares

Material 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.

	Treasury sharesa		Employee share ownership trusta		Total
	millions	£m	millions	£m	millions	£m
At 1 April 2022	41	(108)	94	(166)	135	(274)
Own shares purchasedb	—	—	114	(187)	114	(187)
Share options exercisedb	(5)	14	—	—	(5)	14
Share awards vested	—	—	(14)	25	(14)	25
At 31 March 2023	36	(94)	194	(328)	230	(422)
Own shares purchasedb	—	—	64	(83)	64	(83)
Share options exercisedb	(20)	52	(44)	72	(64)	124
Yourshare vestings	—	—	(5)	8	(5)	8
Share awards vested	—	—	(37)	62	(37)	62
At 31 March 2024	16	(42)	172	(269)	188	(311)

a At 31 March 2024, 16,299,007 shares (FY23: 36,190,551) with an aggregate nominal value of £1m (FY23: £2m) were held at cost as treasury shares and 172,157,686 shares (FY23: 193,798,578) with an aggregate nominal value of £9m (FY23: £10m) were held in the Trust.

b See group cash flow statement. The cash paid for the repurchase of ordinary shares was £133m (FY23: £138m). 35m shares (FY23: 40m) were purchased via forward contracts. The cash received from proceeds on the issue of treasury shares was £57m (FY23: £5m). At 31 March 2024 the group had forward contracts to purchase 15m shares (FY23: 55m shares).

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 21.

21. Share-based payments

Material accounting policies that apply to share-based payments

We operate a number of equity-settled share-based payment arrangements, under which the group receives 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. The fair value 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. Fair value of share option schemes is measured using a Binomial options pricing model.

Service conditions are vesting conditions. Any other conditions are non-vesting conditions which are taken into account to determine the fair value of equity instruments granted. When an award or option does not vest as a result of a failure to meet a nonvesting condition that is within the control of either counterparty, it 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	2024 £m	2023 £m
Employee saveshare plans	13	21
Yourshare	13	12
Executive share plans:
Deferred Bonus Plan (DBP)	9	12
Retention and Restricted Share Plans (RSP)	36	35
	71	80

21. Share-based payments continued

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 HMRC-approved savings-related share option plans, 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 FY24 or FY23.

Yourshare

In FY21 and FY22, all eligible employees of the group were awarded £500 of BT shares. The shares are held in trust for a three-year vesting period after which they will be transferred to employees, providing they have been continuously employed during that time. A similar plan operated 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, unless the employee has elected to receive dividends in cash.

Deferred Bonus Plan (DBP)

Awards are granted annually to selected senior employees where part of their bonus is awarded in shares in the group. These shares vest after three years.

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.

Incentive Share Plan (ISP)

Under this scheme, certain employees were awarded shares if the group met performance measures linked to total shareholder return, normalised free cash flow and revenue growth over a three year period. The last ISP was granted in 2019 and vested in 2022.

Employee Saveshare Plans

Movements in Employee Saveshare options are shown below.

	Number of share options		Weighted average exercise price
	2024	2023	2024	2023
Year ended 31 March	millions	millions	pence	pence
Outstanding at 1 April	269	342	102	102
Granted	—	—	—	—
Forfeited	(23)	(42)	118	130
Exercised	(64)	(5)	89	96
Expired	(26)	(26)	151	208
Outstanding at 31 March	156	269	103	102
Exercisable at 31 March	—	—	—	—

The weighted average share price for all options exercised during FY24 was 118p (FY23: 153p).

The following table summarises information relating to options outstanding and exercisable under Employee Saveshare plans at 31 March 2024.

Normal dates of vesting and exercise (based on calendar years)	Exercise price per share	Weighted average exercise price	Number of outstanding options millions	Weighted average remaining contractual life (months)
2024	164p	164p	27	10
2025	82p	82p	129	22
Total		96p	156	20

Notes to the consolidated financial statements continued

21. Share-based payments continued

Executive share plans

Movements in executive share plan awards are shown below:

	Number of shares (millions)
	ISP	DBP	RSP	Total
At 1 April 2022	31	22	58	111
Awards granted	—	6	29	35
Awards vested	(5)	(5)	(4)	(14)
Awards lapsed	(26)	(1)	(7)	(34)
Dividend shares reinvested	—	2	4	6
At 31 March 2023	—	24	80	104
Awards granted	—	6	42	48
Awards vested	—	(10)	(27)	(37)
Awards lapsed	—	(1)	(8)	(9)
Dividend shares reinvested	—	1	6	7
At 31 March 2024	—	20	93	113

Fair values

There were no grants under Employee Saveshare or the ISP in FY24 or FY23.

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. 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.

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 FY24 was 135p (FY23: 188p) and for RSP awards granted in FY24 was 112p (FY23: 183p).

22. Divestments and assets & liabilities classified as held for sale

Material 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 certain city fibre networks and associated infrastructure assets in Germany and Pelipod Limited, both of which were classified as held for sale in FY23, and the disposal of BT Enia, a subsidiary of BT Italia. We recognised a net profit on disposal after tax of £25m through specific items from these divestments, see below for further details.

In FY23, we completed the disposal of BT Sport operations through forming a sports joint venture (Sports JV) with Warner Bros. Discovery (WBD) recognising a profit on disposal after tax of £28m through specific items. During the current year, we recorded £10m additional net transaction costs through specific items and received £24m from the deferred cash consideration recorded at completion of the transaction.

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.

22. Divestments and assets & liabilities classified as held for sale continued

The net consideration recognised on completion of these divestments was as follows:

	2024	2023a
	£m	£m
Intangible assets, including allocated goodwill of £18m (FY23: £83m)	19	88
Property, plant and equipment	13	13
Right-of-use assets	3	1
Other assetsb	8	760
Liabilitiesb	(8)	(357)
Net assets of operations disposed	35	505
Net financial liabilities recognisedc	—	534
Net impact on the consolidated balance sheet	35	1,039
Profit on disposal, after tax (note 9)	25	28
Net consideration from divestments completed in the year	60	1,067
Additional net transaction costs on the BT Sport disposal (note 9)	(10)	—
Net consideration	50	1,067
Satisfied by
Proceeds received in the year per the cash flow statement	81	29
Deferred cash consideration on BT Sport disposald	(24)	70
Deferred cash consideration from other divestments	5	—
Transaction costs	(2)	(35)
Investment in A preference shares in Sports JV (note 24)	—	428
Investment in C preference shares in Sports JVe	—	161
Ordinary equity interest in Sports JV (note 24)	—	414
Net consideration from divestments completed in the year	60	1,067
Additional net transaction costs on the BT Sport disposal (note 9)	(10)	—
Net consideration	50	1,067

a Balances in FY23 relate to the BT Sport disposal.

b Other assets in FY23 included £632m of capitalised programme rights and £104m prepayments relating to programme rights payments made for licence periods that had not yet started. Liabilities included £351m relating to outstanding trade payables to broadcast rights holders for the current licence period.

c Net financial liabilities in FY23 the fair value of BT's obligation under the minimum revenue commitment of £712m, less tax credit of £178m. d Deferred cash consideration on the BT Sport disposal relates to the discounted cash flows due to BT from the remaining fixed consideration payable by WBD, of which £24m has

been received in FY24. £52m of deferred consideration is outstanding at 31 March 2024 and held in trade and other receivables, see note 16. e BT's C preference shares in the Sports JV are expected to be sold to WBD at the end of BT's earn-out entitlement in consideration for any programme rights funded by BT and is

therefore akin to deferred consideration for pre-funded programme rights contributed by BT in to the Sports JV at formation. See note 24 for further details.

BT Sport

In August 2022 the group formed a sports joint venture (Sports JV) with Warner Bros. Discovery (WBD) combining BT Sport and WBD's Eurosport UK business. As part of the transaction, the group's wholly owned subsidiary, British Telecommunications plc (BT plc or BT) and WBD each contributed, sub-licensed or delivered the benefit of their respective sports rights and distribution businesses for the UK & Ireland to the Sports JV. Both parties each hold a 50% interest and equal voting rights in the Sports JV.

BT Sport's distribution agreement with Virgin Media transferred to the Sports JV, and the Sports JV also entered into an agreement with Sky extending beyond 2030 to provide for its distribution of the Sports JV's combined sports content.

The production and operational assets of BT Sport transferred to WBD who manage and operate the production of the Sports JV's sport content.

BT plc entered into a distribution agreement with the Sports JV to procure the sport content required to continue to supply our broadband, TV and mobile customers. BT plc's agreement with the Sports JV will extend beyond 2030 and 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 no longer has control of the BT Sport operations based on the assessment of ownership and joint control over the key decisions of the Sports JV (50/50 with WBD) established through the Sports JV agreement. The group's retained ordinary equity interest in the combined business has been classified as a joint venture under IFRS 11, see note 24.

WBD have the option to acquire BT plc's 50% interest in the Sports JV at specified points during the first four years of the Sports JV (Call Option). The price payable under the Call Option will be 50% of the fair market value of the Sports JV to be determined at the time of the exercise, plus any unpaid fixed consideration and remaining earn-out as described below. If the Call Option is not exercised, BT plc will have the ability to exit its shareholding in the Sports JV either through a sale or IPO after the initial four-year period.

Notes to the consolidated financial statements continued

22. Divestments and assets & liabilities classified as held for sale continued

Critical & key accounting estimates and significant judgements made in accounting for the BT Sport disposal in FY23

The following critical and key accounting estimates and significant judgements were made in accounting for the BT Sport disposal in FY23 only and are not considered to be ongoing significant judgements.

Assessment of whether BT has joint control over the Sports JV

See note 24 for assessment of control.

Valuation of investment in A preference shares (akin to contingent consideration)

BT will receive an earn-out from the Sports JV (subject to liquidity and usual UK company law requirements), which will end at the earliest of:

• four years post completion of the transaction;
• the exercise by WBD of the Call Option; and
• if the earn-out reaches an agreed cap.

The earn-out cash flows to BT are dependent on the cash profit generation of the Sports JV over the earn-out period and is therefore akin to contingent consideration, initially recorded at a fair value of £428m reflecting the present value of expected cash flows.

Subsequent to the initial recognition, the group's carried forward investment in A preference shares are remeasured to fair value at each reporting date in accordance with IFRS 9, see note 24.

Valuation of the minimum revenue guarantee in BT's distribution agreement with the SportsJV

BT plc's obligation under the minimum revenue guarantee of c. £2bn over the first four years of the Sports JV represents both a trading arrangement on market terms and a financing arrangement for the off-market element of the revenue guarantee, which has been recorded as a financial liability at an initial fair value of £712m.

The valuation of this financial liability, and what a fair cost-per-subscriber would be, is sensitive to a number of assumptions on volumes and price, and there is a range of outcomes which we could have arrived at. Alternative scenarios considered, based on the different prices and terms used with other market participants, could have resulted in a liability ranging from £543m to £837m.

The key assumptions in calculating the financial liability are in estimating what is a market wholesale price at market volume commitment that is supported by the forecast volumes for the related revenue streams. The volumes used are consistent with those included in the jointly-agreed business plan for the Sports JV. We note that the bottom of the range disclosed above is based on the price that we will pay when the minimum revenue guarantee has ended, however we do not believe that is an appropriate rate from the outset due to existing volume commitments.

The liability is held at amortised cost within trade and other payables on the balance sheet (see note 17) – the carrying amount at 31 March 2024 has reduced to £465m (FY23: £660m) after payments made to the Sports JV on the minimum revenue guarantee.

Valuation of BT's equity interest in the Sports JV

WBD has the option to acquire BT plc's 50% interest in the Sports JV at specified points during the first four years of the Sports JV. If the Call Option is not exercised, BT plc will have the ability to exit its shareholding in the JV either through a sale or IPO.

• The group valued its interest in the Sports JV based on the estimated fair value at exit and using the following key assumptions:
• BT expect to realise its interest in the Sports JV through exit rather than ongoing value in use.
• BT expect WBD to exercise its option to acquire BT's 50% interest in the Sports JV at the end of the first four years of the Sports JV.
• An earnings multiple has been applied to the expected year 5 EBITDA per the jointly-agreed business plan the multiple is at the lower end of a possible range identified from comparable peers and transactions in the premium sports subscription and broadcasting market.

The investment is subsequently accounted for using the equity method and will be subject to impairment testing at each reporting period, with any impairment losses recognised through specific items, see note 24.

Discounting of cash flows

All cash flows expected to be received or paid over time were discounted at a rate applicable to the risks associated with the cash flows:

• Deferred payments due to BT from WBD have been discounted at an appropriate post-tax cost of debt;
• BT's earn-out from the Sports JV has been discounted at the weighted average cost of capital for the Sports JV at completion date; and
• BT's commitments under the minimum guarantee have been discounted at the group's post-tax cost of debt.

We do not consider the net present value of the transaction would be materially affected by a reasonable change in the discount rate.

Assets and liabilities held for sale

At 31 March 2024 there are no assets and liabilities classified as held for sale.

Assets and liabilities classified as held for sale at 31 March 2023 related to certain city fibre networks and associated infrastructure assets in Germany and Pelipod Limited. These divestments completed during FY24, and information on the gains and losses on disposal is disclosed above.

22. Divestments and assets & liabilities classified as held for sale continued

The disposal groups held for sale comprised the following assets and liabilities:

	2024	2023
At 31 March	£m	£m
Assets
Intangible assetsa	—	13
Property, plant and equipment	—	4
Right-of-use assets	—	3
Inventories	—	—
Trade and other receivables	—	1
Assets held for sale	—	21
Liabilities
Trade and other payables	—	1
Lease liabilities	—	3
Liabilities held for sale	—	4

a Intangible assets in FY23 include goodwill of £13m that has been allocated to the disposal group.

23. Investments

Material 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, aside from dividends, are recognised in other comprehensive income and are not reclassified to the income statement when the investments are disposed of, instead any balance remaining in other comprehensive income is transferred to retained earnings. Dividends 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.

	2024	2023
At 31 March	£m	£m
Non-current assets
Fair value through other comprehensive income	23	23
Fair value through profit or loss	6	6
Total non-current asset investments	29	29
Current assets
Investments held at amortised cost	2,366	3,548
Current asset investments	2,366	3,548

Investments held at amortised cost relate to money market investments denominated in sterling of £2,355m (FY23: £3,094m), in euros of £5m (FY23: £446m) and US dollars of £6m (FY23: £8m). Within these amounts are investments in liquidity funds of £1,815m (FY23: £3,491m), collateral paid on swaps of £40m (FY23: £48m), interest on investments of £11m (FY23: £9m) and gilt repurchase agreements £500m (FY23: £nil).

Notes to the consolidated financial statements continued

23. Investments continued

Fair value estimation

Fair value hierarchy	Level 1	Level 2	Level 3	Total held at fair value
At 31 March 2024	£m	£m	£m	£m
Non-current and current investments
Fair value through other comprehensive income	—	—	23	23
Fair value through profit or loss	6	—	—	6
Total	6	—	23	29
At 31 March 2023
Non-current and current investments
Fair value through other comprehensive income	—	—	23	23
Fair value through profit or loss	6	—	—	6
Total	6	—	23	29

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 £23m (FY23: £23m) 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.

24. Joint ventures and associates

	2024	2023
At 31 March	£m	£m
Interest in joint ventures	302	354
Interest in associates	5	5
Total	307	359

Share of post tax loss of associates and joint ventures included in the income statement of £21m (FY23: £59m loss) includes £41m loss (FY23: £60m) relating to our sports joint venture (Sports JV) with Warner Bros. Discovery (WBD) and £20m profit (FY23: £1m) relating to our other joint ventures and associates including Rugby Radio Station. The Sports JV is the only material equity-accounted investment held by the group, see below for further details.

Sports JV

In FY23 we formed the Sports JV (known externally as TNT Sports) with WBD, combining BT Sport and WBD's Eurosport UK business. Further details on the transaction are provided in note 22.

Key developments in the Sports JV during the year:

• BT Sport's linear channels and live content were rebranded to TNT Sports prior to the start of the 2023/24 football season with streaming customers migrated to WBD's discovery+ platform in October 2023. Eurosport UK rebranding will follow later in the year.
• Underlying trading, before adjustments made to align with the group's accounting policies (see below), was profitable with stable subscriber volumes.
• Premier League rights were extended with a four-year deal to air 52 exclusively live matches per season until 2029, and a four-year deal was agreed with the Football Association to show the FA Cup from 2025.

The group holds both ordinary equity shares and preference shares in the Sports JV entity.

24. Joint ventures and associates continued

Material accounting policies that apply to the Sports JV

Assessment of whether BT has joint control over the Sports JV

The Sports JV is classified as a joint venture based on an assessment under IFRS 10 and 11 of the ownership, voting power and joint control established through the joint venture agreement between BT and WBD.

Factors relevant to our assessment:

• Equal voting rights over the activities that most significantly impact the returns of the Sports JV, namely decisions around new or existing sports rights and distribution arrangements.
• Unequal cash distribution during the first four years of the JV due to the earn-out mechanism and larger business contributed into the JV by BT.
• Revolving credit facility (RCF) provided by BT to fund short-term liquidity required by the Sports JV for working capital and commitments to sports rights holders.
• WBD's call option to acquire BT's 50% interest in the Sports JV is not exercisable before key decisions over material activities of the Sports JV are made such that joint control still applies.

The assessment whether joint control remains in place is reviewed at each reporting period.

Accounting policies adopted by the Sports JV

The Sports JV has a financial year-end of 31 July and has not yet prepared its first set of audited financial statements. In order to recognise our share of the Sports JV's results for our equity-accounted investment, we have prepared the Sports JV's financial information disclosed below based on management accounts for the period ending 31 March 2024 after making certain adjustments to comply with IFRS.

Significant judgements made in preparing the Sports JV's financial information:

• IFRS 3 acquisition accounting should be applied by the Sports JV over the business combination achieved through the transfer of the BT Sport and Eurosport UK businesses from BT and WBD respectively, recognising acquired intangibles on the current and future value of programme rights, and goodwill.
• Revenues from the minimum guarantee in the Sports JV's distribution agreement with BT should be adjusted to reflect a trading agreement on market terms with a separate financing arrangement for the off-market portion accounted for under IFRS 9 – this mirrors the accounting treatment applied by BT (see note 22).
• A and C preference shares issued by the Sports JV to BT should be classified as a financial liability at fair value through profit or loss under IFRS 9, as cash flows of the liability can be modified by both financial and non-financial factors that are not closely related to the instrument itself.
• Hedge accounting should be applied on the Sports JV's forward contracts with BT (see note 30) with fair value movements on the derivatives recognised in other comprehensive income and held in the cash flow hedge reserve until recycle on settlement of the forward contracts.
• Programme rights should be recognised on the balance sheet from the point at which the licence period begins and are consumed by the Sports JV on a straight-line basis over the programming period which is generally 12 months. This is consistent with accounting policy applied in our previous BT Sport operations that have been transferred to the Sports JV.

Accounting policies in other areas are consistent with those applied by the group.

Key accounting estimates made in accounting for the Sports JV

Valuation of investment in A preference shares

We expect the group's A preference shares to be redeemed by the Sports JV for the distribution of cash to BT under our earn-out entitlement. BT's return on the shares is driven by the underlying cash profit generation of the Sports JV and therefore have been classified as a fair value through profit or loss (FVTPL) financial asset under IFRS 9 and is remeasured to fair value at each reporting date.

The fair value recorded is supported by a jointly-agreed business plan and internal valuation model with the following key assumptions:

• Approximately 45% of revenues and 90% of costs during the remaining earn out period are contractually committed.
• Material contracts are renewed at an economic value no less than current terms.
• Total premium sports subscriber base does not materially grow or decline over the remaining earn-out period.

Ordinary equity shares

Our retained ordinary equity interest in the Sports JV is held under the equity method of accounting, consistent with our accounting policy on associates and joint ventures.

	2024 £m	2023 £m
Carrying amount at 1 April	352	414
Share of total comprehensive loss for the year	(52)	(62)
Dividends received during the year	—	—
Carrying amount at 31 March	300	352

Notes to the consolidated financial statements continued

24. Joint ventures and associates continued

As required by IAS 36, we have assessed the investment for impairment. There is no impairment at 31 March 2024 as the fair value less costs to sell is higher than the carrying amount of the investment. See below for sensitivities we have applied in determining the fair value less costs to sell.

The following is summarised and unaudited financial information for the Sports JV prepared in accordance with IFRS and including adjustments required to align with the group's accounting policies and fair value adjustments.

	2024	2023
Summarised statement of total comprehensive income for year ended 31 March	£m	£m
Revenue	918	557
Loss for the yeara	(82)	(121)
Other comprehensive loss	(22)	(2)
Total comprehensive loss	(104)	(123)
	2024	2023b
Summarised balance sheet at 31 March	£m	£m
Current assetsc	863	1,098
Non-current assetsd	1,085	1,286
Current liabilitiese	(413)	(702)
Non-current liabilitiesf	(575)	(618)
Net assets	960	1,064
Attributable to fair value of BT's A preference shares (see below)	(387)	(429)
BT's share of residual net assets (50%)	287	318
Other fair value adjustments	13	34
Carrying amount of interest in Sports JV	300	352

a Includes amortisation of £27m (FY23: £56m) on acquired intangibles; net finance income of £5m (FY23: £6m); and tax income of £57m (FY23: £17m) driven by current tax charge of £10m (FY23: £4m) offset by deferred tax credit of £67m (FY23: £21m).

b Restated to reflect true-up to opening balance sheet from finalising fair value adjustments.

c Includes cash and cash and cash equivalents of £11m (FY23: £11m).

d Includes goodwill and acquired intangibles of £668m (FY23: £695m restated).

e Includes current financial liabilities (excluding trade and other payables and provisions) of £(244)m (FY23: £(281)m) of which £(163)m (FY23: £(268)m) relates to the outstanding liability on the RCF provided by BT (see note 30).

f Includes non-current financial liabilities (excluding trade and other payables and provisions) of £(305)m (FY23: £(416)m).

The Sports JV had a loss after tax for the year of £82m, after adjustments made to align with the group's accounting policies, and reflects amortisation of acquired intangibles from the BT Sport and Eurosport UK business transfers and adjustments for the off-market minimum guarantee with BT (see note 22). Underlying trading before these adjustments was profitable. In addition, the Sports JV had other comprehensive losses of £22m relating to fair value movements on its foreign exchange hedging arrangement with the group (see note 30) that have been designated as cash flow hedges.

Our share of the Sports JV's results in FY23 included amortisation from provisional fair value adjustments, which were subject to true-up within 12 months from the Sports JV formation. We have subsequently finalised these fair value adjustments and recorded a £25m credit in the current year as a true-up to the amount recorded in FY23, of which our 50% share is £13m. The difference is not material and therefore we have not retrospectively adjusted our share of total comprehensive loss in FY23.

Preference shares

In addition to BT's ordinary shareholding, BT held the following investments in preference shares in the Sports JV that have not been included within the equity-accounted interest above.

	2024	2023
At 31 March	£m	£m
Investment in A preference shares	387	429
Investment in C preference shares	146	126
Total	533	555

A net £22m movement has been recorded on the group's preference share investments relating to fair value changes only, see below for further details.

• A preference shares a £42m fair value loss has been recognised through specific items (see note 9), largely driven by a reduction in forecast cash flows following the Sports JV's investment in new sports content, leading to lower cash available for distribution under BT's earn-out entitlement.
• C preference shares these shares are expected to be sold to WBD at the end of BT's earn-out entitlement in consideration for any sports rights funded by BT at that point. BT's return on the shares is driven by changes in the Sports JV's sports rights portfolio which in turn is dependent on changes in the wider sports rights market and the Sports JV's financial performance and are therefore held as a financial asset at FVTPL under IFRS 9. A £20m fair value gain has been recognised through specific items (see note 9) driven by an expected growth in the Sports JV content portfolio, which will increase the payment to BT for pre-funded sports rights up to the end of BT's earn-out entitlement.

The preference shares are held at Level 3 on the fair value hierarchy, reflecting a valuation methodology that does not use inputs based on observable market data – see note 23 for further details on the fair value hierarchy. See below for sensitivities we have applied in determining the fair value.

24. Joint ventures and associates continued

Sensitivities

The group's ordinary equity and preference share investments in the Sports JV, carry both upside and downside risk from changes in micro and macroeconomic factors affecting the sports content subscription market and risk appetite of investors in that market. Further, a key decision point in the next 12 months, relating to the renewal of a material customer contract, could significantly impact the value of our investments.

We have applied the following sensitivities to these risk factors:

– EBITDA decline from loss of revenue or improvement from outperformance against revised forecasts.

• Increase or decrease in the valuation multiple achieved.
• Increase or decrease in the discount rate applied.

Sensitivity	Fair value of A and C preference shares in Sports JV	Headroom on impairment test over equity-accounted investment
20% increase or decrease in EBITDA	+/- £112m	+/- £117m
10% increase or decrease in discount rate	+/- £4m	+/- £14m
10% change in valuation multiple	—	+/- £57m

None of these sensitivities generated an impairment on the group's equity-accounted investment in the Sports JV.

In valuing our investments, we have assumed an exit after the earn-out period ends on the fourth anniversary of forming the Sports JV. However, an earlier exit would not have a material impact on the amounts recorded.

25. Cash and cash equivalents

Material 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).

	2024	2023
At 31 March	£m	£m
Cash at bank and in hand	332	336
Cash equivalents
Indian rupee deposits	74	55
Other deposits	8	1
Total cash equivalents	82	56
Total cash and cash equivalents	414	392
Bank overdrafts (note 26)	(58)	(11)
Cash and cash equivalents per the cash flow statement	356	381

The majority of cash at bank balance was held at counterparties with a credit rating of A2/A or above. Cash and cash equivalents include restricted cash of £71m (FY23: £131m), of which £14m (FY23: £23m) was held in countries where local capital or exchange controls currently prevent us from accessing cash balances. The remaining balance of £57m (FY23: £108m) was held in escrow accounts, or in commercial arrangements akin to escrow.

Notes to the consolidated financial statements continued

26. Loans and other borrowings

Material 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?

Our capital management policy targets an overall level of debt consistent with our credit rating target of BBB+/Baa1 and minimum rating of BBB/Baa2 while investing in the business, supporting the pension scheme and meeting our distribution policy. To meet this objective, we may issue or repay debt, issue or repurchase shares or adjust 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 and capital management policy and no changes were made in FY24. For details of share issues and repurchases in the year see note 20.

Our capital structure consists of net debt and shareholders' equity. The analysis below summarises the components which we manage as capital.

At 31 March	2024 £m	2023 £m
Net debt	19,479	18,859
Total parent shareholders' equitya	12,513	14,490
Capital structure	31,992	33,349

a Excludes non-controlling interests of £5m (FY23: £24m).

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 the balance sheet. Amounts due to joint ventures and loans and borrowings recognised in relation to monies received from the sale of cash flows of contract assets and as prepayment for the forward sale of redundant copper are excluded. Currency-denominated balances within net debt are translated to sterling at swap rates where hedged. Fair value adjustments and accrued interest applied to reflect the effective interest method are removed. We explain the rationale for using net debt as a key performance indicator, together with changes to the metric in FY24, in Additional Information on page 231.

Net financial debt is defined as 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.

		2024	2023
At 31 March	Notes	£m	£m
Loans and other borrowingsa		18,526	18,521
Lease liabilities	15	4,955	5,359
Assets and liabilities classified as held for saleb	22	—	3
Less:
Cash and cash equivalents	25	(414)	(392)
Current asset investments	23	(2,366)	(3,548)
		20,701	19,943
Adjustments:
To retranslate debt balances at swap rates where hedged by currency swapsc		(512)	(819)
To remove accrued interest applied to reflect the effective interest method and fair value
adjustments		(275)	(254)
Loans with joint ventures	30	(11)	(11)
Loans related to the forward sale of redundant copper		(106)	—
Loans related to sale of contract assets		(318)	—
Net debt		19,479	18,859
Lease liabilities	15	(4,955)	(5,359)
Lease liabilities classified as held for saleb		—	(3)
Net financial debt		14,524	13,497
a Includes overdrafts of £58m at 31 March 2024 (FY23: £11m).

b Refer to note 22.

c The translation difference between spot rate and hedged rate of loans and borrowings denominated in foreign currency.

26. Loans and other borrowings continued

The table below shows the key components of net debt and the increase of £620m this year.

	At 31 March 2023 £m	Cash flows £m	Net lease additionsa £m	Foreign exchange £m	Transfer to within one year £m	Other movementsd £m	At 31 March 2024 £m
Loans and other borrowings due within one yearb	1,772	(1,615)	—	(12)	1,227	23	1,395
Loans and other borrowings due after one year	16,749	1,800	—	(287)	(1,227)	96	17,131
Total loans and other borrowings	18,521	185	—	(299)	—	119	18,526
Lease liabilities due within one year	800	(882)	—	(1)	849	—	766
Lease liabilities due after one year	4,559	—	487	(8)	(849)	—	4,189
Liabilities classified as held for sale	3	—	—	—	—	(3)	—
Total lease liabilities	5,362	(882)	487	(9)	—	(3)	4,955
Gross debt	23,883	(697)	487	(308)	—	116	23,481
Less:
Impact of cross-currency swapsc	(819)	—	—	307	—	—	(512)
Removal of the accrued interest and fair value adjustments	(264)	—	—	—	—	(22)	(286)
Removal of loans with joint ventures	(11)	(1)	—	—	—	1	(11)
Removal of loans related to the forward sale of redundant copper	—	(105)	—	—	—	(1)	(106)
Removal of loans related to sale of cash flows related to contract assets	—	(305)	—	—	—	(13)	(318)
Cash and cash equivalents	(392)	(30)	—	8	—	—	(414)
Current asset investments	(3,548)	1,173	—	10	—	(1)	(2,366)
Removal of accrued interest	10	—	—	—	—	1	11
Net debt	18,859	35	487	17	—	81	19,479

	At 31 March 2022	Cash flows	Net lease additionsa	Foreign exchange	Transfer to within one year	Other movementsd	At 31 March 2023
	£m	£m	£m	£m	£m	£m	£m
Loans and other borrowings due within one yearb	873	(136)	—	65	943	27	1,772
Loans and other borrowings due after one year	15,312	1,746	—	525	(943)	109	16,749
Total loans and other borrowings	16,185	1,610	—	590	—	136	18,521
Lease liabilities due within one year	795	(860)	—	2	863	—	800
Lease liabilities due after one year	4,965	—	449	11	(863)	(3)	4,559
Liabilities classified as held for sale	2	—	—	—	—	1	3
Total lease liabilities	5,762	(860)	449	13	—	(2)	5,362
Gross debt	21,947	750	449	603	—	134	23,883
Less:
Impact of cross-currency swapsc	(234)	—	—	(585)	—	—	(819)
Removal of the accrued interest and fair value adjustments	(251)	—	—	—	—	(13)	(264)
Removal of loans with joint ventures	—	(11)	—	—	—	—	(11)
Cash and cash equivalents	(777)	379	—	3	—	3	(392)
Current asset investments	(2,679)	(885)	—	(21)	—	37	(3,548)
Removal of accrued interest	3	—	—	—	—	7	10
Net debt	18,009	233	449	—	—	168	18,859

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 22).

Notes to the consolidated financial statements continued

26. Loans and other borrowings continued

The table below shows how cash flows from gross debt of £(697)m (FY23: £750m) in the table above reconciles to the line items presented in the group cash flow statement on page 149:

	2024	2023
At 31 March	£m	£m
Repayment of borrowings	(1,676)	(513)
Proceeds from bank loans and bonds	2,242	2,203
Cash flows from collateral (paid) received	(532)	(17)
Increase (decrease) in amounts owned to joint ventures	(1)	11
Change in bank overdrafta	47	(74)
Total loans and other borrowings cash flows - financing activities	80	1,610
Prepayment for the forward sale of copperb	105	—
Total loans and other borrowings cash flows - investing activities	105	—
Total loans and other borrowings cash flows	185	1,610
Payment of lease liabilities	(748)	(727)
Interest on lease liabilities paidc	(134)	(133)
Total lease liability cash flows - financing activities	(882)	(860)
Total gross debt cash flows	(697)	750

a Presented within cash and cash equivalents in the group cash flow statement.

b In FY24 we received an upfront prepayment of £105m from entering into a forward agreement to sell copper granules created from surplus copper cables. As this is expected to be the only cash flow that occurs as part of this transaction the cash receipt has been included as a separate line within cash flows from investing activities in the group cash flow statement. The related liability is recognised on balance sheet within loans and other borrowings, see page 149.

c Presented within interest paid in the group cash flow statement.

26. Loans and other borrowings continued

The table below gives details of the listed bonds and other debt.

	2024	2023
At 31 March	£m	£m
0.875% €306m bond due September 2023a	—	270
4.5% \$675m bond due December 2023a	—	554
1% €469m bond due June 2024a,d	—	415
1% €825m bond due November 2024a	708	726
3.50% £250m index linked bond due April 2025	575	524
0.5% €650m bond due September 2025a	557	571
1.75% €1,300m bond due March 2026a	1,112	1,143
1.5% €1,150m bond due June 2027a	991	1,017
2.75% €700m bond due August 2027a,f	601	530
2.125% €500m bond due September 2028a	431	442
5.125% \$700m bond due December 2028a	561	573
5.75% £600m bond due December 2028	658	669
1.125% €750m bond due September 2029a	640	657
3.25% \$1,000m bond due November 2029a	796	812
9.625% \$2,670m bond due December 2030a (minimum 8.625%b )	2,166	2,214
3.75% €800m bond due February 2031a	704	704
3.125% £500m bond due November 2031	503	503
3.375% €500m bond due August 2032a	433	445
4.25% €850m bond due January 2033a	725	—
3.64% £330m bond due June 2033	339	339
1.613% £330m index linked bond due June 2033	394	380
6.375% £500m bond due June 2037	523	523
3.883% £330m bond due June 2039	340	340
1.739% £330m index linked bond due June 2039	394	381
5.75% £450m bond due February 2041f	445	347
3.924% £340m bond due June 2042	350	350
1.774% £340m index linked bond due June 2042	406	392
2.08% JPY10,000m bond due February 2043a	52	61
3.625% £250m bond due November 2047	251	250
4.25% \$500m bond due November 2049a	400	408
1.874% €500m hybrid bond due August 2080a,c	432	443
4.250% \$500m hybrid bond due November 2081a,c	396	404
4.875% \$500m hybrid bond due November 2081a,c	401	409
8.375% £700m hybrid bond due December 2083c	710	—
Total listed bonds	17,994	17,796
Loans related to the sale of cash flows related to contract assetse	341	100
Loans related to the forward sale of redundant copper	106	—
Other loans	27	614
Bank overdrafts (note 25)	58	11
Total other loans and borrowings	532	725
Total loans and other borrowings	18,526	18,521

a Designated in a cash flow hedge relationship. b The interest rate payable on this bond attracts an additional 0.25% for rating category downgrade by either Moody's or Standard & Poor's to the group's senior unsecured debt below A3/A– respectively. In addition, if Moody's or Standard & Poor's subsequently increase the ratings then the interest rate will be decreased by 0.25% for each rating category upgrade by either rating agency. In no event will the interest rate be reduced below the minimum rate reflected in the above table.

c Includes call options between 1.5 years and 7.5 years.

d Redeemed early in March 2024. e Performance obligations have been substantially delivered to the customer in relation to these cash flows related to contract assets that have been sold but the right to receive cash is dependent on the group's future performance in relation to airtime and so a financial liability has been recognised. The related cash flows have been included within financing activities in the cash flow statement. £318m of the liability relates to sales of cash flows related to contract assets in FY24 and so is removed from our net debt measure, the remaining £23m relates to sales in FY23.

f Increased the issue size on €700m bond due August 2027 by €100m in November 2023 and on £450m bond due February 2041 by £100m in December 2023 .

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 £17,820m (FY23: £16,979m).

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.

During the period the group entered into a forward agreement to sell copper granules created from BT's surplus copper cables. The right to receive cash is dependent on the initial buyer receiving payment from the end customer and so a financial liability of £106m including

Notes to the consolidated financial statements continued

26. Loans and other borrowings continued

accrued interest has been recognised. This should be the only cash flow that occurs as part of this transaction and so the cash receipt of £105m has been included in a separate line within investing activities in the cash flow statement.

Loans and other borrowings are analysed as follows:

	2024	2023
At 31 March	£m	£m
Current liabilities
Listed bonds	996	1,075
Amounts owed to joint ventures	11	11
Other loans and bank overdraftsa	388	686
Total current liabilities	1,395	1,772
Non-current liabilities
Listed bonds	16,998	16,722
Other loans and bank overdraftsa	133	27
Total non-current liabilities	17,131	16,749
Total loans and other borrowings	18,526	18,521

a Includes collateral received on swaps of £15m (FY23: £557m).

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 2024 were unsecured.

The principal repayments of loans and borrowings at hedged rates amounted to £17,728m (FY23: £17,442m) and repayments fall due as follows:

	2024			2023
At 31 March	Carrying amount £m	Effect of hedging and interest £m	Principal repayments at hedged rates £m	Carrying amount £m	Effect of hedging and interest £m	Principal repayments at hedged rates £m
Within one year, or on demand	1,395	(258)	1,137	1,772	(271)	1,501
Between one and two years	2,727	(85)	2,642	1,165	15	1,180
Between two and three years	431	(24)	407	2,669	(141)	2,528
Between three and four years	1,614	29	1,643	404	(33)	371
Between four and five years	2,282	6	2,288	1,539	(14)	1,525
After five years	10,107	(496)	9,611	10,983	(646)	10,337
Total due for repayment after more than one year	17,161	(570)	16,591	16,760	(819)	15,941
Total repayments	18,556	(828)	17,728	18,532	(1,090)	17,442
Non cash adjustmentsa	(30)			(11)
Total loans and other borrowings	18,526			18,521

a Fair value adjustments and unamortised bond fees.

27. Finance expense and income

	2024	2023
Year ended 31 March	£m	£m
Finance expense
Interest on:
Financial liabilities at amortised cost and associated derivatives	872	753
Lease liabilities	134	133
Derivatives	4	9
Fair value movements on derivatives not in a designated hedge relationship	(1)	1
Reclassification of cash flow hedge from other comprehensive income	38	(21)
Unwinding of discount on provisions and other payables	20	14
Total finance expense before specific items	1,067	889
Specific items (note 9)a	121	5
Total finance expense	1,188	894

a Includes £nil (FY23: £13m credit) reclassification of cash flow hedge from other comprehensive income.

27. Finance expense and income continued

	2024	2023
Year ended 31 March	£m	£m
Finance income
Interest on:
Bank deposits and cash equivalents	28	16
Investments held at amortised cost	140	40
Other finance income	13	7
Total finance income	181	63
	2024	2023
Year ended 31 March	£m	£m
Net finance expense before specific items	886	826
Specific items (note 9)	121	5
Net finance expense	1,007	831

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 2024 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 ongoing 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 Corporate Finance Director 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.

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 Corporate Finance Director or the Group Treasury Director.

Hedging strategy

A significant proportion of our external revenue and costs arise within the UK and are denominated in sterling. Our non-UK operations generally trade and are funded in their functional currency which limits their exposure to foreign exchange volatility. We do not have a material exposure to hyperinflationary economies.

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 dollars, euros, Indian rupees and

Notes to the consolidated financial statements continued

28. Financial instruments and risk management continued

Hungarian forints. 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.

		2024			2023
At 31 March	Fixed rate interest £m	Floating rate interest £m	Total £m	Fixed rate interest £m	Floating rate interest £m	Total £m
Sterling	15,899	1,780	17,679	15,210	1,773	16,983
Euro	—	—	—	—	443	443
Other	—	49	49	—	16	16
Total	15,899	1,829	17,728	15,210	2,232	17,442
Ratio of fixed to floating	90%	10%	100%	87%	13%	100%
Weighted average effective fixed interest rate – sterling	4.6%			4.0%

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 ARRs where applicable.

Sensitivity analysis

The income statement and shareholders' equity are exposed to volatility arising from changes in interest rates, foreign exchange rates and energy prices. 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.
• For energy, a 10% increase in energy prices.

The impact on equity, before tax and excluding any impact related to retirement benefit plans, of a 1% increase in interest rates, a 10% strengthening of sterling against other currencies, and a 10% increase in energy prices is as detailed below:

	2024	2023
	£m	£m
	Increase	Increase
At 31 March	(reduce)	(reduce)
Sterling interest rates	602	579
US dollar interest rates	(300)	(371)
Euro interest rates	(316)	(284)
Sterling strengthening	(142)	(169)
Energy prices	27	45

A 1% decrease in interest rates, 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, 10% change in energy prices on group's income statement and our exposure to foreign exchange volatility in the income statement, after hedging (excluding translation exposures), would not have been material in FY24 and FY23.

Credit ratings

We continue to target a BBB+/Baa1 credit rating over the cycle, with a BBB/Baa2 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 £2.1bn at 31 March 2024, our finance expense would increase/decrease by approximately £11m a year if the group's credit rating were to be downgraded/upgraded, respectively, by one credit rating category by both agencies.

Our credit ratings were as detailed below:

	2024		2023
At 31 March	Rating	Outlook	Rating	Outlook
Rating agency
Fitch	BBB	Stable	BBB	Stable
Moody's	Baa2	Stable	Baa2	Stable
Standard & Poor's	BBB	Stable	BBB	Stable

28. Financial instruments and risk management continued

How do we manage liquidity risk?

Management policy

We maintain liquidity by entering into short and long-term financial instruments to support operational and other funding requirements, determined by using short- and long-term cash forecasts. These forecasts are supplemented by a financial headroom analysis which is used to assess funding adequacy for at least a 12-month period. On at least an annual basis the Board reviews and approves the longterm 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 2024 is disclosed in note 26. We have term debt maturities of £0.7bn in FY25.

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 2024 we had undrawn committed borrowing facilities of £2.1bn (FY23: £2.1bn) maturing in March 2027.

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	Loans and other borrowings	Interest on loans and other borrowings	Trade and other payablesc	Lease liabilities	Provisionsd	Total
At 31 March 2024	£m	£m	£m	£m	£m	£m
Due within one year	1,103	738	5,438	765	—	8,044
Between one and two years	2,727	737	189	730	—	4,383
Between two and three years	431	697	88	696	—	1,912
Between three and four years	1,614	680	—	663	—	2,957
Between four and five years	2,282	649	—	634	—	3,565
After five years	10,107	2,569	—	2,103	—	14,779
	18,264	6,070	5,715	5,591	—	35,640
Interest payments not yet accrued	—	(5,778)	—	—	—	(5,778)
Fair value adjustment	(30)	—	—	—	—	(30)
Impact of discounting	—	—	(16)	(636)	—	(652)
Carrying value on the balance sheeta,b	18,234	292	5,699	4,955	—	29,180
At 31 March 2023 (restated)c
Due within one year	1,512	643	5,467	800	3	8,425
Between one and two yearsc	1,165	637	204	774	2	2,782
Between two and three yearsc	2,669	616	189	676	2	4,152
Between three and four yearsc	404	575	88	640	2	1,709
Between four and five years	1,539	558	—	612	2	2,711
After five years	10,983	2,891	—	2,529	—	16,403
	18,272	5,920	5,948	6,031	11	36,182
Interest payments not yet accrued	—	(5,660)	—	—	—	(5,660)
Fair value adjustment	(11)	—	—	—	—	(11)
Impact of discounting	—	—	(32)	(672)	(1)	(705)
Carrying value on the balance sheeta,b,c	18,261	260	5,916	5,359	10	29,806

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 £366m (FY23: £455m) of non-current trade and other payables which relates to non-financial liabilities, and £899m

(FY23: £1,113m) of other taxation, social security and deferred income. c FY23 comparatives have been restated to include the financial liability for the minimum guarantee provided to the Sports JV due in more than one year, totalling £465m.These

amounts had been omitted from this table within the prior year accounts. d No provisions meeting the definition of a financial liability have been identified in FY24.

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.

Notes to the consolidated financial statements continued

28. Financial instruments and risk management continued

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.

		Gross settled	Gross settled
Derivative financial liabilities At 31 March 2024	Net settled £m	outflows £m	inflows £m	Total £m
Due within one year	17	2,274	(2,135)	156
Between one and two years	16	1,152	(1,028)	140
Between two and three years	16	519	(430)	105
Between three and four years	17	1,935	(1,857)	95
Between four and five years	17	597	(528)	86
After five years	12	3,071	(2,866)	217
Totala,b	95	9,548	(8,844)	799
At 31 March 2023
Due within one year	47	2,184	(2,088)	143
Between one and two years	47	1,125	(1,058)	114
Between two and three years	94	939	(882)	151
Between three and four years	111	381	(364)	128
Between four and five years	16	161	(135)	42
After five years	47	2,127	(2,011)	163
Totala,b	362	6,917	(6,538)	741

a Analysed by earliest payment date, 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.

28. Financial instruments and risk management continued

How do we manage energy price risk?

Management policy

UK (excluding Northern Ireland) and European energy prices continue to be exposed to volatility driven by fears of reduced gas supply as Europe continues the shift from Russian gas to LNG and renewables (which themselves are subject to short-term fluctuations given their intermittent nature). In order to manage our exposure to fluctuating energy prices, we have a target for UK (excluding Northern Ireland) energy demand to be at least 80% hedged one quarter before the start of the next financial year, and 50% hedged for the following financial year. We achieve this through forward over the counter hedges and a mixture of new and existing power purchase agreements (PPAs) and derivative virtual PPAs (vPPAs).

Hedging strategy

In each financial year our strategy is to build on our existing PPA and vPPA portfolio, exploring opportunities with 5-10 year contracts delivering favourable net present values. We complement this by monitoring the markets and forward purchasing electricity (power) when the market is favourable. In the forthcoming financial year the aim is to be 95% hedged, which allows for headroom for increased outputs from the renewable sources should weather conditions prevail.

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:

		2024	2023
At 31 March	Notes	£m	£m
Derivative financial assets		1,070	1,479
Investments	23	2,395	3,577
Trade and other receivablesa	16	2,224	1,821
Contract assets	5	1,740	1,934
Cash and cash equivalents	25	414	392
Total		7,843	9,203

a The carrying amount excludes £641m (FY23: £503m) of non-current trade and other receivables which relate to non-financial assets, and £1,341m (FY23: £1,239m) of prepayments, deferred contract costs, finance lease receivables and other assets.

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.

	2024	2023
Moody's/S&P credit rating of counterparty	£m	£m
Aa2/AA and above	1,823	3,498
Aa3/AA–	585	115
A1/A+	819	957
A2/A	261	400
A3/A–	—	53
Baa1/BBB+	—	—
Baa2/BBB and belowa	30	60
Totalb	3,518	5,083

a Baa2/BBB rated exposure represents the energy derivatives and carrying value of forward currency contracts with Sports JV.

b We hold cash collateral of £15m (FY23: £557m) in respect of derivative financial assets with certain counterparties, this has reduced during the year as a result of derivative portfolio management.

The concentration of credit risk for our trading balances is provided in note 16, 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 £1,047m (FY23: £2,024m) of long-dated cross-currency swaps and interest rate swaps is collateralised.

Notes to the consolidated financial statements continued

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.

			Related amounts not set off in the balance sheet
Financial assets and liabilities At 31 March 2024	Amounts presented in the balance sheet £m	Right of set off with derivative counterparties £m	Cash collateral £m	Net amount £m
Derivative financial assets	1,070	(356)	(15)	699
Derivative financial liabilities	(539)	356	40	(143)
Total	531	—	25	556
At 31 March 2023
Derivative financial assets	1,479	(323)	(557)	599
Derivative financial liabilities	(383)	323	48	(12)
Total	1,096	—	(509)	587

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.

Material 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. We effectively operate a process to identify any embedded derivatives within revenue, supply, leasing and financing contracts, including those relating to inflationary features. 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 remeasurement 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.

28. Financial instruments and risk management continued

At 31 March 2024	Current asset £m	Non-current asset £m	Current liability £m	Non-current liability £m
Designated in a cash flow hedge	34	947	80	383
Other	16	73	14	62
Total derivatives	50	1,020	94	445
At 31 March 2023
Designated in a cash flow hedge	78	1,330	62	255
Other	4	67	24	42
Total derivatives	82	1,397	86	297

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 23.

Instruments designated in a cash flow hedge include interest rate swaps and cross-currency swaps hedging euro, US dollar and Japanese yen 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 dollars, euros, Indian rupees and Hungarian forints 12 months forward with certain specific transactions hedged further forward. The related cash flows are recognised in the income statement over this period.

All hedge relationships were fully effective in the period.

The amounts related to items designated as hedging instruments were as follows:

Hedged items At 31 March 2024	Notional principal £m	Asset £m	Liability £m	Balance in cash flow hedge related reserves (gain)/loss £m	Fair value (gain)/loss recognised in OCI £m	Amount recycled from cash flow hedge related reserves to P&L £m
Sterling, euro, US dollar and Japanese yen denominated borrowingsa	13,583	960	(355)	(213)	464	(361)
Step up interest on the 2030 US dollar bondb	112	—	(2)	(25)	2	4
Foreign currency purchases, principally denominated in US dollars, euros, Indian rupees and Hungarian forintsc	1,308	18	(11)	(12)	15	8
Other, including energy contractsd		3	(95)	90	161	(7)
Total cash flow hedges	15,003	981	(463)	(160)	642	(356)
Deferred tax		—	—	27
Derivatives not in a designated hedge relationship		89	(76)	—
Carrying value on the balance sheet		1,070	(539)	(133)
At 31 March 2023
Sterling, euro, US dollar and Japanese yen denominated borrowingsa	12,888	1,316	(290)	(316)	(887)	597
Step up interest on the 2030 US dollar bondb	115	—	(2)	(31)	(8)	6
Foreign currency purchases, principally denominated in US dollars, euros, Indian rupees and Hungarian forintsc	1,211	34	(24)	(35)	(75)	61
Other, including energy contractsd		58	(1)	(64)	(85)	49
Total cash flow hedges	14,214	1,408	(317)	(446)	(1,055)	713
Deferred tax		—	—	106
Derivatives not in a designated hedge relationship		71	(66)	—
Carrying value on the balance sheet		1,479	(383)	(340)

a Sterling, euro, US dollar and Japanese yen denominated borrowings are hedged using cross-currency swaps and interest rate swaps. Amounts recycled to profit and loss are presented within finance expense. Range of hedged rates: sterling interest: 5.9%-6.0% (FY23: 5.9%-6.0%), euro FX: 1.12-1.29 (FY23: 1.11-1.29), US dollar FX: 1.28-1.80 (FY23: 1.28-1.80), Japanese yen FX: 156.92 (FY23: 156.92).

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. Range of hedged FX rates: 1.21-1.28 (FY23: 1.17-1.24).

c Foreign currency purchases, principally denominated in US dollars, euros, Indian rupees and Hungarian forints are hedged using forward currency contracts. Amounts recycled to profit and loss are presented within cost of sales or operating costs, in line with the underlying hedged item. Range of hedged FX rates: US dollar: 1.21-1.30 (FY23: 1.10-1.31), euro: 1.12-1.17 (FY23: 1.11-1.18), Indian rupees: 106.05-120.97 (FY23: 106.05-120.97), Hungarian forint: 458.35-467.81 (FY23: 489.17-503.51).

d Includes £(87)m liability (FY23: £57m asset) relating to energy contracts, these 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. Range of strike price: 60-122 £/MWh (FY23: 60-125 £/MWh).

Notes to the consolidated financial statements continued

29. Other reserves

		Other comprehensive income
	Capital redemption reserve £m	Cash flow reservea £m	Fair valueb reserve £m	Cost of hedging reservec £m	Translation reserved £m	Total £m
At 1 April 2022	27	(148)	(1)	236	505	619
Reclassificatione	—	472	—	(472)	—	—
Exchange differencesf	—	—	—	—	89	89
Net fair value gain (loss) on cash flow hedges	—	864	—	191	—	1,055
Movements in relation to cash flow hedges recognised in income and expenseg	—	(721)	—	8	—	(713)
Fair value movement on assets at fair value through other comprehensive income	—	—	(3)	—	—	(3)
Tax recognised in other comprehensive income	—	(90)	—	—	—	(90)
At 31 March 2023	27	377	(4)	(37)	594	957
Exchange differencesf	—	—	—	—	(66)	(66)
Net fair value gain (loss) on cash flow hedges	—	(661)	—	19	—	(642)
Movements in relation to cash flow hedges recognised in income and expenseg	—	349	—	7	—	356
Tax recognised in other comprehensive income	—	69	—	—	9	78
Transfer to realised profit	—	10	12	—	11	33
At 31 March 2024	27	144	8	(11)	548	716

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. The transfer to realised profit includes a deferred tax adjustment.

b The fair value reserve is used to record gains or losses on equity investments held at fair value through other comprehensive income. When these investments are disposed of any remaining gains or losses in other comprehensive income are transferred to retained earnings.

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 Reclassification on cash flow hedges in FY23 includes £472m reclassification from cash flow hedge reserve to cost of hedging reserve.

f Excludes £nil (FY23: £2m) of exchange differences in relation to retained earnings attributed to non-controlling interests.

g Movements in cash flow hedge-related reserves recognised in income and expense of £356m (FY23: £713m) include a net credit to other comprehensive income of £318m (FY23: charge of £679m) which have been reclassified to operating costs, and a net credit of £38m (FY23: charge of £34m) which have been reclassified to finance expense (see note 27).

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 19.

Associates and joint ventures related parties include the Sports JV with Warner Bros formed during FY23 (see note 22). Sales of services to the Sports JV during FY24 were £33m (FY23: £23m), and purchases from the Sports JV were £299m (FY23: £176m) excluding £211m (FY23: £61m) additional payments made to settle the minimum guarantee liability (see note 17). The amount receivable from the Sports JV as at 31 March 2024 was £3m (FY23: 10m) and the amount payable to the Sports JV was £94m (FY23: £123m).

As part of the BT Sport transaction, the group has committed to providing the Sports JV with a sterling Revolving Credit Facility (RCF), up to a maximum for £300m, for short-term liquidity required by the Sports JV to fund its working capital and commitments to sports rights holders. Amounts drawn down by the Sports JV under the RCF accrue interest at a market reference rate, consistent with the group's external short-term borrowings. The outstanding balance under the RCF of £163m (FY23: £268m) is treated as a loan receivable and held at amortised cost, see note 16. The capacity of the RCF is expected to reduce to £200m during FY25. There is also a loan payable to the Sports JV of £11m (FY23: £11m), see note 26.

The Sports JV has a foreign exchange hedging arrangement with the group to secure euros required to meet its commitments to certain sports rights holders; the group has external forward contracts in place to purchase the euros at an agreed sterling rate in order to mitigate its exposure to exchange risk. The group holds a £29m (FY23: £14m) derivative liability in respect of forward contracts provided to the Sports JV.

30. Related party transactions continued

Transactions from commercial trading arrangements with associates and joint ventures, including the Sports JV, are shown below:

At 31 March	2024 £m	2023 £m
Sales of services to associates and joint ventures	37	29
Purchases from associates and joint ventures	338	216
Amounts receivable from associates and joint ventures	5	10
Amounts payable to associates and joint ventures	95	124

Other related party transactions include a dividend received from a joint venture of £12m (FY23: £nil) and in the prior year the purchase of energy from an entity controlled by the BT Pension Scheme until FY24. FY23 total purchases were £13m and £1m was due to the other party as at 31 March 2023.

31. Financial commitments

Financial commitments as at 31 March 2024 include capital commitments of £1,049m (FY23: £1,480m) and device purchase commitments of £171m (FY23: £217m).

TV programme rights commitments were transferred to the Sports JV formed with Warner Bros. Discovery (WBD) during FY23 (see note 22). Both the group and WBD have guaranteed the Sports JV's obligations under certain programme rights commitments; the fair value of these parent company guarantees is not material.

Other than as disclosed below and in note 18, there were no contingent liabilities or guarantees at 31 March 2024 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.

Legal and regulatory proceedings

See note 18 for contingent liabilities associated with legal and regulatory proceedings.

Notes to the consolidated financial statements continued

32. Re-presentation of prior year comparatives

We have re-presented certain FY23 comparatives to reflect changes to the methodology used to allocate certain shared costs, and the creation of our Business CFU. See note 1 for more details.

The following disclosures are impacted by the creation of the Business unit only. Re-presentation of prior year comparatives is limited to the combination of the balances previously reported in respect of the Enterprise and Global units, with no further adjustments:

• Note 5 Revenue: disaggregation of external revenue
• Note 7 Employees: number of employees

– Note 16 Trade and other receivables: trade receivables not past due and accrued income by CFU

Note 4 Segment information is also impacted by changes to the allocation of shared costs and therefore includes additional adjustments. The tables below present a bridge between previously published financial information and re-presented comparatives for the affected disclosures (segment revenue and profit; internal revenue and costs; and capital expenditure).

Also presented is a bridge in respect of the CFU normalised free cash flow comparatives which are re-presented in the Additional information on page 231.

Note 4 Segment information: Segment revenue and profit

	Consumer	Enterprise	Global	Business	Openreach	Other	Total
Year ended 31 March 2023: published	£m	£m	£m	£m	£m	£m	£m
Segment revenue	9,737	4,962	3,328	—	5,675	27	23,729
Internal revenue	(57)	(113)	—	—	(2,890)	—	(3,060)
Adjusteda revenue from external customers	9,680	4,849	3,328	—	2,785	27	20,669
Adjusted EBITDAb	2,623	1,394	458	—	3,449	4	7,928
Depreciation and amortisationa	(1,397)	(842)	(317)	—	(2,059)	(138)	(4,753)
Adjusteda operating profit (loss)	1,226	552	141	—	1,390	(134)	3,175

Year ended 31 March 2023: adjustments for creation of Business and change

in cost allocation methodology
Segment revenue	—	(4,962)	(3,328)	8,258	—	—	(32)
Internal revenue	—	113	—	(81)	—	—	32
Adjusteda revenue from external customers	—	(4,849)	(3,328)	8,177	—	—	—
Adjusted EBITDAb	(154)	(1,394)	(458)	1,945	61	—	—
Depreciation and amortisationa	(206)	842	317	(1,047)	94	—	—
Adjusteda operating profit (loss)	(360)	(552)	(141)	898	155	—	—

Year ended 31 March 2023: re-presented

Segment revenue	9,737	—	—	8,258	5,675	27	23,697
Internal revenue	(57)	—	—	(81)	(2,890)	—	(3,028)
Adjusteda revenue from external customers	9,680	—	—	8,177	2,785	27	20,669
Adjusted EBITDAb	2,469	—	—	1,945	3,510	4	7,928
Depreciation and amortisationa	(1,603)	—	—	(1,047)	(1,965)	(138)	(4,753)
Adjusteda operating profit (loss)	866	—	—	898	1,545	(134)	3,175

32. Re-presentation of prior year comparatives continued

Note 4 Segment information: Internal revenue and costs

	Internal cost recorded by
	Consumer	Enterprise	Global	Business	Openreach	Other	Total
Year ended 31 March 2023: published	£m	£m	£m	£m	£m	£m	£m
Internal revenue recorded by
Consumer	—	40	16	—	—	1	57
Enterprise	26	—	32	—	—	55	113
Global	—	—	—	—	—	—	—
Business	—	—	—	—	—	—	—
Openreach	1,805	888	184	—	—	13	2,890
Total	1,831	928	232	—	—	69	3,060
Year ended 31 March 2023: adjustments for creation of Business and change in cost allocation methodology
Consumer	—	(40)	(16)	56	—	—	—
Enterprise	(26)	—	(32)	—	—	(55)	(113)
Global	—	—	—	—	—	—	—
Business	26	—	—	—	—	55	81
Openreach	—	(888)	(184)	1,072	—	—	—
Total	—	(928)	(232)	1,128	—	—	(32)
Year ended 31 March 2023: re-presented
Consumer	—	—	—	56	—	1	57
Enterprise	—	—	—	—	—	—	—
Global	—	—	—	—	—	—	—
Business	26	—	—	—	—	55	81
Openreach	1,805	—	—	1,072	—	13	2,890
Total	1,831	—	—	1,128	—	69	3,028
Note 4 Segment information: Capital expenditure
	Consumer	Enterprise	Global	Business	Openreach	Other	Total
Year ended 31 March 2023: published	£m	£m	£m	£m	£m	£m	£m
Intangible assets	530	257	81	—	87	63	1,018
Property, plant and equipment	663	351	171	—	2,709	144	4,038
Capital expenditure	1,193	608	252	—	2,796	207	5,056
Year ended 31 March 2023: adjustments for creation of Business and change in cost allocation methodology
Intangible assets	22	(257)	(81)	361	14	(59)	—
Property, plant and equipment	6	(351)	(171)	525	37	(46)	—
Capital expenditure	28	(608)	(252)	886	51	(105)	—
Year ended 31 March 2023: re-presented
Intangible assets	552	—	—	361	101	4	1,018
Property, plant and equipment	669	—	—	525	2,746	98	4,038
Capital expenditure	1,221	—	—	886	2,847	102	5,056

Additional information: Normalised free cash flow

	Adjustments for creation of Business and change in cost
	Published	allocation methodology	Re-presented
Year ended March 2023	£m	£m	£m
Consumer	1,147	(184)	963
Enterprise	522	(522)	—
Global	63	(63)	—
Business	—	648	648
Openreach	211	8	219
Other	(615)	113	(502)
Normalised free cash flow	1,328	—	1,328

33. Post balance sheet events

On 3 April 2024, BT issued a EUR 750m hybrid bond due on 3 October 2054 under our European Medium Term Note programme with a coupon of 5.125% until the first call date of 5.5 years.

Financial statements of BT Group plc BT Group plc company balance sheet

Registered number 4190816

		2024	2023
At 31 March	Notes	£m	£m
Non-current assets
Investment in subsidiary undertaking	2	11,346	11,278
		11,346	11,278
Current assets
Cash and cash equivalents		6	8
		6	8
Current liabilities
Trade and other payablesa		53	80
		53	80
Total assets less current liabilities		11,299	11,206
Non-current liabilities
Loans and other borrowingsb		400	303
Other payablesa		—	26
		400	329
Equity
Ordinary shares		499	499
Share premium		1,051	1,051
Capital redemption reserve		27	27
Own shares		(311)	(422)
Profit and loss accountc		9,633	9,722
Total equity		10,899	10,877
		11,299	11,206

a Current trade and other payables consists of loans from group undertakings of £13m (FY23: £15m) and other payables of £40m (FY23: £65m). Other payables mostly comprise the obligation to purchase own shares into trust via a forward contract.

b Loans and other borrowings consist of a loan from group undertakings of £400m (FY23: £303m). The loan attracts interest of SONIA plus 60 basis points (FY23: SONIA plus 60 basis

points) and is not due within the 12 months after balance sheet date. 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 £734m (FY23: loss of £1m).

The financial statements of the company on pages 222 to 225 were approved by the Board of Directors on 15 May 2024 and were signed on its behalf by:

Adam Crozier	Allison Kirkby	Simon Lowth
Chairman	Chief Executive	Chief Financial Officer

BT Group plc company statement of changes in equity

	Called up share capitala £m	Share premium account £m	Capital redemption reserve £m	Own sharesb £m	Profit and loss accountb,c £m	Total £m
At 1 April 2022	499	1,051	27	(274)	10,430	11,733
Loss for the year	—	—	—	—	(1)	(1)
Dividends paid	—	—	—	—	(753)	(753)
Share-based payments	—	—	—	—	3	3
Capital contribution in respect of share-based payments	—	—	—	—	77	77
Net buyback of own shares	—	—	—	(148)	(34)	(182)
At 31 March 2023	499	1,051	27	(422)	9,722	10,877
Profit for the year	—	—	—	—	734	734
Dividends paid	—	—	—	—	(757)	(757)
Share-based payments	—	—	—	—	3	3
Capital contribution in respect of share-based payments	—	—	—	—	68	68
Net buyback of own shares	—	—	—	111	(137)	(26)
At 31 March 2024	499	1,051	27	(311)	9,633	10,899

a The allotted, called up and fully paid ordinary share capital of the company at 31 March 2024 was £499m (31 March 2023: £499m), representing 9,968,127,681

(31 March 2023: 9,968,127,681) ordinary shares of 5p each.

b In FY24, 57,073,057 shares (FY23: 18,984,595) were issued from Own shares to satisfy obligations under employee share schemes and executive share awards at a cost of £113m (FY23: £38m). At 31 March 2024, 16,299,007 shares (FY23: 36,190,551) with an aggregate nominal value of £1m (FY23: £2m) were held at cost as treasury shares and 172,157,686 shares (FY23: 193,798,578) with an aggregate nominal value of £9m (FY23: £10m) 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 £734m (FY23: loss of £1m).

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 150 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

The following amended standards were effective during the year, none of which had a material impact on the financial statements of the company.

IFRS 17 Insurance Contracts

BT adopted IFRS 17 with retrospective application on 1 April 2023. We have assessed the impact of the standard on the company, and concluded that its impact is not material. Contracts in scope of the standard are restricted to parent company guarantees, which we have assessed to have no material impact.

Disclosure of Accounting policies (Amendments to IAS 1 and IFRS Practice Statement 2)

These amendments require the disclosure of 'material' rather than 'significant' accounting policies. The amendments have not resulted in any changes to accounting policies disclosures made in these financial statements.

Definition of Accounting Estimate (Amendments to IAS 8)

The amendments introduce a new definition for accounting estimates.The amendments have not resulted in any changes to accounting policies disclosures made in these financial statements.

Deferred Tax related to Assets and Liabilities arising from a Single Transaction (Amendments to IAS 12)

The amendments narrow the scope of the initial recognition exemption to exclude transactions that give rise to equal and offsetting temporary differences.The amendments have not resulted in any changes to accounting policies disclosures made in these 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 2024 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 2024 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 2024 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 (value in use) of the investment.

Investment impairment is assessed at each reporting date. Estimating value in use and key assumptions used (discount rate and growth rate) in performing the impairment assessment are in line with how we assess the group's goodwill in note 13 to the consolidated group financial statements. There is significant headroom between the carrying value of the investment and the calculated value in use. See Note 2 for further details.

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 for final dividends. Interim dividends are recognised when they are paid. 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 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

	Total
Cost	£m
At 1 April 2022	11,201
Additions	77
At 31 March 2023	11,278
Additions	68
At 31 March 2024	11,346

The company held a 100% investment in BT Group Investments Limited, a company registered in England and Wales, throughout FY24 and FY23. Additions of £68m (FY23: £77m) comprise capital contributions in respect of share-based payments.

Investment impairment is assessed at each reporting date to evaluate if there are indicators that the carrying value may not be recoverable. As market capitalisation was less than the cost of investment at points during the year we have performed an impairment review. This was performed in line with the Group goodwill impairment review as detailed in Note 13 of the consolidated accounts.

Our FY24 assessment concluded that there remains significant headroom between the carrying value of the investment and the calculated value in use of the investment. We have exercised a number of assumptions in determining the future cash flows, discount rate and growth rate to arrive at this conclusion.

Value in use is estimated by discounting future cash flows. Future cash flows are calculated on a nominal basis and based on riskadjusted projections derived from the latest Board-approved fiveyear financial plans, representing management's best riskadjusted estimate of future growth. This includes the direct and indirect impacts of inflation and associated mitigations. Plans 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, and form the basis of outlook issued by the group.

The pre-tax discount rate used in performing the value in use calculation was 9.25%. 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.

In FY24 we have used perpetuity growth rates averaging 0.8% as determined based on the long-term growth prospects of each market. The growth rates have been benchmarked against external data for the relevant markets and analysts' expectations. None of the growth rates applied exceed the expected average long-term growth rates for those markets or sectors.

We consider there to be no reasonably possible scenario in which an impairment could occur within the next 12 months from the reporting date.

3. Other information

Dividends

An interim dividend of 2.31p per share amounting to £227m was paid on 2 February 2024 (FY23: interim dividend of 2.31p per share amounting to £226m paid). A final dividend of 5.69p per share amounting to approximately £553m is proposed in respect of the year ended 31 March 2024 (FY23: final dividend of 5.39p per share amounting to £530m paid in respect of the year ended 31 March 2023).

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 FY24 and FY23. The costs relating to qualifying services provided to the company's principal subsidiary, British Telecommunications plc, are recharged to that company.

Related undertakings

	Group
	interest in
Company name	allotted capitala	Share class
Held directly
United Kingdom
1 Braham Street, London, E1 8EE, United Kingdom
BT Group Investments
Limited	100%	ordinary
BT Group Nominees
Limited	100%	ordinary
Held via other group companies
Algeria
20 Micro zone d'Activités Dar El Madina, Bloc B, Loc N01 Hydra, Alger, 16000, Algeria
BT Algeria
Communications SARL	100%	ordinary
Argentina
Maipu No 1210, piso 8 (C1006), Buenos Aires,
Argentina
BT Argentina S.R.L.	100%	ordinary
Australia
Level 20, 420 George Street, Sydney, NSW
2000, Australia
BT Australasia Pty
Limited	100%	ordinary
	100%	preference
Austria
Louis-Häfliger-Gasse 10, 1210, Wien, Austria
BT Austria GmbH	100%	ordinary
Azerbaijan
AZ 1025 The Azure Business Center, 20th Floor, c/ o BDO Azerbaijan LLC, Z1025, Khatai district,
Afiyaddin Jalilov 26, apt.177, Azerbaijan
BT Azerbaijan Limited,
Limited Liability
Company	100%	ordinary
Bahrain
Suite #2216, Building No. 2504, Road 2832, Al
Seef, P.O. BOX 18259, Bahrain
BT Solutions Limited
(Bahrain Branch)b	100%	–
Bangladesh
UTC Building, 19th Floor, Kawran Bazar, Dhaka,
1215, Bangladesh
BT Communications Bangladesh Limited	100%	ordinary
Barbados
3rd Floor, The Goddard Building, Haggatt Hall, St. Michael, BB11059, Barbados
BT (Barbados) Limited	100%	ordinary
Belarus
58 Voronyanskogo St, Office 89, Minsk 220007, Belarus
BT BELRUS Foreign Limited Liability
Company	100%	ordinary
Belgium
Telecomlaan 9, 1831 Diegem, Belgium
BT Global Services
Belgium BV	100%	ordinary
Global Security Europe
Limited – Belgian
Branchb	100%	–
Rue de L'Aêropostale 8, 4460 Grâce-Hollogne,
Belgium
IP Trade SA	100%	ordinary

	allotted	Share
Company name	capitala	class
Bermuda Century House, 16 Par-la-Ville Road, Hamilton,
HM08, Bermuda
Communications Global Network Services Limited	100%	ordinary
Bolivia
Avda. 6 de Agosto N° 2700, Torre Empresarial CADECO, Piso 4, La Paz, Bolivia
BT Solutions Limited Sucursal Boliviab	100%	–
Bosnia and Herzegovina
Trg Heroja 10/1, Sarajevo, 71000, Bosnia and Herzegovina
BTIH Teleconsult
Drustvo sa
organicenom odgovornoscu za
posredovanje i
zastupanje d.o.o.
Sarajevo	100%	–
Botswana
Plot 2482b, Tshekedi Crescent, Extension 9,
Gaborone, 211008, Bontleng, Botswana
BT Global Services
Botswana (Proprietary) Limited	100%	ordinary
Brazil
Avenida Dr. Ruth Cardoso, 4777 – 14 andar, Pinheiros, São Paulo, SP, 05477-000, Brazil
BT Communications do Brasil Limitada	100%	quotas
BT Global
Communications do Brasil Limitada	100%	quotas
Bulgaria
51B Bulgaria Blvd., fl. 4, Sofia, 1404, Bulgaria
BT Bulgaria EOOD	100%	ordinary
BT Global Europe B.V. – Bulgaria branchb	100 %	–
Canada 100 King Steet West, Suite 6200, 1 Canadian Place, Toronto ON M5X 1B8, Canada
BT Canada Inc.	100%	common
Chile
Rosario Norte 407, Piso 6, Las Condes, Santiago, Chile
Servicios de Telecomunicaciones
BT Global Networks
Chile Limitada	100%	ordinary
China
Building 16, 6th Floor, Room 602-B, No. 269 Wuyi Road, Hi-tech Park, Dalian, 116023, China
BT Technology (Dalian) Company Limited	100%	registered
No. 3 Dong San Huan Bei Lu, Chao Yang District, Beijing, 100027, China
BT Limited, Beijing Officeb	100%	–
Room 2101-2103, 21/F, International Capital Plaza, No. 1318 North Sichuan Road, Hong Kou District, Shanghai, 200080, China
BT China Limited
Shanghai Branch
Officeb	100%	–

Company name	Group interest in allotted capitala	Share class
1502-1503, AVIC Center, No. 1008, Huafu Road, Futian District, Shenzhen, 518000, China
BT China Limited – Shenzhen Branchb	100%	–
Room 3, 4, F7, Tower W3, Oriental Plaza, 1 East Chang An Avenue, Dongcheng District, Beijing, 100738, China
BT China Limited	100%	registered
Unit 1537B, Floor 15th, No. 55, Xili Road, Shanghai Free Trade Zone, Shanghai, China
BT China
Communications Limited	50%	ordinary
Colombia
Calle 113, 7-21,Torre A Oficina 1015 Teleport Business, Bogota, Colombia
BT Colombia Limitada	100%	quotas
Costa Rica
Heredia-Belen La Ribera, Centro Corporativo El Cafeta, Edificio B, segundo piso, Oficinas de Deloitte, San José, Costa Rica
BT Global Costa Rica SRL	100%	ordinary
Côte d'Ivoire
Abidjan Plateau, Rue du commerce, Immeuble Nabil 1er étage, 01 BP 12721 Abidjan 01, Côte d'Ivoire
BT Cote D'Ivoire	100%	ordinary
Cyprus
Hadjianastassiou, Ioannides LLC, DELOITTE LEGAL, Maximos Plaza, Tower 3, 2nd Floor, 213 Arch. Makariou III Avenue, Limassol, 3030, Cyprus
BT Solutions Limitedb	100%	–
Arch. Makarios III, 213, Maximos Plaza, Tower 3, Floor 2, Limassol, 3030, Cyprus
BT Global Europe B.V.b	100%	–
Czech Republic
Pujmanové 1753 / 10a, Nusle, 140 00, Prague 4, Czech Republic
BT Global Europe B.V., odštěpný závodb	100%	–
Denmark
Norre Farimagsgade 13, 4. th, 1364 Kobenhavn K, Denmark
BT Denmark ApS	100%	ordinary
Dominican Republic
Av. Abraham Lincoln Esq. Jose Amado Soler, Edif. Progresso, Local 3-A, Sector Ens. Serralles, Santo Domingo, Dominican Republic
BT Dominican
Republic, S. A.	100%	ordinary
Ecuador
Av. Amazonas N21-252 y Carrión, Edificio Londres, 4° Piso, Quito, Ecuador
BT Solutions Limited (Sucursal Ecuador)b	100%	–
Egypt
Unit no. 306 Administrative Second Floor, Al Saraya Mall, Al Mehwar Al- Markazy, Giza, Egypt
BT Telecom Egypt LLC	100%	stakes

Group interest in

	Group interest in allotted	Share
Company name	capitala	class
El Salvador Edificio Avante Penthouse Oficina, 10-01 Y
10-03 Urbanizacion, Madre Selva, Antiguo Cuscatlan, La Libertad, El Salvador
BT El Salvador, Limitada de Capital Variable	100%	ordinary
Finland
Mannerheimvägen 12 B 6, 00100 Helsinki,
Finland BT Nordics Finland Oy	100%	ordinary
France
Tour Ariane, 5 place de la Pyramide, La Defense Cedex, 92088, Paris, France
BT France S.A.S.	100%	ordinary
Germany
Barthstraße 4, 80339, Munich, Germany
BT (Germany) GmbH
& Co. oHG	100%	ordinary
BT Deutschland GmbH	100%	ordinary
BT Garrick GmbH	100%	ordinary
Widdersdorfer Strasse 252, 50933, Cologne, Germany
Global Security Europe Limited – Germany Branchb	100%	–
Ghana
5th Floor, Vivo Place, Cantonments City, Rangoon Lane, P.O. Box MB 595, Accra, Ghana
BT Ghana Ltd	100%	ordinary
Greece
75 Patision Street, Athens, 10434, Greece
BT Solutions Limited Greek Branchb	100%	–
Guatemala
5ta avenida 5-55 zona 14, Edificio Europlaza World Business Center, Torre IV, nivel 7, oficina 702, Guatemala City, Guatemala
BT Guatemala S.A.	100%	unique
Honduras
Colonia Florencia Norte, Edificio Plaza America, 5to Piso, Tegucigalpa, Honduras
BT Sociedad De Responsabilidad
Limitada	100%	–
Hong Kong
Unit 31-105, 31/F, Hysan Place, 500 Hennessy Road, Causeway Bay, Hong Kong
BT Hong Kong Limited	100%	ordinary
Infonet China Limited	100%	ordinary
Hungary
1112 Budapest, Boldizsár utca 4. , Hungary
BT Global Europe B.V. Magyarorszagi
Fioktelepeb BT Limited	100%	–
Magyarorszagi Fioktelepeb	100%	–
BT ROC Kft	100%	business

	Group
	interest in allotted	Share
Company name	capitala	class
India
11th Floor, Eros Corporate Tower, Opp. International Trade Tower, Nehru Place, New Delhi, 110019, India
BT (India) Private Limited	100%	ordinary
BT e-Serv (India) Private Limited	100%	equity
BT Global Business Services Private
Limited BT Global	100%	ordinary
Communications India Private Limited	100%	ordinary
BT Telecom India Private Limited	100%	ordinary
A-47, Hauz Khas, New Delhi, Delhi-DL, 110016, India
Orange Services India Private Limited	100%	ordinary
Indonesia
Menara Astra, 37F. JI. Jendral Sudirman Kav
5-6, Jakarta Pusat, Jakarta, 10220, Indonesia
PT BT Indonesia PT BT	100%	ordinary
Communications Indonesia	95%	ordinary
Isle of Man
Third Floor, St Georges Court, Upper Church
Street, Douglas, IM1 1EE, Isle of Man
Belmullet Limited	100%	ordinary
Communicator Insurance Company
Limited	100%	ordinary
Priestgate Limited Israel	100%	ordinary
Beit Oz, 14 Abba Hillel Silver Rd, Ramat Gan, 52506, Israel
B.T. Communication Israel Ltd	100%	ordinary
Italy
Via Mario Bianchini 15, 00142, Roma, Italy
BT Global Services Limitedb	100%	–
Via Tucidide 14, 20134, Milano, Italy
Atlanet SpA	99%	ordinary
Basictel SpA	99%	ordinary
BT Italia S.p.A.	99%	ordinary
Jamaica
Suite #6, 9A Garelli Avenue , Half way tree, St. Andrew, Kingston 10, Jamaica
BT Jamaica Limited	100%	ordinary
Japan
ARK Mori Building, 12-32 Akasaka, 1-Chome, Minato-Ku, Tokyo, 107 – 6024, Japan
BT Japan Corporation	100%	ordinary
Jersey 26 New Street, St Helier, JE2 3RA, Jersey
Ilford Trustees (Jersey)
Limited	100%	ordinary
PO Box 264, Forum 4, Grenville Street, St Helier, JE4 8TQ, Jersey
BT Jersey Limited	100%	ordinary

Company name	Group interest in allotted capitala	Share class
Jordan
Wadi AlSer – Dahiet Prince Rashid – King Abdullah Street , Building No. 391 – 3rd Floor, Jordan
BT (International) Holdings Limited (Jordan)	100%	ordinary
Kazakhstan
n.p.38b, Building 5, Kaiym Mukhamedkhanov Street, Nura District, Astana, Index 010000, Kazakhstan
BT Kazakhstan LLP	100%	–
Kenya L R No, 1870/ 1/176, Aln House, Eldama Ravine close, off Eldama Ravine Road, Westlands, P O Box 764, Sarit Centre, Nairobi, 00606, Kenya
BT Communications Kenya Limited	70%	ordinary
Korea Level 19, Hana Securities Building, 81, Uisadang daero, Yeongdeungpogu, Seoul, 07321, Republic of Korea
BT Global Services Korea Limited	100%	common
Latvia Muitas iela 1A, Riga, LV-1010, Latvia
BT Latvia Limited,
Sabiedriba ar ierobezotu atbildibu	100%	ordinary
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.	100%	ordinary
Lithuania
Aludariu str 2-33, LT-01113 Vilnius, Lithuania
UAB BTH Vilnius	100%	ordinary
Luxembourg
12 rue Eugene Ruppert, L 2453, Luxembourg BT Global Services
Luxembourg SARL BT Broadband	100%	ordinary
Luxembourg Sàrl Malawi	100%	ordinary
KEZA Office Park Blocks 3, First Floor, Near
Chichiri, Shopping Mall, Blantyre, Malawi
BT Malawi Limited	100%	ordinary
Malaysia
Level 5, Tower 3, Avenue 7, Bangsar South, No.8, Jalan Kerinchi, 59200 Kuala Lumpur, Malaysia
BT Global Technology (M) Sdn. Bhd.	100%	ordinary
BT Systems (Malaysia) Sdn Bhd	100%	ordinary
Malta
Level 1, LM Complex, Brewery Street, Zone 3, Central Business District, Birkirkara CBD, 3040, Malta
BT Solutions Limitedb	100%	–

Related undertakings continued

	Group
	interest in
Company name	allotted capitala	Share class
Mauritius
c/o Deloitte, 7th Floor Standard Chartered Tower, 19-21 Bank Street, Cybercity, Ebène, 72201, Mauritius
BT Global Communications (Mauritius) Limited	100%	ordinary
Mexico
Boulevard Manuel Avila Camacho No. 32, 6th Floor, Lomas de Chapultepec III Section, Miguel Hidalgo, Mexico City CP11000
BT LatAm México, S.A. de C.V.	100%	common
Montenegro
Vasa Raickovica 4b, Podgorica, Podgorica, Montenegro
BT Montenegro DOO Morocco	100%	–
Bd. Abdelmoumen, Immeuble Atrium, n 374, Lot. Manazyl Al Maymoune, 5eme etage, Casablanca, 20390, Morocco
BT Solutions Limited – Morocco Branchb	100%	–
Mozambique Avenida Kenneth Kaunda, number 660, Sommershield, Maputo City, Mozambique
BT Mozambique,
Limitada Namibia	100%	quotas
Unit 3, 2nd floor, Ausspann Plaza, Dr Agostinho Neto Road, Ausspannplatz, Private Bag, Windhoek, 12012, Namibia
BT Solutions Limitedb	100%	–
Netherlands
Herikerbergweg 2, 1101 CM, Amsterdam, Netherlands
BT Global Europe B.V. BT (Netherlands)	100%	ordinary
Holdings B.V.	100%	ordinary
BT Nederland N.V. BT Professional	100%	ordinary
Services Nederland B.V. Global Security Europe	100%	ordinary
Limitedb	100%	–
New Zealand
c/o Deloitte, Level 18, 80 Queen Street, Auckland Central, Auckland, 1010, New Zealand
BT Australasia Pty Limited – New Zealand Branchb	100%	–
Nicaragua
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.	100%	capital
Nigeria
Civic Towers, Plot GA1, Ozumba Mbadiwe Avenue, Victoria Island, Lagos, Nigeria
BT (Nigeria) Limited	100%	ordinary

	Group
	interest in allotted	Share
Company name	capitala	class
North Macedonia
Str. Dame Gruev no.8, 5th floor, Building "Dom na voenite invalidi", Skopje 1000, North Macedonia
BT Solutions Limited
Branch Office in
Skopjeb	100%	–
Norway
Munkedamsveien 45, Oslo, 0121, Norway
BT Solutions Norway AS	100%	ordinary
Oman
Maktabi Building, Building No. 458, Unit No. 413 4th Floor, Road No – R41, Block No. 203, Plot No. 107, Zone No. SW41, Complex No. 271, Al Watiyah, Bausher, Muscat, Sultanate of Oman,
Oman
BT International Holdings Limited & Co.
LLC	100%	ordinary
Pakistan
Cavish Court, A-35, Block 7&8, KCHSU,
Shahrah-e-Faisal, Karachi, 75350, Pakistan
BT Pakistan (Private) Limited	100%	ordinary
Panama
50th and 74th Street, San Francisco, PH 909, 15th and 16th Floor, Panama City, Panama
BT de Panama, S.R.L.	100%	ordinary
Paraguay
Av. Brasilia N° 767 casi Siria, Asunción, Paraguay
BT Paraguay S.R.L.	100%	quotas
Peru
Av. La Mar 662 Of. 201 – Miraflores, Lima, Peru
BT Peru S.R.L.	100%	ordinary
Philippines
11th Floor, Page One Building, 1215 Acacia Ave Madrigal Business Park, Ayala Alabang, Muntinlupa, Metro Manila, 1780, Philippines
IT Holdings, Inc	100%	ordinary
40th Floor, PBCom Tower 6795, Ayala Avenue cor. Rufino St, Makati City, 1226, Philippines
BT Communications Philippines
Incorporated	100%	ordinary
c/o Sun Microsystems Phil Inc., 8767 Paseo de Roxas, Makati City, Philippines
PSPI-Subic, Inc	51%	ordinary
Poland
126/134 Marszalkowska St., Room 128, 00-008, Warsaw, Poland
BT Poland Spółka Z Ograniczoną Odpowiedzialnością	100%	ordinary
Portugal
Rua D. Francisco Manuel de Melo 21-1,
1070-085 Lisboa, Portugal
BT Portugal – Telecomunicaçöes, Unipessoal Lda	100%	ordinary
Puerto Rico
Corporation Service Company Puerto Rico Inc., c/ o RVM Professional Services LLC, A4 Reparto Mendoza, Humacao, 00791, Puerto Rico
BT Communications Sales, LLC Puerto Rico branchb	100%	–

Company name	Group interest in allotted capitala	Share class
Qatar
1413, 14th Floor, Al Fardan Office Tower, Doha, 31316, Qatar
BT Global Services (North Gulf) LLC	49%	ordinary
Republic of Ireland
BDO Block 3 Miesian Plaza, 50-58 Baggot Street Lower, Dublin 2, Dublin, D02 Y754, Ireland
BT Global
Communications
(Ireland) Limited	100%	ordinary
5th Floor, 2 Grand Canal Plaza, Upper Grand Canal Street, Dublin 4, Ireland
The Faraday
Procurement
Company Limited 2 Grand Canal Plaza, Upper Grand Canal	100%	ordinary
Street, Dublin 4, Republic of Ireland
BT Communications Ireland Limited	100%	ordinary
BT Communications Ireland Group Limited	100%	ordinary
BT Communications
Ireland Holdings Limited	100%	ordinary
Whitestream Industries 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	100%	–
Russia
Room 62, prem xx, Floor 2, Pravdy, 26, 127137, Moscow, Russian Federation
BT Solutions Limited
Liability Company	100%	–
Serbia Dimitrija Georgijevica Starike 20, Belgrade, 11070, Serbia
BT Belgrade d.o.o	100%	ordinary
Sierra Leone
84 Dundas Street, Freetown, Sierra Leone
BT (SL) Limited	100%	ordinary
Singapore
Level 3, #03-01/02 & #03-04, Block B, Alexandra Technopark, 438B Alexandra Road, Singapore, 119968
BT (India) Private
Limited Singapore Branchb	100%	–
BT Global Solutions Pte. Ltd.	100%	ordinary
BT Singapore Pte. Ltd.	100%	ordinary
Slovakia
Pribinova 10, 811 09, Bratislava , mestskó èast'
Staré Mesto, Slovakia BT Global Europe B.V.,
o.z.b	100%	–
BT Slovakia s.r.o.	100%	ordinary

	Group interest in
	allotted	Share
Company name	capitala	class
Slovenia Cesta v Mestni Log 1, Ljubljana, 1000, Slovenia
BT GLOBALNE
STORITVE,
telekomunikacijske storitve, obdelava
podatkov, podatkovnih
baz; d.o.o.	100%	ordinary
South Africa
BT Building, Woodmead North Office Park, 54 Maxwell Drive, Woodmead, Johannesburg, 2191, South Africa
BT Communications
Services South Africa (Pty) Limited	100%	ordinary
BT Limitedb	100%	–
Spain
C/ María Tubau, 3, 28050 de Madrid, Spain
BT Global ICT Business
Spain SLU	100%	ordinary
Sri Lanka
Level 03, No 11, Castle Lane, Colombo, 04, Sri Lanka
BT Communications Lanka (Private)
Limited	100%	ordinary
Sudan
Alskheikh Mustafa Building, Parlman Street, Khartoum, Sudan
Newgate Communication
(Sudan) Co. Ltd	100%	ordinary
Sweden
c/o 7A, Vasagatan 28, 111 20, Stockholm, Sweden
BT Nordics Sweden AB	100%	ordinary
Switzerland
Richtistrasse 5, 8304 Wallisellen, Switzerland
BT Switzerland AG	100%	ordinary
Taiwan
11F, No. 1 Songzhi Rd, Xinyi Dist., Taipei City, 110411, Taiwan (Province of China)
BT Limited Taiwan Branchb	100%	–
Tanzania
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	100%	–
Thailand
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	49%	class B
BT Siam Limited	69%	ordinary
	69%	preference
Trinidad and Tobago
2nd Floor CIC Building, 122-124 Frederick Street, Port of Spain, Trinidad and Tobago
BT Solutions Limitedb	100%	–

	Group
Company name	interest in allotted capitala	Share class
Tunisia
Rue de I', Euro Immeuble Slim, Block A-2nd floor-Les berges du Lac, Tunis, 1053, Tunisia
BT Tunisia S.A.R.L	100%	ordinary
Turkey
Acıbadem Mahallesi Çeçen Sk. Akasya A , Kule Kent Etabı Apt. No: 25 A/28- , Üsküdar, Istanbul, Turkey
BT Bilisim Hizmetleri Anonim Şirketi	100%	ordinary
BT Telekom Hizmetleri Anonim Şirketi	100%	common
Uganda
Engoru, Mutebi Advocates, Ground Floor, Rwenzori House, 1 Lumumba Avenue, Kampala, 22510, Uganda
BT Solutions Limitedb	100%	–
Ukraine Office 702, 34 Lesi Ukrainky Boulevard, Kyiv
01042, Ukraine BT Ukraine Limited
Liability Company	100%	stakes
United Arab Emirates Office No G03, Ground Floor, EIB Building No
04, Dubai, United Arab Emirates
BT MEA FZ-LLC	100%	ordinary
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	100%	–
BT UAE Limited – Dubai Branch (2)b	100%	–
United Kingdom
1 Braham Street, London, E1 8EE, United
Kingdom Autumnwindow
Limited Autumnwindow No.2	100%	ordinary
Limited	100%	ordinary
Autumnwindow No.3 Limited	100%	ordinary
Belmullet (IoM) Limitedb	100%	–
BPSLP Limited	100%	ordinary
British Telecommunications
plc	100%	ordinary
Bruning Limited BT (International)	100%	ordinary
Holdings Limited	100%	ordinary
BT (RRS LP) Limited BT Communications	100%	ordinary
Ireland Group Limited – UK Branchb	100%	–
BT Corporate Trustee Limited	100%	limited by guarantee
BT European
Investments Limited BT Fifty-One	100% 100%	ordinary ordinary
BT Fifty-Three Limited BT Global Security	100%	ordinary
Limited	100%	ordinary
BT Holdings Limited	100%	ordinary
Services Limited BT Global Services	100%	ordinary

Company name	Group interest in allotted capitala	Share class
BT IoT Networks
Limited	100%	ordinary
BT Limited BT Ninety-Seven	100%	ordinary
Limited	100%	ordinary
BT Nominees Limited	100%	ordinary
BT OnePhone Limited	100%	ordinary
BT Property Holdings (Aberdeen) Limited	100%	ordinary
BT Property Limited	100%	ordinary
BT Sixty-Four Limited	100%	ordinary
BT SLE Euro Limited	100%	ordinary
BT SLE USD Limited	100%	ordinary
BT Solutions Limited	100%	ordinary
BT UAE Limited	100%	ordinary
Communications Global Network Services Limited – UK Branchb	100%	–
Communications
Networking Services
(UK)	100%	ordinary
EE (Group) Limited EE Group Investments	100%	ordinary
Limited	100%	ordinary
EE Limited	100%	ordinary
EE Pension Trustee Limited	100%	ordinary
ESAT Telecommunications
(UK) Limited	100%	ordinary
Extraclick Limited	100%	ordinary
Global Security Europe Limited	100%	ordinary
Mainline Communications Group Limited	100%	ordinary
Mainline Digital Communications
Limited Newgate Street	100%	ordinary
Secretaries Limited	100%	ordinary
Numberrapid Limited Orange Furbs Trustees	100%	ordinary
Limited Orange Home UK	100%	ordinary
Limited	100%	ordinary
Orange Personal Communications
Services Limited Radianz Limited	100% 100%	ordinary ordinary
Redcare Limited	100%	ordinary
Southgate
Developments Limited	100%	ordinary
Tudor Minstrel	100%	ordinary
Alexander Bain House, 15 York Street, Glasgow, Lanarkshire, G2 8LA, Scotland
BT Corporate Limited	99%	ordinary
BT Falcon 1 LP	51 %	–
Holland House (Northern) Limited	100%	ordinary
BDO LLP, 5 Temple Square, Temple Street, Liverpool, L2 5RH, United Kingdom
BT Lancashire Services Limited	100%	ordinary

Related undertakings continued

	Group interest in allotted	Share
Company name	capitala	class
Kelvin House, 123 Judd Street, London, WC1H 9NP, United Kingdom
Openreach Limited	100%	ordinary
Endeavour, Sheffield Digital Campus,1a Concourse Way, Sheffield, S1 2BJ, United Kingdom
Plusnet plc	100%	ordinary
United States
c/o Corporation Service Company, 251 Little Falls Drive, Wilmington DE 19808, United States
BT Americas Holdings Inc.	100%	common
BT Americas Inc.	100%	common
BT Communications
Sales LLC	100%	units
BT Federal Inc.	100%	common
BT Procure L.L.C.	100%	units
BT United States L.L.C.	100%	units
Infonet Services Corporation	100%	common
Uruguay
Rincón 487 Piso 11, Montevideo, ZIP CODE 11.000, Uruguay
BT Solutions Limited Sucursal Uruguayb	100%	–
Venezuela
Calle Guaicaipuro, Urbanizacion El Rosal, Municipio Chacao, Oficina 11B, Piso 11, Torre Forum, Caracas, Venezuela
BT LatAm Venezuela, S.A.	100%	ordinary
Vietnam
16th Floor Saigon Tower, 29 Le Duan Road, District 1, Ho Chi Minh City, 710000, Socialist Republic of Vietnam
BT (Vietnam) Co. Ltd.	100%	ordinary
Zambia
Plot No. 11058, Haile Selassie Avenue, Zimbabwe, Lusaka, Lusaka Province, 34972, Zambia
BT Solutions Limitedb	100%	–
Zimbabwe
6th Floor, Goldbridge Eastgate, Sam Nujoma Street Harare, Post Box 10400, Zimbabwe
Numberrapid Limitedb	100%	–

Associates (note 24)

Company name	Group interest in allotted capitala	Share class
Held via other group companies
Mauritius
IFS Court, Bank Street, TwentyEight Cybercity, Ebene, 72201, Mauritius
Mahindra – BT Investment Company (Mauritius) Limited	43%	ordinary
Philippines
32F Philam Life Tower, 8767 Paseo de Roxas, Makati City, Philippines
ePLDTSunphilcox JV, Inc	20%	ordinary
SunPhilcox JV, Inc	20%	ordinary
United Kingdom
24/25 The Shard, 32 London Bridge Street, London, SE1 9SG, United Kingdom
Digital Mobile Spectrum Limited	25%	ordinary
10 Stadium Business Court , Millennium Way, Pride Park , Derby, DE24 8HP, United Kingdom
Midland Communications Distribution Limited	35%	ordinary
Phoneline (M.C.D) Limited	35%	ordinary
2nd Floor, Aldgate Tower, 2 Leman Street, London, E1 8FA, United Kingdom
Youview TV Limited	14%	voting

Joint ventures (note 24)

Company name	Group interest in allotted capitala	Share class
Held via other group companies
United Kingdom
Chiswick Park Building 2, 566 Chiswick High Road, London, W4 5YB, United Kingdom
TNT Sports Broadcasting Limitedc	50%	ordinary
6th Floor, One London Wall, London, EC2Y 5EB, United Kingdom
Internet Matters Limited	25%	-
80 Fenchurch Street , London, EC3M 4AE, United Kingdom
Rugby Radio Station (General Partner) Limited	50%	ordinary
Rugby Radio Station (Nominee) Limited	50%	ordinary
St Helen's, 1 Undershaft, London, EC3P 3DQ, United Kingdom
Rugby Radio Station LP	50%	-

All joint ventures are governed by a joint venture agreement.

Joint operations

Company name	Group interest in allotted capitala	Share class
Held via other group companies
United Kingdom
450 Longwater Avenue, Green Park, Reading, Berkshire, RG2 6GF, United Kingdom
Mobile Broadband Network Limited	50%	ordinary

EE Limited and Hutchison 3G UK Limited (together 'the Companies') each have a 50% share in the joint operation Mobile Broadband Network Limited ('MBNL'). MBNL's ongoing purpose is the operation and maintenance of radio access sites for mobile networks through a sharing arrangement. This includes: (i) the efficient management of shared infrastructure and a 3G network on behalf of the Companies, (ii) acquiring certain network elements for shared use, and (iii) coordinating the deployment of new sites, 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 BT Ninety-Five Limited name changed to TNT Sports Broadcasting Limited. In addition to the 50% ordinary A shares we also hold A preference shares and C preference shares, see note 24 for more details.

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. We also reference adjusted revenue and adjusted EBITDA on a Sports JV pro forma basis. The rationale for using these measures, along with a reconciliation from the nearest measures prepared in accordance with IFRS, is 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 significant business restructuring programmes such as the current group-wide cost transformation and modernisation programme, acquisitions and disposals of businesses and investments, impairment of goodwill, charges or credits relating to retrospective regulatory matters, property rationalisation programmes, historical property-related provisions, 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. Conversely, when a reversal occurs in relation to a prior year item not classified as specific, the reversal is not classified as specific in the current year.

Movements relating to the sports joint venture (Sports JV) with Warner Bros. Discovery (WBD), such as fair value gains or losses on the A and C preference shares or impairment charges on the equity-accounted investment as specific. Refer to note 24 for further detail.

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 145.

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 the balance sheet.

Amounts due to joint ventures, loans and borrowings recognised in relation to monies received from the sale of cash flows of contract assets and as prepayment for the forward sale of redundant copper are excluded.

Currency-denominated balances within net debt are translated to sterling at swap rates where hedged. Fair value adjustments and accrued interest applied 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.

As aligned with our normalised free cash flow metric, from FY24 onwards we exclude loans and borrowings recognised in relation to:

• Asset monetisation programmes, in which monies received from the sale of cash flows of contract assets are recorded as liabilities (and the contract asset is not derecognised) until certain performance obligations in the contract are fulfilled and the right to consideration becomes unconditional. Excluding these liabilities is considered to improve the relevance of the net debt metric as it is consistent with the treatment of related cash flows in normalised free cash flow as noted above; and aligns with the underlying rationale and management's view that substantially all the risks and rewards associated with ownership of these assets have been transferred to the end buyer. These liabilities do not reflect the group's indebtedness as they will be extinguished upon the transfer of ringfenced operational cash flows from end customers which management are confident will be received.
• Monies received as prepayment for the forward sale of redundant copper, which are recognised as liabilities until there is physical delivery of the copper (further details in note 26). Excluding these liabilities is again considered to improve the relevance of the net debt metric by aligning with the treatment of related cash flows in normalised free cash flow and the fact that balances are not representative of the group's true indebtedness given that they will be settled by the physical delivery of copper, rather than cash or any other financial asset.

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 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.

From FY24 we also exclude amounts due to joint ventures, loans and borrowings recognised in relation to monies received from the sale of cash flows of contract assets and as prepayment for the forward sale of redundant copper. In line with the net debt definition on page 231. In the table below we have restated the FY23 comparative to align with the updated definition and excluded £11m net loans from joint ventures, however it has not changed the ROCE metric from the previously reported 8.3%.

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	2024 £m	2023 (restated) £m
Reported operating profit for the period	2,214	2,619
Share of post tax profits (losses) of associates and joint ventures	(21)	(59)
Specific items (non-finance and tax)	987	556
Return for the period	3,180	3,116
Equity, debt and debt-like liabilities
Loans and other borrowings	18,526	18,521
Lease liabilities	4,955	5,359
Retirement benefit obligations	4,882	3,139
BDUK grant funding deferral	228	427
Total equity	12,518	14,514
Adjust for balances used to hedge financial risk
Cash and cash equivalents	(414)	(392)
Investments	(2,395)	(3,577)
Net derivative financial instruments	(531)	(1,096)
Adjust for tax balances
Net deferred tax liabilities	485	911
Net current tax receivable	(331)	(349)
Adjust in line with net debt definition
Net loans with joint ventures	(11)	(11)
Loans related to sale of contract assets	(318)	—
Loans related to the forward sale of redundant copper	(106)	—
Capital employed	37,488	37,446
Return on capital employed	8.5 %	8.3 %

Adjusted EBITDA

In addition to measuring financial performance of the group and customer-facing units based on adjusted operating profit, we also measure performance based on adjusted EBITDA. Adjusted EBITDA is defined as the group profit or loss before specific items, net finance expense, taxation, depreciation and amortisation and share of post tax profits or losses of associates and joint ventures.

We consider adjusted EBITDA to be a useful measure of our operating performance because it approximates the underlying operating cash flow by eliminating depreciation and amortisation. Adjusted EBITDA is not a direct measure of our liquidity, which is shown by our cash flow statement, and needs 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 adjusted EBITDA, is set out below.

2024	2023
£m	£m
855	1,905
331	(176)
1,186	1,729
1,007	831
5,398	4,818
38	(12)
450	503
21	59
8,100	7,928

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, payment of lease liabilities, net cash flows from the sale of cash flows related to contract assets, monies received as prepayment for the sale of redundant copper, dividends received from non-current asset investments, associates and joint ventures, and net purchase or disposal of non-current asset investments, before pension deficit payments (including their cash tax benefit), payments relating to spectrum, and specific items. It excludes cash flows that are determined at a corporate level independently of ongoing trading operations such as dividends paid, share buybacks, acquisitions and disposals, repayment and raising of debt, cash flows relating to short-term funding arrangements with joint ventures, and cash flows relating to the Building Digital UK demand deposit account which have already been accounted for within normalised free cash flow. For non-tax related items the adjustments are made on a pre-tax basis.

As reflected above and communicated in our FY23 annual report, from FY24 we have updated our normalised free cash flow metric to reflect the ongoing evolution of the business:

– We include the sale of cash flows of contract assets related to mobile handsets where the performance obligations have been substantially delivered to the customer. This is a financing cash flow in the cash flow statement as certain performance obligations in the contract need to be fulfilled before the right to consideration is unconditional. The underlying rationale for entering into these transactions is however for the purpose of working capital management as handset costs are incurred up front but recovered throughout the customer contract term. We therefore view the related cash flows as equivalent to working capital cash flows internally, and consider that they should be treated in the same way as operating cash inflows in our external normalised free cash flow metric in order to provide the most relevant information to the users of the financial statements. The corresponding operating cash inflow received from customers is excluded from normalised free cash flow if it has previously been included at the time of the sale of the contract assets.

– We include monies received as prepayment for the forward sale of future redundant copper. In the cash flow statement this will be recorded within cash flows from investing activities as a separate line item, and will be the only cash flow recognised in respect of the transaction. We therefore consider it necessary to include the inflow within normalised free cash flow to align with the treatment of cash flows from all other purchases and disposals of property, plant and equipment.

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.

	2024	2023
Year ended 31 March	£m	£m
Cash generated from operationsa	6,012	6,588
Tax paid	(59)	136
Net cash inflow from operating activities	5,953	6,724
Net purchase of property, plant and equipment and intangible assets	(4,967)	(5,307)
Free cash flow	986	1,417
Interest received	140	41
Interest paid	(865)	(709)
Payment of lease liabilities	(748)	(727)
Dividends received from joint ventures, associates and investments	20	9
Net purchase of non-current asset investments	—	(5)
Add back pension deficit payments	823	994
Add back net cash flow from specific items	439	404
Net cashflows from sale of contract assets related to handsets	305	—
Cash flows relating to the BDUK demand deposit account	75	(96)
Prepayment for forward sale of copper	105	—
Normalised free cash flow	1,280	1,328

a Includes £247m outflow (FY23: £259m inflow) related to utilisation of a supply chain financing programme; year on year cash outflow of £506m.

Below we reconcile normalised free cash flow by unit:

		2023
	2024	(re-presented)a
Year ended 31 March	£m	£m
Consumer	1,023	963
Business	431	648
Openreach	590	219
Other	(764)	(502)
Normalised free cash flow	1,280	1,328

a Comparatives for the year ended 31 March 2023 have been re-presented for the impact of the creation of our Business customer-facing unit and a change in the methodology used to allocate shared central costs. For more information see note 1, and for a bridge to prior period published financial information see note 32.

Sports JV pro forma basis

On 3 September 2022 BT Group and Warner Bros. Discovery announced completion of their transaction to form a 50:50 sports joint venture (Sports JV) combining the assets of BT Sport and Eurosport UK. On 18 October 2022 we published unaudited pro forma financial information estimating the impact on the group as if trading in relation to BT Sport had been equity accounted for in previous periods, akin to the Sports JV being in place historically.

Within this annual report we reference pro forma information relating to the prior year ended 31 March 2023. The table below provides a bridge between financial information on a reported basis and a Sports JV pro forma basis (reported basis represented, see note 32).

	Reported basis (re presented, see note 32)	Sports JV pro forma adjustment	Sports JV pro forma basis
	2023	2023	2023
Year ended 31 March	£m	£m	£m
Adjusted revenue
Consumer	9,737	(238)	9,499
BT Group	20,669	(238)	20,431
Adjusted EBITDA
Consumer	2,469	71	2,540
BT Group	7,928	71	7,999
Normalised free cash flow
Consumer	963	123	1,086
BT Group	1,328	—	1,328

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.

Notes

Notes

We connect for good

This annual report contains important information on our financial and operating performance which can also be found online.

Scan to switch to digital

BT Group plc

Registered office: 1 Braham Street, London E1 8EE Registered in England and Wales No. 4190816

Produced by BT Group

PHME 88342 Design by emperor.works Printed on Revive 50 Silk FSC® certified paper, made from 50% de-inked post-consumer waste and 50% virgin fibre from well managed forests and other controlled sources. The inks used are 100% vegetable oil based, printed in the UK by Pureprint Group an FSC® certified Carbon Neutral company. bt.com