Chairman's statement

Last year was, in many ways, a watershed for BT.

At the start of the year, we embarked on an ambitious programme to slim down the company more radically than in any other period in its history.

The reasons for this were clear. In an increasingly competitive market, and with ever tougher price controls, we had to improve our efficiency still further, as the basis for providing better value to our customers and shareholders alike.

Two factors, above all, helped us not only to achieve, but to exceed, our

Financial highlights
Year ended 31 March	1993	1992
Turnover £m	13,242	13,337
Profit before taxation £m	1,972	3,073
Profit after taxation £m	1,248	2,074
Earnings per share (pence)	19.8	33.2
Dividends per share (pence)	15.6	14.4

target for job reductions while maintaining high quality service to our customers. First, we were able to reap the benefits of the massive sums we have invested in recent years on modernising our networks and systems.

The new technology is much more reliable than the old, and requires fewer people to maintain it.
Second, we were able to realise a further tranche of the organisational economies made possible by the radical reshaping of the company in 1991.

As a Board, we have acknowledged the responsibilities we bear to those who leave the company as part of the downsizing programme. The financial terms have recognised the contribution made by leavers to our past success and they have been accompanied by an innovative package including help with job placement, counselling and other support measures.

This voluntary reduction in our workforce was one of the ways in which management was successful in controlling costs, achieving a sound underlying performance despite a flat turnover.

The significant decline in earnings per share during the year is attributable to substantial redundancy and nonrecurring costs. The benefits of good cost control, and the slight improvement in volume growth that has arisen since last summer, came through in a strong fourth quarter operating performance, before redundancy charges.

The recommended final dividend of 9.45 pence brings the total dividend for the year to 15.6 pence, a growth of 8.3 per cent. Your Board believes that this reflects BT's underlying performance and financial strength.
Partly as a result of the voluntary redundancy programme, but also because of the impact of the recession on investments and the consequences of the Government's proposals on advance corporation tax, the

company's main pension fund has moved from surplus into deficit. The company is taking immediate action to rectify this position.

Contributions in respect of all active members of the BT Pension Scheme were resumed from 1 April 1993 and, in addition, the company intends to make a special contribution of £800 million to the pension fund in the year ending 31 March 1994.

While good cost control was a major feature of 1992/93, it was also a year in which we placed great emphasis on new and innovative marketing initiatives, particularly in the area of pricing. As well as extending pricing options and discounts for customers, we introduced a series of special offers, of which the most popular was the Sunday Special, providing national calls at the local cheap rate from 3pm on Sundays in November and December. Together with our continuing high levels of service, these pricing initiatives helped to improve our reputation for value for money with our customers an important task for us as we face increasing competition at all levels of our business.

Another example of building customer loyalty is the development of our world class portfolio of products and services. A notable and much publicised feature was the launch of the videophone for residential customers: tomorrow's world is with us today.

Internationally, we continued to make good progress in developing network related services for major customers in the key markets of the world. Syncordia built steadily on its promising launch, while our filing with the regulatory authorities in the United States, seeking permission to offer customers there direct access to international virtual networks, was an important milestone in our worldwide strategy. The reaction of our competitors showed that BT was, once again, in the lead.

Whether at home or abroad, BT people performed with great dedication in often difficult circumstances a contribution recognised by the operation of the employee share ownership scheme.

Looking at the year ahead, as we face yet tougher price regulation and increasing competition in our markets, it is the dedication of these people, together with the company's underlying technological and financial strength, that leaves BT positioned to take advantage of an upturn in the economy.





Iain Vallance
18 May 1993

Paul Bosonnet Deputy Chairman Appointed a director in 1986 and non executive Deputy Chairman in 1991. Formerly executive deputy chairman of The BOC Group, he is non executive chairman of Logica. Age 60.	Sir Geoffrey Mulcahy Appointed a director in 1988, he is a chairman of Kingfisher Age 51.
Malcolm Argent CBE Group Director and Secretary Appointed a director in 1989. Secretary of BT since 1984. Age 57.	Anthony Booth Managing Director, Special Businesses and International Affairs Mr Booth CEng FIEE was appointed a director in 1984. Age 54.
Sir Eric Ash CBE Professor Sir Eric Ash FRS FEngFIEE was appointed a director in 1987. Rector of the Imperial College of Science, Technology and Medicine. Age 65.

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