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BT Group Plc's CEO Discusses Q3 2012 Results - Earnings Call Transcript

Together with a small decline in depreciation and a lower interest charge, profit before tax grew by 18%. As a result, EPS of GBP 0.061 was 13% higher than last year. Free cash flow before specific items was GBP 65 million higher, and this contributed to a further reduction in our net debt to GBP 7.7 billion. This is a reduction of over GBP 900 million compared with a year ago. In fact, over the last 3 years, our net debt has come down by over GBP 3 billion.

Turning to free cash flow in more detail. Cash CapEx was GBP 31 million lower than last year, partly due to the timing of payments. CapEx in the fourth quarter is typically higher, so expect our CapEx to upturn in line with our outlook of around GBP 2.6 billion for the full year. Interest was GBP 67 million lower, reflecting our lower debt levels. This was offset by higher tax due to our higher profits and as we return to a more normalized tax position.

Working capital and other were GBP 4 million lower than last year. There are a number of moving parts within this, so I'll just highlight some of the larger ones. Working capital in Openreach was down after we paid later than contracted by some operators. This was largely offset by a better working capital position elsewhere within the group. Our regular pension contributions were also low this quarter. If you remember, we said these would reduce this year after we made some overpayments last year.

Overall, free cash flow before specific items was GBP 65 million higher than last year, with lower CapEx and lower regular pension contributions being the main drivers. Finally, we incurred a cash cost on specific items of GBP 48 million, which relates to Global Services restructuring and the property rationalization programs. The full year cash cost for these should still be around GBP 180 million. For the quarter, free cash flow, after specifics, came in at GBP 586 million, a GBP 71 million improvement on the prior year.

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