BT 1999 Annual Report Download - page 27

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26
Introduction
BT’s earnings of 46.3 pence per share for the year ended
31 March 1999 (the 1999 financial year) compare with
26.6 pence for the 1998 financial year and 32.8 pence for the
1997 financial year. Of the earnings in the 1999 financial
year, 11.6 pence per share represented net exceptional
income mainly relating to the sale of the group’s investment
in MCI Communications Corporation in September 1998.
Earnings for the 1998 financial year were affected by net
exceptional charges of 5.1 pence per share, relating to the
windfall tax, partially offset by a fee received relating to
the termination of the BT/MCI merger. Earnings before
exceptional items of 34.7 pence per share for the 1999
financial year compare with an equivalent 31.7 pence and
32.8 pence for the 1998 and 1997 financial years, respectively.
1999 1998 1997
£m £m £m
)))!!
!!!005111111101
Total turnover
– ongoing 18,223 16,039 15,021
Group’s share of ventures’
turnover – ongoing (1,270) (399) (86)
00011!!!005111111101
Group turnover
– ongoing 16,953 15,640 14,935
Other operating income 168 372 106
Operating costs (13,305) (12,355) (11,796)
00011!!!005111111101
Group operating profit 3,816 3,657 3,245
Group’s share of ventures’
profits (losses) (342) (196) 184
00011!!!005111111101
Total operating profit 3,474 3,461 3,429
Profit on sale of fixed
asset investments
and group undertakings 1,107 63 8
Net interest and
premium payable (286) (310) (234)
00011!!!005111111101
Profit before taxation 4,295 3,214 3,203
Taxation – ordinary (1,293) (977) (1,102)
Taxation – windfall –(510) –
00011!!!005111111101
Profit after taxation 3,002 1,727 2,101
Minority interests (19) (25) (24)
00011!!!005111111101
Profit for the
financial year 2,983 1,702 2,077
00011!!!005111111101
Basic earnings
per share 46.3p 26.6p 32.8p
Basic earnings
per share before
exceptional items 34.7p 31.7p 32.8p
00011!!!005111111101
The results for the 1999 and 1998 financial years benefited
from the strong growth in demand for the group’s products
and services. In the 1999 financial year, Internet and mobile
phone usage expanded rapidly and this led to increased
turnover and profit. In the 1998 financial year, the buoyant
UK economy had a beneficial effect on the results. Our new
ventures in Continental Europe and Asia Pacific which we
have established, or in which we have acquired interests,
in the past two to three years, are contributing significantly
to our turnover growth. However, the initial losses being
incurred in their development stages are, as anticipated,
adversely affecting the group’s results. We continue to
be affected by the tight regulatory regime in the UK and
intense competition. Price reductions, including those
imposed by the price control formulae, totalled
approximately £500 million following reductions of over
£750 million in the 1998 financial year and £800 million
in the 1997 financial year. The 1999 and 1998 financial
years’ results included lower redundancy costs in
comparison with the 1997 financial year.
The group’s interest in MCI was sold in September 1998
on the completion of the MCI/WorldCom merger. We
recognised a pre-tax profit of £1,133 million on the sale in
the 1999 financial year; this followed the £273 million fee
we received in November 1997 on announcement of their
agreed merger, as compensation for the break-off of the
merger we had planned with MCI. We ceased equity
accounting for MCI as an associate on 31 October 1997.
At the same time as we disposed of our interest in MCI
in September 1998, we acquired the minority interest
owned by MCI in Concert Communications Services
(Concert). Concert is to be transferred to our proposed
global venture with AT&T later in 1999, once we have
obtained regulatory clearances.
Accounting and presentation changes
A number of changes have been made to the presentation
of the group’s results, largely due to our implementing
several new UK financial reporting standards (FRSs) in the
1999 financial year. The group’s proportional share of its
associates’ and joint ventures’ (ventures) turnover is now
shown in the group profit and loss account. We are also
required to show our share of our ventures’ results at the
operating level in that statement with our share of their
interest charge or income being aggregated with the
group’s. Additionally, BT’s share of its joint ventures’ assets
and liabilities is shown on the face of the group balance
sheet. Goodwill arising on acquisitions completed after
1 April 1998 is being capitalised and amortised over their
economic lives.
Other additional disclosures and minor changes in the
financial statements have been made as a result of
implementing FRSs 9 to 14 in the year and additional
Financial review