BT 2006 Annual Report Download - page 32

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increased by 3%. Our cost efficiency programmes achieved
savings of over £400 million in the 2006 financial year which
enabled us to invest in growing our new wave activities. Total
operating costs of £17,246 million, including specific items,
increased by 8%.
Staff costs in the 2006 financial year, excluding leaver costs
of £133 million, increased by £445 million to £4,833 million
due to the full year impact of the acquisitions, the additional
staff required to grow the networked IT services business and to
service increased levels of activity in the network. Payments to
other telecommunications operators in the 2006 financial year
were £4,045 million, an increase of 9% mainly reflecting the
impact of higher volumes and the full year impact of Albacom
and Infonet. Other operating costs before specific items in the
2006 financial year increased by 11% to £6,113 million. This
reflects the cost of investing in new wave activities and
supporting new networked IT services contracts.
BT’s share of associates’ and joint ventures’ post tax profit
before specific items was £16 million in the 2006 financial year,
compared with losses of £14 million in the 2005 financial year.
During the 2005 financial year Albacom contributed post tax
losses of £22 million prior to becoming a subsidiary.
Net finance expense was £472 million for the 2006 financial
year, an improvement of £127 million against the 2005
financial year. This improvement was due to a number of
factors including the net finance income associated with the
group’sdefined benefit pension obligation of £254 million
which was £56 million higher than last year, the reduction in
the level of net debt and a gain on redemption of the group’s
US dollar convertible bond.
The above factors resulted in the group achieving a profit
before specific items and taxation of £2,177 million in the 2006
financial year, an increase of 5%. The improvement in the year
reflects the improved performance of BT Retail and BT
Wholesale, lower net finance expense and an increase in the
share of profits from associates and joint ventures.
The taxation expense on the profit before specific items for
the 2006 financial year was £533 million, an effective rate of
24.5% compared to 26.0% in the 2005 financial year. The
improvement in the effective tax rate reflects the tax efficient
investment of surplus cash and continued improvement in the
tax efficiency within the group.
Basic earnings per share before specific items were 19.5
pence for the 2006 financial year, an increase of 8% from 18.1
pence.
BT Group plc Annual Report and Form 20-F 2006 Operating and financial review30
Line of business summary
Revenue Operating profit (loss)
a
Specific items
2006
£m
2005
£m
2006
£m
2005
£m
2006
£m
2005
£m
BT Retail 8,452 8,698 644 607 ––
BT Wholesale 9,232 9,095 1,992 1,950 ––
BT Global Services 8,632 7,488 363 411 ––
Other 18 25 (504) 24 138 (299)
Intra-group (6,820) (6,877) ––––
Group totals 19,514 18,429 2,495 2,992 138 (299)
aA reconciliation from total operating profit to profit after tax (net income) is given on page 73.