BT 2001 Annual Report Download - page 47

»200 million. On 26 April 2001, an application for permission to
appeal against the judgement on behalf of certain former
employees in non-managerial grades was lodged in an attempt to
extend the additional bene¢ts to those grades. BT will be
strongly resisting this new claim if permission to appeal is given.
A further actuarial valuation of the BTPS at 31 December
2000 is under consideration. This is in advance of the normal
three-yearly valuation and is being considered in light of the
high level of redundancies since the December 1999 valuation,
the fall in global equity markets in 2000 and the early part of
2001 and the current restructuring of the group.
The BTPS was closed to new entrants on 31 March 2001
and we have set up a new de¢ned contribution pension scheme
which will provide bene¢ts to employees joining the scheme
based on their and the employing company’s contributions.
This change is in line with the practice increasingly adopted by
major UK groups and is designed to be more £exible for
employees and enable the group to determine its pension costs
more precisely than is the case for de¢ned bene¢t schemes. The
¢nancial impact of this change is not expected to be signi¢cant
in the next several years but it should reduce pension costs in
the longer term.
Property
We are in negotiations with Land Securities Trillium and the
William Pears Group, for their joint venture company to
provide property services to BT. We are planning to grant long
leases on much of our specialised properties to that company
and to lease back these properties on a short-term basis. In the
process, we expect to receive a signi¢cant cash sum which will
go towards reducing our borrowings. We anticipate that the
transaction will be completed during the ¢rst half of the 2002
¢nancial year. The main continuing impact on our results from
this transaction is expected to be an increase in operating lease
rental expenses, partly o¡set by the bene¢cial impact on our
interest costs and depreciation charges.
Impact of inflation
In accordance with a requirement of BT’s main licence, the
group’s annual accounts for the 2000 ¢nancial year prepared on
a current cost basis were published in September 2000. These
accounts showed that the group’s current cost pro¢t before tax
was »2,189 million, compared with »2,942 million under the
historical cost convention. The group’s current cost total assets
at 31 March 2000 were »40,408 million, compared with
»37,588 million in its historical cost accounts. These current
cost accounts are no longer required to be published following
a licence amendment.
Environment
When removing old analogue exchange equipment from
buildings, BT recycles the metal content and takes special care
to properly dispose of any hazardous materials. Although BT
receives proceeds from the sale of recovered materials, this is
more than o¡set by the cost of dealing with hazardous
materials, contracting and planning their removal and
preparing the released site for further development. BT believes
that the total cost of dealing with these hazardous materials
will not be signi¢cant.
Geographical information
In the 2001 ¢nancial year, approximately 91% of the group’s
turnover was generated by operations in the UK, compared
with 95% in the 2000 and 96% in the 1999 ¢nancial years.
Including BT’s proportionate share of its ventures, which are
mainly located outside the UK, 62% of total turnover was
generated in the UK, compared with 82% in the 2000 ¢nancial
year and 90% in the 1999 ¢nancial year. BT’s operating pro¢ts
have been derived from its UK operations with losses being
incurred outside the UK in each of the last three ¢nancial years.
Regulatory financial information
BT is required under its main licence to publish disaggregated
¢nancial information for various activities of the group, which
have been used as the basis of charges paid by other
telecommunication operators in the UK for the use of BT’s
network. The activities presented separately in the regulatory
¢nancial statements do not necessarily correspond with any
businesses separately managed, funded or operated within the
group. The results set out in these statements for the 2000, 1999
and 1998 ¢nancial years showed that the group’s operating
pro¢t is derived predominantly from ¢xed-network calls, after
taking account of an operating de¢cit arising on the provision
of exchange lines.
New UK accounting standards
Under a new UK accounting standard FRS 19 ^ Accounting for
deferred tax, we are required to provide for deferred tax on a
full liability basis from 1 April 2001, in place of the existing
requirement to provide only for that deferred tax which we
consider we shall be paying in the foreseeable future. The
impact of this new standard will reduce our distributable
reserves by approximately »2 billion. The adverse impact of
the standard on our annual pro¢t after tax is estimated at
around »60 million and 0.9 pence reduction in our earnings per
share. If this new standard had been adopted on 31 March 2001,
our gearing would be standing at 220% in place of the 192%
under current accounting policies. This new accounting
BT Annual report and Form 20-F 47