BT 2003 Annual Report Download - page 31

Group results
All references in this section to the prior year results
or performance against the prior year are in relation
to the results from continuing activities.
Group turnover increased by 2% to £18,727 million
in the 2003 financial year. The strength in the group’s
new wave businesses and a strong defence of the
group’s market share in its existing businesses was
offset by price deflation. This compared to growth of
8% in the 2002 financial year and reflected the difficult
market conditions.
Group operating profit before goodwill
amortisation and exceptional items at £2,790 million
for the 2003 financial year was £19 million higher than
the prior year. The cost efficiencies achieved during the
year were offset by a £90 million increase in leaver
costs, the negative group operating profit effects of
unwinding the Concert global venture and the Telereal
property sale and leaseback transaction. In total, these
effects reduced group operating profits by over
£400 million, although this was compensated for at the
profit before tax level by a corresponding improvement
in our share of the operating profits of associates and
joint ventures and net interest payable.
In the 2002 financial year the group operating
profit before goodwill amortisation and exceptional
items declined by 10% to £2,771 million.
BT’s share of associates and joint ventures
operating profits before goodwill amortisation and
exceptional items was £181 million in the 2003
financial year compared to a £108 million loss and a
£157 million loss in the 2002 and 2001 financial years,
respectively. The improvement in the 2003 financial
year mainly reflected the benefit of the unwind of the
Concert global venture.
Net interest payable before exceptional items was
£1,146 million for the 2003 financial year, an
improvement of £271 million against the 2002
financial year as a result of the reduction in the level
of net debt. In the 2002 financial year net interest
payable was £221 million higher than the 2001
financial year effecting the increased net debt.
The above factors resulted in the group achieving
a profit before taxation, goodwill amortisation and
exceptional items of £1,829 million in the 2003
financial year, an increase of 44%, reflecting the
underlying operating performance of the group and
lower net interest costs. In the 2002 financial year
the profit before taxation, goodwill amortisation and
exceptional items of £1,273 million was £490 million
lower than the 2001 financial year.
The taxation charge for the 2003 financial year was
£598 million on the profit before goodwill amortisation
and exceptional items, an effective rate of 32.7%
compared to 41.5% and 21.8% in the 2002 and 2001
financial years. The high effective rate in the 2002
financial year was mainly due to the impact of loss
making subsidiaries outside the UK for which tax relief
was not available. The low effective rate in the 2001
financial year reflected tax relief on losses surrendered
by discontinued activities.
Basic earnings per share before goodwill
amortisation and exceptional items were 14.2 pence
for the 2003 financial year, an increase of 61% from
8.8 pence in the 2002 financial year, and 19.3 pence
in the 2001 financial year. The 2002 financial
year reflected the higher operating costs and net
interest payable.
Line of business results
In the following commentary, we discuss the operating
results of the group for the 2003, 2002 and 2001
financial years in terms of the lines of business
established during the 2001 financial year. During the
2003 financial year BT Openworld was transferred
under the management control of BT Retail and the
results have been adjusted to reflect this change for
all periods under review.
There is extensive trading between the lines of
business and their profitability is dependent on the
transfer price levels. The intra-group trading
arrangements are subject to review and have changed
in certain circumstances. Where that is the case the
comparative figures have been restated to reflect
these changes.
The line of business results are presented and
discussed before goodwill amortisation and exceptional
items, for the reasons set out above, to provide a
meaningful comparison of the trading results between
the financial years under review. Goodwill amortisation
and exceptional items are discussed separately in a
group context in the Financial review.
In addition to measuring financial performance
of the lines of business based on the operating profit
Financial review
30 BT Annual Report and Form 20-F 2003
Line of business summary
Group turnover Group operating profit (loss) Goodwill amortisation Exceptional charges (credits)
Group operating profit (loss)
before goodwill amortisation
and exceptional items
2003
£m
2002
£m
2001
£m
2003
£m
2002
£m
2001
£m
2003
£m
2002
£m
2001
£m
2003
£m
2002
£m
2001
£m
2003
£m
2002
£m
2001
£m
BT Retail 13,301 12,811 12,541 1,424 872 654 111–111 – 1,425 984 655
BT Wholesale 11,260 12,256 11,728 1,924 2,163 2,538 ––––79 – 1,924 2,242 2,538
BT Global Services 5,251 4,472 3,468 (446) (2,684) (596) 19 120 87 –2,211 200 (427) (353) (309)
Other 41 70 138 (330) (397) 391 –––198 295 (193) (132) (102) 198
Intra-group (11,126)(11,162)(10,734) ––––––––––––
Total continuing
activities 18,727 18,447 17,141 2,572 (46) 2,987 20 121 88 198 2,696 7 2,790 2,771 3,082
Discontinued
activities –2,112 3,286 –(433) (2,960) –231 285 –11 2,850 –(191) 175
Group totals 18,727 20,559 20,427 2,572 (479) 27 20 352 373 198 2,707 2,857 2,790 2,580 3,257