BT 2004 Annual Report Download - page 37

The exceptional items within operating costs for the
2004, 2003 and 2002 financial years are shown in the
table below.
Exceptional operating costs 2004
£m
2003
£m
2002
£m
Rectification costs 30 ––
Property rationalisation costs –198 –
Impairment of goodwill and
tangible fixed assets –– 2,202
Concert unwind costs –– 172
BT Retail call centre
rationalisation ––68
BT Wholesale bad debt
(release) expense (23) –79
mmO
2
demerger costs ––98
Other ––77
Total attributable to
continuing activities 7198 2,696
Total attributable to
discontinued activities ––11
Total exceptional
operating costs 7198 2,707
In the 2004 financial year, net exceptional operating
costs are the estimated rectification costs relating to a
major incident offset by the £23 million release of the
surplus exceptional bad debt provisions made in the
2002 financial year.
In the 2003 financial year a property
rationalisation charge of £198 million was recognised
in relation to the rationalisation of the group’s London
office portfolio. The rationalisation involves the exit
from a number of office properties.
The most significant item in the 2002 financial
year was the impairment of goodwill and tangible fixed
assets in the European activities of BT Global Services.
In the light of our announcement that BT Global
Services was streamlining its activities to focus on
multi-site corporate customers with European activities
and the assimilation of BT’s share of Concert’s
activities, an impairment review of the investment in
its European activities was performed. As a result, a
goodwill impairment charge of £1,939 million and a
tangible fixed asset impairment charge of £263 million
was recognised. The goodwill in the European activities
was fully written down as a result of the charge.
Other exceptional items in the 2002 financial year
included:
&costs of £172 million associated with the unwind
of the Concert global venture, discussed further on
page 37
&charges of £68 million in relation to BT Retail’s
call centre rationalisation programme, reducing
the number of call centres from 104 to 30 over
two years
&bad debt charges of £79 million, in BT Wholesale,
as a result of severe liquidity problems in the TMT
sector during the latter part of the year
&costs of £98 million associated with the demerger
of mmO
2
&other charges of £77 million including impairment
of payphone assets.
Group operating profit (loss)
In the 2004 financial year, group operating profit from
continuing activities before goodwill amortisation and
the exceptional items described above, of £2,892
million was 4% higher than in the 2003 financial year,
which in turn was 1% higher than in the 2002 financial
year.
Total group operating profit for the 2004 financial
year was £2,873 million compared to a profit of
£2,572 million in the 2003 financial year and a loss of
£479 million in the 2002 financial year. The 2002
financial year loss reflects the losses generated by the
discontinued activities and the exceptional charges of
£2,707 million.
Associates and joint ventures
The results of associates and joint ventures, split
between continuing and discontinued activities, are
shown below: 2004
£m
2003
£m
2002
£m
Share of turnover:
Continuing activities 395 1,455 4,049
Discontinued activities –– 715
Total 395 1,455 4,764
Share of operating (loss)
profit before goodwill
amortisation and
exceptional items:
Continuing activities (8) 181 (108)
Discontinued activities ––74
Total (8) 181 (34)
The group’s share of associates’ and joint ventures’
turnover reduced by £1,060 million during the 2004
financial year mainly reflecting the disposal of the
group’s interest in Cegetel in the 2003 financial year.
During the 2003 financial year there was a
significant rationalisation of the group’s investments in
associates and joint ventures. On 1 April 2002 the
unwind of the Concert global venture was completed
and on 22 January 2003 the sale of the group’s stake
in Cegetel was completed. As a result BT’s share of its
ventures’ turnover fell to £1,455 million in the 2003
financial year from £4,764 million in the 2002 financial
year. In the 2004 financial year, £386 million of the
total arose from ventures located outside the UK,
compared with £1,447 million in the 2003 financial
year and £4,618 million in the 2002 financial year.
The principal contributors to turnover in the 2004
financial year were LG Telecom in Korea (£196 million)
and Albacom in Italy (£147 million). The principal
contributors to turnover in the 2003 financial year
were Cegetel in France (£956 million) up to the date of
disposal and LG Telecom (£198 million). The principal
contributors to turnover from continuing activities in
the 2002 financial year were Concert (£2,158 million),
Cegetel (£1,068 million) and LG Telecom
(£240 million).
BT Annual Report and Form 20-F 200436 Operating and financial review