BT 2004 Annual Report Download - page 38

The principal contributors to turnover from
discontinued activities in the 2002 financial year were
Japan Telecom and J-Phone (£559 million to June
2001) and Airtel (£76 million to June 2001).
The group’s share of its ventures’ operating losses
from continuing activities before goodwill amortisation
and exceptional items totalled £8 million in the 2004
financial year. This compares to a profit of
£181 million and a loss of £108 million in the 2003
and 2002 financial years, respectively.
The principal contributor to the group’s share of
operating profits from continuing activities before
goodwill amortisation and exceptional items in the
2003 financial year was Cegetel (£198 million) and in
the 2002 financial year the principal contributor to the
loss was Concert (£225 million) offset by profits from
Cegetel (£168 million).
Exceptional items within the operating (losses)
profits from joint ventures and associates are as
follows:
2004
£m
2003
£m
2002
£m
Goodwill impairment 26 – 173
Impairment of Concert –– 806
Concert unwind costs ––81
Impairment of
investments and
(release) charge of
related exit costs –(150) 234
Total exceptional operating
costs (credits) 26 (150) 1,294
In the 2004 financial year, BT charged its share of an
exceptional goodwill impairment made by Albacom,
amounting to £26 million.
In the 2003 financial year BT completed the exit
from its investment in Blu on more favourable terms
than anticipated and accordingly exit cost provisions of
£150 million were released.
Concert’s performance was a cause of concern in
2001 and in October 2001 BT and AT&T announced
the unwind of Concert which was subsequently
completed on 1 April 2002. On completion, the
businesses, customer accounts and networks returned
to the two parent companies with BT and AT&T each
taking ownership of substantially those parts of
Concert originally contributed by them. As part of the
settlement with AT&T for the unwind of the Concert
global venture, BT received net cash of US$72 million
(£56 million). This net settlement includes the receipt
of US$350 million reflecting the allocation of the
businesses and the payment of US$278 million to
achieve the equal division of specified working capital
and other liability balances.
BT and AT&T also terminated their Canadian joint
venture agreement under which BT was committed to
participate in AT&T’s future obligation to acquire all of
the publicly traded shares of AT&T Canada. AT&T has
taken full ownership of BT’s interest in the Canadian
joint venture and in AT&T Canada, and has now
assumed full responsibility for all future obligations of
the joint venture. BT has now ceased to have any
interest in AT&T Canada, and has been released from
its future expenditure commitment associated with
AT&T Canada.
In the 2002 financial year BT wrote down the
carrying value of its investments in both Concert and
AT&T Canada. The exceptional impairment charge of
£1,153 million against these investments comprises
Concert goodwill impairment of £260 million, Concert
tangible fixed asset write-downs of £546 million and
the write off of BT’s £347 million interest in AT&T
Canada (included within amounts written off
investments).
BT also recognised exceptional restructuring
charges of £81 million for its share of redundancy and
other unwind costs in Concert and BT’s own unwind
costs of £172 million have been charged against group
operating costs in the 2002 financial year.
In the 2002 financial year exceptional impairment
charges and related exit costs totalling £407 million,
principally relating to goodwill and asset impairments
in Blu and SmarTone, were recognised in the light of
the rapidly changing global telecoms market
conditions.
Goodwill amortisation in the 2004 financial year
amounted to £nil, compared to £2 million in the 2003
financial year and £53 million in the 2002 financial
year. The reduction in the 2003 financial year reflects
the disposals and the goodwill impairment charges
referred to above.
Total operating profit (loss)
Total operating profit from continuing activities before
goodwill amortisation and exceptional items for the
2004 financial year of £2,884 million was 3% lower
than in the 2003 financial year which in turn was 12%
higher than the previous financial year. The movement
in the underlying total operating profit was due to the
factors explained above.
Total operating profit for the 2004 financial year
was £2,839 million, including BT’s share of the
operating results of its associates and joint ventures.
This compared to £2,901 million for the 2003 financial
year and a loss of £1,860 million for the 2002 financial
year. The reduction in total operating profit in the
2004 financial year reflects the reduction in group
turnover and associates’ and joint ventures’ profits
offset by cost efficiency savings, the strong
performance of BT Global Services and lower leaver
costs. The improved performance in the 2003 financial
year reflects the group’s exit from certain loss making
activities and the lower level of goodwill amortisation
and exceptional items.
Profit on sale of group undertakings and fixed
asset investments
During the 2004 financial year, the consideration for
disposals totalled £133 million and the profit before
tax from disposals totalled £36 million. This was
principally in relation to the disposal of the group’s
7.8% interest in Inmarsat which was sold for
US$118 million (£67 million) realising a profit on
disposal of £32 million.
BT Annual Report and Form 20-F 200437 Operating and financial review