BT 2005 Annual Report Download - page 36

The principal contributors to turnover in the 2005
financial year were LG Telecom in Korea (£251 million,
2004 – £196 million) and Albacom in Italy (£97 million,
2004 – £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). In February 2005 Albacom became a
wholly owned subsidiary of the group when the remaining
74% interest was acquired.
The group’s share of its ventures’ operating profits
before goodwill amortisation and exceptional items was
£nil in the 2005 financial year. This compares to a loss of
£8 million and a profit of £181 million in the 2004 and
2003 financial years, respectively.
The principal contributor to the group’s share of
operating profits before goodwill amortisation and
exceptional items in the 2003 financial year was Cegetel
(£198 million).
Exceptional items within the operating (losses) profits
from joint ventures and associates are as follows:
2005
£m
2004
£m
2003
£m
Impairment of assets in
joint ventures 25 ––
Goodwill impairment –26 –
Release of exit costs –– (150)
Total exceptional operating
costs (credits) 25 26 (150)
In the 2005 financial year BT incurred an exceptional
impairment charge of £25 million, being BT’s share of a
write down of Albacom’s assets prior to Albacom
becoming a subsidiary. 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 surplus exit cost provisions of £150 million
were released.
Goodwill amortisation was £nil in both the 2005 and
2004 financial year, compared to £2 million in the 2003
financial year.
Total operating profit (loss)
Total operating profit before goodwill amortisation and
exceptional items for the 2005 financial year of £2,864
million was 1% lower than in the 2004 financial year
which in turn was 3% lower than the previous financial
year. The movement in total operating profit was due to
the factors explained above.
Total operating profit for the 2005 financial year was
£2,764 million, including BT’s share of the operating
results of its associates and joint ventures. This compared
to £2,836 million for the 2004 financial year and
£2,905 million for the 2003 financial year. The reduction
in total operating profit reflects the reduction in
associates’ and joint ventures’ profits offset by cost
efficiency savings, the strong performance of BT Global
Services and lower leaver costs.
Profit on sale of group undertakings and fixed
asset investments
During the 2005 financial year, the net proceeds for
disposals totalled £560 million and the profit before tax
from disposal of non-core investments totalled
£358 million. In January 2005 BT sold its 4% interest in
Intelsat for net proceeds of £64 million which resulted in a
profit on disposal of £46 million. In December 2004 BT
sold its 15.8% interest in Eutelsat SA for net proceeds of
£356 million resulting in a profit on disposal of £236
million. In November 2004 BT completed the sale of its
11.9% shareholding in StarHub Pte Ltd for net proceeds
of £77 million resulting in a profit on disposal of £38
million.
In 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 £67 million realising a profit
on disposal of £32 million.
In the 2003 financial year a number of non-core
investments were sold. The consideration for the disposals
totalled £3,028 million and the profit before taxation from
disposals totalled £1,696 million. This was principally in
relation to the disposal of our 26% interest in Cegetel, a
French telecommunications operator, on 22 January
2003. The total proceeds were £2,603 million, received in
cash, and the profit was £1,509 million before the
recognition of an exceptional interest charge of £293
million on closing out fixed interest rate swaps following
receipt of the sale proceeds.
Interest charge
In the 2005 financial year, the total net interest charge,
including BT’s share of its ventures’ charges, at £801
million was £140 million lower than in the preceding year,
which in turn was £498 million lower than in the 2003
financial year. Of the total net charge, £787 million arises
in the group for the 2005 financial year, compared with
£924 million and £1,420 million in the 2004 and 2003
financial years, respectively.
The reduction in the net interest charge in the 2005
financial year reflects the continued reduction in the level
of net debt. In addition, there were no exceptional
interest charges or credits in the 2005 financial year
compared to a net exceptional charge of £55 million in
the 2004 financial year. The net exceptional charge in the
2004 financial year represents the premium on buying
back E1.1 billion of 7.125% bonds due in 2011 and
US$195 million of the group’s US dollar bonds, partially
offset by a credit from the one off interest recognised on
full repayment of loan notes received as part of the
original consideration from the disposal of Yell.
The reduction in the net interest charge in the 2004
financial year reflects the reduction in the level of net
debt and lower net exceptional charges in the 2004
financial year.
The net interest charge in the 2003 financial year
includes the £293 million exceptional cost of terminating
fixed interest rate swaps as a consequence of the receipt
of the Cegetel sale proceeds.
Interest cover in the 2005 financial year represented
3.6 times total operating profit before goodwill
amortisation and exceptional items, and compares with
interest cover of 3.3 in the 2004 financial year and 2.6 in
the 2003 financial year. The improvement in cover is due
to the reduction in the interest charge mainly arising from
the reduction in net debt.
Operating and financial review BT Group plc Annual Report and Form 20-F 2005 35