BT 2005 Annual Report Download - page 49

The directors submit their report and the audited financial
statements of the company, BT Group plc, and the group,
which includes its subsidiary undertakings, for the 2005
financial year.
Introduction
BT Group plc is the listed holding company for
the BT group of companies.
The Operating and financial review on pages 6 to 45,
the discussion on Corporate governance on pages 50 to
55, the Report on directors’ remuneration on pages 56
to 68 and Risk Factors on page 126 form part of this
report. The audited financial statements are presented on
pages 71 to 122.
Principal activity
The group’s principal activity is the supply
of communications services and equipment. In the 2005
financial year, approximately 91% of group turnover arose
from operations in the UK.
Directors
The names and biographical details of the directors of the
company are given on pages 46 and 47. All served
throughout the financial year, with the exception of Hanif
Lalani, who was appointed on 7 February 2005. Pierre
Danon served as a director until 28 February 2005.
In accordance with the articles of association, Hanif
Lalani, having been appointed as a director by the Board,
retires at the forthcoming annual general meeting (AGM)
and will be proposed for election. Ben Verwaayen, Paul
Reynolds, Carl Symon and Baroness Jay retire by rotation
and will be proposed for re-election. Details of these
directors’ contracts of appointment are included in the
Report on directors’ remuneration on pages 56 to 68
and the discussion on Corporate governance on pages 50
to 55.
Substantial shareholdings
At 18 May 2005, the company had received notifications
from Legal & General Investment Management Limited,
Barclays PLC and Brandes Investment Partners LLC, under
Part VI of the Companies Act 1985, in respect of holdings
of 289,727,496 shares, 341,139,080 shares and
347,201,310 shares respectively, representing holdings of
3.4%, 4.01% and 4.08% of the company’s issued
ordinary share capital.
Interest of management in certain transactions
During and at the end of the 2005 financial year, none of
the company’s directors was materially interested in any
material transaction in relation to the group’s business
and none is materially interested in any presently
proposed material transactions.
Policy on the payment of suppliers
BT’s policy is to use its purchasing power fairly and to pay
promptly and as agreed.
BT has a variety of payment terms with its suppliers.
The terms for payments for purchases under major
contracts are settled when agreeing the other terms
negotiated with the individual suppliers. It is BT’s current
policy to make payments for other purchases within 30
working days of the invoice date, provided that the
relevant invoice is presented to the company in a timely
fashion and is complete. BT’s payment terms are printed
on the company’s standard purchase order forms or,
where appropriate, specified in individual contracts
agreed with the supplier. The ratio, expressed in days,
between the amounts invoiced to the company by its
suppliers in the 2005 financial year and the amounts
owed to its trade creditors at the end of the year was 36
calendar days.
Political donations
The company’s continuing policy is that no company in
the group shall make contributions in cash or kind to any
political party. Arrangements are in place to implement
this policy. However, the definition of political donations
used in the Companies Act 1985 is very much broader
than the sense in which these words are ordinarily used. It
covers activities such as making MPs and others in the
political world aware of key industry issues and matters
affecting the company, which make an important
contribution to their understanding of BT. These activities
are carried out on an even-handed basis related broadly to
the major UK political parties’ electoral strength. The
authority we are requesting at the AGM is not designed to
change the above policy. It will, however, ensure that BT
acts within the provisions of the Companies Act 1985
requiring companies to obtain shareholder authority
before they can make donations to EU political
organisations (which includes UK political parties) as
defined in the Act. During the 2005 financial year the
company’s wholly-owned subsidiary, British
Telecommunications plc, made the following payments to
cover the cost of hosting briefing meetings about the
company’s activities with MPs and MEPs: Labour Party
£10,972; Conservative Party £5,930; Liberal Democrats
Party £2,907; Scottish National Party £2,000; Plaid
Cymru £500.
Auditors
Resolutions to reappoint PricewaterhouseCoopers LLP as
auditors of the company and to authorise the directors to
settle their remuneration will be proposed at the AGM.
Authority to purchase shares
The authority given at last year’s AGM of the company held
on 14 July 2004 for the company to purchase in the market
859 million of its shares, representing 10% of the issued
share capital, expires on 13 October 2005. Shareholders
will be asked to give a similar authority at the AGM.
During the 2005 financial year, 101 million shares of
5 pence each were purchased under this authority (1.2%
of the share capital) for a total consideration of £195
million, at an average price of £1.92 per share. The shares
were purchased in an on-market programme of buying
back the company’s shares, initiated in November 2003,
as part of the company’s shareholder distribution strategy.
36 million shares were cancelled and 134 million shares
have been retained as treasury shares. At 18 May 2005,
11 million treasury shares had been transferred to meet
the company’s obligations under its employee share plans.
Report of the directors
48 BT Group plc Annual Report and Form 20-F 2005