BT 2010 Annual Report Download - page 51

REVIEW OF THE YEAR FINANCIAL REVIEW
49BT GROUP PLC ANNUAL REPORT & FORM 20-F
ADDITIONAL INFORMATION FINANCIAL STATEMENTS REPORT OF THE DIRECTORS REVIEW OF THE YEAR OVERVIEW
Other intangible assets
Other intangible assets include the cost of intangibles acquired from
third parties and internally developed and purchased computer
software. The net book value of other intangible assets decreased by
£59m during 2010 to £2,240m, predominately due to £629m of
additions, which were more than offset by £735m of amortisation.
Property, plant and equipment
Property, plant and equipment decreased by £549m from
£15,405m at 31 March 2009 to £14,856m at 31 March 2010,
predominately due to £1,861m of additions, which were more than
offset by £2,304m of depreciation charges and a £103m reduction
due to disposals. For further details of capital expenditure in 2010,
see page 51.
Derivative financial instruments
The group held derivative financial instruments with a combined
net asset fair value of £1,001m compared with £1,933m at
31 March 2009, which primarily comprise interest rate and cross
currency swaps the group use to hedge its overseas currency
borrowings to Sterling and to hedge its interest to a fixed Sterling
rate. The decrease primarily reflects the year on year weakening of
the US Dollar and Euro currencies against Sterling and an increase
in US interest rates. For further details on the group’s derivative
financial instruments see page 120.
Non current trade and other receivables
Non current trade and other receivables principally comprises costs
relating to the initial set up, transition or transformation phase of
long-term networked IT services contracts. There was a net increase
of £14m during 2010.
Current trade and other receivables
Trade and other receivables decreased by £489m to £3,696m at
31 March 2010 principally reflecting lower prepayments and
accrued income.
Loans and other borrowings
Current and non current loans and other borrowings decreased to
£12,791m at 31 March 2010 from £13,907m at 31 March 2009.
The decrease is primarily due to the translation of the group’s
US Dollar and Euro denominated debt where both currencies have
weakened against Sterling. For further details of movements in net
debt, see page 53.
Trade and other payables
Trade and other payables decreased by £684m to £6,531m at
31 March 2010 principally reflecting the impact of the reduction in
our cost base in 2010.
Taxation liabilities
The deferred taxation liability decreased from £1,728m at
31 March 2009 to £1,456m at 31 March 2010 mainly due to the
impact of the BT Global Services contract and financial review
charges in 2009 on excess capital allowances. The increase in
current taxation liability from £1m to £320m at 31 March 2010
reflects a return to UK taxable profits in 2010. For further details on
taxation, see Taxation section on page 50.
Provisions
The group held current and non current provisions totalling £841m
at 31 March 2010 an increase of £121m compared to 2009. The
movements in provisions are disclosed in note 21.
Retirement benefit obligations
At 31 March 2010, the IAS 19 accounting deficit was £5.7bn, net of
a deferred tax asset of £2.2bn, compared with a deficit of £2.9bn
net of tax, at 31 March 2009. The market value of the BTPS assets
have increased by £6.0bn since 31 March 2009 to £35.3bn at 31
March 2010 principally reflecting the improvement in the global
financial markets during the year. However, the value of the
liabilities have increased by £9.9bn to £43.0bn at 31 March 2010
principally as a result of reductions in the discount rate and
increased inflation expectations. The relationship between the
discount rate in real terms and the value of the BTPS liabilities over
the past five years is shown by the table below.
Information about the funding of the group’s pension obligation is
provided on pages 53 and 54.
Detailed pensions accounting disclosures are provided in note 29
to the consolidated financial statements.
Total equity
A summary of the movements in equity is set out below:
2010 2009
£m £m
Total equity at the beginning of the year 169 5,432
Profit (loss) for the year 1,029 (191)
Other comprehensive loss for the year (3,661) (3,911)
Dividends to shareholders (263) (1,222)
Share-based payment 81 143
Tax on share-based payment 19 (12)
Net issue (purchase) of treasury shares 4 (63)
Movements in minority interests (4) (7)
Total (deficit) equity at the end of the year (2,626) 169
The reduction in equity in 2010 is principally due to the recognition
of actuarial losses on retirement benefit obligations, which more
than offset the profit for the year. The deficit at 31 March 2010
does not impact the distributable reserves and dividend paying
capacity of the parent company, BT Group plc, which had a profit
and loss reserve, net of the treasury reserve, of £9,677m at
Pension scheme liabilities under IAS 19
(£bn)
-45
-40
-35
-30
-25
-20
-15
-10
-5
0
2006 2007 2008 2009 2010
Value of
liabilities
Real
discount
rate
1%
2%
3%
4%
5%
2.19%
3.24%
3.84%
1.83%
2.28%