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BT’s loss of 27.7 pence per
share for the year ended 31 March 2001 (the 2001 financial year) compares with
earnings of 31.7 pence for the 2000 financial year and 46.3 pence for the 1999
financial year. Exceptional items and goodwill amortisation have affected
earnings in each of these years. Earnings for the 2001 financial year were
affected by net exceptional charges of 39.6 pence per share, primarily relating
to goodwill impairment and mobile subscriber acquisition costs written off
partially offset by the profit on disposals of investments and rates refunds.
Of the earnings in the 2000 financial year, 0.1 pence per share represented net
exceptional income. In the 1999 financial year, net exceptional income amounted
to 11.6 pence per share mainly relating to the sale of the group’s investment
in MCI Communications Corporation in September 1998. Goodwill amortisation
adversely affected earnings by 8.6 pence per share in the 2001 financial year
before exceptional charges, by 2.6 pence per share in the 2000 financial year
and by 0.3 pence per share in the 1999 financial year. Before goodwill
amortisation and exceptional items, earnings of 20.5 pence per share for the
2001 financial year compare with an equivalent 34.2 pence and 35.0 pence for
the 2000 and 1999 financial years, respectively.
The results for the 2001 financial year reflect the higher interest charges which have arisen from BT’s
recent investment in new businesses and new third-generation mobile licences,
as well as losses incurred by our newly acquired businesses and the adverse
effect which competitive pressures have had on our operating margins in the UK
fixed-voice telephony and wireless markets. The results for the 2000 financial
year also reflected the adverse effect which competitive pressures had on
operating margins. The results for that year were additionally impacted by the
costs of meeting increased customer demand, particularly for wireless
communications, and of growing new areas of business. In both the 2001 and 2000
financial years, BT benefited from the strong growth in demand for the group’s
products and services. Internet and wireless phone usage expanded rapidly and
this led to increased turnover. In the 2000 financial year, the buoyant UK
economy had a beneficial effect on the results. Our ventures in North America,
continental Europe and Asia Pacific which we have established, or in
which we have acquired interests, in recent years, contributed significantly to
our total turnover growth. However, the initial losses incurred by many in
their development stages are, as anticipated, adversely affecting the group’s
results. We continue to be affected by the tight regulatory regime in the UK.
Price reductions, including those imposed by the price control formulae,
totalled approximately £200 million in the 2001 financial year, following
reductions of approximately £550 million in the 2000 financial year and over
£500 million in the 1999 financial year. |
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| Summarised profit and loss account |
|
|
|
 |
| Total turnover |
29,666 |
|
21,903 |
|
18,223 |
|
| Group’s
share of ventures’turnover |
(9,937 |
) |
(3,364 |
) |
(1,270 |
) |
| Trading between group and principal joint venture |
698 |
|
176 |
|
– |
|
|
| Group turnover |
20,427 |
|
18,715 |
|
16,953 |
|
| Other operating income |
393 |
|
242 |
|
168 |
|
| Operating costs |
(20,759 |
) |
(15,359 |
) |
(13,305 |
) |
|
| Group operating profit (loss) |
61 |
|
3,598 |
|
3,816 |
|
| Group’s share of ventures’ losses |
(397 |
) |
(400 |
) |
(342 |
) |
|
| Total operating profit (loss) |
(336 |
) |
3,198 |
|
3,474 |
|
| Profit on sale of fixed asset investments and group undertakings |
619 |
|
126 |
|
1,107 |
|
| Net interest |
(1,314 |
) |
(382 |
) |
(286 |
) |
|
| Profit (loss) before taxation |
(1,031 |
) |
2,942 |
|
4,295 |
|
| Taxation |
(652 |
) |
(897 |
) |
(1,293 |
) |
|
| Profit (loss) after taxation |
(1,683 |
) |
2,045 |
|
3,002 |
|
| Minority interests |
(127 |
) |
10 |
|
(19 |
) |
|
| Profit (loss) for the financial year |
(1,810 |
) |
2,055 |
|
2,983 |
|
|
| Basic earnings (loss) per share |
(27.7 |
)p |
31.7 |
p |
46.3 |
p |
|
Profit before goodwill amortisation,
exceptional items and taxation |
2,072 |
|
3,100 |
|
3,274 |
|
Basic earnings per share before goodwill
amortisation and exceptional items |
20.5 |
p |
34.2 |
p |
35.0 |
p |
|
|
|
The 2001 financial year has been dominated by the restructuring of our previously centrally organised business
into several decentralised lines of business, by our acquisitions of interests and mobile licences in Europe and by the consequent increase
in net debt, which rose to £27.9 billion at 31 March 2001. Towards the end of the 2001 financial year, in January and February 2001, we acquired
the 55% interest in Viag Interkom of Germany we did not already own. Earlier on in the year, in June 2000, we acquired the 50% interest in
Telfort of The Netherlands not already owned.
During the year, we acquired through auctions one of the five UK third-generation mobile licences, Viag Interkom gained one of six licences
in Germany and Telfort acquired one in The Netherlands. We also acquired a significant economic interest in the J-Phone mobile businesses
in Japan in May 2000 which we have now agreed to sell to Vodafone, our main competitor in the wireless market in the UK and elsewhere in Europe.
In order to finance these investments, we issued two significant series of bonds totalling £13 billion, one primarily in the US and the other
primarily in Europe. In November 2000, we sold our 34% interest in sunrise communications at a profit of £454 million.
In early January 2000, Concert, our global venture 50/50 owned with AT&T, was established. Concert took over a major part of our international
communications activities and is currently managing the communication needs of a number of our multinational corporate customers. At the same
time, it also acquired the Concert Communications Services group (Concert Communications) from BT. As a consequence, from the last quarter
of the 2000 financial year, certain of the group’s former turnover is reported as part of our proportionate share of our joint ventures’
turnover. Also in the 2000 financial year, BT took a 30% interest, jointly with AT&T, in Japan Telecom, acquired the remaining 40% interest
in BT Cellnet which it did not already own, and acquired control of Esat Telecom Group, a leading Irish communications group. The AT&T ownership
interest in Japan Telecom has been acquired by Vodafone in April 2001 and in May 2001 we agreed to sell our interest in Japan Telecom also
to that company.
In the 1999 financial year, the group’s interest in MCI, held since 1994, was sold on the completion of the MCI/WorldCom merger. We
recognised a pre-tax profit of £1,133 million on this sale; this followed the £273 million fee we received in November 1997 on the announcement
of their agreed merger, as compensation for the break-off of the merger we had planned with MCI. We ceased equity accounting for MCI as an
associate on 31 October 1997. At the same time as we disposed of our interest in MCI in September 1998, we acquired the minority interest
owned by MCI in Concert Communications.
On 10 May 2001, we announced our intention to demerge BT Wireless later in 2001 to create two separately listed companies; the first, BT Wireless,
will comprise our controlled wireless operations in Europe, and the other, Future BT, will be a focused European network and retail business
concentrating on voice and data services. We are currently considering proposals to sell or demerge Yell, our classified advertising directories
business. We also announced on 10 May 2001, a rights issue to raise approximately £5.9 billion from shareholders and that we were halting
the payment of dividends for the time being. These steps combined with asset disposals, including the sale of the investments in Japan, are
designed to reduce net debt in Future BT to between £15 billion and £20 billion by 31 March 2002.
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