BTPLC Annual Report 2005 - Consolidated Fianancial Statements

2. Segmental analysis

The group provides telecommunication services, principally in the UK, and essentially operates as a unitary business. Its main services and products are fixed voice and data calls, the provision of fixed exchange lines to homes and businesses, the provision of communication services to other operators, the provision of private services to businesses and the supply of telecommunication equipment for customers’ premises.
The turnover of each line of business is derived as follows:

BT Retail derives its turnover from the supply of exchange lines and from the calls made over these lines, the provision of ICT products and services, the leasing of private circuits and other private services, the sale and rental of customer premises equipment to the group’s UK customers and other lines of business and from its narrowband and broadband internet access products.

BT Wholesale derives its turnover from providing network services and solutions to communications companies, including fixed and mobile network operators, ISPs (internet service providers) and other service providers, including other BT lines of business, and from carrying transit traffic between telecommunications operators.

BT Global Services mainly generates its turnover from the provision of ICT products and services, outsourcing and systems integration work and from the fixed network operations of the group’s European subsidiaries. The business also derives revenues from providing web hosting facilities to end customers and through BT lines of business.

Segmented information on the lines of business is given below for the years ended 31 March 2005, 31 March 2004 and 31 March 2003 as required by the UK accounting standard SSAP 25 and the US accounting standard SFAS No. 131 (SFAS 131).
There is extensive trading between the lines of business and profitability is dependent on the transfer price levels. These intra-group trading arrangements and operating assets are subject to periodic review and have changed in some instances. Comparative figures have been restated for these and other changes and in certain instances have been determined using apportionments and allocations.

						Depreciation	Operating profit (loss) of associates		Total
	External	Internal		Group total		and amortisation	and joint ventures		operating profit (loss)
Year ended 31 March 2005	£m	£m		£m		£m	£m		£m

BT Retail	12,115	447		12,562		134	1		1,116
BT Wholesale	3,812	5,167		8,979		1,909	–		1,940
BT Global Services	2,671	3,710		6,381		584	(31	)	(35	)
Other	25	–		25		229	5		(257	)
Intra-group	–	(9,324	)	(9,324	)	–	–		–

Group totals	18,623	–		18,623		2,856	(25	)	2,764

						Depreciation	Operating profit (loss) of associates		Total
	External	Internal		Group total		and amortisation	and joint ventures		operating profit (loss)
Year ended 31 March 2004	£m	£m		£m		£m	£m		£m	^a

BT Retail	12,602	338		12,940		163	1		1,232
BT Wholesale	3,473	5,410		8,883		1,919	–		1,884
BT Global Services	2,410	3,372		5,782		624	(37	)	(153	)
Other	34	1		35		230	2		(127	)
Intra-group	–	(9,121	)	(9,121	)	–	–		–

Group totals	18,519	–		18,519		2,936	(34	)	2,836

^a	Restated – see note 1

						Depreciation	Operating profit (loss) of associates		Total
	External	Internal		Group total		and amortisation	and joint ventures		operating profit (loss)
Year ended 31 March 2003	£m	£m		£m		£m	£m		£m	^a

BT Retail	12,979	238		13,217		202	(3	)	1,212
BT Wholesale	3,525	5,726		9,251		1,923	(1	)	2,069
BT Global Services	2,183	3,234		5,417		632	180		(214	)
Other	40	1		41		278	153		(162	)
Intra-group	–	(9,199	)	(9,199	)	–	–		–

Group totals	18,727	–		18,727		3,035	329		2,905

^a	Restated – see note 1

Transactions between divisions are at prices set in accordance with those agreed with Ofcom (and previously Oftel) where the services provided are subject to regulation. Other transactions are at arm’s length.
The following tables show the capital expenditure on plant, equipment and property, the net operating assets or liabilities and the net book value of associates and joint ventures by line of business for the years ended 31 March 2005 and 2004. Net operating assets comprise tangible and intangible fixed assets, stocks, debtors, less creditors (excluding loans and other borrowings) and provisions for liabilities and charges (excluding deferred tax).

Year ended, or as at, 31 March 2005	Capital expenditure £m	Net operating assets (liabilities) £m		Interest in associates and joint ventures £m

BT Retail	154	(50	)	–
BT Wholesale	1,973	11,827		–
BT Global Services	628	2,147		78
Other	256	(178	)	30

Total	3,011	13,746		108


Year ended, or as at, 31 March 2004	Capital expenditure £m	Net operating assets (liabilities) £m		Interest in associates and joint ventures £m

BT Retail	118	(40	)	(9	)
BT Wholesale	1,809	11,940		–
BT Global Services	479	1,291		89
Other	267	213		41

Total	2,673	13,404		121

Information about geographic areas:

	2005 £m	2004 £m	2003 £m

Turnover with external customers
Attributable to UK	16,967	17,190	17,536
Attributable to non-UK countries^a	1,656	1,329	1,191

Group turnover	18,623	18,519	18,727

^a	Turnover attributable to non-UK countries comprises the external turnover of group companies and branches operating outside the UK.

	2005 £m	2004 £m

Group fixed assets are located
UK	14,734	14,538
Europe, excluding the UK	1,164	1,029
Americas	633	305
Asia and Pacific	123	143

Total	16,654	16,015

^a	Restated – see note 1

Geographical segment analysis in accordance with the requirements of SSAP 25 is as follows:

	2005 £m	2004 £m	2003 £m

Total turnover on basis of origin
UK	16,973	17,198	17,544
Europe, excluding the UK	1,480	1,272	2,151
Americas	206	151	155
Asia and Pacific	372	293	332

Total	19,031	18,914	20,182

	2005 £m	2004 £m	2003 £m

Group turnover on basis of origin
UK	16,967	17,190	17,536
Europe, excluding the UK	1,396	1,124	978
Americas	190	151	153
Asia and Pacific	70	54	60

Total	18,623	18,519	18,727

The analysis of turnover by geographical area is stated on the basis of origin. In an analysis of turnover by destination, incoming and transit international calls by country of origin and turnover with non-UK joint ventures and associates would be treated differently but would not lead to a materially different geographical analysis.

	2005 £m		2004 £m	^a	2003 £m	^a

Group operating profit (loss)
UK	2,905		2,996		3,224
Europe, excluding the UK	(167	)	(132	)	(627	)
Americas	61		9		(28	)
Asia and Pacific	(10	)	(3	)	7

Total	2,789		2,870		2,576

^a	Restated – see note 1

	2005 £m		2004 £m		2003 £m

Share of operating (losses) profits of associates and joint ventures, including goodwill amortisation
UK	–		(1	)	(2	)
Europe, excluding the UK	(43	)	(48	)	305
Americas	–		–		(1	)
Asia and Pacific	18		15		27

Total	(25	)	(34	)	329



	Net operating assets £m	Interest in associates and joint ventures £m	Total £m	Net operating assets £m	Interest in associates and joint ventures £m	Total £m

UK	11,599	3	11,602	11,444	7	11,451
Europe, excluding the UK	1,600	–	1,600	1,742	24	1,766
Americas	532	1	533	199	–	199
Asia and Pacific	15	104	119	19	90	109

Total	13,746	108	13,854	13,404	121	13,525

Net operating assets (liabilities) comprise tangible and intangible fixed assets, stocks, debtors less creditors (excluding loans and other borrowings), and provisions for liabilities and charges (excluding deferred tax).

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