Consumer turnover in the 2005 financial year was 6% lower (4% excluding the impact of regulatory reductions to mobile termination rates) at £5,637 million. New wave consumer turnover increased by 85% to £412 million, driven by the continuing growth of broadband and mobility. Residential broadband connections almost doubled to 1,330,000 at 31 March 2005 and mobility connections increased by more than four fold to 187,000 at 31 March 2005. BT has introduced several price cuts to its broadband packages throughout the year to ensure it remains a key player in this highly competitive market. In February 2005 we announced that our retail broadband customers would be able to receive broadband at speeds of up to 2Mbit/s (up to four times faster) at no extra cost. Traditional consumer turnover declined by 9% reflecting the impact of CPS (Carrier Pre Selection) and broadband substitution. BT’s estimated residential market share, as measured by the volume of fixed to fixed voice minutes, declined by 6 percentage points to 64% compared to the 2004 financial year. The estimated market share, as measured by the volume of fixed to fixed voice minutes, is based on our actual minutes, market data provided by Ofcom and an extrapolation of the historical market trends.
     The proportion of contracted revenues has been increasing, now approaching 63% (2004 – 58%) of total revenues, with the success of the BT Together packages and broadband. There are now 17.6 million BT Together customers and the number of customers on the frequent user packages continues to grow. The underlying 12 months rolling average revenue per customer household (net of mobile termination charges) of £256 in the 2005 financial year was 4% lower than the 2004 financial year. Consumer turnover in the 2004 financial year was 2% lower (1% excluding the impact of regulatory reductions to mobile termination rates) at £5,974 million when compared to the 2003 financial year.
     Turnover from smaller and medium sized enterprise customers in the 2005 financial year reduced by 5% to £2,464 million compared to a reduction of 4% in the previous year. This decline reflects the continued penetration of CPS and the impact of customers switching from traditional telephony services to new wave services, including broadband. New wave turnover in this customer segment increased by 34% year on year driven mainly by the 40% growth in Business Broadband customers to 347,000 at 31 March 2005. The expansion of the BT Business Plan portfolio continued during the year with the number of locations increasing by 67% against last year to 445,000. This, together with our 83 BT Local Businesses, defended against some of the decline in traditional turnover.
     Major corporate (UK and international) turnover increased by 4% to £6,101 million in the 2005 financial year (2% excluding the effect of acquisitions and the impact of regulatory reductions to mobile termination rates) with the growing new wave turnover more than offsetting the decline in traditional services. This reflects the continued migration from traditional voice only services to managed ICT solutions contracts and an increase in mobility and broadband turnover. New wave turnover now represents almost half (48%) of all major corporate turnover compared to 42% in the 2004 financial year. ICT contract wins amounted to more than £7 billion in both the 2005 and 2004 financial years. The largest win in 2005 was a contract with Reuters expected to be worth up to £1.5 billion over eight and a half years and in 2004 the major wins were three NHS contracts expected to be worth more than £2 billion and forming an integral part of the National Programme for Information Technology in the NHS.
     In the 2004 financial year major corporate turnover increased by 2% to £5,881 million. This reflects the migration of traditional voice only services to managed ICT solutions contracts from which turnover grew by 19% to £2,546 million in the 2004 financial year.
     Wholesale (UK and global carrier) turnover in the 2005 financial year increased by 9% (16% excluding the impact of regulatory reductions to mobile termination rates) to £4,396 million. New wave turnover in the UK wholesale business increased by 84% driven by broadband and managed services after growing by 54% in the 2004 financial year. The global carrier business turnover increased by 5% in the 2005 financial year following a decline of 5% in the 2004 financial year. This reflects the increases in termination revenues in Europe partly offset by the anticipated decline in AT&T revenues. In the 2004 financial year Wholesale turnover fell by 2% (up 1% excluding the impact of regulatory reductions to mobile termination rates) to £4,030 million.
     We reached 5 million broadband DSL connections in early April 2005 which is a year ahead of our target and represents an increase of 126% from 31 March 2004.
     Group operating costs before goodwill amortisation and exceptional items increased by 1% to £15,930 million in the 2005 financial year. The operating costs from acquisitions were £134 million in the 2005 financial year. Excluding acquisitions, group operating costs before goodwill amortisation and exceptional items were flat. Our cost efficiency programmes achieved savings of about £400 million in the 2005 financial year which enabled us to invest in growing our new wave activities. In the 2004 financial year group operating costs before goodwill amortisation and exceptional items reduced by 2% to £15,807 million when compared to the prior year.
     Net staff costs in the 2005 financial year, excluding leaver costs of £166 million, increased by £27 million to £3,563 million due to the additional staff required to service ICT contracts. Net staff costs in the 2004 financial year, excluding leaver costs of £202 million, increased by £145 million to £3,536 million due to the impact of increased pay and national insurance rates and the higher SSAP 24 pension charge, offset by improved efficiency. Payments to other telecommunications operators in the 2005 financial year were £3,725 million, a decrease of 6% mainly reflecting the impact of mobile termination rate reductions offset partly by higher volumes. In the 2004 financial year payments to other telecommunications operators were £3,963 million, an increase of 1% on the 2003 financial year as both UK and overseas payments increased. Other operating costs before goodwill amortisation and exceptional items in the 2005 financial year increased by 9% to £5,636 million. This reflects not only the cost of supporting new ICT contracts, but also investment in new wave activities, including strengthening our networked IT services delivery capabilities outside the UK, higher marketing costs and higher subscriber acquisition costs. Other operating costs before goodwill amortisation and exceptional items reduced by 6% in the 2004 financial year largely due to efficiency cost savings offset by the adverse impact of currency movements.
     Group operating profit before goodwill amortisation and exceptional items at £2,864 million for the 2005 financial year was 1% lower than the prior year mainly reflecting the cost of supporting new ICT contracts and investment in new wave activities. Group operating profit before goodwill amortisation and exceptional items at £2,889 million for the 2004 financial year was 3% higher than the prior year. This reflected cost efficiencies achieved during the year, the improved performance of BT Global Services and a £74 million decrease in leaver costs offset by the decline in turnover. Group operating profit margins before goodwill amortisation and exceptional items were relatively steady year on year at 15.4% and 15.6% in the 2005 and 2004 financial years, respectively.
     BT’s share of associates’ and joint ventures’ operating results before goodwill amortisation and exceptional items was £nil in the 2005 financial year, compared to losses of £8 million in the 2004 financial year and a £181 million profit in the 2003 financial year. The 2003 financial year includes the results of our interest in Cegetel which was sold in January 2003.
     Net interest payable before exceptional items was £801 million for the 2005 financial year, an improvement of £85 million against the 2004 financial year following an improvement of £260 million in the 2004 financial year. This reflects the reduction in net debt in both years.
     The above factors resulted in the group achieving a profit before taxation, goodwill amortisation and exceptional items of £2,085 million in the 2005 financial year, an increase of 4% compared to the 2004 financial year. In the 2004 financial year the profit before taxation, goodwill amortisation and exceptional items of £2,013 million was £173 million higher than the 2003 financial year. The improvement in both years reflects the underlying operating performance of the group and lower net interest costs.
     The taxation charge for the 2005 financial year was £539 million on the profit before goodwill amortisation and exceptional items, an effective rate of 25.9% compared to 28.2% and 32.5% in the 2004 and 2003 financial years, respectively. The improvement in the effective tax rate reflects the tax efficient investment of surplus cash and continued improvement in the tax efficiency within the group.
     Basic earnings per share before goodwill amortisation and exceptional items were 18.1 pence for the 2005 financial year, an increase of 7% from 16.9 pence in the 2004 financial year, and were 14.4 pence in the 2003 financial year.

Line of business summary (Opens new window)
 

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