BTPLC Annual Report 2005 - Financial review

	2005	2004		2003
	£m	£m		£m

Group turnover	6,381	5,782		5,417
Group operating profit (loss)^a	7	(105	)	(375	)
EBITDA^a	580	508		238
Capital expenditure	628	479		445

^a	Before goodwill amortisation and exceptional items

BT Global Services supplies managed services and solutions to multi-site organisations worldwide – our core target market is 10,000 multi-site organisations including major companies with significant global requirements, together with large organisations in target local markets. We provide them with global reach and a complete range of networked IT services.
     Our extensive global communications network and strong strategic partnerships enable us to serve customers in the key commercial centres of Europe, North America and the Asia Pacific region.
     Our global communications services portfolio includes: desktop and network equipment and software; transport and connectivity; managed LAN (local area network), WAN (wide area network) and IPVPN (internet protocol virtual private network) services; managed mobility; applications hosting; storage and security services; and business transformation and change management services.
     In the 2005 financial year BT Global Services’ turnover was £6,381 million, including £111 million from the Albacom and Infonet businesses acquired in the final quarter of the year. This represents an underlying increase of 8% compared to the 2004 financial year. BT Global Solutions’ turnover grew by 17% in the 2005 financial year to £3,202 million, following growth of 14% in the 2004 financial year, reflecting the conversion of the strong order book. BT Consulting & Systems Integration performed strongly with turnover of £824 million in the 2005 financial year, representing an increase of 14% over the prior year (2004 – 16%). The growth includes the impact of the NHS contracts won in 2004. In the 2005 and 2004 financial years contract wins from managed ICT solutions amounted to more than £7 billion. BT Global Products’ turnover grew by 4% to £1,897 million in the 2005 financial year (2004 – 9%) and continues to reflect the growth of MPLS (Multi Protocol Label Switching). In the 2005 financial year BT Global Carrier turnover increased by 2% to £981 million, reversing the decline of 1% seen in the 2004 financial year. The increase in 2005 reflects the increases in termination revenues in Europe partly offset by the anticipated decline in AT&T revenues.
     The increase in turnover, together with lower network and selling, general and administration costs, helped generate improvements in EBITDA before exceptional items in the 2005 financial year of 14% to £580 million, following an improvement of 113% in the 2004 financial year. The 2005, 2004 and 2003 financial years include leaver costs of £33 million, £33 million and £65 million, respectively. Headcount increased by 16% to 24,600 in the 2005 financial year which includes the expected increase in resources associated with strengthening the overseas network centric solutions delivery capabilities and an increase in headcount to service the increased ICT contract base. Headcount increased by 23% to 21,200 in the 2004 financial year.
     The 2005 financial year saw Global Services deliver its first ever full year operating profit before goodwill amortisation and exceptional items, at £7 million, an improvement of £112 million over the previous year. The acquisitions contributed an operating loss of £10 million since acquisition in the final quarter of the 2005 financial year.
     Capital expenditure for the 2005 financial year was £628 million, an increase of 31% from £479 million in the 2004 financial year, mainly due to expenditure on the NHS contracts won in 2004.

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