Financial and Mangement Accounting (Cable and Wireless Plc) - Essay Example

Financial & Management Accounting Introduction The company selected for the purpose of this write up is Cable and Wireless Plc and its annual report 2008 has been used for reporting on its financial activities and the appraisal of one of its accounting policies. The Cable and Wireless Plc has been analyzed in this write- up in two sections. The first section contains a report on the appraisal of financial activities of Cable and Wireless Plc basically relating to for its financial year ending on 22 March 2008 and in comparisons with company’s performances in earlier year 2007 as well as with the performances of its competitor Vodafone Group Plc in the telecom industry. In the second section one of the important accounting policies being followed by Cables & Wireless Plc has been described and analyzed with reference to the impact of this accounting policy on the company’s financial statements. It may be noted that Cable and Wireless Plc is a listed company at London Stock Exchange and follows International Accounting Standards for accounting and financial reporting purposes. Contents Introduction Contents Financial Activity Report Profitability Liquidity Efficiency Capital Gearing Investors’ Interests Accounting Policy Implications Conclusion Appendix A Appendix B References Financial Activity Report Financial activities of any company for a period of time are summarized in its financial statements. Information contained in the financial statements is of great concern to interested parties like shareholders, creditors, management and others. Keeping all relative interests of all sections of users of financial information, the financial activities of Cables and Wire Plc have been analyzed in this report mostly using the tools of financial ratios and other information provided in the annual report 2008 of the company. The financial review has been made broadly under the categories of profitability, liquidity, efficiencies in performances, capital gearing, and the investors’ interests in the company. The financial ratios used in this analysis are calculated in Annexure A. Profitability Operational profits of the company are earnings before interest and taxes (EBIT). In fact these profits are profits resulting from operational activities of the company. Operating profit margins shows this profit earned by the company on its each pound of sales. Cable and Wireless Plc has earned operational profits (EBIT) at the rate of 9.01% of its sales during 2008. The comparative ratio for 2007 was mere 3.08%. The operational profits has shown for 2008 has shown a great jump when compared to operational profits of 2007 despite the fact that turnover of the company has in fact decreased slightly in 2008 as compared to 2007. The total revenue in 2008 was £3152m as compared to £3348m 2007. The reason for increased operating profits in 2008 is the efficiency creating by the company in incurring operating expense and a comparative increase in other operational income as well. The company has shown great efficiency in controlling its operating costs from 88.44% of revenue in 2007 to 83.34 % in 2008, and thus giving a net savings of 5.1%. The other major factor contributing to rise of operating profits is other operational income that has gone up in absolute figure from £26m in 2007 to £62m in 2008. Some contributions have also been made by decrease in other operational expenses from £13m in 2007 to mere £4m in 2008. In other words, the Cable and wireless Plc has economized its operational activities Though Cables & Wireless Plc has improved upon its profitability performance in 2008 when compared with its own performance in 2007, but its competitor Vodafone Group Plc is far ahead in the field of operational profitability performance. Vodafone Group Plc has an operating ratio of 28.32% in 2008 as against 9.01% of Cables and Wireless Plc. Even net margins of Cables and Wireless Plc of 6.98% appear poor against 19.04% of Vodafone Group Plc. Accordingly Cables & Wireless Plc. has yet to work harder, as it did in the year 2008, to attain some good position in the telecom industry so far as profitability performances are concerned. Liquidity Liquidity analysis of a company describes its short term solvency status. That is to say whether the company is in a position meet its short term obligation as and when those become due. In the regard the composition of company’s current asset and current liabilities play big role as current ratio and quick ratio are calculated by taking into the figures of current assets and current liabilities. These ratios very clearly provide an analysis of the liquidity of the company. In any industry the general rule is that current ratio of 2:1 and quick ratio of 1:1 is the parameter to consider a firm solvency in short period of time, but this standard may change depending upon special circumstances of the industry. Taking this general rule of solvency as parameter it can be said that the Cable & Wireless Plc. is having a far less than a comfortable liquidity position. In the year 2008 its current ratio is 1.01:1 but is quick ratio is 1:1 as required by the general rule. It may be noted that for calculating quick ratio only quick assets are considered and assets like inventories are ignored. It appears that though the company operations are providing good results, but they are not generating enough liquidity in shape of current assets as per requirements of general rule. With the result Cable & Wireless might be facing liquidity crunch when current obligations become due. The liquidity position of the company was slightly better in the year 2007, when its current ratio was 1:1 and its quick ration slightly better at 1.26:1. However, even in 2007 the company was not in a comfortable position from liquidity point of view. The main reason for this that average collection period was increased from 93.21 days in 2007 to 99.12 days in 2008. The liquidity position of the competitor Vodafone Group Plc. is worse than Cable & Wireless Plc. Vodafone is in big liquidity crunch and is not in a position to meet its current obligations when those become due mainly because its current ratio is very poor 0.4:1 and quick ratio at miserable position of 0.38: 1. That shows that Cable & Wireless is doing slightly better than its competitor but its liquidity position can not be called comfortable. The company needs immediate measures to improve its liquidity position. One of the ways of improving liquidity position is to go in for long term debts and use part of those debts for meeting current liabilities till the liquidity position of the company gets improved in order meet its current obligation timely. The company requires a concentrated effort to improve its liquidity position. Efficiencies Efficiency in activities can be judged through a variety of ratios that have been considered in this section of financial analysis of the performance of Cable and Wireless Plc. To start with let us take analysis of net credit period enjoyed by the company. Net credit period is difference between average payment period and average collection period. Cables and wireless enjoyed a net credit period of 39.9 days in 2007 that has risen to 42. 04 days in 2008. This describes a picture of creeping inefficiency into the liquidity system of Cable & Wireless. The company’s liquidity was inadequate to meet current obligations despite increased average collection period from 93.21 days in 2007 to 99.12 days in 2008, even after taking resort to increased average payment period that has increased from 133.11 days in 2007 to 141.16 days in 2008. The competitor Vodafone is also languishing at a net credit period of 55.67 days which is more than the credit period enjoyed by Cable & Wireless. That shows that Vodafone is dependent more than Cable & Wireless on the credit provided by accounts payable because of its pathetic liquidity position described in earlier part of the write- up. Efficiency in use of inventory is measured by Inventory ratio of the entity. Inventory turnover ratio describes that how many times inventory has rotated itself during the financial period to generate sales. Inventory turnover of Cable and wireless is 154.53 times in the year 2008 and 128.74 days in 2007. It appears that the company is trying to make up its delicate and inefficient liquidity position by rotating inventory faster in 2008 as compared to 2007. That probably is the reason that quick ratio is at the level of 1:1 as the company does not want its inventory to remain idle. The performance of the company is remarkable in 2008 when compared to 2007. But the performance of the competitor Vodafone is no where near to Cable & Wireless. It is at the level of 52.49 times. Another measure of efficiency is the ratio of Total Asset Turnover. This ratio tells about the efficiency with which the company has used its assets to generate sales revenue. The Cable and Wireless’s total asset turnover is 0.76 times is 2008 and that is almost same as was in 2007 of 0.75 times. Considering the lower asset turnover ratio of Vodafone in 2008 of 0.28, it can be said that Cable & Wireless is performing better than Vodafone. The sales revenue of Cable & Wireless has lowered in from $3348m in 2007 to $3152m in 2008, and almost stagnancy in total assets turnover can be termed as one of the reasons for reduction in sales revenue. There is a possibility that the assets of cables and are nearing the completion of their useful lives and require renewals and replacements to augment the asset turnover ratio, so that revenue may rise in order to bring increased operational results for the company. Overall efficiency- wise the Cable & Wireless Plc is depending heavily on credit period from accounts payable to safeguard the risks of its delicate liquidity position. Inventory turnover ratio is providing a needed boost to maintain the revenue to a reasonable level; but assets of the company need revitalization in the shape of renewals and replacement to augment the revenue so that an all round efficiency is maintained to attain better financial results. Capital Gearing Assets of the company are financed either by owned capital of shareholders or through the borrowed capital in the shape of long term and short loans and other liabilities. The composition of capital in the shape of equities and debts sometime plays a decisive role over the financial performance of the company besides financing the total assets of the company. Impact of the composition of capital on performance and other matters can better be described through capital gearing or leverage of its capital. Capital gearing or leverage can be explained through debt ratios as calculated in the annexure A of this write- up. A company is highly geared when more than half of its total assets are financed through debt capital, and conversely it is low geared if less than half of total assets are financed through debt capital. Cable & Wireless Plc. is highly geared company, as 54.82% of its total assets in 2008 were financed through debt capital as compared to 57.69% in the year 2007. Though dependency on debts in financing total assets has been slightly reduced in 2008 as compared to 2007 but the company has remained a highly geared in composition of its capital employed. There are certain benefits from ‘trading in equity’ which the Cable & Wireless can enjoy because of its high geared status in the composition of its capital. Debt capital has fixed liability in the shape of interest that is charged to revenue, and after meeting the fixed interest liabilities the entire profits belong to equity holders as they are residual beneficiaries of the company. Accordingly during the period of high profitability equity holders can take advantage of high geared capital compositions and enjoy the benefits of trading in equity as residual beneficiaries, which the equity holders of Cable & Wireless are benefiting at present status of the company. So far the competitor Vodafone Group Plc is concerned; this company is low geared as only 39.91% of total assets of the company in 2008 have been financed through debt capital. Dependency on debt capital is also a risky proposal during the period of low profits. The company has to bear fixed interest liabilities of the debt capital whatever may be the situation, whether company earns profits or losses. From this point of view the competitor Vodafone Group Plc has an edge as it has less than 50% of total assets that has been financed through debt capital and according comparative low fixed interest bearing liabilities. Investors’ Interests Investors’ interests in any company can be gauged through certain market ratios like Price/ Earning Ratio, and also from the dividend payouts of the company. For Cable & Wireless Plc. and its competitor these ratios have been calculated in the Annexure A. P/E ratio indicates how much amount an investor is willing to pay for each pound of earnings of the company. This ratio measures the level of confidence the investors have in the company. Cable & Wireless Plc has a price earning ratio of 218.97 in 2008 and 214.65 in 2007. That shows that investors were ready to pay £218.97 for each pound of earning of Cable & Wireless as at March 31, 2008, and £214.65 as at March 31, 2007. The P/E ratio of Vodafone Group Plc. is £227.63 as at March 31, 2008. It appears that both companies are enjoying high degree of confidence of investors. This is clear from the fact that when the market value of shares of Cable & Wireless Plc as at March 31, 2008 has shown a decline as compared to its market value as at March 31, 2007, the confidence of investors has not been shaken as has been reflected by its P/E ratios. In fact as at March 31, 2008, investors were willing to more for one pound of the company’s earning as compared to what they willing to pay as at March 31, 2007. Same is the case with Vodafone Group Plc. whose P/E ratio as at March 31, 2008 is 227.63 and that is much better than Cables & Wireless Plc. This analysis gains weight from the dividend payouts made by both the companies. Cables and Wireless Plc. has made a total dividend payout (both interim and final) during 2008 to the tune of 7.50 p as compared to 5.85p. in 2007. This is the reason why P/E ratio has risen despite fall in the market value of shares on March 31, 2008 when compared to values at March 31, 2007. The dividend payout of Vodafone group Plc for 2008 was 7.51p. This shows that Cables & wireless is following the trend of the telecom industry of paying good dividends and maintaining a high P/E ratio. Accounting Policy Implications Note 2 to the consolidated financial statements presented in the annual report 20081 of the Cables and Wireless Plc deals with significant accounting policies being followed by the company. One of those policies relates to ‘Segment Reporting’ and is narrated in Note 2.4 and also stated in Annexure 2 of this write up. The main features of the policy of the company with regard to segment reporting are as under: Business segments have been taken as primary segments. Business segments has been defined as a component of group provided services that are subject to risks and returns that are different from those of other segments. Revenues have been allocated to primary segments on the basis of service the segment renders; and assets and liabilities have been allocated as per their substantial relations to respective segment. Secondary segment reporting is geographically based. Revenue allocation in secondary allocation is as per location where telecommunication services have been delivered. Similarly assets and liabilities in secondary allocation are also location based. The international Accounting Standard applicable to ‘segment reporting’ is IAS 14, and Cables & Wireless plc is adhering to the provisions of this standard as is clear from the following: IAS 14.9 defines business segment as “a component of enterprise that (a) provides a single product or service or a group of related products and services and (b) that is subject to risks and returns that are different from those of other business segments” (Deloitte IAS Plus) 2. It is clear from note 2.4 of Annual Report 2008 of the company that it has segmented primary reporting strictly as per provisions of IAS 14.9. As per IAS 14.26-27, ‘for most enterprises one basis of segment is primary and the other is secondary, with considerable less disclosure for secondary segments.’(Deloitte IAS Plus) Cables & Wireless Plc has reported much less information in secondary geographical segments as compared to primary business segments as will be seen from relevant text attached in the Appendix B. Impact of the policy relating to segments Cable and Wireless provides telecom services on international basis. Accordingly the business wise segmentation in the primary segments was necessary to give a view of performance under each business segment. The company has made two primary business segments as International & Europe, and Asia & US, and reported continuing operational income under each of these segments with comparative reporting of previous year. Similarly total primary segmental assets, liabilities, capital expenditures and other items have also been reported for 2007 and 2008. Primary segmental reporting is very detailed and exhaustive that touches almost all aspect of financial information about profits or loss, and assets and liabilities. Secondary segmental reporting though short, as required and defined by IAS 14, but it covers all geographical business information divided into six geographical segments, namely Europe, Asia & US(including UK, Europe, US and Asia), Caribbean, Panama, Macau, Monaco, and Rest of the World. The information about revenue, assets, liabilities, and other items has been provided not in that detail as in primary segmentation but enough for the reader to understand the value and volume of business information of these segments very well. The company has disregarded the inter segment sales while reporting under segments, but has stated that the transaction of those inter segment sales were on arms length basis. The impact of this information leaves an impression of fairness all around whether dealing in between the segments or otherwise. Conclusion Cable & Wireless Plc is a company with operations scattered around the world. It has maintained a good profitability performance during 2008 despite the fact that revenue in 2008 declined as compared 2007. The emphasis was to economize the cost of sales. Liquidity is a definite problem with the company as is with other companies as well. Efficiency on inventory turnover has covered up lot of operational weaknesses of the company in 2008. The company is highly geared and the equity holders are presented with a stage to have benefits of trading in equity. Investors are ever willing to invest as it clear from it price earning ratio. The company is following strictly the provisions IAS 14 in maintaining its accounting policy of segment reporting. The information is exhaustive under primary segments that are business wise; and adequate in secondary segments that are created on the basis geographical areas covered by the company in its business operations. Word Count: 3208 Appendix A: Ratio Calculations Appendix B Copy of primary financial statements taken from the Annual Return 2008 of Cables and Wireless Plc 2008 Consolidated Income statement for the year ending 31st March 2008 2007/08 2006/07 Pre- Preexceptional Exceptional exceptional Exceptional items items Total items items Total Note £m £m £m £m £m £m Continuing operations Revenue 5 3,152 – 3,152 3,348 – 3,348 Operating costs before depreciation and amortisation 6 (2,574) (53) (2,627) (2,883) (78) (2,961) Amortisation 18 (47) – (47) (39) (11) (50) Depreciation 17, 19 (252) (37) (289) (234) (2) (236) Other operating income 7 9 53 62 13 13 26 Other operating expenses 8 (4) – (4) (2) (11) (13) Group operating profit/(loss) 284 (37) 247 203 (89) 114 Share of post-tax profit/(loss) of joint ventures and associates 20 37 – 37 18 (29) (11) Total operating profit/(loss) 321 (37) 284 221 (118) 103 Gains and losses on sale of non-current assets 10 1 – 1 – 153 153 Gain on termination of operations 11 8 6 14 3 18 21 Finance income 12 53 – 53 52 – 52 Finance expense 12 (75) (10) (85) (80) – (80) Profit/(loss) before income tax 308 (41) 267 196 53 249 Income tax (expense)/credit 13 (56) 9 (47) (44) 1 (43) Profit/(loss) for the year from continuing operations 252 (32) 220 152 54 206 Discontinued operations Profit for the year from discontinued operations 14 – – – – 28 28 Profit/(loss) for the year 252 (32) 220 152 82 234 Attributable to: Equity holders of the Company 191 (27) 164 92 82 174 Minority interest 61 (5) 56 60 – 60 252 (32) 220 152 82 234 Earnings per share attributable to the equity holders of the Company during the year (pence per share) 15 – basic 6.8p 7.5p – diluted 6.6p 7.4p Earnings per share from continuing operations attributable to the equity holders of the Company during the year (pence per share) 15 – basic 6.8p 6.3p – diluted 6.6p 6.2p Earnings per share from discontinued operations attributable to the equity holders of the Company during the year (pence per share) 15 – basic – 1.2p – diluted – 1.2p The notes on pages 71 to 119 are an integral part of these financial statements. Further detail on exceptional items is set out in the relevant notes. Consolidated Balance Sheet as at 31 March 2008 31 March 31 March 2008 2007 Note £m £m ASSETS Non-current assets Intangible assets 18 807 745 Property, plant and equipment 19 1,488 1,465 Investments in joint ventures and associates 20 142 117 Available-for-sale financial assets 21 27 15 Deferred tax asset 30 26 28 Retirement benefit asset 32 32 75 Other receivables 22 60 62 Other non-current assets – 11 2,582 2,518 Current assets Inventories 23 17 23 Trade and other receivables 22 856 855 Cash and cash equivalents 24 699 1,043 1,572 1,921 Non-current assets and disposal groups held for sale 25 5 52 1,577 1,973 Total assets 4,159 4,491 Current liabilities Trade and other payables 26 1,219 1,221 Financial liabilities at fair value 28 59 60 Current tax liabilities 130 122 Loans and obligations under finance leases 27 59 77 Provisions 31 92 72 1,559 1,552 Liabilities associated with disposal groups held for sale 25 – 10 1,559 1,562 Net current assets 18 411 Non-current liabilities Trade and other payables 26 40 65 Financial liabilities at fair value 28 73 75 Loans and obligations under finance leases 27 397 639 Deferred tax liabilities 30 30 59 Provisions 31 135 154 Retirement benefit obligations 32 46 47 721 1,039 Net assets 1,879 1,890 EQUITY Capital and reserves attributable to the Company’s equity shareholders Share capital 33 634 615 Share premium 34 156 56 Reserves 34 897 1,010 1,687 1,681 Minority interest 36 192 209 Total equity 1,879 1,890 The notes on pages 71 to 119 are an integral part of these financial statements. These financial statements on pages 67 to 70 were approved by the Board of Directors on 21 May 2008 and signed on its behalf by: Richard Lapthorne Chairman Tony Rice Group Finance Director and Joint Group Managing Director, Central Consolidated statement of recognized income and expenses for the year ended 31 March 2008 2007/08 2006/07 Note £m £m Actuarial (losses)/gains in the value of defined benefit retirement plans 32 (100) 105 Exchange differences on translation of foreign operations (8) (172) Fair value gains on available-for-sale assets 21 2 – Tax on items taken directly to or transferred from equity 11 (5) Amounts recognised directly in equity (95) (72) Profit for the year 220 234 Total recognised income and expense for the year 125 162 Attributable to: Equity holders of the Company 81 138 Minority interest 44 24 125 162 The notes on pages 71 to 119 are an integral part of these financial statements. Consolidated Cash Flow Statement for the year ended 31 March 2008 2007/08 2006/07 Note £m £m Cash flows from operating activities Cash generated from continuing operations 37 504 299 Cash generated from discontinued operations 37 – – Income taxes paid (46) (46) Net cash from operating activities 458 253 Cash flows from investing activities Continuing operations Finance income 49 43 Other income – 9 Dividends received 15 23 Increase in available-for-sale financial assets (10) – Proceeds on disposal of non-current assets held for sale 93 – Proceeds on disposal of property, plant and equipment 5 15 Purchase of property, plant and equipment (342) (338) Purchase of intangible assets (63) (40) Disposal of credit linked notes – 40 Proceeds on disposal of associates – 256 Acquisition of subsidiaries (net of cash received) and minority interests 40 (74) (15) Net cash used in continuing operations (327) (7) Discontinued operations – – Net cash used in investing activities (327) (7) Net cash flow before financing 131 246 Cash flows from financing activities Continuing operations Dividends paid to shareholders (138) (83) Dividends paid to minority interests (58) (93) Repayments of borrowings (258) (212) Interest paid (49) (55) Proceeds from borrowings 12 122 Proceeds on issue of ESOP trust shares 6 3 Purchase of ESOP trust shares (2) – Proceeds on issue of ordinary share capital 8 15 Net cash used in continuing operations (479) (303) Discontinued operations – – Net cash used in financing activities (479) (303) Net decrease in cash and cash equivalents (348) (57) Cash and cash equivalents at 1 April 1,043 1,127 Exchange gains/(losses) on cash and cash equivalents 4 (22) Cash and cash equivalents at 31 March 699 1,048 Less: Cash included in disposal groups held for sale – (5) Net cash and cash equivalents 24 699 1,043 Note 2.4 to financial statement as it appears in Annual Report 2008 of Cables & Wireless Plc The Group discloses its primary segment reporting by business segment. The Directors consider that this is the most appropriate distinction between the source and nature of risks and returns associated with its activities. A business segment is defined as a component of the Group engaged in providing services that are subject to risks and returns that are different from those of other business segments. Revenues and expenses are allocated to business segments based on the type of service to which they relate. Assets, liabilities and capital expenditure are allocated to particular business segments if they substantially relate to a single identifiable segment. Assets and capital expenditure that relate to a range of services falling under different business segments are reported as unallocated. The Group discloses its secondary segment reporting by geographical segment. A geographical segment is defined as a component of the Group engaged in providing services within a particular economic environment that are subject to risks and returns different from those of segments operating in other economic environments. Revenues are allocated to geographical segments based on the location where the telecommunication services are delivered. Assets, liabilities and capital expenditure are allocated to geographical segments based on their location. Segment Information The segment assets and liabilities, capital expenditure and other items as at and for the year ended 31 March 2008 and 31 March 2007 are: Europe, Other1 and International Asia & US eliminations Total 2007/08 £m £m £m £m Continuing operations Segment assets 1,537 1,859 621 4,017 Joint ventures 150 (8) – 142 Total assets 1,687 1,851 621 4,159 Total liabilities (686) (1,053) (541) (2,280) Capital expenditure (190) (221) – (411) Acquisitions (12) (9) – (21) Depreciation and amortisation (142) (157) – (299) Impairment (37) – – (37) Increase/(decrease) in provisions 48 (9) (32) 7 2006/07 Continuing operations Segment assets 1,578 1,840 956 4,374 Joint ventures 129 (12) – 117 Total assets 1,707 1,828 956 4,491 Total liabilities (717) (1,074) (810) (2,601) Capital expenditure (168) (235) – (403) Acquisitions – – (15) (15) Depreciation and amortisation (145) (128) – (273) Assets written off – (13) – (13) (Decrease)/increase in provisions (3) (76) 1 (78) 1 Other includes Central and non-operating assets and liabilities. Goodwill of £431 million (2006/07 – £421 million) relating to the acquisition of Energis is included in the Europe, Asia & US segment. Goodwill of £108 million (2006/07 – £102 million) relating to the acquisition of Monaco Telecom and £10 million (2006/07 – £nil) relating to Connecteo, is included in the International segment. Other and eliminations includes assets and liabilities held centrally by the Group, primarily cash and borrowings, and other non-operating items including tax balances. Discontinued operations Discontinued operations represent those businesses which have been disposed of or are classified as held for sale at the year end. There were no operations held for sale at 31 March 2008 and 31 March 2007. Details of the results of operations disposed of in prior periods are set out in note 14. The segment results of the discontinued operations for the year ended 31 March 2008 are £nil. The releases of unutilised provisions resulting in a profit of £28 million in 2006/07 related primarily to the Group’s exit from its former US operations in a prior financial year. This profit is included in the Other and eliminations segment. The segment assets and liabilities, capital expenditure and other items as at and for the year ended 31 March 2008 and 31 March 2007 are: Europe, Other1 and International Asia & US eliminations Total 2007/08 £m £m £m £m Continuing operations Segment assets 1,537 1,859 621 4,017 Joint ventures 150 (8) – 142 Total assets 1,687 1,851 621 4,159 Total liabilities (686) (1,053) (541) (2,280) Capital expenditure (190) (221) – (411) Acquisitions (12) (9) – (21) Depreciation and amortisation (142) (157) – (299) Impairment (37) – – (37) Increase/(decrease) in provisions 48 (9) (32) 7 2006/07 Continuing operations Segment assets 1,578 1,840 956 4,374 Joint ventures 129 (12) – 117 Total assets 1,707 1,828 956 4,491 Total liabilities (717) (1,074) (810) (2,601) Capital expenditure (168) (235) – (403) Acquisitions – – (15) (15) Depreciation and amortisation (145) (128) – (273) Assets written off – (13) – (13) (Decrease)/increase in provisions (3) (76) 1 (78) 1 Other includes Central and non-operating assets and liabilities. Goodwill of £431 million (2006/07 – £421 million) relating to the acquisition of Energis is included in the Europe, Asia & US segment. Goodwill of £108 million (2006/07 – £102 million) relating to the acquisition of Monaco Telecom and £10 million (2006/07 – £nil) relating to Connecteo, is included in the International segment. Other and eliminations includes assets and liabilities held centrally by the Group, primarily cash and borrowings, and other non-operating items including tax balances. Discontinued operations Discontinued operations represent those businesses which have been disposed of or are classified as held for sale at the year end. There were no operations held for sale at 31 March 2008 and 31 March 2007. Details of the results of operations disposed of in prior periods are set out in note 14. The segment results of the discontinued operations for the year ended 31 March 2008 are £nil. The releases of unutilised provisions resulting in a profit of £28 million in 2006/07 related primarily to the Group’s exit from its former US operations in a prior financial year. This profit is included in the Other and eliminations segment. The segment assets and liabilities, capital expenditure and other items as at and for the year ended 31 March 2008 and 31 March 2007 are: Europe, Other1 and Caribbean Panama Macau Monaco ROW Asia & US eliminations Total 2007/08 £m £m £m £m £m £m £m £m Continuing operations Segment assets 652 314 103 313 155 1,859 621 4,017 Joint ventures 93 – – 10 47 (8) – 142 Total assets 745 314 103 323 202 1,851 621 4,159 Total liabilities (205) (141) (34) (211) (95) (1,053) (541) (2,280) Capital expenditure (88) (52) (18) (4) (28) (221) – (411) Acquisitions – – – (12) – (9) – (21) Depreciation and amortisation (59) (37) (17) (14) (15) (157) – (299) Impairment (37) – – – – – – (37) Increase/(decrease) in provisions 9 1 – 1 37 (9) (32) 7 2006/07 Continuing operations Segment assets 697 317 104 283 177 1,840 956 4,374 Joint ventures and associates 73 – – 5 51 (12) – 117 Total assets 770 317 104 288 228 1,828 956 4,491 Total liabilities (267) (143) (36) (195) (76) (1,074) (810) (2,601) Capital expenditure (77) (31) (19) (10) (31) (235) – (403) Acquisitions – – – – – – (15) (15) Depreciation and amortisation (61) (38) (15) (14) (17) (128) – (273) Assets written off – – – – – (13) – (13) (Decrease)/increase in provisions – (2) – 11 (12) (76) 1 (78) 1 Other includes Central and non-operating assets. Revenue is based on the location where the telecommunication services were delivered. It does not follow necessarily that the international telecommunication traffic transiting the Group’s networks originates in that location. The Group does not have access to information on the original source or ultimate destination of all international telecommunication traffic. Goodwill of £431 million (2006/07 – £421 million) relating to Energis is included in the Europe, Asia & US segment. Goodwill of £108 million (2006/07 – £102 million) relating to Monaco Telecom is included in the Monaco segment. Goodwill of £10 million (2006/07 – £nil) relating to Connecteo is included in the Rest of the World segment. Other and eliminations includes assets and liabilities held centrally by the Group, primarily cash and borrowings, and other non-operating items including tax balances. Discontinued operations There was no revenue or segment assets for discontinued operations as at and for the years ended 31 March 2008 and 31 March 2007. References Read More