You are the Management Accountant of Global plc. Global plc has operations in a number of different areas of the world and presents segmental information on a geographical basis in accordance with SSAP 25 Segmental reporting. The segmental information for the year ended 30 June 2002 is given below:
|
Europe |
America |
Africa |
Group |
|||||
|
2002 |
2001 |
2002 |
2001 |
2002 |
2001 |
2002 |
2001 |
|
|
£m |
£m |
£m |
£m |
£m |
£m |
£m |
£m |
|
|
TURNOVER |
||||||||
|
Turnover by destination: |
||||||||
|
Sales to third parties |
700 |
680 |
600 |
550 |
400 |
200 |
1700 |
1430 |
|
Turnover by origin: |
||||||||
|
Total sales |
720 |
685 |
610 |
560 |
440 |
205 |
1770 |
1450 |
|
Inter segment sales |
(20) |
(5) |
(10) |
(10) |
(40) |
(5) |
(70) |
(20) |
|
Sales to third parties |
700 |
680 |
600 |
550 |
400 |
200 |
1700 |
1430 |
|
PROFIT BEFORE |
||||||||
|
TAXATION |
||||||||
|
Segment profit 1 (loss) |
70 |
69 |
990 |
90 |
(20) |
(40) |
140 |
119 |
|
Common costs |
(25) |
(20) |
||||||
|
Operating profit |
115 |
99 |
||||||
|
Net interest |
(18) |
(15) |
||||||
|
Group share of associates’ |
97 |
84 |
||||||
|
profit before taxation |
10 |
9 |
12 |
5 |
– |
– |
22 |
14 |
|
Group profit before taxation |
119 |
98 |
||||||
|
NET ASSETS |
||||||||
|
Segment net assets |
350 |
320 |
360 |
330 |
200 |
180 |
910 |
830 |
|
Unallocated assets |
120 |
100 |
||||||
|
Group share of net assets of |
1030 |
930 |
||||||
|
associates |
55 |
52 |
36 |
30 |
91 |
82 |
||
|
Total net assets |
1121 |
1012 |
||||||
Your Managing Director has reviewed the segmental information above and has expressed concerns about the performance of Global plc. He is particularly concerned about the fact that the Africa segment has been making losses ever since the initial investment in 2000. He wonders whether operations in Africa should be discontinued, given the consistently poor results.
Required
Prepare a report for the Managing Director of Global plc that analyses the performance of the three geographical segments of the business, based on the data that has been provided. The report can take any form you wish, but you should specifically refer to any reservations you may have regarding the use of the segmental data for analysis purposes.