|
|
| |
|
|
2006
£m |
|
|
2005
£m |
|
|
|
Interest on borrowings |
|
|
916 |
|
|
1,053 |
|
Loss arising on derivatives not in a designated hedge relationship |
|
|
8 |
|
|
– |
|
Interest on pension scheme liabilities |
|
|
1,816 |
|
|
1,720 |
|
|
|
Total finance expense |
|
|
2,740 |
|
|
2,773 |
|
Income from listed investments |
|
|
(44 |
) |
|
(47 |
) |
Other interest and similar income |
|
|
(154 |
) |
|
(209 |
) |
Expected return on pension scheme assets |
|
|
(2,070 |
) |
|
(1,918 |
) |
|
|
Total finance income |
|
|
(2,268 |
) |
|
(2,174 |
) |
|
|
Net finance expense |
|
|
472 |
|
|
599 |
|
|
|
In the 2006 financial year, net finance expense at £472 million were £127 million lower than last year with the net finance income associated with the group’s defined benefit pension obligation of £254 million, being £56 million higher than the 2005 financial year. The interest on pension scheme liabilities
and expected return on pension scheme assets reflects the IAS 19 assumptions and valuation as at 31 March 2005.
The reduction in the interest on borrowings reflects the decrease in the group’s debt. The reduction in other interest and similar income reflects the lower level of investment holdings following their utilisation on funding the maturity of bonds, offset by a gain of £27 million on the group’s US dollar
convertible 2008 bond which was redeemed during the year.
Interest cover in the 2006 financial year, excluding the net finance income associated with the group’s defined benefit pension obligation, represented 3.6 times total operating profit before specific items, and compares with interest cover of 3.4 in the 2005 financial year. The improvement in cover was due to the reduction in the interest expense mainly arising from the reduction in net debt. |
