|
|
|
|
NET
FINANCE EXPENSE
|
 |
 |
|
|
| |
|
|
2007
£m |
|
|
2006
£m |
|
|
2005
£m |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
on borrowings
|
|
|
728 |
|
|
916 |
|
|
1,053 |
|
|
Loss
arising on derivatives not in a designated hedge
relationship
|
|
|
4 |
|
|
8 |
|
|
– |
|
|
Interest
on pension scheme liabilities
|
|
|
1,872 |
|
|
1,816 |
|
|
1,720 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
finance expense
|
|
|
2,604 |
|
|
2,740 |
|
|
2,773 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
from listed investments
|
|
|
(7 |
) |
|
(44 |
) |
|
(47 |
) |
|
Other
interest and similar income
|
|
|
(72 |
) |
|
(154 |
) |
|
(209 |
) |
|
Expected
return on pension scheme assets
|
|
|
(2,292 |
) |
|
(2,070 |
) |
|
(1,918 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Total
finance income
|
|
|
(2,371 |
) |
|
(2,268 |
) |
|
(2,174 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Analysed
as:
|
|
|
|
|
|
|
|
|
|
|
|
Net
finance expense before specific items and pensions
|
|
|
653 |
|
|
726 |
|
|
797 |
|
|
Interest
associated with pensions
|
|
|
(420 |
) |
|
(254 |
) |
|
(198 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Net
finance expense before specific items
|
|
|
233 |
|
|
472 |
|
|
599 |
|
|
Specific
items
|
|
|
(139 |
) |
|
– |
|
|
– |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
finance expense
|
|
|
94 |
|
|
472 |
|
|
599 |
|
|
|
|
|
|
|
|
|
|
|
|
In the 2007
financial year, the net finance expense before specific
items of £233 million was £239 million lower
than the 2006 financial year, which in turn was £127
million lower than in the 2005 financial year. The net
finance income associated with the group’s defined
benefit pension obligation of £420 million was £166
million higher than the 2006 financial year which in turn
was £56 million higher than the 2005 financial year
as a result of the increase in the value of the scheme
assets over the period. The interest on pension scheme
liabilities and expected return on pension scheme assets
for the 2007 financial year reflects the IAS 19 assumptions
and valuation as at 31 March 2006.
Interest
on borrowings of £728 million in the 2007 financial
year was £188 million lower than the 2006 financial
year which in turn was £137 million lower than the
2005 financial year. Both reductions mainly reflect the
reduction in gross debt through the repayment of bonds
on maturity, in particular the 2005 dollar bond and 2006
euro bond. Interest income arising from listed investments
and other interest and similar income of £79 million
in the 2007 financial year was £119 million lower
than the 2006 financial year which in turn was £58
million lower than the 2005 financial year. The reduction
in interest income mainly reflects the lower level of
investment holdings following their utilisation to fund
bond maturities. In the 2006 financial year the reduction
in finance income was offset by a gain of £27 million
on the redemption of group’s US dollar convertible
2008 bond.
Interest
cover before specific items in the 2007 financial year,
excluding the net finance income associated with the group’s
defined benefit pension obligation and specific items,
represented 4.2 times total operating profit before specific
items which compares with interest cover of 3.6 times
in the 2006 financial year and 3.4 in the 2005 financial
year. The improvement in cover was due to the improvement
in operating profit and reduction in net finance expense
before pensions and specific items. |
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