Net finance expense
| |
2008
£m |
|
|
2007
£m |
|
|
2006
£m |
|
| Interest on borrowings |
822 |
|
|
728 |
|
|
916 |
|
| Loss arising on derivatives
not in a designated
hedge relationship |
41 |
|
|
4 |
|
|
8 |
|
| Interest on pension scheme liabilities |
2,028 |
|
|
1,872 |
|
|
1,816 |
|
|
|
|
|
|
|
|
|
|
| Total finance expense |
2,891 |
|
|
2,604 |
|
|
2,740 |
|
|
|
|
|
|
|
|
|
|
| Income from listed investments |
– |
|
|
(7 |
) |
|
(44 |
) |
| Other interest and similar income |
(65 |
) |
|
(72 |
) |
|
(154 |
) |
| Expected return on pension
scheme assets |
(2,448 |
) |
|
(2,292 |
) |
|
(2,070 |
) |
|
|
|
|
|
|
|
|
|
| Total finance income |
(2,513 |
) |
|
(2,371 |
) |
|
(2,268 |
) |
|
|
|
|
|
|
|
|
|
| Analysed as: |
|
|
|
|
|
|
|
|
| Net finance expense before
specific items
and pensions |
798 |
|
|
653 |
|
|
726 |
|
| Interest associated with pensions |
(420 |
) |
|
(420 |
) |
|
(254 |
) |
|
|
|
|
|
|
|
|
|
| Net finance expense before
specific items |
378 |
|
|
233 |
|
|
472 |
|
| Specific items |
– |
|
|
(139 |
) |
|
– |
|
|
|
|
|
|
|
|
|
|
| Net finance expense |
378 |
|
|
94 |
|
|
472 |
|
|
|
|
|
|
|
|
|
|
In 2008, net finance expense before
specific items was £378 million (2007: £233 million, 2006:
£472 million). The net finance income associated with our defined
benefit pension obligation of £420 million was at the same level
as 2007, which in turn was £166 million higher than 2006 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 reflects the IAS 19 assumptions and valuation
as at the start of the financial year.
Interest
on borrowings was £822 million in 2008 (2007: £728 million,
2006: £916 million). The increase in 2008 reflects higher net
debt and higher interest rates on variable rate borrowings. The reduction
in 2007 reflects the reduction in gross debt through the repayment
of bonds on maturity, in particular the 2005 US dollar bond and 2006
Euro bond. Losses arising on derivatives not in a designated hedge
relationship was £41 million in 2008 (2007: £4 million,
2006: £8 million). In 2008, losses on derivatives not in a designated
hedge relationship included a charge of £26 million on a low
cost borrowing transaction which was marginally earnings positive
after tax in the year.
Interest
income arising from listed investments and other interest and similar
income was £65 million in 2008 (2007: £79 million, 2006:
£198 million). The reduction in interest income mainly reflects
the lower level of investment holdings following their utilisation
to fund bond maturities. In 2006, finance income
included a gain of £27 million on the early redemption of the
group’s US dollar convertible 2008 bond.
3.6
times
interest
covera
in 2008
a Before
specific items and net finance income associated with the group’s
defined benefit pension scheme
Interest
cover before specific items and the net finance income associated
with our defined benefit pension obligation, represented 3.6 times
total operating profit before specific items in 2008, which compares
with interest cover of 4.2 times in 2007 and 3.6 times in 2006. The
reduction in cover was largely due to the increase in net finance
expense before pensions and specific items primarily driven by the
share buy back programme.
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