IFRS basis 1 - 14
1. Basis of preparation – IFRS basis
- From 2005, all European Union listed companies are required to prepare consolidated financial statements using International Financial Reporting Standards (IFRS), issued by the International Accounting Standards Board (IASB). The FSA listing rules in the UK require that the 2005 interim results must also be presented on a basis consistent with IFRS. Accordingly, the results for the six months to 30 June 2005 have been prepared using the Group’s accounting policies under IFRS published in the market release on 5 July 2005, “Impact of International Financial Reporting Standards on the results for 31 December 2004”. This is the Group’s first set of financial results prepared in accordance with IFRS accounting policies and its previously reported 2004 consolidated financial statements have accordingly been restated to comply with IFRS, with the date of transition to IFRSs being 1 January 2004.
The Group’s accounting policies are in accordance with IFRS issued by the IASB. The European Union has endorsed all relevant IFRS with the exception of the amendment to IAS19 Employee Benefits (2004), the amendments to IAS39 The Fair Value Option published by the IASB in June 2005 and Interpretation 4 of the International Financial Reporting Interpretations Committee Determining whether an Arrangement contains a Lease (IFRIC4). These amendments and IFRIC4 are expected to be endorsed by the European Commission during 2005 and, although they are not mandatory until 2006, the Group has decided to adopt them early and reflect their impact within this interim announcement. The Group’s full year financial statements at 31 December 2005 will be prepared in accordance with these endorsed IFRSs and this announcement reflects the accounting policies expected to apply at the year end.
The IFRSs themselves are subject to possible amendment by interpretative guidance from the IASB or external bodies and are therefore subject to change prior to publication of the Group’s full year financial statements for the year ended 31 December 2005. - In line with the requirements of International Financial Reporting Standard 1, First-Time Adoption of International Financial Reporting Standards (IFRS1), Aviva has applied the Group’s accounting policies under IFRS retrospectively at the date of transition being 1 January 2004, with exception of a number of permitted exemptions. These are detailed in the market release of 5 July 2005, “Impact of International Financial Reporting Standards on the results for 31 December 2004”.
- Aviva has chosen to revisit its longer term investment return (“LTIR”) methodology from 2005 as part of a discretionary change not required by IFRS. This change in accounting policy was adopted and detailed in the market release of 5 July “Impact of International Financial Reporting Standards on the results for 31 December 2004”.
- The requirements of International Financial Reporting Standard 5, Non-current Assets Held for Sale and Discontinued Operations have been applied prospectively from 1 January 2005.
- Financial Reporting Standard 27, Life Assurance (FRS27) was issued by the UK’s Accounting Standards Board (ASB) on 13 December 2004, following the Penrose inquiry. Aviva, along with other major insurance companies and the Association of British Insurers (ABI), has signed a Memorandum of Understanding (MoU) with the ASB relating to FRS27. Under this MoU, Aviva has agreed to adopt voluntarily in full the standard from 2005 within the Group’s IFRS financial statements.
Within FRS27, the ASB acknowledged the difficulty of applying the requirements retrospectively and indeed it is the Group’s view that it would be impractical to do so. Hence, in accordance with IAS8 and FRS27, only the balance sheet at 31 December 2004 has been restated for the impact of FRS27. No adjustments have been made, nor are any required, to the 2004 income statement, the opening balance sheet at 1 January 2004 or the balance sheet at 30 June 2004. - In accordance with Phase I of International Financial Reporting Standard 4, Insurance Contracts (IFRS 4), the Group has applied existing accounting practices for insurance and participating investment contracts, modified as appropriate to comply with the IFRS framework and applicable standards.
- Items included in the financial statements of each of the Group’s entities are measured in the currency of the primary economic environment in which that entity operates (the “functional currency”). The consolidated financial statements are stated in sterling, which is the Company’s functional and presentation currency. As supplementary information, consolidated financial information is also presented in Euros.
- The results for the six months to 30 June 2005 and the results for the six months to 30 June 2004 are unaudited but have been reviewed by the auditor, Ernst & Young LLP. The interim accounts do not constitute statutory accounts as defined in Section 240 of the Companies Act 1985. The results on an IFRS basis for the full year 2004 have been audited by Ernst & Young LLP. The Group’s 2004 Annual Report and Accounts have been filed with the Registrar of Companies. The auditors have reported on the 2004 accounts and their report was unqualified and did not contain a statement under Section 237(2) or (3) of the Companies Act 1985.
2. Exchange rates
The euro rates employed in this announcement are an average rate of 1 euro = £0.69 (6 months to 30 June 2004: 1 euro = £0.68; full year 2004: 1 euro = £0.68) and a closing rate of 1 euro = £0.68 (30 June 2004: 1 euro = £0.67; 31 December 2004: 1 euro = £0.71).3. Acquisitions
(a) RAC plc
On 4 May 2005, the Group acquired 100% of the share capital of RAC plc. The results of RAC plc’s operations have been included in the consolidated financial statements of the Group with effect from 4 May 2005, and contributed £17 million to the consolidated profit before tax.
| £m | |
|---|---|
| Purchase cost | |
| Cash paid | 566 |
| Fair value of 88 million shares issued, based on their published price at date of exchange (average of £6.03 per share) | 530 |
| Costs attributable | 17 |
| Total | 1,113 |
The assets and liabilities at the date of acquisition were:
| Book value £m |
Goodwill reversal and intangible revaluation £m |
Pension scheme valuation £m |
Fair value and accounting policy adjustments £m |
Fair value £m |
|
|---|---|---|---|---|---|
| Assets | |||||
| Goodwill | 510 | (510) | – | – | – |
| Intangible assets | 59 | 333 | – | – | 392 |
| Tax assets | 58 | – | – | (58) | – |
| Other assets | 608 | – | – | 52 | 660 |
| Total assets | 1,235 | (177) | – | (6) | 1,052 |
| Liabilities | |||||
| Provisions | |||||
| Pension deficit | (257) | – | (56) | – | (313) |
| Other | (8) | – | – | (4) | (12) |
| Tax liabilities | – | (118) | 17 | 47 | (54) |
| Other liabilities | (708) | – | – | (5) | (713) |
| Total liabilities | (973) | (118) | (39) | 38 | (1,092) |
| Shareholders’ funds acquired | 262 | (295) | (39) | 32 | (40) |
| Goodwill (including £118 million arising from the creation of the deferred tax liability on intangibles) | 1,153 | ||||
| Intangible assets | 392 | ||||
| Total goodwill and intangible assets | 1,545 | ||||
| Less: deferred tax liability | (118) | ||||
| Total value of goodwill and intangible assets net of associated tax included on balance sheet | 1,427 |
Separable intangible assets have been identified and valued by an independent third party at £392 million, using estimated post-tax cash flows and post-tax discount rates. These comprise the RAC, BSM and Lex brands and contractual customer relationships. Of this £260 million has been assessed as having an indefinite life with the remaining £132 million being amortised over 9 to 22 years.
A deferred tax liability of £118 million has been provided against these intangible assets, resulting in an increase in residual goodwill by this amount. Although this liability has been recognised in accordance with IAS12, and a proportion will be amortised to the income statement as the related intangible asset is amortised, this liability is only payable if the intangible asset is sold separately and this is not expected to happen.
The pension scheme valuation adjustment and associated deferred taxation represents the effect of aligning the assumptions of the RAC plc schemes to those of Aviva. The fair value of the RAC pension deficit at the date of acquisition amounted to £313 million (£219 million after deferred tax).
The residual goodwill of £1,153 million essentially represents synergies, both in increased revenues and in reduced costs, expected to arise in RAC plc and our UK general insurance business as a result of the acquisition.
£14 million of integration costs for the restructuring of the combined Norwich Union Insurance and RAC businesses has been included in the results to 30 June 2005.
In July 2005, the Group completed the transfer of ownership of Hyundai Cars (UK) to motor manufacturer Hyundai Motor UK Limited . Accordingly, the assets and liabilities of this business have been presented as held for sale on the balance sheet.
(b) Gresham Insurance Company Limited
On 31 March 2005, the Group acquired 100% of the share capital of Gresham Insurance Company Limited. The cash consideration including purchase costs was £75 million. The fair value of the net assets acquired, including intangibles of £14 million, was £75 million, giving rise to no goodwill on acquisition.
(c) Solus Automotive Limited
On 11 May 2005, the Group acquired 100% of the share capital of Solus Automotive Limited. The cash consideration including purchase costs was £20 million, including £12 million of cash and £8 million of deferred consideration. The fair value of the net assets acquired was nil, giving rise to £20 million of goodwill on acquisition.
(d) Unaudited pro forma combined revenues and profit
Shown below are unaudited pro forma figures for combined revenues and profit as though the acquisition date for all business combinations effected during the period had been 1 January 2005, after giving effect to purchase accounting adjustments and the elimination of intercompany transactions. The pro forma financial information is not necessarily indicative of the combined results that would have been attained had the acquisitions taken place at 1 January 2005, nor is it necessarily indicative of future results.
| 6 months 2005 £m |
|
|---|---|
| Revenues (premiums and fee income) | 13,636 |
| IFRS profit before tax attributable to shareholders | 1,138 |
4. Exceptional costs for termination of operations
In February 2004, the Group announced the closure of its UK national broker subsidiary, Hill House Hammond (HHH) together with the sale of its commercial business. The associated pre-tax costs of the closure of HHH were £40 million and relate to termination activities, including redundancy costs and closure provisions.
5. Profit on the disposal of subsidiaries and associates
The net profit on the disposal of subsidiary and associated undertakings comprises:
| 6 months 2005 £m |
6 months 2004 £m |
Full year 2004 £m |
|
|---|---|---|---|
| General insurance businesses | |||
| United Kingdom | – | – | 28 |
| France | 1 | 7 | 6 |
| Asia (a) | 145 | – | – |
| Other small operations | (1) | 1 | – |
| 145 | 8 | 34 |
(a) Sale of Asian general insurance businesses
On 7 September 2004, the Group announced the disposal of its Asian general insurance businesses to Mitsui Sumitomo Insurance (MSI) for a total of US$450 million in cash. The sale was subject to obtaining regulatory clearance and approval from other shareholders in the Asian businesses.
Under the terms of the agreement, MSI will acquire all of Aviva’s general insurance businesses in Asia. These comprise the general insurance business of Aviva Limited and the general insurance assets of Aviva Asia Pte Limited in Singapore; Aviva Insurance Berhad in Malaysia (including its branch in Brunei); Aviva Insurance (Thai) Company Limited in Thailand; PT Aviva Insurance in Indonesia; Dah Sing General Insurance Co Limited in Hong Kong; and Aviva’s branch operations in Hong Kong, the Philippines, Marianas, Macau and Taiwan. The transaction will be achieved through share purchase of Aviva’s interests in joint venture operations, business purchase and asset purchase in Singapore, and transfer of Aviva’s general insurance branch operations in Hong Kong, the Philippines, Marianas, Macau and Taiwan.
The transaction is expected to complete in phases. Phase I completed on 28 February 2005 and included all businesses above except for Malaysia, Indonesia, Macau, Marianas, Taiwan, Dah Sing and the Philippines. The businesses in Macau and Dah Sing were then sold prior to 30 June 2005. The sale of Indonesia completed in July 2005 and the remaining businesses will be included as part of the completion of Phase II, expected in the second half of 2005. The assets and liabilities of these businesses are included in the totals held for sale on the balance sheet.
Subject to the receipt of regulatory approval, the total proceeds for the sale of these businesses were fixed by reference to the net assets of the businesses as at 31 December 2003 and are not adjusted to reflect the results in the period from 1 January 2004 to completion. The Group does not bear any continuing operating risk from 31 December 2003.
The results of the Asian general insurance business have been consolidated with those of the Group’s ongoing operations until the completion of each transaction. Although the Group has retained no economic interest in the operations of this business beyond 31 December 2003, the post-tax operating profits are incorporated in the Group’s consolidated income statement from 1 January 2004 to the date of completion. This will be offset by a corresponding change to the final profit on sale. Total profit on sale on the first tranche of the disposal was £145 million and £102 million after tax.
6. Geographical analysis of life IFRS operating profit
| 6 months 2005 £m |
6 months 2004 £m |
Full year 2004 £m |
|
|---|---|---|---|
| United Kingdom | |||
| With-profit | 33 | 49 | 97 |
| Non-profit | 178 | 179 | 256 |
| Europe (excluding UK) | |||
| France | 131 | 89 | 213 |
| Ireland | 14 | 14 | 31 |
| Italy | 24 | 19 | 49 |
| Netherlands (including Belgium and Luxembourg) | 58 | 54 | 214 |
| Poland | 48 | 39 | 80 |
| Spain | 39 | 24 | 72 |
| Other |
1 | (4) | 5 |
| International | (16) | 57 | 99 |
| Total | 510 | 520 | 1,116 |
7. Geographical analysis of fund management IFRS operating profit
| 6 months 2005 £m |
6 months 2004 £m |
Full year 2004 £m |
|
|---|---|---|---|
| Morley | |||
| – UK business | 11 | 4 | 10 |
| – European and International business | 7 | 3 | 8 |
| Other fund management operations | |||
| UK | |||
| – Royal Bank of Scotland | (3) | (6) | (6) |
| – Norwich Union investment funds | 3 | 5 | 4 |
| France | 10 | 8 | 15 |
| Other Europe | 1 | – | 2 |
| International | 4 | 3 | 7 |
| Total | 33 | 17 | 40 |
8. Geographical analysis of general insurance and health
(a) Operating result
| Operating profit | Underwriting result | ||||||
|---|---|---|---|---|---|---|---|
| 6 months 2005 £m |
6 months 2004 £m |
Full year 2004 £m |
6 months 2005 £m |
6 months 2004 £m |
Full year 2004 £m |
||
| United Kingdom | 431 | 364 | 797 | 104 | 52 | 146 | |
| Europe (excluding UK) | |||||||
| France | 17 | 20 | 33 | (12) | (9) | (16) | |
| Ireland | 83 | 60 | 135 | 53 | 38 | 82 | |
| Netherlands | 55 | 53 | 88 | 14 | 2 | 10 | |
| Other | 19 | 12 | 32 | 2 | (4) | 6 | |
| International | |||||||
| Canada | 67 | 52 | 133 | 14 | 5 | 37 | |
| Other | 22 | 22 | 41 | 7 | 8 | 6 | |
| Total | 694 | 583 | 1,259 | 182 | 92 | 271 | |
(b) Investment return information
| Actual investment return credited to income |
Longer-term investment return | |||||||
|---|---|---|---|---|---|---|---|---|
| 6 months 2005 £m |
6 months 2004 £m |
Full year 2004 £m |
6 months 2005 £m |
6 months 2004 £m |
Full year 2004 £m |
|||
| United Kingdom | 280 | 301 | 569 | 327 | 312 | 651 | ||
| Europe (excluding UK) | ||||||||
| France | 23 | 24 | 48 | 29 | 29 | 49 | ||
| Ireland | 24 | 18 | 39 | 30 | 22 | 53 | ||
| Netherlands | 53 | 19 | 83 | 41 | 51 | 78 | ||
| Other | 14 | 12 | 20 | 17 | 16 | 26 | ||
| International | ||||||||
| Canada | 44 | 39 | 83 | 53 | 47 | 96 | ||
| Other | 15 | 15 | 33 | 15 | 14 | 35 | ||
| Total longer-term investment return | 512 | 491 | 988 | |||||
| Total actual investment income | 453 | 428 | 875 | |||||
| Realised gains /(losses) | 55 | (6) | 47 | |||||
| Unrealised gains/(losses) | 124 | (169) | 227 | |||||
| Total actual investment return | 632 | 253 | 1,149 | |||||
The total short-term fluctuation in investment return of £120 million (six months 30 June 2004: £(238) million; full year 2004: £161 million) is the difference between the total actual investment return of £632 million (six months 30 June 2004: £253 million; full year 2004: £1,149 million) and the total longer-term investment return of £512 million (six months 30 June 2004: £491 million; full year 2004: £988 million).
Actual income and longer-term investment return both contain the amortisation of the discount/premium arising on the acquisition of fixed income securities.
The longer-term investment return is calculated separately for each principal general insurance and health business unit. In respect of equities and properties, the return is calculated by multiplying the opening market value of the investments, adjusted for sales and purchases during the period, by the longer-term rate of investment return. The longer-term rate of investment return is determined using consistent assumptions between operations, having regard to local economic and market forecasts of investment return. The allocated longer-term return for other investments is the actual income receivable for the year.
The principal assumptions underlying the calculation of the longer-term investment return are:
| Longer-term rates of return Equities |
Longer-term rates of return Properties |
||||
|---|---|---|---|---|---|
| 2005 % |
2004 % |
2005 % |
2004 % |
||
| United Kingdom | 7.6% | 7.8% | 6.6% | 6.8% | |
| France | 6.7% | 7.3% | 5.7% | 6.3% | |
| Ireland | 6.7% | 7.3% | 5.7% | 6.3% | |
| Netherlands | 6.7% | 7.3% | 5.7% | 6.3% | |
| Canada | 7.4% | 7.7% | 6.4% | 6.7% | |
The table below shows the sensitivity of Group operating profit before tax to changes in the longer-term rates of return:
| 6 months 2005 £m |
6 months 2004 £m |
|||
|---|---|---|---|---|
| Movement in investment return for |
By | Change in | By | By |
| Equities | 1% higher/lower | Group operating profit | 27 | 25 |
| Properties | 1% higher/lower | Group operating profit | 4 | 3 |
9. Other operations
| 6 months 2005 £m |
6 months 2004 £m |
Full year 2004 £m |
|
|---|---|---|---|
| RAC | 11 | – | – |
| Hill House Hammond | – | (9) | (8) |
| Personal finance subsidiaries | 1 | – | (1) |
| Your Move | – | 8 | 9 |
| Norwich Union Life Services | (38) | (15) | (80) |
| Other | 28 | (19) | (41) |
| 2 | (35) | (121) |
10. Corporate costs
| 6 months 2005 £m |
6 months 2004 £m |
Full year 2004 £m |
|
|---|---|---|---|
| Global finance transformation programme | (28) | (45) | (85) |
| Central costs and sharesave schemes | (55) | (54) | (103) |
| (83) | (99) | (188) |
11. Unallocated interest charges
| 6 months 2005 £m |
6 months 2004 £m |
Full year 2004 £m |
|
|---|---|---|---|
| External | |||
| subordinated debt | (85) | (84) | (169) |
| other | (45) | (40) | (77) |
| Internal | (101) | (100) | (219) |
| Net finance income on pension schemes | 18 | 19 | 28 |
| (213) | (205) | (437) |
12. Tax
(a) Tax charged to the income statement
| 6 months 2005 £m |
6 months 2004 £m |
Full year 2004 £m |
|
|---|---|---|---|
| Current tax: | |||
| For the year | 492 | 214 | 475 |
| Prior year adjustments | 21 | (48) | (92) |
| Total current tax | 513 | 166 | 383 |
| Deferred tax: | |||
| Origination and reversal of timing differences | 66 | (6) | 272 |
| Changes in tax rates or tax laws | – | (1) | (1) |
| Write down of deferred tax assets | 16 | – | – |
| Total deferred tax | 82 | (7) | 271 |
| Total tax charged to income statement | 595 | 159 | 654 |
The tax expense attributable to policyholders’ returns in the UK, Ireland and Australia included in the tax charge is as follows:
| 6 months 2005 £m |
6 months 2004 £m |
Full year 2004 £m |
|
|---|---|---|---|
| Current tax | 198 | 49 | 195 |
| Deferred tax | 90 | (70) | 188 |
| Total tax attributable to policyholders’ returns charged to income statement | 288 | (21) | 383 |
Tax charge analysed between
| 6 months 2005 £m |
6 months 2004 £m |
Full year 2004 £m |
|
|---|---|---|---|
| Tax charge/(credit) attributable to policyholders’ returns | 288 | (21) | 383 |
| Tax charge on IFRS operating profit before tax attributable to shareholders’ profits from continuing operations | 256 | 245 | 319 |
| Tax charge/(credit) on profit on other activities | 51 | (65) | (48) |
| Total tax charged to income statement | 595 | 159 | 654 |
(b) Tax charged to equity
| 6 months 2005 £m |
6 months 2004 £m |
Full year 2004 £m |
|
|---|---|---|---|
| Deferred tax | (18) | (41) | 15 |
| Total tax charged to equity | (18) | (41) | 15 |
(c) Tax reconciliation
The tax on the Group's net profit before tax differs from the theoretical amount that would arise using the tax rate of the home country of the Company as follows:
| 6 months 2005 £m |
6 months 2004 £m |
Full year 2004 £m |
|
|---|---|---|---|
| Net profit before tax | 1,412 | 428 | 2,025 |
| Tax calculated at standard UK corporation tax rate of 30% (2004: 30%) | 424 | 128 | 608 |
| Different basis of tax for UK life insurance | 164 | 29 | 217 |
| Adjustment to tax charge in respect of prior years | 20 | (34) | (88) |
| Non-assessable dividends | (59) | (41) | (30) |
| Non-taxable profit on sale of subsidiaries and associates | – | 20 | 12 |
| Disallowable expenses | 21 | 26 | 65 |
| Different local basis of tax on overseas profits/(losses) | 34 | 5 | (13) |
| Deferred tax assets not recognised | 7 | 15 | (120) |
| Other | (16) | 11 | 3 |
| Tax charge for the period | 595 | 159 | 654 |
13. Earnings per share
(a) Basic earnings per share
| 6 months 2005 | 6 months 2004 | Full year 2004 | |||||||
|---|---|---|---|---|---|---|---|---|---|
| Before tax £m |
Net of tax, minorities and preference dividends £m |
Per share p |
Before tax £m |
Net of tax, minorities and preference dividends £m |
Per share p | Before tax £m |
Net of tax, minorities
and preference dividends £m |
Per share p |
|
| Operating profit attributable to ordinary shareholders from continuing operations | 943 | 623 | 27.1 | 781 | 492 | 21.8 | 1,669 | 1,221 | 54.1 |
| Adjusted for the following items: | |||||||||
| –Impairment of goodwill | (10) | (10) | (0.4) | - | - | - | (41) | (41) | (1.8) |
| (44) | (44) | (1.9) | (35) | (35) | (1.6) | (85) | (85) | (3.8) | |
| (16) | (14) | (0.6) | (2) | (2) | (0.1) | (7) | (7) | (0.3) | |
| – Financial Services Compensation Scheme and other levies | – | – | – | (25) | (18) | (0.8) | (49) | (29) | (1.3) |
| – Short term fluctuation on return on investments backing general insurance and health business | 120 | 100 | 4.3 | (238) | (190) | (8.4) | 161 | 195 | 8.7 |
| – Profit on the disposal of subsidiaries and associates | 145 | 102 | 4.4 | 8 | 8 | 0.4 | 34 | 34 | 1.5 |
| –Integration costs | (14) | (10) | (0.4) | – | – | – | – | – | – |
| – Exceptional costs for termination of operations | – | – | – | (40) | (30) | (1.3) | (40) | (30) | (1.3) |
| Profit attributable to ordinary shareholders | 1,124 | 747 | 32.5 | 449 | 225 | 10.0 | 1,642 | 1,258 | 55.8 |
Earnings per share has been calculated based on the operating profit before impairment of goodwill, amortisation and impairment of acquired additional value of in-force long-term business and other intangibles and exceptional items, after tax, attributable to ordinary shareholders, for continuing operations, as well as on the profit attributable to ordinary shareholders. The directors believe the former earnings per share figures provide a better indication of operating performance. The calculation of basic earnings per share uses a weighted average of 2,300 million (six months 30 June 2004: 2,252 million; full year 2004: 2,256 million) ordinary shares in issue, after deducting shares owned by the employee share trusts.
The actual number of shares in issue at 30 June 2005 was 2,371 million (30 June 2004: 2,262 million; full year 2004: 2,282 million).
(b) Diluted earnings per share:
| 6 months 2005 | 6 months 2004 | Full year 2004 | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Total £m |
Weighted average
number of shares m |
Per share p |
Total £m |
Weighted average
number of shares m |
Per share p |
Total £m |
Weighted average number of shares m |
Per share p |
|||
| Profit attributable to equity shareholders | 747 | 2,300 | 32.5 | 225 | 2,252 | 10.0 | 1,258 | 2,256 | 55.8 | ||
| Dilutive effect of share awards and options | – | 26 | (0.4) | – | 22 | (0.1) | – | 18 | (0.5) | ||
| Diluted earnings per share | 747 | 2,326 | 32.1 | 225 | 2,274 | 9.9 | 1,258 | 2,274 | 55.3 | ||
14. Dividends and appropriations
| 6 months 2005 £m |
6
months 2004 £m |
Full year 2004 £m |
|
|---|---|---|---|
| Ordinary dividends declared and charged to equity in the period | |||
| Final 2003 - 15.15p per share, paid on 17 May 2004 | – | 342 | 342 |
| Interim 2004 - 9.36p per share, paid on 17 November 2004 | – | – | 211 |
| Final 2004 -16.00p per share, paid on 17 May 2005 | 364 | – | – |
| 364 | 342 | 553 | |
| Preference dividends declared and charged to equity in the period | 9 | 9 | 17 |
| 373 | 351 | 570 |
Subsequent to 30 June 2005, the directors proposed an interim dividend for 2005 of 9.83p per ordinary share, £233 million in total. This will be accounted for as an appropriation of retained earnings in the full year ending 31 December 2005.
Interest payable on the deferred capital instrument issued in November 2004 is treated as an appropriation of retained profits and, accordingly, it is accounted for when paid. No interest has been paid since the deferred capital instrument was issued last year, and the first and subsequent payments will be made in the second half of each accounting period. The pre-tax accumulated interest payable at 30 June 2005 amounted to £31 million (31 December 2004: £6 million). Tax relief will be obtained at a rate of 30%.
Irish shareholders who are due to be paid a dividend denominated in euros will receive a payment at the exchange rate prevailing on 11 August 2005.