Interim results - 6 months ended 30 June 2006
Operating and financial review
Unallocated interest charges
Unallocated interest charges of £177 million (2005: £213 million) comprise internal and external interest on borrowings, subordinated debt and intra-group loans not allocated to local business operations. Also included is net pension income which represents the expected return on pension scheme assets less the interest charge on pension scheme liabilities. Interest costs in the period were lower at £215 million (2005: £231 million). Within this, external interest costs reduced to £109 million (2005: £130 million) reflecting repayment of senior debt while internal interest costs amounted to £106 million (2005: £101 million). Net pension income increased to £38 million (2005: £18 million).
Interest on the £990 million direct capital instrument issued in 2004 is not included within unallocated interest as it is instead treated as an appropriation of profits retained in the period. This appropriation will be charged when declared and settled in accordance with IFRS and will be reflected in the second half of the year.
