Net finance costs
Our finance costs for 2007/08 were £175 million, compared with £168 million in 2006/07.
Despite increases in the UK and US floating rates, our interest payable on bank and other loans reduced, mainly as a result of lower debt levels. Our interest costs also benefited from increased capitalised interest, thanks mostly to Terminal 5 and aircraft orders.
Our finance income for the year was £111 million, down £18 million on last year. The reduction was due to lower average cash balances, only partially offset by higher interest rates. The lower cash balance was due to one-off payments into NAPS and the fine paid to the US Department of Justice (DOJ) for anti-competitive activity.
Pension financing income and retranslation expenses
Pension financing income was £34 million in 2007/08 compared to a charge of £19 million in 2006/07. This was primarily the result of a higher return on assets in the pension scheme following the one-off cash contributions into NAPS.
The retranslation of currency borrowings generated a charge of £11 million, compared with a credit of £13 million the previous year. The movement versus last year was due mainly to a strengthening of the Japanese yen this year, partly offset by lower yen debt levels.
Profit on sale of fixed assets and investments
Profit on the sale of fixed assets and investments for the year was £14 million (2006/07: £47 million which included a profit of £48 million on the sale of our holding in World Network Services).
Share of post-tax profits in associates
During the year, we increased our holding in Iberia from 9.95 per cent to 13.15 per cent. The increase in our share of post-tax profits in associates – up from £5 million in 2006/07 to £26 million in 2007/08 – in part reflects this increased shareholding.
Taxation
The analysis and explanation of tax is set out in note 11 to the financial statements.
Our total tax charge arising on profits from continuing operations was £187 million (2006/07: £173 million) giving us an effective tax rate for the year in relation to our profits from continuing operations of 21 per cent (2006/07: 28 per cent). The tax charge benefited from a one-off deferred tax credit of £76 million arising from the reduction in the UK corporation tax rate from 30 per cent to 28 per cent, which is effective from April 1, 2008, and there were charges relating to prior years totalling £4 million (2006/07: £14 million credit). Excluding these one-off items the effective tax rate for the Group would have been 29 per cent (2006/07: 31 per cent).
We paid corporation taxes totalling £66 million during the year, compared with £128 million last year, and we had a corporation tax provision of £4 million at March 31, 2008 (March 31, 2007: £54 million). Our deferred tax balance at March 31, 2008 was £1,154 million (March 31, 2007: £930 million).
Earnings per share
The total earnings attributable to shareholders for the year was £680 million, equivalent to 59.0 pence per share. This represents a 131 per cent increase on last year’s earnings per share of 25.5 pence. The increase was driven by both the higher profit before tax, and by a one-off credit to the tax charge, arising from the reduced corporation tax rate effective from April 1, 2008.