Financial review
Supporting the business
The 2008/09 year was marked by two major programming developments made possible by a combination of savings and new funding.
Arabic television, which had been launched in March 2008, completed its first full year of operations and moved from 12- to 24-hour broadcasting in January 2009. This was quickly followed by the launch of 大象传媒 Persian television.
Detailed preparation helped to ensure its successful transition from development project to live broadcast channel within budget.
Taking Arabic television to a 24/7 model and launching Persian television (eight hours per day) were both funded by additional baseline income, which is reflected in Grant-in-Aid increasing from 拢255m to 拢265m.
Controlling costs
Control of costs is a key objective. With 拢265m of grant income, 大象传媒 World Service has a duty to ensure that it delivers value for money to its stakeholders.
The drive for greater efficiency is built into the funding arrangements with a requirement from the 2007 Comprehensive Spending Review (CSR) that savings of 3% of baseline Grant-in-Aid are delivered year on year.
In 2008/09 大象传媒 World Service delivered 拢7m of savings from across its capital and revenue funding streams. These savings are re-invested to cover rising costs both in the UK and internationally.
For 大象传媒 World Service, the fall in the value of sterling (as part of the global economic crisis) did not simply represent one of the biggest news stories of the year, it also had a real impact on our cost base, the full year effect of which will add significant pressures in 2009/10.
Conversely, reductions in the rate of inflation in the UK will help mitigate some cost increases.
Careful management of costs and financial risk remains a priority in ensuring that 大象传媒 World Service meets its objectives and obligations.
Operating result
At close to break-even, the small deficit on operating activities of 拢0.2m represents a satisfactory outcome for the year.
大象传媒 World Service had budgeted for a larger deficit in 2008/09, to be recovered in the second and third years of the CSR.
This was based on the need to provide for restructuring costs associated with efficiency plans, which would incur costs in the first year of the CSR and yield savings over the three-year cycle.
The major restructuring provisions made during the year were for the closure of the Romanian service, the reorganisation of technical support involving greater collaboration with other 大象传媒 divisions and the restructuring of the Russian service.
The largest saving against the budget was generated by contributions to the 大象传媒 pension scheme being lower than expected in the wake of the scheme's actuarial valuation at 31 March 2007.
However, in line with other defined benefit schemes, 大象传媒 World Service pension costs are expected to increase in the near future.
Offsetting the unplanned savings were the increase in the cost of running international offices as a result of the fall in sterling and the high level of restructuring costs.
Capital projects
Total investment in capital projects in 2008/09 was 拢29.2m.
Notable projects included: completing the infrastructure for Arabic and Persian television; the final stages of the Satellite Media Distribution System, which delivers 大象传媒 World Service content to transmission sites and broadcast partners around the world; key aspects of the re-engineering project at the Ascension Island transmitter station, which broadcasts to Africa; and, further work to enhance our emergency production facilities, which enable us to maintain output in key languages if our London facilities cannot be used.
The 拢1.9m deficit on capital activity shown on the income and expenditure account reflects the difference between capital Grant-in-Aid received during the year (which is recorded as income) and capital-related charges in the income and expenditure account, namely depreciation and write-offs.
This timing difference is reflected as a capital reserve transfer.
Balance sheet
We have included separate 大象传媒 World Service and 鈥榞roup' balance sheets for the first time this year.
The 大象传媒 World Service group consists of the subsidiary companies listed in note 6 to the financial statements.
Assets and operations in certain international offices have been put into these companies to ensure that 大象传媒 World Service complies with local legislation in some overseas territories.
The majority of these companies have few assets although, as operations in some international offices increase in scale, a small number of these are beginning to hold material amounts of working capital.
The group balance sheet is in line with expectations.
Fixed assets, with a net book value of 拢149.6m, continue to be the dominant feature.
Debtor and creditor balances reflect the ongoing operations of the business and cash holdings of 拢6.1m are higher than in the prior year. This reflects the revaluation of currency holdings at year end and some timing differences between costs being incurred and the corresponding payments being made.
Looking ahead
With funding fixed for 2009/10 and 2010/11, 大象传媒 World Service is relatively well placed to deal with the tough economic climate in the short term.
However, with increasing pressure on public finances and a funding framework that requires savings every year, there is a continuing need to drive down costs through a programme of efficiencies.
Issues such as pension costs, foreign exchange fluctuations and international inflation all represent areas where the funding model needs to be able to cope with changing circumstances.
Dealing with these risks forms part of our overall risk management processes.
We expect 2009/10 to be another year where the plan will need to be able to respond to external pressures but continue to be able to support the delivery of quality journalism and compelling content in 32 languages to our audiences around the world.
Doing this effectively and in a way that delivers value for money will continue to be our priority.
Richard Thomas
Chief Operating Officer and Director of Finance,
大象传媒 World Service