UK – Drinks firm Diageo is to take a 95 million-pound (136.8 million euro) charge in relation to its 1.4 billion pound pension deficit.

The company said in its year-end trading update that the recovery in equity markets has been reflected in the value of the pension funds' investments.

“This has however been offset by other changes including an increase in pension liabilities as a result of the reduction in corporate bond yields used to calculate pension liabilities and modifications to the assumptions used.”

It said that the deficit on its main pension funds was still around 1.4 billion pounds. “Under FRS17 accounting requirements this is currently estimated to give rise in fiscal '04 to a charge to operating profit of 95 million pounds and a charge to interest of 25 million pounds.”

"Trading conditions have remained tough in the second half of the year, compounded by the Iraqi conflict and SARS," Diageo added.