Shareholder Executive

Met Office

Purpose

The Met Office is the official national meteorological service for the UK. It provides weather and climate related services to a range of public and commercial customers in the UK and around the world. The Met Office is a world-leading centre for the science of climate change and numerical weather prediction.

Legal Status and Ownership

The Met Office is a trading fund of the Ministry of Defence.

Government's Objectives

The overall objective of the Met Office is to deliver value to the UK taxpayer in three distinct areas:

Weather and climate related services to the public

To deliver efficiently, effectively and with value for money, a Public Met Service including free-at-point-of use services to the public, and the underpinning capability to sustain and develop this in the future, including the science base and investment in key infrastructure.

Weather and climate related services to central Government

To use weather and climate related information to assist Government departments in achieving their objectives, in ways which do not lend themselves to direct competition. Key customer departments include MoD and Defra.

Weather and climate related services provided on a commercial basis

Consistent with achieving the objectives above, the Met Office is to maximise the return to the taxpayer by drawing in profitable revenue from sources not directly funded by the Exchequer, including local government organisations, public bodies overseas and private sector customers.

Financial Performance

£m	2008	2007	2006
Turnover	177	171	170
Operating Profit	13	8	13
Profit/(Loss) for the year	14	9	9
Net Cash flow	(0)	(3)	4
Net Operating Assets	180	180	165
RONA	7.0%	4.4%	8.1%
ROCE	6.1%	4.0%	5.3%
Shareholders' Funds	206	199	182
Dividends	11	7	6

Commentary

This was another successful year at the Met Office in which it met all its Key Performance Targets for the third year running. Turnover in 2007-08 was £176.6m compared with £171.0m in 2006-07. Commercial revenue increased slightly to £27.0m (2006-07: £26.9m), thus reversing the recent trend of falling revenue. Operating profit increased from £7.9m in 2006-07 to £12.7m in 2007-08. This was as a result of the Met Office maintaining its trading year position and the non-recurrence of the exceptional charges encountered in 2006-07. Business profitability, a measure of profi tability on revenue from services provided on a commercial basis rose from £3.9m in 2006-07 to £4.4m in 2007-08. Return on Capital Employed (ROCE) increased from 4.0% in 2006-07 to 6.1%, and remains above the 3.5% target.

The Met Office provided excellent forecasts of a number of very high profile weather events, notably the major flooding of summer 2007, the storm surges of November 2007 and the severe gales of March 2008. Following the flooding events of summer 2007, the Met Office provided evidence for several inquiries, including those by Sir Michael Pitt, the Environment Food and Rural Affairs Committee at Westminster and the Scottish Parliament's Rural Affairs and Environment Committee.

The Intergovernmental Panel on Climate Change (IPCC) was jointly awarded the Nobel Peace Prize in recognition of 'their efforts to build up and disseminate greater knowledge about man-made climate change, and to lay the foundations for the measures that are needed to counteract such change'. Met Office scientists were part of the IPCC delegation at the award ceremony, which reflects their prominence throughout the 20 year history of the IPCC and underlines the Met Office's key role in climate science on a global scale.

The Met Office has been reviewing key elements of its strategy and has identified some areas of business where improvement is needed to deliver future success and profitability. In some instances, this will lead to strategic amendments to the current Met Office Corporate Plan, while in others further work is being carried out which will be incorporated into the next Corporate Plan due by the end of 2008.