Notes on the accounts
- 1 Accounting policies
- 2 Segmental analyses
- 3 Profit from operations
- 4 Net finance costs
- 5 Associates and joint ventures
- 6 Taxation on ordinary activities
- 7 Earnings per share
- 8 Dividends and other appropriations
- 9 Intangible assets
- 10 Property, plant and equipment
- 11 Investments in associates and joint ventures
- 12 Retirement benefit schemes
- 13 Deferred tax
- 14 Trade and other receivables
- 15 Available-for-sale investments
- 16 Derivative financial instruments
- 17 Inventories
- 18 Income tax receivable and payable
- 19 Cash and cash equivalents
- 20 Capital and reserves – reconciliation of movement in total equity
- 21 Borrowings
- 22 Other provisions for liabilities and charges
- 23 Trade and other payables
- 24 Financial instruments and risk management
- 25 Cash flow
- 26 Business combinations and disposals
- 27 Share-based payments
- 28 Group employees
- 29 Related party disclosures
- 30 Contingent liabilities and financial commitments
25 Cash flow
Cash generated from operations
|Profit from operations||4,721||4,318|
|– amortisation and impairment of trademarks||58||106|
|– amortisation and impairment of intangible assets||365||322|
|– gains on disposal of businesses||(5)|
|– depreciation and impairment of property, plant and equipment||394||469|
|– increase in inventories||(47)||(280)|
|– increase in trade and other receivables||(87)||(127)|
|– increase in trade and other payables||46||497|
|– decrease in net retirement benefit liabilities||(208)||(153)|
|– increase in provisions for liabilities and charges||232||17|
|– other non-cash items||63||43|
|Cash generated from operations||5,537||5,207|
Profit from operations includes charges in respect of Group restructuring and integration costs referred to in note 3(e). These are also reflected in the movements in depreciation, amortisation, impairment, inventories, receivables, payables and provisions above and in the proceeds on disposal of property, plant and equipment shown in the Group cash flow statement. The net cash outflow in respect of the Group's restructuring costs was £207 million (2010: £193 million), of which £217 million (2010: £219 million) is included in cash generated from operations above.
Cash flows from investing activities
(a) Purchases and proceeds on disposals of investments
The purchases and disposals of investments (which comprise available-for-sale investments and loans and receivables) comprises a net cash inflow in respect of current investments of £3 million (2010: £1 million outflow).
(b) Proceeds from associates’ share buy-backs
In 2011, the proceeds from associates’ share buy-backs reflect proceeds of £71 million in respect of the Group’s participation in the share buy-back programme conducted by Reynolds American Inc.
(c) Purchase of other subsidiaries and associates
In 2011, the net cash outflow of £295 million on the purchase of Protabaco reflects the settlement of the purchase consideration of £298 million less the acquired net cash and cash equivalents of £3 million, as explained in note 26(a).
(d) Proceeds on disposal of subsidiaries
In 2010, the proceeds on disposal of subsidiaries reflects the consideration received, less cash and cash equivalents disposed of, from the sale of the Group’s Belgium distribution business, Lyfra NV, as explained in note 26(b).
Cash flows from financing activities
(a) Cash flows from borrowings
During the year, the Group established a US$2 billion commercial paper programme. It is Group policy that short-term sources of funds (including drawings under both the US$ programme and the existing Group £1 billion euro commercial paper (ECP) programme) are backed by undrawn committed lines of credit and cash. At 31 December 2011 £85 million of commercial paper was outstanding (2010: undrawn).
In November 2011, the Group issued a new €600 million bond with a maturity of November 2021.
In September 2011, the Group repaid a Mexican peso 1,444 million borrowing which was due in September 2011 with a new Mexican peso 1,444 million borrowing due 2014.
In June 2011, the Group repaid a €530 million bond. The repayment was financed from Group cash balances.
During the year the Group’s subsidiary in Brazil received proceeds of £401 million (2010: £410 million) from short-term borrowings in respect of advance payments on leaf export contracts and repaid £519 million (2010: £297 million).
In December 2010, the Group negotiated a new central banking facility of £2 billion with a final maturity date of December 2015. This facility is provided by 22 banks. The existing central banking facility of £1.75 billion, with a final maturity date of March 2012 was cancelled at the same time. The facility was undrawn at both 31 December 2011 and 2010.
On 25 June 2010, the terms of €470 million of the €1 billion bond maturing in 2011 were modified by extending the maturity to 2020; at the same time, the Group issued an additional €130 million bond with a maturity of 2020. In addition, €413 million of the Group’s €750 million bond maturing in 2012 was purchased and cancelled. At the same time, the Group issued a new £275 million bond with a maturity of 2040.
In May 2010, the Group repaid a €525 million bond. The repayment was financed from debt issued in November 2009.
(b) Movements relating to derivative financial instruments
The movement relating to derivative financial instruments is in respect of derivatives taken out to hedge cash and cash equivalents and external borrowings, derivatives taken out to hedge inter company loans and borrowings and derivatives treated as net investment hedges. Derivatives taken out as cash flow hedges in respect of financing activities are also included in the movement relating to derivative financial instruments, while other such derivatives in respect of operating and investing activities are reflected along with the underlying transactions.
(c) Purchase of non-controlling interests
In 2011, the cash outflow of £10 million arises from the acquisition of non-controlling interests in Chile. The cash outflow of £12 million in 2010 arises from the acquisition of non-controlling interests in Bentoel of shareholders who did not wish to participate in the merger of Bentoel and BAT Indonesia as well as non-controlling interests in subsidiaries in the EEMEA region.