directors report and accounts 2006 - Cash flow


 Cash flow

Cash flow

Net cash from operating activities before restructuring costs and taxation3,295 3,229
Restructuring costs(220)(143)
Net cash from operating activities2,362 2,324
Net interest(263)(231)
Net capital expenditure(419)(378)
Dividends to minority interests(139)(133)
Free cash flow1,541 1,582
Dividends paid to shareholders(1,008)(910)
Share buy-back(500)(501)
Other net flows(5)(49)
Net cash flows28 122

IFRS cash flow
Net cash from operating activities2,362 2,324
Net cash from investing activities(315)(292)
Net cash from financing activities(2,339)(2,147)
Net cash flows(292)(115)

The IFRS cash flow includes all transactions affecting cash and cash equivalents, including financing. The alternative cash flow above is presented to illustrate the cash flows before transactions relating to borrowings.

The Group’s net cash flow from operating activities at £2,362 million was £38 million higher. The growth in underlying operating performance was offset by the timing of working capital movements. However, a £49 million fall in tax outflows, reflecting the timing of payments, as well as £66 million higher dividends from associates more than offset the higher restructuring flows.

After higher net capital expenditure and net interest flows, with similar levels of dividends to minority interests, the free cash flow is £41 million lower than in 2005 at £1,541 million. This inflow exceeds the total cash outlay on dividends to shareholders and share buy-back by £33 million.

The other net flows in 2006 principally reflect the purchase of minority interests in Chile and shares for the Group’s share-based compensation plans, largely offset by the sale of Toscano in Italy and the sale of brands. The other net flows in 2005 mainly arise from the acquisition of further shares in the Group’s Danish associate and the acquisition of Restomat AG in Switzerland, partly offset by the proceeds of the brand sale to Gallaher.

The above flows resulted in net cash inflows of £28 million compared to £122 million in 2005. After taking account of transactions related to borrowings, especially the net repayment of borrowings, the above flows resulted in a net decrease of cash and cash equivalents of £292 million compared to a net decrease of £115 million in 2005, as shown in the IFRS cash flow above.

These cash flows, after an adverse exchange impact of £96 million, resulted in cash and cash equivalents, net of overdrafts, decreasing by £388 million in 2006 (2005: £66 million).

Borrowings, excluding overdrafts but taking into account derivatives relating to borrowings, were £6,401 million compared to £7,117 million as at 31 December 2005. The decrease in this figure principally reflected the net repayment of borrowings and the impact of exchange movements.

Current available-for-sale investments at 31 December 2006 were £128 million (31 December 2005: £96 million).

As a result of the above borrowings, net of cash, cash equivalents and current available-for-sale investments, were £4,996 million (31 December 2005: £5,357 million).