The cash inflow from operations of £5,777 million in the 2006 financial year compares with £5,906 million, primarily as a result of lower working capital inflows of £120 million compared to £253 million in the 2005 financial year. Tax paid in the 2006 financial year totalled £390 million compared with £332 million in the 2005 financial year. This increase in tax payments was primarily as a result of normalisation of tax payments following low tax payments in the 2005 financial year.
     Net cash inflow from investing activities of £365 million in the 2006 financial year compares with a net cash outflow of £1,740 million in the 2005 financial year. This includes a net cash inflow of £3,221 million on investments, which were used to partly fund the repayment of maturing debt. Net cash outflow for the purchase of property, plant and equipment and computer software was £2,874 million, compared to £2,945 million in the 2005 financial year. The net cash outflow for acquisitions in the 2006 financial year totalled £167 million and mainly related to the acquisitions of Radianz and Atlanet. In the 2005 financial year the net cash outflow of £418 million mainly related to the acquisitions of Infonet and Albacom. Interest received was £185 million in the 2006 financial year compared to £374 million in 2005 which included receipts on restructuring the group’s swap portfolio.
     Net cash outflow from financing activities of £5,278 million in the 2006 financial year compares with £3,529 million in the 2005 financial year. Included in the 2006 net cash outflow is a repayment of £4,432 million for maturing debt. In addition, the group raised a new sterling floating rate borrowing for £1,000 million and issued new commercial paper raising net proceeds of £464 million. Equity dividends paid in 2006 were £907 million whilst those paid in the 2005 financial year totalled £784 million. Interest paid was £1,086 million compared to £1,260 million in the prior year which included payments on restructuring the group’s swap portfolio.
     During the 2006 financial year the share buyback programme continued with the group repurchasing 166 million shares for consideration of £360 million. During the 2005 financial year the group repurchased 101 million shares for consideration of £195 million.
     As 31 March 2006, net debt was £7,534 million, a reduction of £359 million from 31 March 2005. The group’s definition of net debt, which is a non-GAAP measure, is provided on page 83.

Free cash flow is defined as the net increase in cash and cash equivalents less flows from financing activities (excluding interest paid) less the flows from the acquisition or disposal of subsidiaries, joint ventures and associates. It is a non-GAAP measure since it is not defined under IFRS, but it is a key indicator used by management in order to assess operational performance. Free cash flow was £1,612 million in the 2006 financial year, compared to £2,282 million in the 2005 financial year. The reduction in free cash flow compared to the 2005 financial year is mainly due to the impact of proceeds of £537 million from the disposal of non-current asset investments in the 2005 financial year, mainly in respect of the disposal of Eutelsat, Starhub and Intelsat. Other factors contributing to the decrease were lower working capital inflows and higher normalised tax payments following low tax payments in the 2005 financial year. This has been partly offset by lower cash payments on purchase of property, plant and equipment and software in the 2006 financial year, although capital additions and accruals are higher at the end of the 2006 financial year.

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