|
10.
NET DEBT
Net debt consists
of loans and other borrowings less current asset investments
and cash and cash equivalents. Loans and other borrowings
are measured at the net proceeds raised, adjusted to
amortise any discount over the term of the debt. For
the purpose of this analysis current asset investments
and cash and cash equivalents are measured at the lower
of cost and net realisable value. Currency denominated
balances within net debt are translated to sterling
at swapped rates where hedged.
This
definition of net debt measures balances at the expected
value of future cash flows due to arise on maturity
of financial instruments and removes the balance sheet
adjustments made from the re-measurement of hedged risks
under fair value hedges and the use of the amortised
cost method as required by IAS 39. In addition, the
gross balances are adjusted to take account of netting
arrangements amounting to £49 million (2006: £171
million). Net debt is a non GAAP measure since it is
not defined in IFRSs but it is a key indicator used
by management in order to assess operational performance
and balance sheet strength.
| |
|
|
2007 |
|
|
2006 |
|
| |
|
|
£m |
|
|
£m |
|
|
|
|
|
|
|
|
|
|
Analysis
of net debt
|
|
|
|
|
|
|
|
|
Loans
and other borrowings (current and non current)
|
|
|
8,590 |
|
|
9,935 |
|
|
Less:
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
|
1,075 |
|
|
1,965 |
|
|
Current
asset investments
|
|
|
3 |
|
|
365 |
|
|
|
|
|
|
|
|
|
| |
|
|
7,512 |
|
|
7,605 |
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
To
retranslate currency denominated balances at swapped
rates where hedged
|
|
|
577 |
|
|
121 |
|
|
To
recognise borrowings and investments at net proceeds
and unamortised discount
|
|
|
(175 |
) |
|
(192 |
) |
|
|
|
|
|
|
|
|
|
Net
debt
|
|
|
7,914 |
|
|
7,534 |
|
|
|
|
|
|
|
|
|
After allocating
the element of the adjustments which impacts loans and
other borrowings as defined above, gross debt at 31
March 2007 was £8,943 million (2006:
£9,685 million).
| |
|
|
2007 |
|
|
2006 |
|
| |
|
|
£m |
|
|
£m |
|
|
|
|
|
|
|
|
|
|
Reconciliation
of movement in net debt
|
|
|
|
|
|
|
|
|
Net
debt at 1 April
|
|
|
7,534 |
|
|
7,893 |
|
|
Increase
(decrease) in net debt resulting from cash flows
|
|
|
219 |
|
|
(199 |
) |
|
Net
debt assumed or issued on acquisitions
|
|
|
11 |
|
|
– |
|
|
Currency
movements
|
|
|
124 |
|
|
(75 |
) |
|
Other
non-cash movements
|
|
|
26 |
|
|
(85 |
) |
|
|
|
|
|
|
|
|
|
Net
debt at 31 March
|
|
|
7,914 |
|
|
7,534 |
|
|
|
|
|
|
|
|
|
Non-cash
transactions
Other non-cash
movements in 2006 includes £87 million relating
to the early redemption of the group’s US dollar
convertible bond for shares in LG Telecom. |
