Free cash flow

    2008
£m
  2007
£m
    2006
£m
 
Net cash inflow from operating activities   5,486   5,210   5,387  
Net purchase of property, plant equipment and software   (3,253 ) (3,209 ) (2,874 )
Net purchase of non current asset investments   (1 ) (3 ) (1 )
Dividends from associates and joint ventures   2   6   1  
Interest received   111   147   185  
Interest paid   (842 ) (797 ) (1,086 )







 
Free cash flow   1,503   1,354   1,612  







 


The components of free cash flow, which is a non-GAAP measure and a key performance indicator, are presented in the table above and reconciled to net cash inflow from operating activities, the most directly comparable IFRS measure. For further discussion of the definition of free cash flow.

 
     
     
top_arrow   11%
increase in free cash flow
to £1,503 million
     
     The increase in free cash flow in 2008 of £149 million is largely due to the income tax repayment from HMRC of £521 million (2007: £376 million), a reduction in income taxes paid of £189 million, lower pension deficiency payments of £320 million (2007: £520 million), together with an improvement in working capital movements. These improvements were partially offset by payments of £297 million associated with our transformation activities and higher cash payments in respect of capital expenditure and net interest paid. The reduction in free cash flow in 2007 compared with 2006 was mainly due to the pension deficiency payment of £520 million and an increase in net expenditure on property, plant, equipment and software of £335 million. These increases were offset by lower taxes paid following the initial cash receipt in relation to the settlement of £376 million from HMRC and lower net interest paid of £731 million.

 

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