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The primary objective of our capital
management policy is to seek to maintain a solid investment grade
credit rating whilst continuing to invest for the future and, with
an efficient balance sheet, further enhance the return to shareholders.
In order to meet this objective, we may issue new shares, repurchase
shares, adjust the amount of dividends paid to shareholders, or issue
or repay debt. We manage the capital structure and make adjustments
to it in the light of changes in economic conditions and the risk
characteristics of the group. The Board regularly reviews the capital
structure. No changes were made to these objectives, policies and
processes during 2007 and 2008.
Our
capital structure consists of net debt, committed facilities and similar
arrangements and shareholders’ equity (excluding the cash flow
reserve). The following analysis summarises the components which we
manage as capital:
| |
|
2008 |
|
2007 |
|
|
|
|
£m |
|
£m |
|
| Total parent
shareholders’ equity (excluding cash flow reserve) |
|
5,252 |
|
4,215 |
|
| Net debt (see
note 10) |
|
9,460 |
|
7,914 |
|
| Undrawn committed
facilities (see note
33) |
|
2,335 |
|
3,535 |
|
|
|
|
|
|
|
| |
|
17,047 |
|
15,664 |
|
|
|
|
|
|
|
Components of capital at 31 March 2008
(%) |
 |
 |
Parent shareholders'
equity |
| |
|
 |
Net debt |
| |
|
 |
Undrawn committed facilities |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
In May 2007, following the Board’s
most recent review of the capital structure, we announced an increased
share buy back programme of £2.5 billion over the period to 31
March 2009 which has and will result in substantially increased borrowings.
Our
general policy is to raise and invest funds centrally, using a variety
of capital market issues, borrowing and investment facilities, to
meet anticipated funding and investment requirements. This consists
of a combination of short, medium and long-term financial instruments.
Despite adverse market credit conditions, in 2008 we proactively raised
long-term funds of £3.5 billion and short-term funds of £0.4
billion. A proportion of
these borrowings were raised using our European Medium Term Note programme
and US Shelf registration.
At
31 March 2008 we had financial assets of £5.5 billion consisting
of current and non current investments, trade and other receivables,
and cash and cash equivalents. We continually review our credit exposures
and have taken proactive steps to ensure that the impact of the current
adverse market conditions on these financial assets is minimised.
In particular, line of business management have been actively reviewing
exposures arising from trading balances and in managing investments
the centralised treasury operation has continued to monitor the credit
quality of investments across treasury counterparties.
At
31 March 2008, the group’s credit rating was BBB+/Baa1 with Standard
and Poor’s and Moody’s, respectively (2007: BBB+/Baa1).
We are not subject to any externally imposed capital requirements.
The Board reviews the group’s dividend policy and funding requirements
annually.
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