Financing
In
2008, our cash inflow from operations was £5,187 million (2007: £5,245 million, 2006: £5,777 million), a reduction of 1% compared with 2007. Cash generated from operations includes pension deficiency
payments of £320 million, with no further deficiency payment due until December 2009. In 2007, pension deficiency final payments were £520 million, whereas in 2006, no pension deficiency payments were made. In addition, in 2008 we made
cash payments of £297 million (2007 and 2006: £nil) associated with
our transformation activities.
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| Summarised
cash flow statement |
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| |
|
2008
£m |
|
2007
£m |
|
2006
£m |
|
| Cash generated from operations |
|
5,187 |
|
5,245 |
|
5,777 |
|
| Net income taxes repaid
(paid) |
|
299 |
|
(35 |
) |
(390 |
) |
|
|
|
|
|
|
|
|
| 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 acquisition of subsidiaries,
associates, joint ventures and group undertakings |
|
(364 |
) |
(237 |
) |
(167 |
) |
Net (purchase) sale of
current and non current asset investments |
|
(160 |
) |
515 |
|
3,069 |
|
| Dividends received from
associates and joint ventures |
|
2 |
|
6 |
|
1 |
|
| Interest received |
|
111 |
|
147 |
|
185 |
|
|
|
|
|
|
|
|
|
| Net cash (used) received
in investing activities |
|
(3,664 |
) |
(2,778 |
) |
214 |
|
| Net drawdown (repayment)
of borrowings |
|
2,061 |
|
(765 |
) |
(2,946 |
) |
| Equity dividends paid |
|
(1,236 |
) |
(1,057 |
) |
(907 |
) |
| Net repurchase of shares |
|
(1,413 |
) |
(279 |
) |
(339 |
) |
| Interest paid |
|
(842 |
) |
(797 |
) |
(1,086 |
) |
|
|
|
|
|
|
|
|
| Net cash used in financing
activities |
|
(1,430 |
) |
(2,898 |
) |
(5,278 |
) |
|
|
|
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|
|
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| Effect of exchange rates
on cash and cash equivalents |
|
25 |
|
(35 |
) |
– |
|
| Net increase (decrease)
in cash and cash equivalents |
|
417 |
|
(501 |
) |
323 |
|
|
|
|
|
|
|
|
|
| (Increase) decrease in net
debt resulting from cash flows |
|
(1,510 |
) |
(219 |
) |
199 |
|
|
|
|
|
|
|
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In 2008, we received a net tax refund of
£299 million, which includes a refund of £521 million in relation
to the settlement of open tax years up to and including 2004/05, which was agreed
with HMRC in 2007, together with tax paid of £222 million. In 2007, we
paid net tax of £35 million, which includes the initial cash receipt of
£376 million in relation to the settlement with HMRC. In 2006, we paid
tax of £390 million.
Net
cash outflow from investing activities was £3,664 million in 2008 (2007:
£2,778 million outflow, 2006: £214 million inflow). In 2008, our net
cash outflow for the purchase of property, plant and equipment was £3,253
million (2007: £3,209 million, 2006: £2,874 million). The increase
in both 2008 and 2007 reflects our preparations for 21CN and the systems developments
required by the Undertakings agreed with Ofcom.
In 2008, we have continued to make targeted acquisitions to expand our global
reach and enhance our capabilities in specific areas. Our net cash expenditure
on acquiring new businesses was £364 million in 2008 (2007: £237 million,
2006: £167 million). Significant acquisitions made in the current year
include Comsat International, Frontline Technologies Corporation Limited and
i2i Enterprise Private Limited. In 2007, significant acquisitions included INS
Inc and PlusNet, and in 2006, Radianz and Atlanet.
In 2008,
the net cash outflow from the net purchase of investments was £160 million,
compared with an inflow of £515 million in 2007, and an inflow of £3,069
million in 2006. The cash outflow in 2008 mainly related to the increase in
amounts held by liquidity funds. The net cash inflow in 2006 relates to the
sale of investments, which was used to partly fund the repayment of maturing
debt in that year.
Interest
received was £111 million in 2008, compared with £147 million in 2007
and £185 million in 2006. The interest receipts in 2008 and 2007 include
£65 million and £74 million, respectively, from HMRC on the settlement
discussed in the specific items section of this Financial review. Excluding
these receipts, interest received was £27 million lower in 2008 which in
turn was £112 million lower in 2007, reflecting the lower level of investments
held as debt matured and was repaid.
Net
cash outflow from financing activities of £1,430 million in 2008 compares
with £2,898 million in 2007 and £5,278 million in 2006. In 2008, we
raised debt of £3,939 million mainly through our European Medium Term Note
and US Shelf programmes which was partially offset by cash outflows on the repayment
of maturing borrowings, lease liabilities and the net repayment of commercial
paper amounting to £1,878 million. In 2007, the full and part maturity
of notes and leases resulted in a cash outflow of £1,085 million mainly
offset by the net issue of commercial paper of £309 million. Included in
the 2006 net cash outflow is a repayment of £4,432 million for maturing
debt. In addition, we raised new Sterling floating rate borrowing of £1,000
million and issued commercial paper raising net proceeds of £464 million
in 2006.
At 31
March 2008, net debt was £9,460 million, compared with £7,914 million
at 31 March 2007 and £7,534 million at 31 March 2006. The components of
net debt, which is a non-GAAP measure, together with a reconciliation to the
most directly comparable IFRS measure, are detailed in the net debt note. The share buy
back programme has resulted in a cash outflow of £1,498 million and this
is reflected in the increase in net debt in 2008.
Equity
dividends paid in 2008 were £1,236 million, compared with £1,057 million
and £907 million in 2007 and 2006, respectively. Interest paid in 2008
was £842 million, compared with £797 million and £1,086 million
in 2007 and 2006, respectively. The increase in 2008 mainly reflects the impact
of increased net debt and a one-off payment of £26 million on the close out of derivatives associated with
a low cost borrowing transaction. The reduction in 2007 mainly reflects the
impact of debt maturities discussed above.
During
2008, the share buy back programme continued and we repurchased 540 million
shares for cash consideration of £1,498 million. During 2007 and 2006 we
repurchased 148 million and 166 million shares for cash consideration of £400
million and £348 million, respectively. We also issued 53 million shares
out of treasury to satisfy obligations under employee share scheme exercises
receiving consideration of £85 million (2007: £123 million, 2006:
£9 million).
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