BT 2013 Annual Report Download - page 49

Performance 47
Performance
Cash flow
Our cash generation is strong, with normalised free cash flow of £2.3bn
and net debt of £7.8bn, down £1.3bn. The cash generation of our
business has put us in a good liquidity and funding position.
Free cash flow
We measure our performance using normalised free cash flow. This is
one of our three key performance indicators as detailed on page 4.
Normalised free cash flow, which is defined on page 171, is an
important measure of our financial performance. It represents the
cash we generate from our operations after capital expenditure and
finance costs. It excludes the impact of specific items, purchases of
telecommunications licences, pension deficit payments and the related
cash tax benefits. This is consistent with how management measures our
financial performance and gives us a meaningful way to analyse the free
cash flow generated by the group.
We have set out a reconciliation from net cash inflow from operating
activities, the most directly comparable IFRS measure, to normalised
freecash flow, on page 172.
Summarised cash flow statement
Year ended 31 March
2013
£m
2012
£m
2011
£m
EBITDA 6,181 6,064 5,886
Capital expenditurea(2,438) (2,560) (2,630)
Interest (692) (685) (944)
Taxationb(624) (615) (356)
Working capital movements (81) (3) (11)
Other non-cash and
non-current liabilities
movements (46) 106 131
Normalised free cash flow 2,300 2,307 2,076
Purchases of
telecommunications
licences (202) – –
Cash tax benefit of pension
deficit payments 560 215 147
Specific items (366) (204) (212)
Reported free cash flow 2,292 2,318 2,011
Pension deficit payments (325) (2,000) (1,030)
Dividends (683) (590) (543)
Disposals and acquisitions 222 15 64
Share buyback programme (302) – –
Proceeds from issue of own
shares 109 21 8
Reduction (increase) in net
debt from cash flows 1,313 (236) 510
Net debt at 1 April (9,082) (8,816) (9,283)
Reduction (increase) in net
debt from cash flows 1,313 (236) 510
Non-cash movements (28) (30) (43)
Net debt at 31 March (7,797) (9,082) (8,816)
a Excluding purchases of telecommunications licences.
b Excluding cash tax benefit of pension deficit payments.
We generated normalised free cash flow of £2,300m which was in line
with our expectation for the year and level with the prior year.
Growth in our profits and efficiencies in our capital expenditure
programmes helped generate strong cash flows although these
improvements were largely offset by working capital movements, some
of which reflected the timing of contract-related receipts and supplier
payments.
Our cash generation and financial strength have enabled us to progress
our financial objectives. We have reduced our net debt by £1,285m
whilst supporting our pension fund, paying progressive dividends to
our shareholders and making strategic investments for the future of our
business. We have also spent £302m (2011/12 and 2010/11: £nil) on
our share buyback programme to counteract the dilutive effect of our
all-employee share option plans. Exercises of share options generated
proceeds of £109m (2011/12: £21m, 2010/11: £8m).
The net cash outflow from specific items was £366m (2011/12: £204m,
2010/11: £212m) which principally comprised restructuring costs
of £147m (2011/12: £120m, 2010/11: £165m), a £95m outflow
following the regulatory decision on historic Ethernet pricing, cash
payments of £67m from the ladder pricing decision relating to 2010/11
and 2011/12, and property rationalisation costs of £55m (2011/12:
£68m, 2010/11: £47m).
Disposals and acquisitions included proceeds of £270m relating to the
sale of our remaining interest in Tech Mahindra which were partially
offset by a net £54m outflow, including £10m cash acquired, in relation
to our acquisition of Tikit Group plc.