Louis Vuitton 2005 Annual Report Download - page 77

PASSIONATE ABOUT CREATIVITY
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LVMH 2005 CONSOLIDATED FINANCIAL STATEMENTS
COMMENTS ON THE CONSOLIDATED
CASH FLOW STATEMENT
The consolidated cash flow statement, presented on the opposite page,
details the principal cash flows for the year ended December 31, 2005.
Cash flow from operations before changes in working capital amounted
to 3,089 million euros, compared to 2,708 million euros one year earlier,
an increase of 14%.
After interest and income taxes, net cash from operations before changes
in working capital amounted to 2,251 million euros, an increase of 7%.
Income taxes paid amounted to 616 million euros in 2005, compared
to 389 million in 2004. This increase was primarily due to an exceptional
interim corporate income tax charge on French companies which was
paid at the end of 2005.
Working capital requirements rose by 257 million euros. In particular,
increases in inventories absorbed 281 million euros of cash as a result
of business growth and the replenishment of related inventories.
The change in trade accounts receivable generated working capital
requirements of 67 million euros, whereas the change in trade accounts
payable decreased working capital requirements by 27 million euros.
Net cash from operating activities resulted in a substantial positive
balance of 1,994 million euros.
Net cash used in investing activities, which covers operating activities
and financial transactions, amounted to 818 million euros.
Operating capital expenditures during the year, net of proceeds from
disposals, amounted to 679 million euros, thus reflecting the healthy
pace of the Group’s business development, and particularly that of its
flagship brands: Louis Vuitton, Parfums Christian Dior, Fendi, and
Sephora among others.
Disposals of non-current available for sale financial assets exceeded
purchases by an amount of 400 million euros. Changes in consolida-
tion scope resulted in a net disbursement of 604 million euros. This
amount mainly comprises the impact of the acquisition of 100% of
Glenmorangie, and the final 30% share in Millennium, for 438 million
euros and 92 million euros, respectively.
Transactions relating to equity generated a net cash outflow of
531 million euros.
Dividends paid by LVMH S.A. in 2005 amounted to 446 million euros
(excluding treasury shares), of which 329 million was paid in May in
respect of the final 2004 dividend and 117 million was paid in December
in respect of the interim dividend for 2005. Moreover, minority interests
in consolidated subsidiaries received dividends in the amount of
120 million euros. This related primarily to Diageo in respect of its 34%
investment in Moët Hennessy and minority interests in DFS.
The net cash generated by operating and investing activities, and equity
transactions thus amounted to 645 million euros.
The Group repaid borrowings in the amount of 1,559 million euros, a
substantially higher amount than new borrowings contracted.
New borrowings generated 1,192 million euros of cash. In particular,
the Group made a 600 million euro 7-year public bond issue in June 2005
and issued Loan Notes at the time of the acquisition of Glenmorangie,
of which 60 million euros were outstanding at December 31, 2005. The
Group also continued to fund its operations in Japan by means of the
private placement of Euro Medium Term Notes.
The reduction in net financial debt is reflected in the decrease in long
term borrowings, the increase in cash and cash equivalents and the 190
million euro decrease in commercial paper outstanding.
As of December 31, 2005, cash and cash equivalents net of bank over-
drafts amounted to 1,080 million euros.