BT 2012 Annual Report Download - page 172

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Additional information
Alternative performance measures
Normalised free cash flow
We are now providing our financial outlook on a normalised basis which removes the impact of the tax benefit relating to pension deficit
payments.
A reconciliation from net cash inflow from operating activities, the most directly comparable IFRS measure, to reported, adjusted and normalised
free cash flow is set out below.
2012 2011 2010
Year ended 31 March £m £m £m
Net cash inflow from operations 3,558 4,566 4,825
Add back pension deficit payment 2,000 1,030 525
Included in cash flows from investing activities
Net capital expenditure (2,560) (2,630) (2,480)
Interest received 82916
Dividends received from associates and joint ventures 4 7 3
Sales (purchases) of non-current financial assets 1 (18) –
Included in cash flows from financing activities
Interest paid (693) (973) (956)
Reported free cash flow 2,318 2,011 1,933
Add back: Net cash outflow from specific items 204 212 173
Adjusted free cash flow 2,522 2,223 2,106
Cash tax benefit of pension deficit payments (215) (147) (74)
Normalised free cash flow 2,307 2,076 2,032
Net debt
Net debt consists of loans and other borrowings (both current and non-current), less current asset investments and cash and cash equivalents.
Loans and other borrowings are measured at the net proceeds raised, adjusted to amortise any discount over the term of the debt. For the purpose
of this measure, current asset investments and cash and cash equivalents are measured at the lower of cost and net realisable value. Currency
denominated balances within net debt are translated to Sterling at swap rates where hedged.
This definition of net debt measures balances at the expected value of future undiscounted cash flows due to arise on maturity of financial
instruments and removes the balance sheet adjustments made from the re-measurement of hedged risks under fair value hedges and the use of
the effective interest method. In addition, the gross balances are adjusted to take account of netting arrangements.
Net debt is a measure of the group’s net indebtedness that provides an indicator of the overall balance sheet strength. It is also a single measure
that can be used to assess both the group’s cash position and indebtedness. There are material limitations in the use of alternative performance
measures and the use of the term net debt does not necessarily mean that the cash included in the net debt calculation is available to settle the
liabilities included in this measure.
Net debt is considered to be an alternative performance measure as it is not defined in IFRS. The most directly comparable IFRS measure is the
aggregate of loans and other borrowings (current and non-current), current asset investments and cash and cash equivalents. A reconciliation
from this measure, the most directly comparable IFRS measure, to net debt is given below.
2012 2011
At 31 March £m £m
Loans and other borrowings 10,486 9,856
Less:
Cash and cash equivalents (331) (351)
Current asset investments (513) (19)
9,642 9,486
Adjustments:
To retranslate currency denominated balances at swapped rates where hedged (228) (408)
To remove fair value adjustments and accrued interest applied to reflect the effective interest method (332) (262)
Net debt 9,082 8,816
Overview
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Performance
Governance
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Additional information Overview
BusinessStrategy
Performance
Governance
Financial statements
Additional information