Imperial Chemical Industries (ICI)

Cash flow
The following analysis of cash flow, which relates to the table (right), distinguishes between cash flows which relate to operating activities and those which relate to investing activities. Included within operating activities are the top-up payments to the ICI UK Pension Fund, interest, tax paid (excluding tax on disposals) and dividends paid. Included within investing activities are sales and purchases of tangible fixed assets, net proceeds from disposals of businesses, payments against disposal provisions which, in some cases, will continue for a number of years, and acquisition expenditure.

Operating activities
Profit before special items, net finance expense, taxation, depreciation and amortisation (“EBITDA”) for the year was £721m, £12m higher than last year (2004 £709m), primarily as a result of higher trading profit.

After a relatively poor start to the year, working capital management improved in the second half and a significant element of the cash inflow was delivered through improved inventory management and effective control of debtors and creditors.

Cash outflows in relation to special items of £53m were £28m lower than in 2004 as elements of the restructuring programme reached completion. Despite higher cash outflows in relation to tax and dividend payments, net cash from operating activities for the year was an inflow of £359m, £32m higher than last year.

Investing activities
The completion of the sale of the Vinamul Polymers business, with proceeds of £111m, was the major contributor to net disposal proceeds of £108m. Capital expenditure of £159m was in line with last year (2004 £158m). After payments of £47m in respect of disposals prior to 2004 (2004 £95m) and acquisitions of £23m (2004 £4m), net cash used in investing activities was an outflow of £106m, compared with an inflow of £29m in 2004 which included the proceeds from the sale of the Quest Food Ingredients business.

Cash flow before acquisitions and divestments
The Group generated a cash inflow before acquisitions and divestments of £170m, compared with £82m for 2004.

Movement in net debt
Net debt at the end of 2005 was £745m, £244m lower than at the beginning of the year. Net debt at the start of the year was increased by £69m for restatement due to IFRS transition adjustments in relation to certain financial instruments recognised in accordance with IAS 32 Financial Instruments: Disclosure and Presentation and IAS 39 Financial Instruments: Recognition and Measurement. The non-cash impact of £9m included the result of foreign currency translation and fair value adjustments.

Financing activities
Further to the cash inflow from operating activities of £359m (2004 £327m), and the cash outflow from investing activities of £106m (2004 cash inflow of £29m), both explained above, the cash flow from financing activities was an outflow of £224m (2004 outflow of £464m). Repayments of long-term loans were significantly lower than in 2004 at £137m (2004 £521m). The increase in current asset investments of £6m was £32m lower than last year whilst the movement in short-term borrowings resulted in a cash outflow of £114m compared with an inflow of £84m in 2004. Consequently, cash and cash equivalents at the end of 2005 were £516m, £47m higher than at the end of 2004.