IFRS basis results
Summary consolidated cash flow statement
| Half year 2007 £m |
Half year 2006 £m |
Full year 2006 £m |
|
|---|---|---|---|
| Cash flows from operating activities | |||
| Profit before tax from continuing operations (note i) | 726 | 899 | 2,221 |
| Profit (loss) before tax from discontinued operations (including profit on sale) (note M) | 222 | (45) | (150) |
| Total profit before tax | 948 | 854 | 2,071 |
| Changes in operating assets and liabilities (note ii) | 283 | 73 | 420 |
| Other items (note ii) | (767) | (241) | (282) |
| Net cash flows from operating activities | 464 | 686 | 2,209 |
| Cash flows from investing activities | |||
| Net cash flows from purchases and disposals of property and equipment | (137) | (280) | (140) |
| Costs incurred on purchase of Egg minority interests (note K) | – | (6) | (6) |
| Acquisition of subsidiaries, net of cash balances (note iii) | (77) | 15 | (70) |
| Disposal of Egg, net of cash balances (notes iv and K) | (538) | – | – |
| Disposal of other subsidiaries, net of cash balances (note iii) | 157 | 80 | 114 |
| Net cash flows from investing activities | (595) | (191) | (102) |
| Cash flows from financing activities | |||
| Structural borrowings of the Group: | |||
| Shareholder-financed operations (note v): | |||
| Redemption | (150) | (1) | (1) |
| Interest paid | (104) | (104) | (204) |
| With-profits operations (note vi): | |||
| Interest paid | – | (9) | (9) |
| Equity capital (note vii): | |||
| Issues of ordinary share capital | 1 | 1 | 15 |
| Dividends paid | (171) | (260) | (323) |
| Net cash flows from financing activities | (424) | (373) | (522) |
| Net (decrease) increase in cash and cash equivalents | (555) | 122 | 1,585 |
| Cash and cash equivalents at beginning of period | 5,071 | 3,586 | 3,586 |
| Effect of exchange rate changes on cash and cash equivalents | (16) | (43) | (100) |
| Cash and cash equivalents at end of period (note viii) | 4,500 | 3,665 | 5,071 |
Notes
(i) Profit before tax represents income net of post-tax transfers to unallocated surplus of with-profits funds before tax attributable to policyholders and unallocated surplus of with-profits
funds, unit-linked policies and shareholders’ profits. It does not represent profit before tax attributable to shareholders.
(ii) The adjusting items to profit before tax include changes in operating assets and liabilities and other items comprising adjustments in respect of non-cash items, including
operational interest receipts and payments, dividend receipts and tax paid. The figure of £(767)m for other items at half year 2007 includes £(290)m in respect of the profit on
sale of Egg, which is included in the cash flows from investing activities in this statement, and tax paid of £(361)m. The most significant elements of the adjusting items within
changes in operating assets and liabilities are as follows:
| Half year 2007 £m |
Half year 2006 £m |
Half year 2006 £m |
|
|---|---|---|---|
| Deferred acquisition costs (excluding changes taken directly to equity) | (277) | (462) | (398) |
| Other non-investment and non-cash assets | (884) | (873) | 166 |
| Investments | (7,189) | (2,618) | (13,748) |
| Policyholder liabilities (including unallocated surplus) | 7,181 | 4,105 | 13,540 |
| Other liabilities (including operational borrowings) | 1,452 | (79) | 860 |
| Changes in operating assets and liabilities | 283 | 73 | 420 |
(iii) Acquisitions and disposals of subsidiaries shown above include venture fund and other investment subsidiaries of the PAC with-profits fund, as shown in note K.
(iv) The amount of £(538)m in respect of the disposal of Egg, net of cash balances shown above, represents the net sale proceeds of £527m less cash and cash equivalents of
£1,065m held by Egg and transferred on disposal.
(v) Structural borrowings of shareholder-financed operations consist of the core debt of the parent company and related finance subsidiaries, Jackson surplus notes and, in 2006,
Egg debenture loans. Following the sale of Egg in May 2007, these loans no longer form part of the Group’s borrowings. Core debt excludes borrowings to support short-term
fixed income securities programmes and non-recourse borrowings of investment subsidiaries of shareholder-financed operations. Cash flows in respect of these borrowings are
included within cash flows from operating activities. In June 2007, borrowings of £150m were repaid on maturity.
(vi) Structural borrowings of with-profits operations relate solely to the £100m 8.5 per cent undated subordinated guaranteed bonds which contribute to the solvency base of the
Scottish Amicable Insurance Fund (SAIF), a ring-fenced sub-fund of the PAC with-profits fund. Cash flows on other borrowings of with-profits funds, which principally relate to
venture fund investment subsidiaries and other consolidated investment vehicles, are categorised as operating activities in the presentation above.
(vii) Cash movements in equity capital exclude scrip dividends and share capital issued in respect of the acquisition of Egg minority interests in 2006.
(viii) Of the cash and cash equivalents amounts reported above, £377m (half year 2006: £388m; full year 2006: £437m) represents cash and cash equivalents of the parent
company and related finance subsidiaries.
