Dividend
The directors propose a dividend of 5 pence per share (totalling £58 million) for the year ended March 31, 2008. The dividend will be submitted for approval at the annual general meeting to be held on July 15, 2008. The financial statements do not reflect the dividend payable which will be accounted for as a reduction in shareholders’ equity in the year ending March 31, 2009.
Capital expenditure
| (£ million) | 2007/08 | 2006/07 |
|---|---|---|
| Aircraft, spares, modifications and refurbishments (net of refund of progress payments) | 428 | 258 |
| Property and equipment | 209 | 81 |
| Landing rights and other intangible assets | 40 | 41 |
| Investments | 57 | 0 |
| 734 | 380 |
Our capital spend in the year was £734 million, up £354 million on last year. This was primarily down to higher spend on fleet assets, mainly due to the delivery of seven new Airbus shorthaul aircraft, higher investment in property and equipment for Terminal 5, and additional investment in Iberia.
Capital commitments
Capital commitments authorised and contracted for but not provided in the accounts amount to £5,189 million for the Group (2006/07: £554 million) and £5,185 million for the Company (2006/07: £553 million).
The outstanding commitments include £5,162 million for the acquisition of four Boeing 777 aircraft scheduled for delivery in 2009, 19 Airbus A320 family (from 2008 to 2010), 12 Airbus A380 (from 2012 to 2014) and 24 Boeing 787 (from 2012 to 2015).
Working capital
At March 31, 2008 our total current assets and receivables were £3,148 million, compared to £3,431 million at March 31, 2007. The reduction primarily reflects lower current interest-bearing deposits, due mainly to the payments to NAPS and the DOJ, partially offset by increases in short-term derivative financial instruments.
Our total current liabilities at March 31, 2008 were £3,244 million, down £381 million versus March 31, 2007. This mostly reflects a reduction in short-term provisions, due mainly to the $300 million (£149 million) payment to the DOJ, and a reclassification of some elements of the remainder of the provision for anti-competitive activity from short-term to long-term provisions.
We believe the working capital is sufficient for our current requirements.
Cash flow
Our cash and cash equivalents position at March 31, 2008 was £1,864 million. This was a reduction of £491 million compared with the position at March 31, 2007. The reduction was driven by a number of one-off items during the year.
Firstly, we paid £560 million into NAPS in April 2007 as part of the changes agreed to address the deficit in NAPS. Secondly, as discussed, we were fined $300 million ($100 million for longhaul passenger fuel surcharges and $200 million for cargo) by the DOJ for anti-competitive activity. This was paid during the first half of the year. Finally, we paid an additional £50 million into NAPS in March 2008. Again, this was in line with the changes agreed last year, under which we agreed to pay up to an additional £50 million a year for three years if our year end cash balance exceeds £1.8 billion.
Net cash inflow from operating activities was £303 million, a reduction of £453 million over 2006/07. This was primarily due to the one-off payments highlighted above and changes to working capital, partially offset by improvements in operating cash flow.
The £78 million increased cash outflow on investing activities was primarily due to our increased spend on property, plant and equipment (new aircraft and Terminal 5), and increasing our shareholding in Iberia.
Liquidity
At March 31, 2008 we had short-term loans and deposits and cash at bank and in hand amounting to £1,864 million (March 31, 2007: £2,355 million). In addition, we had undrawn long-term committed aircraft financing facilities totalling approximately $2,880 million, further committed general facilities of $115 million and ¥75 billion, undrawn uncommitted overdraft lines totalling £20 million and €20 million, and undrawn uncommitted money-market lines of £45 million.
Net debt/total capital ratio
Net debt at March 31, 2008 amounted to £1,310 million, an increase of £319 million compared with March 31, 2007. This is net of cash and cash equivalents and other interest-bearing deposits totalling £1,864 million.
Despite our increase in net debt, the net debt/total capital ratio at March 31, 2008 was 28.8 per cent, a 0.3 point reduction on last year. This was mainly due to growth in retained profits. Including operating leases, our net debt/total capital ratio was 38.4 per cent, a 1.2 point reduction from last year.
Financial risk management
We are exposed to a variety of financial risks, including market risk, credit risk and liquidity risk. Our overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on our financial performance. This is covered in more detail in note 30 to the financial statements.
Keith Williams, Chief Financial Officer