Strong Cash Flow
Our operating businesses are strongly cash generative. Once the businesses have achieved a certain critical mass, they can generally increase revenues without a significant increase in working capital. Our businesses are not particularly capital intensive, with the principal fixed assets being IT systems, office and warehouse facilities. Significant investments are made periodically in IT system up-grades and facility expansions, but annual capital expenditure would typically be lower than the depreciation charge over the business cycle.
Free cash flow is defined as the cash flow generated after tax but before acquisitions and dividends. This measures the success of the operating businesses and the Group as a whole, in turning profit into cash through the careful management of working capital and capital investments in the business.
Over the last five years, we have generated a robust free cash flow averaging £15.2m pa representing 99% of average adjusted profit after tax. These figures exclude the one-off proceeds from the sales of surplus land and buildings from legacy businesses - a total of ca £20m over the period 2003 - 2007.
The total cash flow, after dividend payments and acquisitions, has left us with a strong, ungeared balance sheet. This provides the financial resources to fund our growth strategy, while providing healthy and progressive dividend payments.
