ABSTRACT
INTERNAL FUNDS/INVESTMENT Operating profit 934 849 Interest received 34 28
968 877 Non-cash item: Depreciation 406 358 Gross funds from operations 1 374 1 235 Financing costs and tax: (638) (574)
Interest paid 163 122 Tax paid 237 238 Dividends paid 238 214
Net funds from operations 736 661 Increases in working capital: (19) (51)
Stocks (56) (114) Debtors (12) (36) Creditors 49 99
Net cash from operations 717 610 Sale of tangible fixed assets 27 82 Sale of subsidiaries (2) 322 Total cash available 742 1 014 Fixed asset investment (1 285) (1 486)
Purchase of tangible fixed assets 1 032 805 Purchase of subsidiaries 184 649 Purchase of interests in joint ventures 69 32
Financing requirement (543) (472)
External financing Ordinary share capital 42 38 Increase in loans 704 422 (Increase) in short-term deposits (7) (116) (lncrease)/decrease in cash (196) 128
543 472
INTERPRETING TESCO’S CASH FLOWS The statement shown on the left shows cash flows for 1998 and 1999. From these figures, we can see a number of interesting things:
• Operating profit rose 10 per cent, from £849m to £934m. • Following heavy investment in fixed assets, depreciation rose by 13.5 per cent. • Interest paid was up by one-third, but tax paid was unchanged. • A sa result, net funds from operations were 11 per cent up. • Working capital figures again reflect a small net investment. • Tangible fixed asset investment is a quarter up on 1998’s large amount. • Again there is a significant financing requirement, more than £500m in 1999. • And again it is met by increased loans. (Tesco’s debt ratio (net of cash) has risen
in the year from 23 to 29 per cent.)
The five years’ figures (below) add some extra insight:
• In the three earlier years working capital decreased (as one would expect with growing turnover, given the large excess of current liabilities over current assets).
