31. Consolidated cash flow analysis
a) Reconciliation of profit before tax to cash inflows from continuing operations
| US$ million | 2007 | 2006(1) |
|---|---|---|
| Profit before tax – continuing operations | 8,821 | 8,443 |
| Depreciation and amortisation | 1,398 | 1,414 |
| Share-based payment charges | 138 | 182 |
| Special items and remeasurements of subsidiaries and joint ventures | (243) | 102 |
| Net finance costs before remeasurements | 137 | 110 |
| Fair value gains before special items and remeasurements | (12) | (13) |
| Share of net income from associates | (197) | (607) |
| Additional pension contributions | – | (188) |
| Provisions | 77 | 14 |
| Increase in inventories | (352) | (299) |
| Increase in operating receivables | (389) | (602) |
| Increase in operating payables | 53 | 511 |
| Other adjustments | (56) | (55) |
| Cash inflows from continuing operations | 9,375 | 9,012 |
(1) Comparatives have been adjusted to exclude amounts relating to discontinued operations.
b) Reconciliation to the balance sheet
| Cash and cash equivalents(1) | Short term borrowings | Medium and long term borrowings | ||||
|---|---|---|---|---|---|---|
| US$ million | 2007 | 2006 | 2007 | 2006 | 2007 | 2006 |
| Balance sheet | 3,129 | 3,004 | (5,895) | (2,028) | (2,404) | (4,220) |
| Balance sheet – disposal groups(2) | – | 63 | (31) | (135) | – | (8) |
| Bank overdrafts | (17) | (87) | 17 | 87 | – | – |
| Bank overdrafts – disposal groups(2) | (38) | – | – | – | – | – |
| Net debt classifications | 3,074 | 2,980 | (5,909) | (2,076) | (2,404) | (4,228) |
(1) Short term borrowings on the balance sheet include overdrafts which are included within cash and cash equivalents for net debt.
(2) Disposal group balances are shown as ‘Assets classified as held for sale’ and ‘Liabilities directly associated with assets classified as held for sale’ on the balance sheet.
c) Movement in net debt
| US$ million | Cash and cash equivalents(1) | Debt due within one year |
Debt due after one year | Current financial asset investments | Net debt excluding hedges | Hedges(2) | Total net debt including hedges |
|---|---|---|---|---|---|---|---|
| Balance at 1 January 2006 | 3,319 | (1,965) | (6,363) | 16 | (4,993) | 13 | (4,980) |
| Cash flow(3) | (170) | (193) | (374) | (5) | (742) | – | (742) |
| Acquisition and disposal of businesses(4) | – | 224 | 1,480 | (1) | 1,703 | – | 1,703 |
| Conversion to equity | – | 311 | 757 | – | 1,068 | – | 1,068 |
| Unwinding of discount on convertible debt | – | – | (13) | – | (13) | – | (13) |
| Reclassifications | – | (509) | 438 | – | (71) | – | (71) |
| Movement in fair value | – | – | 5 | – | 5 | 180 | 185 |
| Other non-cash movements | – | 6 | (13) | (14) | (21) | – | (21) |
| Currency movements | (169) | 50 | (145) | 4 | (260) | – | (260) |
| Balance at 1 January 2007 | 2,980 | (2,076) | (4,228) | – | (3,324) | 193 | (3,131) |
| Cash flow(3) | 34 | (2,618) | (1,334) | – | (3,918) | – | (3,918) |
| Acquisition, disposal and demerger of businesses | – | 468 | 1,858 | – | 2,326 | – | 2,326 |
| Reclassifications | – | (1,394) | 1,420 | – | 26 | – | 26 |
| Movement in fair value | – | (7) | 10 | – | 3 | 195 | 198 |
| Other non-cash movements | – | – | 18 | – | 18 | – | 18 |
| Currency movements | 60 | (282) | (148) | – | (370) | – | (370) |
| Balance at 31 December 2007 | 3,074 | (5,909) | (2,404) | – | (5,239) | 388 | (4,851) |
(1) The Group operates in certain countries (principally South Africa and Venezuela) where the existence of exchange controls may restrict the use of certain cash balances. These restrictions are not expected to have any material effect on the Group’s ability to meet its ongoing obligations.
(2) Derivative instruments that provide an economic hedge of assets and liabilities in net debt are included above to reflect the true net debt position of the Group at the year end. This consists of net current derivative assets of $396 million (2006: $6 million) and net non-current derivative liabilities of $8 million (2006: $187 million net assets) and are classified within other financial assets and liabilities on the balance sheet.
(3) Cash flow on debt due within one year includes repayments of $162 million which relate to discontinued operations (2006: $228 million). Similarly, cash flow on debt due after one year includes receipts of $993 million (2006: $107 million) which relate to discontinued operations.
(4) Includes net debt of $1,917 million which was transferred to ‘Investments in associates’.