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v3.23.1

Adjusted Cash Flow and Free Cash Flow | 12 Months Ended
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Dec. 31, 2022
Adjusted Cash Flow and Free Cash Flow. |
Adjusted Cash Flow and Free Cash Flow | C10. Adjusted Cash Flow and Free Cash Flow ​
​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | 2022 | ​ | 2021 | ​ | 2020
​ | ​ | £m | ​ | £m | ​ | £m
Operating profit |  | 317 |  | 347 |  | 294
Adjustments for: |  |  |  |  |  |
– Depreciation and impairment of property, plant and equipment |  | 148 |  | 128 |  | 132
– Depreciation and impairment of leased assets |  | 106 |  | 78 |  | 78
– Amortisation and impairment of intangible assets (excluding computer software) |  | 118 |  | 74 |  | 82
– Amortisation and impairment of computer software |  | 22 |  | 17 |  | 19
– Other non-cash items |  | 8 |  | 6 |  | (1)
Changes in working capital (excluding the effects of acquisitions and exchange differences on consolidation): |  | ​ |  | ​ |  | ​
– Inventories |  | (4) |  | (3) |  | (23)
– Contract costs |  | (10) |  | (5) |  | (2)
– Trade and other receivables |  | 37 |  | 59 |  | (19)
– Accrued income |  | (32) |  | — |  | 2
– Trade and other payables and provisions |  | (75) |  | (43) |  | 78
– Contract liabilities |  | 81 |  | 11 |  | 13
Cash generated from operating activities |  | 716 |  | 669 |  | 653
​ | ​ | ​ | ​ | ​ | ​ | ​
Purchase of property, plant and equipment | ​ | (153) | ​ | (128) | ​ | (130)
Purchase of intangible fixed assets | ​ | (37) | ​ | (32) | ​ | (23)
Capital element of lease payments and initial direct costs incurred | ​ | (104) | ​ | (88) | ​ | (83)
Proceeds from sale of property, plant and equipment | ​ | 5 | ​ | 7 | ​ | 6
Cash impact of one-off and adjusting items | ​ | 59 | ​ | 27 | ​ | 7
Dividends received from associates | ​ | 4 | ​ | 4 | ​ | 12
Adjusted Cash Flow | ​ | 490 | ​ | 459 | ​ | 442
Interest received | ​ | 13 | ​ | 5 | ​ | 8
Interest paid | ​ | (52) | ​ | (42) | ​ | (49)
Income tax paid | ​ | (77) | ​ | (69) | ​ | (64)
Free Cash Flow | ​ | 374 | ​ | 353 | ​ | 337
​ ​ Free Cash Flow The Group aims to generate sustainable cash flow (Free Cash Flow) in order to support its acquisition programme and to fund dividend payments to shareholders. Free Cash Flow is measured as net cash from operating activities, adjusted for cash flows related to the purchase and sale of property, plant, equipment and intangible fixed assets, cash flows related to leased assets, cash flows related to one-off and adjusting items and dividends received from associates. These items are considered by management to be non-discretionary, as continued investment in these assets is required to support the day-to-day operations of the business. A reconciliation of Free Cash Flow from net cash from operating activities is provided in the table below: ​
​ | ​ | ​ | ​ | ​
​ |  | 2022 |  | 2021
​ | ​ | AER | ​ | AER
​ | ​ | £m | ​ | £m
Net cash from operating activities |  | 600 |  | 563
Purchase of property, plant, equipment and intangible fixed assets |  | (190) |  | (160)
Capital element of lease payments and initial direct costs incurred |  | (104) |  | (88)
Proceeds from sale of property, plant, equipment and software |  | 5 |  | 7
Cash impact of one-off and adjusting items | ​ | 59 | ​ | 27
Dividends received from associates |  | 4 |  | 4
Free Cash Flow |  | 374 |  | 353
​ Adjusted Free Cash Flow Conversion ​ Adjusted Free Cash Flow Conversion is calculated by dividing Adjusted Free Cash Flow by Adjusted Profit After Tax, expressed as a percentage. Adjusted Free Cash Flow is measured as Free Cash Flow adjusted for product development additions and net investment hedge cash interest through Other Comprehensive Income. ​
​ | ​ | ​ | ​ | ​ | ​
​ |  | 2022 |  | 2021 |
​ | ​ | AER |  | AER | ​
​ | ​ | £m | ​ | £m | ​
Adjusted Profit After Tax |  | 427 |  | 336 | ​
Free Cash Flow |  | 374 |  | 353 | ​
Product development additions |  | 10 |  | 7 | ​
Net investment hedge cash interest through Other Comprehensive Income |  | 8 |  | 4 | ​
Adjusted Free Cash Flow |  | 392 |  | 364 | ​
Adjusted Free Cash Flow Conversion |  | 91.8 | % | 108.3 | %
​

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