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32. Cash generated from operations
| All figures in £ millions | Notes | 2007 | 2006 |
|---|---|---|---|
| Net profit | 310 | 469 | |
| Adjustments for: | |||
| Income tax | 222 | 19 | |
| Depreciation | 10 | 68 | 77 |
| Amortisation of purchased intangible assets | 11 | 45 | 28 |
| Adjustment on recognition of pre-acquisition deferred tax | 11 | – | 7 |
| Amortisation of other intangible assets | 11 | 25 | 23 |
| Investment in pre-publication assets | 17 | (230) | (213) |
| Amortisation of pre-publication assets | 17 | 192 | 210 |
| Loss on sale of property, plant and equipment | 1 | 2 | |
| Net finance costs | 6 | 106 | 74 |
| Share of results of joint ventures and associates | 12 | (23) | (24) |
| Profit on sale of discontinued operations | 3 | (146) | – |
| Goodwill impairment of discontinued operation | 3 | 97 | – |
| Net foreign exchange gains/(losses) from transactions | 11 | (37) | |
| Share-based payment costs | 25 | 30 | 25 |
| Inventories | (1) | (16) | |
| Trade and other receivables | (5) | (60) | |
| Trade and other liabilities | 80 | 54 | |
| Retirement benefit obligations | (126) | (17) | |
| Provisions | 3 | – | |
| Net cash generated from operations | 659 | 621 | |
| Dividends from joint ventures and associates | 12 | 32 | 45 |
| Purchase of property, plant and equipment | (86) | (68) | |
| Purchase of intangible assets | (33) | (29) | |
| Finance lease principal payments | (2) | (3) | |
| Proceeds from sale of property, plant and equipment | 14 | 8 | |
| Add back: Special pension contribution | 100 | – | |
| Add back: Cash spent against integration and fair value provisions | – | 1 | |
| Operating cash flow | 684 | 575 | |
| Operating tax paid | (61) | (59) | |
| Net operating finance costs paid | (90) | (82) | |
| Operating free cash flow | 533 | 434 | |
| Non-operating tax paid | (26) | – | |
| Special pension contribution | (100) | – | |
| Cash spent against integration and fair value provisions | – | (1) | |
| Total free cash flow | 407 | 433 | |
| Dividends paid (including to minorities) | (248) | (235) | |
| Net movement of funds from operations | 159 | 198 |
Included in net cash generated from operations is an amount of £7m (2006: £33m) relating to discontinued operations.
Operating cash flow, operating free cash flow and total free cash flow have been disclosed as they are part of Pearson’s corporate and operating measures. Following the completion of the latest actuarial valuation of the UK Group pension plan as at January 2006, the Group agreed that during 2007 it would make additional payments to the plan amounting to £100m. The Group has excluded this £100m from its definition of operating cash flow and operating free cash flow as it distorts the underlying operating performance for the year.
In the cash flow statement, proceeds from sale of property, plant and equipment comprise:
| All figures in £ millions | 2007 | 2006 |
|---|---|---|
| Net book amount | 15 | 10 |
| Loss on sale of property, plant and equipment | (1) | (2) |
| Proceeds from sale of property, plant and equipment | 14 | 8 |
The principal other non-cash transactions are movements in finance lease obligations of £4m (2006: £4m).