Strong cash flow
In the current trading environment the business delivered strong cash flow of £78m, up 4% on the prior year representing 118% of profit after tax.
This performance was delivered through continued tight control over working capital, with stable stock turn and reducing debtor days whilst capital expenditure was less than half the level of depreciation.
Robust financial metrics
The Group has robust financial metrics with interest cover of 13 times and net debt to EBITDA of 1.7 times. We have significant headroom between these metrics and the banking covenants. The Group completed its bank refinancing in the year and has committed facilities of £314m with £281m maturing in September 2012.
Pensions
The Group, following consultation with its UK based employees, has taken action to improve the sustainability of its UK defined benefit pension scheme. This has involved changes to early retirement terms, a restriction on future salary increases that may be considered pensionable, and a life expectancy risk sharing mechanism between the Group and the pension scheme members.
The UK scheme deficit of £6.3m is £15.5m lower than at the previous year end due to these rule changes together with various adjustments to the pension assumptions.
Gross margin management
Gross margin for the year was 49.5%, with the second half improving on the first half due to more targeted use of customer discounts, better buying and selling price increases.
Reducing costs
Operating costs, at constant currency, have reduced year on year.
We have taken decisive action to reduce operating costs across the business and will realise annualised savings of around £18m of which around £15m will be realised in the coming year.
These actions have been taken across all regions of the business. They have been enabled by the increasing e‑Commerce channel share, strong control of discretionary spend, redistribution of activity between the Group’s two UK warehouses and exploiting the benefits of our systems infrastructure.
| Free cash flow | £78m |
|---|---|
| Net debt to Headline EBITDA | 1.7x |
| Interest cover | 13x |
| Committed facility headroom | £111m |
