A summary of the Group's unaudited cash flow statement and balance sheet and notes as at 30 June 2009 are provided in the Interim financial statements.
In the first half of 2010, operating profit was £340 million, depreciation, amortisation and impairment £203 million, non–cash share–based incentive charges £35 million, net interest paid £107 million, tax paid £96 million, capital expenditure £90 million and other net cash outflows £1 million. Free cash flow available for working capital requirements, debt repayment, acquisitions, share re–purchases and dividends was, therefore, £284 million. This free cash flow was absorbed by £90 million in net cash acquisition payments and investments (of which £75 million was for earnout payments and loan note redemptions, with the balance of £15 million for investments and new acquisition payments net of disposal proceeds), £28 million in share re–purchases and £127 million in dividends, (paid for the first time in the first half of this year) a total outflow of £245 million. This resulted in a net cash inflow of £39 million, before any changes in working capital.
Average net debt in the first six months of 2010 fell by £254 million to £3.168 billion, compared to £3.422 billion in 2009, at 2010 exchange rates. On 30 June 2010 net debt was £3.029 billion, against £3.447 billion on 30 June 2009, a decrease of £418 million. Your Board continues to examine ways of deploying its EBITDA, (of over £1.3 billion or over $2 billion for the preceding twelve months) and substantial free cash flow (of almost £800 million or approximately $1.2 billion per annum, also for the previous twelve months), to enhance share owner value. At the time of the TNS transaction, it was announced that, for the following two years, acquisitions would be limited up to £100 million per annum, the Group’s share buy–back programme would be targeted up to 1% per annum and dividend growth at up to 15% per annum, using surplus cash generated to reduce debt.
In the first half of 2010, the Group continued to make small–sized acquisitions or investments in high growth geographical or functional areas. In the first six months of this year, acquisitions and increased equity stakes have been focused on advertising and media investment management in Poland, Israel, Brazil, and Colombia; in public relations and public affairs in Germany and Poland; in direct, digital and interactive in the United States, the United Kingdom, Germany and Brazil.
The Company continues to focus on examining the relative merits of dividends and share buy–backs and following the strong first half results has re–instituted an increase in dividend with a 15% hike in the first interim dividend, the upper limit committed to at the time of the TNS acquisition, to 5.97p per share. In the first half, 4.5 million shares were purchased at a cost of £28.6 million and an average price of £6.42 per share.