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Financial Review

Financial position

The Group looks to adopt efficient financing structures that enable it to use its balance sheet strength to achieve the Group’s objectives without putting shareholder value at risk. The Group’s balance sheet is set out in table 3.

Table 3: Balance sheet

2007
£m 		2006
£m
Intangible assets 1,173.9 697.6
Property, plant and equipment 678.7 501.9
Other non-current assets 34.3 37.2
Current assets excluding cash 311.9 322.3
Net debt (910.8) (438.4)
Non-current liabilities excluding borrowings (186.4) (209.7)
Current liabilities excluding borrowings (660.5) (583.1)
Disposal group net assets - 17.7
Net assets 441.1 345.5

The Group’s capital structure comprises its equity and its net debt. During 2007, the Group issued 792,659 shares to meet obligations under its employee share schemes, for consideration of £5.5m. The increase in the Group’s net debt from £438.4m to £910.8m is explained in the Finance Review above. The Group’s principal gearing ratio is net debt to EBITDA. At 31 December 2007, based on the reported EBITDA of £282.9 (2006: £264.0m) and net debt of £910.8m (2006: 438.4m) the ratio was 3.2 (2006: 1.7) with the increase driven by the acquisition of Continental Auto.

Liquidity

At 31 December 2007, the Group had two bank debt facilities: an £800 million revolving credit facility maturing in June 2011 and a €500m term loan facility expiring in April 2008. At 31 December 2007, the headroom under the facilities was £199.4m (2006: £247.8m).

The Group has complied with all of its banking covenants in the year. Since year end we have replaced the €500m term loan facility with a €540m term loan facility expiring in February 2009 with a one year extension to February 2010 at the Group’s option.

The Group’s net debt includes cash balances totalling £55.2m (2006: £33.5m) which cannot be withdrawn from our TOCs. This is because the franchise agreements with the DfT restrict the withdrawal of cash to ensure a TOC is able to meet its working capital requirements. Cash can only be withdrawn by loan or dividend to the extent that certain financial ratios are complied with.

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