Cash flows Extracts from management reviews within annual reports Marks and Spencer plc We took a number of actions to improve our cash flow in 2008/09. In addition to reducing capital expenditure to £652m from over £1bn in the previous year, we generated a working capital inflow of £194.0m and raised £58.3m from the disposal of non-trading stores.
As a result, we generated a net cash inflow of £107.5m after paying interest, tax, dividend and share buyback of £661.2m. In addition, we agreed certain changes to the property partnership with the pension fund that provide us with discretion around the annual payments from the partnership to the fund. This gives us additional cash flow flexibility and reclassifies the obligation from debt to equity. As a result of our good cash flow management and the changes to the property partnership, net debt at year-end was down to £2.5bn from £3.1bn at the end of 2007/08.

First Group plc The Group continues to generate strong cash flows which are used to enhance shareholder value and pay down debt. Throughout the year we repaid £1,062m of existing short-term acquisition debt from new equity of £231m, new medium- to long-term debt and cash generation. Subsequent to year-end we successfully issued a 12 year £350m bond, the proceeds of which were used to prepay the remaining balance on short-term acquisition debt and to reduce drawings under our bank revolving facilities. The Group’s debt maturity profile has been significantly improved during the period with the average duration increasing to 4.6 years (2008: 3.5 years). Following the issue of the £350m bond, the average debt duration has further increased to 6.0 years. The next major facilities do not fall due until February 2012. Liquidity under committed bank facilities is strong with £583m available at the yearend.
The flexible nature of our businesses together with the actions we have implemented on costs and a strong focus on budgetary discipline will ensure that the Group is well placed to deliver our plans for cash generation and to continue to reduce net debt.

Discussion points 

1 What do we learn about cash flow from the information provided by Marks and Spencer (a retail business) and First Group (a transport business).
2 Why are both companies placing emphasis on reduction of net debt (external borrowing minus cash and short-term investments)?