Cash Flow Statement


	March 2005 € m	March 2004 € m
Operating profit	505	296
Depreciation and other non-cash items	113	151
Earnings before interest, tax and depreciation	618	447
(Increase)/decrease in working capital	(137)	114
Cash generated from operations	481	561
Returns on investments and servicing of finance	5	(26)
Taxation paid	(79)	(68)
Net acquisitions of fixed assets	(127)	(118)
Free cash flow from operations	280	349
Dividends received from associate - BAT	267	252
Proceeds from disposal of BAT preference shares	828	-
Proceeds from indirect disposal of BAT ordinary shares	179	-
Other investing activities, net	(5)	30
Net cash inflow before financing activities	1 549	631
Dividends paid to unitholders	(219)	(176)
Buy-back of Richemont units, net	44	(98)
Other financing activities, net	(257)	(13)
Exchange rate effects	30	29
Increase in cash, cash equivalents and short-term borrowings	1 147	373
Cash and cash equivalents at beginning of year	(371)	(744)
Cash and cash equivalents at end of year	776	(371)
Long-term borrowings	(159)	(423)
Net cash/(borrowings)	617	(794)

During the financial year, Richemont repaid its net borrowings such that, at 31 March 2005, its net cash position was € 617 million. The € 1 411 million change from the prior year reflects principally the cash generated from operations as well as the funds received from the settlement of the BAT preference shares, together with the proceeds of the minor disposal of BAT ordinary shares to Remgro.

Earnings before interest, tax and depreciation amounted to € 618 million, an increase of 38 per cent compared to the prior year, reflecting the increased sales and the Group's operating leverage. Working capital requirements increased by € 137 million during the year, primarily reflecting inventory movements. As a result, € 481 million of cash was generated from operations.

Capital expenditure, net of disposals, was broadly in line with the depreciation charge for the year, reflecting the planned slowdown in the rate of expansion of the Group's retail network and lower investment in the expansion of watch manufacturing capacity.

Dividends received from BAT comprised the final dividend in respect of BAT's financial year ended 31 December 2003 and the interim dividend in respect of the 2004 financial year. Total dividends received amounted to € 267 million, including € 32 million in respect of the final dividend on the preference shares.

Proceeds from the disposal of the preference shares in BAT in 2004 amounted to € 828 million. The payment represented the second and final tranche of the redeemable preference shares issued by BAT as part of the consideration for the merger with Rothmans International in 1999. The proceeds from the indirect disposal of ordinary shares in BAT to Remgro Limited, the Group's jointventure partner, in March 2005 amounted to € 179 million.