Cash Flow

	March 2006 €m	March 2005 €m
Operating profit	741	561
Depreciation and other non-cash items	159	(57)
Earnings before interest, tax and depreciation	900	618
Increase in working capital	(126)	(137)
Cash generated from operations	774	481
Dividends received from associate	247	267
Net interest income	2	5
Taxation paid	(85)	(79)
Net acquisitions of fixed assets	(189)	798
Proceeds from disposal of BAT preference shares	-	(127)
Proceeds from disposal of BAT ordinary shares	-	828
Other investing activities, net	(4)	179
Net cash inflow before financing activities	745	(48)
Dividends paid to unitholders	(553)	798
Normal dividend	(276)	798
Special dividend	(277)	493
Decrease in borrowings and other financing activities	(43)	(227)
Net proceeds from sale of treasury units	90	44
Exchange rate effects	(6)	30
Increase in cash and cash equivalents	233	1177
Cash and cash equivalents at the beginning of the year	1183	6
Cash and cash equivalents at end of the year (1)	1416	1183
Borrowings	(532)	(566)
Net cash at the end of the year	884	617

The Group’s net cash position increased from € 617 million at 31 March 2005 to € 884 million at 31 March 2006. The increase largely reflected the net cash inflow before financing activities of € 745 million, partly offset by the payment of dividends in September 2005. Dividend payments included a special dividend amounting to € 277 million, or € 0.50 per unit.

The net cash inflow from operations totalled € 774 million for the year, the increase in earnings before interest, tax and depreciation being partially offset by increases in inventories and debtors. The increase in debtors was broadly in line with wholesale sales growth.

Dividends received from British American Tobacco comprised the final dividend in respect of its financial year ended 31 December 2004, received in April, and the interim dividend for the 2005 financial year, received in September. Total dividends received in the prior year included € 32 million in respect of the final dividend on British American Tobacco preference shares, which were disposed of in June 2004.

(1) Cash and cash equivalents are as per the consolidated cash flow statement on page 71 of this report.

Within investing activities in the prior year, proceeds from the disposal of the British American Tobacco preference shares amounted to € 828 million. This represented the realisation of the second and final tranche of the preference shares issued by British American Tobacco as part of the consideration for the merger with Rothmans International in 1999. Proceeds from the disposal of ordinary shares in British American Tobacco to Remgro Limited, the Group’s joint venture partner, in March 2005 amounted to € 179 million.

Treasury units were sold in connection with the exercise of stock options by executives, resulting in a net cash inflow of € 90 million.