| 6 months to 30th September | 2004 £m |
BTC stock cover (wks) |
2005 £m |
BTC stock cover (wks) |
|---|---|---|---|---|
| Trading profit (before financing costs) | 197 | 180 | ||
| Working capital | (280) | 14.7 | (29) | 12.6 |
| Capital expenditure | (140) | (100) | ||
| Depreciation | 79 | 92 | ||
| Taxation and other items | (59) | (59) | ||
| (203) | 84 | |||
| Disposal of fixed assets | - | 296 | ||
| Net cash flow after investing activities | (203) | 380 |
The Group's cash flow has been well controlled in the first half. Working capital growth in the half year is only £29m despite the seasonal increase in BTC stock in preparation for the Christmas quarter.
Working capital benefited from the early receipt of £85m for dispensing which was received on the last day of September rather than in October. Nevertheless even adjusting for this, the outflow is much lower than last year and is in line with our guidance of flat working capital for the full year.
BTC stock cover has been reduced by 2 weeks since September last year. You may recall last year we added an additional 1 week's stock cover to provide a buffer against potential disruption during the implementation of the Supply Chain changes. This week's cover was taken out in the second half of last year. The remaining reduction of one week can broadly be divided into equal parts. Around half a week's cover reflects later buying of Christmas products. The other half a week's cover is a genuine reduction largely from stock in the back shop of stores. This is good progress towards our goal of reducing stock cover by 2 weeks over the next 2 years.
Capital expenditure is £100m. This is in line with our guidance of £190m for the full year with the reduction on last year reflecting the trading conditions. Spend has been directed towards new stores, IT, particularly to support the healthcare business, and in fixtures for beauty halls and the relaunch of own brand cosmetics.
The depreciation charge is up on last year as the effect of the investment programme feeds through to the income statement. As a result, depreciation in the half was only £8m lower than capital spend.
Finally, asset disposals, including sale and leaseback receipts, added £296m to cash flow bringing net cash inflow after investing activities to £380m for the half year.
I believe the Group's cash position is healthy and is the result not only of the cash generative nature of the business but also careful management of its cash resources.
