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National Grid PLC
19 November 2009
19 November 2009
National Grid plc
Half year report for the six months ended 30 September 2009 (unaudited)
HIGHLIGHTS
* Very strong first half performance
* Pre-tax profit1 up 16%, earnings per share1 up 31%
* Higher operating cash flow2 of GBP1,607m
* 8% increase in the interim dividend
* Delivering on our priorities
* Regulatory progress in the US, filings on track
* Capital investment of GBP1.5bn, in line with plans for full year
* Funding for the year complete, stable credit ratings, net debt down GBP693m
* Outlook for 2009/10 strong, in line with our expectations
FINANCIAL RESULTS FOR CONTINUING OPERATIONS
+------------------------------------------------------+-----------+-----------+-----------+
| | Six months ended 30 September |
+------------------------------------------------------+-----------------------------------+
| (GBPm, at actual exchange rate) | 2009 | 2008 | % change |
+------------------------------------------------------+-----------+-----------+-----------+
| Business performance | | | |
+------------------------------------------------------+-----------+-----------+-----------+
| Operating profit | 1,149 | 1,079 | 6 |
+------------------------------------------------------+-----------+-----------+-----------+
| Pre-tax profit | 649 | 558 | 16 |
+------------------------------------------------------+-----------+-----------+-----------+
| Earnings | 554 | 431 | 29 |
+------------------------------------------------------+-----------+-----------+-----------+
| Earnings per share | 22.5p | 17.2p3 | 31 |
+------------------------------------------------------+-----------+-----------+-----------+
| | | | |
+------------------------------------------------------+-----------+-----------+-----------+
| Statutory results | | | |
+------------------------------------------------------+-----------+-----------+-----------+
| Operating profit | 1,404 | 943 | 49 |
+------------------------------------------------------+-----------+-----------+-----------+
| Pre-tax profit | 944 | 564 | 67 |
+------------------------------------------------------+-----------+-----------+-----------+
| Earnings | 696 | 406 | 71 |
+------------------------------------------------------+-----------+-----------+-----------+
| Earnings per share | 28.3p | 16.2p3 | 75 |
+------------------------------------------------------+-----------+-----------+-----------+
| | | | |
+------------------------------------------------------+-----------+-----------+-----------+
| Dividend per share | 13.65p | 12.64p | 8 |
+------------------------------------------------------+-----------+-----------+-----------+
Steve Holliday, Chief Executive, said:
"We have made good operational and financial progress against our priorities for
this year and have delivered a very strong financial performance in the first
half. Our pre-tax profits were up 16%, supported by lower financing costs,
delivering higher operating cash flows. We have now filed or implemented new
rate plans for over 60% of our US rate base and are on track to deliver this
year's investment programme of GBP3.4bn, financed through internal cash flows
and borrowings.
As we look to the future our focused strategy is being confirmed by the changing
energy landscape, which creates a number of organic growth opportunities for
National Grid. With the right regulatory frameworks this will create significant
value for our shareholders."
CHIEF EXECUTIVE'S REVIEW
National Grid has made a very good start to what is expected to be a strong
financial year. This is despite the prevailing economic conditions, which have
marginally affected our distribution businesses particularly in the US. We have
made good progress on our stated priorities for 2009/10:- delivering our
disciplined investment programme, progressing with our US regulatory filings and
driving efficiency through the phased introduction of our operating model.
Looking forward, the energy landscape is changing, creating a number of organic
growth opportunities for National Grid.
Priorities for 2009/10
Our investment pipeline remains strong. In the UK electricity and gas markets,
investment is being driven by changes in sources of gas supply and electricity
generation (c.40%), and the need for asset replacement (c.60%). In the US
electricity and gas markets, investment is being driven by customer additions
(c.20%), the need for asset replacement (c.50%), system reinforcement (c.20%)
and the emerging need for renewable generation (c.10%).
To date this year we have invested GBP1.5bn and are on target to invest around
GBP3.4bn for the full year, growing our asset base. This is supported by current
rate plans and long term contracts and is being financed from internal cash flow
and borrowings.
Our financial position remains robust. Net operating cash flows are GBP747m
higher than the previous period reflecting a favourable working capital
movement. We have completed our funding requirement of GBP2.5bn for 2009/10 and
have already pre-funded GBP1.3bn of our funding requirement for 2010/11. This
year National Grid has issued long term bonds totalling over $2bn, from its
Upstate New York regulated entity, Niagara Mohawk, and Massachusetts Electric at
competitive rates. This is part of our programme to reallocate debt to our US
operating companies.
Our net finance costs for this period have decreased by GBP20m to GBP504m. This
reflects our variable rate debt benefiting from lower interest rates, along with
UK deflation positively affecting our index linked debt. We have taken full
advantage of these lower rates, fixing the majority of our variable rate debt
portfolio for both the current year and 2010/11.
We are committed to financing our business in a manner consistent with
maintaining an efficient balance sheet and optimising our cost of capital. We
expect all credit metrics to improve this year, primarily due to the reduction
in our interest charge. Moody's Investor Services, Fitch Ratings and Standard &
Poor's have all reaffirmed our credit ratings with stable outlook.
We continue to make progress on our rate case filings in the US. This financial
year we have made filings in Massachusetts Electric Company and Narragansett
Electric. In addition we plan to file the Niagara Mohawk electric rate case in
early 2010 and intend to file a rate case for our Colonial Gas business in the
first quarter of 2010/11. At the same time we plan to make a consolidated
filing, combining our Boston and Essex gas businesses into a single rate plan,
greatly simplifying and improving the transparency of our Massachusetts gas
regulatory arrangements.
We continue to drive efficiency through the phased introduction of our operating
model. We expect that our 2009/10 regulated controllable costs (excluding bad
debts) as a proportion of our asset base will reduce significantly from the 8.1%
reported for 2008/09. We continue to drive procurement costs down through a
combination of leveraging National Grid's scale, unit price reductions and a
decrease in the number of suppliers. We remain on track with delivery of our
KeySpan synergy savings, at 30 September 2009 we had achieved a run rate of
$140m.
Potential growth opportunities
When we set out our strategy in November 2006, we noted the significant
requirement for investment in our chosen markets, the UK and US, driven largely
by the need for asset replacement, renewable energy policy and customer
connections. Since that time, there have been clear developments in both UK and
US energy policy and the regulatory and commercial regimes are now beginning to
take shape. In the main they are being driven by specific national and state
targets for renewable energy supply and reductions in carbon emissions.
This changing energy landscape will create a number of opportunities for
National Grid and other energy companies. These will include the need for
investment in renewable generation, new transmission systems to connect new
nuclear stations and onshore and offshore wind generation, smart grids, carbon
capture and storage projects, interconnectors and strategic gas storage. Whilst
it is unclear today which of these projects will be appropriate for National
Grid or their precise timing, we expect that greater clarity will emerge as UK
and US energy policies continue to crystallise and appropriate regulatory
frameworks are put in place. We are clear that we will adopt a rigorous
approach to the assessment of these opportunities as they emerge and will be
selective about which we pursue. We will only undertake investments that produce
an attractive and predictable return for shareholders.
DIVIDEND
Reflecting the positive outlook for the year, the Board has approved an 8%
increase in the interim dividend to 13.65p per ordinary share ($1.1480 per
American Depositary Share) in line with its long term policy. The interim
dividend is to be paid on 20 January 2010 to shareholders on the register as at
4 December 2009. A scrip dividend alternative will be offered.
OUTLOOK
Current performance remains in line with our expectations.
We continue to expect a strong performance from our Transmission and Electricity
Distribution and Generation businesses.Our Gas Distribution business will
benefit from increases in net revenues under our UK and US rate plans, but will
be impacted by negative timing differences, resulting in lower operating profit
in this business.
Net interest charges will benefit from low inflation and the majority of our
variable rate debt having been fixed at low interest rates. Our full year
effective tax rate is expected to be in line with last year.
Overall we are well positioned to deliver another year of strong performance.
BASIS OF PRESENTATION
Unless otherwise stated, all financial commentaries are given on a business
performance basis at actual exchange rates. Business performance represents the
results for continuing operations before exceptional items, mark-to-market
remeasurements of commodity contracts and financial instruments that are held
for economic hedging purposes but did not achieve hedge accounting, and US
stranded cost recoveries. Commentary provided in respect of results after
exceptional items, mark-to-market remeasurements and US stranded cost recoveries
is described as 'statutory'.
REVIEW OF RESULTS AND FINANCIAL POSITION
Operating profit was GBP1,149m, up 6% on the prior period (up 2% on a constant
currency basis4). This was primarily driven by good results in our Transmission
and Electricity Distribution and Generation businesses partially offset by
timing related items in our US Gas Distribution business. Operating profit
performance in the first half of the year reflected the expected seasonality in
our US businesses.
Net finance costs were GBP504m, 4% lower than the prior period, reflecting lower
interest rates and RPI deflation benefiting the accretion on index linked bonds.
We expect this trend to continue through to the full year but lessen as RPI
inflation returns. Profit before tax was up 16% to GBP649m. The tax charge on
profit was GBP93m, GBP32m lower than the prior period, with the first half tax
charge under IAS34 reflecting discrete items of GBP67m and the geographical and
seasonal split of our earnings. For the full year we expect our effective tax
rate to be in line with last year.Earnings were up GBP123m on the prior period
at GBP554m. Earnings per share increased 31% from 17.2p in the first half last
year to 22.5p.
Exceptional items and remeasurements for continuing operations
increased statutory earnings by GBP142m after tax. After these items and
minority interests, statutory earnings for continuing operations attributable to
shareholders were GBP696m - statutory basic earnings per share from continuing
operations were 28.3p compared with 16.2p for the prior period.
Operating cash flows from continuing operations, before exceptional items,
remeasurements, stranded cost recoveries and taxation, were GBP1,607m, GBP747m
higher than the prior period.
Organic investment in our continuing businesses was GBP1.5bn, in line with our
plans for the year.
Our net debt fell to GBP21.98bn at 30 September 2009 compared with GBP22.67bn at
31 March 2009, reflecting the impact of the weakening of the US dollar - pound
exchange rate on our dollar denominated debt.
Further information about our principal risks and uncertainties for the next six
months of the financial year is provided in Note 13 on page 25.
REVIEW OF TRANSMISSION OPERATIONS
+------------------------------------------------------+-----------+-----------+-----------+
| Summary results | Six months ended 30 September |
+------------------------------------------------------+-----------------------------------+
| (GBPm) | 2009 | 2008 | % change |
+------------------------------------------------------+-----------+-----------+-----------+
| Revenue and other operating income | 1,826 | 1,975 | (8) |
+------------------------------------------------------+-----------+-----------+-----------+
| Operating costs | (978) | (1,188) | (18) |
+------------------------------------------------------+-----------+-----------+-----------+
| Depreciation and amortisation | (211) | (196) | 8 |
+------------------------------------------------------+-----------+-----------+-----------+
| Operating profit - actual exchange | 637 | 591 | 8 |
| rate | | | |
+------------------------------------------------------+-----------+-----------+-----------+
| Operating profit - constant currency | 637 | 611 | 4 |
+------------------------------------------------------+-----------+-----------+-----------+
+------------------------------------------------------+-----------+-----------+-----------+
| Operating profit by geographical segment | Six months ended 30 September |
+------------------------------------------------------+-----------------------------------+
| (GBPm, at constant currency) | 2009 | 2008 | % change |
+------------------------------------------------------+-----------+-----------+-----------+
| UK | 549 | 508 | 8 |
+------------------------------------------------------+-----------+-----------+-----------+
| US | 88 | 103 | (15) |
+------------------------------------------------------+-----------+-----------+-----------+
| Operating profit | 637 | 611 | 4 |
+------------------------------------------------------+-----------+-----------+-----------+
+------------------------------------------------------+-----------+-----------+-----------+
| Capital investment | Six months ended 30 September |
+------------------------------------------------------+-----------------------------------+
| (GBPm, at actual exchange rate) | 2009 | 2008 | % change |
+------------------------------------------------------+-----------+-----------+-----------+
| UK | 561 | 684 | (18) |
+------------------------------------------------------+-----------+-----------+-----------+
| US | 99 | 72 | 38 |
+------------------------------------------------------+-----------+-----------+-----------+
| Capital investment | 660 | 756 | (13) |
+------------------------------------------------------+-----------+-----------+-----------+
Transmission operating profit was up 8% at GBP637m. Our allowed UK transmission
regulated revenue increased by 6.7% for electricity and 3.8% for gas at 1 April
2009 in line with our RPI + X price control allowances. This resulted in
operating profit from our UK regulated revenue being GBP60m higher than the
prior period. This was partially offset by operating profit lower in the US by
GBP15m largely due to timing differences. Operating profit from our French
Interconnector, which had a particularly strong performance last year, was lower
by GBP22m. Other items increased operating profit by GBP3m. The period on period
movement in exchange rates had a GBP20m positive benefit on Transmission
operating profit.
Capital investment in Transmission was GBP660m. Large schemes in the UK include
load related investment in the Thames estuary and transmission investment in
renewable generation (which earns an enhanced return). Investment in our US
transmission networks includes reliability spend in New York and investment on
the New England East-West Solution (NEEWS) project, where we earn an enhanced
Federal Energy Regulatory Commission (FERC) return on equity of 12.89%.
REVIEW OF GAS DISTRIBUTION OPERATIONS
+------------------------------------------------------+-----------+-----------+-----------+
| Summary results | Six months ended 30 September |
+------------------------------------------------------+-----------------------------------+
| (GBPm) | 2009 | 2008 | % change |
+------------------------------------------------------+-----------+-----------+-----------+
| Revenue and other operating income | 1,767 | 1,863 | (5) |
+------------------------------------------------------+-----------+-----------+-----------+
| Operating costs | (1,331) | (1,432) | (7) |
+------------------------------------------------------+-----------+-----------+-----------+
| Depreciation and amortisation | (183) | (157) | 17 |
+------------------------------------------------------+-----------+-----------+-----------+
| Operating profit - actual exchange | 253 | 274 | (8) |
| rate | | | |
+------------------------------------------------------+-----------+-----------+-----------+
| Operating profit - constant currency | 253 | 276 | (8) |
+------------------------------------------------------+-----------+-----------+-----------+
+------------------------------------------------------+-----------+-----------+-----------+
| Operating profit by geographical segment | Six months ended 30 September |
+------------------------------------------------------+-----------------------------------+
| (GBPm, at constant currency) | 2009 | 2008 | % change |
+------------------------------------------------------+-----------+-----------+-----------+
| UK | 385 | 264 | 46 |
+------------------------------------------------------+-----------+-----------+-----------+
| US | (132) | 12 | - |
+------------------------------------------------------+-----------+-----------+-----------+
| Operating profit | 253 | 276 | (8) |
+------------------------------------------------------+-----------+-----------+-----------+
+------------------------------------------------------+-----------+-----------+-----------+
| Capital investment | Six months ended 30 September |
+------------------------------------------------------+-----------------------------------+
| (GBPm, at actual exchange rate) | 2009 | 2008 | % change |
+------------------------------------------------------+-----------+-----------+-----------+
| UK capex | 104 | 72 | 44 |
+------------------------------------------------------+-----------+-----------+-----------+
| UK repex | 233 | 207 | 13 |
+------------------------------------------------------+-----------+-----------+-----------+
| US | 204 | 170 | 20 |
+------------------------------------------------------+-----------+-----------+-----------+
| Capital investment | 541 | 449 | 20 |
+------------------------------------------------------+-----------+-----------+-----------+
Gas Distribution operating profit decreased by GBP21m during the period to
GBP253m. In the UK, net regulated revenues were up GBP23m, reflecting increases
under the price control allowance. In addition the re-phasing of UK billing
between the first and second half of the year increased operating profit by
GBP104m. In the US, where the vast majority of annual revenue is collected in
the second half of the year, net revenues were up GBP16m on the prior period.
This good performance comes on the back of last year's significant over
recovery, which together with negative timing impacts in this half year, has led
to a GBP142m period on period decrease in operating profit. Most of this year's
under recovery is expected to reverse in the second half. In addition, as
anticipated, the US recession is reducing our customers' ability to pay their
bills with operating profit down by GBP16m as a result of an increase in bad
debts. Other items reduced UK and US net operating profit by GBP8m. The period
on period movement in exchange rates had a GBP2m positive benefit on operating
profit.
During the period, together with our Gas Distribution alliance partnerships in
the UK, we have replaced around 1,026km of gas mains, resulting in total
replacement expenditure (repex) of GBP233m. In our US operations customer
connections have slowed as a result of the US recession. This period we have
added around 19,000 new customers. Overall, our investment in network
infrastructure projects in the UK and US resulted in total capital expenditure
(including repex) of GBP541m this period, 20% up on the prior period.
We continue to make good regulatory progress in the US. On 14 May 2009 our
Niagara Mohawk gas rate case, recommended by the New York Public Service
Commission (NYPSC) staff, was approved in full with a base allowed return of
10.2% and provided for a $39m increase in revenues. The revenue increase came
into effect on 20 May. On 29 May 2009 the New Hampshire gas rate case (covering
around 1% of our US rate base) was approved. We were disappointed with the
allowed return on equity of 9.54%, which is out of line with other regulatory
decisions and we subsequently asked the New Hampshire Public Utilities
Commission to reconsider the decision. Last week, the Commission denied our
motion for reconsideration and we are now considering our next steps.
Next year we plan to make a rate case filing for Colonial Gas and a consolidated
filing, combining our Boston and Essex businesses into a single rate plan. Our
continued programme of refiling rate cases will benefit both customers and
shareholders by supporting much needed investment and recovery of costs.
REVIEW OF ELECTRICITY DISTRIBUTION AND GENERATION OPERATIONS
+------------------------------------------------------+-----------+-----------+-----------+
| Summary results | Six months ended 30 September |
+------------------------------------------------------+-----------------------------------+
| (GBPm) | 2009 | 2008 | % change |
+------------------------------------------------------+-----------+-----------+-----------+
| Revenue and other operating income* | 1,947 | 1,854 | 5 |
+------------------------------------------------------+-----------+-----------+-----------+
| Operating costs | (1,673) | (1,639) | 2 |
+------------------------------------------------------+-----------+-----------+-----------+
| Depreciation and amortisation | (105) | (86) | 22 |
+------------------------------------------------------+-----------+-----------+-----------+
| Operating profit - actual exchange | 169 | 129 | 31 |
| rate | | | |
+------------------------------------------------------+-----------+-----------+-----------+
| Operating profit - constant currency | 169 | 160 | 6 |
+------------------------------------------------------+-----------+-----------+-----------+
+------------------------------------------------------+-----------+-----------+-----------+
| Operating profit by principal activities | Six months ended 30 September |
+------------------------------------------------------+-----------------------------------+
| (GBPm, at constant currency) | 2009 | 2008 | % change |
+------------------------------------------------------+-----------+-----------+-----------+
| Electricity distribution | 109 | 135 | (19) |
+------------------------------------------------------+-----------+-----------+-----------+
| Long Island transmission and | 25 | 9 | 178 |
| distribution services | | | |
+------------------------------------------------------+-----------+-----------+-----------+
| Long Island generation | 35 | 16 | 119 |
+------------------------------------------------------+-----------+-----------+-----------+
| Operating profit | 169 | 160 | 6 |
+------------------------------------------------------+-----------+-----------+-----------+
+------------------------------------------------------+-----------+-----------+-----------+
| Capital investment | Six months ended 30 September |
+------------------------------------------------------+-----------------------------------+
| (GBPm, at actual exchange rate) | 2009 | 2008 | % change |
+------------------------------------------------------+-----------+-----------+-----------+
| Electricity distribution | 148 | 130 | 14 |
+------------------------------------------------------+-----------+-----------+-----------+
| Long Island generation | 18 | 13 | 38 |
+------------------------------------------------------+-----------+-----------+-----------+
| Capital investment | 166 | 143 | 16 |
+------------------------------------------------------+-----------+-----------+-----------+
* Excludes revenue from stranded cost recoveries.
During the period, operating profit from Electricity Distribution and Generation
increased by 31% to GBP169m. This period saw an increase in our net revenues of
GBP29m, primarily reflecting the increase in generation contract revenues.
Timing related items, mainly relating to an under recovery of income,
temporarily reduced operating profit by GBP64m. Other items, including a
reduction in service penalty costs and the absence of non-cash one off items
incurred last year, increased operating profit by GBP44m. 2008 saw us delivering
a significant improvement in our upstate New York system reliability
performance, consistently beating our historic average and avoiding service
penalties. The period on period movement in exchange rates benefited operating
profit by GBP31m.
We have made solid regulatory progress during the period. As planned in
Massachusetts and Rhode Island we filed electric rate cases on 15 May 2009 and 1
June 2009 respectively. These filings will benefit both customers and
shareholders by supporting much needed investment and recovery of costs. We
expect a conclusion to be reached around the end of the year in Massachusetts
and early next year in Rhode Island.
REVIEW OF NON-REGULATED AND OTHER ACTIVITIES
+-----------------------------------------------------+-----------+-----------+-----------+
| Summary results | Six months ended 30 September |
+-----------------------------------------------------+-----------------------------------+
| (GBPm) | 2009 | 2008 | % change |
+-----------------------------------------------------+-----------+-----------+-----------+
| Revenue and other operating income | 382 | 356 | 7 |
+-----------------------------------------------------+-----------+-----------+-----------+
| Operating costs | (206) | (194) | 6 |
+-----------------------------------------------------+-----------+-----------+-----------+
| Depreciation and amortisation | (86) | (77) | 12 |
+-----------------------------------------------------+-----------+-----------+-----------+
| Operating profit | 90 | 85 | 6 |
+-----------------------------------------------------+-----------+-----------+-----------+
+-----------------------------------------------------+-----------+-----------+-----------+
| Operating profit by principal activities | Six months ended 30 September |
+-----------------------------------------------------+-----------------------------------+
| (GBPm, at actual exchange rate) | 2009 | 2008 | % change |
+-----------------------------------------------------+-----------+-----------+-----------+
| Metering | 86 | 76 | 13 |
+-----------------------------------------------------+-----------+-----------+-----------+
| Grain LNG | 20 | 4 | 400 |
+-----------------------------------------------------+-----------+-----------+-----------+
| Property | 10 | 24 | (58) |
+-----------------------------------------------------+-----------+-----------+-----------+
| Sub-total operating profit | 116 | 104 | 12 |
+-----------------------------------------------------+-----------+-----------+-----------+
| Corporate and other activities | (26) | (19) | 37 |
+-----------------------------------------------------+-----------+-----------+-----------+
| Operating profit | 90 | 85 | 6 |
+-----------------------------------------------------+-----------+-----------+-----------+
+-----------------------------------------------------+-----------+-----------+-----------+
| Capital investment* | Six months ended 30 September |
+-----------------------------------------------------+-----------------------------------+
| (GBPm, at actual exchange rate) | 2009 | 2008 | % change |
+-----------------------------------------------------+-----------+-----------+-----------+
| Metering | 64 | 76 | (16) |
+-----------------------------------------------------+-----------+-----------+-----------+
| Grain LNG | 60 | 122 | (51) |
+-----------------------------------------------------+-----------+-----------+-----------+
| Property | 2 | 3 | (33) |
+-----------------------------------------------------+-----------+-----------+-----------+
| Other | 13 | 43 | (70) |
+-----------------------------------------------------+-----------+-----------+-----------+
| Capital investment | 139 | 244 | (43) |
+-----------------------------------------------------+-----------+-----------+-----------+
* Excludes investment in joint ventures.
Operating profit from our non-regulated and other activities increased by 6% to
GBP90m. This was primarily driven by an increase in profit in our Metering and
Grain LNG businesses, partially offset by a reduction in operating profit in our
Property business. As reported in February, given current market conditions we
have taken action to defer property sales in order to preserve value. This has
reduced operating profit by GBP14m compared to the previous period.
Metering operating profit was up GBP10m at GBP86m, mainly driven by increased
revenue, and lower costs and depreciation charges. During the period, capital
investment in this business was GBP64m, with around 360,000 new meters
installed. On 29 April 2009 the Competition Appeal Tribunal in part overturned
Ofgem's decision to fine us for a breach of the UK Competition Act 1998 and
reduced the fine to GBP30m but also upheld the original decision in part. The
Court of Appeal has granted us leave to appeal the Tribunal's decision both on
points of law and as to the amount of the penalty.
Our Grain LNG business delivered an operating profit of GBP20m, five times that
of the previous period, as a result of Phase II becoming operational in December
2008. During the period capital investment in this business decreased by 51% to
GBP60m, mainly reflecting the completion of the Phase II capacity extension in
October 2008. Phase III is currently under construction and is planned to
complete in late 2010. This will add a further LNG tank and a second unloading
jetty, increasing the total annual capacity of the terminal to around 15 million
tonnes, representing around 20% of total UK gas demand. These investments are
underpinned by long-term, take-or-pay contracts, which deliver an index-linked
revenue stream for 20 years.
PROVISIONAL FINANCIAL TIMETABLE
+---------------------+----------------------------------------------------------------+
| 2 December 2009 | Ordinary shares go ex-dividend |
+---------------------+----------------------------------------------------------------+
| | |
+---------------------+----------------------------------------------------------------+
| 4 December 2009 | Record date for 2009/10 interim dividend |
+---------------------+----------------------------------------------------------------+
| | |
+---------------------+----------------------------------------------------------------+
| 9 December 2009 | Scrip reference price announced |
+---------------------+----------------------------------------------------------------+
| | |
+---------------------+----------------------------------------------------------------+
| 18 December 2009 | Scrip election date for 2009/10 interim dividend |
+---------------------+----------------------------------------------------------------+
| | |
+---------------------+----------------------------------------------------------------+
| 20 January 2010 | 2009/10 interim dividend paid to qualifying ordinary |
| | shareholders |
+---------------------+----------------------------------------------------------------+
| | |
+---------------------+----------------------------------------------------------------+
| February 2010 | Interim Management Statement |
+---------------------+----------------------------------------------------------------+
| | |
+---------------------+----------------------------------------------------------------+
| 20 May 2010 | 2009/10 preliminary results |
+---------------------+----------------------------------------------------------------+
| | |
+---------------------+----------------------------------------------------------------+
| 2 June 2010 | Ordinary shares go ex-dividend |
+---------------------+----------------------------------------------------------------+
| | |
+---------------------+----------------------------------------------------------------+
| 4 June 2010 | Record date for 2009/10 final dividend |
+---------------------+----------------------------------------------------------------+
| | |
+---------------------+----------------------------------------------------------------+
| 9 June 2010 | Scrip reference price announced |
+---------------------+----------------------------------------------------------------+
| | |
+---------------------+----------------------------------------------------------------+
| Mid-June 2010 | Annual Report published |
+---------------------+----------------------------------------------------------------+
| | |
+---------------------+----------------------------------------------------------------+
| 21 July 2010 | Scrip election date for 2009/10 final dividend |
+---------------------+----------------------------------------------------------------+
| | |
+---------------------+----------------------------------------------------------------+
| 26 July 2010 | Interim Management Statement and |
| | Annual General Meeting, ICC, Birmingham |
+---------------------+----------------------------------------------------------------+
| | |
+---------------------+----------------------------------------------------------------+
| 18 August 2010 | 2009/10 final dividend paid to qualifying ordinary |
| | shareholders |
+---------------------+----------------------------------------------------------------+
CONTACTS
National Grid:
Investors
+----------------------------+----------------------------+----------------------------+
| David Rees | +44 (0)20 7004 3170 | +44 (0)7901 511322(m) |
+----------------------------+----------------------------+----------------------------+
| George Laskaris | +1 718 403 2526 | +1 917 375 0989(m) |
+----------------------------+----------------------------+----------------------------+
| Richard Smith | +44 (0)20 7004 3172 | +44 (0)7747 006321(m) |
+----------------------------+----------------------------+----------------------------+
| Victoria Davies | +44 (0)20 7004 3171 | +44 (0)7771 973447(m) |
+----------------------------+----------------------------+----------------------------+
Media
+----------------------------+----------------------------+----------------------------+
| Clive Hawkins | +44 (0)20 7004 3147 | +44 (0)7836 357173(m) |
+----------------------------+----------------------------+----------------------------+
| Chris Mostyn | +1 781 907 1726 | +1 347 702 3740(m) |
+----------------------------+----------------------------+----------------------------+
| Gemma Stokes | +44 (0)1926 65 3555 | +44 (0)7974 198333(m) |
+----------------------------+----------------------------+----------------------------+
| Brunswick: Tom Burns | +44 (0)20 7404 5959 | +44 (0)7974 982308(m) |
+----------------------------+----------------------------+----------------------------+
An analyst presentation will be held at the London Stock Exchange, 10
Paternoster Square, London EC4M 7LS at 9:15am (UK time) today.
Live telephone coverage of the analyst presentation - password 'National Grid'
+------------------+----------------------------+------------------+---------------------+
| UK dial in | +44 (0) 203 023 4488 | US dial in | +1 866 966 5335 |
| number | | number | |
+------------------+----------------------------+------------------+---------------------+
Telephone replay of the analyst presentation (available until 19 December 2009)
+------------------+----------------------------+------------------+---------------------+
| Dial in number | +44 (0) 208 196 1998 | Account number | 5254788# |
+------------------+----------------------------+------------------+---------------------+
A live web cast of the presentation will also be available at
www.nationalgrid.com.
A short video of Steve Holliday talking about these results is available on
www.cantos.com.
You can view or download copies of our latest Annual Report or the Annual Review
from our website at www.nationalgrid.com/corporate/Investor+Relations/ or
request a free printed copy by contacting investor.relations@ngrid.com.
CAUTIONARY STATEMENT
This announcement contains certain statements that are neither reported
financial results nor other historical information. These statements are
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended. These statements include information with respect to National Grid's
financial condition, results of operations and businesses, strategy, plans and
objectives. Words such as "anticipates", "expects", "intends", "plans",
"believes", "seeks", "estimates", "may", "will", "continue", "project" and
similar expressions, as well as statements in the future tense, identify
forward-looking statements. These forward-looking statements are not guarantees
of National Grid's future performance and are subject to assumptions, risks and
uncertainties that could cause actual future results to differ materially from
those expressed in or implied by such forward-looking statements. Many of these
assumptions, risks and uncertainties relate to factors that are beyond National
Grid's ability to control or estimate precisely, such as delays in obtaining, or
adverse conditions contained in, regulatory approvals and contractual consents,
unseasonable weather affecting the demand for electricity and gas, competition
and industry restructuring, changes in economic conditions, currency
fluctuations, changes in interest and tax rates, changes in energy market
prices, changes in historical weather patterns, changes in laws, regulations or
regulatory policies, developments in legal or public policy doctrines, the
impact of changes to accounting standards, technological developments and the
ability to access capital markets and other sources of credit in a timely manner
on acceptable terms, especially considering the recent deterioration of market
conditions in the global economy and financial markets. Other factors that
could cause actual results to differ materially from those described in this
announcement include the ability to integrate the businesses relating to
announced or recently completed acquisitions with National Grid's existing
business to realise the expected synergies from such integration, the
availability of new acquisition opportunities and the timing and success of
future acquisition opportunities, the timing and success or other impact of the
sales of National Grid's non-core businesses, the failure for any reason to
achieve reductions in costs or to achieve operational efficiencies, the failure
to retain key management, the behaviour of UK electricity market participants on
system balancing, the timing of amendments in prices to shippers in the UK gas
market, the performance of National Grid's pension schemes and the regulatory
treatment of pension costs, and any adverse consequences arising from outages on
or otherwise affecting energy networks, including gas pipelines owned or
operated by National Grid. For a more detailed description of some of these
assumptions, risks and uncertainties, together with any other risk factors,
please see National Grid's filings with and submissions to the US Securities and
Exchange Commission (the "SEC") (and in particular the "Risk Factors" and
"Operating and Financial Review" sections in its most recent Annual Report on
Form 20-F). Except as may be required by law or regulation, National Grid
undertakes no obligation to update any of its forward-looking statements. The
effects of these factors are difficult to predict. New factors emerge from time
to time and National Grid cannot assess the potential impact of any such factor
on its activities or the extent to which any factor, or combination of factors,
may cause results to differ materially from those contained in any
forward-looking statement. The contents of any website referenced herein do not
form part of this document.
+--------------------------------------------+-------+----------+--+----------+--+----------+--+
| CONSOLIDATED INCOME STATEMENT | | 2009 | | 2008 | | Year | |
| for the six months ended 30 September | | | | | | ended 31 | |
| | | | | | | March | |
| | | | | | | 2009 | |
+--------------------------------------------+-------+----------+--+----------+--+----------+--+
| |Notes | GBPm | | GBPm | | GBPm | |
+--------------------------------------------+-------+----------+--+----------+--+----------+--+
| | | | | | | | |
+--------------------------------------------+-------+----------+--+----------+--+----------+--+
| Revenue | 2a | 6,044 | | 6,072 | | 15,624 | |
+--------------------------------------------+-------+----------+--+----------+--+----------+--+
| Other operating income | | 13 | | 29 | | 63 | |
+--------------------------------------------+-------+----------+--+----------+--+----------+--+
| Operating costs | | (4,653) | | (5,158) | | (13,064) | |
+--------------------------------------------+-------+----------+--+----------+--+----------+--+
| | | | | | | | |
+--------------------------------------------+-------+----------+--+----------+--+----------+--+
| Operating profit | | | | | | | |
+--------------------------------------------+-------+----------+--+----------+--+----------+--+
| - Before exceptional items, remeasurements | 2b | 1,149 | | 1,079 | | 2,915 | |
| and stranded cost recoveries | | | | | | | |
+--------------------------------------------+-------+----------+--+----------+--+----------+--+
| - Exceptional items, remeasurements and | 3 | 255 | | (136) | | (292) | |
| stranded cost recoveries | | | | | | | |
+--------------------------------------------+-------+----------+--+----------+--+----------+--+
| Total operating profit | 2c | 1,404 | | 943 | | 2,623 | |
+--------------------------------------------+-------+----------+--+----------+--+----------+--+
| | | | | | | | |
+--------------------------------------------+-------+----------+--+----------+--+----------+--+
| Interest income and similar income | 4 | 509 | | 640 | | 1,315 | |
+--------------------------------------------+-------+----------+--+----------+--+----------+--+
| Interest expense and other finance costs | | | | | | | |
+--------------------------------------------+-------+----------+--+----------+--+----------+--+
| - Before exceptional items and | | (1,013) | | (1,164) | | (2,465) | |
| remeasurements | | | | | | | |
+--------------------------------------------+-------+----------+--+----------+--+----------+--+
| - Exceptional items and remeasurements | 3 | 40 | | 142 | | (84) | |
+--------------------------------------------+-------+----------+--+----------+--+----------+--+
| | 4 | (973) | | (1,022) | | (2,549) | |
+--------------------------------------------+-------+----------+--+----------+--+----------+--+
| | | | | | | | |
+--------------------------------------------+-------+----------+--+----------+--+----------+--+
| Share of post-tax results of joint | | 4 | | 3 | | 5 | |
| ventures and associates | | | | | | | |
+--------------------------------------------+-------+----------+--+----------+--+----------+--+
| | | | | | | | |
+--------------------------------------------+-------+----------+--+----------+--+----------+--+
| Profit before taxation | | | | | | | |
+--------------------------------------------+-------+----------+--+----------+--+----------+--+
| - Before exceptional items, remeasurements | | 649 | | 558 | | 1,770 | |
| and stranded cost recoveries | | | | | | | |
+--------------------------------------------+-------+----------+--+----------+--+----------+--+
| - Exceptional items, remeasurements and | 3 | 295 | | 6 | | (376) | |
| stranded cost recoveries | | | | | | | |
+--------------------------------------------+-------+----------+--+----------+--+----------+--+
| Total profit before taxation | | 944 | | 564 | | 1,394 | |
+--------------------------------------------+-------+----------+--+----------+--+----------+--+
| Taxation | | | | | | | |
+--------------------------------------------+-------+----------+--+----------+--+----------+--+
| - Before exceptional items, remeasurements | 5 | (93) | | (125) | | (517) | |
| and stranded cost recoveries | | | | | | | |
+--------------------------------------------+-------+----------+--+----------+--+----------+--+
| - Exceptional items, remeasurements and | 3 | (153) | | (31) | | 45 | |
| stranded cost recoveries | | | | | | | |
+--------------------------------------------+-------+----------+--+----------+--+----------+--+
| Total taxation | | (246) | | (156) | | (472) | |
+--------------------------------------------+-------+----------+--+----------+--+----------+--+
| | | | | | | | |
+--------------------------------------------+-------+----------+--+----------+--+----------+--+
| Profit from continuing operations after | | | | | | | |
| taxation | | | | | | | |
+--------------------------------------------+-------+----------+--+----------+--+----------+--+
| - Before exceptional items, remeasurements | | 556 | | 433 | | 1,253 | |
| and stranded cost recoveries | | | | | | | |
+--------------------------------------------+-------+----------+--+----------+--+----------+--+
| - Exceptional items, remeasurements and | 3 | 142 | | (25) | | (331) | |
| stranded cost recoveries | | | | | | | |
+--------------------------------------------+-------+----------+--+----------+--+----------+--+
| Profit for the period from continuing | | 698 | | 408 | | 922 | |
| operations | | | | | | | |
+--------------------------------------------+-------+----------+--+----------+--+----------+--+
| | | | | | | | |
+--------------------------------------------+-------+----------+--+----------+--+----------+--+
| Profit for the period from discontinued | | | | | | | |
| operations | | | | | | | |
+--------------------------------------------+-------+----------+--+----------+--+----------+--+
| - Before exceptional items and | | - | | 6 | | 9 | |
| remeasurements | | | | | | | |
+--------------------------------------------+-------+----------+--+----------+--+----------+--+
| - Exceptional items and remeasurements | | - | | 11 | | 16 | |
+--------------------------------------------+-------+----------+--+----------+--+----------+--+
| | | - | | 17 | | 25 | |
+--------------------------------------------+-------+----------+--+----------+--+----------+--+
| | | | | | | | |
+--------------------------------------------+-------+----------+--+----------+--+----------+--+
| | | | | | | | |
+--------------------------------------------+-------+----------+--+----------+--+----------+--+
| Profit for the period | | 698 | | 425 | | 947 | |
+--------------------------------------------+-------+----------+--+----------+--+----------+--+
| | | | | | | | |
+--------------------------------------------+-------+----------+--+----------+--+----------+--+
| Attributable to: | | | | | | | |
+--------------------------------------------+-------+----------+--+----------+--+----------+--+
| - Equity shareholders of the parent | | 696 | | 423 | | 944 | |
+--------------------------------------------+-------+----------+--+----------+--+----------+--+
| - Minority interests | | 2 | | 2 | | 3 | |
+--------------------------------------------+-------+----------+--+----------+--+----------+--+
| | | | | | | | |
+--------------------------------------------+-------+----------+--+----------+--+----------+--+
| | | | | | | | |
+--------------------------------------------+-------+----------+--+----------+--+----------+--+
| | | 698 | | 425 | | 947 | |
+--------------------------------------------+-------+----------+--+----------+--+----------+--+
| | | | | | | | |
+--------------------------------------------+-------+----------+--+----------+--+----------+--+
| Earnings per share from continuing | | | | | | | |
| operations* | | | | | | | |
+--------------------------------------------+-------+----------+--+----------+--+----------+--+
| - Basic | 6a | 28.3p | | 16.2p | | 37.1p | |
+--------------------------------------------+-------+----------+--+----------+--+----------+--+
| - Diluted | 6b | 28.1p | | 16.1p | | 36.8p | |
+--------------------------------------------+-------+----------+--+----------+--+----------+--+
| | | | | | | | |
+--------------------------------------------+-------+----------+--+----------+--+----------+--+
| Earnings per share* | | | | | | | |
+--------------------------------------------+-------+----------+--+----------+--+----------+--+
| - Basic | 6a | 28.3p | | 16.8p | | 38.1p | |
+--------------------------------------------+-------+----------+--+----------+--+----------+--+
| - Diluted | 6b | 28.1p | | 16.7p | | 37.8p | |
+--------------------------------------------+-------+----------+--+----------+--+----------+--+
| | | | | | | | |
+--------------------------------------------+-------+----------+--+----------+--+----------+--+
| Dividends per ordinary share: paid during | 7 | 23.00p | | 21.30p | | 33.94p | |
| the period | | | | | | | |
+--------------------------------------------+-------+----------+--+----------+--+----------+--+
| Dividends per ordinary share: for the | | 13.65p | | 12.64p | | 35.64p | |
| period | | | | | | | |
+--------------------------------------------+-------+----------+--+----------+--+----------+--+
| | | | | | | | |
+--------------------------------------------+-------+----------+--+----------+--+----------+--+
* In accordance with IAS 33, comparative period amounts have been restated as a
result of the shares issued via the scrip dividend
+---------------------------------------------------+----------+--+----------+--+----------+--+
| CONSOLIDATED STATEMENT OF COMPREHENSIVE | 2009 | | 2008 | | Year | |
| INCOME | | | | | ended 31 | |
| for the six months ended 30 September | | | | | March | |
| | | | | | 2009 | |
+---------------------------------------------------+----------+--+----------+--+----------+--+
| | GBPm | | GBPm | | GBPm | |
+---------------------------------------------------+----------+--+----------+--+----------+--+
| | | | | | | |
+---------------------------------------------------+----------+--+----------+--+----------+--+
| Profit for the period | 698 | | 425 | | 947 | |
+---------------------------------------------------+----------+--+----------+--+----------+--+
| | | | | | | |
+---------------------------------------------------+----------+--+----------+--+----------+--+
| Other comprehensive income: | | | | | | |
+---------------------------------------------------+----------+--+----------+--+----------+--+
| Exchange adjustments | (79) | | 141 | | 464 | |
+---------------------------------------------------+----------+--+----------+--+----------+--+
| Actuarial net loss | (1,424) | | (113) | | (2,018) | |
+---------------------------------------------------+----------+--+----------+--+----------+--+
| Deferred tax on actuarial net losses | 455 | | 29 | | 678 | |
+---------------------------------------------------+----------+--+----------+--+----------+--+
| Net losses taken to equity in respect of cash | (3) | | (12) | | (1) | |
| flow hedges | | | | | | |
+---------------------------------------------------+----------+--+----------+--+----------+--+
| Transferred to profit or loss on cash flow hedges | (5) | | 3 | | (53) | |
+---------------------------------------------------+----------+--+----------+--+----------+--+
| Deferred tax on cash flow hedges | 1 | | 3 | | 19 | |
+---------------------------------------------------+----------+--+----------+--+----------+--+
| Net gains/(losses) taken to equity on | 33 | | (7) | | 9 | |
| available-for-sale investments | | | | | | |
+---------------------------------------------------+----------+--+----------+--+----------+--+
| Transferred to profit or loss on sale of | - | | (2) | | (18) | |
| available-for-sale investments | | | | | | |
+---------------------------------------------------+----------+--+----------+--+----------+--+
| Deferred tax on available-for-sale investments | (5) | | 1 | | 7 | |
+---------------------------------------------------+----------+--+----------+--+----------+--+
| | | | | | | |
+---------------------------------------------------+----------+--+----------+--+----------+--+
| Other comprehensive (loss)/income for the period | (1,027) | | 43 | | (913) | |
+---------------------------------------------------+----------+--+----------+--+----------+--+
| | | | | | | |
+---------------------------------------------------+----------+--+----------+--+----------+--+
| | | | | | | |
+---------------------------------------------------+----------+--+----------+--+----------+--+
| Total comprehensive (loss)/income for the period | (329) | | 468 | | 34 | |
+---------------------------------------------------+----------+--+----------+--+----------+--+
| | | | | | | |
+---------------------------------------------------+----------+--+----------+--+----------+--+
| Total comprehensive (loss)/income attributable | | | | | | |
| to: | | | | | | |
+---------------------------------------------------+----------+--+----------+--+----------+--+
| - Equity shareholders of the parent | (330) | | 466 | | 26 | |
+---------------------------------------------------+----------+--+----------+--+----------+--+
| - Minority interests | 1 | | 2 | | 8 | |
+---------------------------------------------------+----------+--+----------+--+----------+--+
| | | | | | | |
+---------------------------------------------------+----------+--+----------+--+----------+--+
| | (329) | | 468 | | 34 | |
+---------------------------------------------------+----------+--+----------+--+----------+--+
| | | | | | | |
+---------------------------------------------------+----------+--+----------+--+----------+--+
+--------------------------------------------+-------+----------+--+----------+--+----------+--+
| CONSOLIDATED BALANCE SHEET | | 2009 | | 2008 | | At 31 | |
| at 30 September | | | | | | March | |
| | | | | | | 2009 | |
+--------------------------------------------+-------+----------+--+----------+--+----------+--+
| |Notes | GBPm | | GBPm | | GBPm | |
+--------------------------------------------+-------+----------+--+----------+--+----------+--+
| | | | | | | | |
+--------------------------------------------+-------+----------+--+----------+--+----------+--+
| Non-current assets | | | | | | | |
+--------------------------------------------+-------+----------+--+----------+--+----------+--+
| Goodwill | | 4,843 | | 4,357 | | 5,391 | |
+--------------------------------------------+-------+----------+--+----------+--+----------+--+
| Other intangible assets | | 355 | | 314 | | 370 | |
+--------------------------------------------+-------+----------+--+----------+--+----------+--+
| Property, plant and equipment | | 29,197 | | 26,321 | | 29,545 | |
+--------------------------------------------+-------+----------+--+----------+--+----------+--+
| Deferred tax assets | | 219 | | - | | 137 | |
+--------------------------------------------+-------+----------+--+----------+--+----------+--+
| Pension asset | | - | | 1,055 | | 269 | |
+--------------------------------------------+-------+----------+--+----------+--+----------+--+
| Other non-current assets | | 139 | | 128 | | 106 | |
+--------------------------------------------+-------+----------+--+----------+--+----------+--+
| Financial and other investments | | 425 | | 304 | | 361 | |
+--------------------------------------------+-------+----------+--+----------+--+----------+--+
| Derivative financial assets | 9 | 1,867 | | 633 | | 1,533 | |
+--------------------------------------------+-------+----------+--+----------+--+----------+--+
| | | | | | | | |
+--------------------------------------------+-------+----------+--+----------+--+----------+--+
| Total non-current assets | | 37,045 | | 33,112 | | 37,712 | |
+--------------------------------------------+-------+----------+--+----------+--+----------+--+
| | | | | | | | |
+--------------------------------------------+-------+----------+--+----------+--+----------+--+
| Current assets | | | | | | | |
+--------------------------------------------+-------+----------+--+----------+--+----------+--+
| Inventories and current intangible assets | | 647 | | 860 | | 556 | |
+--------------------------------------------+-------+----------+--+----------+--+----------+--+
| Trade and other receivables | | 1,702 | | 2,085 | | 2,672 | |
+--------------------------------------------+-------+----------+--+----------+--+----------+--+
| Financial and other investments | 9 | 1,669 | | 1,265 | | 2,197 | |
+--------------------------------------------+-------+----------+--+----------+--+----------+--+
| Derivative financial assets | 9 | 432 | | 291 | | 593 | |
+--------------------------------------------+-------+----------+--+----------+--+----------+--+
| Cash and cash equivalents | 9 | 359 | | 148 | | 737 | |
+--------------------------------------------+-------+----------+--+----------+--+----------+--+
| | | | | | | | |
+--------------------------------------------+-------+----------+--+----------+--+----------+--+
| Total current assets | | 4,809 | | 4,649 | | 6,755 | |
+--------------------------------------------+-------+----------+--+----------+--+----------+--+
| | | | | | | | |
+--------------------------------------------+-------+----------+--+----------+--+----------+--+
| Total assets | 2d | 41,854 | | 37,761 | | 44,467 | |
+--------------------------------------------+-------+----------+--+----------+--+----------+--+
| | | | | | | | |
+--------------------------------------------+-------+----------+--+----------+--+----------+--+
| Current liabilities | | | | | | | |
+--------------------------------------------+-------+----------+--+----------+--+----------+--+
| Borrowings | 9 | (2,626) | | (2,412) | | (3,253) | |
+--------------------------------------------+-------+----------+--+----------+--+----------+--+
| Derivative financial liabilities | 9 | (183) | | (317) | | (307) | |
+--------------------------------------------+-------+----------+--+----------+--+----------+--+
| Trade and other payables | | (2,302) | | (2,391) | | (2,835) | |
+--------------------------------------------+-------+----------+--+----------+--+----------+--+
| Current tax liabilities | | (274) | | (642) | | (383) | |
+--------------------------------------------+-------+----------+--+----------+--+----------+--+
| Provisions | | (263) | | (291) | | (248) | |
+--------------------------------------------+-------+----------+--+----------+--+----------+--+
| | | | | | | | |
+--------------------------------------------+-------+----------+--+----------+--+----------+--+
| Total current liabilities | | (5,648) | | (6,053) | | (7,026) | |
+--------------------------------------------+-------+----------+--+----------+--+----------+--+
| | | | | | | | |
+--------------------------------------------+-------+----------+--+----------+--+----------+--+
| Non-current liabilities | | | | | | | |
+--------------------------------------------+-------+----------+--+----------+--+----------+--+
| Borrowings | 9 | (22,883) | | (19,092) | | (23,540) | |
+--------------------------------------------+-------+----------+--+----------+--+----------+--+
| Derivative financial liabilities | 9 | (615) | | (272) | | (633) | |
+--------------------------------------------+-------+----------+--+----------+--+----------+--+
| Other non-current liabilities | | (1,936) | | (1,948) | | (2,092) | |
+--------------------------------------------+-------+----------+--+----------+--+----------+--+
| Deferred tax liabilities | | (2,514) | | (2,883) | | (2,661) | |
+--------------------------------------------+-------+----------+--+----------+--+----------+--+
| Pensions and other post-retirement benefit | | (3,652) | | (1,664) | | (3,080) | |
| obligations | | | | | | | |
+--------------------------------------------+-------+----------+--+----------+--+----------+--+
| Provisions | | (1,349) | | (1,124) | | (1,451) | |
+--------------------------------------------+-------+----------+--+----------+--+----------+--+
| | | | | | | | |
+--------------------------------------------+-------+----------+--+----------+--+----------+--+
| Total non-current liabilities | | (32,949) | | (26,983) | | (33,457) | |
+--------------------------------------------+-------+----------+--+----------+--+----------+--+
| | | | | | | | |
+--------------------------------------------+-------+----------+--+----------+--+----------+--+
| Total liabilities | | (38,597) | | (33,036) | | (40,483) | |
+--------------------------------------------+-------+----------+--+----------+--+----------+--+
| | | | | | | | |
+--------------------------------------------+-------+----------+--+----------+--+----------+--+
| Net assets | | 3,257 | | 4,725 | | 3,984 | |
+--------------------------------------------+-------+----------+--+----------+--+----------+--+
| | | | | | | | |
+--------------------------------------------+-------+----------+--+----------+--+----------+--+
| Equity | | | | | | | |
+--------------------------------------------+-------+----------+--+----------+--+----------+--+
| Called up share capital | | 297 | | 294 | | 294 | |
+--------------------------------------------+-------+----------+--+----------+--+----------+--+
| Share premium account | | 1,368 | | 1,371 | | 1,371 | |
+--------------------------------------------+-------+----------+--+----------+--+----------+--+
| Retained earnings | | 6,467 | | 8,171 | | 7,135 | |
+--------------------------------------------+-------+----------+--+----------+--+----------+--+
| Other equity reserves | | (4,887) | | (5,124) | | (4,830) | |
+--------------------------------------------+-------+----------+--+----------+--+----------+--+
| | | | | | | | |
+--------------------------------------------+-------+----------+--+----------+--+----------+--+
| Shareholders' equity | | 3,245 | | 4,712 | | 3,970 | |
+--------------------------------------------+-------+----------+--+----------+--+----------+--+
| Minority interests | | 12 | | 13 | | 14 | |
+--------------------------------------------+-------+----------+--+----------+--+----------+--+
| | | | | | | | |
+--------------------------------------------+-------+----------+--+----------+--+----------+--+
| Total equity | | 3,257 | | 4,725 | | 3,984 | |
+--------------------------------------------+-------+----------+--+----------+--+----------+--+
| | | | | | | | |
+--------------------------------------------+-------+----------+--+----------+--+----------+--+
+---------------------------------+-----------+---------+----------+----------+----------------+-----------+--------+
| CONSOLIDATED STATEMENT OF | Called-up | Share | Retained | Other | Total | Minority | Total |
| CHANGES IN EQUITY | share | premium | earnings | equity | share-holders' | interests | equity |
| | capital | account | | reserves | equity | | |
+---------------------------------+-----------+---------+----------+----------+----------------+-----------+--------+
| | GBPm | GBPm | GBPm | GBPm | GBPm | GBPm | GBPm |
+---------------------------------+-----------+---------+----------+----------+----------------+-----------+--------+
| | | | | | | | |
+---------------------------------+-----------+---------+----------+----------+----------------+-----------+--------+
| Changes in equity for the | | | | | | | |
| period: | | | | | | | |
+---------------------------------+-----------+---------+----------+----------+----------------+-----------+--------+
| | | | | | | | |
+---------------------------------+-----------+---------+----------+----------+----------------+-----------+--------+
| At 1 April 2009 | 294 | 1,371 | 7,135 | (4,830) | 3,970 | 14 | 3,984 |
+---------------------------------+-----------+---------+----------+----------+----------------+-----------+--------+
| Total comprehensive | - | - | (273) | (57) | (330) | 1 | (329) |
| (loss)/income for the period | | | | | | | |
+---------------------------------+-----------+---------+----------+----------+----------------+-----------+--------+
| Equity dividends | - | - | (557) | - | (557) | - | (557) |
+---------------------------------+-----------+---------+----------+----------+----------------+-----------+--------+
| Scrip dividend related share | 3 | (3) | 137 | - | 137 | - | 137 |
| issue | | | | | | | |
+---------------------------------+-----------+---------+----------+----------+----------------+-----------+--------+
| Other movements in minority | - | - | - | - | - | (3) | (3) |
| interests | | | | | | | |
+---------------------------------+-----------+---------+----------+----------+----------------+-----------+--------+
| Share-based payment | - | - | 10 | - | 10 | - | 10 |
+---------------------------------+-----------+---------+----------+----------+----------------+-----------+--------+
| Issue of treasury shares | - | - | 13 | - | 13 | - | 13 |
+---------------------------------+-----------+---------+----------+----------+----------------+-----------+--------+
| Tax on share-based payment | - | - | 2 | - | 2 | - | 2 |
+---------------------------------+-----------+---------+----------+----------+----------------+-----------+--------+
| | | | | | | | |
+---------------------------------+-----------+---------+----------+----------+----------------+-----------+--------+
| At 30 September 2009 | 297 | 1,368 | 6,467 | (4,887) | 3,245 | 12 | 3,257 |
+---------------------------------+-----------+---------+----------+----------+----------------+-----------+--------+
| | | | | | | | |
+---------------------------------+-----------+---------+----------+----------+----------------+-----------+--------+
| | | | | | | | |
+---------------------------------+-----------+---------+----------+----------+----------------+-----------+--------+
| | | | | | | | |
+---------------------------------+-----------+---------+----------+----------+----------------+-----------+--------+
| | Called-up | Share | Retained | Other | Total | Minority | Total |
| | share | premium | earnings | equity | share-holders' | interests | equity |
| | capital | account | | reserves | equity | | |
+---------------------------------+-----------+---------+----------+----------+----------------+-----------+--------+
| | GBPm | GBPm | GBPm | GBPm | GBPm | GBPm | GBPm |
+---------------------------------+-----------+---------+----------+----------+----------------+-----------+--------+
| | | | | | | | |
+---------------------------------+-----------+---------+----------+----------+----------------+-----------+--------+
| Changes in equity for the | | | | | | | |
| period: | | | | | | | |
+---------------------------------+-----------+---------+----------+----------+----------------+-----------+--------+
| | | | | | | | |
+---------------------------------+-----------+---------+----------+----------+----------------+-----------+--------+
| At 1 April 2008 | 294 | 1,371 | 8,943 | (5,252) | 5,356 | 18 | 5,374 |
+---------------------------------+-----------+---------+----------+----------+----------------+-----------+--------+
| Total comprehensive income for | - | - | 338 | 128 | 466 | 2 | 468 |
| the period | | | | | | | |
+---------------------------------+-----------+---------+----------+----------+----------------+-----------+--------+
| Equity dividends | - | - | (531) | - | (531) | - | (531) |
+---------------------------------+-----------+---------+----------+----------+----------------+-----------+--------+
| Repurchase of share capital and | - | - | (599) | - | (599) | - | (599) |
| purchase of treasury shares | | | | | | | |
+---------------------------------+-----------+---------+----------+----------+----------------+-----------+--------+
| Other movements in minority | - | - | - | - | - | (7) | (7) |
| interests | | | | | | | |
+---------------------------------+-----------+---------+----------+----------+----------------+-----------+--------+
| Share-based payment | - | - | 10 | - | 10 | - | 10 |
+---------------------------------+-----------+---------+----------+----------+----------------+-----------+--------+
| Issue of treasury shares | - | - | 8 | - | 8 | - | 8 |
+---------------------------------+-----------+---------+----------+----------+----------------+-----------+--------+
| Tax on share-based payment | - | - | 2 | - | 2 | - | 2 |
+---------------------------------+-----------+---------+----------+----------+----------------+-----------+--------+
| | | | | | | | |
+---------------------------------+-----------+---------+----------+----------+----------------+-----------+--------+
| At 30 September 2008 | 294 | 1,371 | 8,171 | (5,124) | 4,712 | 13 | 4,725 |
+---------------------------------+-----------+---------+----------+----------+----------------+-----------+--------+
| | | | | | | | |
+---------------------------------+-----------+---------+----------+----------+----------------+-----------+--------+
| | | | | | | | |
+---------------------------------+-----------+---------+----------+----------+----------------+-----------+--------+
| | | | | | | | |
+---------------------------------+-----------+---------+----------+----------+----------------+-----------+--------+
| | Called-up | Share | Retained | Other | Total | Minority | Total |
| | share | premium | earnings | equity | share-holders' | interests | equity |
| | capital | account | | reserves | equity | | |
+---------------------------------+-----------+---------+----------+----------+----------------+-----------+--------+
| | GBPm | GBPm | GBPm | GBPm | GBPm | GBPm | GBPm |
+---------------------------------+-----------+---------+----------+----------+----------------+-----------+--------+
| | | | | | | | |
+---------------------------------+-----------+---------+----------+----------+----------------+-----------+--------+
| Changes in equity for the year: | | | | | | | |
+---------------------------------+-----------+---------+----------+----------+----------------+-----------+--------+
| | | | | | | | |
+---------------------------------+-----------+---------+----------+----------+----------------+-----------+--------+
| At 1 April 2008 | 294 | 1,371 | 8,943 | (5,252) | 5,356 | 18 | 5,374 |
+---------------------------------+-----------+---------+----------+----------+----------------+-----------+--------+
| Total comprehensive | - | - | (396) | 422 | 26 | 8 | 34 |
| (loss)/income for the year | | | | | | | |
+---------------------------------+-----------+---------+----------+----------+----------------+-----------+--------+
| Equity dividends | - | - | (838) | - | (838) | - | (838) |
+---------------------------------+-----------+---------+----------+----------+----------------+-----------+--------+
| Repurchase of share capital and | - | - | (603) | - | (603) | - | (603) |
| purchase of treasury shares | | | | | | | |
+---------------------------------+-----------+---------+----------+----------+----------------+-----------+--------+
| Other movements in minority | - | - | - | - | - | (12) | (12) |
| interests | | | | | | | |
+---------------------------------+-----------+---------+----------+----------+----------------+-----------+--------+
| Share-based payment | - | - | 22 | - | 22 | - | 22 |
+---------------------------------+-----------+---------+----------+----------+----------------+-----------+--------+
| Issue of treasury shares | - | - | 8 | - | 8 | - | 8 |
+---------------------------------+-----------+---------+----------+----------+----------------+-----------+--------+
| Tax on share-based payment | - | - | (1) | - | (1) | - | (1) |
+---------------------------------+-----------+---------+----------+----------+----------------+-----------+--------+
| | | | | | | | |
+---------------------------------+-----------+---------+----------+----------+----------------+-----------+--------+
| At 31 March 2009 | 294 | 1,371 | 7,135 | (4,830) | 3,970 | 14 | 3,984 |
+---------------------------------+-----------+---------+----------+----------+----------------+-----------+--------+
| | | | | | | | |
+---------------------------------+-----------+---------+----------+----------+----------------+-----------+--------+
+---------------------------------------------------+---------+--+---------+--+---------+--+
| CONSOLIDATED CASH FLOW STATEMENT | 2009 | | 2008 | | Year | |
| for the six months ended 30 September | | | | | ended | |
| | | | | | 31 | |
| | | | | | March | |
| | | | | | 2009 | |
+---------------------------------------------------+---------+--+---------+--+---------+--+
| | GBPm | | GBPm | | GBPm | |
+---------------------------------------------------+---------+--+---------+--+---------+--+
| | | | | | | |
+---------------------------------------------------+---------+--+---------+--+---------+--+
| Cash flows from operating activities | | | | | | |
+---------------------------------------------------+---------+--+---------+--+---------+--+
| Total operating profit | 1,404 | | 943 | | 2,623 | |
+---------------------------------------------------+---------+--+---------+--+---------+--+
| Adjustments for: | | | | | | |
+---------------------------------------------------+---------+--+---------+--+---------+--+
| Exceptional items, remeasurements and | (255) | | 136 | | 292 | |
| stranded cost recoveries | | | | | | |
+---------------------------------------------------+---------+--+---------+--+---------+--+
| Depreciation and amortisation | 585 | | 511 | | 1,122 | |
+---------------------------------------------------+---------+--+---------+--+---------+--+
| Share-based payment charge | 10 | | 10 | | 22 | |
+---------------------------------------------------+---------+--+---------+--+---------+--+
| Changes in working capital | 329 | | (161) | | 54 | |
+---------------------------------------------------+---------+--+---------+--+---------+--+
| Changes in provisions | (57) | | (32) | | (99) | |
+---------------------------------------------------+---------+--+---------+--+---------+--+
| Changes in pensions and other | (409) | | (547) | | (678) | |
| post-retirement benefit obligations | | | | | | |
+---------------------------------------------------+---------+--+---------+--+---------+--+
| Cash flows relating to exceptional items | (72) | | (39) | | (131) | |
+---------------------------------------------------+---------+--+---------+--+---------+--+
| Cash flows relating to stranded cost recoveries | 194 | | 113 | | 359 | |
+---------------------------------------------------+---------+--+---------+--+---------+--+
| | | | | | | |
+---------------------------------------------------+---------+--+---------+--+---------+--+
| Cash flows generated from continuing operations | 1,729 | | 934 | | 3,564 | |
+---------------------------------------------------+---------+--+---------+--+---------+--+
| Cash flows relating to discontinued operations | - | | 1 | | (8) | |
| (excluding tax) | | | | | | |
+---------------------------------------------------+---------+--+---------+--+---------+--+
| | | | | | | |
+---------------------------------------------------+---------+--+---------+--+---------+--+
| Cash generated from operations | 1,729 | | 935 | | 3,556 | |
+---------------------------------------------------+---------+--+---------+--+---------+--+
| Tax paid | (131) | | (229) | | (143) | |
+---------------------------------------------------+---------+--+---------+--+---------+--+
| | | | | | | |
+---------------------------------------------------+---------+--+---------+--+---------+--+
| Net cash inflow from operating activities | 1,598 | | 706 | | 3,413 | |
+---------------------------------------------------+---------+--+---------+--+---------+--+
| | | | | | | |
+---------------------------------------------------+---------+--+---------+--+---------+--+
| Cash flows from investing activities | | | | | | |
+---------------------------------------------------+---------+--+---------+--+---------+--+
| Acquisition of investments | (53) | | (29) | | (73) | |
+---------------------------------------------------+---------+--+---------+--+---------+--+
| Purchases of intangible assets | (35) | | (56) | | (78) | |
+---------------------------------------------------+---------+--+---------+--+---------+--+
| Purchases of property, plant and equipment | (1,426) | | (1,535) | | (3,107) | |
+---------------------------------------------------+---------+--+---------+--+---------+--+
| Disposals of property, plant and equipment | 9 | | 18 | | 27 | |
+---------------------------------------------------+---------+--+---------+--+---------+--+
| Interest received | 12 | | 61 | | 85 | |
+---------------------------------------------------+---------+--+---------+--+---------+--+
| Dividends received from joint ventures | 17 | | - | | - | |
+---------------------------------------------------+---------+--+---------+--+---------+--+
| Net movements in financial investments | 507 | | 814 | | 99 | |
+---------------------------------------------------+---------+--+---------+--+---------+--+
| | | | | | | |
+---------------------------------------------------+---------+--+---------+--+---------+--+
| Cash flows used in continuing operations - | (969) | | (727) | | (3,047) | |
| investing activities | | | | | | |
+---------------------------------------------------+---------+--+---------+--+---------+--+
| Cash flows relating to discontinued operations | | | | | | |
+---------------------------------------------------+---------+--+---------+--+---------+--+
| - disposal proceeds (net of tax) (i) | - | | 1,600 | | 1,053 | |
+---------------------------------------------------+---------+--+---------+--+---------+--+
| - other investing activities | - | | (3) | | (4) | |
+---------------------------------------------------+---------+--+---------+--+---------+--+
| | | | | | | |
+---------------------------------------------------+---------+--+---------+--+---------+--+
| Net cash flow (used in)/from investing activities | (969) | | 870 | | (1,998) | |
+---------------------------------------------------+---------+--+---------+--+---------+--+
| | | | | | | |
+---------------------------------------------------+---------+--+---------+--+---------+--+
| Cash flows from financing activities | | | | | | |
+---------------------------------------------------+---------+--+---------+--+---------+--+
| Proceeds from issue of share capital and sale of | 13 | | 8 | | 8 | |
| treasury shares | | | | | | |
+---------------------------------------------------+---------+--+---------+--+---------+--+
| (Decrease)/increase in borrowings and related | (112) | | 17 | | 1,641 | |
| derivatives | | | | | | |
+---------------------------------------------------+---------+--+---------+--+---------+--+
| Interest paid | (480) | | (468) | | (1,061) | |
+---------------------------------------------------+---------+--+---------+--+---------+--+
| Dividends paid to shareholders | (420) | | (531) | | (838) | |
+---------------------------------------------------+---------+--+---------+--+---------+--+
| Repurchase of share capital and purchase of | - | | (623) | | (627) | |
| treasury shares | | | | | | |
+---------------------------------------------------+---------+--+---------+--+---------+--+
| | | | | | | |
+---------------------------------------------------+---------+--+---------+--+---------+--+
| Net cash flow used in financing activities | (999) | | (1,597) | | (877) | |
+---------------------------------------------------+---------+--+---------+--+---------+--+
| | | | | | | |
+---------------------------------------------------+---------+--+---------+--+---------+--+
| Net (decrease)/increase in cash and cash | (370) | | (21) | | 538 | |
| equivalents | | | | | | |
+---------------------------------------------------+---------+--+---------+--+---------+--+
| Exchange movements | (7) | | 5 | | 18 | |
+---------------------------------------------------+---------+--+---------+--+---------+--+
| Net cash and cash equivalents at start of period | 720 | | 164 | | 164 | |
+---------------------------------------------------+---------+--+---------+--+---------+--+
| | | | | | | |
+---------------------------------------------------+---------+--+---------+--+---------+--+
| Net cash and cash equivalents at end of period | 343 | | 148 | | 720 | |
| (ii) | | | | | | |
+---------------------------------------------------+---------+--+---------+--+---------+--+
| | | | | | | |
+---------------------------------------------------+---------+--+---------+--+---------+--+
* 31 March 2009 includes payment of tax arising on disposal of the Ravenswood
generation station and other businesses of GBP564m.
* Net of bank overdrafts of GBP16m (30 September 2008: GBPnil; 31 March 2009:
GBP17m).
NOTES TO THE 2009/10 HALF YEAR FINANCIAL INFORMATION
1. Basis of preparation and new accounting standards, interpretations and
amendments
The half year financial information covers the six month period ended 30
September 2009 and has been prepared under International Financial Reporting
Standards (IFRS) as issued by the International Accounting Standards Board
(IASB), and IFRS as adopted by the European Union, in accordance with
International Accounting Standard 34 'Interim Financial Reporting' and the
Disclosure and Transparency Rules of the Financial Services Authority. The half
year financial information is unaudited but has been reviewed by the auditors
and their report is attached to this document.
The following standards, interpretations and amendments, issued by the IASB and
by the International Financial Reporting Interpretations Committee (IFRIC), are
effective for the year ending 31 March 2010. None of these had a material impact
on consolidated results or assets and liabilities.
* IFRS 8 on operating segments
* IAS 23 revised on borrowing costs
* IFRIC 13 on customer loyalty programmes
* IAS 1 revised on the presentation of financial statements
* Amendment to IFRS 2 on share-based payments
* Amendments to IAS 32 and IAS 1 on puttable financial instruments and obligations
arising on liquidation
* Amendments to IFRS 1 and IAS 27 on recognition of investments on first-time
adoption of IFRS and dividends out of pre-acquisition profits
* Improvements to IFRS 2008
* IFRIC 15 on agreements for the construction of real estate
* IFRIC 16 on hedges of a net investment in a foreign operation
* Amendment to IAS 39 on the effective date for reclassification of financial
assets
The following interpretation and amendments, issued by the IFRIC and the IASB,
are effective for the year ending 31 March 2010, but have not yet been endorsed
by the European Union:
* IFRIC 18 on transfers of assets from customers
* Amendment to IFRS 7 on improving disclosures about financial instruments
* Amendments to IFRIC 9 and IAS 39 on embedded derivatives
The amendment to IFRS 7 and amendments to IFRIC 9 and IAS 39 have no impact on
the consolidated results or assets and liabilities of the Company. The impact of
IFRIC 18 is to increase profit for the six months ended 30 September 2009 and
reduce liabilities as at 30 September 2009; however, the adoption of this
interpretation did not have a material impact on our consolidated results or
assets and liabilities and therefore the half year financial information
complies with both IFRS as issued by the IASB and IFRS as adopted by the
European Union.
The half year financial information does not constitute statutory accounts as
defined in Section 434 of the Companies Act 2006. It should be read in
conjunction with the statutory accounts for the year ended 31 March 2009, which
were prepared in accordance with IFRS as adopted by the European Union and the
IASB and have been filed with the Registrar of Companies. The auditors' report
on these statutory accounts was unqualified and did not contain a statement
under Section 237(2) or (3) of the Companies Act 1985.
The half year financial information has been prepared in accordance with the
accounting policies expected to be applicable for the year ending 31 March 2010
and consistent with those applied in the preparation of our accounts for the
year ended 31 March 2009, except for the impact of new standards,
interpretations and amendments noted above.
Date of approval
This announcement was approved by the Board of Directors on 18 November 2009.
2. Segmental analysis
The segmental analysis is based on the information the Board of Directors uses
internally for the purposes of evaluating the performance of operating segments
and determining resource allocation between operating segments. The Company
assesses the performance of its operations principally on the basis of operating
profit before exceptional items, remeasurements and stranded cost recoveries.
The following table describes the main activities for each operating segment:
+------------------------------+------------------------------------------------------+
| Transmission UK | High-voltage electricity transmission networks, the |
| | gas transmission network in the UK, UK liquefied |
| | natural gas (LNG) storage activities and the French |
| | electricity interconnector. |
+------------------------------+------------------------------------------------------+
| Transmission US | High-voltage electricity transmission networks in |
| | New York and New England. |
+------------------------------+------------------------------------------------------+
| Gas Distribution UK | Four of the eight regional networks of Great |
| | Britain's gas distribution system. |
+------------------------------+------------------------------------------------------+
| Gas Distribution US | Gas distribution in New York and New England. |
+------------------------------+------------------------------------------------------+
| Electricity Distribution and | Electricity distribution in New York and New England |
| Generation US | and electricity generation in New York. |
+------------------------------+------------------------------------------------------+
Other activities primarily relate to non-regulated businesses and other
commercial operations not included within the above segments, including:
UK-based gas metering activities; UK property management; a UK LNG import
terminal; other LNG operations; US unregulated transmission pipelines; US gas
fields; and corporate activities, including business development.
Sales between operating segments are priced having regard to the regulatory and
legal requirements to which the businesses are subject.
The Gas Distribution US segment experiences significant seasonal fluctuations
owing to weather conditions and peak delivery volumes occurring in the second
half of the fiscal year. In the UK the pricing methodology for gas distribution
has a higher capacity delivery component and a lower volume component and so is
not subject to such significant seasonal fluctuations.
A reconciliation of the operating segments' measure of profit to total profit
before taxation is provided on the face of the income statement. Further details
of the reconciling items are provided in note 3.
* Revenue
+--------------------------------------------------------+----------+----------+----------+
| Six months ended 30 September | 2009 | 2008 | Year |
| | | | ended 31 |
| | | | March |
| | | | 2009 |
+--------------------------------------------------------+----------+----------+----------+
| | GBPm | GBPm | GBPm |
+--------------------------------------------------------+----------+----------+----------+
| | | | |
+--------------------------------------------------------+----------+----------+----------+
| Operating segments - continuing operations | | | |
+--------------------------------------------------------+----------+----------+----------+
| Transmission UK | 1,609 | 1,799 | 3,487 |
+--------------------------------------------------------+----------+----------+----------+
| Transmission US | 208 | 176 | 420 |
+--------------------------------------------------------+----------+----------+----------+
| Gas Distribution UK | 768 | 647 | 1,466 |
+--------------------------------------------------------+----------+----------+----------+
| Gas Distribution US | 999 | 1,216 | 4,786 |
+--------------------------------------------------------+----------+----------+----------+
| Electricity Distribution and Generation US | 2,175 | 2,011 | 4,972 |
+--------------------------------------------------------+----------+----------+----------+
| Other activities | 378 | 327 | 719 |
+--------------------------------------------------------+----------+----------+----------+
| Sales between operating segments | (93) | (104) | (226) |
+--------------------------------------------------------+----------+----------+----------+
| | | | |
+--------------------------------------------------------+----------+----------+----------+
| Revenue | 6,044 | 6,072 | 15,624 |
+--------------------------------------------------------+----------+----------+----------+
| | | | |
+--------------------------------------------------------+----------+----------+----------+
| Total excluding stranded cost recoveries | 5,816 | 5,915 | 15,189 |
+--------------------------------------------------------+----------+----------+----------+
| Stranded cost recoveries | 228 | 157 | 435 |
+--------------------------------------------------------+----------+----------+----------+
| | | | |
+--------------------------------------------------------+----------+----------+----------+
| Revenue | 6,044 | 6,072 | 15,624 |
+--------------------------------------------------------+----------+----------+----------+
| | | | |
+--------------------------------------------------------+----------+----------+----------+
| Geographical area | | | |
+--------------------------------------------------------+----------+----------+----------+
| UK | 2,695 | 2,666 | 5,334 |
+--------------------------------------------------------+----------+----------+----------+
| US | 3,349 | 3,406 | 10,290 |
+--------------------------------------------------------+----------+----------+----------+
| | | | |
+--------------------------------------------------------+----------+----------+----------+
| Revenue | 6,044 | 6,072 | 15,624 |
+--------------------------------------------------------+----------+----------+----------+
| | | | |
+--------------------------------------------------------+----------+----------+----------+
2. Segmental analysis (continued)
* Operating profit - before exceptional items, remeasurements and stranded cost
recoveries
+---------------------------------------------------------+---------+---------+---------+
| Six months ended 30 September | 2009 | 2008 | Year |
| | | | ended |
| | | | 31 |
| | | | March |
| | | | 2009 |
+---------------------------------------------------------+---------+---------+---------+
| | GBPm | GBPm | GBPm |
+---------------------------------------------------------+---------+---------+---------+
| | | | |
+---------------------------------------------------------+---------+---------+---------+
| Operating segments - continuing operations | | | |
+---------------------------------------------------------+---------+---------+---------+
| Transmission UK | 549 | 508 | 1,126 |
+---------------------------------------------------------+---------+---------+---------+
| Transmission US | 88 | 83 | 175 |
+---------------------------------------------------------+---------+---------+---------+
| Gas Distribution UK | 385 | 264 | 672 |
+---------------------------------------------------------+---------+---------+---------+
| Gas Distribution US | (132) | 10 | 612 |
+---------------------------------------------------------+---------+---------+---------+
| Electricity Distribution and Generation US | 169 | 129 | 265 |
+---------------------------------------------------------+---------+---------+---------+
| Other activities | 90 | 85 | 65 |
+---------------------------------------------------------+---------+---------+---------+
| | | | |
+---------------------------------------------------------+---------+---------+---------+
| Operating profit before exceptional items, | 1,149 | 1,079 | 2,915 |
| remeasurements and stranded cost recoveries | | | |
+---------------------------------------------------------+---------+---------+---------+
| | | | |
+---------------------------------------------------------+---------+---------+---------+
| Geographical area | | | |
+---------------------------------------------------------+---------+---------+---------+
| UK | 1,022 | 855 | 1,875 |
+---------------------------------------------------------+---------+---------+---------+
| US | 127 | 224 | 1,040 |
+---------------------------------------------------------+---------+---------+---------+
| | | | |
+---------------------------------------------------------+---------+---------+---------+
| Operating profit before exceptional items, | 1,149 | 1,079 | 2,915 |
| remeasurements and stranded cost recoveries | | | |
+---------------------------------------------------------+---------+---------+---------+
| | | | |
+---------------------------------------------------------+---------+---------+---------+
c) Operating profit - after exceptional items, remeasurements and stranded cost
recoveries
+---------------------------------------------------------+---------+---------+---------+
| Six months ended 30 September | 2009 | 2008 | Year |
| | | | ended |
| | | | 31 |
| | | | March |
| | | | 2009 |
+---------------------------------------------------------+---------+---------+---------+
| | GBPm | GBPm | GBPm |
+---------------------------------------------------------+---------+---------+---------+
| | | | |
+---------------------------------------------------------+---------+---------+---------+
| Operating segments - continuing operations | | | |
+---------------------------------------------------------+---------+---------+---------+
| Transmission UK | 544 | 503 | 1,063 |
+---------------------------------------------------------+---------+---------+---------+
| Transmission US | 86 | 82 | 173 |
+---------------------------------------------------------+---------+---------+---------+
| Gas Distribution UK | 378 | 251 | 629 |
+---------------------------------------------------------+---------+---------+---------+
| Gas Distribution US | (47) | (205) | 226 |
+---------------------------------------------------------+---------+---------+---------+
| Electricity Distribution and Generation US | 356 | 232 | 531 |
+---------------------------------------------------------+---------+---------+---------+
| Other activities | 87 | 80 | 1 |
+---------------------------------------------------------+---------+---------+---------+
| | | | |
+---------------------------------------------------------+---------+---------+---------+
| Operating profit after exceptional items, | 1,404 | 943 | 2,623 |
| remeasurements and stranded cost recoveries | | | |
+---------------------------------------------------------+---------+---------+---------+
| | | | |
+---------------------------------------------------------+---------+---------+---------+
| Geographical area | | | |
+---------------------------------------------------------+---------+---------+---------+
| UK | 1,010 | 843 | 1,729 |
+---------------------------------------------------------+---------+---------+---------+
| US | 394 | 100 | 894 |
+---------------------------------------------------------+---------+---------+---------+
| | | | |
+---------------------------------------------------------+---------+---------+---------+
| Operating profit after exceptional items, | 1,404 | 943 | 2,623 |
| remeasurements and stranded cost recoveries | | | |
+---------------------------------------------------------+---------+---------+---------+
| | | | |
+---------------------------------------------------------+---------+---------+---------+
2. Segmental analysis (continued)
d) Total assets
+---------------------------------------------------------+---------+---------+---------+
| As at 30 September | 2009 | 2008 | 31 |
| | | | March |
| | | | 2009 |
+---------------------------------------------------------+---------+---------+---------+
| | GBPm | GBPm | GBPm |
+---------------------------------------------------------+---------+---------+---------+
| | | | |
+---------------------------------------------------------+---------+---------+---------+
| Operating segments - continuing operations | | | |
+---------------------------------------------------------+---------+---------+---------+
| Transmission UK | 10,552 | 10,948 | 10,451 |
+---------------------------------------------------------+---------+---------+---------+
| Transmission US | 2,229 | 1,906 | 2,238 |
+---------------------------------------------------------+---------+---------+---------+
| Gas Distribution UK | 6,393 | 6,035 | 6,158 |
+---------------------------------------------------------+---------+---------+---------+
| Gas Distribution US | 8,736 | 7,936 | 10,112 |
+---------------------------------------------------------+---------+---------+---------+
| Electricity Distribution and Generation US | 6,629 | 6,042 | 7,854 |
+---------------------------------------------------------+---------+---------+---------+
| Other activities | 2,547 | 2,446 | 2,289 |
+---------------------------------------------------------+---------+---------+---------+
| | | | |
+---------------------------------------------------------+---------+---------+---------+
| | 37,086 | 35,313 | 39,102 |
+---------------------------------------------------------+---------+---------+---------+
| Joint ventures - continuing operations | 222 | 111 | 168 |
+---------------------------------------------------------+---------+---------+---------+
| Unallocated | 4,546 | 2,337 | 5,197 |
+---------------------------------------------------------+---------+---------+---------+
| | | | |
+---------------------------------------------------------+---------+---------+---------+
| Total assets | 41,854 | 37,761 | 44,467 |
+---------------------------------------------------------+---------+---------+---------+
| | | | |
+---------------------------------------------------------+---------+---------+---------+
| Geographical area | | | |
+---------------------------------------------------------+---------+---------+---------+
| UK | 18,976 | 18,859 | 18,527 |
+---------------------------------------------------------+---------+---------+---------+
| US | 18,332 | 16,565 | 20,743 |
+---------------------------------------------------------+---------+---------+---------+
| Unallocated | 4,546 | 2,337 | 5,197 |
+---------------------------------------------------------+---------+---------+---------+
| | | | |
+---------------------------------------------------------+---------+---------+---------+
| Total assets | 41,854 | 37,761 | 44,467 |
+---------------------------------------------------------+---------+---------+---------+
| | | | |
+---------------------------------------------------------+---------+---------+---------+
The analysis of total assets includes all attributable goodwill and excludes
inter-segment balances. Unallocated total assets comprise cash and cash
equivalents, taxation, current financial investments and total derivative
financial assets.
e) Depreciation and amortisation
+---------------------------------------------------------+---------+---------+---------+
| Six months ended 30 September | 2009 | 2008 | Year |
| | | | ended |
| | | | 31 |
| | | | March |
| | | | 2009 |
+---------------------------------------------------------+---------+---------+---------+
| | GBPm | GBPm | GBPm |
+---------------------------------------------------------+---------+---------+---------+
| | | | |
+---------------------------------------------------------+---------+---------+---------+
| Operating segments - continuing operations | | | |
+---------------------------------------------------------+---------+---------+---------+
| Transmission UK | 182 | 174 | 353 |
+---------------------------------------------------------+---------+---------+---------+
| Transmission US | 29 | 22 | 56 |
+---------------------------------------------------------+---------+---------+---------+
| Gas Distribution UK | 96 | 86 | 177 |
+---------------------------------------------------------+---------+---------+---------+
| Gas Distribution US | 87 | 71 | 172 |
+---------------------------------------------------------+---------+---------+---------+
| Electricity Distribution and Generation US | 108 | 86 | 223 |
+---------------------------------------------------------+---------+---------+---------+
| Other activities | 86 | 77 | 146 |
+---------------------------------------------------------+---------+---------+---------+
| | | | |
+---------------------------------------------------------+---------+---------+---------+
| Depreciation and amortisation* | 588 | 516 | 1,127 |
+---------------------------------------------------------+---------+---------+---------+
| | | | |
+---------------------------------------------------------+---------+---------+---------+
| Geographical area | | | |
+---------------------------------------------------------+---------+---------+---------+
| UK | 356 | 331 | 679 |
+---------------------------------------------------------+---------+---------+---------+
| US | 232 | 185 | 448 |
+---------------------------------------------------------+---------+---------+---------+
| | | | |
+---------------------------------------------------------+---------+---------+---------+
| Depreciation and amortisation* | 588 | 516 | 1,127 |
+---------------------------------------------------------+---------+---------+---------+
| | | | |
+---------------------------------------------------------+---------+---------+---------+
* Includes amounts in respect of the amortisation of acquisition-related
intangibles (see note 3) 3. Exceptional items, remeasurements and stranded cost
recoveries
Exceptional items, remeasurements and stranded cost recoveries are items of
income and expenditure that, in the judgement of management, should be disclosed
separately on the basis that they are material, either by their nature or their
size, to an understanding of our financial performance and significantly distort
the comparability of financial performance between periods. Items of income or
expense that are considered by management for designation as exceptional items
include such items as significant restructurings, write-downs or impairments of
non-current assets, material changes in environmental or decommissioning
provisions, integration of acquired businesses, amortisation of
acquisition-related intangibles and gains or losses on disposals of businesses
or investments.
Remeasurements comprise gains or losses recorded in the income statement arising
from changes in the fair value of commodity contracts and of derivative
financial instruments to the extent that hedge accounting is not achieved or is
not effective.
Stranded cost recoveries represent the recovery of historical costs in the US
related to generation assets that are no longer owned. Such costs can be
recovered from customers as permitted by regulatory agreements.
+----------------------------------------------------------+---------+---------+---------+
| Six months ended 30 September | 2009 | 2008 | |
| | | | Year |
| | | | ended |
| | | | 31 |
| | | | March |
| | | | 2009 |
+----------------------------------------------------------+---------+---------+---------+
| | GBPm | GBPm | GBPm |
+----------------------------------------------------------+---------+---------+---------+
| | | | |
+----------------------------------------------------------+---------+---------+---------+
| Exceptional items - restructuring costs (i) | (48) | (39) | (192) |
+----------------------------------------------------------+---------+---------+---------+
| Exceptional items - environmental related provisions | (7) | (9) | (78) |
| (ii) | | | |
+----------------------------------------------------------+---------+---------+---------+
| Exceptional items - other (iii) | (3) | (3) | (5) |
+----------------------------------------------------------+---------+---------+---------+
| Remeasurements - commodity contracts (iv) | 113 | (239) | (443) |
+----------------------------------------------------------+---------+---------+---------+
| Stranded cost recoveries (v) | 200 | 154 | 426 |
+----------------------------------------------------------+---------+---------+---------+
| Total exceptional items, remeasurements and stranded | 255 | (136) | (292) |
| cost recoveries included within operating profit | | | |
+----------------------------------------------------------+---------+---------+---------+
| | | | |
+----------------------------------------------------------+---------+---------+---------+
| Remeasurements - commodity contracts (iv) | (1) | 2 | (2) |
+----------------------------------------------------------+---------+---------+---------+
| Remeasurements - net gains/(losses) on derivative | 41 | 140 | (82) |
| financial instruments (vi) | | | |
+----------------------------------------------------------+---------+---------+---------+
| Total exceptional items and remeasurements included | 40 | 142 | (84) |
| within finance costs | | | |
+----------------------------------------------------------+---------+---------+---------+
| | | | |
+----------------------------------------------------------+---------+---------+---------+
| Total exceptional items, remeasurements and stranded | 295 | 6 | (376) |
| cost recoveries before taxation | | | |
+----------------------------------------------------------+---------+---------+---------+
| | | | |
+----------------------------------------------------------+---------+---------+---------+
| Exceptional tax item - deferred tax charge arising from | - | (40) | (49) |
| change in UK industrial building allowance regime (vii) | | | |
+----------------------------------------------------------+---------+---------+---------+
| Tax on exceptional items - restructuring costs (i) | 17 | 13 | 59 |
+----------------------------------------------------------+---------+---------+---------+
| Tax on exceptional items - environmental related | 3 | 4 | 16 |
| provisions (ii) | | | |
+----------------------------------------------------------+---------+---------+---------+
| Tax on exceptional items - other (iii) | 1 | 1 | 2 |
+----------------------------------------------------------+---------+---------+---------+
| Tax on remeasurements - commodity contracts (iv) | (45) | 94 | 179 |
+----------------------------------------------------------+---------+---------+---------+
| Tax on remeasurements - derivative financial instruments | (49) | (42) | 8 |
| (vi) | | | |
+----------------------------------------------------------+---------+---------+---------+
| Tax on stranded cost recoveries (v) | (80) | (61) | (170) |
+----------------------------------------------------------+---------+---------+---------+
| | | | |
+----------------------------------------------------------+---------+---------+---------+
| Tax on exceptional items, remeasurements and stranded | (153) | (31) | 45 |
| cost recoveries | | | |
+----------------------------------------------------------+---------+---------+---------+
| | | | |
+----------------------------------------------------------+---------+---------+---------+
| Total exceptional items, remeasurements and stranded | 142 | (25) | (331) |
| cost recoveries | | | |
+----------------------------------------------------------+---------+---------+---------+
| | | | |
+----------------------------------------------------------+---------+---------+---------+
| | | | |
+----------------------------------------------------------+---------+---------+---------+
| Total exceptional items after taxation | (37) | (73) | (247) |
+----------------------------------------------------------+---------+---------+---------+
| Total commodity contract remeasurements after taxation | 67 | (143) | (266) |
+----------------------------------------------------------+---------+---------+---------+
| Total derivative financial instrument remeasurements | (8) | 98 | (74) |
| after taxation | | | |
+----------------------------------------------------------+---------+---------+---------+
| Total stranded cost recoveries after taxation | 120 | 93 | 256 |
+----------------------------------------------------------+---------+---------+---------+
| | | | |
+----------------------------------------------------------+---------+---------+---------+
| Total exceptional items, remeasurements and stranded | 142 | (25) | (331) |
| cost recoveries after taxation | | | |
+----------------------------------------------------------+---------+---------+---------+
| | | | |
+----------------------------------------------------------+---------+---------+---------+
3. Exceptional items, remeasurements and stranded cost recoveries (continued)
* For the six months ended 30 September 2009 restructuring costs include charges
related to the integration of KeySpan of GBP22m (six months ended 30 September
2008: GBP19m; year ended 31 March 2009: GBP53m) and transformation related
initiatives of GBP26m (six months ended 30 September 2008: GBP5m; year ended 31
March 2009: GBP68m). Charges in the comparative periods also included planned
cost reduction programmes in our UK businesses of GBP15m for the six months
ended 30 September 2008 (year ended 31 March 2009: GBP21m). For the year ended
31 March 2009 there was an additional charge for the restructuring of our
liquefied natural gas (LNG) storage facilities of GBP50m. On 8 October 2009 we
announced plans to outsource elements of our UK shared services organisation and
we expect to record the majority of associated costs during the second half of
the financial year.
* For the six months ended 30 September 2009 there was an environmental charge of
GBP7m (six months ended 30 September 2008: GBP9m) relating to US sites. For the
year ended 31 March 2009, the UK charge was GBP37m and the US charge GBP41m.
Within this, GBP42m was due to significant movements in discount rates arising
from reductions in market risk free rates due to economic conditions together
with GBP25m arising from changes in landfill tax legislation in the UK. Costs
incurred with respect to US environmental provisions are substantially
recoverable from customers.
* For the six months ended 30 September 2009 other costs relate to amortisation
charges on acquisition-related intangibles of GBP3m (six months ended 30
September 2008: GBP3m; year ended 31 March 2009: GBP5m).
* Remeasurements - commodity contracts represent mark-to-market movements on
certain physical and financial commodity contract obligations in the US. These
contracts primarily relate to the forward purchase of energy for supply to
customers, or to the economic hedging thereof, that are required to be measured
at fair value and that do not qualify for hedge accounting. Under the existing
rate plans in the US, commodity costs are recoverable from customers although
the timing of recovery may differ from the pattern of costs incurred. These
movements are comprised of those impacting operating profit which are based on
the change in the commodity contract liability and those impacting finance costs
as a result of the time value of money.
* Stranded cost recoveries include the recovery of some of our historical
investments in generating plants that were divested as part of the restructuring
and wholesale power deregulation process in New England and New York during the
1990s. Stranded cost recoveries on a pre-tax basis consist of revenue of GBP228m
(six months ended 30 September 2008: GBP157m; year ended 31 March 2009: GBP435m)
and operating costs of GBP28m (six months ended 30 September 2008: GBP3m; year
ended 31 March 2009: GBP9m).
* Remeasurements - net gains/(losses) on derivative financial instruments comprise
gains/(losses) arising on derivative financial instruments reported in the
income statement. These exclude gains and losses for which hedge accounting has
been effective, which have been recognised directly in equity or which are
offset by adjustments to the carrying value of debt. The tax charge on
remeasurements includes a GBP45m adjustment in respect of prior years (year end
31 March 2009: GBP1m).
* The exceptional tax charge of GBP40m in the six months ended 30 September 2008
(year ended 31 March 2009: GBP49m) arose from a change in the UK industrial
building allowance regime arising in the 2008 Finance Act. This resulted in an
increase in deferred tax liabilities.
4. Finance income and costs
+--------------------------------------------------------+----------+----------+----------+
| Six months ended 30 September | 2009 | 2008 | |
| | | | Year |
| | | | ended 31 |
| | | | March |
| | | | 2009 |
+--------------------------------------------------------+----------+----------+----------+
| | GBPm | GBPm | GBPm |
+--------------------------------------------------------+----------+----------+----------+
| | | | |
+--------------------------------------------------------+----------+----------+----------+
| Interest income on financial instruments | 12 | 54 | 79 |
+--------------------------------------------------------+----------+----------+----------+
| Expected return on pension and other post-retirement | 497 | 586 | 1,236 |
| benefit plan assets (i) | | | |
+--------------------------------------------------------+----------+----------+----------+
| | | | |
+--------------------------------------------------------+----------+----------+----------+
| Interest income and similar income | 509 | 640 | 1,315 |
+--------------------------------------------------------+----------+----------+----------+
| | | | |
+--------------------------------------------------------+----------+----------+----------+
| Interest expense on financial instruments | (421) | (621) | (1,280) |
+--------------------------------------------------------+----------+----------+----------+
| Interest on pension and other post-retirement benefit | (603) | (588) | (1,250) |
| plan liabilities | | | |
+--------------------------------------------------------+----------+----------+----------+
| Unwinding of discounts on provisions | (39) | (26) | (68) |
+--------------------------------------------------------+----------+----------+----------+
| Less: interest capitalised | 50 | 71 | 133 |
+--------------------------------------------------------+----------+----------+----------+
| | | | |
+--------------------------------------------------------+----------+----------+----------+
| Interest expense | (1,013) | (1,164) | (2,465) |
+--------------------------------------------------------+----------+----------+----------+
| | | | |
+--------------------------------------------------------+----------+----------+----------+
| Net gains/(losses) on derivative financial instruments | | | |
| and commodity contracts | | | |
+--------------------------------------------------------+----------+----------+----------+
| included in remeasurements | 40 | 142 | (84) |
+--------------------------------------------------------+----------+----------+----------+
| | | | |
+--------------------------------------------------------+----------+----------+----------+
| Interest expense and other finance costs | (973) | (1,022) | (2,549) |
+--------------------------------------------------------+----------+----------+----------+
| | | | |
+--------------------------------------------------------+----------+----------+----------+
| Net finance costs | (464) | (382) | (1,234) |
+--------------------------------------------------------+----------+----------+----------+
| | | | |
+--------------------------------------------------------+----------+----------+----------+
| Comprising: | | | |
+--------------------------------------------------------+----------+----------+----------+
| Net finance costs excluding exceptional finance costs | (504) | (524) | (1,150) |
| and remeasurements | | | |
+--------------------------------------------------------+----------+----------+----------+
| Exceptional items and remeasurements (see note 3) | 40 | 142 | (84) |
+--------------------------------------------------------+----------+----------+----------+
| | | | |
+--------------------------------------------------------+----------+----------+----------+
| | (464) | (382) | (1,234) |
+--------------------------------------------------------+----------+----------+----------+
| | | | |
+--------------------------------------------------------+----------+----------+----------+
i) The difference between actual and expected investment return on pension
assets is reported as an actuarial gain or loss within the statement of
comprehensive income.
5. Taxation
The tax charge for the period, excluding tax on exceptional items,
remeasurements and stranded cost recoveries is GBP93m (six months ended 30
September 2008: GBP125m; year ended 31 March 2009: GBP517m). The effective tax
rate of 14.3% (six months ended 30 September 2008: 22.4%) for the period is
based on the best estimate of the weighted average annual income tax rate by
jurisdiction expected for the full year. The current period rate reflects the
seasonality of earnings following the KeySpan acquisition as well as other
discrete items. For the full year we expect the group effective tax rate to be
approximately 29%. The actual effective tax rate for the year ended 31 March
2009 was 29.2%.
6. Earnings per share
a) Basic earnings per share
+----------------------------------+----------+----------+----------+-----------+----------+-----------+
| Six months ended 30 September | 2009 | 2009 | 2008 | 2008 | Year | Year |
| | | | | | ended | ended |
| | | | | | 31 | 31 |
| | | | | | March | March |
| | | | | | 2009 | 2009 |
+----------------------------------+----------+----------+----------+-----------+----------+-----------+
| | | Earnings | | Earnings | | Earnings |
| | Earnings | per | Earnings | per | Earnings | per |
| | | share | | share | | share |
+----------------------------------+----------+----------+----------+-----------+----------+-----------+
| | GBPm | pence | GBPm | pence* | GBPm | pence* |
+----------------------------------+----------+----------+----------+-----------+----------+-----------+
| | | | | | | |
+----------------------------------+----------+----------+----------+-----------+----------+-----------+
| Adjusted - continuing operations | 554 | 22.5 | 431 | 17.2 | 1,250 | 50.4 |
+----------------------------------+----------+----------+----------+-----------+----------+-----------+
| Exceptional items after taxation | (37) | (1.5) | (73) | (2.9) | (247) | (10.0) |
+----------------------------------+----------+----------+----------+-----------+----------+-----------+
| Commodity contract | 67 | 2.7 | (143) | (5.7) | (266) | (10.7) |
| remeasurements after taxation | | | | | | |
+----------------------------------+----------+----------+----------+-----------+----------+-----------+
| Derivative remeasurements after | (8) | (0.3) | 98 | 3.9 | (74) | (2.9) |
| taxation | | | | | | |
+----------------------------------+----------+----------+----------+-----------+----------+-----------+
| Stranded cost recoveries after | 120 | 4.9 | 93 | 3.7 | 256 | 10.3 |
| taxation | | | | | | |
+----------------------------------+----------+----------+----------+-----------+----------+-----------+
| | | | | | | |
+----------------------------------+----------+----------+----------+-----------+----------+-----------+
| Continuing operations | 696 | 28.3 | 406 | 16.2 | 919 | 37.1 |
+----------------------------------+----------+----------+----------+-----------+----------+-----------+
| | | | | | | |
+----------------------------------+----------+----------+----------+-----------+----------+-----------+
| Adjusted - discontinued | - | - | 6 | 0.2 | 9 | 0.4 |
| operations | | | | | | |
+----------------------------------+----------+----------+----------+-----------+----------+-----------+
| Gains on disposal of operations | - | - | 11 | 0.4 | 16 | 0.6 |
| after taxation | | | | | | |
+----------------------------------+----------+----------+----------+-----------+----------+-----------+
| | | | | | | |
+----------------------------------+----------+----------+----------+-----------+----------+-----------+
| Discontinued operations | - | - | 17 | 0.6 | 25 | 1.0 |
+----------------------------------+----------+----------+----------+-----------+----------+-----------+
| | | | | | | |
+----------------------------------+----------+----------+----------+-----------+----------+-----------+
| Basic | 696 | 28.3 | 423 | 16.8 | 944 | 38.1 |
+----------------------------------+----------+----------+----------+-----------+----------+-----------+
| | | | | | | |
+----------------------------------+----------+----------+----------+-----------+----------+-----------+
| | | millions | | millions* | | millions* |
+----------------------------------+----------+----------+----------+-----------+----------+-----------+
| | | | | | | |
+----------------------------------+----------+----------+----------+-----------+----------+-----------+
| Weighted average number of | | 2,458 | | 2,506 | | 2,480 |
| shares - basic | | | | | | |
+----------------------------------+----------+----------+----------+-----------+----------+-----------+
| | | | | | | |
+----------------------------------+----------+----------+----------+-----------+----------+-----------+
b) Diluted earnings per share
+----------------------------------+----------+----------+----------+-----------+----------+-----------+
| Six months ended 30 September | 2009 | 2009 | 2008 | 2008 | Year | Year |
| | | | | | ended | ended |
| | | | | | 31 | 31 |
| | | | | | March | March |
| | | | | | 2009 | 2009 |
+----------------------------------+----------+----------+----------+-----------+----------+-----------+
| | | Earnings | | Earnings | | Earnings |
| | Earnings | per | Earnings | | Earnings | per |
| | | share | | per | | share |
| | | | | share | | |
+----------------------------------+----------+----------+----------+-----------+----------+-----------+
| | GBPm | pence | GBPm | pence* | GBPm | pence* |
+----------------------------------+----------+----------+----------+-----------+----------+-----------+
| | | | | | | |
+----------------------------------+----------+----------+----------+-----------+----------+-----------+
| Adjusted diluted - continuing | 554 | 22.4 | 431 | 17.1 | 1,250 | 50.1 |
| operations | | | | | | |
+----------------------------------+----------+----------+----------+-----------+----------+-----------+
| Exceptional items after taxation | (37) | (1.5) | (73) | (2.9) | (247) | (9.9) |
+----------------------------------+----------+----------+----------+-----------+----------+-----------+
| Commodity contract | 67 | 2.7 | (143) | (5.7) | (266) | (10.7) |
| remeasurements after taxation | | | | | | |
+----------------------------------+----------+----------+----------+-----------+----------+-----------+
| Derivative remeasurements after | (8) | (0.3) | 98 | 3.9 | (74) | (3.0) |
| taxation | | | | | | |
+----------------------------------+----------+----------+----------+-----------+----------+-----------+
| Stranded cost recoveries after | 120 | 4.8 | 93 | 3.7 | 256 | 10.3 |
| taxation | | | | | | |
+----------------------------------+----------+----------+----------+-----------+----------+-----------+
| | | | | | | |
+----------------------------------+----------+----------+----------+-----------+----------+-----------+
| Diluted - continuing operations | 696 | 28.1 | 406 | 16.1 | 919 | 36.8 |
+----------------------------------+----------+----------+----------+-----------+----------+-----------+
| | | | | | | |
+----------------------------------+----------+----------+----------+-----------+----------+-----------+
| Adjusted diluted - discontinued | - | - | 6 | 0.2 | 9 | 0.4 |
| operations | | | | | | |
+----------------------------------+----------+----------+----------+-----------+----------+-----------+
| Gains on disposal of operations | - | - | 11 | 0.4 | 16 | 0.6 |
| after taxation | | | | | | |
+----------------------------------+----------+----------+----------+-----------+----------+-----------+
| | | | | | | |
+----------------------------------+----------+----------+----------+-----------+----------+-----------+
| Diluted - discontinued | - | - | 17 | 0.6 | 25 | 1.0 |
| operations | | | | | | |
+----------------------------------+----------+----------+----------+-----------+----------+-----------+
| | | | | | | |
+----------------------------------+----------+----------+----------+-----------+----------+-----------+
| Diluted | 696 | 28.1 | 423 | 16.7 | 944 | 37.8 |
+----------------------------------+----------+----------+----------+-----------+----------+-----------+
| | | | | | | |
+----------------------------------+----------+----------+----------+-----------+----------+-----------+
| | | millions | | millions* | | millions* |
+----------------------------------+----------+----------+----------+-----------+----------+-----------+
| | | | | | | |
+----------------------------------+----------+----------+----------+-----------+----------+-----------+
| Weighted average number of | | 2,473 | | 2,523 | | 2,497 |
| shares - diluted | | | | | | |
+----------------------------------+----------+----------+----------+-----------+----------+-----------+
| | | | | | | |
+----------------------------------+----------+----------+----------+-----------+----------+-----------+
* Earnings per share data for comparative periods have been restated, in
accordance with IAS 33, to reflect the impact of the additional 24.7 million
ordinary shares issued as a scrip dividend on 19 August 2009.
7. Dividends
The following table shows the dividends paid to equity shareholders:
+--------------------------------+--------+--------+---------+--------+--------+----------+----------+
| Six months ended 30 September | 2009 | 2009 | 2009 | 2008 | 2008 | Year | Year |
| | | | | | | ended | ended |
| | | | | | | 31 March | |
| | | | | | | 2009 | 31 March |
| | | | | | | | 2009 |
+--------------------------------+--------+--------+---------+--------+--------+----------+----------+
| | pence | Total | Settled | pence | Total | pence | Total |
| | per | GBPm | | per | GBPm | per | GBPm |
| | share | | via | share | | share | |
| | | | scrip | | | | |
| | | | GBPm | | | | |
+--------------------------------+--------+--------+---------+--------+--------+----------+----------+
| | | | | | | | |
+--------------------------------+--------+--------+---------+--------+--------+----------+----------+
| Ordinary dividends | | | | | | | |
+--------------------------------+--------+--------+---------+--------+--------+----------+----------+
| Final - year ended 31 March | - | - | - | 21.30 | 531 | 21.30 | 531 |
| 2008 | | | | | | | |
+--------------------------------+--------+--------+---------+--------+--------+----------+----------+
| Interim - year ended 31 March | - | - | - | - | - | 12.64 | 307 |
| 2009 | | | | | | | |
+--------------------------------+--------+--------+---------+--------+--------+----------+----------+
| Final - year ended 31 March | 23.00 | 557 | 137 | - | - | - | - |
| 2009 | | | | | | | |
+--------------------------------+--------+--------+---------+--------+--------+----------+----------+
| | | | | | | | |
+--------------------------------+--------+--------+---------+--------+--------+----------+----------+
| | 23.00 | 557 | 137 | 21.30 | 531 | 33.94 | 838 |
+--------------------------------+--------+--------+---------+--------+--------+----------+----------+
| | | | | | | | |
+--------------------------------+--------+--------+---------+--------+--------+----------+----------+
The Directors are proposing an interim dividend of 13.65p per share that would
absorb approximately GBP336m of shareholders' equity to be paid in respect of
the year ending 31 March 2010. A scrip dividend will be offered as an
alternative.
8. Reconciliation of net cash flow to movement in net debt
+--------------------------------------------------------+----------+----------+----------+
| Six months ended 30 September | 2009 | 2008 | |
| | | | Year |
| | | | ended 31 |
| | | | March |
| | | | 2009 |
+--------------------------------------------------------+----------+----------+----------+
| | GBPm | GBPm | GBPm |
+--------------------------------------------------------+----------+----------+----------+
| | | | |
+--------------------------------------------------------+----------+----------+----------+
| (Decrease)/ increase in cash and cash equivalents | (370) | (21) | 538 |
+--------------------------------------------------------+----------+----------+----------+
| Decrease in financial investments | (507) | (814) | (99) |
+--------------------------------------------------------+----------+----------+----------+
| Decrease/(increase) in borrowings and related | 112 | (17) | (1,641) |
| derivatives (i) | | | |
+--------------------------------------------------------+----------+----------+----------+
| Net interest paid on the components of net debt | 468 | 407 | 956 |
+--------------------------------------------------------+----------+----------+----------+
| | | | |
+--------------------------------------------------------+----------+----------+----------+
| Increase in net debt resulting from cash flows | (297) | (445) | (246) |
+--------------------------------------------------------+----------+----------+----------+
| Changes in fair value of financial assets and | 1,404 | (1,103) | (3,625) |
| liabilities and exchange movements | | | |
+--------------------------------------------------------+----------+----------+----------+
| Net interest charge on the components of net debt | (414) | (567) | (1,161) |
+--------------------------------------------------------+----------+----------+----------+
| | | | |
+--------------------------------------------------------+----------+----------+----------+
| Movement in net debt (net of related derivative | 693 | (2,115) | (5,032) |
| financial instruments) in the period | | | |
+--------------------------------------------------------+----------+----------+----------+
| Net debt (net of related derivative financial | (22,673) | (17,641) | (17,641) |
| instruments) at start of period | | | |
+--------------------------------------------------------+----------+----------+----------+
| | | | |
+--------------------------------------------------------+----------+----------+----------+
| Net debt (net of related derivative financial | (21,980) | (19,756) | (22,673) |
| instruments) at end of period | | | |
+--------------------------------------------------------+----------+----------+----------+
| | | | |
+--------------------------------------------------------+----------+----------+----------+
i) The decrease in borrowings and related derivatives for the six months ended
30 September 2009 comprises proceeds received from loans issued of GBP0.9bn less
payments to repay loans of GBP0.7bn and movement in short-term borrowings and
derivative settlements of GBP0.3bn.
9. Net debt
+--------------------------------------------------------+----------+----------+----------+
| At 30 September | 2009 | 2008 | 31 March |
| | | | 2009 |
+--------------------------------------------------------+----------+----------+----------+
| | GBPm | GBPm | GBPm |
+--------------------------------------------------------+----------+----------+----------+
| | | | |
+--------------------------------------------------------+----------+----------+----------+
| Cash and cash equivalents | 359 | 148 | 737 |
+--------------------------------------------------------+----------+----------+----------+
| Bank overdrafts | (16) | - | (17) |
+--------------------------------------------------------+----------+----------+----------+
| | | | |
+--------------------------------------------------------+----------+----------+----------+
| Net cash and cash equivalents | 343 | 148 | 720 |
+--------------------------------------------------------+----------+----------+----------+
| Financial investments | 1,669 | 1,265 | 2,197 |
+--------------------------------------------------------+----------+----------+----------+
| Borrowings (excluding bank overdrafts) | (25,493) | (21,504) | (26,776) |
+--------------------------------------------------------+----------+----------+----------+
| | | | |
+--------------------------------------------------------+----------+----------+----------+
| | (23,481) | (20,091) | (23,859) |
+--------------------------------------------------------+----------+----------+----------+
| | | | |
+--------------------------------------------------------+----------+----------+----------+
| Net debt related derivative financial assets | 2,299 | 924 | 2,126 |
+--------------------------------------------------------+----------+----------+----------+
| Net debt related derivative financial liabilities | (798) | (589) | (940) |
+--------------------------------------------------------+----------+----------+----------+
| | | | |
+--------------------------------------------------------+----------+----------+----------+
| Net debt (net of related derivative financial | (21,980) | (19,756) | (22,673) |
| instruments) | | | |
+--------------------------------------------------------+----------+----------+----------+
| | | | |
+--------------------------------------------------------+----------+----------+----------+
10. Commitments and contingencies
+--------------------------------------------------------+----------+----------+----------+
| At 30 September | 2009 | 2008 | 31 March |
| | | | 2009 |
+--------------------------------------------------------+----------+----------+----------+
| | GBPm | GBPm | GBPm |
+--------------------------------------------------------+----------+----------+----------+
| | | | |
+--------------------------------------------------------+----------+----------+----------+
| Future capital expenditure contracted for but not | 1,698 | 1,286 | 1,626 |
| provided | | | |
+--------------------------------------------------------+----------+----------+----------+
| Commitments under non-cancellable operating leases | 841 | 818 | 946 |
+--------------------------------------------------------+----------+----------+----------+
| Energy purchase commitments (i) | 3,488 | 2,766 | 3,645 |
+--------------------------------------------------------+----------+----------+----------+
| Guarantees (ii) | 1,196 | 970 | 1,202 |
+--------------------------------------------------------+----------+----------+----------+
| Other commitments and contingencies (iii) | 670 | 246 | 644 |
+--------------------------------------------------------+----------+----------+----------+
| | | | |
+--------------------------------------------------------+----------+----------+----------+
Comparatives have been restated to present items on a basis consistent with the
current period classification.
i) Commodity contracts that do not meet the normal purchase, sale or usage
criteria and hence are accounted for as derivative contracts are recorded at
fair value and incorporated in other non-current assets, trade and other
receivables, trade and other payables and other non-current liabilities. At
30 September 2009 these amounted to GBP196m (30 September 2008: GBP64m; 31 March
2009: GBP310m).
ii) Details of the guarantees entered into by the Company or its subsidiary
undertakings at 30 September 2009 are shown below:
* a guarantee in respect of Ravenswood Unit 40 financing amounting to
approximately GBP375m. This expires in 2040;
* a letter of support of obligations under a shareholders' agreement relating to
the interconnector project between Britain and the Netherlands amounting to
approximately GBP261m. This expires in 2010;
* guarantees of certain obligations in respect of the UK Grain LNG Import Terminal
amounting to approximately GBP188m. These run for varying lengths of time,
expiring between now and 2028;
* a guarantee amounting to approximately GBP120m of half of the obligations of the
interconnector project between Britain and the Netherlands. This expires in
2010;
* guarantees of the liabilities of a metering subsidiary under meter operating
contracts amounting to GBP53m. These are ongoing;
* an uncapped guarantee, for which the maximum liability is estimated at GBP40m,
to The Crown Estates in support of the transfer of the interconnector between
France and England to National Grid Interconnectors Limited as part of the
Licence to Assign Lease. This is ongoing;
* letters of credit in support of gas balancing obligations amounting to GBP26m,
lasting for less than one year;
* guarantees of GBP14m relating to certain property obligations. The bulk of these
expire by December 2025;
* collateral of GBP15m to secure syndicate insurance obligations which are
evergreen;
* guarantees in respect of a former associate amounting to GBP14m, the bulk of
which relates to its obligations to supply telecommunications services. These
are open-ended; and
* other guarantees amounting to GBP90m arising in the normal course of business
and entered into on normal commercial terms. These guarantees run for varying
lengths of time.
iii) Includes commitments largely relating to gas purchasing and property
remediation of GBP640m (30 September 2008: GBP195m; 31 March 2009: GBP615m).
In last year's Annual Report and Accounts we reported a decision by the Gas and
Electricity Markets Authority (GEMA) (the "Decision") to levy on us a fine of
GBP41.6 million for a breach of the UK Competition Act 1998 in respect of term
contracts with gas suppliers entered into by our UK metering services business
in 2004. We also noted that we had appealed the Decision to the Competition
Appeal Tribunal (the "Tribunal"). On 29 April 2009, the Tribunal overturned the
Decision in part and reduced the fine to GBP30 million but upheld the original
Decision in part. The Court of Appeal has granted us leave to appeal the
Tribunal's decision both on points of law and as to the amount of the penalty.
As at the date of this announcement, we remain of the view that an outflow of
economic benefits is not probable, and as a result, no provision has been made
in these accounts either for the reduced fine of GBP30 million, or for any other
possible financial impact of the ruling.
In October 2008, we informed Ofgem that our mains replacement activity carried
out within the UK's West Midlands Alliance partnership may have been
misreported. National Grid and Ofgem jointly appointed Ernst & Young to carry
out a full investigation to determine the extent of the issue. At present it is
too early to determine the likely outcome of the investigation and any potential
consequences.
In May 2007, KeySpan received a civil investigative demand from the Antitrust
Division of the United States Department of Justice (DoJ), requesting the
production of documents and information relating to its investigation of
competitive issues in the New York City electricity capacity market prior to the
Company's acquisition of KeySpan. The civil investigative demand is a request
for information in the course of an investigation and does not constitute the
commencement of legal proceedings, and no specific allegations have been made
against KeySpan. In April 2008, KeySpan received a second civil investigative
demand in connection with this matter. KeySpan believes that its activity in the
capacity market has been consistent with all applicable laws and regulations and
it continues to cooperate fully with the investigation. Since July 2009,
KeySpan and the DoJ have entered discussions that could potentially lead to a
settlement of this matter.
11. Exchange rates
The consolidated results are affected by the exchange rates used to translate
the results of its US operations and US dollar transactions. The US dollar to
pound sterling exchange rates used were:
+----------------------------------------------------------+---------+---------+---------+
| 30 September | 2009 | 2008 | |
| | | | Year |
| | | | ended |
| | | | 31 |
| | | | March |
| | | | 2009 |
+----------------------------------------------------------+---------+---------+---------+
| | | | |
+----------------------------------------------------------+---------+---------+---------+
| Closing rate applied at period end | 1.60 | 1.78 | 1.44 |
+----------------------------------------------------------+---------+---------+---------+
| Average rate applied for the period | 1.55 | 1.92 | 1.54 |
+----------------------------------------------------------+---------+---------+---------+
| | | | |
+----------------------------------------------------------+---------+---------+---------+
12. Related party transactions
There were no significant changes in the nature and size of related party
transactions for the period to those disclosed in the financial statements for
the year ended 31 March 2009.
13. Principal risks and uncertainties
The principal risks and uncertainties which could affect National Grid for the
remaining six months of the financial year are disclosed in the Annual Report
and Accounts 2008/09 ('Annual Report'). A list of the significant risks is
provided on page 40 of the Annual Report, and the risks are then disclosed in
more detail on pages 97 to 99, and pages 166 to 172. Our overall risk management
process is designed to identify, manage, and mitigate our business risks,
including financial risks. Our assessment of the principal risks and
uncertainties and our risk management processes have not changed since the year
end.
Statement of Directors' Responsibilities
The half year report is the responsibility of, and has been approved by, the
Directors. The Directors are responsible for preparing the half year report in
accordance with the Disclosure and Transparency Rules of the United Kingdom's
Financial Services Authority.
The Directors confirm that the financial information has been prepared in
accordance with IAS 34 as adopted by the European Union, and that the half year
report herein includes a fair review of the information required by DTR 4.2.7
and DTR 4.2.8.
The Directors of National Grid plc are as listed in the National Grid plc Annual
Report for the year ended 31 March 2009 with the exception of Bob Catell who
retired from the Board on 27 July 2009.
By order of the Board
.......................... ..........................
Steve Holliday Steve Lucas
18 November 2009 18 November 2009
Chief Executive OfficerFinance Director
Independent review report to National Grid plc
Introduction
We have been engaged by the Company to review the condensed set of financial
statements in the half-yearly financial report for the six months ended 30
September 2009, which comprises the consolidated income statement, statement of
comprehensive income, balance sheet, statement of changes in equity, cash flow
statement and related notes. We have read the other information contained in the
half-yearly financial report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in the condensed
set of financial statements.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been approved
by, the directors. The directors are responsible for preparing the half-yearly
financial report in accordance with the Disclosure and Transparency Rules of the
United Kingdom's Financial Services Authority.
As disclosed in note 1, the annual financial statements of the group are
prepared in accordance with International Financial Reporting Standards (IFRSs)
as adopted by the European Union. The condensed set of financial statements
included in this half-yearly financial report has been prepared in accordance
with International Accounting Standard 34, 'Interim Financial Reporting', as
adopted by the European Union.
Our responsibility
Our responsibility is to express to the company a conclusion on the condensed
set of financial statements in the half-yearly financial report based on our
review. This report, including the conclusion, has been prepared for and only
for the company for the purpose of the Disclosure and Transparency Rules of the
Financial Services Authority and for no other purpose. We do not, in producing
this report, accept or assume responsibility for any other purpose or to any
other person to whom this report is shown or into whose hands it may come save
where expressly agreed by our prior consent in writing.
Scope of review
We conducted our review in accordance with International Standard on Review
Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information
Performed by the Independent Auditor of the Entity' issued by the Auditing
Practices Board for use in the United Kingdom. A review of interim financial
information consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (UK and Ireland) and
consequently does not enable us to obtain assurance that we would become aware
of all significant matters that might be identified in an audit. Accordingly, we
do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe
that the condensed set of financial statements in the half-yearly financial
report for the six months ended 30 September 2009 is not prepared, in all
material respects, in accordance with International Accounting Standard 34 as
adopted by the European Union and the Disclosure and Transparency Rules of the
United Kingdom's Financial Services Authority.
PricewaterhouseCoopers LLP
Chartered Accountants
London
18 November 2009
1 Business performance results are the primary financial performance measure
used by National Grid, being the results for continuing operations before
exceptional items, remeasurements and stranded cost recoveries. Remeasurements
comprise gains or losses recorded in the income statement arising from changes
in the fair value of commodity contracts and of derivative financial instruments
to the extent that hedge accounting is not achieved or is not fully effective.
Stranded cost recoveries are costs associated with historical generation
investment and related contractual commitments that were not recovered through
the sale of those investments - these recoveries end in 2011. Further details
are provided in Note 3 on page 20. A reconciliation of business performance to
statutory results is provided in the consolidated income statement on page 11.
2 Operating cash flow from continuing operations before exceptional items,
remeasurements, stranded cost recoveries and taxation.
3 Adjusted to reflect scrip dividend, refer to note 6 on page 22.
4 'Constant currency basis' refers to the reporting of the actual results
against the prior period results which, in respect of any US$ currency
denominated activity, have been translated using the average US$ exchange rate
for the six months ended 30 September 2009, which was $1.55 to GBP1.00. The
average rate for the six months ended 30 September 2008 was $1.92 to GBP1.00.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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