form 6-k
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
_______________
FORM 6-K
REPORT OF FOREIGN ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 OF
THE SECURITIES EXCHANGE ACT OF 1934
Date: 26th November 2002
NATIONAL GRID TRANSCO plc
(Registrant's Name)
1-3 Strand
London
WC2N 5EH
(Registrant’s Address)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form
20-F or Form 40-F.
Form 20-F Form 40-F
Indicate by check mark whether the registrant by furnishing the information contained in this Form is
also thereby furnishing the information to the Commission pursuant to Rule 12g3- 2(b) under the
Securities Exchange Act of 1934.
Yes No
If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule
12g3-2(b):
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly authorised.
NATIONAL GRID TRANSCO plc
s/David C. Forward
By:_________________________
Name: David C Forward
Title: Assistant Secretary
Date: 26th November 2002
ANNEX 1 - Copy Announcement as sent
FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
Report of Foreign Issuer
Pursuant to Rule 13a - 16 or 15d - 16 of
The Securities Exchange Act of 1934
Announcement to the London Stock Exchange
for 26th November 2002
National Grid Transco plc
1-3 Strand
London
WC2N 5EH
United Kingdom
---------------------------------------------------------------------------------------------------------
Announcement:
1. National Grid Transco Interim Results for the six months Ended 30 September 2002.
National Grid Transco Interim Results
for the six months ended 30 September 2002
Good Results. Strong Cashflow. Positive Outlook.
o Strong operating performance *
- £802m operating profit up 36% including £206m first full period contribution from the New York
operation, formerly Niagara Mohawk.
- £339m profit before tax up 24%.
- £1,197m operating cash flow up 42%.
o Key strategic steps
- Merger of National Grid and Lattice completed - on track to deliver in excess of £100m
annualised synergy savings by March 2004.
- UK businesses set to outperform regulatory targets.
- Integration of New York operation ahead of schedule.
- US on track to deliver the further 20% reduction in controllable costs by March 2005.
- Exit from altnet investments nearing completion.
o Dividend
- Interim dividend of 6.86p per ordinary share for half year, up 6.2% in line with aim of 5% per
year real growth as expressed in sterling until 2006.
Financial Highlights
------------------------------------------- ----------------------------------------- -------------------- ---------------------
National Grid Transco National Grid Group Lattice Group
----------------------------------------
(on a pro forma basis)
------------------------------------------- ----------------------------------------- -------------------- ---------------------
Six months ended Six months ended Six months ended Six months ended
30 September 2002 30 September 2001 30 September 2002 30 September 2002
Turnover */** £4,309m £3,221m £3,029m £1,302m
Operating profit/(loss) */**
Electricity & Gas £823m £606m £645m £178m
Other £(21)m £(16)m £(17)m £(4)m
Total £802m £590m £628m £174m
Net interest * £463m £317m £282m £181m
Pre-tax profit/(loss) * £339m £273m £346m £(7)m
Profit/(loss) after tax and minority
interests * £244m £232m £248m £(4)m
Earnings per share * 7.9p 8.3p 14.1p (0.1)p
Operating cashflow * £1,197m £845m £841m £356m
NGT dividend per share 6.86p 6.46p***
------------------------------------------- -------------------- -------------------- -------------------- ---------------------
* Before exceptional items, additional NTS auction income last year and goodwill amortisation as
appropriate.
** 40% of Transco revenue and about 20% of operating profit typically fall in the first half of the
financial year.
*** National Grid Group plc actual 2001 interim dividend.
National Grid Transco
2002/03 Half Year Results
Page 5
Sir John Parker, Chairman of National Grid Transco, said:
"This is a strong set of results fully in line with expectations.
"We are making excellent progress in the UK and the US. In the UK, both our electricity and gas
businesses are outperforming against targets for reducing controllable costs, and we will exceed the
annualised £100m merger savings by March 2004. In the US, we are ahead of schedule delivering
integration savings from our New York operation, and overall are confident of achieving a further 20%
reduction in US controllable costs. None of this has deflected us from delivering efficient, safe and
reliable energy.
“Reflecting the strength and prospects of our business, we will pay an interim dividend of 6.86p, in
line with our aim to increase dividends per share by 5% a year in real terms until 2006. Looking
ahead, we are confident that the skills, market position and resources of National Grid Transco will
enable us to continue to deliver shareholder value.”
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CONTACT DETAILS
National Grid Transco:
Investors
Marcy Reed +44 (0)20 7004 3170 +44 (0)7768 490807(m)
Terry McCormick +44 (0)20 7004 3171 +44 (0)7768 045139(m)
Louise Clamp +44 (0)20 7004 3172 +44 (0)7768 555641(m)
Gary Rawlinson +44 (0)20 7004 3173 +44 (0)7768 536750(m)
Bob Seega (US) +1 508 389 2598
Media
Gillian Home +44 (0)20 7004 3150
Clive Hawkins +44 (0)20 7004 3147
Jim Willison +44 (0)20 7004 3149
Pager +44 (0)7659 117841 (out of hours)
Citigate Dewe Rogerson +44 (0)20 7638 9571
Anthony Carlisle +44 (0)7973 611888(m)
The Maitland Consultancy
Angus Maitland +44 (0) 20 7379 5151
Analyst presentation
Merrill Lynch Financial Centre, 100 Newgate Street, London EC1A 1HQ.
9:00am (UK time) today
Live telephone coverage of analyst presentation - password National Grid Transco
Dial in number: + 44 (0) 20 8401 1043
US call in number: + 1 303 713 7888
UK instant replay available until 26 December - passcode 899 192
Dial in number: + 44 (0) 20 8288 4459
Freephone number: 0500 637 880
US instant replay available until 26 December- passcode 899 192
Dial in number: + 1 703 736 7336
Live webcast of presentation will also be available on www.ngtgroup.com
Teleconference with Roger Urwin and Steve Lucas
15.00 UK time (10.00 EST & 07.00 PST)
Dial in number: +44 (0) 20 8781 0577
US call in number: + 1 952 556 2813
UK instant replay available until 26 December - passcode 648 162
Dial in number: +44 (0) 20 8288 4459
Freephone number: 0500 637 880
US instant replay available until 26 December - passcode 648 162
Dial in number: + 1 703 736 7336
Photographs are available on www.newscast.co.uk
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. Because these forward-looking statements are subject to assumptions, risks and
uncertainties, actual future results may differ materially from those expressed in or implied by such
statements. Many of these assumptions, risks and uncertainties relate to factors that are beyond
National Grid Transco's ability to control or estimate precisely, such as delays in obtaining or
adverse conditions contained in regulatory approvals, competition and industry restructuring, changes
in economic conditions, currency fluctuations, changes in energy market prices, changes in historical
weather patterns, changes in laws, regulations or regulatory policies, developments in legal or public
policy doctrines, technological developments, the availability of new acquisition opportunities or the
timing and success of future acquisition opportunities. Other factors that could cause actual results
to differ materially from those described in this announcement include the ability to integrate Niagara
Mohawk and Lattice Group plc successfully within National Grid Transco or to realise synergies from
such integration or the failure to retain key management, unseasonal weather impacting on demand for
electricity and gas, 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 the Group's pension
schemes and the regulatory treatment of pension costs. For a more detailed description of these
assumptions, risks and uncertainties, together with any other risk factors please see National Grid
Transco’s filings with the United States Securities and Exchange Commission (and in particular the
“Risk Factors” and “Operating and Financial Review” sections in its most recent annual report on 20F).
Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only
as of the date of this announcement. National Grid Transco does not undertake any obligation to
publicly release any revisions to these forward-looking statements to reflect events or circumstances
after the date of this announcement.
---------------------------------------------------------------------------------------------------------
NATIONAL GRID TRANSCO plc
The merger of National Grid Group plc ("National Grid) and Lattice Group plc ("Lattice") to form
National Grid Transco plc ("National Grid Transco," "NGT" or "the Group") was completed on 21 October
2002. The combination of National Grid and Lattice meets the merger accounting criteria under UK GAAP
and therefore the pro forma financial information has been prepared in accordance with merger
accounting principles. Pro forma results for National Grid Transco have been prepared for illustrative
purposes, as if the merger had taken place on 1 April 2001 (the first day of the comparative period).
Detailed actual results are also included for National Grid and Lattice as separate entities for
completeness. Financial information has been provided for the main NGT business segments. We have taken
the opportunity of the merger and the first full contribution from Niagara Mohawk to review how best to
segment our results and have adopted a geographical and functional split. We have included additional
data on the Investors' section of our website (www.ngtgroup.com) to allow full reconciliation against
the previous National Grid and Lattice segments.
Unless otherwise indicated, numbers are stated before exceptional items, goodwill amortisation and the
impact of additional NTS auction income last year.
NATIONAL GRID TRANSCO SIX-MONTH PRO FORMA RESULTS
---------------------------------------------------------------------------------------------------------
Total turnover for the period was £4,309m.
o National Grid's turnover increased 52% to £3,029m, due to the contribution from the New York
operation of National Grid USA, the acquisition of which was completed on 31 January 2002.
o Lattice's turnover increased 4% to £1,302m. Turnover in Transco is seasonal, with the first
half typically accounting for around 40% of annual turnover.
Total operating profit was £802m.
o National Grid’s operating profit for the period was up £243m to £628m, reflecting a strong
performance from the regulated business in the UK, as well as the first full period contribution of
£206m from the New York operation.
o Lattice’s operating profit fell £31m to £174m due to increased turnover being more than offset
by the planned increase in replacement expenditure ("repex"). With operating costs evenly balanced
across the year, the first half typically accounts for some 20% of operating profits.
Net interest was £463m. EBIT interest cover was 1.7 times. Funds from operations cover, excluding
repex, was 2.7 times.
o National Grid's net interest increased £129m to £282m, due to the inclusion of borrowings
related to the New York operation.
o Lattice's net interest rose by £17m to £181m.
Profit before tax was £339m.
o National Grid's profit before tax was up 49% to £346m.
o Lattice's £7m loss before tax was down from a prior period profit before tax of £41m.
NATIONAL GRID TRANSCO SIX-MONTH PRO FORMA RESULTS (continued)
---------------------------------------------------------------------------------------------------------
The tax charge on the profit for the period was £92m, representing an effective tax rate of 32% on
profit before exceptionals and after goodwill amortisation. There were no releases of prior year tax
provisions during the period (£42m of releases in same period last year). The tax charge includes full
provision for deferred tax on an undiscounted basis, consistent with the Group's ongoing accounting
policy. On this basis:
o National Grid's tax charge for the period was £94m.
o Lattice's tax credit for the period was £2m. Prior year results for Lattice have been
restated to include a full provision for deferred taxes on an undiscounted basis. Previously
Lattice's deferred tax was reported on a discounted basis.
Profit after tax and minority interests was £244m.
o National Grid's profit after tax and minority interests was £248m, up 21% from £205m for the
prior period.
o Lattice's loss after tax and minority interests was £4m, a decrease from a prior period profit
of £27m.
Earnings per share were 7.9 pence for NGT, based on the pro forma weighted average number of shares for
National Grid Transco at 30 September 2002.
o National Grid earnings per share increased 0.2 pence to 14.1 pence.
o Lattice earnings per share decreased 0.9 pence to a loss of 0.1 pence.
Net exceptional charges totalled £337m (£278m after tax).
o National Grid had exceptional net credits totalling £6m (£31m after tax). They comprise:
- A £127m credit (£145m after tax) in respect of Intelig and other telecom joint ventures. This
substantially reflects the release of provisions representing the reversal of the Group's
share of retained losses incurred by Intelig and other telecom joint ventures during the
period.
- An exceptional net interest charge of £93m (before and after tax) relating to our share of
exchange losses incurred on foreign exchange borrowings included within the Group's share of
retained losses incurred by Intelig referred to above.
- An exceptional net interest gain of £38m (before and after tax). This relates to a gain on
net monetary liabilities of £69m as a result of the adoption of hyper-inflationary accounting
in Transener, offset by our share of their exchange losses incurred on foreign exchange
borrowings of £31m.
- A £12m minority interest charge being a share of the £38m net exceptional credit related to
Transener as shown above.
- Merger related costs of £38m (£37m after tax).
- US integration and UK restructuring costs of £16m (£10m after tax).
o Lattice had exceptional charges totalling £343m (£309m after tax). They comprise:
- A £166m charge (£165m after tax) to write down fully the carrying value of its altnet
investments, and provide for all related liabilities at 30 September.
- A £32m loss before and after tax arising from the sale of The Leasing Group.
- Restructuring costs of £90m (£63m after tax).
- Merger related costs of £67m (£61m after tax).
Partially offset by:
- Profit on disposal of tangible fixed assets of £12m (before and after tax).
Group net debt at 30 September was £14,162m.
o National Grid net debt at 30 September fell to £7,624m, down £617m from the position at 31
March, largely a result of the depreciation of the US Dollar.
o Lattice net debt at 30 September rose to £6,538m, up £480m from the position at 31 March,
primarily due to the seasonality of Transco's revenue.
NATIONAL GRID TRANSCO SIX-MONTH PRO FORMA RESULTS (continued)
---------------------------------------------------------------------------------------------------------
Cash flow from operations was £1,197m.
o National Grid's cash flow from operations was £841m, up 52% from last year, largely as a
result of the addition of the New York operation.
o Lattice's cash flow from operations was £356m, up 23% from last year.
Capital expenditure, including capitalised interest, amounted to £752m.
o National Grid's capex increased by £62m to £303m, largely due to the inclusion of capex for
the New York operation.
o Lattice's capex decreased by £218m to £449m, primarily due to planned lower levels of
investment in the high-pressure NTS and reduced investment in 186k.
Interim dividend
The Board has declared an interim dividend of 6.86 pence per ordinary share. The dividend will be
payable on 21 January 2003 to shareholders on the register on 6 December 2002. This represents a 6.2%
nominal increase compared with last year's National Grid payment, in line with our aim to increase
dividends per ordinary share expressed in sterling by 5% in real terms in each financial year to 31
March 2006.
The dividend per American Depositary Share (ADS) declared by the Board is $0.5352. The ADS dividend
will be paid on 21 January 2003 to ADS holders of record on 6 December.
---------------------------------------------------------------------------------------------------------
REVIEW OF OPERATIONS
MERGER UPDATE
At the completion of the merger on 21 October, we had fully integrated the corporate centres of
National Grid and Lattice. We have also made good progress in integrating the support functions of the
two UK operations in the Midlands and have announced the new location for the combined Midlands office
for our UK gas and electricity businesses. The operations of Transco's National Transmission and
Trading business and NGC are now under single management. We are confident we will exceed the
annualised £100m synergy savings by March 2004 which we announced earlier this year.
UK ELECTRICITY AND GAS NETWORKS
UK Electricity
The UK electricity transmission business continued to trade strongly, achieving operating profits of
£284m, an increase of £41m from the same period last year. The electricity Transmission Owner (TO)
business contributed £255m and the electricity System Operator (SO) £29m. This operating performance
was driven by a further reduction in controllable costs, excellent performance under the electricity SO
incentive scheme and the recognition of non-recurring income for excluded services.
With the introduction of 'Staying Ahead', we have reduced controllable costs by 19.5% in real terms
since 1 April 2001 and are confident that we will achieve the planned 30% real reduction over the price
control period to March 2006. At the same time, high standards of both safety and reliability of the
network have been maintained. Exceptional reorganisation costs were £6m before tax (£4m after tax).
---------------------------------------------------------------------------------------------------------
REVIEW OF OPERATIONS (continued)
UK Electricity (continued)
We made good progress over the summer on this year's Balancing Services Incentive Scheme ("BSIS"),
including the successful introduction of one-hour gate closure on 2 July. BSIS contributed £24m to
electricity SO operating profit for the half year. Maintaining performance at this level over the
remainder of the year will be challenging and will depend upon participants' behaviour on system and
energy balancing over the winter months.
UK interconnector profits were £10m, up £3m on the same period last year.
UK Gas Distribution and Transmission
Transco's operating profit fell by £15m to £178m, primarily due to the planned increase in replacement
expenditure which rose by £36m over the first half of last year to £216m. Repex is expensed for
accounting purposes, but for regulatory purposes, half of the costs are included in the regulatory
asset base.
In the six months to September 2002, controllable costs were £11m lower than in the same period last
year. Initial savings from the restructuring programme were partially offset by the planned increase
in pension costs of £8m resulting from the 2001 actuarial review. We are on track to outperform our
regulatory targets for controllable costs over the 5-year price control period. Exceptional Transco
restructuring costs during the period were £84m before tax (£59m after tax).
Transco's safety and reliability performance remain high, and we are on track to meet the Health &
Safety Executive's year-end target for the decommissioning of medium pressure ductile iron (MPDI) mains
in full.
Our performance under the new gas System Operator (SO) and Mains Replacement incentive mechanisms has
been encouraging.
US ELECTRICITY AND GAS NETWORKS
National Grid USA continued to deliver strong performance through the first six months of the year
despite sluggish economic conditions with very few signs of early improvement.
Integration savings are being delivered ahead of schedule, with an annualised reduction in controllable
costs of 4% in real terms. Through synergy savings and other cost cutting measures, the US operation
will reduce controllable costs by 20% in real terms over the 3 year period to March 2005.
Operating profits from energy delivery in New England amounted to £119m, compared with £121m for the
same period last year, with the depreciation of the US dollar masking a 3% increase in underlying US
dollar profits. In New England, distribution delivery volumes increased by 1.9% over the same period
last year, primarily due to warmer weather. Underlying volume growth on a weather corrected basis was
approximately 0.5%.
Energy delivery in New York contributed £143m in operating profit, including £8m from the gas
distribution business. The gas operation's financial performance is subject to seasonality, with
around 15% of annual operating profit typically arising during the first half of the financial year.
New York electricity delivery growth exhibited similar characteristics to New England with a 1.7%
increase overall. Underlying volume on a weather corrected basis remained unchanged from year to year.
REVIEW OF OPERATIONS (continued)
---------------------------------------------------------------------------------------------------------
US ELECTRICITY AND GAS NETWORKS (continued)
Operating profit from Stranded Cost Recovery and Generation ("Stranded Costs") in New England fell to
£18m from £25m, as expected. In New York, Stranded Costs contributed £63m to operating profit. Sales
of the last two operating nuclear plants have been completed, and the Group no longer owns any interest
in operational nuclear generating plants.
In New England, the nominal pre-tax return on investment for the six months ended 30 September 2002 was
an annualised 9.6%, up from 9.4% for the year ended 31 March 2002. This results in 9.1% for the
combined business at 30 September, which keeps us on track to meet our 10.5% target by March 2005.
The development of Regional Transmission Organisations in the US continues to make progress. We
recently signed an agreement with three companies to manage their transmission assets under an
Independent Transmission Company called GridAmerica operating within the Midwest ISO. The three
companies' transmission assets span over 17,000 miles of transmission lines, serving an area equal in
size to the UK. This agreement will be considered by the Federal Energy Regulatory Commission in the
coming weeks.
OTHER ELECTRICITY OPERATIONS
Transener, our electricity transmission joint venture in Argentina, continued to deliver good operating
performance. The introduction of hyper-inflationary accounting resulted in a net exceptional gain of
£38m in the period, bringing the share of net liabilities back to zero.
Following a detailed consultation process, the Basslink project to build, own and operate an
interconnector between the Australian mainland and Tasmania has received final approval. The £300m
project is due to be completed in 2005.
NON REGULATED BUSINESSES
Mobile Infrastructure Services
We are making progress in growing our mobile infrastructure services business in the UK and US. In the
UK, Gridcom and SST are now trading as a single entity, and pro forma operating losses have been
significantly reduced from £31m in the first half of last year to a loss of £8m in this period.
Gridcom US will launch before the end of this financial year.
Telecoms
Withdrawal from our altnet investments is nearing completion. We have sold our stakes in Manquehue net
and Silica Networks and with the restructuring of our shareholding in Energis Polska, we have no future
funding obligation.
We continue to pursue an exit from Intelig in market conditions that make it difficult to effect a
sale. We will not provide further finance to Intelig to fund the operations of the business and our
exit will be completed within the provisions already made.
REVIEW OF OPERATIONS (continued)
---------------------------------------------------------------------------------------------------------
Telecoms (continued)
The sale process for 186k's assets is progressing to schedule. As previously indicated, we have fully
written down the former Lattice altnet assets, resulting in an exceptional charge of £166m before tax.
As Energis went into administration during the period, we no longer treat it as an associate and
therefore do not include any losses from it in our half year results.
PENSIONS
Financial Reporting Standard (FRS) 17 has not yet been implemented, and the 2003 accounts will be
prepared under SSAP24, based on actuarial valuations of the Group's various pension schemes. It is the
results of periodic actuarial valuations that determine the level of contribution, these valuations
being based on long term financial assumptions.
Under the proposed FRS17, the accounting values of the Group's pension and other post-retirement
benefit assets, liabilities and charges would be subject to the volatility of short-term market
fluctuations. Assets would be valued on the basis of market values at each balance sheet date and the
present value of the liabilities would be calculated using a fluctuating discount rate by reference to
estimated yields on AA corporate bonds or equivalent. FRS 17 would therefore provide a highly volatile
snapshot as at a particular date.
The FRS17 deficit (net of deferred tax) in respect of pension obligations for the Lattice scheme would
be £669m at 31 October 2002, down from a net surplus of £261m at 31 March 2002. The next actuarial
valuation is due to be carried out as at 31 March 2003. For the UK operations of National Grid, the
net FRS17 deficit at 31 October 2002 would be £202m, as compared to a net deficit of £36m at 31 March
2002. The next actuarial valuation is due to be carried out as at 31 March 2004. For both of the UK
schemes, precedent is for pension costs to be allowed as an operating expenditure for UK regulatory
purposes. The US operations of National Grid would have had a net FRS17 deficit in respect of pension
and other post-retirement benefit obligations at 31 October 2002 of £649m, compared to a net deficit of
£406m at 31 March 2002. In the US, pension and other post-retirement liabilities are generally
recoverable through customer rates.
OUTLOOK
---------------------------------------------------------------------------------------------------------
The businesses continue to perform strongly and are on track to meet our expectations for the full
year. Our enlarged Group is well positioned to deliver growing earnings, strong cashflow and its
progressive dividend policy.
National Grid Transco
2002/03 Half Year Results
Pro forma Section
Six months ended 30 September Page 10
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Pro forma Group Profit and Loss Account
2002 2001
Notes £m £m
------------------------------------------------------------------------ ------------------ ------- ----------------- ------------------
Group turnover - continuing operations 2a 4,309 3,468
Operating costs (3,843) (2,775)
------------------------------------------------------------------------ ------------------ ------- ----------------- ------------------
------- ----------------- ------------------
Operating profit of Group undertakings - continuing operations 2c 466 693
Share of joint ventures' operating profit/(loss) - continuing
operations 2c 7 (14)
Share of joint ventures' and associate's operating
profit/(loss) - discontinued operations 2c 105 (213)
------- ----------------- ------------------
578 466
Operating profit
------- ----------------- ------------------
- Before exceptional items and goodwill amortisation 2b 802 837
- Exceptional items (171) (323)
- Goodwill amortisation (53) (48)
------- ----------------- ------------------
Total operating profit 578 466
Non-operating exceptional items (99) 82
Net interest
------- ----------------- ------------------
- Excluding exceptional items (463) (317)
- Exceptional financing costs (55) -
------- ----------------- ------------------
(518) (317)
------------------------------------------------------------------------ ------------------ ------- ----------------- ------------------
(Loss)/profit on ordinary activities before taxation (39) 231
Taxation
------- ----------------- ------------------
- Excluding exceptional items (92) (113)
- Exceptional items 59 (1)
------- ----------------- ------------------
(33) (114)
------------------------------------------------------------------------ ------------------ ------- ----------------- ------------------
(Loss)/profit on ordinary activities after taxation (72) 117
Minority interests
------- ----------------- ------------------
- Excluding exceptional items (3) (2)
- Exceptional items (12) -
------- ----------------- ------------------
(15) (2)
------------------------------------------------------------------------ ------------------ ------- ----------------- ------------------
(Loss)/profit for the period (87) 115
======================================================================== ================== ======= ================= ==================
(Loss)/earnings per ordinary share
Basic 3 (2.8)p 4.1p
Adjusted (excluding exceptional items, goodwill amortisation and
additional NTS entry capacity auction turnover) 3 7.9p 8.3p
------------------------------------------------------------------------ ------------------ ------- ----------------- ------------------
Pro forma Group Statement of Total Recognised Gains and Losses
2002 2001
£m £m
------------------------------------------------------------------------ ------------------ ------- ------------------ -----------------
(Loss)/profit for the period (87) 115
Exchange adjustments (283) (26)
Other recognised gain - 6
------------------------------------------------------------------------ ------------------ ------- ------------------ -----------------
Total recognised gains and losses for the period (370) 95
======================================================================== ================== ======= ================== =================
I) Turnover and operating profit for the six months ended 30 September 2001 were increased by the
impact of additional NTS entry capacity auction turnover (£247m).
II) Includes £121m exceptional credits relating to "Impairment of investments in joint ventures
and associate" (see note 3a, in the National Grid Group Section, page 23).
National Grid Transco
2002/03 Half Year Results
Pro forma Section
As at 30 September Page 11
Pro forma Summary Group Balance Sheet
2002 2001
£m £m
------------------------------------------------------------------------ ------------------ ------- ------------------ ------------------
Fixed assets
Intangible assets - goodwill and other 1,899 1,321
Tangible assets 16,647 13,632
------- ------------------ ------------------
Investments in joint ventures 55 191
Investment in associate - 391
Other investments 219 151
------- ------------------ ------------------
Total investments 274 733
------------------------------------------------------------------------ ------------------ ------- ------------------ ------------------
18,820 15,686
Current assets
Stocks 147 102
Debtors (amounts falling due within one year) 1,754 1,251
Debtors (amounts falling due after more than one year) 3,582 913
Assets held for exchange 17 17
Cash and investments 699 816
------------------------------------------------------------------------ ------------------ ------- ------------------ ------------------
6,199 3,099
Creditors (amounts falling due within one year) (5,492) (3,295)
------------------------------------------------------------------------ ------------------ ------- ------------------ ------------------
Net current assets/(liabilities) 707 (196)
------------------------------------------------------------------------ ------------------ ------- ------------------ ------------------
Total assets less current liabilities 19,527 15,490
Creditors (amounts falling due after more than one year) (13,943) (10,746)
Provisions for liabilities and charges (4,393) (3,478)
------------------------------------------------------------------------ ------------------ ------- ------------------ ------------------
Net assets 1,191 1,266
======================================================================== ================== ======= ================== ==================
Capital and reserves
Called up share capital 310 281
Share premium account 1,244 -
Other reserves (5,139) (5,183)
Revaluation reserve - 50
Profit and loss account 4,694 6,084
------------------------------------------------------------------------ ------------------ ------- ------------------ ------------------
Equity shareholders' funds 1,109 1,232
Minority interests 82 34
------------------------------------------------------------------------ ------------------ ------- ------------------ ------------------
Total shareholders' funds 1,191 1,266
======================================================================== ================== ======= ================== ==================
Net debt included above 14,162 9,317
------------------------------------------------------------------------ ------------------ ------- ------------------ ------------------
National Grid Transco
2002/03 Half Year Results
Pro forma Section
Six months ended 30 September Page 12
Pro forma Summary Group Cash Flow Statement
2002 2001
£m £m
------------------------------------------------------------------------ ------------------ ------- ------------------ ------------------
Net cash inflow from operating activities (I) 1,100 1,034
Dividends from joint ventures 3 7
Net cash outflow for returns on investments and servicing of finance (453) (267)
Taxation (41) (46)
Net cash outflow for capital expenditure and financial investment (745) (687)
Net cash inflow/(outflow) from acquisitions and disposals 109 (55)
Equity dividends paid (358) (256)
------------------------------------------------------------------------ ------------------ ------- ------------------ ------------------
Net cash outflow before management of liquid resources and financing (385) (270)
Net cash outflow from the management of liquid resources (193) (284)
Net cash inflow from financing 663 579
------------------------------------------------------------------------ ------------------ ------- ------------------ ------------------
Movement in cash and overdrafts 85 25
======================================================================== ================== ======= ================== ==================
I) Net cash inflow from operating activities excluding exceptional cash flows and additional NTS
entry capacity auction turnover for the six months ended 30 September 2002 amounted to £1,197m
(2001: £845m).
II) Includes £218m in respect of additional NTS entry capacity auction turnover.
National Grid Transco
2002/03 Half Year Results
Pro forma Section
Notes Page 16
1. Basis of Preparation
The pro forma financial information is unaudited and does not comprise statutory accounts within the
meaning of section 240 of the Companies Act 1985. The pro forma financial information has been
reviewed by the auditors and their report is set out on page 39.
It has been prepared for illustrative purposes, as if the merger had taken place on 1 April 2001, the
first day of the comparative period. It does not purport to represent what the combined results of
operations, cash flows and balance sheet actually would have been if the merger had occurred on 1 April
2001.
The pro forma financial information comprises an aggregation of the National Grid Group and Lattice
information (see pages 17 to 29 and 30 to 38 respectively), as adjusted for the issue of shares on
merger with a nominal value of £132m and the elimination of transactions and balances between the
former groups relating to turnover and operating costs in the relevant period and the elimination of
debtors and creditors at the balance sheet date, amounting to £22m and £7m respectively (2001: £25m and
£8m).
A pro forma adjustment of £221m (2001: £221m) has been made to other reserves, representing the
difference between shares issued of £132m and the called up share capital of Lattice Group plc at the
date of the merger.
The combination of National Grid Group and Lattice meets the merger accounting criteria under UK GAAP
and the transaction has, therefore, been accounted for as a merger.
The pro forma section of this interim results announcement was approved by the Board of Directors on 25
November 2002.
2. Segmental analysis
a) Group turnover
2002 2001
£m £m
------------------------------------------------------------------------ ------------------ ------- ------------------ ------------------
Continuing operations
UK electricity 689 646
US electricity 1,996 1,183
Transco 1,223 1,423
US gas 136 -
Other activities 461 313
Sales between businesses (196) (97)
------------------------------------------------------------------------ ------------------ ------- ------------------ ------------------
4,309 3,468
======================================================================== ================== ======= ================== ==================
Europe 2,164 2,269
North America 2,145 1,199
------------------------------------------------------------------------ ------------------ ------- ------------------ ------------------
4,309 3,468
======================================================================== ================== ======= ================== ==================
I) Turnover for the six months ended 30 September 2001 was increased by the impact of additional
NTS entry capacity auction turnover (£247m).
2. Segmental analysis (continued)
b) Operating profit - before exceptional items and
goodwill amortisation
2002 2001
£m £m
------------------------------------------------------------------------ ------------------ ------- ------------------ ------------------
Continuing operations
UK electricity 294 249
US electricity 335 146
Transco 178 440
US gas 8 -
Other activities (4) 32
------------------------------------------------------------------------ ------------------ ------- ------------------ ------------------
Group undertakings 811 867
======================================================================== ================== ======= ================== ==================
Continuing operations
------- ------------------ ------------------
Other electricity activities 8 18
Other activities (1) (16)
------- ------------------ ------------------
7 2
Discontinued operations
Other activities (16) (32)
------------------------------------------------------------------------ ------------------ ------- ------------------ ------------------
Joint ventures and associate (9) (30)
------------------------------------------------------------------------ ------------------ ------- ------------------ ------------------
Total operating profit 802 837
------------------------------------------------------------------------ ------------------ ------- ------------------ ------------------
Europe 462 699
North America 344 149
Latin America (7) (14)
Rest of the World 3 3
------------------------------------------------------------------------ ------------------ ------- ------------------ ------------------
Total operating profit 802 837
======================================================================== ================== ======= ================== ==================
I) Operating profit for the six months ended 30 September 2001 was increased by the impact of
additional NTS entry capacity auction turnover (£247m).
2. Segmental analysis (continued)
c) Operating profit - after exceptional items and
goodwill amortisation
2002 2001
£m £m
------------------------------------------------------------------------ ------------------ ------- ------------------ ------------------
Continuing operations
UK electricity 288 238
US electricity 278 108
Transco 94 440
US gas 4 -
Other activities (204) 28
Impairment of investments in joint ventures 6 (121)
------------------------------------------------------------------------ ------------------ ------- ------------------ ------------------
Group undertakings 466 693
======================================================================== ================== ======= ================== ==================
Continuing operations
------- ------------------ ------------------
Other electricity activities 8 18
Other activities (1) (32)
------- ------------------ ------------------
7 (14)
Discontinued operations
Other activities 105 (213)
------------------------------------------------------------------------ ------------------ ------- ------------------ ------------------
Joint ventures and associate 112 (227)
------------------------------------------------------------------------ ------------------ ------- ------------------ ------------------
Total operating profit 578 466
======================================================================== ================== ======= ================== ==================
Europe 181 659
North America 281 109
Latin America 113 (305)
Rest of the World 3 3
------------------------------------------------------------------------ ------------------ ------- ------------------ ------------------
Total operating profit 578 466
======================================================================== ================== ======= ================== ==================
I) Operating profit for the six months ended 30 September 2001 was increased by the impact of
additional NTS entry capacity auction turnover (£247m).
3. (Loss)/earnings per ordinary share
Six months ended Six months ended
30 September 2002 30 September 2001
(Loss)/
earnings per (Loss)/profit Earnings per Profit for the
share for the period share period
pence £m pence £m
---------------------------------------------------------- ------ ---------------- ----------------- ----------------- -----------------
Basic (2.8) (87) 4.1 115
Exceptional operating items 5.5 171 11.6 323
Exceptional non-operating items 3.2 99 (2.9) (82)
Exceptional financing charge 1.8 55 - -
Tax impact of exceptional items (1.9) (59) - 1
Exceptional minority interest 0.4 12 - -
Goodwill amortisation 1.7 53 1.7 48
Additional NTS entry capacity auction turnover - - (8.9) (247)
Tax impact of NTS entry capacity auction turnover - - 2.7 74
---------------------------------------------------------- ------ ---------------- ----------------- ----------------- -----------------
Adjusted (excluding exceptional items,
goodwill amortisation and additional NTS entry capacity
auction turnover) 7.9 244 8.3 232
========================================================== ====== ================ ================= ================= =================
The pro forma (loss)/earnings per share has been calculated on a pro forma weighted average number of
shares as follows:
Six months ended
30 September
2002 2001
Number Number
------------------------------------------------------------------------ ------------------ ------- ------------------ ------------------
National Grid Group 1,765 1,481
Increase arising from the merger (I) 1,313 1,305
------------------------------------------------------------------------ ------------------ ------- ------------------ ------------------
Total pro forma 3,078 2,786
======================================================================== ================== ======= ================== ==================
I) Lattice Group weighted average number of shares of 3,502m (2001: 3,479m) multiplied by 0.375,
being the ratio of National Grid Transco plc shares issued for each Lattice Group plc share.
National Grid Transco
2002/03 Half Year Results
National Grid Group Section
Page 17
Group Profit and Loss Account
Year ended
31 March
Six months ended 2002
30 September £m
2002 2001
Notes £m £m
------------------------------------------------------------------------ ------- ------------------ ------------------ ------------------
Group turnover - continuing operations 2a 3,029 1,989 4,401
Operating costs (2,463) (1,764) (3,894)
------------------------------------------------------------------------ ------- ------------------ ------------------ ------------------
------- ------------------ ------------------ ------------------
Operating profit of Group undertakings - continuing operations 2c 566 225 507
Share of joint ventures' operating profit - continuing operations 2c 8 18 36
Share of joint ventures' and associate's operating
profit/(loss) - discontinued operations 2c 105 (213) (672)
------- ------------------ ------------------ ------------------
679 30 (129)
Operating profit
------- ------------------ ------------------ ------------------
- Before exceptional items and goodwill amortisation 2b 628 385 875
- Exceptional items 3a 105 (307) (914)
- Goodwill amortisation (54) (48) (90)
------- ------------------ ------------------ ------------------
Total operating profit/(loss) 679 30 (129)
Non-operating exceptional items 3b (32) 20 52
Net interest
------- ------------------ ------------------ ------------------
- Excluding exceptional items (282) (153) (293)
- Exceptional financing costs 3c (55) - (142)
------- ------------------ ------------------ ------------------
4 (337) (153) (435)
------------------------------------------------------------------------ ------- ------------------ ------------------ ------------------
Profit/(loss) on ordinary activities before taxation 310 (103) (512)
Taxation
------- ------------------ ------------------ ------------------
- Excluding exceptional items 5 (94) (24) (85)
- Exceptional items 25 6 60
------- ------------------ ------------------ ------------------
(69) (18) (25)
------------------------------------------------------------------------ ------- ------------------ ------------------ ------------------
Profit/(loss) on ordinary activities after taxation 241 (121) (537)
Minority interests
------- ------------------ ------------------ ------------------
- Excluding exceptional items (4) (3) (6)
- Exceptional items 3d (12) - 50
------- ------------------ ------------------ ------------------
(16) (3) 44
------------------------------------------------------------------------ ------- ------------------ ------------------ ------------------
Profit/(loss) for the period 225 (124) (493)
Dividends 7 (212) (96) (265)
------------------------------------------------------------------------ ------- ------------------ ------------------ ------------------
Profit/(loss) transferred to/(from) profit and loss account reserve 13 (220) (758)
======================================================================== ======= ================== ================== ==================
Earnings/(loss) per ordinary share
Basic 6 12.7p (8.4)p (32.3)p
Adjusted (excluding exceptional items and goodwill amortisation) 6 14.1p 13.9p 32.1p
Dividends per ordinary share 7 6.86p 6.46p 16.04p
------------------------------------------------------------------------ ------- ------------------ ------------------ ------------------
Group Statement of Total Recognised Gains and Losses
Six months ended Year ended
31 March
2002
30 September £m
2002 2001
£m £m
------------------------------------------------------------------------ ------- ------------------ ------------------ ------------------
Profit/(loss) for the period 225 (124) (493)
Exchange adjustments (281) (26) (58)
Tax on exchange adjustments - - 21
------------------------------------------------------------------------ ------- ------------------ ------------------ ------------------
Total recognised gains and losses for the period (56) (150) (530)
======================================================================== ======= ================== ================== ==================
National Grid Transco
2002/03 Half Year Results
National Grid Group Section
Page 18
Summary Group Balance Sheet
As at 31 March
2002
As at 30 September £m
2002 2001
£m £m
------------------------------------------------------------------------ ------- ------------------ ------------------ ------------------
Fixed assets
Intangible assets - goodwill 1,906 1,305 2,113
Tangible assets 8,805 5,638 9,122
------- ------------------ ------------------ ------------------
Investments in joint ventures 53 161 57
Investment in associate - 391 -
Other investments 217 141 241
------- ------------------ ------------------ ------------------
Total investments 270 693 298
------------------------------------------------------------------------ ------- ------------------ ------------------ ------------------
10,981 7,636 11,533
Current assets
Stocks 78 35 56
Debtors (amounts falling due within one year) 1,192 793 1,528
Debtors (amounts falling due after more than one year) 3,578 902 4,054
Assets held for exchange 17 17 17
Investments held for resale - - 16
Cash and investments 443 501 212
------------------------------------------------------------------------ ------- ------------------ ------------------ ------------------
5,308 2,248 5,883
Creditors (amounts falling due within one year) (3,018) (1,450) (2,969)
------------------------------------------------------------------------ ------- ------------------ ------------------ ------------------
Net current assets 2,290 798 2,914
------------------------------------------------------------------------ ------- ------------------ ------------------ ------------------
Total assets less current liabilities 13,271 8,434 14,447
Creditors (amounts falling due after more than one year) (7,529) (4,381) (8,118)
Provisions for liabilities and charges (2,726) (1,585) (3,035)
------------------------------------------------------------------------ ------- ------------------ ------------------ ------------------
Net assets 3,016 2,468 3,294
======================================================================== ======= ================== ================== ==================
Capital and reserves
Called up share capital 178 149 178
Share premium account 1,244 - 1,243
Other reserve 359 312 359
Profit and loss account 1,148 1,972 1,416
------------------------------------------------------------------------ ------- ------------------ ------------------ ------------------
Equity shareholders' funds 2,929 2,433 3,196
Minority interests 87 35 98
------------------------------------------------------------------------ ------- ------------------ ------------------ ------------------
Total shareholders' funds 3,016 2,468 3,294
======================================================================== ======= ================== ================== ==================
Reconciliation of Movement in Equity Shareholders' Funds
Six months ended Year ended
31 March
2002
30 September £m
2002 2001
£m £m
------------------------------------------------------------------------ ------- ------------------ ------------------ ------------------
Profit/(loss) for the period 225 (124) (493)
Dividends (212) (96) (265)
------------------------------------------------------------------------ ------- ------------------ ------------------ ------------------
13 (220) (758)
Issue of ordinary shares 1 5 1,317
Exchange adjustments (281) (26) (58)
Tax on exchange adjustments - - 21
------------------------------------------------------------------------ ------- ------------------ ------------------ ------------------
Net (decrease)/increase in equity shareholders' funds (267) (241) 522
Equity shareholders' funds at start of period 3,196 2,674 2,674
------------------------------------------------------------------------ ------- ------------------ ------------------ ------------------
Equity shareholders' funds at end of period 2,929 2,433 3,196
======================================================================== ======= ================== ================== ==================
National Grid Transco
2002/03 Half Year Results
National Grid Group Section
Page 19
Group Cash Flow Statement
Year ended
31 March
Six months ended 2002
30 September £m
2002 2001
Notes £m £m
------------------------------------------------------------------------ ------- ------------------ ------------------ ------------------
Net cash inflow from operating activities 8 808 548 1,255
Dividends from joint ventures 3 7 13
Net cash outflow for returns on investments
and servicing of finance (298) (103) (358)
Taxation
Corporate tax (paid)/refunded (21) 44 (7)
Capital expenditure
------- ------------------ ------------------ ------------------
Net payments to acquire tangible fixed assets (353) (217) (492)
Receipts from disposals of tangible fixed assets 4 22 28
------- ------------------ ------------------ ------------------
Net cash outflow for capital expenditure (349) (195) (464)
Acquisitions and disposals
------- ------------------ ------------------ ------------------
Payments to acquire investments (76) (31) (50)
Receipts from disposal of investments 187 - 37
Acquisition of Group undertakings - - (934)
------- ------------------ ------------------ ------------------
Net cash inflow/(outflow) for acquisitions and disposals 111 (31) (947)
Equity dividends paid (169) (133) (229)
------------------------------------------------------------------------ ------- ------------------ ------------------ ------------------
Net cash inflow/(outflow) before the management of
liquid resources and financing 85 137 (737)
Management of liquid resources
------- ------------------ ------------------ ------------------
(Increase)/decrease in short-term deposits 9, 10 (185) (226) 336
------- ------------------ ------------------ ------------------
Net cash (outflow)/inflow from the management of
liquid resources (185) (226) 336
Financing
------- ------------------ ------------------ ------------------
Issue of ordinary shares 8 9 12
Net increase in borrowings 9, 10 149 102 443
------- ------------------ ------------------ ------------------
Net cash inflow from financing 157 111 455
------------------------------------------------------------------------ ------- ------------------ ------------------ ------------------
Movement in cash and overdrafts 9, 10 57 22 54
======================================================================== ======= ================== ================== ==================
National Grid Transco
2002/03 Half Year Results
National Grid Group Section
Notes Page 29
1. Basis of preparation
The financial information contained in this announcement has been prepared on the basis of the
accounting policies set out in the National Grid Annual Report and Form-20F for the year ended 31 March
2002 except as noted below and does not constitute statutory accounts as defined in Section 240 of the
Companies Act 1985. The financial information in respect of the year ended 31 March 2002 has been
derived from the statutory accounts for the year ended 31 March 2002, which have been delivered to the
Registrar of Companies. The auditors' report on those statutory accounts was unqualified and did not
contain a statement under Section 237(2) or (3) of the Companies Act 1985. The financial information
in respect of the six months ended 30 September 2002 is unaudited but has been reviewed by the auditors
and their report is set out on page 39.
In translating into sterling the Group's share of the net assets and results of a joint venture
operating in a hyper-inflationary economy for the six month period ended 30 September 2002, adjustments
have been made to reflect current price levels. Such adjustments have been reflected through the Group
profit and loss account or statement of total recognised gains and losses as appropriate. The Group's
share of the gain on net monetary liabilities has been credited to the Group profit and loss account
through 'net interest', and is shown as part of the Group's exceptional financing costs - note 3 (c).
For the year ended 31 March 2002, exceptional financing costs of £142m were reported net of a minority
interest credit amounting to £50m. For the period ended 30 September 2002, the comparative has been
restated to present the exceptional financing costs and related minority interest on a gross basis.
The National Grid Group Section of this interim results announcement was approved by the Board of
Directors on 25 November 2002.
2. Segmental analysis
Following the merger with Lattice Group, a review of the segmental analysis has been undertaken, with a
view to determining the appropriate segmental analysis for the new merged group, National Grid
Transco. Consequently, the segments reported for National Grid Group below have been aligned with the
segmental analysis to be adopted by National Grid Transco.
a) Group turnover
Year ended
31 March
Six months ended 2002
30 September £m
2002 2001
£m £m
------------------------------------------------------------------------ ------- ------------------ ------------------ ------------------
Continuing operations
UK electricity 689 646 1,322
US electricity 1,996 1,183 2,554
US gas 136 - 104
Other activities 220 183 443
Sales between businesses (12) (23) (22)
------------------------------------------------------------------------ ------- ------------------ ------------------ ------------------
3,029 1,989 4,401
======================================================================== ======= ================== ================== ==================
Europe 891 797 1,729
North America 2,138 1,192 2,672
------------------------------------------------------------------------ ------- ------------------ ------------------ ------------------
3,029 1,989 4,401
======================================================================== ======= ================== ================== ==================
Other activities turnover primarily comprises market services, including provision of the on-the-day
commodity market for gas trading in Great Britain and contracting activities.
2. Segmental analysis (continued)
b) Operating profit - before exceptional items and
goodwill amortisation
Six months ended Year ended
31 March
2002
30 September £m
2002 2001
£m £m
------------------------------------------------------------------------ ------- ------------------ ------------------ ------------------
Continuing operations
UK electricity 294 249 543
US electricity 335 146 353
US gas 8 - 17
Other activities (1) 4 (20)
------------------------------------------------------------------------ ------- ------------------ ------------------ ------------------
Group undertakings 636 399 893
======================================================================== ======= ================== ================== ==================
Continuing operations
Other electricity activities 8 18 36
Discontinued operations
Other activities (16) (32) (54)
------------------------------------------------------------------------ ------- ------------------ ------------------ ------------------
Joint ventures and associate (8) (14) (18)
------------------------------------------------------------------------ ------- ------------------ ------------------ ------------------
Total operating profit 628 385 875
======================================================================== ======= ================== ================== ==================
Europe 286 246 511
North America 346 150 378
Latin America (7) (14) (19)
Rest of the World 3 3 5
------------------------------------------------------------------------ ------- ------------------ ------------------ ------------------
Total operating profit 628 385 875
======================================================================== ======= ================== ================== ==================
2. Segmental analysis (continued)
c) Operating profit - after exceptional items and
goodwill amortisation
Year ended
31 March
Six months ended 2002
30 September £m
2002 2001
£m £m
------------------------------------------------------------------------ ------- ------------------ ------------------ ------------------
Continuing operations
UK electricity 288 238 503
US electricity 278 108 213
US gas 4 - 8
Other activities (10) - (31)
Impairment of investments in joint ventures and associate 6 (121) (186)
------------------------------------------------------------------------ ------- ------------------ ------------------ ------------------
Group undertakings 566 225 507
------------------------------------------------------------------------ ------- ------------------ ------------------ ------------------
Continuing operations
Other electricity activities 8 18 36
Discontinued operations
Other activities 105 (213) (672)
------------------------------------------------------------------------ ------- ------------------ ------------------ ------------------
Joint ventures and associate 113 (195) (636)
------------------------------------------------------------------------ ------- ------------------ ------------------ ------------------
Total operating profit 679 30 (129)
======================================================================== ======= ================== ================== ==================
Europe 280 222 (49)
North America 283 110 225
Latin America 113 (305) (310)
Rest of the World 3 3 5
------------------------------------------------------------------------ ------- ------------------ ------------------ ------------------
Total operating profit 679 30 (129)
======================================================================== ======= ================== ================== ==================
In prior periods, exceptional restructuring costs incurred in the USA have not been allocated to
specific business segments. For the period ended 30 September 2002, the comparative has been restated
to show the allocation of these costs against the relevant business segments.
3. Exceptional items
a) Operating
Year ended
31 March
Six months ended 2002
30 September £m
2002 2001
£m £m
------------------------------------------------------------------------ ------- ------------------ ------------------ ------------------
Restructuring costs (16) (17) (122)
Impairment of investments in joint ventures and associate 127 (290) (792)
Merger costs (6) - -
------------------------------------------------------------------------ ------- ------------------ ------------------ ------------------
105 (307) (914)
======================================================================== ======= ================== ================== ==================
I) Relates to costs incurred in business reorganisations in the UK and US businesses (£10m after
tax).
II) Relates to Intelig and other telecom joint ventures (£145m after tax). The exceptional
credits substantially represent the reversal of the Group's share of retained losses incurred by
these joint ventures during the period. £121m of the pre-tax exceptional credits have been
reflected in "Share of joint ventures' and associate's operating profit/(loss) - discontinued
operations".
III) Represents employee and property costs associated with the merger with Lattice Group plc (£5m
after tax).
b) Non-operating
Six months ended Year ended
31 March
2002
30 September £m
2002 2001
£m £m
------------------------------------------------------------------------ ------- ------------------ ------------------ ------------------
Merger costs (32) - -
Exceptional profit relating to Energis - 20 20
Profit on disposal of investments - - 10
Profit on disposal of tangible fixed assets - - 22
------------------------------------------------------------------------ ------- ------------------ ------------------ ------------------
(32) 20 52
======================================================================== ======= ================== ================== ==================
IV) Represents transaction costs of the merger with Lattice Group plc (£32m after tax).
c) Financing costs
The exceptional net interest costs of £55m (£55m after tax) relates to the Group's share of exchange
losses incurred on foreign currency borrowings by joint ventures amounting to £124m, partially offset
by the Group's share of a gain on net monetary liabilities of £69m. The gain on the net monetary
liabilities relates to Citelec, a joint venture operating in Argentina, and reflects the net gain
arising on net monetary liabilities that are financing the operation in a hyper-inflationary economy.
d) Minority interest
The exceptional minority interest charge of £12m relates to the Group's share of the minority interest
in the after taxation operating results of Citelec, and primarily reflects the minority's share of the
gain on net monetary liabilities referred to above.
4. Net interest
Six months ended Year ended
31 March
2002
30 September £m
2002 2001
£m £m
------------------------------------------------------------------------ ------- ------------------ ------------------ ------------------
Net interest payable on net debt and other items 277 113 273
Less: interest capitalised (14) (12) (25)
------------------------------------------------------------------------ ------- ------------------ ------------------ ------------------
263 101 248
Joint ventures 74 36 171
Associate - 16 16
------------------------------------------------------------------------ ------- ------------------ ------------------ ------------------
337 153 435
======================================================================== ======= ================== ================== ==================
Comprising:
Net interest, excluding exceptional net interest 282 153 293
Exceptional net interest (note 3 (c), page 23) 55 - 142
------------------------------------------------------------------------ ------- ------------------ ------------------ ------------------
Net interest, including exceptional net interest 337 153 435
======================================================================== ======= ================== ================== ==================
5. Taxation
The tax charge of £94m on profit before taxation, excluding exceptional items, for the six months ended
30 September 2002, is based on the estimated effective tax rate for the year ending 31 March 2003 of
32.2%.
6. Earnings per ordinary share
Six months ended Six months ended Year ended
30 September 2002 30 September 2001 31 March 2002
Weighted (Loss)/ (Loss)/ (Loss)/ (Loss)/
Earnings Profit for average earnings profit for earnings profit for
per share the period number of per share the period per share the year
pence £m shares pence £m pence £m
-------------------------------------------- ------------ ------------- ------------ ------------ ------------ ------------- ------------
Basic 12.7 225 1,765 (8.4) (124) (32.3) (493)
Exceptional operating items
(note 3 (a), page 23) (5.9) (105) - 20.7 307 59.9 914
Exceptional non-operating items
(note 3 (b), page 23) 1.8 32 - (1.3) (20) (3.4) (52)
Exceptional financing charge
(note 3 (c), page 23) 3.1 55 - - - 9.3 142
Tax impact of exceptional items (1.4) (25) - (0.4) (6) (4.0) (60)
Exceptional minority interest
(note 3 (d), page 23) 0.7 12 - - - (3.3) (50)
Goodwill amortisation 3.1 54 - 3.3 48 5.9 90
-------------------------------------------- ------------ ------------- ------------
------------ ------------ ------------- ------------
Adjusted (excluding exceptional items and 14.1 248 1,765 13.9 205 32.1 491
goodwill amortisation)
============ ============ ============= ============
Dilutive impact of employee share options (0.1) - 2
Dilutive impact of 4.25% exchangeable
bonds 2008 (0.2) 11 110
-------------------------------------------- ------------ ------------- ------------
Diluted (excluding exceptional items and 13.8 259 1,877
goodwill amortisation)
Exceptional operating items
(note 3 (a), page 23) 5.6 105 -
Exceptional non-operating items
(note 3 (b), page 23) (1.7) (32) -
Exceptional financing charge
(note 3 (c), page 23) (2.9) (55) -
Tax impact of exceptional items 1.3 25 -
Exceptional minority interest
(note 3 (d), page 23) (0.6) (12) -
Goodwill amortisation (2.9) (54) -
-------------------------------------------- ------------ ------------- ------------
Diluted (including exceptional items and
goodwill amortisation) 12.6 236 1,877
============================================ ============ ============= ============
For September 2001 and March 2002, there is no difference between basic and diluted earnings per
share. In respect of the six months and year ended 30 September 2001 and 31 March 2002 respectively,
earnings per share is based upon 1,481m and 1,527m shares.
In prior periods, the reconciling items between basic and adjusted earnings per share have been shown
net of tax. For the period ended 30 September 2002, the comparatives have been restated to show the
reconciling items gross of tax.
7. Dividends
The National Grid interim dividend for the six months ended 30 September 2002 of £212m has been
calculated on the basis of the number of National Grid Transco plc ordinary shares in issue after the
merger with Lattice Group plc, based on an ordinary interim dividend per share of 6.86p.
8. Reconciliation of operating profit to net cash inflow from operating activities
Six months ended Year ended
31 March
2002
30 September £m
2002 2001
£m £m
------------------------------------------------------------------------ ------- ------------------ ------------------ ------------------
Operating profit of Group undertakings 566 225 507
Group exceptional operating items 17 138 307
Depreciation and amortisation 329 183 437
(Increase)/decrease in working capital (3) 27 85
Decrease in provisions (67) (14) (44)
Other (1) (4) 1
------------------------------------------------------------------------ ------- ------------------ ------------------ ------------------
Net cash inflow from operating activities before exceptional items 841 555 1,293
Expenditure relating to exceptional operating items and merger costs (33) (7) (38)
------------------------------------------------------------------------ ------- ------------------ ------------------ ------------------
Net cash inflow from operating activities 808 548 1,255
======================================================================== ======= ================== ================== ==================
9. Reconciliation of net cash flow to movement in net debt
Six months ended Year ended
31 March
2002
30 September £m
2002 2001
£m £m
------------------------------------------------------------------------ ------- ------------------ ------------------ ------------------
Movement in cash and overdrafts 57 22 54
Net cash outflow/(inflow) from the management of liquid resources 185 226 (336)
Increase in borrowings (149) (102) (443)
------------------------------------------------------------------------ ------- ------------------ ------------------ ------------------
Change in net debt resulting from cash flows 93 146 (725)
Acquisition of Group undertakings - - (3,622)
Exchange adjustments 525 60 20
Other non-cash movements (1) (7) 4
------------------------------------------------------------------------ ------- ------------------ ------------------ ------------------
Movement in net debt in the period 617 199 (4,323)
Net debt at start of period (8,241) (3,918) (3,918)
------------------------------------------------------------------------ ------- ------------------ ------------------ ------------------
Net debt at end of period (7,624) (3,719) (8,241)
======================================================================== ======= ================== ================== ==================
10. Analysis of changes in net debt
At Cash flow Exchange Other At
1 April non-cash
2002 adjustments movements 30 September 2002
£m £m £m £m £m
----------------------------------
------- ------------------ ------------------ ------------------ ------------------ ------------------
Cash at bank and in hand(I) 92 54 - - 146
Bank overdrafts (37) 3 1 - (33)
------- ------------------ ------------------ ------------------ ------------------ ------------------
55 57 1 - 113
Deposits(I) 120 185 (8) - 297
------- ------------------ ------------------ ------------------ ------------------ ------------------
Long-term debt (7,001) (406) 438 487 (6,482)
Short-term debt (1,415) 257 94 (488) (1,552)
------- ------------------ ------------------ ------------------ ------------------ ------------------
(8,416) (149) 532 (1) (8,034)
---------------------------------- ------- ------------------ ------------------ ------------------ ------------------ ------------------
(8,241) 93 525 (1) (7,624)
================================== ======= ================== ================== ================== ================== ==================
I) Cash and investments per the balance sheet £443m (31 March 2002: £212m).
11. Net debt comprises
At 31 March
2002
At 30 September £m
2002 2001
£m £m
------------------------------------------------------------------------ ------- ------------------ ------------------ ------------------
Cash and investments 443 501 212
Short-term debt including bank overdrafts (1,585) (316) (1,452)
Long-term debt (6,482) (3,904) (7,001)
------------------------------------------------------------------------ ------- ------------------ ------------------ ------------------
(7,624) (3,719) (8,241)
======================================================================== ======= ================== ================== ==================
12. Exchange rates
The Group's results are affected by the exchange rates used to translate the results of its US
operations. The US dollar to sterling exchange rates used were:
Six months ended Year ended
31 March
30 September 2002
2002 2001
------------------------------------------------------------------------ ------- ------------------ ------------------
------------------
Closing rate 1.56 1.47 1.42
Average rate 1.52 1.45 1.44
------------------------------------------------------------------------ ------- ------------------ ------------------ ------------------
13. Differences between UK and US Generally Accepted Accounting Principles ("GAAP")
a) Reconciliation of net income to US GAAP
The following is a summary of the material adjustments to net income which would have been required if
US GAAP had been applied instead of UK GAAP.
Six months ended Year ended 31
March
2002
30 September £m
2002 2001
£m £m
------------------------------------------------------------------------ ------- ------------------ ------------------ ------------------
Profit for the period, excluding exceptional items 194 157 401
Exceptional items after taxation 31 (281) (894)
------------------------------------------------------------------------ ------- ------------------ ------------------ ------------------
Net income/(loss) under UK GAAP 225 (124) (493)
Adjustments to conform with US GAAP
Deferred taxation 26 25 7
Pensions 5 15 29
Share option schemes (1) (1) (1)
Tangible fixed assets 2 2 3
Financial instruments (89) (84) (83)
Issue costs associated with Equity Plus Income Convertible Securities (EPICs) (1) (1) (2)
Carrying value of EPICs liability 2 180 203
Severance and integration costs (13) - 67
Recognition of income - 6 (4)
Goodwill 54 36 78
Deferred merger costs 32 - -
Share of joint ventures' and associate's (22) (18) 37
Other (9) 1 (4)
------------------------------------------------------------------------ ------- ------------------ ------------------ ------------------
Total US GAAP adjustments (14) 161 330
------------------------------------------------------------------------ ------- ------------------ ------------------ ------------------
Net income/(loss) under US GAAP 211 37 (163)
======================================================================== ======= ================== ================== ==================
Basic earnings/(loss) per share - US GAAP 12.0p 2.5p (10.7)p
Diluted earnings/(loss) per share - US GAAP 11.8p 2.5p (10.7)p
Net income under US GAAP includes a net gain of £63m (2001 and 31 March 2002 net gains of £281m and net
losses of £893m respectively) relating to net gains which are treated as exceptional items under UK
GAAP.
13. Differences between UK and US Generally Accepted Accounting Principles ("GAAP") (continued)
b) Reconciliation of equity shareholders' funds to US GAAP
The following is a summary of the material adjustments to equity shareholders' funds which would have
been required if US GAAP had been applied instead of UK GAAP.
At 31 March
2002
At 30 September £m
2002 2001
£m £m
------------------------------------------------------------------------ ------- ------------------ ------------------ ------------------
Equity shareholders' funds under UK GAAP 2,929 2,433 3,196
------------------------------------------------------------------------ ------- ------------------ ------------------ ------------------
Adjustments to conform with US GAAP
Deferred taxation (25) (26) (52)
Pensions 220 194 217
Shares held by employee share trusts (38) (5) (46)
Ordinary dividends 212 96 169
Tangible fixed assets (37) (40) (38)
Financial instruments (162) (99) (81)
Issue costs associated with EPICs 1 3 2
Carrying value of EPICs liability 243 217 241
Severance liabilities 1 - 15
Recognition of income (22) (11) (22)
Regulatory assets 25 - 34
Goodwill 148 68 105
Deferred merger costs 32 - -
Share of joint ventures' and associate's (15) (34) 21
Other (7) (3) (2)
------------------------------------------------------------------------ ------- ------------------ ------------------ ------------------
Total US GAAP adjustments 576 360 563
------------------------------------------------------------------------ ------- ------------------ ------------------ ------------------
Equity shareholders' funds under US GAAP 3,505 2,793 3,759
======================================================================== ======= ================== ================== ==================
National Grid Transco
2002/03 Half Year Results
Lattice Group Section
Page 32
Group Profit and Loss Account
Year ended
31 March
2002
Six months ended (as restated)(I)
30 September £m
2002 2001
(as restated)(I)
Notes £m £m
------------------------------------------------------------------------ ------- ------------------ ------------------ ------------------
Group turnover - continuing operations 2a 1,302 1,504 3,153
Operating costs (1,402) (1,036) (2,600)
------------------------------------------------------------------------ ------- ------------------ ------------------ ------------------
------- ------------------ ------------------ ------------------
Operating (loss)/profit of Group undertakings - continuing operations 2c (100) 468 553
Share of joint ventures' operating loss - continuing operations 2c (1) (32) (65)
------- ------------------ ------------------ ------------------
(101) 436 488
Operating profit
------- ------------------ ------------------ ------------------
- Before exceptional items and goodwill amortisation 2b 174 452 908
- Exceptional items - continuing operations 3a (276) (16) (413)
- Goodwill amortisation 1 - (7)
------- ------------------ ------------------ ------------------
Total operating (loss)/profit (101) 436 488
Non-operating exceptional items 3b (67) 62 104
Net interest 4 (181) (164) (364)
------------------------------------------------------------------------ ------- ------------------ ------------------ ------------------
(Loss)/profit on ordinary activities before taxation (349) 334 228
Taxation
------- ------------------ ------------------ ------------------
- Excluding exceptional items 5 2 (89) (166)
- Exceptional items 34 (7) 106
------- ------------------ ------------------ ------------------
36 (96) (60)
------------------------------------------------------------------------ ------- ------------------ ------------------ ------------------
(Loss)/profit on ordinary activities after taxation (313) 238 168
Minority interests 1 1 4
------------------------------------------------------------------------ ------- ------------------ ------------------ ------------------
(Loss)/profit for the period (312) 239 172
Dividends - (126) (315)
------------------------------------------------------------------------ ------- ------------------ ------------------ ------------------
(Loss)/profit transferred (from)/to profit and loss account reserve (312) 113 (143)
======================================================================== ======= ================== ================== ==================
(Loss)/earnings per ordinary share
Basic 6 (8.9)p 6.9p 4.9p
Adjusted (excluding exceptional items, goodwill amortisation and
additional NTS entry capacity auction turnover) 6 (0.1)p 0.8p 10.4p
------------------------------------------------------------------------ ------- ------------------ ------------------ ------------------
Group Statement of Total Recognised Gains and Losses
Six months ended Year ended
31 March
2002
(as restated)(I)
30 September £m
2002 2001
(as restated)(I)
£m £m
------------------------------------------------------------------------ ------- ------------------ ------------------ ------------------
(Loss)/profit for the period (312) 239 172
Other recognised gains and losses (2) 6 11
Tax on other recognised gains and losses - - (4)
Reduction in revaluation reserve on reclassification of investment
properties - - (50)
------- ------------------ ------------------ ------------------
Total recognised gains and losses for the period (314) 245 129
================== ==================
Prior period adjustment (I) (605)
------- ------------------
Total gains and losses recognised since last annual report (919)
======= ==================
I) For information on restatements, which arise from changes in accounting policies, see note 1,
page 33.
II) Turnover and operating profit for the six months ended 30 September 2001 were increased by the
impact of additional NTS entry capacity auction turnover (£247m).
Summary Group Balance Sheet
As at 30 September As at 31 March
2002
(as restated)(I)
£m
2002 2001
(as restated)(I)
£m £m
------------------------------------------------------------------------ ------- ------------------ ------------------ ------------------
Fixed assets
Intangible assets - goodwill and other (7) 16 (6)
Tangible assets 7,842 7,994 7,998
------- ------------------ ------------------ ------------------
Investments in joint ventures 2 30 4
Other investments 2 10 9
------- ------------------ ------------------ ------------------
Total investments 4 40 13
------------------------------------------------------------------------ ------- ------------------ ------------------ ------------------
7,839 8,050 8,005
Current assets
Stocks 69 67 68
Debtors (amounts falling due within one year) 569 466 378
Debtors (amounts falling due after more than one year) 4 11 4
Cash and investments 256 315 252
------------------------------------------------------------------------ ------- ------------------ ------------------ ------------------
898 859 702
Creditors (amounts falling due within one year) (2,481) (1,853) (1,926)
------------------------------------------------------------------------ ------- ------------------ ------------------ ------------------
Net current liabilities (1,583) (994) (1,224)
------------------------------------------------------------------------ ------- ------------------ ------------------ ------------------
Total assets less current liabilities 6,256 7,056 6,781
Creditors (amounts falling due after more than one year) (6,414) (6,365) (6,663)
Provisions for liabilities and charges (1,667) (1,893) (1,628)
------------------------------------------------------------------------ ------- ------------------ ------------------ ------------------
Net liabilities (1,825) (1,202) (1,510)
======================================================================== ======= ================== ================== ==================
Capital and reserves
Called up share capital 353 353 353
Other reserves (5,719) (5,716) (5,719)
Revaluation reserve - 50 -
Profit and loss account 3,546 4,112 3,860
------------------------------------------------------------------------ ------- ------------------ ------------------ ------------------
Equity shareholders' deficit (1,820) (1,201) (1,506)
Minority interests (5) (1) (4)
------------------------------------------------------------------------ ------- ------------------ ------------------ ------------------
Total shareholders' deficit (1,825) (1,202) (1,510)
======================================================================== ======= ================== ================== ==================
Reconciliation of Movement in Equity Shareholders' Deficit
Six months ended Year ended
31 March
2002
(as restated)(I)
30 September £m
2002 2001
(as restated)(I)
£m £m
------------------------------------------------------------------------ ------- ------------------ ------------------ ------------------
(Loss)/profit for the period (312) 239 172
Dividends - (126) (315)
------------------------------------------------------------------------ ------- ------------------ ------------------ ------------------
(312) 113 (143)
Other recognised gains and losses for the period (2) 6 (43)
------------------------------------------------------------------------ ------- ------------------ ------------------ ------------------
Net (decrease)/increase in equity shareholders' deficit (314) 119 (186)
Equity shareholders' deficit at start of period(i) (1,506) (1,320) (1,320)
------------------------------------------------------------------------ ------- ------------------ ------------------ ------------------
Equity shareholders' deficit at end of period (1,820) (1,201) (1,506)
======================================================================== ======= ================== ================== ==================
I) For information on restatements, which arise from changes in accounting policies, see note 1,
page 33.
Group Cash Flow Statement
Six months ended Year ended
31 March
2002
30 September £m
2002 2001
Notes £m £m
------------------------------------------------------------------------ ------- ------------------ ------------------ ------------------
Net cash inflow from operating activities 7 292 486 1,036
Net cash outflow for returns on investments
and servicing of finance (155) (164) (347)
Taxation
Corporation tax paid (20) (90) (205)
Capital expenditure and financial investment
------- ------------------ ------------------ ------------------
Net payments to acquire intangible and tangible fixed assets (452) (619) (1,242)
Receipts from disposals of tangible fixed assets 54 76 163
Net investment in finance leases 2 (1) 8
Proceeds from sale of shares by employee share plan - 50 50
Proceeds from disposal of fixed asset investments - 2 2
------- ------------------ ------------------ ------------------
Net cash outflow for capital expenditure and financial investment (396) (492) (1,019)
Acquisitions and disposals
------- ------------------ ------------------ ------------------
Payments to acquire joint ventures (2) (6) (6)
Acquisition of Group undertakings - (18) (16)
------- ------------------ ------------------ ------------------
Net cash outflow for acquisitions and disposals (2) (24) (22)
Equity dividends paid (189) (123) (249)
------------------------------------------------------------------------ ------- ------------------ ------------------ ------------------
Net cash outflow before the management of
liquid resources and financing (470) (407) (806)
Management of liquid resources
------- ------------------ ------------------ ------------------
(Increase)/decrease in short-term deposits 8, 9 (8) (58) 11
------- ------------------ ------------------ ------------------
Net cash (outflow)/inflow from the management of
liquid resources (8) (58) 11
Financing
------- ------------------ ------------------ ------------------
Net increase in borrowings 8, 9 506 468 763
------- ------------------ ------------------ ------------------
Net cash inflow from financing 506 468 763
------------------------------------------------------------------------ ------- ------------------ ------------------ ------------------
Movement in cash and overdrafts 8, 9 28 3 (32)
======================================================================== ======= ================== ================== ==================
I) Includes £218m in respect of additional NTS entry capacity auction turnover.
National Grid Transco
2002/03 Half Year Results
Lattice Group Section
Notes Page 38
1. Basis of Preparation
The financial information contained in this announcement has been prepared on the basis of the
accounting policies set out in the Lattice Annual Report for the fifteen months ended 31 March 2002
except as noted below and does not constitute statutory accounts as defined in Section 240 of the
Companies Act 1985. The financial information in respect of the year ended 31 March 2002 has been
derived from the unaudited information for that period included in the Lattice Annual Report for the
fifteen months ended 31 March 2002. The financial information is unaudited but has been reviewed by
the auditors and their report is set out on page 39.
The Lattice Group Section of this interim results announcement was approved by the Board of Directors
on 25 November 2002.
Changes in accounting policies
FRS 19 'Deferred Tax' was implemented on a discounted basis during the period ended 31 March 2002. As
a result of the merger of National Grid and Lattice, accounting policies of the two groups are being
aligned. Consequently deferred tax is now being accounted for on an undiscounted basis.
This change in accounting policy results in a significant reduction in distributable reserves in
Transco plc. It does not impact the distributable reserves of Transco's holding company, Transco
Holdings plc. Therefore, to mitigate the impact on the Group of the reduction in Transco plc's
distributable reserves, in October 2002 Ofgem consented to Transco making loans to Transco Holdings.
Transco Holdings is now subject to a number of licence conditions as if it were Transco. These include
restrictions on loans to affiliates and related parties and a restriction on its activities to those
permitted to be carried out by Transco and to acting as Transco's holding company.
Again, as a result of this alignment of accounting policies, the net interest credit included within
the pensions charge is now reported within net interest. Previously this was reported in operating
costs.
The impact of the changes in accounting policies is set out below:
Year ended
31 March
Six months ended 2002
30 September £m
2002 2001
£m £m
------------------------------------------------------------------------ ------- ------------------ ------------------ ------------------
Profit and loss account
Total operating profit:
Reclassification of pensions interest (8) (25) (22)
Net interest:
Reclassification of pensions interest 8 25 22
Taxation:
Accounting for deferred tax on an undiscounted basis 75 (14) (4)
------------------------------------------------------------------------ ------- ------------------ ------------------ ------------------
Increase/(decrease) in (loss)/profit for the period 75 (14) (4)
======================================================================== ======= ================== ================== ==================
Balance sheet
Provisions for liabilities and charges:
Accounting for deferred tax on an undiscounted basis (530) (615) (605)
======================================================================== ======= ================== ================== ==================
2. Segmental analysis
Following the merger with National Grid, a review of the segmental analysis has been undertaken, with a
view to determining the appropriate segmental analysis for the new merged group, National Grid
Transco. Consequently, the segments reported for Lattice Group below have been aligned with the
segmental analysis to be adopted by National Grid Transco.
a) Group turnover
Six months ended Year ended
31 March
2002
30 September £m
2002 2001
£m £m
------------------------------------------------------------------------ ------- ------------------ ------------------ ------------------
Continuing operations
Transco 1,223 1,423 2,980
Other activities 241 130 268
Sales between businesses (162) (49) (95)
------------------------------------------------------------------------ ------- ------------------ ------------------ ------------------
1,302 1,504 3,153
======================================================================== ======= ================== ================== ==================
I) Turnover for the six months ended 30 September 2001 was increased by the impact of additional
NTS entry capacity auction turnover (£247m).
b) Operating profit - before exceptional items and Six months ended Year ended
31 March
2002
(as restated)(I)
goodwill amortisation 30 September £m
2002 2001
(as restated)(I)
£m £m
------------------------------------------------------------------------ ------- ------------------ ------------------ ------------------
Continuing operations
Transco 178 440 940
Other activities (3) 28 (15)
------------------------------------------------------------------------ ------- ------------------ ------------------ ------------------
Group undertakings 175 468 925
Joint ventures - other activities (1) (16) (17)
------------------------------------------------------------------------ ------- ------------------ ------------------ ------------------
Total operating profit 174 452 908
======================================================================== ======= ================== ================== ==================
c) Operating profit - after exceptional items and Six months ended Year ended
31 March
2002
(as restated)(I)
goodwill amortisation 30 September £m
2002 2001
(as restated)(I)
£m £m
------------------------------------------------------------------------ ------- ------------------ ------------------ ------------------
Continuing operations
Transco 94 440 840
Other activities (194) 28 (287)
------------------------------------------------------------------------ ------- ------------------ ------------------ ------------------
(100) 468 553
Joint ventures - other activities (1) (32) (65)
------------------------------------------------------------------------ ------- ------------------ ------------------ ------------------
Total operating profit (101) 436 488
======================================================================== ======= ================== ================== ==================
I) For information on restatements, which arise from changes in accounting policies, see note 1,
page 33.
II) Operating profit for the six months ended 30 September 2001 was increased by the impact of
additional NTS entry capacity auction turnover (£247m).
3. Exceptional items
Six months ended Year ended
31 March
2002
30 September £m
2002 2001
£m £m
------------------------------------------------------------------------ ------- ------------------ ------------------ ------------------
a) Operating
Restructuring costs (90) - (65)
Impairment of assets (166) - (300)
Merger costs (20) - -
Share of exceptional operating items of joint venture - (16) (48)
------------------------------------------------------------------------ ------- ------------------ ------------------ ------------------
(276) (16) (413)
======================================================================== ======= ================== ================== ==================
b) Non-operating
Merger costs (47) - -
Gain on sale of shares by an employee share plan - 31 31
Loss on sale of group undertaking (32) - -
Profit on disposal of tangible fixed assets 12 31 73
------------------------------------------------------------------------ ------- ------------------ ------------------ ------------------
(67) 62 104
======================================================================== ======= ================== ================== ==================
I) Primarily represents redundancy costs in Transco and 186k.
II) Following a review of the carrying value of 186k's assets, the Group has incurred an
impairment charge of £166m. The net book value of fixed assets has been reduced to £nil.
III) Primarily represents employee and property costs associated with the merger with National Grid
Group plc.
IV) Represents transaction costs of the merger with National Grid Group plc and related employee
share scheme costs.
V) Loss on the sale of TLG Group, being net proceeds of £91m less net book value of £123m.
4. Net interest
Six months ended Year ended
31 March
2002
(as restated)(I)
30 September £m
2002 2001
(as restated)(I)
£m £m
------------------------------------------------------------------------ ------- ------------------ ------------------ ------------------
Net interest payable on net debt and other items 175 162 359
Add: unwinding of discount on environmental cost provision 6 9 17
Less: interest capitalised - (8) (13)
------------------------------------------------------------------------ ------- ------------------ ------------------ ------------------
181 163 363
Joint venture - 1 1
------------------------------------------------------------------------ ------- ------------------ ------------------ ------------------
181 164 364
======================================================================== ======= ================== ================== ==================
I) For information on restatements, which arise from changes in accounting policies, see note 1,
page 33.
5. Taxation
The tax credit of £2m on loss before taxation, excluding exceptional items, for the six months ended 30
September 2002, is based on the estimated effective tax rate for the year ending 31 March 2003 of 30.4%.
6. (Loss)/earnings per ordinary share
Six months ended Six months ended Year ended
30 September 2002 30 September 2001 31 March 2002
(Loss)/ Weighted
earnings Loss for average
per share the period number of
pence £m shares (as restated) (I) (as restated) (I)
Earnings Profit for Earnings Profit for
per share the period per share the period
pence £m pence £m
-------------------------------------------- ------------ ------------- ------------ ------------ ------------ ------------- ------------
Basic (8.9) (312) 3,502 6.9 239 4.9 172
Exceptional operating items
(see note 3(a), page 35) 7.9 276 - 0.5 16 11.9 413
Exceptional non-operating items
(see note 3 (b), page 35) 1.9 67 - (1.8) (62) (3.0) (104)
Tax impact of exceptional items (1.0) (34) - 0.2 7 (3.0) (106)
Goodwill amortisation - (1) - - - 0.2 7
Additional NTS entry capacity auction
turnover - - - (7.1) (247) (0.9) (30)
Tax impact of NTS entry capacity auction
turnover - - - 2.1 74 0.3 9
------------ ------------ ------------- ------------
-------------------------------------------- ------------ ------------- ------------
Adjusted (excluding exceptional items, (0.1) (4) 3,502 0.8 27 10.4 361
goodwill amortisation and additional NTS
entry capacity auction turnover)
============================================ ============ ============= ============
Dilutive impact of employee share options - - (0.1) -
------------ ------------ ------------- ------------
Diluted (excluding exceptional items, 0.8 27 10.3 361
goodwill amortisation and NTS entry
capacity auction turnover)
Additional NTS entry capacity auction
turnover 7.0 247 0.9 30
Tax impact of additional NTS entry
capacity auction turnover (2.1) (74) (0.3) (9)
Exceptional operating items
(see note 3 (a), page 35) (0.5) (16) (11.8) (413)
Exceptional non-operating items
(see note 3 (b), page 35) 1.8 62 3.0 104
Tax impact of exceptional items (0.2) (7) 3.0 106
Goodwill amortisation - - (0.2) (7)
------------ ------------ ------------- ------------
Diluted (including exceptional items,
goodwill amortisation and NTS entry
capacity auction turnover) 6.8 239 4.9 172
============ ============ ============= ============
I) For information on restatements, which arise from changes in accounting policies, see note 1,
page 33.
For the six months ended 30 September 2002 there is no difference between basic and diluted earnings
per share.
In respect of the six months and year ended 30 September 2001 and 31 March 2002 respectively, earnings
per share is based upon 3,479m and 3,480m shares (diluted 3,515m and 3,517m).
7. Reconciliation of operating (loss)/profit to cash inflow from operating activities
Six months ended Year ended
31 March
2002
(as restated)(I)
30 September £m
2002 2001
(as restated)(I)
£m £m
------------------------------------------------------------------------ ------- ------------------ ------------------ ------------------
Operating (loss)/profit of Group undertakings (100) 468 553
Group exceptional operating items 276 - 365
Depreciation and amortisation 227 211 439
Increase in working capital (59) (174) (40)
Increase/(decrease) in provisions 12 3 (216)
------------------------------------------------------------------------ ------- ------------------ ------------------ ------------------
Net cash inflow from operating activities before exceptional items 356 508 1,101
Expenditure relating to exceptional operating items and merger costs (64) (22) (65)
------------------------------------------------------------------------ ------- ------------------ ------------------ ------------------
Net cash inflow from operating activities 292 486 1,036
======================================================================== ======= ================== ================== ==================
I) For information on restatements, which arise from changes in accounting policies, see note 1,
page 33.
8. Reconciliation of net cash flow to movement in net debt
Six months ended Year ended
31 March
2002
30 September £m
2002 2001
£m £m
------------------------------------------------------------------------ ------- ------------------ ------------------ ------------------
Movement in cash and overdrafts 28 3 (32)
Net cash outflow/(inflow) from the management of liquid resources 8 58 (11)
Increase in borrowings (506) (468) (763)
------------------------------------------------------------------------ ------- ------------------ ------------------ ------------------
Change in net debt resulting from cash flows (470) (407) (806)
Acquisition of Group undertakings - - (56)
Other non-cash movements (10) (4) (9)
------------------------------------------------------------------------ ------- ------------------ ------------------ ------------------
Movement in net debt in the period (480) (411) (871)
Net debt at start of period (6,058) (5,187) (5,187)
------------------------------------------------------------------------ ------- ------------------ ------------------ ------------------
Net debt at end of period (6,538) (5,598) (6,058)
======================================================================== ======= ================== ================== ==================
9. Analysis of changes in net debt
At Cash flow Non-cash At
1 April 30 September
2002 movements 2002
£m £m £m £m
-----------------------------------------------------
------- ------------------ ------------------ ------------------ ------------------
Cash at bank and in hand (I) 18 (4) - 14
Bank overdrafts (47) 32 - (15)
------- ------------------ ------------------ ------------------ ------------------
(29) 28 - (1)
Deposits (I) 234 8 - 242
------- ------------------ ------------------ ------------------ ------------------
Long-term debt (5,712) (213) 490 (5,435)
Short-term debt (551) (293) (500) (1,344)
------- ------------------ ------------------ ------------------ ------------------
(6,263) (506) (10) (6,779)
----------------------------------------------------- ------- ------------------ ------------------ ------------------ ------------------
(6,058) (470) (10) (6,538)
===================================================== ======= ================== ================== ================== ==================
I) Cash and investments per the balance sheet £256m (31 March 2002 £252m).
10. Net debt comprises
At 31 March
2002
At 30 September £m
2002 2001
£m £m
------------------------------------------------------------------------ ------- ------------------ ------------------ ------------------
Cash and investments 256 315 252
Short-term debt including bank overdrafts (1,359) (447) (598)
Long-term debt (5,435) (5,466) (5,712)
------------------------------------------------------------------------ ------- ------------------ ------------------ ------------------
(6,538) (5,598) (6,058)
======================================================================== ======= ================== ================== ==================
National Grid Transco
2002/03 Half Year Results
PricewaterhouseCoopers
Independent Review Report Page 39
Independent review report to National Grid Transco plc
Introduction
We have been instructed by the company to review the financial information which comprises the group
profit and loss accounts, group statements of total recognised gains and losses, group cash flow
statements for the six months ended 30 September 2002, balance sheet information as at 30 September
2002, comparative figures and associated notes of Lattice Group plc and National Grid Group plc. We
have read the other information contained in the interim report and considered whether it contains any
apparent misstatements or material inconsistencies with the financial information.
Directors' responsibilities
The interim report, including the financial information contained therein, is the responsibility of,
and has been approved by the directors of National Grid Transco plc. The directors are responsible for
preparing the interim report in accordance with the Listing Rules of the Financial Services Authority
which require that the accounting policies and presentation applied to the interim figures should be
consistent with those applied in preparing the preceding annual accounts except where any changes, and
the reasons for them, are disclosed.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin 1999/4 issued by the Auditing
Practices Board for use in the United Kingdom. A review consists principally of making enquiries of
management and applying analytical procedures to the financial information and underlying financial
data and, based thereon, assessing whether the accounting policies and presentation have been
consistently applied unless otherwise disclosed. A review excludes audit procedures such as tests of
controls and verification of assets, liabilities and transactions. It is substantially less in scope
than an audit performed in accordance with United Kingdom Auditing Standards and therefore provides a
lower level of assurance than an audit. Accordingly we do not express an audit opinion on the financial
information.
Review conclusion
On the basis of our review we are not aware of any material modifications that should be made to the
financial information as presented for the six months ended 30 September 2002.
In addition, we have reviewed, without performing an audit, the pro forma financial information which
comprises the pro forma group profit and loss account, pro forma group statement of total recognised
gains and losses, pro forma group cash flow statement for the six months ended 30 September 2002, pro
forma summary group balance sheet information as at 30 September 2002, comparative figures and
associated notes. This pro forma financial information has been prepared, for illustrative purposes
only, as if the merger of Lattice Group plc and National Grid Group plc had taken place on 1 April
2001. The pro forma financial information is solely the responsibility of, and has been approved by,
the Directors. On the basis of our review, we are not aware of any material modifications that should
be made to the pro forma financial information compiled on the basis set out in the notes to the
interim report.
PricewaterhouseCoopers
Chartered Accountants
London
25 November 2002