REG - National Grid PLC - Half year results for period ended 31 Sept 2014 <Origin Href="QuoteRef">NG.L</Origin> - Part 2
10/11/2014 09:35
- Part 2: For the preceding part double click ID:nRSG4128Wa
In total, these targets are set in terms of a regulatory definition of combined total operating and capital
expenditure, also termed "totex". The definition of totex differs from the total combined regulated controllable operating
costs and regulated capital expenditure as reported in this statement according to IFRS accounting principles. Key
differences are capitalised interest, capital contributions, exceptional costs, costs covered by other regulatory
arrangements and unregulated costs.
CAUTIONARY STATEMENT
This announcement contains certain statements that are neither reported financial results nor other historical information.
These statements are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements include information with
respect to National Grid's financial condition, its results of operations and businesses, strategy, plans and objectives.
Words such as 'aims', 'anticipates', 'expects', 'should', 'intends', 'plans', 'believes', 'outlook', 'seeks', 'estimates',
'targets', 'may', 'will', 'continue', 'project' and similar expressions, as well as statements in the future tense,
identify forward-looking statements. These forward-looking statements are not guarantees of National Grid's future
performance and are subject to assumptions, risks and uncertainties that could cause actual future results to differ
materially from those expressed in or implied by such forward-looking statements. Many of these assumptions, risks and
uncertainties relate to factors that are beyond National Grid's ability to control or estimate precisely, such as changes
in laws or regulations, announcements from and decisions by governmental bodies or regulators (including the timeliness of
consents for construction projects); the timing of construction and delivery by third parties of new generation projects
requiring connection; breaches of, or changes in, environmental, climate change and health and safety laws or regulations,
including breaches or other incidents arising from the potentially harmful nature of its activities; network failure or
interruption, the inability to carry out critical non network operations and damage to infrastructure, due to adverse
seasonal and weather conditions including the impact of major storms as well as the results of climate change or due to
unauthorised access to or deliberate breaches of National Grid's IT systems and supporting technology; changes in public
safety concerns, including due to network failure or interruption involving National Grid or other utility providers, and
related increases in repair and emergency response activities; performance against regulatory targets and standards and
against National Grid's peers with the aim of delivering stakeholder expectations regarding costs and efficiency savings,
including those related to investment programmes and internal transformation projects; and customers and counterparties
(including financial institutions) failing to perform their obligations to the Company. Other factors that could cause
actual results to differ materially from those described in this announcement include fluctuations in exchange rates,
interest rates and commodity price indices; restrictions and conditions (including filing requirements) in National Grid's
borrowing and debt arrangements, funding costs and access to financing; regulatory requirements for the Company to maintain
financial resources in certain parts of its business and restrictions on some subsidiaries' transactions such as paying
dividends, lending or levying charges; inflation; the delayed timing of recoveries and payments in National Grid's
regulated businesses and whether aspects of its activities are contestable; the funding requirements and performance of
National Grid's pension schemes and other post-retirement benefit schemes; the failure to attract, train or retain
employees with the necessary competencies, including leadership skills, and any significant disputes arising with National
Grid's employees or the breach of laws or regulations by its employees; and the failure to respond to market developments
and grow the Company's business to deliver its strategy, as well as incorrect or unforeseen assumptions or conclusions
(including unanticipated costs and liabilities) relating to business development activity, including assumptions in
connection with joint ventures. For further details regarding these and other assumptions, risks and uncertainties that may
impact National Grid, please read the Strategic Report section and the 'Risk factors' on pages 167 to 169 of National
Grid's most recent Annual Report and Accounts. In addition, new factors emerge from time to time and National Grid cannot
assess the potential impact of any such factor on its activities or the extent to which any factor, or combination of
factors, may cause actual future results to differ materially from those contained in any forward-looking statement. Except
as may be required by law or regulation, the Company undertakes no obligation to update any of its forward-looking
statements, which speak only as of the date of this announcement.
UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
Consolidated income statement 2014 2013
for the six months ended 30 September
Notes £m £m
Revenue 2(a) 6,364 6,721
Operating costs (4,728) (5,186)
Operating profit
Before exceptional items and remeasurements 2(b) 1,611 1,572
Exceptional items and remeasurements 3 25 (37)
Total operating profit 2(b) 1,636 1,535
Finance income 4 9 10
Finance costs
Before exceptional items and remeasurements 4 (501) (615)
Exceptional items and remeasurements 3 13 110
Total finance costs 4 (488) (505)
Share of post-tax results of joint ventures and associates 18 12
Profit before tax
Before exceptional items and remeasurements 2(b) 1,137 979
Exceptional items and remeasurements 3 38 73
Total profit before tax 2(b) 1,175 1,052
Taxation
Before exceptional items and remeasurements 5 (258) (225)
Exceptional items and remeasurements 3 (13) 408
Total taxation (271) 183
Profit after tax
Before exceptional items and remeasurements 879 754
Exceptional items and remeasurements 3 25 481
Profit for the period 904 1,235
Attributable to:
Equity shareholders of the parent 908 1,242
Non-controlling interests (4) (7)
904 1,235
Earnings per share1
Adjusted basic2 6(a) 23.4p 20.2p
Adjusted diluted2 6(b) 23.3p 20.1p
Basic 6(a) 24.1p 33.0p
Diluted 6(b) 24.0p 32.8p
1. Comparative amounts have been restated to reflect the impact of additional shares issued as scrip dividends.
2. Before exceptional items and remeasurements.
Consolidated statement of comprehensive incomefor the six months ended 30 September 2014 2013
£m £m
Profit for the period 904 1,235
Other comprehensive (loss)/income:
Items that will not be reclassified to profit or loss
Remeasurements of net retirement benefit obligations (27) 775
Tax on items that will not be reclassified to profit or loss 15 (375)
Total items that will not be reclassified to profit or loss (12) 400
Items that are or may be reclassified subsequently to profit or loss
Exchange adjustments 39 (168)
Net gains on cash flow hedges 8 31
Transferred to profit or loss on cash flow hedges 1 9
Net gains/(losses) on available-for-sale investments 12 (8)
Tax on items that may be reclassified to profit or loss (4) (17)
Total items that may be reclassified subsequently to profit or loss 56 (153)
Other comprehensive gain for the period, net of tax 44 247
Total comprehensive income for the period 948 1,482
Total comprehensive income attributable to:
Equity shareholders of the parent 952 1,490
Non-controlling interests (4) (8)
948 1,482
Consolidated statement of financial position 30 September2014 31 March 2014
Notes £m £m
Non-current assets
Goodwill 4,727 4,594
Other intangible assets 684 669
Property, plant and equipment 38,351 37,179
Other non-current assets 99 87
Pension assets 154 174
Financial and other investments 296 284
Investments in joint ventures and associates 339 351
Derivative financial assets 8 1,385 1,557
Total non-current assets 46,035 44,895
Current assets
Inventories and current intangible assets 428 268
Trade and other receivables 1,888 2,855
Financial and other investments 10 3,292 3,599
Derivative financial assets 8 203 413
Cash and cash equivalents 10 344 354
Total current assets 6,155 7,489
Total assets 52,190 52,384
Current liabilities
Borrowings 10 (2,808) (3,511)
Derivative financial liabilities 8 (477) (339)
Trade and other payables (2,659) (3,031)
Current tax liabilities (195) (168)
Provisions (257) (282)
Total current liabilities (6,396) (7,331)
Non-current liabilities
Borrowings 10 (22,790) (22,439)
Derivative financial liabilities 8 (893) (824)
Other non-current liabilities (1,873) (1,841)
Deferred tax liabilities (4,210) (4,082)
Pensions and other post-retirement benefit obligations (2,530) (2,585)
Provisions (1,377) (1,363)
Total non-current liabilities (33,673) (33,134)
Total liabilities (40,069) (40,465)
Net assets 12,121 11,919
Equity
Share capital 443 439
Share premium account 1,332 1,336
Retained earnings 15,042 14,895
Other equity reserves (4,703) (4,759)
Shareholders' equity 12,114 11,911
Non-controlling interests 7 8
Total equity 12,121 11,919
Consolidated statement of changes in equity
Share capital Share premium account Retained earnings Other equity reserves Total share-holders' equity Non-controlling interests Total equity
Notes £m £m £m £m £m £m £m
Changes in equity for the period:
Equity as at 1 April 2014 439 1,336 14,895 (4,759) 11,911 8 11,919
Profit for the period - - 908 - 908 (4) 904
Total other comprehensive (loss)/income for the period - - (12) 56 44 - 44
Total comprehensive income/(loss) for the period - - 896 56 952 (4) 948
Equity dividends 7 - - (1,029) - (1,029) - (1,029)
Scrip dividend related share issue 7 4 (4) 289 - 289 - 289
Issue of treasury shares - - 21 - 21 - 21
Purchase of treasury shares - - (39) - (39) - (39)
Other movements in non-controlling interests - - - - - 3 3
Share-based payment - - 9 - 9 - 9
At 30 September 2014 443 1,332 15,042 (4,703) 12,114 7 12,121
Share capital Share premium account Retained earnings Other equity reserves Total share-holders' equity Non-controlling interests Total equity
Notes £m £m £m £m £m £m £m
Changes in equity for the period:
Equity as at 1 April 2013 433 1,344 13,133 (4,681) 10,229 5 10,234
Profit for the period - - 1,242 - 1,242 (7) 1,235
Total other comprehensive income/(loss) for the period - - 400 (152) 248 (1) 247
Total comprehensive income/(loss) for the period - - 1,642 (152) 1,490 (8) 1,482
Equity dividends 7 - - (964) - (964) - (964)
Scrip dividend related share issue 7 6 (6) 444 - 444 - 444
Issue of treasury shares - - 12 - 12 - 12
Purchase of treasury shares - - (4) - (4) - (4)
Other movements in non-controlling interests - - - - - 12 12
Share-based payment - - 8 - 8 - 8
At 30 September 2013 439 1,338 14,271 (4,833) 11,215 9 11,224
Consolidated cash flow statementfor the six months ended 30 September 2014 2013
Notes £m £m
Cash flows from operating activities
Total operating profit 2(b) 1,636 1,535
Adjustments for:
Exceptional items and remeasurements 3 (25) 37
Depreciation, amortisation and impairment 721 690
Share-based payment 9 8
Changes in working capital 423 (51)
Changes in provisions (38) (87)
Changes in pensions and other post-retirement benefit obligations (159) (174)
Cash flows relating to exceptional items 16 (70)
Cash generated from operations 2,583 1,888
Tax paid (156) (186)
Net cash inflow from operating activities 2,427 1,702
Cash flows from investing activities
Purchases of intangible assets (88) (31)
Purchases of property, plant and equipment (1,286) (1,472)
Disposals of property, plant and equipment 1 4
Dividends received from joint ventures 25 25
Interest received 10 10
Net movements in short-term financial investments 343 1,545
Net cash flow (used in) / from investing activities (995) 81
Cash flows from financing activities
Proceeds from issue of treasury shares 21 12
Purchase of treasury shares (39) (4)
Proceeds from contributions by non-controlling equity interest holders 5 -
Proceeds from loans received 847 540
Repayments of loans (1,452) (1,281)
Net movements in short-term borrowings and derivatives 327 (225)
Interest paid (418) (443)
Dividends paid to shareholders (740) (520)
Net cash flow used in financing activities (1,449) (1,921)
Net decrease in cash and cash equivalents (17) (138)
Exchange movements 7 (16)
Net cash and cash equivalents at start of period 339 648
Net cash and cash equivalents at end of period1 10 329 494
1. Net of bank overdrafts of £15m (2013: £15m).
Notes
1. Basis of preparation and new accounting standards, interpretations and amendments
The half year financial information covers the six month period ended 30 September 2014 and has been prepared under
International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB), and
IFRS as adopted by the European Union, in accordance with International Accounting Standard 34 'Interim Financial
Reporting' and the Disclosure and Transparency Rules of the Financial Conduct Authority. The half year financial
information is unaudited but has been reviewed by the auditors and their report is attached to this document.
The following standards, interpretations and amendments, issued by the IASB and by the IFRS Interpretations Committee
(IFRIC), are effective for the year ending 31 March 2015. None of the pronouncements had a material impact on the Company's
consolidated results or assets and liabilities for the six month period ended 30 September 2014.
· IFRIC 21 'Levies';
· Amendments to IAS 32 'Financial Instruments: Presentation' in respect of offsetting financial assets and
liabilities;
· Amendments to IFRS 10 'Consolidated Financial Statements', IFRS 12 'Disclosure of Interests in Other Entities' and
IAS 27 'Separate Financial Statements' in respect of Investment Entities;
· Amendments to IAS 36 'Impairment of Assets' in respect of recoverable amount disclosures for non-financial assets;
and
· Amendments to IAS 39 'Financial Instruments: Recognition and Measurement' in respect of novation of derivatives and
continuation of hedge accounting.
The half year financial information has been prepared in accordance with the accounting policies expected to be applicable
for the year ending 31 March 2015 and consistent with those applied in the preparation of the accounts for the year ended
31 March 2014.
In preparing this half year financial information, the areas of judgement made by management in applying the Group's
accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated
financial statements for the year ended 31 March 2014.
The half year financial information does not constitute statutory accounts as defined in Section 434 of the Companies Act
2006. It should be read in conjunction with the statutory accounts for the year ended 31 March 2014, which were prepared in
accordance with IFRS as issued by the IASB and as adopted by the European Union, and have been filed with the Registrar of
Companies. The auditors' report on these statutory accounts was unqualified and did not contain a statement under Section
498 of the Companies Act 2006.
Having made enquiries, the Directors consider that the Company and its subsidiary undertakings have adequate resources to
continue in business for the foreseeable future, and that it is therefore appropriate to adopt the going concern basis in
preparing the half year financial information.
2. Segmental analysis
The Board of Directors is National Grid's chief operating decision making body (as defined by IFRS 8 'Operating segments').
The segmental analysis is based on the information the Board of Directors uses internally for the purposes of evaluating
the performance of operating segments and determining resource allocation between segments. The performance of operating
segments is assessed principally on the basis of operating profit before exceptional items and remeasurements.
The following table describes the main activities for each operating segment:
UK Electricity Transmission High voltage electricity transmission networks.
UK Gas Transmission The gas transmission network in Great Britain and UK liquefied natural gas (LNG) storage activities.
UK Gas Distribution Four of the eight regional networks of Great Britain's gas distribution system.
US Regulated Gas distribution networks, electricity distribution networks and high voltage electricity transmission networks in New York and New England and electricity generation facilities in New York and Massachusetts.
Other activities primarily relate to non-regulated businesses and other commercial operations not included within the above
segments, including: UK gas metering activities; the Great Britain - France Interconnector; UK property management; a UK
LNG import terminal; US LNG operations; US unregulated transmission pipelines; together with corporate activities. The
Great Britain - France Interconnector was moved from UK Electricity Transmission to Other activities in the second half of
the 2013/14 financial year. The prior period comparatives have been restated overleaf to provide a like-for-like
comparison.
Sales between operating segments are priced having regard to the regulatory and legal requirements to which the businesses
are subject. The analysis of revenue by geographical area is on the basis of destination. There are no material sales
between the UK and US geographical areas.
The US Regulated segment typically experiences seasonal fluctuations in revenue and operating profit due to higher delivery
volumes during the second half of the financial year. These seasonal fluctuations have a consequential impact on the
working capital balances in the consolidated statement of financial position at 30 September 2014 when compared to 31 March
2014.
2. Segmental analysis continued
(a) Revenue
Six months ended 30 September 2014 20131
£m £m
Operating segments
UK Electricity Transmission 1,784 1,676
UK Gas Transmission 375 388
UK Gas Distribution 929 945
US Regulated 2,948 3,404
Other activities 421 405
Sales between segments (93) (97)
6,364 6,721
Geographical areas
UK 3,377 3,312
US 2,987 3,409
6,364 6,721
1. Restated to reflect the changes in operating segment presentation as described on page 27.
(b) Operating profit
Before exceptional items and remeasurements After exceptional items and remeasurements
Six months ended 30 September 2014 20131 2014 20131
£m £m £m £m
Operating segments
UK Electricity Transmission 687 565 687 535
UK Gas Transmission 110 133 110 132
UK Gas Distribution 434 456 434 357
US Regulated 307 330 332 434
Other activities 73 88 73 77
1,611 1,572 1,636 1,535
Geographical areas
UK 1,404 1,356 1,404 1,214
US 207 216 232 321
1,611 1,572 1,636 1,535
Reconciliation to profit before tax:
Operating profit 1,611 1,572 1,636 1,535
Finance income 9 10 9 10
Finance costs (501) (615) (488) (505)
Share of post-tax results of joint ventures and associates 18 12 18 12
Profit before tax 1,137 979 1,175 1,052
1. Restated to reflect the changes in operating segment presentation as described on page 27.
3. Exceptional items and remeasurements
Exceptional items and remeasurements are items of income and expenditure that, in the judgment of management, should be
disclosed separately on the basis that they are important to an understanding of our financial performance and may
significantly distort the comparability of financial performance between periods. Remeasurements comprise gains or losses
recorded in the income statement arising from changes in the fair value of commodity contracts and of derivative financial
instruments to the extent that hedge accounting is not achieved or is not effective.
Six months ended 30 September 2014 2013
£m £m
Included within operating profit:
Exceptional items:
Restructuring costs1 - (66)
Gas holder demolition provision2 - (79)
LIPA MSA transition3 - 123
- (22)
Remeasurements - commodity contracts4 25 (15)
25 (37)
Included within finance costs:
Remeasurements - derivative financial instruments4 13 110
Total included within profit before tax 38 73
Included within taxation:
Exceptional credit arising on items not included in profit before tax:
Deferred tax credit arising on the reduction in the UK tax rate 5 - 424
Tax on exceptional items - (18)
Tax on remeasurements4 (13) 2
(13) 408
Total exceptional items and remeasurements after tax 25 481
Analysis of exceptional items and remeasurements after tax:
Total exceptional items after tax - 384
Total remeasurements after tax 25 97
Total 25 481
3. Exceptional items and remeasurements continued
1. For the period ended 30 September 2013, we recognised restructuring costs of £66m related to restructuring of our UK
operations in preparedness to deliver RIIO and other transformation related initiatives in the UK and US. No exceptional
restructuring costs have been incurred in the period ended 30 September 2014.
2. No further provision has been made for the demolition of certain non-operational gas holders in the UK (2013: £79m).
3. For the period ended 30 September 2013, we recognised a net gain of £123m relating to a pension curtailment for
employees who transferred to a new employer following the cessation of the Management Services Agreement (MSA) with the
Long Island Power Authority (LIPA) on 31 December 2013 and associated transition costs.
4. Remeasurements
i. Included within operating profit - commodity contracts represent mark-to-market movements on certain physical and
financial commodity contract obligations in the US. These contracts primarily relate to the forward purchase of energy for
supply to customers, or to the economic hedging thereof, that are required to be measured at fair value and that do not
qualify for hedge accounting. Under the existing rate plans in the US, commodity costs are recoverable from customers
although the timing of recovery may differ from the pattern of costs incurred.
ii. Included within finance costs - net gains and losses on derivative financial instruments comprise gains
and losses arising on derivative financial instruments reported in the income statement. These exclude gains and losses for
which hedge accounting has been effective, which have been recognised directly in other comprehensive income or which are
offset by adjustments to the carrying value of debt.
5. For the period ended 30 September 2013 and following enactment of the Finance Act 2013 in July 2013, we recognised an
exceptional tax credit of £424m that arose from a reduction in the UK corporation tax rate from 23% to 21% applicable from
1 April 2014 as well as from a further reduction to 20% from 1 April 2015. The reductions resulted in a decrease in
deferred tax liabilities.
4. Finance income and costs
Six months ended 30 September 2014 2013
£m £m
Interest income on financial instruments 9 10
Finance income 9 10
Net interest on pension and other post-retirement benefit plan obligations (49) (72)
Interest expense on financial instruments (482) (575)
Unwinding of discounts on provisions (33) (40)
Less: interest capitalised 63 72
Finance costs before exceptional items and remeasurements (501) (615)
Net gains on derivative financial instruments included in remeasurements 13 110
Exceptional items and remeasurements included within finance costs 13 110
Finance costs (488) (505)
Net finance costs (479) (495)
5. Taxation
The tax charge for the period, excluding tax on exceptional items and remeasurements is £258m (2013: £225m). The effective
tax rate of 22.7% (2013: 23.0%) for the period is based on the best estimate of the weighted average annual income tax rate
by jurisdiction expected for the full year. The current period rate reflects the seasonality of earnings in the US. For the
full year we expect the Group effective tax rate to be around 25%. The effective tax rate for the year ended 31 March 2014
was 22.5%.
6. Earnings per share
Adjusted earnings per share, excluding exceptional items and remeasurements, are provided to reflect the business
performance subtotals used by the Company. For further details of exceptional items and remeasurements, see note 3.
(a) Basic earnings per share
Six months ended 30 September 2014 2014 2013 20131
Earnings Earnings Earnings Earnings
per share per share
£m pence £m pence
Adjusted earnings 883 23.4 761 20.2
Exceptional items after tax - - 384 10.2
Remeasurements after tax 25 0.7 97 2.6
Earnings 908 24.1 1,242 33.0
millions millions
Weighted average number of shares - basic1 3,771 3,764
1. Comparative amounts have been restated to reflect the impact of additional shares issued as scrip dividends.
(b) Diluted earnings per share
Six months ended 30 September 2014 2014 2013 20131 Earnings
Earnings Earnings Earnings per share
per share
£m pence £m pence
Adjusted diluted earnings 883 23.3 761 20.1
Exceptional items after tax - - 384 10.1
Remeasurements after tax 25 0.7 97 2.6
Diluted earnings 908 24.0 1,242 32.8
millions millions
Weighted average number of shares - diluted1 3,790 3,783
1. Comparative amounts have been restated to reflect the impact of additional shares issued as scrip dividends.
7. Dividends
The following table shows the actual dividends paid to equity shareholders:
Six months ended 30 September 2014 2014 2014 2013 2013 2013
pence per share Total £m Settled via scrip £m pence per share Total £m Settled via scrip £m
Ordinary dividends
Final - year ended 31 March 2014 27.54 1,029 289 - - -
Final - year ended 31 March 2013 - - - 26.36 964 444
The Directors are proposing an interim dividend of 14.71p per share to be paid in respect of the year ending 31 March 2015.
This would absorb approximately £555 million of shareholders' equity. An interim dividend for the year ended 31 March 2014
of 14.49p per share was paid in January 2014. The total paid was £539 million of which £nil was settled via scrip issues.
8. Fair value measurement
Carrying values and fair values of certain financial assets and liabilities
Certain of the Group's financial instruments are measured at fair value. The following table categorises these financial
assets and liabilities by the valuation methodology applied in determining their fair value using the fair value hierarchy
described on page 143 of the Annual Report and Accounts 2013/14.
- More to follow, for following part double click ID:nRSG4128WcRecent news on National Grid
See all newsREG - National Grid PLC - Director Declaration
AnnouncementREG - National Grid PLC - FY2025 Full Year Results Statement
AnnouncementREG - National Grid PLC - Director/PDMR Shareholding
AnnouncementREG - Allianz Global Invs - Top 10 Holdings
AnnouncementREG - NGG Finance PLC - Announcement of Early Redemption of the Securities
Announcement