REG - National Grid PLC - National Grid Half Year Results - 30 Sept 2016 <Origin Href="QuoteRef">NG.L</Origin> - Part 3
10/11/2016 07:07
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The areas covered by the MPR
related to specific outputs with eight year allowances in UK Electricity Transmission. Ofgem proposed that allowances
should be adjusted to reflect that some specific outputs that are no longer required. This results in a reduction of £38m
in UK Electricity Transmission totex allowances. Ofgem also proposed to approve £21m of National Grid's request related to
enhanced electricity system operator outputs. These changes are expected to take effect from April 2018.
National Grid welcomes Ofgem's continued commitment to the clarity and certainty offered by the eight-year RIIO framework,
which has started to deliver important benefits for customers.
In its role as electricity system operator, the business published the Winter Outlook on 14 October 2016. This document
indicates a generation margin of 6.6% for the winter 2016/17 to meet the security of supply standard. This includes 3.5 GW
of contingency balancing reserve services, in the form of supplemental balancing reserve (SBR), approximately 1 GW more
than for winter 2015/16. Demand side balancing reserve (DSBR) was not procured for winter 2016/17.
This winter, Electricity Margin Notices (EMN) will replace Notifications of Inadequate System Margin (NISM). An EMN is
designed to inform the market that the electricity system operator would like the expected margin between forecast demand
and available supply to be greater. It is a signal for the market to take action, either by increasing generation or by
reducing demand.
UK GAS TRANSMISSION
Operating profit in UK Gas Transmission for the first six months of the year was in line with the same period last year.
Excluding the impact of timing, operating profit was up £7m, with higher net revenues reflecting RPI, MOD adjustments and
higher base allowances. Overall, costs were slightly lower.
Capital investment of £116m was £25m higher than the prior period, driven by an increase in asset health spend to deliver
RIIO Network Output Measures and with the Feeder 9 project, a pipeline replacement under the Humber estuary, moving into
construction phase.
The UK Gas Transmission business expects to deliver its regulatory outputs at a level of totex above the associated
regulatory allowance for this year. As a result, the business expects totex incentive performance to adversely affect
achieved returns for the year as a whole. Totex for the first half of the year was approximately £180m compared to around
£150m in the first half of 2015/16.
For the full year the business expects to deliver a good incentive performance, close to the level achieved in the prior
year, while legacy incentives continue to reduce in line with the agreed profile.
On 18 August 2016, Ofgem announced its "minded to" position for the Mid-Period Review (MPR) for the RIIO-T1 price control.
As expected, the scope of this MPR was narrow with no change to key financial parameters of the framework. The areas
covered by the MPR related to specific outputs with eight year allowances in UK Gas Transmission. Ofgem proposed that
allowances are adjusted for specific outputs that are no longer required (specifically, two pipeline projects in the South
West that were anticipated at the start of RIIO) resulting in a reduction of £169m of totex allowances. These changes are
expected to take effect from April 2018.
In the Winter Outlook published on 14 October 2016, National Grid confirmed that it expects there to be sufficient gas
supplies available to meet demand for winter 2016/17 from a wide range of supply sources.
UK GAS DISTRIBUTION
Operating profit in UK Gas Distribution at £403m was down £25m for the first six months of the year, compared to the first
six months of the prior year, including adverse timing of £19m. Excluding timing, operating profit was £6m lower reflecting
increased depreciation, flat controllable and other costs, partially offset by higher net revenues.
Capital investment was £268m, £18m lower than the comparable prior period, reflecting lower workload.
The UK Gas Distribution business expects to deliver its regulatory outputs for the year for a level of totex below the
associated regulatory allowance. This reflects continued delivery of efficiencies in the repex programme. Following a very
strong performance in 2015/16, the business expects to deliver a similarly strong level of totex incentive performance for
this year as a whole. Totex for the first half of the year was approximately £450m compared to £480m in the first half of
2015/16.
For the full year the business expects to deliver a good outturn under annual revenue incentive schemes, with a slight
increase over the previous year.
On 12 May 2016, Ofgem confirmed that they would not undertake a mid-period review for UK Gas Distribution.
US REGULATED OPERATIONS
Operating profit in the US Regulated business was £435m, up £46m for the first six months of the year, on a constant
currency basis, including favourable timing of £107m. Excluding timing, operating profit was £61m lower mainly reflecting
the write off of prior years' capital costs and higher health care costs, operating taxes and increased vegetation
management expenditure. This was partially offset by higher net revenues due to the benefit of capital trackers and
increased customer contributions.
Capital investment was £1,039m, £39m higher than the comparable prior period on a constant currency basis. This increased
expenditure was driven by higher leak prone pipe replacement and gas growth spend in the Massachusetts business and higher
spend on the Block Island Transmission System and South Street Station upgrade projects in the FERC jurisdiction. This
sustained level of increased investment was a key feature of the updated regulatory filings in Massachusetts Electric and
the downstate New York gas businesses KEDNY and KEDLI. Moving forward, capital investment is expected to continue to
feature prominently in the new rate filings the Group plans to make in 2017 and will support strong levels of growth in the
rate base.
Return on equity in the US Regulated business for this fiscal year is expected to be around 8%, ahead of the full benefit
of new rate revisions, which came into effect in October 2016 in Massachusetts and are expected in January 2017 in New
York. National Grid expects that these new rates will enable the US business to improve its returns in the future.
US JURISDICTION UPDATE
New York
The New York Jurisdiction consists of Niagara Mohawk, an electricity and gas distribution company in upstate New York and
KEDNY and KEDLI, gas distribution companies in downstate New York.
KEDNY and KEDLI are currently operating under a rate case that was agreed in 2008. Since that time, the companies have made
two successful interim filings that increased the level of allowed capital investment, providing strong growth and allowing
National Grid to make critical investments on behalf of customers. The current capital plan expires in January 2017. Last
year, KEDNY and KEDLI earned 7.1% and 7.3% return on equity, respectively.
In September 2016, National Grid filed a Joint Proposal for the KEDNY and KEDLI utilities requesting updated rates
beginning in January 2017. The proposal, developed jointly with the New York Public Service Commission Staff, is subject to
a final Commission decision which is expected in December 2016 or January 2017.
The proposal is a three year plan that includes a 9% allowed return on equity on a 48%/52% equity and debt structure as
well as opportunities to earn incremental revenue through additional performance incentives. It also includes US GAAP
revenue increases for KEDNY and KEDLI of $272m/$112m in year one, $41m/$20m in year two and $49m/$27m in year three,
respectively collectively increasing annual revenues by over $500m by year three. This includes over 85% of the requested
increase in operating cost. Customer bill increases, which are more closely aligned with IFRS revenue reporting, would be
more gradual. Importantly, the proposal also includes capital investment allowances totalling $3bn for the two utilities
over three years, allowing for 585 miles of leak prone pipe replacement, a step up on recent levels.
As a result of the Joint Proposal, National Grid is expecting to proceed with four gas projects under the state's Reforming
the Energy Vision (REV) programme, each project will test a new solution to improve the operation of the network for the
benefit of customers
Niagara Mohawk is currently operating on a rate plan that began in April 2013 and allowed for revenue increases through
March 2016. For calendar year 2015, Niagara Mohawk Gas earned an 8.4% return on equity and Niagara Mohawk Electric earned
an 8.1% return on equity.
In May, National Grid received an order approving its capital investment petition for $1.3bn across the electricity and gas
business over two years. The petition was funded through the use of deferred credits to provide incremental US GAAP
revenues to National Grid with no bill impact to customers. National Grid plans to file full rate cases for Niagara Mohawk
in 2017.
National Grid continues to implement its four electricity projects under the state's REV programme within the Niagara
Mohawk service territory and all projects are on track.
Investment in the New York companies decreased compared to the first half of 2015/16, with investments being made within
the regulated allowances. Within this, KEDNY is nearing completion of the Northern Queens Reinforcement Gas Pipeline, an
investment of approximately $150m that will install over six miles of transmission main and 2,000 feet of distribution
main. The project is expected to help meet existing load and accommodate growth in the area. It will also complete New York
City's Clean Heat oil to gas conversions programme.
The New York Jurisdiction is on track to invest at a similar to level to 2015/16.
Massachusetts
The Massachusetts Jurisdiction consists of the Massachusetts Electric business (including Nantucket electric) and the
Massachusetts Gas business (including Boston Gas and Colonial Gas).
Massachusetts Gas is currently operating under rates that became effective November 2010. In 2015, National Grid agreed a
gas capital plan of up to $219m, allowing the business to earn a return on an increased level of investment in leak prone
pipe. In calendar year 2015 the company earned a return on equity of 8.4%. National Grid plans to file a full rate case for
Massachusetts Gas in 2017.
For the first half of FY2016, Massachusetts Electric was operating under rates that became effective in 2010, based on a
2008 historic test year. Inflation and investment above allowed levels put significant pressure on returns with the company
earning 3.4% last year.
In September 2016, National Grid received a final rate order for Massachusetts Electric that established new rates
effective 1 October 2016. As Massachusetts uses historic test years the rate plan is not for a fixed term but rather resets
rates moving forward. The order includes a 9.9% allowed return on equity on a 51%/49% equity and debt structure. It also
includes a rate year revenue increase of $101m including 92% of the initial operating expenditure increase requested.
Importantly, the proposal also includes a step up of capital investment of up to $249m.
Investment in the Massachusetts companies has increased compared to the first half of 2015/16. The majority of the capital
investment being made in Massachusetts is within the gas businesses, primarily driven by the Gas System Enhancement
Programme which allows for the replacement of ageing infrastructure on a 20-year cycle.
On the electric side, National Grid has filed for a two-year extension of its smart grid pilot in Worcester to allow the
company to test grid modernisation applications on a small scale and allow customers to benefit from the programme.
To help meet the Commonwealth of Massachusetts' clean energy goals of attaining 20 percent of the state's electricity
through renewables by 2020, National Grid is developing solar generation through multiple phases. Phase 1 consisted of 5MW
across 5 sites and was completed in 2011. Phase 2, which is underway, will add 16 MW and is scheduled to be completed in
2016. National Grid has proposed a third programme to add a further 14 MW of capacity. If approved, the company plans to
locate and build the solar arrays during 2017.
The Massachusetts Jurisdiction expects to invest at an increased level this year compared to 2015/16.
Rhode Island
The Rhode Island Jurisdiction consists of a Rhode Island Electric business and a Rhode Island Gas business that cover the
majority of the state.
Both the gas and electric business are operating under one-year rate plans that became effective in February 2013. These
include Infrastructure Safety and Reliability (ISR) capital trackers that allow National Grid to agree a level of
investment for the coming year and recover the full costs associated with investment in year. In calendar year 2015 the
company earned a return on equity of 10.2% in Rhode Island. National Grid is currently considering filing a full rate case
in Rhode Island in late 2017 or early 2018.
Investment in the Rhode Island companies is at a similar level to the first half of 2015/16. The investment programme to
replace ageing gas pipe and maintain safe and reliable electric service is on track.
The Rhode Island Jurisdiction expects to invest at a similar level to 2015/16 this year.
FERC
The FERC Jurisdiction consists of the Long Island Generation business, the Canadian Interconnector, New England Power, and
Narragansett Electric (Transmission).
Long Island Generation and the Canadian Interconnector are contracted investments, meaning that they earn revenues from
long term contracts with customers. The contracts are regulated by FERC and allow for an agreed return on equity. New
England Power and Narragansett Electric (Transmission) use formula rates that allow for the businesses to earn returns on
incremental investments almost immediately. In calendar year 2015, the FERC Jurisdiction outperformed its regulatory
allowance achieving 11.4% return on equity.
Investment in the FERC companies for the first six months of the year is up from the half year 2015/16. The FERC
Jurisdiction recently completed the Block Island transmission system, connecting the United States' first offshore wind
farm. Capital investment in 2016/17 is expected to increase slightly compared to last year.
The FERC Jurisdiction is an additional source of growth opportunity for the business and National Grid believes it has
developed a strong pipeline of new potential projects.
OTHER ACTIVITIES
Six months ended 30 September AdjustedOperating profit Capital Investment
(£m) 2016 2015 2016 2015
Metering 86 84 16 20
Grain LNG 35 39 2 11
French Interconnector 35 81 5 2
Property 44 61 5 -
UK corporate and other activities (31) (21) 38 20
Sub-total UK 169 244 66 53
US corporate and other activities (12) 44 34 44
Total 157 288 100 97
Operating profit in Other activities was £157m for the first six months of the year. As expected, this was down £131m on
the same period in the prior year, reflecting the non-recurrence of the prior year Iroquois gain and the return to more
normal levels of profitability for the 2GW capacity IFA.
The reduced levels of profitability of IFA reflect the very high power price differential between France and the UK
experienced in the first half of 2015/16 which increased the revenue generated from the auctions of the interconnector's
capacity during this period.
In April 2016, National Grid reached an agreement with Ofgem to progressively share a proportion of its IFA profits, net of
capital expenditure, with UK customers. This reflects the fact that the business has now fully recovered the cost of
building the interconnector. The agreement also allows National Grid to make further investment so IFA can continue to play
its important role.
As expected, the Property business delivered a reduced operating profit for the first six months, reflecting the phasing of
property disposals (Tottenham and Northfleet) in the prior year which were weighted to the first half of the year. In
August, National Grid's Property business completed the first sale of a site, at Battersea, to the St William joint
venture.
Other costs, including business development costs and UK and US corporate costs were up compared to the same period in
2015/16 primarily due to the non-recurrence of the gain on the exchange of National Grid's interest in the Iroquois
Pipeline for shares in Dominion Midstream Partners, LP that occurred in the first half of the prior period and an increase
in business development spend on new interconnectors.
JOINT VENTURES AND ASSOCIATES
Six months ended 30 September
Share of post-tax results by principal activities (£m) 2016 2015 % change
BritNed 28 23 22
Millennium 6 5 20
Other (3) 0 -
Share of post-tax results of joint ventures and associates 31 28 11
Capital investment* 41 30 37
* capital investment excludes £5m and £55m equity contribution to St William property joint venture for 2016 and 2015,
respectively
Joint ventures and associates in the Group consist principally of interests in an electricity transmission interconnector,
gas pipeline and St William. At the start of the year these included a 50% interest in the 1GW BritNed electricity
interconnector between the Netherlands and England, and a 26% interest in the Millennium natural gas pipeline in New York
State.
National Grid's share of post-tax results of joint ventures for the first six months of the year was £31m, an increase of
£3m compared with the same period last year. This reflected an increase in the contribution from the BritNed
Interconnector.
APPENDIX: BASIS OF PRESENTATION, DEFINITIONS AND METRIC CALCULATIONS
BASIS OF PRESENTATION
Adjusted and Statutory Results
Unless otherwise stated, all financial commentaries in this release are given on an adjusted basis at actual exchange
rates. Prior year earnings per share figures are restated to reflect the impact of additional shares issued as scrip
dividends (refer to note 6 on page 36).
In considering the financial performance of our businesses and segments, we analyse each of our primary financial measures
of operating profit, profit before tax, profit for the year attributable to equity shareholders and EPS into two
components. The first of these components is referred to as an adjusted profit measure, also known as a business
performance measure. This is the principal measure used by management to assess the performance of the underlying business.
Adjusted results exclude exceptional items and remeasurements. These items are reported collectively as the second
component of the financial measures. Note 3 on page 34 explains in detail the items which are excluded from our adjusted
profit measures.
Adjusted profit measures have limitations in their usefulness compared with the comparable total profit measures as they
exclude important elements of our financial performance. However, we believe that by presenting our financial performance
in two components it is easier to read and interpret financial performance between periods, as adjusted profit measures are
more comparable having removed the distorting effect of the excluded items. Those items are more clearly understood if
separately identified and analysed.
DEFINITIONS
Annual asset growth
'Annual asset growth' measures the increase in 'total regulatory value and other investments', defined below.
Capital investment
'Capital investment' or 'investment' refer to additions to plant, property and equipment and intangible assets, and equity
contributions to joint ventures, other than the St William joint venture during the period. St William is excluded based on
the nature of this joint venture arrangement.
Constant currency
'Constant currency basis' refers to the reporting of the actual results against the results for the same period last year
which, in respect of any US$ currency denominated activity, have been translated using the average US$ exchange rate for
the six months ended 30 September 2016, which was $1.39 to £1.00. The average rate for the six months ended 30 September
2015, was $1.54 to £1.00. Assets and liabilities as at 30 September 2015 have been retranslated at the closing rate at 30
September 2016 of $1.30 to £1.00. The closing rate for the balance sheet date 30 September 2015 was $1.51 to £1.00.
Earnings per share
Prior year earnings per share figures are restated to reflect the impact of additional shares issued as scrip dividends.
Load related spend
'Load related spend' is capital expenditure that relates to the installation of new assets to accommodate changes in the
level or pattern of energy supply and demand.
Net revenue
'Net revenue' is revenue less pass-through costs, such as payments to other UK network owners, system balancing costs, and
gas and electricity commodity costs in the US. Pass-through costs are fully recoverable from our customers and are
recovered through separate charges that are designed to recover those costs with no profit. Any over- or under-recovery of
these costs is returned to, or recovered from, our customers.
Non-load related spend
'Non-load related spend' is capital expenditure that relates to the replacement or refurbishment of assets which are either
at the end of their useful life due to their age or condition, or need to be replaced on safety or environmental grounds.
Return on equity
'Return on equity' or 'returns' is a performance metric measuring returns from the investment of shareholders' funds. It is
a financial ratio of a measure of earnings divided by an equity base.
Timing
Under the Group's regulatory frameworks, the majority of the revenues that National Grid is allowed to collect each year
are governed by a regulatory price control or rate plan. If a company collects more than this allowed level of revenue, the
balance must be returned to customers in subsequent years, and if it collects less than this level of revenue it may
recover the balance from customers in subsequent years. These variances between allowed and collected revenues give rise to
"over and under recoveries". In addition, a number of costs in both the UK and the US are pass-through costs (including
substantial commodity and energy efficiency costs in the US), and are fully recoverable from customers. Any timing
differences between costs of this type being incurred and their recovery through revenues are also included in over and
under-recoveries. In the UK, timing differences also include an estimation of the difference between revenues earned under
revenue incentive mechanisms and any associated revenues collected. UK timing balances and movements exclude any
adjustments associated with changes to controllable cost (totex) allowances or adjustments under the totex incentive
mechanism.
Identification of these timing differences enables a better comparison of performance from one period to another. Opening
balances of under and over-recoveries have been restated where appropriate to correspond with regulatory filings and
calculations.
Total regulatory value and other investments
The sum of: the regulatory asset value of the UK regulated businesses determined under the methodology set out in Ofgem's
Price Control Financial Model; the rate bases applicable to each US regulated entity calculated according to the
methodology used by each respective utility regulator; the value of assets held by the Group's other activities; together
with investments in joint ventures and associates. Other activities primarily relate to non-network businesses and other
commercial operations including: UK gas metering activities; the Great Britain-France Interconnector; UK property
management; and a UK LNG import terminal.
Totex
Under the UK RIIO regulatory arrangements the Company is incentivised to deliver efficiencies against cost targets set by
the regulator. 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.
PROVISIONAL FINANCIAL TIMETABLE
22 November 2016 ADR's go ex-dividend
24 November 2016 Ordinary shares go ex-dividend
25 November 2016 Record date for 2016/17 interim dividend
1 December 2016 Scrip reference price announced
9 December 2016 Scrip election date for 2016/17 interim dividend
11 January 2017 2016/17 interim dividend paid to qualifying shareholders
18 May 2017 2016/17 preliminary results
31 May 2017 ADR's go ex-dividend
1 June 2017 Ordinary shares go ex-dividend
2 June 2017 Record date for 2016/17 final dividend
8 June 2017 Scrip reference price announced
31 July 2017 Annual General Meeting, ICC, Birmingham
16 August 2017 2016/17 final dividend paid to qualifying shareholders
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 '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, including any arising as a result of the United Kingdom's exit from the European Union,
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 weather conditions
including the impact of major storms as well as the results of climate change, due to counterparties being unable to
deliver physical commodities, or due to the failure of or unauthorised access to or deliberate breaches of National Grid's
IT systems and supporting technology; 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 and remediation plans; 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 or deflation; 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 the
National Grid's employees or the breach of laws or regulations by its employees; the failure to respond to market
developments, including competition for onshore transmission, the threats and opportunities presented by emerging
technology, development activities relating to changes in the energy mix and the integration of distributed energy
resources, and the need to 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 the Company's potential sale of a majority stake in its gas distribution business
and 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 183 to 186 of National Grid plc'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 2016 2015
for the six months ended 30 September
Notes £m £m
Revenue 2(a) 7,203 6,854
Operating costs (5,413) (5,005)
Operating profit
Before exceptional items and remeasurements 2(b) 1,851 1,836
Exceptional items and remeasurements 3 (61) 13
Total operating profit 2(b) 1,790 1,849
Finance income 4 39 6
Finance costs
Before exceptional items and remeasurements 4 (562) (499)
Exceptional items and remeasurements 3,4 (813) (36)
Total finance costs 4 (1,375) (535)
Share of post-tax results of joint ventures and associates 31 28
Profit before tax
Before exceptional items and remeasurements 2(b) 1,359 1,371
Exceptional items and remeasurements 3 (874) (23)
Total profit before tax 2(b) 485 1,348
Tax
Before exceptional items and remeasurements 5 (295) (302)
Exceptional items and remeasurements 3 316 3
Total tax 21 (299)
Profit after tax
Before exceptional items and remeasurements 1,064 1,069
Exceptional items and remeasurements 3 (558) (20)
Profit for the period 506 1,049
Attributable to:
Equity shareholders of the parent 504 1,047
Non-controlling interests 2 2
506 1,049
Earnings per share1
Basic 6(a) 13.4p 27.7p
Diluted 6(b) 13.3p 27.6p
Adjusted basic2 6(a) 28.2p 28.2p
Adjusted diluted2 6(b) 28.1p 28.1p
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 2016 2015
£m £m
Profit for the period 506 1,049
Other comprehensive (loss)/income:
Items that will never be reclassified to profit or loss
Remeasurements - net retirement benefit obligations (1,050) 481
Tax on items that will never be reclassified to profit or loss 207 (128)
Total items that will never be reclassified to profit or loss (843) 353
Items that will or may be reclassified subsequently to profit or loss
Exchange adjustments 243 (28)
Net losses on cash flow hedges (3) (3)
Transferred to profit or loss on cash flow hedges 3 20
Net gains/(losses) on available-for-sale investments 9 (21)
Tax on items that may be reclassified subsequently to profit or loss 1 (2)
Total items that will or may be reclassified subsequently to profit or loss 253 (34)
Other comprehensive (loss)/income for the period, net of tax (590) 319
Total comprehensive (loss)/income for the period (84) 1,368
Total comprehensive (loss)/income attributable to:
Equity shareholders of the parent (87) 1,366
Non-controlling interests 3 2
(84) 1,368
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:
At 1 April 2016 447 1,326 16,305 (4,523) 13,555 10 13,565
Profit for the period - - 504 - 504 2 506
Total other comprehensive (loss)/income for the period - - (843) 252 (591) 1 (590)
Total comprehensive (loss)/income for the period - - (339) 252 (87) 3 (84)
Equity dividends 7 - - (923) - (923) - (923)
Scrip dividend related share issue 2 (2) - - - - -
Issue of treasury shares - - 17 - 17 - 17
Purchase of treasury shares - - (12) - (12) - (12)
Purchase of own shares - - (6) - (6) - (6)
Share-based payment - - 13 - 13 - 13
At 30 September 2016 449 1,324 15,055 (4,271) 12,557 13 12,570
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:
At 1 April 2015 443 1,331 14,870 (4,682) 11,962 12 11,974
Profit for the period - - 1,047 - 1,047 2 1,049
Total other comprehensive income/(loss) for the period - - 353 (34) 319 - 319
Total comprehensive income/(loss) for the period - - 1,400 (34) 1,366 2 1,368
Equity dividends 7 - - (805) - (805) - (805)
Scrip dividend related share issue 3 (3) - - - - -
Issue of treasury shares - - 15 - 15 - 15
Purchase of treasury shares - - (245) - (245) - (245)
Purchase of own shares - - (6) - (6) - (6)
Other movements in non-controlling interests - - 1 - 1 (5) (4)
Share-based payment - - 12 - 12 - 12
At 30 September 2015 446 1,328 15,242 (4,716) 12,300 9 12,309
Consolidated statement of financial position 30 September 2016 31 March 2016
Notes £m £m
Non-current assets
Goodwill 5,885 5,315
Other intangible assets 2 932 887
Property, plant and equipment 2 46,511 43,364
Other non-current assets 140 82
Pension assets 11 171 410
Financial and other investments 522 482
Investments in joint ventures and associates 461 397
Derivative financial assets 8 1,884 1,685
Total non-current assets 56,506 52,622
Current assets
Inventories and current intangible assets 446 437
Trade and other receivables 2,339 2,472
Financial and other investments 10 3,255 2,998
Derivative financial assets 8 218 278
Cash and cash equivalents 10 162 127
Total current assets 6,420 6,312
Total assets 62,926 58,934
Current liabilities
Borrowings 10 (4,149) (3,611)
Derivative financial liabilities 8 (925) (337)
Trade and other payables (3,135) (3,285)
Current tax liabilities (137) (252)
Provisions (218) (236)
Total current liabilities (8,564) (7,721)
Non-current liabilities
Borrowings 10 (28,079) (24,733)
Derivative financial liabilities 8 (1,588) (1,732)
Other non-current liabilities (2,202) (2,071)
Deferred tax liabilities (4,606) (4,634)
Pensions and other post-retirement benefit obligations 11 (3,733) (2,995)
Provisions (1,584) (1,483)
Total non-current liabilities (41,792) (37,648)
Total liabilities (50,356) (45,369)
Net assets 12,570 13,565
Equity
Share capital 449 447
Share premium account 1,324 1,326
Retained earnings 15,055 16,305
Other equity reserves (4,271) (4,523)
Shareholders' equity 12,557 13,555
Non-controlling interests 13 10
Total equity 12,570 13,565
Consolidated cash flow statementfor the six months ended 30 September 2016 2015
Notes £m £m
Cash flows from operating activities
Total operating profit 2(b) 1,790 1,849
Adjustments for:
Exceptional items and remeasurements 3 61 (13)
Depreciation, amortisation and impairment 865 796
Share-based payment charge 13 12
Gain on exchange of associate for available-for-sale investment - (49)
Changes in working capital 54 370
Changes in provisions (67) (40)
Changes in pensions and other post-retirement benefit obligations (392) (244)
Cash flows relating to exceptional items (72) (23)
Cash generated from operations 2,252 2,658
Tax paid (164) (135)
Net cash inflow from operating activities 2,088 2,523
Cash flows from investing activities
Acquisition of investments (49) (78)
Purchases of intangible assets (82) (114)
Purchases of property, plant and equipment (1,855) (1,748)
Disposals of property, plant and equipment 2 1
Dividends received from joint ventures 49 35
Interest received 12 7
Net movements in short-term financial investments (137) 546
Net cash flow used in investing activities (2,060) (1,351)
Cash flows from financing activities
Proceeds from issue of treasury shares 17 15
Purchase of treasury shares (12) (245)
Purchase of own shares (6) (6)
Proceeds received from
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