REG - National Grid PLC - Results for the year ended 31 March 2015 <Origin Href="QuoteRef">NG.L</Origin> - Part 4
15/07/2015 18:44
- Part 4: For the preceding part double click ID:nRSU8507Nc
1. Net of bank overdrafts of £3m (2014: £15m).
Notes
1. Basis of preparation and new accounting standards, interpretations and amendments
The full year financial information contained in this announcement, which does not constitute statutory accounts as defined
in Section 434 of the Companies Act 2006, has been derived from the statutory accounts for the year ended 31 March 2015,
which will be filed with the Registrar of Companies in due course. Statutory accounts for the year ended 31 March 2014 have
been filed with the Registrar of Companies. The auditors' report on each of these statutory accounts was unqualified and
did not contain a statement under Section 498 of the Companies Act 2006.
The full year financial information has been prepared in accordance with the accounting policies applicable for the year
ended 31 March 2015 and are consistent with those applied in the preparation of our accounts for the year ended 31 March
2014.
The following standards, interpretations and amendments, issued by the IASB and by the IFRS Interpretations Committee
(IFRIC), are effective for the year ended 31 March 2015. None of the pronouncements had a material impact on the Company's
consolidated results or assets and liabilities for the year ended 31 March 2015.
· 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.
Date of approval
This announcement was approved by the Board of Directors on 20 May 2015.
2. Segmental analysis
We present revenue and the results of the business analysed by operating segment, based on the information the Board of
Directors uses internally for the purposes of evaluating the performance of operating segments and determining resource
allocation between operating segments. The Board is National Grid's chief operating decision-making body (as defined by
IFRS 8 'Operating segments') and assesses the performance of operations principally on the basis of operating profit before
exceptional items and remeasurements (see note 3).
There have been no changes to our reporting structure during the year ended 31 March 2015.
The following table describes the main activities for each operating segment:
UK Electricity Transmission High voltage electricity transmission networks in Great Britain.
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.
Other activities primarily relate to non-regulated businesses and other commercial operations not included within the above
segments, including: the Great Britain-France electricity interconnector; UK based gas metering activities; UK property
management; a UK LNG import terminal; US LNG operations; US unregulated transmission pipelines; together with corporate
activities.
Sales between operating segments are priced considering 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.
(a) Revenue
2015£m 2014£m
Operating segments:
UK Electricity Transmission 3,754 3,387
UK Gas Transmission 1,022 941
UK Gas Distribution 1,867 1,898
US Regulated 7,986 8,040
Other activities 762 736
Sales between segments (190) (193)
15,201 14,809
Geographical areas
UK 7,191 6,759
US 8,010 8,050
15,201 14,809
2. Segmental analysis continued
(b) Operating profit
Before exceptional items and remeasurements After exceptional items and remeasurements
2015 2014 2015 2014
£m £m £m £m
Operating segments:
UK Electricity Transmission 1,237 1,087 1,237 1,027
UK Gas Transmission 437 417 437 406
UK Gas Distribution 826 904 826 780
US Regulated 1,164 1,125 1,081 1,388
Other activities 199 131 199 134
3,863 3,664 3,780 3,735
Geographical areas:
UK 2,820 2,723 2,820 2,531
US 1,043 941 960 1,204
3,863 3,664 3,780 3,735
Reconciliation to profit before tax:
Operating profit 3,863 3,664 3,780 3,735
Finance income 36 36 36 36
Finance costs (1,069) (1,144) (1,234) (1,051)
Share of post-tax results of joint ventures and associates 46 28 46 28
Profit before tax 2,876 2,584 2,628 2,748
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
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.
2015 2014
£m £m
Included within operating profit:
Exceptional items:
Restructuring costs1 - (136)
Gas holder demolition costs2 - (79)
LIPA MSA transition3 - 254
Other4 - 16
- 55
Remeasurements - commodity contracts5 (83) 16
(83) 71
Included within finance costs:
Exceptional items:
Debt redemption costs6 (131) -
Remeasurements:
Net (losses)/gains on derivative financial instruments7 (34) 93
(165) 93
Total included within profit before tax (248) 164
Included within tax:
Exceptional credits/(charges) arising on items not included in profit before tax:
Deferred tax credit arising on the reduction in the UK corporation tax rate8 6 398
Deferred tax charge arising from an increase in US state income tax rates9 - (8)
Tax on exceptional items 28 (57)
Tax on remeasurements5, 7 44 (36)
78 297
Total exceptional items and remeasurements after tax (170) 461
Analysis of total exceptional items and remeasurements after tax:
Exceptional items after tax (97) 388
Remeasurements after tax (73) 73
Total (170) 461
3. Exceptional items and remeasurements continued
1. No exceptional restructuring costs have been incurred in the year ended 31 March 2015. Restructuring costs for 2014
included: costs related to the continued restructuring of our UK operations in preparedness to deliver RIIO, other
transformation-related initiatives in the UK and US and an associated software impairment for licences that will no longer
be used.
2. No further provision (2014: £79m) has been made for the demolition of non-operational gas holders in the UK.
3. For the year ended 31 March 2014, a net gain of £254m was recognised. This included a pension curtailment and
settlement (£214m) 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. There was also a gain of £142m following
the extinguishment of debt obligations of £98m and a £56m cash payment received, in compensation for the Company forgiving
an historical pension receivable and carrying charges. These gains were offset by transition costs and other provisions
incurred to effect the transition.
4. During the year ended 31 March 2014, £16m was received following the sale to a third party of a settlement award which
arose as a result of a legal ruling in 2008.
5. Remeasurements - commodity contracts represent mark-to-market movements on certain physical and financial commodity
contract obligations in the US. These contracts primarily relate to the forward purchase of energy for supply to customers,
or to the economic hedging thereof, that are required to be measured at fair value and that do not qualify for hedge
accounting. Under the existing rate plans in the US, commodity costs are recoverable from customers although the timing of
recovery may differ from the pattern of costs incurred.
6. Represents costs arising from a liability management programme. We have reviewed and restructured the Group debt
portfolio following the commencement of the RIIO price controls in 2013 and the slow down in our planned short term UK
capital investment programme as the industry assesses the impact of EMR. This resulted in a bond repurchase programme with
a notional value of £924m.
7. Remeasurements - net (losses)/gains on derivative financial instruments comprise (losses)/gains 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. The tax charge in the year includes a credit of £1m (2014: £nil) in respect of prior years.
8. The Finance Act 2013 enacted reductions in the UK corporation tax rate from 23% to 21% from 1 April 2014, and from 21%
to 20% from 1 April 2015. These reductions have resulted in decreases to UK deferred tax liabilities in these periods.
9. The exceptional tax charge in the prior year arose from a net increase in US state income tax rates. Effective from 1
April 2014, the state income tax rate for Massachusetts regulated utilities increased from 6.5% to 8% and, effective from 1
April 2016, the state income tax rate for New York will decrease from 7.1% to 6.5%.
4. Finance income and costs
2015 2014
£m £m
Finance income 36 36
Finance costs
Net interest on pension and other post-retirement benefit obligations (101) (128)
Interest expense on financial instruments (981) (1,091)
Unwinding of discounts on provisions (73) (73)
Less: interest capitalised1 86 148
Finance costs before exceptional items and remeasurements (1,069) (1,144)
Exceptional items:
Debt redemption costs (131) -
Remeasurements:
Net (losses)/gains on derivative financial instruments2, 3 (34) 93
Exceptional items and remeasurements included within finance costs (165) 93
Finance costs (1,234) (1,051)
Net finance costs (1,198) (1,015)
1. Interest on funding attributable to assets in the course of construction in the current year was capitalised at a
rate of 3.8% (2014: 4.5%). In the UK, capitalised interest qualifies for a current year tax deduction with tax relief
claimed of £24m (2014: £32m). In the US, capitalised interest is added to the cost of plant and qualifies for tax
depreciation allowances.
2. Includes a net foreign exchange gain on financing activities of £636m (2014: £268m) offset by foreign exchange gains
and losses on derivative financial instruments measured at fair value.
3. Includes a net gain on instruments designated as fair value hedges of £219m (2014: £183m loss) offset by a net loss
of £162m (2014: £205m gain) arising from fair value adjustments to the carrying value of debt.
5. Tax
2015 2014
£m £m
Tax before exceptional items and remeasurements 695 581
Exceptional tax on items not included in profit before tax (note 3) (6) (390)
Tax on other exceptional items and remeasurements (72) 93
Tax on total exceptional items and remeasurements (note 3) (78) (297)
Total tax charge 617 284
Tax as a percentage of profit before tax % %
Before exceptional items and remeasurements 24.2 22.5
After exceptional items and remeasurements 23.5 10.3
The tax charge for the year can be analysed as follows:
£m £m
Current tax
UK corporation tax at 21% (2014: 23%) 309 355
UK corporation tax adjustment in respect of prior years (2) (9)
Overseas corporation tax 51 54
Overseas corporation tax adjustment in respect of prior years (62) (88)
Total current tax 296 312
Deferred tax
UK deferred tax 123 (292)
UK deferred tax adjustment in respect of prior years 7 (3)
Overseas deferred tax 138 276
Overseas deferred tax adjustment in respect of prior years 53 (9)
Total deferred tax 321 (28)
Total tax charge 617 284
Adjustments in respect of prior years include the following amounts that relate to exceptional items and remeasurements:
£1m credit (2014: £nil).
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
Earnings2015 Earnings Earnings2014 Earnings
per share2015 per share2014
£m pence £m pence
Adjusted earnings 2,189 58.1 2,015 53.5
Exceptional items after tax (97) (2.6) 388 10.3
Remeasurements after tax (73) (1.9) 73 1.9
Earnings 2,019 53.6 2,476 65.7
2015millions 2014millions
Weighted average number of shares - basic1 3,766 3,766
1. Comparative amounts have been restated to reflect the impact of additional shares issued as scrip dividends.
(b) Diluted earnings per share
Earnings2015 Earnings per share2015 Earnings2014 Earnings per share2014
£m pence £m pence
Adjusted earnings 2,189 57.9 2,015 53.2
Exceptional items after tax (97) (2.6) 388 10.3
Remeasurements after tax (73) (1.9) 73 1.9
Earnings 2,019 53.4 2,476 65.4
2015millions 2014millions
Weighted average number of shares - diluted1 3,783 3,785
1. Comparative amounts have been restated to reflect the impact of additional shares issued as scrip dividends.
7. Dividends
2015 2014
Pence Cash dividend paid Scrip dividend Pence Cash dividend paid Scrip dividend
per share £m £m per share £m £m
Interim dividend in respect of current year 14.71 531 26 14.49 539 -
Final dividend in respect of prior year 27.54 740 289 26.36 520 444
42.25 1,271 315 40.85 1,059 444
The Directors are proposing a final dividend for the year ended 31 March 2015 of 28.16p per share that will absorb
approximately £1,054m of shareholders' equity (assuming all amounts are settled in cash). It will be paid on 5 August 2015
to shareholders who are on the register of members at 5 June 2015 and a scrip dividend will be offered as an alternative,
subject to shareholders' approval at the Annual General Meeting.
8. Reconciliation of net cash flow to movement in net debt
2015 2014
£m £m
Decrease in cash and cash equivalents (247) (283)
Decrease in financial investments (1,157) (1,720)
Increase in borrowings and related derivatives 682 1,021
Net interest paid on the components of net debt1 925 841
Change in net debt resulting from cash flows 203 (141)
Changes in fair value of financial assets and liabilities and exchange movements (1,777) 1,360
Net interest charge on the components of net debt1 (1,068) (1,053)
Extinguishment of debt resulting from LIPA MSA transition (note 3) - 98
Other non-cash movements (83) (25)
Movement in net debt (net of related derivative financial instruments) in the year (2,725) 239
Net debt (net of related derivative financial instruments) at start of year (21,190) (21,429)
Net debt (net of related derivative financial instruments) at end of year (23,915) (21,190)
1. An exceptional expense of £131m (2014: £nil) is included in net interest charge on the components of net debt and an
exceptional cash outflow of £152m (2014: £nil) is included in net interest paid on the components of net debt.
9. Net debt
2015 2014
£m £m
Cash and cash equivalents 119 354
Bank overdrafts (3) (15)
Net cash and cash equivalents 116 339
Financial investments 2,559 3,599
Borrowings (excluding bank overdrafts) (25,907) (25,935)
Net debt related derivative financial assets 1,716 1,970
Net debt related derivative financial liabilities (2,399) (1,163)
Net debt (net of related derivative financial instruments) (23,915) (21,190)
10. Commitments and contingencies
2015 2014
£m £m
Future capital expenditure contracted for but not provided 2,360 2,624
Operating lease commitments 627 630
Energy purchase commitments 4,338 3,537
Guarantees and letters of credit (a) 1,297 1,252
(a) Guarantees and letters of credit
2015 2014
£m £m
Guarantee of sublease for US property (expires 2040) 236 232
Guarantees of certain obligations of Grain LNG Import Terminal (expire up to 2028) 151 155
Guarantee of certain obligations for construction of HVDC West Coast Link (expected expiry 2016) 555 594
Other guarantees and letters of credit (various expiry dates) 355 271
1,297 1,252
(b) Litigation and claims
Through the ordinary course of the Group's operations, we are party to various litigations, claims and investigations. We
do not expect the ultimate resolution of any of these proceedings to have a material adverse effect on our results of
operations, cash flows or financial position.
11. Exchange rates
The consolidated results are affected by the exchange rates used to translate the results of our US operations and US
dollar transactions. The US dollar to pound sterling exchange rates used were:
2015 2014
Closing rate applied at year end 1.49 1.67
Average rate applied for the year 1.58 1.62
12. Related party transactions
The following significant transactions with related parties were in the normal course of business. Amounts receivable from
and payable to related parties are due on normal commercial terms:
2015 2014
£m £m
Sales: Goods and services supplied to a pension plan and joint ventures 52 15
Purchases: Goods and services received from joint ventures and associates1 120 128
Receivable from a pension plan and joint ventures 4 3
Payable to joint ventures and associates 6 5
Dividends received from joint venture and associates2 79 38
1. During the year the Company received goods and services from a number of joint ventures and associates, including
Iroquois Gas Transmission System, L.P. of £24m (2014: £30m), Millennium Pipeline Company, LLC of £26m (2014: £31m) for the
transportation of gas in the US and NGET/SPT Upgrades Limited of £68m (2014: £67m) for the construction of a transmission
link in the UK.
2. Dividends were received from BritNed Development Limited of £49m (2014: £17m), Iroquois Gas Transmission System, L.P. of
£14m (2014: £11m) and Millennium Pipeline Company, LLC of £16m (2014: £10m).
1 'Adjusted results', 'Value Added' and a number of other terms and performance measures used in this document are not
defined within accounting standards or may be applied differently by other organisations. For clarity, we have provided
definitions of these terms, descriptions of restatements and, where relevant, proforma calculations on pages 36 to 40.
Prior year EPS has been adjusted to reflect the additional shares issued as scrip dividends, refer to note 6 on page 55.
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