Final Results

National Grid Group PLC 23 May 2000 THE NATIONAL GRID GROUP plc PRELIMINARY RESULTS for the year ended 31 March 2000 Financial highlights * Basic earnings per share up 13 % to 78.0p * Basic earnings per share excluding exceptional items,goodwill amortisation and telecoms start-up losses up 15 % to 28.3p * Profit before tax excluding exceptional items £473.7m(1998/99 £458.9m) * Exceptional pre-tax profits of £1.0bn relating to partial disposal of Energis * Final dividend per share up 6.8 % to 8.35p making the total dividend per share for the year 13.94p, a 5% real increase Electricity USA * Acquisition of NEES completed 22 March 2000, National Grid USA formed * Integration of NEES and EUA's operations on 1 May 2000 * Long term, incentive-based rate plans in place * £60m per year improvement in operating profit projected by 2003/04 Telecoms Europe * joint venture in Poland with Energis to launch services around the year end * National Grid's 36.3% holding in Energis worth £2.3 bn at last night's closing price Latin America * Intelig voice services launched 23 January 2000 - data services to be launched 23 July 2000 * New ventures announced today - £55m for 30% of Telefonica Manquehue in Santiago - 50% stake in £140m Southern Cone Communications Network in Argentina and Chile Commenting on the results, James Ross, Chairman said: 'This has been another very good year for National Grid. The Group's businesses have again performed strongly and we have taken further major steps in developing our international growth strategy. 'Group Operating profits before goodwill amortisation were up 2% to £590.6 million, before taking account of start-up losses in Intelig. Despite these start-up losses, profit after tax increased to £350.6 million and, in addition, we made exceptional profits of over £1 billion as we locked in more of the value of our Energis holding. We are declaring a final dividend up 6.8% bringing the full year total to 13.94p, an increase of 5% in real terms. UK 'In the UK, winter peak system availability was again over 99% and transmission profits were up 3%. Our focus is now on the regulatory review and on preparations to introduce the new electricity trading systems this Autumn. USA 'In the USA, following completion of the acquisition of NEES on 22 March and of EUA on 19 April, the two businesses were fully integrated on 1 May 2000. 'The acquisition of these businesses has substantially changed the profile of National Grid's balance sheet and operating profit - some 30% of Group operating profit now comes from the USA. ' When we announced the acquisition of NEES and EUA, the 1998 operating profit of their continuing operations was some £240 million. The pre-tax nominal return on our £2.9 billion investment would have been some 8.3%. Following the achievement of 20-year incentive-based regulatory settlements, the efficiency gains already achieved and benefits we are confident of achieving in the distribution and telecoms businesses, operating profits will rise to at least £305 million in the year 2003/04, increasing our investment return by over 25% to 10.5%. 'With US inflation at around 2%, this compares very favourably with the 6.5% pre-tax real return most regulated businesses in the UK are currently allowed. This return is before taking account of further uplift from a potential consolidating acquisition in the Northeast US and from the upside available in transmission. This under-scores the attraction we saw in the US. Telecoms 'As well as locking in more of the value of our investment in Energis, whose results demonstrate its continued rapid growth and move towards profitability, we have taken a set of key steps. 'In Poland, in conjunction with Energis, we have taken a stake in a consortium which has won a licence to launch a new telecoms operation. The service launch will be around this calendar year end. 'In Brazil, Intelig, in which we hold a 50% interest, successfully launched voice services on 23 January, less than a year after it was formed. It has already become one of Brazil's best known brands, has attracted over 1.2 million customers and a 15% share of its addressable market. It is set to launch data services, targeting the business market on 23 July. The current auction of Sprint's 25% interest in Intelig following Sprint's proposed merger with MCI Worldcom is planned to be completed in July or August and will place an early market valuation on Intelig. 'Today, we are announcing two new investments that significantly extend our Latin American telecoms presence into Argentina and Chile. 'We have acquired a 30% stake in Telefonica Manquehue, a Santiago-based telecom operator. In addition, we have taken a 50% stake in Southern Cone Communications, which will develop a network linking Argentina's principal cities and will cross the Andes, linking to Santiago. The network will leverage the fourth electricity line built by Transener, utilise road ducts in the rest of Argentina as well as the trans-Andes gas pipeline, also already constructed. In future it has the potential to link both to Intelig's Brazilian network and to landing stages on both coasts of Latin America for the submarine cables to the USA. Future Prospects 'Our strategy of a balance between strong cashflows from electricity and substantial capital appreciation from telecoms is now well established. It is a strategy we expect to create further significant value in the coming years.' Analysts' presentation City Presentation Centre, 4 Chiswell Street, London EC1Y 4UP 8:30 am (UK time) today Live coverage available UK: 020 8515 2308 USA: 1 303 205 1500 Replay available UK: 020 8797 2499(pin 113076 hash) USA: 1 303 590 3000 (pin 714980) Teleconference at 4.00 pm UK time (11.00 am Eastern Time and 8.00 am Pacific Time) UK: 020 8797 2499 (pin 113078 hash) USA: 1 303 205 1500 (pin 715016) Contact National Grid +44 (0) 20 7312 5779 David Jones Stephen Box Jill Sherratt (mobile: +44 (0)7768 490807) Susan Stevens Citigate Dewe Rogerson +44 (0) 20 7638 9571 Anthony Carlisle Sue Pemberton (mobile: +44 (0)973 611888) GROUP RESULTS Operating profits from our established businesses increased while our share of operating loss from Energis was lower. Mainly as a consequence of start-up losses associated with our investment in Intelig, the telecoms network in Brazil, total operating profit was £38.8 million lower at £538.6 million. Year on year comparison is distorted by a one-off release of £15.2 million provisions to the 1998/99 profit and loss account following the introduction in that year of FRS12. Net interest declined £53.6 million to £64.9 million, reflecting the lower average level of net debt,resulting from the sales of Energis shares in February 1999 and in February 2000. Our share of the interest paid by Energis and our joint ventures increased from £17.6 million to £21.9 million. Interest cover for the year was 8.3 times. Year-end net debt rose to £2,663.6 million from £703.4 million, principally as a result of the acquisition of New England Electric System (NEES) on 22 March 2000. The impact of this was partly offset by the proceeds from the sale of shares in Energis. The results include an exceptional profit of £1,027.3 million before tax arising from the reductions in the Group's interest in Energis.(This is explained more fully in Note 3 to this announcement). Excluding exceptional items, profit before tax increased to £473.7 million from £458.9 million. The tax charge was £352.6 million and included £229.5 million relating to the exceptional profits. The effective tax rate for the year,excluding the impact of the exceptional items, was 26.0 per cent compared with 26.2 per cent in the previous year. Profit after tax, excluding exceptional items, was £350.6 million, up from £338.6 million the year before. Basic earnings per share rose 13 per cent to 78.0 pence. Excluding exceptional items and goodwill amortisation basic earnings per share increased 4 per cent to 24.3 pence. If telecoms start-up losses are also excluded basic earnings per share increased 15 per cent to 28.3 pence. Following a change in accounting policy the Group now capitalises interest that is directly attributable to the construction of tangible fixed assets. This change has resulted in the restatement of prior year results and is more fully explained in Note 1 of this announcement. Acquisitions of NEES and EUA The acquisition of NEES was completed on 22 March 2000 at a cost of £2.1 billion, and the acquisition of Eastern Utilities Associates (EUA) was completed on 19 April 2000 at a cost of £0.4 billion. They were funded by cash resources and bank borrowings. The NEES net assets acquired have a fair value of £1.2 billion, resulting in goodwill of £0.85 billion which has been capitalised and is being amortised through the profit and loss account over 20 years. The fair value exercise has not been completed in respect of the EUA net assets. As a result of the short period of ownership, from 22 March, National Grid USA's contribution to the Group's results was not material. Final dividend The Board is recommending a final ordinary dividend of 8.35 pence per share to be paid on 15 August to shareholders on the register at 5 June. This brings the total ordinary dividend to 13.94 pence per share, an increase of 6.7 per cent compared with 1998/99, at the top end of our target range of 4 to 5 per cent real dividend per share growth. This dividend per share is covered 1.7 times (1998/99: 1.8 times) by basic earnings per share excluding exceptional items and goodwill amortisation. REVIEW OF OPERATIONS ELECTRICITY UK Transmission Transmission turnover increased by £13.6 million to £1,208.2 million. This was mainly due to the increase in price capped transmission revenues by £36.8 million to £873.6 million as a result of setting transmission network use of system charges to recoup under-recoveries from previous years. We reduced the costs of transport uplift under the Transmission Services Scheme(TSS) for the sixth successive year and increased our profit margin to £27.3 million. During the year, we reduced UK Transmission controllable costs by 3 per cent in real terms. This follows our real reduction of 14 per cent in year one and 4 per cent in year two of the current price control period. We remain on target to achieve an average real reduction of 6 per cent per year over the current price control period. Transmission operating profit rose £14.9 million to £522.8 million. Capital investment amounted to £286.4 million, including capitalised interest, compared with £313.9 million in the previous year. Once again the system performed extremely well, achieving over 99 per cent availability in winter peak conditions in a year when peak demand was the highest ever. With cost reductions among the best in the transmission and distribution sector, the UK transmission business is a world leader in operating efficiency and performance. This strong track record, and the management of capital expenditure of over £3 billion over the last ten years, stands us in good stead for the third regulatory review which is now underway. The new transmission price control is due to come into effect on 1 April 2001 and is likely to increase in duration from four to five years. we welcome this longer term approach for what is a long term business. UK Interconnectors Operating profit from Interconnectors was up £6.2 million to £45.7 million. This improvement was due to the higher transfers from France,following last year's reduced transfers over the summer, and the high level of LOLP capacity payments experienced in the first half of the year. Other activities Excluding the impact of the £15.2 million provisions release credited to the profit and loss account 1998/99, profit from other activities declined by £13.3 million in 1999/00 due to higher business development costs and lower profits in our UK and US metering businesses. National Grid USA We formed National Grid USA on the completion of the acquisition of NEES on 22 March 2000. The acquisition of EUA was completed on 19 April 2000. There are four main upsides associated with the acquisitions and we are making good progress on all of them to increase our returns. The first upside is in distribution with the introduction of incentive-based regulation. The operations of NEES and EUA in Massachusetts and Rhode Island have been integrated and rate plans agreed in these states have been implemented. These long-term agreements provide incentives to improve efficiency for the benefit of customers and shareholders. We will achieve this principally as a result of commercial applications of developments in technology which will improve both administrative and operational efficiency and the effectiveness of capital expenditure. The rate plans also enable us to benefit from volume growth. Plans are in hand to realise substantial benefits from the opportunities the rate plans give us. The second upside comes through consolidation. The integration of EUA's operations with those of NEES is resulting in savings of around 50 per cent of EUA's controllable costs. These savings are expected to be around £25 million per annum and we now expect to achieve them in the first full year of combined operation. The integration skills we have developed can be used in other acquisitions and we intend to take advantage of our strong position in the fragmented Northeastern market to grow the US business. The third upside comes from the development of opportunities for transmission. The Federal Electricity Regulatory Commission (FERC) issued an Order in December 1999 which encourages the establishment of regional transmission organisations following the unbundling of generation from transmission and distribution assets. Our experience of the competitive UK market is highly relevant and we are submitting proposals to FERC on our solutions for transmission issues in the Northeastern USA. The fourth upside is our telecoms dark fibre business, NEESCom. This business installs fibre along distribution and transmission networks and leases it to telecoms, internet and cable operators as dark fibre. It has taken advantage of the surge in demand in the region to expand its network, with more than 125,000 fibre miles installed. New long term sales contracts signed in the last year have a present value of £70 million. We expect the acquisitions to be earnings neutral after goodwill amortisation next year (2000/01), and to enhance earnings after goodwill amortisation thereafter. On a proforma basis, the combined operating profit of the continuing operations of NEES and EUA for the year ended 31 December 1999 was approximately £250 million.We expect the upsides in the distribution and telecoms businesses to improve operating profit by £60 million by 2003/04. Argentina Our share of operating profit from our joint venture in the principal Argentine transmission system, Transener, increased by £1.9 million to £10.4 million, partly due to cost savings achieved during the year. Demand rose in Argentina and we have again reduced outage rates on the system. We completed the construction of the 800 mile, 500kV fourth line, which transports an additional 1,100MW to the demand centre of Buenos Aires from hydro generation in the South West. It was commissioned on 20 December 1999 and has improved operational flexibility. Zambia Copperbelt Energy Corporation (CEC), our joint venture in Zambia, is continuing to perform well. Our share of its operating profit was £4.0 million,£0.2 million up from last year's level even after the costs associated with a major restructuring of the organisation during the year which will enable CEC to further improve its profitability. The full privatisation of the copper mines of Zambia has now taken place which should result in renewed investment and an increase in production, with an associated increase in electricity demand. TELECOMS Europe Energis Energis continues to perform strongly with turnover up 73 per cent to £494.0 million, and EBITDA up 86 per cent to £92.3 million. Our share of its operating loss for the period reduced by £7.6 million to £4.0 million. In February 2000, we took advantage of the surge in the telecoms sector to lock in some more of the value of our Energis holding which had reached 78 per cent of our market capitalisation. We did this by placing 28.9 million Energis shares in the market at 3380 pence. The exceptional profit was £895.2 million. The acquisition by Energis of EnerTel announced in November 1999 was funded in part by a placing of 14.7 million Energis shares at 2125 pence per share. This transaction resulted in an exceptional profit of approximately £131.2 million. At yesterday's closing price, the market value of our remaining holding of 36.3 per cent in Energis was £2.3 billion and the internal rate of return on our investment in Energis was 80 per cent. Poland In January, the Polish Ministry for Post and Telecommunication announced its intention to award an inter-regional voice telephony licence to NG Koleje Telekomunikacja (NGKT),the company we have established with Energis, the national Polish railways, Polskie Koleje Panstwowe (PKP) and Centrala, a local telecoms operator. A data licence has also been applied for and is expected to be issued shortly. The consortium is putting in place a state-of-the-art network linking major cities principally by leasing 3,100 route miles of existing fibre on the railway network owned by PKP. Commercial launch, which will focus on the business sector, is planned for around the end of this calendar year. National Grid expects to invest around £60 million over the first two years. Latin America We have extended our telecoms activities in Latin America. We now have investments in telecoms networks in the three major economies in South America, building on the reputation we have created in Brazil. The combined value of the Brazilian, Argentine and Chilean telecoms markets is an estimated £22 billion, forcast to grow at around 12 per cent per annum. Intelig Intelig, our joint venture in Brazil has made good progress. It launched voice services on 23 January 2000 only a year after receiving its licence and has established a strong brand and reputation. It now has 1.2 million regular customers. It will launch data services, concentrating our marketing on the corporate customer base, on 23 July 2000. Our investment during the year was £125 million and our share of start-up operating losses £44.1 million. Telefonica Manquehue and Southern Cone Communications Today we announced the investment £55 million for a 30% share of Telefonica Manquehue which is a well established competitive local exchange carrier in Santiago, Chile. The other principal shareholders are MetroGas (25.4 per cent), the Rabat family (21.2 per cent), Williams Communications of the US (Williams) (16.5 per cent) and Xycom (6.8 percent). MetroGas has the concession to install natural gas in Santiago which creates an unique opportunity to establish an underground fibre optic network. We also announced an investment in Southern Cone Communications, a major new state-of-the-art broadband fibre optic network across Argentina and Chile, which we are developing in partnership with Williams and Telefonica Manquehue. We hold 50 per cent of the venture, Telefonica Manquehue holds 30.1 per cent and Williams Communication holds 19.9 per cent. Southern Cone Communications will develop a 2,700 route mile SDH network linking major Argentine cities with a spur crossing the Andes to Santiago in Chile. In Argentina, it will use Transener's fourth transmission line and road ducts. The trans-Andes link will utilise ducts running along an existing gas pipeline. The initial network will be constructed by the end of 2000 at a cost of £140 million. Our equity investment will be around £40 million. There is the potential to create additional links to the proposed submarine cable landing points on the Pacific and Atlantic coasts connecting to other countries in Latin America and the USA. Start-up telecoms ventures Our telecoms ventures in Poland and Latin America will involve investment of some £220 million during the current year with start-up losses of around £80 million. BOARD STRUCTURE Reflecting the Group's international growth strategy we introduced a new Board structure upon formation of National Grid USA. Roger Urwin is Group Director Europe, Wob Gerretsen is Group Director Latin America and Rick Sergel who was formerly President and CEO of NEES, joined the Board as Group Director North America. Professor Paul Joskow, formerly a Non-executive Director of NEES, joined the Board as a Non-executive Director. OUTLOOK Our strategy combines a powerful combination of cash generation which supports a progressive dividend policy and substantial capital appreciation. Our new Group structure provides the management focus to identify and take advantage of the opportunities that exist. We are in a strong position to continue creating value from our electricity activities and from our telecoms start-ups. In the UK our focus is on the regulatory review and the implementation of NETA. In the US we will drive profitability, taking advantage of the opportunities presented by the new rate plans. Our Polish telecoms venture will launch services during the year and we now have a strong position in Latin America, where we are developing telecoms networks in the key economies of Brazil, Argentina and Chile. We no longer have strategic role in the development of Energis and while the business to be an outstanding success we intend to realise the value of our investment within the next three years. The fragmented nature of the electricity market in the Northeastern USA provides opportunities for further consolidation and our excellent record of cost control, our integration skills and our regulatory expertise put us in a strong position to take advantage of them. We hope to announce an acquisition of a similar size to NEES within the Northeastern USA by the end of the year. THE NATIONAL GRID GROUP plc GROUP PROFIT AND LOSS ACCOUNT Year ended 31 March 2000 2000 1999 (restated) Notes £m £m Group turnover - Continuing operations 1,578.5 1,514.2 - Acquisition 36.2 - --------- --------- 2 1,614.7 1,514.2 Operating costs (1,042.6) (937.5) --------- --------- Operating profit - Continuing operations 569.4 576.7 - Acquisition 2.7 - --------- --------- Operating profit of Group undertakings 572.1 576.7 Share of joint ventures' and associate's operating (loss)/profit (33.5) 0.7 --------- --------- Total operating profit - Before goodwill amortisation 546.5 579.9 - Goodwill amortisation (7.9) (2.5) --------- --------- 2 538.6 577.4 Exceptional profit relating to partial disposal of Energis 3 1,027.3 891.8 Net interest 4 (64.9) (118.5) Exceptional cost of closing out interest rate swaps - (52.6) --------- --------- Profit on ordinary activities before taxation 1,501.0 1,298.1 Taxation - Excluding exceptional items (123.1) (120.3) - Exceptional items (229.5) (162.8) --------- --------- 5 (352.6) (283.1) --------- --------- Profit on ordinary activities after taxation 1,148.4 1,015.0 Dividends 6 (205.5) (192.0) --------- --------- Retained profit 942.9 823.0 ========= ========= Earnings per ordinary share - Basic, on profit for the year 7 78.0p 69.2p - Basic, on adjusted profit* 7 24.3p 23.3p - Diluted, on profit for the year 7 73.4p 65.2p - Diluted, on adjusted profit* 7 23.8p 22.7p *Adjusted profit excludes exceptional items and goodwill amortisation Dividends per ordinary share 6 13.94p 13.07p THE NATIONAL GRID GROUP plc GROUP BALANCE SHEET At 31 March 2000 2000 1999 (restated) £m £m Fixed assets Intangible assets - goodwill 844.7 15.1 Tangible assets 4,938.3 3,099.4 Investments 519.0 233.1 --------- --------- 6,302.0 3,347.6 --------- --------- Current assets Stocks 29.3 12.7 Debtors (due within one year) 490.1 140.2 Debtors (due after one year) 798.3 52.3 Assets held for exchange 16.6 16.6 Business held for resale 118.9 - Cash and deposits 1,011.6 1,524.5 --------- --------- 2,464.8 1,746.3 Creditors (due within one year) (1,861.1) (1,414.9) --------- --------- Net current assets 603.7 331.4 --------- --------- Total assets less current liabilities 6,905.7 3,679.0 Creditors (due after more than one year) (3,500.2) (1,680.9) Provisions for liabilities and charges (461.4) (45.6) --------- --------- Net assets employed 2,944.1 1,952.5 ========= ========= Capital and reserves Called up share capital 174.7 173.9 Share premium account 274.7 246.5 Profit and loss account 2,459.6 1,532.1 --------- --------- Shareholders' funds 2,909.0 1,952.5 Minority interests 35.1 - --------- --------- 2,944.1 1,952.5 ========= ========= Net debt 2,663.6 703.4 Gearing 90% 36% THE NATIONAL GRID GROUP plc SUMMARISED GROUP CASH FLOW STATEMENT Year ended 31 March 2000 2000 1999 Notes £m £m Net cash inflow from operating 8(a) 682.0 605.9 activities Dividends from joint ventures 4.5 3.1 Net cash outflow for returns on investments and servicing of finance (64.7) (119.7) Corporate tax paid (274.3) (154.9) Net cash outflow for capital expenditure (279.2) (312.5) Net cash (outflow)/inflow for acquisitions and disposals 8(b) (1,236.7) 934.1 Equity dividends paid (197.6) (183.1) --------- -------- Net cash (outflow)/inflow before management of liquid resources and financing (1,366.0) 772.9 Net cash inflow/(outflow) from the management of liquid resources 9 618.8 (1,482.3) Issue of ordinary shares 5.5 5.4 Repurchase of ordinary shares (1.1) - --------- --------- New borrowings 1,029.3 717.7 Borrowings repaid (260.1) (35.5) --------- --------- Increase in borrowings 9 769.2 682.2 --------- --------- Net cash inflow from financing 773.6 687.6 --------- --------- Movement in cash and overdrafts 9 26.4 (21.8) ========= ========= THE NATIONAL GRID GROUP plc GROUP STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES Year ended 31 March 2000 2000 1999 (restated) Note £m £m Profit after taxation 1,148.4 1,015.0 Exchange adjustments 3.1 (0.8) --------- --------- Total recognised gains and losses relating to the year 1,151.5 1,014.2 ========= Prior year adjustment 1 208.5 --------- Total gains and losses recognised since last annual report 1,360.0 ========= RECONCILIATION OF MOVEMENT IN SHAREHOLDERS' FUNDS Year ended 31 March 2000 2000 1999 (restated) £m £m Profit after taxation 1,148.4 1,015.0 Dividends (205.5) (192.0) --------- --------- 942.9 823.0 Issue of ordinary shares 11.6 5.9 Repurchase of ordinary shares (1.1) - Exchange adjustments 3.1 (0.8) --------- --------- Net increase in shareholders' funds 956.5 828.1 Shareholders' funds at start of year 1,952.5* 1,124.4 --------- --------- Shareholders' funds at end of year 2,909.0 1,952.5 ========= ========= * originally £1,744.0m before adding prior year adjustment of £208.5m THE NATIONAL GRID GROUP plc NOTES 1. Prior year adjustment The Group has adopted the policy of capitalising interest costs that are directly attributable to the construction of tangible fixed assets as part of the cost of those assets, in line with Financial Reporting Standard 15 'Tangible Fixed Assets' ('FRS 15'). The interest capitalised is being depreciated over the estimated useful economic lives of the related tangible fixed assets. This change in accounting policy, which has the effect of reducing total operating profit and net interest charge for the year ended 31 March 2000 by £6.5m and £22.5m respectively, has been reflected in the accounts as a prior period adjustment in accordance with Financial Reporting Standard 3. As a result, shareholders' funds at 31 March 1999 have been increased by £208.5m and the comparative amounts of total operating profit and net interest charge for the year ended 31 March 1999 have been reduced by £5.9m and £19.4m respectively. 2. Segmental analysis Turnover Operating profit 2000 1999 2000 1999 (restated) £m £m £m £m Continuing operations: UK transmission 1,208.2 1,194.6 522.8 507.9 Interconnectors 86.6 75.8 45.7 39.5 Ancillary services 111.9 116.6 0.3 0.2 Other activities 209.4 161.9 0.6 29.1* Sales between businesses (37.6) (34.7) - - --------- --------- --------- --------- 1,578.5 1,514.2 569.4 576.7 NEES (acquisition) 36.2 - 2.7 - --------- --------- Group turnover 1,614.7 1,514.2 ========= ========= --------- --------- Operating profit of Group undertakings 572.1 576.7 --------- --------- Joint ventures - transmission, distribution and supply of electricity 14.6 12.3 - telecommunications (44.1) - --------- --------- (29.5) 12.3 Associate (Energis) - telecommunications (4.0) (11.6) --------- --------- Share of joint ventures' and associate's operating (loss)/profit (33.5) 0.7 --------- --------- Total operating profit 538.6 577.4 ========= ========= * Includes £15.2m relating to a revision of accounting estimates of provisions resulting from the implementation of FRS 12. The principal activities of NEES (New England Electric System, now renamed National Grid USA) are the transmission and distribution of electricity. 3. Exceptional profit relating to partial disposal of Energis The exceptional profit of £1,027.3m relating to the partial disposal of the Group's shareholding in Energis, an associated undertaking, comprises a profit of £895.2m (£665.7m after tax) resulting from the sale of 28.9m shares in Energis and a pre and post-tax profit of £132.1m relating to reductions in the Group's interest in Energis primarily as a consequence of the placing by Energis of 14.8m of its shares. 4. Net interest 2000 1999 (restated) £m £m Interest payable and similar charges 158.4 148.4 Interest capitalised (20.4) (19.4) Interest receivable and similar income (95.0) (28.1) -------- -------- 43.0 100.9 Joint ventures and associate 21.9 17.6 -------- -------- 64.9 118.5 ======== ======== 5. Taxation 2000 1999 £m £m United Kingdom corporation tax 117.9 117.3 Overseas taxation 2.1 1.0 --------- --------- 120.0 118.3 Joint ventures and associate 3.1 2.0 --------- --------- Taxation - excluding exceptional items 123.1 120.3 Taxation - relating to exceptional items 229.5 162.8 --------- --------- 352.6 283.1 ========= ========= 6. Dividends 2000 1999 2000 1999 pence pence (per ordinary share) £m £m Interim 5.59 5.25 82.5 76.9 Proposed final 8.35 7.82 123.0 115.1 --------- --------- --------- --------- 13.94 13.07 205.5 192.0 ========= ========= ========= ========= The proposed final dividend of 8.35p per ordinary share will be paid on 15 August 2000 to shareholders on the register on 5 June 2000. 7. Earnings per ordinary share Basic earnings per ordinary share for the year ended 31 March 2000 of 78.0p (1999 : 69.2p) is calculated based on profit after taxation of £1,148.4m (1999 : £1,015.0m) and 1,472.9m (1999: 1,466.6m) shares - being the weighted average number of shares in issue during the year, excluding the shares held by employee share trusts. Basic earnings per ordinary share on the adjusted profit for the year ended 31 March 2000 of 24.3p (1999 : 23.3p) excludes the net exceptional gain (as described in note 3) and goodwill amortisation totalling £789.9m (1999: £673.9m) and is based on earnings of £358.5m (1999 : £341.1m). For the purposes of calculating diluted earnings per share, earnings and the weighted average number of shares have been adjusted for the effects of dilutive potential ordinary shares. 8. Summarised Group cash flow statement a) Net cash inflow from operating activities 2000 1999 (restated) £m £m Operating profit of Group undertakings 572.1 576.7 Depreciation and amortisation 157.5 134.0 Profit on disposal of tangible fixed assets (4.3) (2.5) (Increase)/decrease in stocks (0.4) 0.2 Increase in debtors (21.9) (13.0) Decrease in creditors (11.5) (60.6) Decrease in provisions (6.8) (29.6) Other (2.7) 0.7 --------- --------- 109.9 29.2 --------- --------- 682.0 605.9 ========= ========= b) Net cash outflow for acquisitions and disposals 2000 1999 £m £m Acquisition of Group undertakings (2,045.1) (12.1) Payments to acquire investments (144.5) (13.1) Receipts from sales of Energis shares 952.9 959.3 --------- --------- (1,236.7) 934.1 ========= ========= 9. Movement in net debt 2000 1999 £m £m Movement in cash and overdrafts 26.4 (21.8) Cash (inflow)/outflow from management of liquid resources (618.8) 1,482.3 Increase in borrowings (769.2) (675.2)* --------- --------- Change in net debt resulting from cash flows (1,361.6) 785.3 Acquisition of Group undertakings (611.7) (4.2) Certificates of tax deposit surrendered (5.9) (8.7) Exchange adjustments 29.9 (0.3) Other non-cash movements (10.9) (10.2) --------- --------- Movement in net debt in the year (1,960.2) 761.9 Net debt at start of year (703.4) (1,465.3) --------- --------- Net debt at end of year (2,663.6) (703.4) ========= ========= * Net of £7.0m costs relating to the issue of long term debt. 10. Acquisition of NEES The composition of the Group's balance sheet has significantly changed as a result of the acquisition of NEES on 22 March 2000. The acquisition cost £2,070.8m and the net assets acquired had a provisional fair value of £1,223.2m, resulting in goodwill of £847.6m which has been capitalised and is being amortised through the profit and loss account over 20 years. 11. Differences between UK and US Generally Accepted Accounting Principles ('GAAP') The Group prepares its consolidated accounts in accordance with UK GAAP, which differ in certain respects from US GAAP. The significant adjustments necessary to restate net income and shareholders' funds in accordance with US GAAP are set out below. a) Net income 2000 1999 (restated) £m £m Profit after taxation, excluding exceptional items 350.6 338.6 Exceptional items after taxation 797.8 676.4 --------- --------- Net income under UK GAAP 1,148.4 1,015.0 --------- --------- Adjustments to conform with US GAAP: Deferred taxation (1.4) (40.5) Pensions 5.7 14.9 Share option schemes (5.4) (4.5) Tangible fixed assets 3.4 3.4 Interest rate and currency swaps 27.9 25.5 Issue costs associated with EPICs (1.8) 7.3 EPICs liability (115.0) - Severance costs (11.3) (12.2) Goodwill - effect of US GAAP adjustments (0.2) - Share of associate's adjustments to conform with US GAAP (40.5) (6.1) --------- --------- Total US GAAP adjustments (138.6) (12.2) --------- --------- Net income under US GAAP 1,009.8 1,002.8 ========= ========= Basic earnings per share - US GAAP 68.6p 68.4p Diluted earnings per share - US GAAP 64.7p 64.4p Net income under US GAAP includes £795.7m (1999 : £718.6m) relating to the profit arising on the partial disposal of the Group's shareholding in Energis plc, which is treated as an exceptional item under UK GAAP. b) Shareholders' funds 2000 1999 (restated) £m £m Shareholders' funds under UK GAAP 2,909.0 1,952.5 --------- --------- Adjustments to conform with US GAAP: Deferred taxation (916.7) (704.5) Pensions 162.8 163.0 Shares held by employee share trusts (16.3) (11.0) Ordinary dividends 123.0 115.1 Tangible fixed assets (45.0) (48.4) Interest rate and currency swaps 1.0 (5.7) Issues costs associated with EPICs 5.5 7.3 EPICs liability (115.0) - Severance liabilities 5.5 10.9 Goodwill - effect of US GAAP adjustments 210.6 - Share of associate's adjustments to conform with US GAAP 21.3 (15.1) --------- --------- Total US GAAP adjustments (563.3) (488.4) --------- --------- Shareholders' funds under US GAAP 2,345.7 1,464.1 ========= ========= 12. Basis of preparation The financial information contained in this announcement, which does not constitute statutory accounts as defined in Section 240 of the Companies Act 1985, has been extracted from the audited statutory accounts of the Group in respect of the year ended 31 March 2000 which will be filed with the Registrar of Companies in due course. The auditors' report on these accounts is unqualified and does not contain a statement under section 237(2) or (3) of the Companies Act 1985. This preliminary results announcement was approved by the Board of Directors on 22 May 2000. Cautionary statement In order to utilise the safe harbour provisions of the United States Private Securities Litigation Reform Act of 1995, The National Grid Group plc (NGG) is providing the following cautionary statement: this document contains certain forward-looking statements with respect to management aims and objectives; financial condition; results of operations; planned expansion; investments or other projects; the timing of investments, acquisitions or dispositions, and savings and other benefits as a result of the acquisitions of NEES and EUA. By their nature, forward-looking statements involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future. Actual results and developments could differ materially from those expressed or implied by these forward-looking statements. This could happen because of, among other things, changes in economic and business conditions in the United Kingdom, the United States and internationally; in the regulatory policies adopted by the authorities of the United Kingdom, the United States and other jurisdictions; and in the political conditions and economic growth in other areas where we do business.

Companies

National Grid (NG.)
Investor Meets Company
UK 100
FTSE quotes by TradingView

Latest directors dealings

All directors dealings today