Interim Results
National Grid Transco PLC
18 November 2004
Embargoed until 0700 18 November 2004
National Grid Transco plc
Results for the six months ended 30 September 2004
Strong earnings growth. Positive outlook.
• Strong operating performance, particularly from the US
• Underlying earnings per share up 10%
• Sale of four UK gas distribution networks at a substantial premium to RAV
on track
• Crown Castle UK - performance and integration progressing well
• Planned £2 billion return of value
• Planned 20% increase in total dividend for the year - 7% increase in
interim dividend
Financial highlights - £ million (except where indicated)
Six months ended 30 September
2004 2003 - restated % change
(Note A)
Underlying business results (Note B)
Operating profit - constant
currency basis (Note C) 771 753 2
Operating profit - actual exchange rate 771 783 (2)
Pre-tax profit 394 373 6
Earnings 296 267 11
Earnings per share 9.6p 8.7p 10
Statutory results
Operating profit 633 583 9
Pre-tax profit 289 439 (34)
Earnings 215 387 (44)
Earnings per share * 7.0p 12.6p (44)
Dividend per share 8.5p 7.91p 7
Underlying Business Results exclude goodwill amortisation and exceptional items.
For notes A, B and C - see REVIEW OF GROUP RESULTS below. *Statutory EPS last
year included 7.4p exceptional gain related to the EPIC bond.
Sir John Parker, Chairman, said:
'We have delivered another robust operating performance across the Group,
particularly from our US business. We have continued to drive strong growth in
underlying earnings per share, up 10% over the same period last year.
'In addition, during the period we reached agreement to sell four of our UK gas
distribution networks. These sales will realise a substantial premium to the
regulatory asset values of the networks, deliver our desired shape for the UK
gas distribution business going forward and enable a £2 billion return of value
to our shareholders and repayment of £2.3 billion of debt following their
completion. We have also completed the acquisition of Crown Castle UK, creating
the UK's leading independent provider of wireless infrastructure services.
'In the light of our outlook for the full year and our confidence in the Group's
longer term prospects, we plan to increase our total dividend for the year by
20%, subject to the completion of the network sales. This will bring dividend
growth of nearly 40% since the merger of Lattice with National Grid. From this
higher dividend level, we will then maintain our target of 7% annual dividend
growth over the three years to March 2008.'
OVERVIEW
A strong operational performance across the Group, particularly from our US
business, drove the growth in the Group's underlying operating profit, which
increased by £18m (2%) on a constant currency basis to £771m. This was despite
our planned £52m increase in expenditure on the replacement of UK gas mains
('repex') in UK gas distribution, which represents the great majority of the
expected full year increase. Group underlying profit before tax increased by 6%
to £394m, and underlying earnings per share grew 10% to 9.6p.
In the US, we reduced controllable costs by £25m to a level that is 15% below
that at March 2002 in real terms. Building on the long term rate agreements we
have in the US, we have now successfully completed the interim review of our
Rhode Island regulatory rate plan, delivering immediate customer benefits whilst
retaining a return on equity, including incentives, approaching 12%, with the
opportunity to deliver further benefits from outperformance. Last month, we
reached agreement with our labour union in New York on a new 42 month labour
contract and look forward to delivering the benefits that this will bring. This,
together with last year's agreement with our New England unions, enables us to
still further increase productivity through more efficient working practices
alongside additional benefits in terms of safety and service standards.
In the UK, we continued our record of strong operating performance in both the
transmission and distribution businesses. Following the agreement to sell four
of our UK gas distribution networks, we are now implementing the next stage of
our 'Way Ahead' programme within the retained UK gas distribution business. We
have made good progress towards obtaining the required regulatory approvals to
complete the sales, and anticipate completion in the second calendar quarter of
2005. With expected cash proceeds of £5.8bn, the sales will crystallise a 20%
premium to the March 2004 regulatory asset value (14% to our estimated March
2005 regulatory asset value) and represent a further major step in value
creation. They deliver our desired shape for the UK gas distribution business
going forward and enable both a £2bn return of value to our shareholders and
repayment of £2.3bn of debt following their completion.
During the period, we invested £900m (including repex) in our businesses. We
also completed the acquisition of the UK assets of Crown Castle International
Corp. ('Crown Castle UK') for £1.1bn in August and its performance and
integration with Gridcom in the UK are progressing well.
These results reflect National Grid Transco's core strengths of operational
performance, the management of regulation and disciplined capital management and
reinforce our confidence in our business going forward. While we are announcing
a 7% increase in the interim dividend, we intend (subject to completion of the
network sales) to increase the ordinary dividend by 20% for the current year, a
near 40% increase over the past 2 years. From this higher dividend level, we
will continue to pursue our target of annual dividend growth of 7% until March
2008.
REVIEW OF GROUP RESULTS
Turnover from continuing activities was £3.8bn, down £0.2bn on the same period
last year, mainly reflecting the weaker US Dollar/GBP exchange rate.
Underlying operating profit at constant US Dollar/GBP exchange rates was up 2%.
This was despite a £52m increase in repex in the first half, which represents
the great majority of the expected full year increase. The total repex of £238m
in the period (£186m last year) is fully expensed for accounting (and taxation)
purposes. However, for regulatory purposes, half of the regulatory allowance for
repex is recovered in current revenues and half is added to the regulatory asset
base. The effect of removing half of the repex, net of tax, from earnings is
equivalent to increasing earnings per share by 2.7p in the current period (2.1p
in the prior period).
We reduced net interest expense by £33m to £377m, despite an increase in
interest rates during the period, primarily by refinancing and continued active
management of the debt book, lower average net debt during the period and the
weaker US Dollar.
Underlying profit before tax was up 10% from £359m to £394m on a constant
currency basis, and up 6% from £373m on an actual exchange rate basis.
The tax charge on underlying profit for the period was £100m, representing an
effective tax rate of 25%.
Underlying earnings were £296m, up from £267m last year. Underlying earnings per
share were up 10% to 9.6p from 8.7p last year.
The period-on-period weakness in the US Dollar means that last year's underlying
operating profit was £30m higher than on a constant currency basis but, after
interest and tax, the net impact on underlying earnings was £9m.
There were net exceptional charges (including both operating and non-operating
exceptional items) totalling £58m before tax, comprising:
• Restructuring costs of £91m (£67m after tax) relating to planned cost
reduction programmes, the gas distribution network sales and the integration of
Gridcom and Crown Castle, less
• Gains on sales of property and businesses of £33m before and after tax.
After exceptional items and goodwill amortisation, basic earnings per share were
7.0p, down from 12.6p last year, when we had a significant net exceptional gain
arising from the settlement of the Energis-related EPIC bond, which enhanced
last year's earnings per share by 7.4p.
We maintained our high levels of investment in the business, with capital
expenditure for the period, including capitalised interest, of £662m, compared
with £723m last year.
The Group has consistently generated strong cashflow. Underlying cashflow from
operations for the period of £988m (of which £387m came from our US businesses)
up 6% from £932m last year.
Group net debt was £14.5bn at 30 September 2004, up £1.9bn from 31 March 2004,
reflecting the £1.1bn acquisition of Crown Castle UK, the normal first half
seasonal cash outflow and some strengthening of the US Dollar since 31 March
2004.
An interim dividend of 8.5p per ordinary share ($0.7865 per American Depositary
Share (ADS)) will be paid on 24 January 2005 to shareholders on the register on
3 December 2004.
Note A: In our 2003/04 full year results, we indicated that we would implement
FRS20 (Share-based Payment) and provided information on the expected financial
impact. We have now implemented FRS20. In addition, to align with our
presentation of the full year results for 2003/04, we have reclassified certain
losses on the disposal of tangible fixed assets in the prior half year from
exceptional items and included them within the depreciation charge. All
comparisons in this statement are against the restated figures for the prior
period. Further detail is provided in Note 1.
Note B: 'Underlying business results' represent the primary measures used by the
Board and are presented before goodwill amortisation and exceptional items. The
Board believes that exclusion of these items provides a better comparison of
results. Unless otherwise stated, all financial commentaries in this
announcement are on an 'underlying business results' basis and are preceded by
the prefix 'underlying'. Reconciliations of these measures to statutory measures
are provided in the Group Profit & Loss Account, Notes 6(a) and 6(b), and the
Group Cash Flow Statement. Further detail is provided on our website
(www.ngtgroup.com).
Note C: 'Constant currency basis' refers to reporting of the actual 2004 first
half underlying business results against the 2003 first half results which, in
respect of any US$ currency denominated activity, have been translated using the
average US$ exchange rate for the six months ended 30 September 2004.
REVIEW OF OPERATIONS
ELECTRICITY AND GAS TRANSMISSION
Six months ended 30 September 2004 (£m) 2003 (£m) % Change
(restated)
Underlying operating profit
UK Electricity Transmission 283 258 10
UK Gas Transmission 82 119 (31)
---------- ----------
UK Electricity & Gas Transmission 365 377 (3)
US Electricity Transmission
- constant currency basis 65 63 3
- actual exchange rate 65 70 (7)
Underlying operating profit from UK electricity transmission was up £25m (10%)
at £283m compared with £258m last year. This primarily reflects the expected
beneficial impact from the new connections charging reform ('Plugs') of £16m and
timing effects of transmission operator revenue which was under-collected last
year (£14m), offset by £5m of higher electricity pension charges.
Underlying operating profit from UK gas transmission was down £37m (31%),
although this primarily reflects a timing difference of £26m in lower income
from capacity auctions that will be recovered in the second half of the year.
The remainder of the variance mainly reflects a one-off benefit in gas shrinkage
costs in 2003/04 of £9m.
In UK electricity transmission, we have been appointed as Great Britain System
Operator and expect that the British Electricity Transmission and Trading
Arrangements (BETTA) will be implemented in April 2005, expanding our System
Operator role into Scotland. Furthermore, as the proportion of renewable
generation and imports of both gas and LNG increase, we anticipate additional
opportunities to invest in our UK transmission networks.
In the US, our transmission business delivered underlying operating profit of
£65m, up 3% on last year on a constant currency basis.
In New England, we are working with other transmission owners to implement the
recently approved Regional Transmission Organisation ('RTO') and have filed with
FERC requesting an increased return on equity for both existing operations and
new transmission investment. GridAmerica has had a very successful first year of
operations and is already bringing greater independence, coordination and
efficiency to transmission in the Midwest.
UK GAS DISTRIBUTION
Six months ended 30 September 2004 (£m) 2003 (£m) % Change
(restated)
Underlying operating profit 18 38 (53)
Replacement expenditure 238 186 28
Underlying operating profit from UK gas distribution was £18m, compared with
£38m in the same period last year, primarily because the great majority (£52m)
of the planned year-on-year increase in repex was undertaken in the first half.
This was only partially offset by an increase in formula income driven by
increased underlying volumes and colder weather than last year.
Although colder than last year, the weather during the period was actually much
warmer than normal and revenues would have been some £30m higher if seasonal
normal temperatures had prevailed. Generally, the financial performance of this
business is heavily weighted towards the second half, due to the seasonality of
gas consumption.
As announced on 31 August 2004, we have reached agreement to sell four of our
eight UK gas distribution networks. We are making good progress with the
required regulatory approvals and expect the transactions to complete in the
second calendar quarter of 2005.
The reshaped business distributes gas to more than 11 million consumers,
including those in the cities of London, Birmingham, Manchester and Liverpool,
with a more densely populated network covering just over a quarter of Great
Britain. We expect that this will enable us to deliver our 'Way Ahead' programme
more effectively and continue to define the new efficiency frontier for UK gas
distribution. Following the sales announcement, we immediately moved into the
next implementation phase of the 'Way Ahead'. The management team has been
appointed and we have scheduled the office closures required to move towards a
centralised business model that will enable us better to exploit best practice
and operational synergies. We are also making excellent progress in developing
our new contractor alliances in order to deliver our replacement expenditure
programme more effectively.
US ELECTRICITY AND GAS DISTRIBUTION
Six months ended 30 September 2004 (£m) 2003 (£m) % Change
Underlying operating profit (constant currency basis)
- electricity distribution
(excl stranded costs) 154 140 10
- gas distribution 16 6 167
---------- ----------
170 146 16
- stranded costs 53 52 2
---------- ----------
223 198 13
---------- ----------
Underlying operating profit (actual exchange rate)
- electricity distribution
(excl stranded costs) 154 156 (1)
- gas distribution 16 7 129
---------- ----------
170 163 4
- stranded costs 53 58 (9)
---------- ----------
223 221 1
---------- ----------
The performance of our US electricity and gas distribution business has been
particularly strong. Despite the impact of a cool summer, underlying operating
profit (excluding stranded cost recovery) increased by £24m (16%) in the period
on a constant currency basis to £170m.
Weather adjusted electricity distribution volume growth remains strong at 3%
overall.
We have reduced our distribution controllable costs by £25m since last year,
reflecting the effects of reductions in headcount and programmes for the
management of bad debt. US controllable costs (including transmission) are now
15% below their March 2002 level in real terms.
We have reached agreement on a new 42 month contract with our labour union in
New York. Together with last year's agreement with our New England unions, this
will enable us to increase productivity still further through more efficient
working practices alongside additional benefits in terms of safety and service
standards.
In Rhode Island, we have successfully completed the interim review of our
regulatory rate plan, delivering immediate customer benefits whilst retaining a
return on equity, including incentives, approaching 12%. The agreement allows us
to retain our share of earned savings until 2019, in line with our original
agreement, with the opportunity to deliver further customer benefits and
shareholder value from further outperformance.
WIRELESS INFRASTRUCTURE AND OTHER ACTIVITIES
Six months ended 30 September 2004 (£m) 2003 (£m) % Change
(restated)
Underlying operating profit
Wireless infrastructure business 9 2 350
Other activities (including
joint ventures) 91 75 21
Wireless infrastructure business
We completed the acquisition of Crown Castle UK on 31 August 2004. The business
is performing in line with our expectations and, with new mobile operator leases
adding to recurring revenues, it is on track to deliver good profit growth. We
remain confident of achieving our integration savings of £18m on an annualised
basis by March 2006 and expect to deliver more than half this target by March
2005.
With one month's contribution from Crown Castle UK and improved performances at
Gridcom's UK and US businesses, underlying operating profit in this business was
£9m, up from £2m last year.
Other activities
Across our other activities (including joint ventures), underlying operating
profit for the period was £91m, up from £75m last year. This reflects
particularly strong first half sales of property stock by SecondSite and the
elimination of losses at Fulcrum Connections, partially offset by the expected
impact of the new pricing structure of our contracts with gas suppliers within
our Metering business.
We continue to make good progress on construction of our LNG import terminal at
the Isle of Grain and the Basslink project in Australia. These projects are
expected to be ready for service as planned during 2005. We have also received
planning permission to extend the Grain LNG import facility and are actively
assessing market interest in potential expansion.
PENSIONS
We have completed the annual assessment of the Lattice Group Pension Scheme as
agreed with the trustees last year. This is less extensive than a formal
valuation and shows a funding deficit, net of tax, in the range of £400m - £500m
at 31 March 2004.
A new three-yearly actuarial valuation for the National Grid Pension Scheme has
been carried out and shows a funding deficit, net of tax, of £190m. We are in
discussions with the trustees with a view to deferring deficit contributions
until 2007.
The SSAP24 charges (including interest) for the period for the Lattice Group and
National Grid pension schemes were £56m (2003 £73m) and £18m (2003 £4m)
respectively.
BOARD CHANGES
As previously announced, Rick Sergel retired from the Board on 26 July 2004 and
has been replaced by Mike Jesanis. Following James Ross' retirement on 21
October 2004, Ken Harvey is now the Senior Independent Director.
OUTLOOK, RETURN OF VALUE AND DIVIDEND POLICY
Continued strong operational performance across our businesses in both the UK
and the US underpins our confidence in the prospects for the Group. We are
confident of achieving our targeted reductions in controllable costs across our
businesses and of the increasing opportunities for investment for growth.
With the sales of the four UK gas distribution networks scheduled for completion
in the second calendar quarter of 2005, we expect to deliver the return of £2bn
to shareholders during the summer of 2005. We expect this return of value to be
by way of a B-share scheme, followed by a share consolidation. This will provide
shareholders with the choice of receiving the return as a dividend or through
the repurchase of B-shares.
As previously announced, we intend to raise the total dividend for the year by
20% to 23.7p, subject to completion of the network sales process, and expect
that this increase over our previously stated policy will be paid as part of the
final dividend. An interim dividend of 8.5p per ordinary share ($0.7865 per
American Depositary Share (ADS)) will be paid on 24 January 2005 to shareholders
on the register on 3 December 2004, representing a 7% increase on the interim
dividend paid in the last financial year. Looking ahead, we continue to aim to
increase dividends per ordinary share expressed in sterling by 7% in each
financial year up to 31 March 2008.
CONTACT DETAILS
National Grid Transco:
Investors
Alexandra Lewis +44 (0)20 7004 3170 +44 (0)7768 554879(m)
Terry McCormick +44 (0)20 7004 3171 +44 (0)7768 045139(m)
Richard Smith +44 (0)20 7004 3172 +44 (0)7768 555641(m)
Bob Seega (US) +1 508 389 2598
Media
Clive Hawkins +44 (0)20 7004 3147 +44 (0) 7836 357173(m)
Citigate Dewe Rogerson +44 (0)20 7638 9571
Anthony Carlisle +44 (0)7973 611888(m)
An analyst presentation will be held at Merrill Lynch, The King Edward Hall, 2
King Edward Street, London, EC1A 1HQ at 8:45 am (UK time) today.
Live telephone coverage of analyst presentation - password National Grid Transco
Dial in number +44 (0) 20 7081 9429
US call in number +1 800 897 3150
Telephone replay of the analyst presentation (available until 2 December 2004)
Dial in number + 44 (0) 20 7081 9440
Account number 869 448
Recording number 265 426
Live webcast of presentation will also be available at www.ngtgroup.com
Photographs are available on www.newscast.co.uk
Cautionary statement
This announcement contains certain statements that are neither reported
financial results nor other historical information. These statements are
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended. Because these forward-looking statements are subject to assumptions,
risks and uncertainties, actual future results may differ materially from those
expressed in or implied by such statements. Many of these assumptions, risks and
uncertainties relate to factors that are beyond National Grid Transco's ability
to control or estimate precisely, such as delays in obtaining, or adverse
conditions contained in, regulatory approvals, competition and industry
restructuring, changes in economic conditions, currency fluctuations, changes in
interest and tax rates, changes in energy market prices, changes in historical
weather patterns, changes in laws, regulations or regulatory policies,
developments in legal or public policy doctrines, technological developments,
the failure to retain key management, the availability of new acquisition
opportunities or the timing and success of future acquisition opportunities.
Other factors that could cause actual results to differ materially from those
described in this announcement include the ability to integrate the US and UK
businesses acquired by or merged with National Grid Transco or to continue to
realise the expected synergies from such integrations, the failure for any
reason to achieve reductions in costs or to achieve operational efficiencies,
unseasonable weather impacting on demand for electricity and gas, the behaviour
of UK electricity market participants on system balancing, the timing of
amendments in prices to shippers in the UK gas market, the performance of
National Grid Transco's pension schemes and the regulatory treatment of pension
costs, the impact of the proposed disposal by National Grid Transco of 4 of its
UK gas distribution networks and any adverse consequences arising from outages
on or otherwise affecting energy networks owned and/or operated by National Grid
Transco. For a more detailed description of these assumptions, risks and
uncertainties, together with any other risk factors, please see National Grid
Transco's filings with the United States Securities and Exchange Commission (and
in particular the 'Risk Factors' and 'Operating and Financial Review' sections
in its most recent annual report on Form 20-F). Recipients are cautioned not to
place undue reliance on these forward-looking statements, which speak only as of
the date of this announcement. National Grid Transco does not undertake any
obligation to release publicly any revisions to these forward-looking statements
to reflect events or circumstances after the date of this announcement.
GROUP PROFIT AND LOSS ACCOUNT 2004 2003 Year ended
FOR THE SIX MONTHS ENDED (restated) 31 March
30 SEPTEMBER 2004
(restated)
Notes £m £m £m
=========== =========== ===========
Group turnover
- continuing operations
before acquisition 2a 3,760 4,029 8,875
Group turnover
- acquisition 2a 22 - -
--------------- --------------- ---------------
Group turnover
- continuing operations 3,782 4,029 8,875
Group turnover
- discontinued operations 2a - 158 158
--------------- --------------- ---------------
Group turnover 3,782 4,187 9,033
Operating costs (3,153) (3,609) (7,203)
--------------- --------------- ---------------
Operating profit of
Group undertakings -
continuing operations
before acquisition 2c 624 578 1,830
Operating profit of
Group undertakings -
acquisition 2c 5 - -
--------------- --------------- ---------------
Operating profit of
Group undertakings -
continuing operations 629 578 1,830
--------------- --------------- ---------------
Share of joint ventures'
operating profit -
continuing operations 2c 3 4 7
Share of joint ventures'
operating profit -
discontinued operations 2c 1 1 -
--------------- --------------- ---------------
Share of joint ventures'
operating profit 4 5 7
--------------- --------------- ---------------
Operating profit
- Before exceptional
items and goodwill
amortisation 2b 771 783 2,213
- Exceptional items 3a (91) (150) (277)
- Goodwill amortisation (47) (50) (99)
--------------- --------------- ---------------
Total operating profit 633 583 1,837
Non-operating
exceptional items 3b 33 266 322
Net interest 4 (377) (410) (822)
--------------- --------------- ---------------
Profit on ordinary
activities before taxation
- Before exceptional
items and goodwill
amortisation 6a 394 373 1,391
- Exceptional items and
goodwill amortisation (105) 66 (54)
--------------- --------------- ---------------
289 439 1,337
Taxation
- Excluding exceptional
items 5 (100) (102) (350)
- Exceptional items 24 54 89
--------------- --------------- ---------------
(76) (48) (261)
--------------- --------------- ---------------
Profit on ordinary
activities after taxation 213 391 1,076
Minority interests 2 (4) (2)
--------------- --------------- ---------------
Profit for the period
- Before exceptional
items and goodwill
amortisation 6b 296 267 1,039
- Exceptional items and
goodwill amortisation (81) 120 35
--------------- --------------- ---------------
215 387 1,074
Dividends 7 (262) (243) (609)
--------------- --------------- ---------------
(Loss)/profit transferred
(from)/to profit and
loss account reserve (47) 144 465
============ =========== ===========
EARNINGS AND DIVIDENDS PER
ORDINARY SHARE 2004 2003 Year ended
FOR THE SIX MONTHS ENDED (restated) 31 March
30 SEPTEMBER
2004
(restated)
Notes pence pence pence
=========== =========== ===========
Basic (including exceptional
items and goodwill 6b 7.0 12.6 35.0
amortisation)
Adjusted basic (excluding
exceptional items and goodwill
amortisation) 6b 9.6 8.7 33.8
=========== =========== ===========
Dividends per ordinary share 7 8.5 7.91 19.78
=========== =========== ===========
GROUP STATEMENT OF TOTAL Year ended
RECOGNISED GAINS AND LOSSES
FOR THE SIX MONTHS ENDED 31 March
30 SEPTEMBER 2004 2003 2004
(restated) (restated)
£m £m £m
=========== =========== ===========
Profit for the period 215 387 1,074
Exchange
adjustments 55 (171) (417)
Tax on exchange
adjustments - - (12)
--------------- --------------- ---------------
Total recognised
gains and losses 270 216 645
=========== =========== ===========
GROUP BALANCE SHEET AT
30 SEPTEMBER 2004 2003 At 31 March
2004
(restated) (restated)
Note £m £m £m
=========== =========== ===========
Fixed assets
Intangible assets 2,236 1,745 1,537
Tangible assets 17,554 16,845 16,706
Investments in
joint ventures 19 41 19
Other investments 135 155 132
--------------- --------------- ---------------
19,944 18,786 18,394
--------------- --------------- ---------------
Current assets
Stocks 158 190 91
Debtors (amounts
falling due within
one year) 1,563 1,729 1,588
Debtors (amounts
falling due after more
than one year) 2,692 3,040 2,708
Cash and investments 688 499 616
--------------- --------------- ---------------
5,101 5,458 5,003
Creditors (amounts
falling due within
one year) (5,725) (4,688) (4,513)
--------------- --------------- ---------------
Net current (liabilities)/
assets (624) 770 490
--------------- --------------- ---------------
Total assets less
current liabilities 19,320 19,556 18,884
Creditors (amounts
falling due after more
than one year) (13,801) (14,146) (13,464)
Provisions for liabilities
and charges (4,224) (4,244) (4,149)
--------------- --------------- ---------------
Net assets employed 1,295 1,166 1,271
============ =========== ===========
Capital and reserves
Called up share capital 309 308 309
Share premium account 1,283 1,247 1,280
Other reserves (4,974) (4,996) (4,983)
Profit and loss account 4,627 4,551 4,615
--------------- --------------- ---------------
Equity shareholders' funds 1,245 1,110 1,221
Minority interests 50 56 50
--------------- --------------- ---------------
Total shareholders' funds 1,295 1,166 1,271
=========== =========== ===========
Net debt
included above 11 14,482 13,921 12,632
--------------- --------------- ---------------
RECONCILIATION OF MOVEMENT IN
EQUITY SHAREHOLDERS' FUNDS Year ended
FOR THE SIX MONTHS ENDED 31 March
30 SEPTEMBER 2004 2003 2004
(restated) (restated)
£m £m £m
=========== =========== ===========
Profit for the
period 215 387 1,074
Dividends (262) (243) (609)
--------------- --------------- ---------------
(47) 144 465
Issue of ordinary shares 3 - 34
Movement in shares held by
employee share trust 4 4 5
Employee share
scheme awards 9 12 25
Exchange adjustments 55 (171) (417)
Tax on exchange
adjustments - - (12)
--------------- --------------- ---------------
Net increase/(decrease) in
equity shareholders' funds 24 (11) 100
--------------- --------------- ---------------
Opening shareholders'
funds as previously reported 1,213 1,152 1,113
Restatement of opening equity
shareholders' funds on
adoption of UITF 38 (i) - (39) -
Restatement of opening equity
shareholders' funds on
adoption of FRS 20 (ii) 8 8 8
--------------- --------------- ---------------
Opening equity shareholders'
funds as restated 1,221 1,121 1,121
--------------- --------------- ---------------
Closing equity
shareholders' funds 1,245 1,110 1,221
=========== =========== ===========
i) The Group adopted Urgent Issues Task Force (UITF) 38 'Accounting for
ESOP trusts' at 31 March 2004. UITF 38 was not reflected in the Group's
published results for the six months to 30 September 2003.
ii) During the six months ended 30 September 2004, the Group adopted
Financial Reporting Standard (FRS) 20 'Share-based Payment'.
Further details of restatements are given in note 1.
GROUP CASH FLOW STATEMENT
FOR THE SIX MONTHS ENDED 2004 2003 Year ended
30 SEPTEMBER 31 March
2004
Notes £m £m £m
=========== =========== ===========
Net cash inflow from
operating activities
before exceptional items 9 988 932 3,058
Expenditure relating to
exceptional items (119) (121) (248)
--------------- --------------- ---------------
Net cash inflow from
operating activities 869 811 2,810
Dividends from
joint ventures 3 2 8
Net cash outflow for
returns on investments
and servicing of finance (381) (335) (692)
Taxation
Corporate tax
(paid)/received (125) 10 (18)
Capital expenditure and
financial investment
Payments to acquire
intangible and tangible
fixed assets (705) (752) (1,400)
Receipts from disposals of
tangible fixed assets 16 64 146
--------------- --------------- ---------------
Net cash outflow for
capital expenditure
and financial investment (689) (688) (1,254)
Acquisitions and disposals
Payments to acquire
subsidiary undertaking 8 (1,133) - -
Less: Cash acquired with
subsidiary undertaking 29 - -
--------------- --------------- ---------------
(1,104) - -
Payments to acquire
investments - (27) (26)
Receipts from disposals of
investments 11 10 33
--------------- --------------- ---------------
Net cash (outflow)/inflow
from acquisitions
and disposals (1,093) (17) 7
Equity dividends paid (366) (317) (560)
--------------- --------------- ---------------
Net cash (outflow)/inflow
before the management
of liquid resources and
financing (1,782) (534) 301
Net cash (outflow)/inflow
from the management of
liquid resources 10 (107) 76 (48)
Financing
Issue of ordinary shares 3 - 38
Termination of
cross currency swaps 10 - 148 148
Increase/(decrease) in
borrowings 10 1,860 287 (426)
--------------- --------------- ---------------
Net cash inflow/(outflow)
from financing 1,863 435 (240)
--------------- --------------- ---------------
Movement in cash and
overdrafts 10 (26) (23) 13
=========== =========== ===========
NOTES TO THE ACCOUNTS
1. Basis of preparation
The financial information contained in this announcement has been prepared on
the basis of the accounting policies set out in the National Grid Transco Annual
Report and Accounts for the year ended 31 March 2004 except as described below,
and does not constitute statutory accounts as defined in Section 240 of the
Companies Act 1985. The financial information in respect of the year ended 31
March 2004 has been derived from the statutory accounts for the year ended 31
March 2004, which have been delivered to the Registrar of Companies. The
auditors' report on those statutory accounts was unqualified and did not contain
a statement under Section 237(2) or (3) of the Companies Act 1985. The financial
information in respect of the six months ended 30 September 2004 is unaudited
but has been reviewed by the auditors and their report is attached to this
document.
New accounting standards and changes in presentation
Adoption of Financial Reporting Standard (FRS) 20
During the year the company adopted FRS 20 'Share-based Payment'. The adoption
of the standard constitutes a change in accounting policy and therefore the
impact has been reflected as a prior year adjustment in accordance with FRS 3
'Reporting Financial Performance'.
The standard requires that where shares or rights to shares are granted to third
parties, including employees, a charge should be recognised in the profit and
loss account based on the fair value of the shares at the date the grant of
shares or right to shares is made.
Adoption of Urgent Issues Task Force (UITF) 38
At 31 March 2004 the company adopted UITF 38 'Accounting for ESOP trusts'. The
adoption of this standard constituted a change in accounting policy and was
accounted for as a prior year adjustment in accordance with FRS 3. The effect of
adoption of this standard was reflected in the accounts for the year ended 31
March 2004. In respect of the six months ended 30 September 2003, the effect of
adoption is described below.
At 30 September 2003 the Group reported £39m of own shares within fixed asset
investments. On adoption of UITF 38, the own shares have been transferred from
fixed asset investments into the profit and loss account reserve. The adoption
of UITF 38 has resulted in a decrease in net assets of £39m at 30 September
2003.
Changes in presentation
To align with the treatment adopted in presenting the results for the year ended
31 March 2004, certain losses on disposal of tangible fixed assets have been
reclassified for the six months ended 30 September 2003 from exceptional items
to depreciation.
The effect of the adoption of these accounting standards and the
reclassification of certain losses on disposal of tangible fixed assets is as
follows:
Six months ended 30 September 2003
____________Operating Profit___________
Before exceptional After exceptional
items and goodwill items and goodwill
amortisation amortisation
£m £m
================== ==================
As previously reported 815 595
Impact of FRS 20 (12) (12)
Impact of UITF 38 - -
Certain losses on disposal of
tangible fixed assets reclassified
to depreciation (20) -
------------------ ------------------
As restated 783 583
================== ==================
Six months ended 30 September 2003
___________Profit for the period_________
Before exceptional After exceptional
items and goodwill items and goodwill
amortisation amortisation
£m £m
================== ==================
As previously reported 299 399
Impact of FRS 20 (12) (12)
Impact of UITF 38 - -
Certain losses on disposal of
tangible fixed assets reclassified
to depreciation (20) -
------------------ ------------------
As restated 267 387
================== ==================
Six months ended 30 September 2003
Net assets employed
£m
==================
As previously reported 1,197
Impact of FRS 20 8
Impact of UITF 38 (39)
------------------
As restated 1,166
==================
Year ended 31 March 2004
___________Operating Profit_______________
Before exceptional After exceptional
items and goodwill items and goodwill
amortisation amortisation
£m £m
================== ==================
As previously reported 2,238 1,862
Impact of FRS 20 (25) (25)
------------------ ------------------
As restated 2,213 1,837
================== ==================
Year ended 31 March 2004
___________Profit for the year____________
Before exceptional After exceptional
items and goodwill items and goodwill
amortisation amortisation
£m £m
================== ==================
As previously reported 1,064 1,099
Impact of FRS 20 (25) (25)
------------------ ------------------
As restated 1,039 1,074
================== ==================
Year ended 31 March 2004
Net assets employed
£m
==================
As previously reported 1,263
Impact of FRS 20 8
------------------
As restated 1,271
==================
This interim results announcement was approved by the Board of Directors on
17 November 2004
2. Segmental analysis
Segmental information is presented in accordance with the management
responsibilities and economic characteristics of the Group's business
activities. As a result of the acquisition of Crown Castle UK as described in
note 8, a new business segment has been presented for the first time. The
results of Crown Castle UK have been combined with similar activities of the
existing operations of the Group and presented as a new segment shown as
'Wireless infrastructure' below. The related comparative numbers of this segment
were previously included within 'Other activities'.
a) Group turnover
Six months ended
30 September 2004 2003 Year ended
(restated) 31 March
2004
(restated)
£m £m £m
============ =========== ===========
Continuing operations
UK gas distribution 812 764 2,245
UK electricity and gas
transmission 870 867 1,867
US electricity transmission 146 160 318
US electricity distribution 1,576 1,838 3,537
US gas distribution 130 162 464
Wireless infrastructure 52 30 72
Other activities 430 394 834
Sales between businesses (234) (186) (462)
--------------- --------------- ---------------
3,782 4,029 8,875
Discontinued operations - 158 158
--------------- --------------- ---------------
3,782 4,187 9,033
=========== ========== ==========
Geographical analysis
UK 1,936 2,033 4,736
US 1,846 2,154 4,297
--------------- --------------- ---------------
3,782 4,187 9,033
=========== =========== ===========
Continuing operations of Group
undertakings comprise:
Existing business 3,760 4,029 8,875
Acquisition (Crown Castle UK) 22 - -
--------------- --------------- ---------------
3,782 4,029 8,875
=========== =========== ===========
b) Operating profit - before exceptional items and goodwill amortisation
Six months ended
30 September 2004 2003 Year ended
(restated) 31 March
2004
(restated)
£m £m £m
=========== =========== ===========
Group undertakings - continuing
operations
UK gas distribution 18 38 716
UK electricity and gas
transmission 365 377 759
US electricity transmission 65 70 133
US electricity distribution 207 214 448
US gas distribution 16 7 48
Wireless infrastructure 9 2 6
Other activities 87 70 96
--------------- --------------- ---------------
Operating profit of
Group undertakings 767 778 2,206
--------------- --------------- ---------------
Joint ventures - continuing
operations
Electricity activities 3 4 7
Joint ventures - discontinued
operations 1 1 -
--------------- --------------- ---------------
Operating profit of
joint ventures 4 5 7
--------------- --------------- ---------------
Total operating profit 771 783 2,213
=========== =========== ===========
Geographical analysis
UK 477 485 1,576
US 290 293 631
Rest of the World 4 5 6
--------------- --------------- ---------------
771 783 2,213
=========== =========== ===========
Continuing operations of Group
undertakings comprise:
Existing business 762 778 2,206
Acquisition (Crown Castle UK) 5 - -
--------------- --------------- ---------------
767 778 2,206
=========== =========== ===========
c) Operating profit - after exceptional items and goodwill amortisation
Six months ended
30 September 2004 2003 Year ended
(restated) 31 March
2004
(restated)
£m £m £m
=========== =========== ===========
Group undertakings - continuing
operations
UK gas distribution (51) (1) 627
UK electricity and gas
transmission 365 369 745
US electricity transmission 54 51 105
US electricity distribution 162 97 293
US gas distribution 12 2 37
Wireless infrastructure 1 (1) (6)
Other activities 86 61 29
--------------- --------------- ---------------
Operating profit of
Group undertakings 629 578 1,830
--------------- --------------- ---------------
Joint ventures - continuing
operations
Electricity activities 3 4 7
Joint ventures
- discontinued operations 1 1 -
--------------- --------------- ---------------
Operating profit of
joint ventures 4 5 7
--------------- --------------- ---------------
Total operating profit 633 583 1,837
=========== =========== ===========
Geographical analysis
UK 401 430 1,416
US 228 148 415
Rest of the World 4 5 6
--------------- --------------- ---------------
633 583 1,837
=========== =========== ===========
Continuing operations of Group
undertakings comprise:
Existing business 624 578 1,830
Acquisition (Crown Castle UK) 5 - -
--------------- --------------- ---------------
629 578 1,830
=========== =========== ===========
3. Exceptional items
a) Operating
Six months ended
30 September 2004 2003 Year ended
(restated) 31 March
2004
£m £m £m
=========== =========== ===========
Continuing operations
Restructuring costs (i) 91 150 249
Environmental
provision (ii) - - 28
--------------- --------------- ---------------
Total operating
exceptional items 91 150 277
=========== =========== ===========
i) Restructuring costs relate to costs incurred in planned cost reduction
programmes in the UK and US businesses (30 September 2004: £67m after tax, 30
September 2003: £96m after tax, 31 March 2004: £170m after tax). Restructuring
costs include £39m of costs associated with the proposed disposal of UK-based
distribution networks (30 September 2003: £nil, 31 March 2004: £24m) and £6
million (30 September 2003: £nil, 31 March 2004: £nil) relating to the
integration of Gridcom and Crown Castle UK.
ii) Following completion of site investigations in the UK during the year
ended 31 March 2004, the environmental obligations in respect of those sites
were adjusted resulting in the recognition of an additional charge for that year
of £28m (£28m after tax).
b) Non-operating
Six months ended
30 September 2004 2003 Year ended
31 March
2004
£m £m £m
=========== =========== ===========
Continuing operations
Profit on disposal of
tangible fixed
assets (iii) (20) (40) (96)
--------------- --------------- ---------------
(20) (40) (96)
--------------- --------------- ---------------
Discontinued operations
Gain on assets held for
exchange (iv) - (226) (226)
Profit on sale or
termination of
operations (v) (13) - -
--------------- --------------- ---------------
(13) (226) (226)
--------------- --------------- ---------------
Total non-operating
exceptional items (33) (266) (322)
=========== =========== ===========
iii) The after tax profit on disposal of tangible fixed assets was £20m (30
September 2003: £40m, 31 March 2004: £96m).
iv) The gain on assets held for exchange related to the profit recognised on
Energis shares delivered to Equity Plus Income Convertible Securities (EPICs)
bondholders on 6 May 2003 in settlement of all EPICs outstanding at that date
that had a carrying value of £243m. This transaction represented the culmination
of a deferred sale arrangement entered into in February 1999. The after tax gain
on assets held for exchange was £nil (30 September 2003: £226m, 31 March 2004:
£226m).
v) The credit for the six months ended 30 September 2004 relates to the
profit on sale of a joint venture investment in Compania Inversora En
Transmicion Electrica CITELEC S.A. (£13m after tax).
4. Net interest
Six months ended
30 September 2004 2003 Year ended
31 March
2004
£m £m £m
=========== =========== ===========
Interest payable
and similar charges 428 460 920
Unwinding of
discount on
provisions 2 6 11
Interest
capitalised (31) (26) (55)
--------------- --------------- ---------------
Interest payable
and similar
charges net of
interest capitalised 399 440 876
Interest
receivable and
similar income (32) (37) (58)
--------------- --------------- ---------------
367 403 818
Joint ventures 10 7 4
--------------- --------------- ---------------
377 410 822
=========== =========== ===========
5. Taxation
The tax charge of £100m (30 September 2003: £102m) on profit before taxation,
excluding exceptional items and goodwill amortisation, for the six months ended
30 September 2004, is based on the estimated effective tax rate for the year
ending 31 March 2005 of 25% (30 September 2003: 27%) excluding exceptional
items, goodwill amortisation and prior year adjustments.
6. Adjusted profit on ordinary activities before taxation and earnings per
ordinary share
a) Reconciliation of profit on ordinary activities before taxation to adjusted
profit on ordinary activities before taxation
Six months ended
30 September 2004 2003 Year ended
(restated) 31 March
2004
(restated)
£m £m £m
=========== =========== ===========
Profit on ordinary
activities before
taxation 289 439 1,337
Exceptional operating
items (note 3(a)) 91 150 277
Exceptional
non-operating
items (note 3(b)) (33) (266) (322)
Goodwill
amortisation 47 50 99
--------------- --------------- ---------------
Adjusted profit on
ordinary activities
before taxation 394 373 1,391
=========== =========== ===========
b) Earnings per share
Six months ended 30 September 2004
Weighted
Earnings Profit average
per for the number
share period of shares
pence £m million
=========== =========== ===========
Basic, including
exceptional items
and goodwill
amortisation 7.0 215 3,080
Exceptional operating
items (note 3(a)) 3.0 91 -
Exceptional
non-operating
items (note 3(b)) (1.1) (33) -
Exceptional tax credit (0.8) (24) -
Goodwill
amortisation 1.5 47 -
--------------- --------------- ---------------
Adjusted basic,
excluding
exceptional items
and goodwill
amortisation 9.6 296 3,080
=========== =========== ===========
There is no material difference between basic and diluted earnings per share for
the six months ended 30 September 2004.
Six months ended 30 September 2003
(restated)
Weighted
Earnings Profit average
per for the number
share period of shares
pence £m million
=========== =========== ===========
Basic, including
exceptional items
and goodwill
amortisation 12.6 387 3,068
Exceptional operating
items (note 3(a)) 5.0 150 -
Exceptional
non-operating
items (note 3(b)) (8.7) (266) -
Exceptional tax credit (1.8) (54) -
Goodwill
amortisation 1.6 50 -
--------------- --------------- ---------------
Adjusted basic,
excluding exceptional
items and goodwill
amortisation 8.7 267 3,068
=========== =========== ===========
There is no material difference between basic and diluted earnings per share for
the six months ended 30 September 2003.
Year ended 31 March 2004
(restated)
Weighted
Earnings Profit average
per for the number
share year of shares
pence £m million
=========== =========== ===========
Basic, including
exceptional items
and goodwill
amortisation 35.0 1,074 3,070
Exceptional operating
items (note 3(a)) 9.0 277 -
Exceptional
non-operating
items (note 3(b)) (10.5) (322) -
Exceptional tax credit (2.9) (89) -
Goodwill
amortisation 3.2 99 -
--------------- --------------- ---------------
Adjusted basic,
excluding exceptional
items and goodwill
amortisation 33.8 1,039 3,070
Dilutive impact of
employee share
options (0.1) - 7
--------------- --------------- ---------------
Adjusted diluted,
excluding exceptional
items and goodwill
amortisation 33.7 1,039 3,077
Exceptional operating
items (note 3(a)) (9.0) (277) -
Exceptional
non-operating
items (note 3(b)) 10.5 322 -
Exceptional tax credit 2.9 89 -
Goodwill
amortisation (3.2) (99) -
--------------- --------------- ---------------
Diluted, including
exceptional items
and goodwill
amortisation 34.9 1,074 3,077
=========== =========== ===========
7. Dividends
The interim dividend of 8.5p per ordinary share (six months ended 30 September
2003: 7.91p) will be paid on 24 January 2005 to shareholders on the register on
3 December 2004.
8. Acquisition of Crown Castle UK
On 31 August 2004, the Group acquired Crown Castle UK from Crown Castle
International Corp. for consideration of £1,145m (including £14m of costs), of
which £1,133m had been paid as at 30 September 2004. A provisional fair value of
£426m has been ascribed to the net assets acquired, resulting in provisional
goodwill of £719m being recognised, which will be amortised over 20 years.
9. Reconciliation of operating profit to net cash inflow from operating
activities before exceptional items
Six months ended
30 September 2004 2003 Year ended
(restated) 31 March
2004
(restated)
£m £m £m
=========== =========== ===========
Operating profit of
Group undertakings 629 578 1,830
Group exceptional
operating items 91 150 277
Depreciation and
amortisation 554 553 1,117
Increase in working
capital (296) (254) (96)
Increase/(decrease)
in provisions 1 (107) (95)
Other non-cash
flows 9 12 25
--------------- --------------- ---------------
Net cash inflow
from operating
activities before
exceptional items 988 932 3,058
=========== =========== ===========
10. Reconciliation of net cash flow to movement in net debt
Six months ended
30 September 2004 2003 Year ended
31 March
2004
£m £m £m
=========== =========== ===========
Movement in cash
and overdrafts (26) (23) 13
Net cash outflow/
(inflow) from the
management of liquid
resources 107 (76) 48
(Increase)/decrease
in borrowings (1,860) (287) 426
--------------- --------------- ---------------
Change in net
debt resulting
from cash flows (1,779) (386) 487
Exchange
adjustments (69) 111 534
Settlement of
EPICs (see
note 3(b)(iv)) - 243 243
Other non-cash
movements (2) (11) (18)
--------------- --------------- ---------------
Movement in net
debt in the period (1,850) (43) 1,246
Net debt at start
of period (12,632) (13,878) (13,878)
--------------- --------------- ---------------
Net debt at
end of period (14,482) (13,921) (12,632)
=========== =========== ===========
During the six months ended 30 September 2003 and the year ended 31 March 2004
certain cross currency swaps were terminated and £209m of cash was received.
£61m of this cash flow has been reported in both periods within the total of net
cash outflow for returns on investments and servicing of finance amounting to £
(335)m and £(692)m respectively and £148m has been reported within net cash
inflow/(outflow) from financing for both periods. Termination of these cross
currency swaps also necessitated a retranslation of Euro denominated debt at new
swapped rates amounting to £(140)m, which is reported within the net exchange
adjustments of £111m and £534m above.
11. Net debt
At 30 September 2004 2003 At 31 March
2004
£m £m £m
=========== =========== ===========
Cash and
investments 688 499 616
Short-term
debt including
bank overdrafts (3,333) (2,289) (1,706)
Long-term debt (11,837) (12,131) (11,542)
--------------- --------------- ---------------
(14,482) (13,921) (12,632)
=========== =========== ===========
12. Exchange rates
The Group's results are affected by the exchange rates used to translate the
results of its US operations and US dollar transactions. The US dollar to
sterling exchange rates used were:
30 September 2004 2003 31 March
2004
=========== =========== ===========
Closing rate applied at period end 1.80 1.67 1.83
Average rate applied for the period 1.80 1.62 1.68
=========== =========== ===========
13. Differences between UK and US Generally Accepted Accounting Principles
('GAAP')
a) Reconciliation of net income to US GAAP
The following is a summary of the material adjustments to net income that would
have been required if US GAAP had been applied instead of UK GAAP.
Six months ended
30 September 2004 2003 Year ended
(restated) 31 March
2004
(restated)
£m £m £m
=========== =========== ===========
Net income
under UK GAAP 215 387 1,074
--------------- --------------- ---------------
Adjustments to conform
with US GAAP
Deferred taxation (46) (11) (24)
Pensions 28 3 7
Fixed assets -
purchase of Lattice (175) (181) (364)
Impairment of Advantica -
goodwill and other
intangible assets - - (31)
Replacement expenditure
(net of depreciation) 230 186 383
Financial instruments 47 (87) 82
Carrying value of EPICs
liability - (226) (226)
Severance and
integration costs 13 80 -
Recognition of income 13 15 (9)
Goodwill 47 50 99
Restructuring
- purchase of Lattice 1 - 2
Share of joint ventures'
adjustments - (7) -
Other (8) 7 5
--------------- --------------- ---------------
Total US GAAP adjustments 150 (171) (76)
--------------- --------------- ---------------
Net income
under US GAAP 365 216 998
=========== =========== ===========
Basic earnings
per share - US GAAP 11.8p 7.0p 32.5p
Diluted earnings per
share - US GAAP 11.8p 7.0p 32.4p
=========== =========== ===========
b) Reconciliation of equity shareholders' funds to US GAAP
The following is a summary of the material adjustments to equity shareholders'
funds that would have been required if US GAAP had been applied instead of UK
GAAP.
At 30 September At 31 March
2004 2004
(restated)
£m £m
=========== ===========
Equity shareholders' funds under
UK GAAP 1,245 1,221
--------------- ---------------
Adjustments to conform with US GAAP
Deferred taxation (1,921) (1,876)
Pensions (1,065) (1,069)
Ordinary dividends 262 366
Tangible fixed assets - reversal
of partial release of impairment
provision (31) (32)
Fixed assets - impact of Lattice
purchase accounting and
replacement expenditure 7,373 7,318
Financial instruments (228) (285)
Severance liabilities 3 3
Recognition of income (22) (35)
Regulatory assets 155 128
Intangible assets and goodwill 4,115 4,065
Restructuring - purchase
of Lattice (3) (4)
Other 37 21
--------------- ---------------
Total US GAAP adjustments 8,675 8,600
--------------- ---------------
Equity shareholders' funds under
US GAAP 9,920 9,821
=========== ===========
Independent review report to National Grid Transco plc
Introduction
We have been instructed by the Company to review the financial information which
comprises the Group Profit and Loss Account, Group Balance Sheet, Group Cash
Flow Statement, Group Statement of Total Recognised Gains and Losses,
Reconciliation of Movement in Equity Shareholders' Funds and notes 1 to 13. We
have read the other information contained in the interim results statement and
considered whether it contains any apparent misstatements or material
inconsistencies with the financial information.
Directors' responsibilities
The interim results statement, including the financial information contained
therein, is the responsibility of, and has been approved by the Directors. The
Directors are responsible for preparing the interim results statement in
accordance with the Listing Rules of the Financial Services Authority which
require that the accounting policies and presentation applied to the interim
figures should be consistent with those applied in preparing the preceding
annual accounts except where any changes, and the reasons for them, are
disclosed.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin 1999/4
issued by the Auditing Practices Board for use in the United Kingdom. A review
consists principally of making enquiries of group management and applying
analytical procedures to the financial information and underlying financial data
and, based thereon, assessing whether the accounting policies and presentation
have been consistently applied unless otherwise disclosed. A review excludes
audit procedures such as tests of controls and verification of assets,
liabilities and transactions. It is substantially less in scope than an audit
performed in accordance with United Kingdom Auditing Standards and therefore
provides a lower level of assurance than an audit. Accordingly we do not express
an audit opinion on the financial information. This report, including the
conclusion, has been prepared for and only for the Company for the purpose of
the Listing Rules of the Financial Services Authority and for no other purpose.
We do not, in producing this report, accept or assume responsibility for any
other purpose or to any other person to whom this report is shown or into whose
hands it may come save where expressly agreed by our prior consent in writing.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 30 September 2004.
PricewaterhouseCoopers LLP
Chartered Accountants
London
17 November 2004
(a) The maintenance and integrity of the Company website is the
responsibility of the Directors; the work carried out by the auditors does not
involve consideration of these matters and, accordingly, the auditors accept no
responsibility for any changes that may have occurred to the interim report
since it was initially presented on the website.
(b) Legislation in the United Kingdom governing the preparation and
dissemination of financial information may differ from legislation in other
jurisdictions.
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