Last checked at 23 Aug 2010 10:57
The following regulated information, disseminated pursuant to DTR 6.3.5, comprises the Half-Yearly Financial Report of Northern Electric plc for the six months ended 30 June 2010.
Pursuant to LR 9.6.1, two copies of the document have been submitted to the UK Listing Authority and will shortly be available for inspection at the UK Listing Authority's Document Viewing Facility, which is situated at:
Financial Services Authority
25 The North Colonnade
Canary Wharf
London
E14 5HS
Tel. No. 020 7066 8333
The Half-Yearly Financial Report for the six months ended 30 June 2010 is also available on the website
www.ce-electricuk.com
NORTHERN ELECTRIC plc
HALF-YEARLY FINANCIAL REPORT
SIX MONTHS ENDED 30 JUNE 2010
NORTHERN ELECTRIC plc:
INTERIM MANAGEMENT REPORT
Registered Number: 2366942
Registered Office: Lloyds Court, 78 Grey Street, Newcastle upon Tyne, NE1 6AF
Cautionary Statement
This interim management report has been prepared solely to provide additional information to shareholders to assess the strategies of Northern Electric plc (the "Company") and its subsidiaries (the "Group") and the potential for those strategies to succeed and should not be relied on by any other party or for any other purpose.
Operations
The principal activity of the Company during the six months to 30 June 2010 was to act as a holding company, with its main operating subsidiaries being Northern Electric Distribution Limited ("NEDL") and Integrated Utility Services Limited ("IUS"). NEDL holds an electricity distribution licence serving an area of approximately 14,400 sq km in the north east of England. It receives electricity from the National Grid transmission system and distributes it to the 1.6 million customers connected to its electricity distribution network of transformers, switchgear and overhead and underground cables, at voltages of up to 132kV. NEDL is subject to regulation by the Gas and Electricity Markets Authority, which acts through the Office of Gas and Electricity Markets ("Ofgem"). IUS provides engineering contracting services to a range of clients, including Network Rail, Scottish Water, Northumbrian Water and Yorkshire Water.
During the six months to 30 June 2010, NEDL distributed electricity to customers in its distribution services area and continued to target its investment strategy at delivering improvements in the overall performance of its electricity distribution network in an efficient and cost-effective manner. NEDL's capital expenditure programme included activities to refurbish, replace and construct assets such as substations, transformers, switchgear, overhead and underground cables and associated equipment. IUS continued to operate its engineering contracting business, including the provision of connections services to electricity distribution networks.
In order to give effect to Ofgem's final proposals in respect of distribution price control review 5 ("DPCR5"), NEDL's charges based on those final proposals, together with a rebalancing of distribution charges between customer groups, were amended such that, on 1 April 2010, its charges made in relation to the distribution of electricity to domestic customers increased by about 2.8%, or equivalent to about 0.4% on their electricity bills. Changes to the charges made in relation to non-domestic customers varied more widely between different types of non-domestic customers.
On 2 July 2010, NEDL entered into an agreement with the European Investment Bank ("EIB"), under which the EIB will provide NEDL with a £119m loan facility. As at the date of this half-yearly financial report, no drawings had been made under that facility.
IUS' framework service provider contract with E.ON expired in March 2010 and E.ON made the decision to adopt an 'Alliance' delivery strategy from April 2010. IUS was unsuccessful in its tenders for both the Infrastructure and New Connections Alliances and transfered activity to the new service providers at the end of March 2010. As a result, IUS' headcount reduced by approximately 50%, as the staff employed on the E.ON contract transferred to the new service providers.
NORTHERN ELECTRIC plc:
REGISTERED NUMBER: 2366942
INTERIM MANAGEMENT REPORT (CONTINUED)
Operations (continued)
In respect of its key customer service performance indicators, NEDL stated in the most recent regulatory accounts provided to Ofgem that performance for the regulatory year ended 31 March 2010 in respect of its Customer Interruptions ("CI"), Customer Minutes Lost ("CML") and Customer satisfaction targets was as follows:
|
| Actual | Target |
| CML: | 68.7 (2009: 76.3) | 67.4 (2009: 68.4) |
| CI: | 62.3 (2009: 64.2) | 74.5 (2009: 74.5) |
| Customer satisfaction: | 91.2% (2009: 89.2%) | 90% (2009: 90%) |
The safety of its employees continued to be of paramount importance to the Group, with the on-going focus being on the goal that no employees should be injured during their working time.
In this respect, performance in the six months to 30 June 2010 was disappointing in respect of lost time accidents but encouraging in respect of preventable vehicle accidents. During that time, the Group experienced three lost time accidents (six months to 30 June 2009: 1), against an annual target of one for the CE Electric UK Funding Company group of companies (the "CE Group") and two preventable vehicle accidents, against an annual target of 26 (six months to 30 June 2009: 14). However, the incidents that have been experienced in the six months to 30 June 2010 have been at a low level of severity. Work continues to reduce the accident rates, with the lessons learned from such incidents being incorporated into the CE Group's safety improvement plan and a safe driving programme being implemented via online and formal training sessions. As a result of the CE Group's continued commitment to improving its safety performance, it remains a leading safety performer in its sector.
Results for the six months ended 30 June 2010
The half-yearly accounts for the six months ended 30 June 2010 consolidate the results of the Company and its subsidiaries and are prepared under International Financial Reporting Standards. The half-yearly accounts do not comprise statutory accounts required to be delivered to the Registrar of Companies under the Companies Act 2006 and have not been subject to audit or review by the Group's auditors. The Group will deliver its statutory accounts for the current financial year ending on 31 December 2010 to the Registrar of Companies by 30 April 2011.
A summary of the key financial results is set out below:
Key financials
Revenue
Revenue at £140.4m was £7.0m higher than for the six months ended 30 June 2009 mainly due to tariff increases, following the implementation of the DCPR 5 final proposals.
NORTHERN ELECTRIC plc:
REGISTERED NUMBER: 2366942
INTERIM MANAGEMENT REPORT (CONTINUED)
Cash flow
Cash and cash equivalents as at 30 June 2010 were £188.9m, representing an increase of £47.5m when compared with the position at 31 December 2009. New borrowings raised of £31.8m and cash from operating acitivities of £54.2m, were partly offset by cash used in investing acitivities of £38.5m.
The Group has access to short-term borrowing facilities provided by Yorkshire Electricity Group plc, a related party, and to committed revolving credit facilities priovided by Lloyds TSB Bank plc, Royal Bank of Scotland plc and Abbey National Treasury Services plc.
Financial position
Profit before tax at £54.9m was £9.7m higher than the six months ended 30 June 2009 mainly due to the impact of revised distribution tariffs following the implementation of the DCPR 5 final proposals.
Dividends
No ordinary dividends were paid in the period resulting in £38.3m being transferred to reserves.
Related party transactions
The Company provides certain corporate functions to the CE Group, including financial and management accounting, financial planning, treasury, taxation, procurement, pensions, internal audit, legal advice, insurance management, claims handling and litigation services. Further details of the related party transactions entered into by the Group and the Company and changes therein are included in Note 3 to this interim management report.
Pensions
The Company is the Principal Employer in the Northern Electric Group of the Electricity Supply Pension Scheme (the "Scheme"), a defined benefit scheme, and, in March 2008, reached agreement with the Group Trustees to repair the Scheme deficit. The agreement comprises monthly cash payments of £2.4m (£28.4m per annum). These payments aim to remove the shortfall of £95.1m identified by the triennial valuation, as at 31 March 2007, by December 2010, subject to the actuarial assumptions adopted for being borne out in practice.
The next triennial actuarial valuation of the Scheme, as at 31 March 2010, is currently in progress with the associated arrangements for repair of the expected deficit, to be agreed by 31 March 2011. The Group's contributions to the Scheme under the current deficit repair arrangements will not materially alter until the 2010 actuarial valuation of the Scheme is complete. Given the changes in the economic environment since the last valuation and the associated impact on financial markets, it is likely that the deficit identified by the 2010 valuation will be somewhat greater than that calculated in 2007. Further details of the Group's pension arrangements can be found in the Company's annual report and accounts for the year to 31 December 2009.
NORTHERN ELECTRIC plc:
REGISTERED NUMBER: 2366942
INTERIM MANAGEMENT REPORT (CONTINUED)
Pensions (continued)
As part of the DPCR5 process, Ofgem recognised that pensions, particularly with respect to the current deficit positions of various schemes, represent a significant cost to the distribution network operators ("DNOs") and confirmed that the DNOs would be allowed to recover the full value of the deficits attributable to a licensee's distribution business in existence as at 31 March 2010 (after an adjustment to reflect the residual of unfunded early retirement deficiency costs as at 31 March 2010), via their regulated revenues.
Risks and uncertainties
Regulation
One of the principal risks facing NEDL relates to possible changes in its allowed income as a result of modifications to the price control formulae that are set out within the special conditions of the electricity distribution licence. However, all of the changes to those special conditions required to give effect to Ofgem's final proposals in respect of DPCR5 were agreed and implemented with effect from 1 April 2010 for the five-year period ending on 31 March 2015. Given the regulatory environment in which NEDL operates, the financial risks to NEDL during the term of the price control, are that changes in most categories of cost incurred by NEDL will have a direct impact on its financial results.
Financial
The principal risks associated with the regulatory environment, within which NEDL operates are mentioned above. As IUS' business is primarily in the competitive engineering contracting market, it contnues to be subject to the issues created by the general economic downturn and associated trading conditions. Consequently, demand for IUS' multi-utility service has continued to be lower than in previous years and there is an enhanced risk of counter-party default and an increase in the potential for IUS to be exposed to bad debt. It is anticpated that these conditions will continue for the remainder of 2010.
The Group addresses interest rate risk by having a policy of providing a stable, low cost of financing over time whilst observing approved risk parameters being financed by long-term borrowings at fixed rates and having access to short-term borrowing facilities at floating rates of interest. As at 30 June 2010, 83% of the Group's borrowings were at fixed rates and the average maturity for these borrowings was 21 years. Despite this position, the Group remains mindful of the current economic climate and the associated potential impact on the cost of its short-term borrowings. No material currency risks are faced by the Group and it is policy that no trading in financial instruments should be undertaken.
Further information on the principal long term risks and uncertainties and the internal control system are included in the Company's latest annual report for the year to 31 December 2009, which is available at www.ce-electricuk.com.
NORTHERN ELECTRIC plc:
REGISTERED NUMBER: 2366942
INTERIM MANAGEMENT REPORT (CONTINUED)
Going concern
In the Company's latest annual report and accounts for the year to 31 December 2009 the directors set out a number of factors taken into account when considering continuing to adopt the going concern basis in preparing those annual report and accounts and would confirm that no events have occurred during the six months to 30 June 2010 to alter the view expressed in those annual report and accounts.
Future strategy and objectives
The Company will continue to develop its business as a holding company in a manner that concentrates on the Group's core skills of electricity distribution and engineering contracting.
NEDL will continue to operate its business with the goal of out-performing the allowances in the distribution price control, while efficiently investing in its electricity distribution system with the aim of improving the quality of supply and service provided to its customers. The majority of NEDL's distribution revenues for the period to 31 March 2015 have been set by Ofgem.
IUS will look to develop further its engineering contracting business by delivering a high standard of service to its existing clients and pursuing opportunities in other sectors.
Responsibility Statement
We confirm that to the best of our knowledge:
(a) the condensed set of finanical statements has been prepared in accordance with IAS 34, "Interim Financial Reporting", and gives a true and fair view of the assets, liabilities, financial position and profit of the Group for the six months to 30 June 2010;
(b) the interim management report contains a fair review of the information required by DTR 4.2.7 (indication of important events during the first six months of the year and description of the principal risks and uncertainties for the remaining six months of the year); and
(c) the interim management report includes a fair review of the information required by DTR 4.2.8R (disclosure of related parties' transactions and changes therein).
By order of the board
T E Fielden
Director
20 August 2010
NORTHERN ELECTRIC plc
REGISTERED NUMBER: 2366942
CONDENSED FINANCIAL STATEMENTS - SIX MONTHS ENDED 30 JUNE 2010
CONSOLIDATED INCOME STATEMENT
|
| 6 Months ended 30 June 2010 |
| 6 Months ended 30 June 2009 |
| Year ended 31 December 2009 |
|
| Unaudited |
| Unaudited |
| Audited |
|
| £m |
| £m |
| £m |
|
|
|
|
|
|
|
| Revenue | 140.4 |
| 133.4 |
| 276.6 |
| Cost of sales | (17.3) |
| (21.7) |
| (47.8) |
|
|
|
|
|
|
|
| Gross profit | 123.1 |
| 111.7 |
| 228.8 |
|
|
|
|
|
|
|
| Distribution costs | (30.0) |
| (34.7) |
| (71.4) |
| Administrative expenses | (22.8) |
| (17.7) |
| (33.5) |
|
|
|
|
|
|
|
| Operating profit | 70.3 |
| 59.3 |
| 123.9 |
|
|
|
|
|
|
|
| Share of profit after tax of joint venture accounted for using the equity method | 0.2 |
| 0.2 |
| 0.3 |
| Other gains | 0.1 |
| 0.1 |
| 0.3 |
| Investment income | 0.7 |
| 2.3 |
| 3.6 |
| Finance costs | (16.4) |
| (16.7) |
| (33.0) |
|
|
|
|
|
|
|
| Profit before tax | 54.9 |
| 45.2 |
| 95.1 |
|
|
|
|
|
|
|
| Income tax expense | (16.6) |
| (12.3) |
| (27.3) |
|
|
|
|
|
|
|
| Profit from ordinary activities after tax | 38.3 |
| 32.9 |
| 67.8 |
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME - SIX MONTHS ENDED 30 JUNE 2010
There is no other comprehensive income for the Group for the six months to 30 June 2010, the comparative six month period in 2009 or the year ended 31 December 2009, other than the profits reported above. NORTHERN ELECTRIC plc
REGISTERED NUMBER: 2366942
CONDENSED FINANCIAL STATEMENTS - SIX MONTHS ENDED 30 JUNE 2010
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
|
|
|
| Share |
| Capital |
|
|
|
|
|
| Share |
| Premium |
| Redemption |
| Retained |
| Total |
|
| Capital |
| Account |
| Reserve |
| Earnings |
| Equity |
|
| £m |
| £m |
| £m |
| £m |
| £m |
|
|
|
|
|
|
|
|
|
|
|
|
Balance at 1 January 2010 (audited) | 72.2 |
| 158.8 |
| 6.2 |
| 416.2 |
| 653.4 |
|
Comprehensive income for the period (unaudited) | - |
| - |
| - |
| 38.3 |
| 38.3 |
|
|
|
|
|
|
|
|
|
|
|
| Balance at 30 June 2010 (unaudited) | 72.2 |
| 158.8 |
| 6.2 |
| 454.5 |
| 691.7 |
|
|
|
| Share |
| Capital |
|
|
|
|
|
| Share |
| Premium |
| Redemption |
| Retained |
| Total |
|
| Capital |
| Account |
| Reserve |
| Earnings |
| Equity |
|
| £m |
| £m |
| £m |
| £m |
| £m |
|
|
|
|
|
|
|
|
|
|
|
|
Balance at 1 January 2009 (audited) | 72.2 |
| 158.8 |
| 6.2 |
| 348.4 |
| 585.6 |
|
Comprehensive income for the period (unaudited) | - |
| - |
| - |
| 32.9 |
| 32.9 |
|
|
|
|
|
|
|
|
|
|
|
| Balance at 30 June 2009 (unaudited) | 72.2 |
| 158.8 |
| 6.2 |
| 381.3 |
| 618.5 |
|
|
|
| Share |
| Capital |
|
|
|
|
|
| Share |
| Premium |
| Redemption |
| Retained |
| Total |
|
| Capital |
| Account |
| Reserve |
| Earnings |
| Equity |
|
| £m |
| £m |
| £m |
| £m |
| £m |
|
|
|
|
|
|
|
|
|
|
|
|
Balance at 1 January 2009 (audited) | 72.2 |
| 158.8 |
| 6.2 |
| 348.4 |
| 585.6 |
|
Comprehensive income for the year (audited) | - |
| - |
| - |
| 67.8 |
| 67.8 |
|
|
|
|
|
|
|
|
|
|
|
| Balance at 31 December 2009 (audited) | 72.2 |
| 158.8 |
| 6.2 |
| 416.2 |
| 653.4 |
NORTHERN ELECTRIC plc
REGISTERED NUMBER: 2366942
CONDENSED FINANCIAL STATEMENTS - SIX MONTHS ENDED 30 JUNE 2010
CONSOLIDATED BALANCE SHEET
|
| 30 June 2010 |
| 30 June 2009 |
| 31 December 2009 |
|
| Unaudited |
| Unaudited |
| Audited |
|
| £m |
| £m |
| £m |
| Non-current assets |
|
|
|
|
|
| Property, plant and equipment | 1,391.8 |
| 1,323.6 |
| 1,361.5 |
| Intangibles | 4.1 |
| 5.4 |
| 4.7 |
| Investments in joint venture | 3.1 |
| 3.0 |
| 3.2 |
| Investments in other companies | 0.1 |
| 0.1 |
| 0.1 |
| Retirement benefit asset | 143.4 |
| 112.2 |
| 128.4 |
| Trade and other receivables | 4.9 |
| 4.3 |
| 5.4 |
|
|
|
|
|
|
|
|
| 1,547.4 |
| 1,448.6 |
| 1,503.3 |
|
|
|
|
|
|
|
| Current assets |
|
|
|
|
|
| Inventories | 12.0 |
| 16.5 |
| 13.7 |
| Trade and other receivables | 47.2 |
| 44.3 |
| 58.0 |
| Cash and cash equivalents | 188.9 |
| 160.7 |
| 141.4 |
|
|
|
|
|
|
|
|
| 248.1 |
| 221.5 |
| 213.1 |
|
|
|
|
|
|
|
| Total assets | 1,795.5 |
| 1,670.1 |
| 1,716.4 |
|
|
|
|
|
|
|
| Current liabilities |
|
|
|
|
|
| Trade and other payables | (64.5) |
| (57.2) |
| (66.0) |
| Current income tax liabilities | (10.4) |
| (8.1) |
| (10.4) |
| Deferred revenue | (12.7) |
| (12.9) |
| (13.8) |
| Borrowings | (73.3) |
| (54.2) |
| (41.6) |
| Provisions | (1.2) |
| (1.5) |
| (1.0) |
|
|
|
|
|
|
|
|
| (162.1) |
| (133.9) |
| (132.8) |
|
|
|
|
|
|
|
| Net current assets | 86.0 |
| 87.6 |
| 80.3 |
|
|
|
|
|
|
|
| Non-current liabilities |
|
|
|
|
|
| Borrowings | (349.6) |
| (347.2) |
| (349.5) |
| Deferred income tax liabilities | (183.4) |
| (174.6) |
| (179.9) |
| Retirement benefit obligations | (1.4) |
| (1.4) |
| (1.5) |
| Deferred revenue | (405.6) |
| (393.4) |
| (397.6) |
| Provisions | (1.7) |
| (1.1) |
| (1.7) |
|
|
|
|
|
|
|
|
| (941.7) |
| (917.7) |
| (930.2) |
|
|
|
|
|
|
|
| Total liabilities | (1,103.8) |
| (1,051.6) |
| (1,063.0) |
|
|
|
|
|
|
|
| Net assets | 691.7 |
| 618.5 |
| 653.4 |
|
|
|
|
|
|
|
| EQUITY |
|
|
|
|
|
| Share capital | 72.2 |
| 72.2 |
| 72.2 |
| Share premium account | 158.8 |
| 158.8 |
| 158.8 |
| Retained earnings | 454.5 |
| 381.3 |
| 416.2 |
| Other reserves | 6.2 |
| 6.2 |
| 6.2 |
|
|
|
|
|
|
|
| Total equity | 691.7 |
| 618.5 |
| 653.4 |
The interim accounts were approved by the board of directors and authorised for issue on 20 August 2010 and were signed on its behalf by:
T E Fielden, Director
NORTHERN ELECTRIC plc
REGISTERED NUMBER: 2366942
CONDENSED FINANCIAL STATEMENTS - SIX MONTHS ENDED 30 JUNE 2010
CONSOLIDATED CASH FLOW STATEMENT
|
| 6 Months ended 30 June 2010 |
| 6 Months ended 30 June 2009 |
| Year ended 31 December 2009 |
|
| Unaudited |
| Unaudited |
| Audited |
|
| £m |
| £m |
| £m |
|
|
|
|
|
|
|
| Net cash from operating activities | 54.2 |
| 34.3 |
| 74.0 |
|
|
|
|
|
|
|
| Investing activities |
|
|
|
|
|
| Dividends received from joint venture | 0.4 |
| 0.4 |
| 0.3 |
| Proceeds from disposal of property, plant and equipment | 0.1 |
| 0.1 |
| 0.2 |
| Purchase of property, plant and equipment | (58.5) |
| (71.5) |
| (130.2) |
| Purchase of intangible assets | (0.2) |
| (0.2) |
| (0.4) |
| Receipt of customer contributions | 19.7 |
| 16.4 |
| 27.2 |
|
|
|
|
|
|
|
| Net cash used in investing activities | (38.5) |
| (54.8) |
| (102.9) |
|
|
|
|
|
|
|
| Financing activities |
|
|
|
|
|
| Movement in loan from parent undertaking | - |
| - |
| (19.4) |
| New borrowings raised | 31.8 |
| - |
| 7.7 |
| Repayment of borrowings | - |
| (0.8) |
| - |
|
|
|
|
|
|
|
| Net cash generated from/(used in) financing activities | 31.8 |
| (0.8) |
| (11.7) |
|
|
|
|
|
|
|
| Net increase/(decrease) in cash and cash equivalents | 47.5 |
| (21.3) |
| (40.6) |
|
|
|
|
|
|
|
| Cash and cash equivalents at beginning of period | 141.4 |
| 182.0 |
| 182.0 |
|
|
|
|
|
|
|
| Cash and cash equivalents at end of period | 188.9 |
| 160.7 |
| 141.4 |
NORTHERN ELECTRIC plc
REGISTERED NUMBER: 2366942
CONDENSED FINANCIAL STATEMENTS- SIX MONTHS ENDED 30 JUNE 2010
NOTES TO THE ACCOUNTS
1. REVENUE AND SEGMENTAL ANALYSIS
The Group operates in two principal areas of activity, that of the distribution of electricity and engineering contracting in the United Kingdom.
|
| 6 months ended 30 June 2010 (Unaudited) | |||||||||
|
|
Distribution |
| Engineering Contracting |
|
Other |
| Consolidation Adjustments |
|
Total |
|
|
| £m |
| £m |
| £m |
| £m |
| £m |
|
|
|
|
|
|
|
|
|
|
|
|
|
| REVENUE |
|
|
|
|
|
|
|
|
|
|
| External sales | 121.7 |
| 16.2 |
| 2.5 |
| - |
| 140.4 |
|
| Inter-segment sales | 0.2 |
| - |
| 3.7 |
| (3.9) |
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total Revenue | 121.9 |
| 16.2 |
| 6.2 |
| (3.9) |
| 140.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| SEGMENT RESULTS |
|
|
|
|
|
|
|
|
|
|
| Operating profit | 54.2 |
| 0.4 |
| 1.5 |
| 14.2 |
| 70.3 |
|
| Share of profit after tax of joint venture accounted for using the equity method |
|
|
|
|
|
|
|
| 0.2 |
|
| Other gains |
|
|
|
|
|
|
|
| 0.1 |
|
| Investment income |
|
|
|
|
|
|
|
| 0.7 |
|
| Finance costs |
|
|
|
|
|
|
|
| (16.4) |
|
|
Profit before tax |
|
|
|
|
|
|
|
| 54.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| OTHER INFORMATION |
|
|
|
|
|
|
|
|
|
|
| Capital additions | 56.3 |
| - |
| - |
| (3.8) |
| 52.5 |
|
| Depreciation and amortisation | 23.9 |
| 0.1 |
| - |
| (1.0) |
| 23.0 |
|
| Amortisation of deferred revenue | (6.1) |
| - |
| - |
| - |
| (6.1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
"Other" comprises business support units such as head office overheads. Consolidation Adjustments includes the elimination of inter-segment trading and pension accounting adjustments.
Sales and purchases between the different segments are made at commercial prices.
External sales to RWE Npower plc of £39.6m are included within the Distribution Segment. External sales of £6.8m to E.ON are included within the Engineering Contracting Segment.
NORTHERN ELECTRIC plc
REGISTERED NUMBER: 2366942
CONDENSED FINANCIAL STATEMENTS - SIX MONTHS ENDED 30 JUNE 2010
NOTES TO THE ACCOUNTS (CONTINUED)
1. REVENUE AND SEGMENTAL ANALYSIS (CONTINUED)
|
| 6 months ended 30 June 2009 (Unaudited) | |||||||||
|
|
Distribution |
| Engineering Contracting |
|
Other |
| Consolidation Adjustments |
|
Total |
|
|
| £m |
| £m |
| £m |
| £m |
| £m |
|
|
|
|
|
|
|
|
|
|
|
|
|
| REVENUE |
|
|
|
|
|
|
|
|
|
|
| External sales | 108.7 |
| 20.9 |
| 3.8 |
| - |
| 133.4 |
|
| Inter-segment sales | 0.3 |
| - |
| 3.8 |
| (4.1) |
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total Revenue | 109.0 |
| 20.9 |
| 7.6 |
| (4.1) |
| 133.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| SEGMENT RESULTS |
|
|
|
|
|
|
|
|
|
|
| Operating profit | 42.3 |
| 0.5 |
| (2.1) |
| 18.6 |
| 59.3 |
|
| Share of profit after tax of joint venture accounted for using the equity method |
|
|
|
|
|
|
|
| 0.2 |
|
| Other gains |
|
|
|
|
|
|
|
| 0.1 |
|
| Investment income |
|
|
|
|
|
|
|
| 2.3 |
|
| Finance costs |
|
|
|
|
|
|
|
| (16.7) |
|
|
Profit before tax |
|
|
|
|
|
|
|
| 45.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| OTHER INFORMATION |
|
|
|
|
|
|
|
|
|
|
| Capital additions | 64.7 |
| - |
| - |
| (1.7) |
| 63.0 |
|
| Depreciation and amortisation | 22.2 |
| 0.1 |
| - |
| (0.4) |
| 21.9 |
|
| Amortisation of deferred revenue | (5.5) |
| - |
| - |
| - |
| (5.5) |
|
|
|
|
|
|
|
|
|
|
|
|
|
"Other" comprises business support units such as head office overheads. Consolidation Adjustments includes the elimination of inter-segmental trading and pension accounting adjustments.
Sales and purchases between the different segments are made at commercial prices.
External sales to RWE Npower plc of £37.3m are included within the Distribution Segment. External sales of £11.3m to E.ON are included within the Engineering Contracting Segment.
NORTHERN ELECTRIC plc
REGISTERED NUMBER: 2366942
CONDENSED FINANCIAL STATEMENTS - SIX MONTHS ENDED 30 JUNE 2010
NOTES TO THE ACCOUNTS (CONTINUED)
1. REVENUE AND SEGMENTAL ANALYSIS (CONTINUED)
|
| Year ended 31 December 2009 (Audited) | ||||||||
|
|
Distribution |
| Engineering Contracting |
|
Other |
| Consolidation Adjustments |
|
Total |
|
| £m |
| £m |
| £m |
| £m |
| £m |
|
|
|
|
|
|
|
|
|
|
|
| REVENUE |
|
|
|
|
|
|
|
|
|
| External sales | 224.5 |
| 45.9 |
| 6.2 |
| - |
| 276.6 |
| Inter-segment sales | 0.4 |
| - |
| 7.4 |
| (7.8) |
| - |
|
|
|
|
|
|
|
|
|
|
|
| Total revenue | 224.9 |
| 45.9 |
| 13.6 |
| (7.8) |
| 276.6 |
|
|
|
|
|
|
|
|
|
|
|
| SEGMENT RESULTS |
|
|
|
|
|
|
|
|
|
| Operating profit | 89.7 |
| 1.1 |
| 3.0 |
| 30.1 |
| 123.9 |
| Share of profit after tax of joint venture accounted for using the equity method |
|
|
|
|
|
|
|
| 0.3 |
| Other losses |
|
|
|
|
|
|
|
| 0.3 |
| Investment income |
|
|
|
|
|
|
|
| 3.6 |
| Finance costs |
|
|
|
|
|
|
|
| (33.0) |
| Profit before tax |
|
|
|
|
|
|
|
| 95.1 |
|
|
|
|
|
|
|
|
|
|
|
| OTHER INFORMATION |
|
|
|
|
|
|
|
|
|
| Capital additions | 123.8 |
| - |
| - |
| (2.6) |
| 121.2 |
| Depreciation and amortisation | 43.5 |
| 0.1 |
| - |
| 1.0 |
| 44.6 |
| Amortisation of deferred revenue | (11.6) |
| - |
| - |
| - |
| (11.6) |
|
|
|
|
|
|
|
|
|
|
|
"Other" comprises business support units such as head office overheads. Consolidation Adjustments includes the elimination of inter-segmental trading and pension accounting adjustments.
Sales and purchases between the different segments are made at commercial prices.
External sales to RWE Npower plc of £72.7m are included within the Distribution Segment. External sales of £23.8m to E.ON are included within the Engineering Contracting Segment.
NORTHERN ELECTRIC plc
REGISTERED NUMBER: 2366942
CONDENSED FINANCIAL STATEMENTS - SIX MONTHS ENDED 30 JUNE 2010
NOTES TO THE ACCOUNTS (CONTINUED)
1. REVENUE AND SEGMENTAL ANALYSIS (CONTINUED)
The accounting policies of the reportable segments are the same as the Group's accounting policies which are described in the Group's latest annual financial statements. The segment results represent the profit earned by each segment without allocation of the share of profits of joint ventures, investment revenue and finance costs, and income tax expense. This is the measure reported to the Group's President and Chief Operating Officer for the purposes of assessment of segment performance.
| Segment net assets | ||||
|
|
| 30 June 2010 £m | 30 June 2009 £m | 31 December 2009 £m |
|
|
| Unaudited | Unaudited | Audited |
| Distribution |
| 1,012.1 | 950.9 | 1,001.1 |
| Engineering contracting |
| 0.5 | 6.3 | 5.7 |
| Other |
| 228.9 | 243.4 | 203.6 |
| Consolidation Adjustments |
| (122.0) | (159.2) | (116.6) |
|
|
| ______________ | ______________ | ______________ |
| Total net assets by segment |
| 1,119.5 | 1,041.4 | 1,093.8 |
|
|
| ______________ | ______________ | ______________ |
| Unallocated net corporate liabilities |
| (427.8) | (422.9) | (440.4) |
|
|
| ______________ | ______________ | ______________ |
| Total net assets |
| 691.7 | 618.5 | 653.4 |
|
|
| ============ | ============ | ============ |
Segment assets in "Other" include investments held by Northern Electric plc in its subsidiary companies totaling £203.1m (June 2009: £203.1m, December 2009: £203.1m), which are eliminated in Consolidation Adjustments.
Consolidation Adjustments also include a £13.7m credit to operating profit (June 2009: £14.6m, December 2009: £29.2m), the recognition of the £143.4m retirement benefit asset (June 2009: £112.2m, December 2009: £128.4m) and a £43.0m reduction in cumulative capitalised costs (June 2009: £41.1m, December 2009: £42.2m) as a consequence of the Distribution and Engineering Contracting divisions accounting for retirement benefits on a cash accrued basis.
Unallocated net corporate liabilities include cash and cash equivalents, borrowings and taxation.
For the purposes of monitoring segment performance and allocating resources between segments, the Group's President and Chief Operating Officer monitors the tangible, intangible and financial assets attributable to each segment. All assets and liabilities are allocated to reportable segments with the exception of long term and short term borrowings and current and deferred tax balances.
NORTHERN ELECTRIC plc
REGISTERED NUMBER: 2366942
CONDENSED FINANCIAL STATEMENTS - SIX MONTHS ENDED 30 JUNE 2010
NOTES TO THE ACCOUNTS (CONTINUED)
2. INCOME TAX EXPENSE
|
| 6 months ended 30 June |
| 6 months ended 30 June |
| Year ended 31 December |
|
| 2010 |
| 2009 |
| 2009 |
|
| Unaudited |
| Unaudited |
| Audited |
|
| £m |
| £m |
| £m |
|
|
|
|
|
|
|
| Current tax | 15.4 |
| 8.6 |
| 18.2 |
|
|
|
|
|
|
|
| Deferred tax | 3.5 |
| 5.3 |
| 10.6 |
|
|
|
|
|
|
|
| Adjustment in relation to prior periods | (2.3) |
|
(1.6) |
|
(1.5) |
|
|
|
|
|
|
|
| Total income tax expense | 16.6 |
| 12.3 |
| 27.3 |
The underlying tax for the interim period is calculated by applying the effective average tax rate of 28% on profit before preference dividends accrued.
Preference dividends are included within finance costs.
NORTHERN ELECTRIC plc
REGISTERED NUMBER: 2366942
CONDENSED FINANCIAL STATEMENTS - SIX MONTHS ENDED 30 JUNE 2010
NOTES TO THE ACCOUNTS (CONTINUED)
3. RELATED PARTY TRANSACTIONS
GROUP
Details of transactions between the Group and other related parties are disclosed below.
Loans
The Group has made loans to companies in the CE Group. The total interest included in investment income in the income statement for the six months ended 30 June 2010 was £0.7m (six month ended 30 June 2009: £1.3m, year ended 31 December 2009: £3.5m). Included within cash and cash equivalents is £188.9m as at 30 June 2010 (30 June 2009: £160.7m, 31 December 2009: £141.4m) in respect of these loans.
The Group has received loans from companies in the CE Group. The total interest included in finance costs in the income statement for the six months ended 30 June 2010 was £11.3m (six months ended 30 June 2009: £11.6m, year ended 31 December 2009: £6.3m). Included within borrowings is £173.2m as at 30 June 2010 (30 June 2009: £126.1m, 31 December 2009: £100.0m) in respect of these loans.
Interest on loans to/from Group companies is charged at a commercial rate of interest.
NORTHERN ELECTRIC plc
REGISTERED NUMBER: 2366942
CONDENSED FINANCIAL STATEMENTS - SIX MONTHS ENDED 30 JUNE 2010
NOTES TO THE ACCOUNTS (CONTINUED)
3. RELATED PARTY TRANSACTIONS (CONTINUED)
GROUP (CONTINUED)
Trading transactions
During the year, Group entities entered into the following trading transactions with related parties that are not members of the Group:
|
Related Party |
Sales to Related Party |
| Purchases from Related Party |
|
| Amounts Owed to Related Party |
|
| £m |
| £m |
|
| £m |
|
|
|
|
|
|
|
|
| June 2010: |
|
|
|
|
|
|
| CE Insurance Services Limited | - |
| 0.3 |
|
| - |
| CE UK Gas Holdings Limited | 0.1 |
| - |
|
| - |
| Integrated Utility Services Limited (Registered in Eire) | - |
| 0.5 |
|
| 0.1 |
| Vehicle Lease and Service Limited |
|
|
|
|
|
|
| Yorkshire Electricity Distribution plc | 8.1 |
| 3.6 |
|
| - |
|
|
|
|
|
|
|
|
| June 2009: |
|
|
|
|
|
|
| CE Insurance Services Limited | - |
| 0.3 |
|
| - |
| CE UK Gas Holdings Limited | 0.1 |
| - |
|
| - |
| Integrated Utility Services Limited (Registered in Eire) | - |
| 0.6 |
|
| 0.1 |
| Vehicle Lease and Service Limited | - |
| 2.7 |
|
| 0.2 |
| Yorkshire Electricity Distribution plc | 7.2 |
| 3.2 |
|
| - |
NORTHERN ELECTRIC plc
REGISTERED NUMBER: 2366942
CONDENSED FINANCIAL STATEMENTS - SIX MONTHS ENDED 30 JUNE 2010
NOTES TO THE ACCOUNTS (CONTINUED)
3. RELATED PARTY TRANSACTIONS (CONTINUED)
GROUP (CONTINUED)
Trading transactions (Continued)
|
Related Party |
Sales to Related Party |
| Purchases from Related Party |
|
| Amounts Owed to Related Party |
|
| £m |
| £m |
|
| £m |
|
|
|
|
|
|
|
|
| December 2009: |
|
|
|
|
|
|
| CE Insurance Services Limited | - |
| 0.7 |
|
| - |
| CE UK Gas Holdings Limited | 0.2 |
| - |
|
| - |
| Integrated Utility Services Limited (Registered in Eire) | - |
| 1.0 |
|
| 0.1 |
| Vehicle Lease and Service Limited | 0.2 |
| 3.2 |
|
| 0.2 |
| Yorkshire Electricity Distribution plc | 12.7 |
| 7.9 |
|
| - |
Sales and purchases from related parties were made at commercial prices.
The amounts outstanding are unsecured and will be settled in cash. No guarantees have been given or received. No provisions have been made for doubtful debts in respect of amounts owed by related parties.
During 2010, 3 directors (30 June 2009: 3, 31 December 2009: 3) and 8 key personnel (30 June 2009: 8, 31 December 2009: 8) utilised the services provided by Northern Transport Finance Limited, a company in the Group.
The amounts included in finance lease receivables owed by these directors and key personnel total £0.1m (30 June 2009: £0.1m, 31 December 2009: £0.1m) in respect of non-current and £0.1m (30 June 2009: £0.1m, 31 December 2009: £0.1m) in respect of current receivables.
NORTHERN ELECTRIC plc
REGISTERED NUMBER: 2366942
CONDENSED FINANCIAL STATEMENTS - SIX MONTHS ENDED 30 JUNE 2010
NOTES TO THE ACCOUNTS (CONTINUED)
3. RELATED PARTY TRANSACTIONS (CONTINUED)
COMPANY
Details of transactions between the Company and other related parties are disclosed below.
Loans
The Company has made loans to companies in the CE Group. The total interest included in investment income in the income statement for the period ended 30 June 2010 was £0.5m (six months ended 30 June 2009: £1.3m, year ended 31 December 2009: £1.8m). Included within cash and cash equivalents is £94.9m as at 30 June 2010 (30 June 2009: £107.2m, 31 December 2009: £111.8m) in respect of these loans.
The Company has received loans from companies in the CE Group. The total interest included in finance costs in the income statement for the period ended 30 June 2010 was £nil (six months ended 30 June 2009: £2.2m, year ended 31 December 2009: £0.3m). Included within borrowings is £nil as at 30 June 2010 (30 June 2009: £14.1m, 31 December 2009: £nil) in respect of these loans.
Interest on loans to/from Group companies is charged at a commercial rate of interest.
Trading transactions
During the year, the Company entered into the following trading transactions with other members of the CE Group:
NORTHERN ELECTRIC plc
REGISTERED NUMBER: 2366942
CONDENSED FINANCIAL STATEMENTS - SIX MONTHS ENDED 30 JUNE 2010
NOTES TO THE ACCOUNTS (CONTINUED)
3. RELATED PARTY TRANSACTIONS (CONTINUED)
COMPANY (CONTINUED)
|
Related Party |
|
| Sales to Related Party |
| Purchases from Related Party |
| Dividends received from Related Party |
|
|
|
| £m |
| £m |
| £m |
| June 2010: |
|
|
|
|
|
|
|
| CE UK Gas Holdings Limited |
|
| 0.1 |
| - |
| - |
| Integrated Utility Services Limited |
|
| 0.2 |
| - |
| - |
| Northern Electric Distribution Limited |
|
| 1.6 |
| 0.1 |
| - |
| Northern Electric Properties Limited |
|
| 0.1 |
| 0.1 |
| - |
| Vehicle Lease and Service Limited |
|
| - |
| - |
| 0.3 |
| Yorkshire Electricity Distribution plc |
|
| 1.7 |
| - |
| - |
|
|
|
|
|
|
|
|
|
| June 2009: |
|
|
|
|
|
|
|
| CE UK Gas Holdings Limited |
|
| 0.1 |
| - |
| - |
| Integrated Utility Services Limited |
|
| 0.3 |
| - |
| 1.2 |
| Northern Electric Distribution Limited |
|
| 3.2 |
| 0.1 |
| - |
| Northern Electric Properties Limited |
|
| 0.1 |
| 0.1 |
| - |
| Vehicle Lease and Service Limited |
|
| - |
| - |
| 0.4 |
| Yorkshire Electricity Distribution plc |
|
| 2.2 |
| - |
| - |
NORTHERN ELECTRIC plc
REGISTERED NUMBER: 2366942
CONDENSED FINANCIAL STATEMENTS - SIX MONTHS ENDED 30 JUNE 2010
NOTES TO THE ACCOUNTS (CONTINUED)
3. RELATED PARTY TRANSACTIONS (CONTINUED)
COMPANY (CONTINUED)
|
Related Party |
|
| Sales to Related Party |
| Purchases from Related Party |
| Dividends received from Related Party |
|
|
|
| £m |
| £m |
| £m |
| December 2009: |
|
|
|
|
|
|
|
| CE UK Gas Holdings Limited |
|
| 0.2 |
| - |
| - |
| Integrated Utility Services Limited |
|
| 0.2 |
| - |
| 1.2 |
| Northern Electric Distribution Limited |
|
| 5.5 |
| 0.2 |
| 20.0 |
| Northern Electric Properties Limited |
|
| 0.1 |
| 0.2 |
| - |
| Vehicle Lease and Service Limited |
|
| - |
| - |
| 0.3 |
| Yorkshire Electricity Distribution plc |
|
| 3.3 |
| - |
| - |
Sales and purchases from related parties were made at commercial prices.
There are no amounts outstanding to other members of the CE Group.
No dividends were received from Integrated Utility Services Limited in the period to 30 June 2010.
4. ACCOUNTING POLICIES
The Group's accounting policies are the same as the accounting policies which are described in the Group's latest annual report and accounts for the year to 31 December 2009.