Last checked at 19 Aug 2009 18:06
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 2009.
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 ColonnadeCanary WharfLondon
E14 5HS
Tel. No. 020 7066 8333
The Half-Yearly Financial Report for the six months ended 30 June 2009 is also available on the website
www.ce-electricuk.com
NORTHERN ELECTRIC plc
HALF-YEARLY FINANCIAL REPORT
SIX MONTHS ENDED 30 JUNE 2009
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 2009 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 E.on, Network Rail, Scottish Water, Northumbrian Water and Yorkshire Water.
During the six months to 30 June 2009, 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 program 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 the electricity distribution networks of distribution network operators.
The main impact on the Group's financial performance for the six months to 30 June 2009 was the general economic downturn which adversely impacted the financial performance of both of its principal operating subsidiaries. Compared with the same period in 2008, the reduction in the volume of units distributed across NEDL's distribution network was offset by the impact of revised tariffs implemented in April 2009. In addition, IUS experienced reductions in work volumes.
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 2009 in respect of its Customer Interruptions ("CI"), Customer Minutes Lost ("CML") and Customer satisfaction targets was as follows:
| Actual | Target | |
| CML: | 76.3 (2008: 70.5) | 68.4 (2008: 69.5) |
| CI: | 64.2 (2008: 66.3) | 74.5 (2008: 74.5) |
| Customer satisfaction: | 89.2% (2008: 88.6%) | 90% (2008: 90%) |
NORTHERN ELECTRIC plc:
REGISTERED NUMBER: 2366942
INTERIM MANAGEMENT REPORT (CONTINUED)
Operations (continued)
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 2009 was somewhat disappointing. During that time the Group experienced one lost time accident (six months to 30 June 2008: 2), against an annual target of zero for the CE Electric UK Funding Company group of companies (the "CE Group") and 14 preventable vehicle accidents, against an annual target of 13 (six months to 30 June 2008: 14). Work continues to reduce the accident rates, a dedicated road risk manager has been appointed and the lessons learned from such incidents are incorporated into the Group's safety improvement plan.
Results for the six months ended 30 June 2009
The half-yearly accounts for the six months ended 30 June 2009 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 2009 to the Registrar of Companies by 30 June 2010.
A summary of the key financial results is set out below:
Key financials
Revenue
Revenue at £133.4m was £4.6m lower than for the six months ended 30 June 2008 mainly due to lower volumes in the engineering contracting business as a consequence of the general economic downturn in that industry in the period.
Cash flow
Cash and cash equivalents as at 30 June 2009 were £160.7m, representing a decrease of £21.3m when compared with the position at 31 December 2008. Cash outflows from investing activities of £54.8m and the repayment of borrowings of £0.8m were partly offset by cash inflows from operating activities of £34.3m.
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 and Royal Bank of Scotland plc.
Financial position
Profit before tax at £45.2m was £11.8m lower than the six months ended 30 June 2008 mainly due to higher pension costs and lower investment income due to lower average rates of interest compared to the same period in the prior year.
NORTHERN ELECTRIC plc:
REGISTERED NUMBER: 2366942
INTERIM MANAGEMENT REPORT (CONTINUED)
Dividends
No ordinary dividends were paid in the period resulting in £32.9m 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 by December 2010 subject to the actuarial assumptions adopted for the triennial valuation as at 31 March 2007 being borne out in practice. The next triennial actuarial valuation of the Scheme will take place as at 31 March 2010, with the associated arrangements for repair of the deficit or use of surplus, to be agreed by 31 March 2011. Although the treatment of pensions-related costs forms part of the discussions with Ofgem regarding the Distribution Price Control Review ("DPCR") process mentioned below, it is not expected that the Company's contributions to the Scheme will materially alter until the 2010 actuarial valuation of the Scheme is complete. Further details of the Company's pension arrangements can be found in the Company's annual report and accounts for the year to 31 December 2008.
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. During the six months to 30 June 2009, NEDL has been fully engaged with Ofgem in the DPCR Distribution Price Control Review process, which will culminate in Ofgem making its final proposals in respect of the price control formula that will take effect for the five-year period commencing 1 April 2010. As part of that process, NEDL submitted its detailed business plans in February 2009 and provided updates in June and July, triggering an assessment by Ofgem that resulted in the publication of an initial set of proposals on 3 August 2009.
NEDL is currently giving detailed consideration to those proposals and dialogue between NEDL and Ofgem will then take place throughout the second half of 2009, with Ofgem's final proposals being expected prior to the end of 2009. As such, the ultimate conclusion to that process is seen as the principal risk and uncertainty facing the Group from April 2010.
NORTHERN ELECTRIC plc:
REGISTERED NUMBER: 2366942
INTERIM MANAGEMENT REPORT (CONTINUED)
Risks and uncertainties (continued)
Regulation (continued)
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 primarlily in the competitive engineering contracting market, it is subject to the issues created by the general economic downturn and associated trading conditions. Consequently, demand for IUS's multi-utility service has continued to be lower than in previous years due to the current position in the house building and property development market and there is an enhanced the risk of counter-party default and increase in the potential for IUS to be exposed to bad debt. It is anticpated that these conditions will continue for the remainder of 2009.
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 2009, 86% of the Group's borrowings were at fixed rates and the average maturity for these borrowings was 22 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 2008, which is available at www.ce-electricuk.com.
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 provided to its customers. The majority of NEDL's distribution revenues for the period to 31 March 2010 have been set by Ofgem.
IUS will look to further develop its engineering contracting business by delivering a high standard of service to its existing clients and pursuing opportunities in the health, education, industrial, chemical and manufacturing sectors.
NORTHERN ELECTRIC plc:
REGISTERED NUMBER: 2366942
INTERIM MANAGEMENT REPORT (CONTINUED)
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 2009;
(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
P A Jones
Director
14 August 2009
NORTHERN ELECTRIC plc
REGISTERED NUMBER: 2366942
CONDENSED FINANCIAL STATEMENTS - SIX MONTHS ENDED 30 JUNE 2009
CONSOLIDATED INCOME STATEMENT
| 6 Months ended 30 June 2009 | 6 Months ended 30 June 2008 | Year ended 31 December 2008 | |||
| Unaudited | Unaudited | Audited | |||
| £m | £m | £m | |||
| Revenue | 133.4 | 138.0 | 271.2 | ||
| Cost of sales | (21.7) | (25.8) | (49.9) | ||
| Gross profit | 111.7 | 112.2 | 221.3 | ||
| Distribution costs | (34.7) | (33.2) | (66.7) | ||
| Administrative expenses | (17.7) | (10.4) | (20.9) | ||
| Operating profit | 59.3 | 68.6 | 133.7 | ||
| Share of profit after tax of joint venture accounted for using the equity method | 0.2 | 0.2 | 0.4 | ||
| Other gains | 0.1 | 0.1 | 0.4 | ||
| Investment income | 2.3 | 5.9 | 11.1 | ||
| Finance costs | (16.7) | (17.8) | (35.9) | ||
| Profit before tax | 45.2 | 57.0 | 109.7 | ||
| Income tax expense | (12.3) | (1.0) | (23.7) | ||
| Profit from ordinary activities after tax | 32.9 | 56.0 | 86.0 |
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME - SIX MONTHS ENDED 30 JUNE 2009
There is no other comprehensive income for the Group for the six months to 30 June 2009, the comparative six month period in 2008 or the year ended 31 December 2008, other than the profits reported above.
NORTHERN ELECTRIC plc
REGISTERED NUMBER: 2366942
CONDENSED FINANCIAL STATEMENTS - SIX MONTHS ENDED 30 JUNE 2009
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 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 2008 (audited) | 72.2 | 158.8 | 6.2 | 262.4 | 499.6 | ||||
| Comprehensive income for the period (unaudited) | - | - | - | 56.0 | 56.0 | ||||
| Balance at 30 June 2008 (unaudited) | 72.2 | 158.8 | 6.2 | 318.4 | 555.6 |
| Share | Capital | ||||||||
| Share | Premium | Redemption | Retained | Total | |||||
| Capital | Account | Reserve | Earnings | Equity | |||||
| £m | £m | £m | £m | £m | |||||
| Balance at 1 January 2008 (audited) | 72.2 | 158.8 | 6.2 | 262.4 | 499.6 | ||||
| Comprehensive income for the year (audited) | - | - | - | 86.0 | 86.0 | ||||
| Balance at 31 December 2008 (audited) | 72.2 | 158.8 | 6.2 | 348.4 | 585.6 |
NORTHERN ELECTRIC plc
REGISTERED NUMBER: 2366942
CONDENSED FINANCIAL STATEMENTS - SIX MONTHS ENDED 30 JUNE 2009
CONSOLIDATED BALANCE SHEET
| 30 June 2009 | 30 June 2008 | 31 December 2008 | |||
| Unaudited | Restated (note 4) Unaudited | Audited | |||
| £m | £m | £m | |||
| Non-current assets | |||||
| Property, plant and equipment | 1,323.6 | 1,224.4 | 1,283.9 | ||
| Intangibles | 5.4 | 5.8 | 5.7 | ||
| Investments in joint venture | 3.0 | 3.0 | 3.2 | ||
| Investments in other companies | 0.1 | 0.1 | 0.1 | ||
| Retirement benefit asset | 112.2 | 72.5 | 95.9 | ||
| Trade and other receivables | 4.3 | 4.6 | 4.3 | ||
| 1,448.6 | 1,310.4 | 1,393.1 | |||
| Current assets | |||||
| Inventories | 16.5 | 22.8 | 20.0 | ||
| Trade and other receivables | 44.3 | 49.1 | 47.8 | ||
| Cash and cash equivalents | 160.7 | 177.2 | 182.0 | ||
| 221.5 | 249.1 | 249.8 | |||
| Total assets | 1,670.1 | 1,559.5 | 1,642.9 | ||
| Current liabilities | |||||
| Trade and other payables | (57.2) | (78.6) | (67.3) | ||
| Current income tax liabilities | (8.1) | (14.0) | (15.5) | ||
| Deferred revenue | (12.9) | (11.9) | (12.5) | ||
| Borrowings | (54.2) | (29.8) | (55.7) | ||
| Provisions | (1.5) | (1.7) | (2.1) | ||
| (133.9) | (136.0) | (153.1) | |||
| Net current assets | 87.6 | 113.1 | 96.7 | ||
| Non-current liabilities | |||||
| Borrowings | (347.2) | (347.0) | (347.1) | ||
| Deferred income tax liabilities | (174.6) | (154.0) | (169.3) | ||
| Retirement benefit obligations | (1.4) | (1.4) | (1.4) | ||
| Deferred revenue | (393.4) | (364.3) | (385.6) | ||
| Provisions | (1.1) | (1.2) | (0.8) | ||
| (917.7) | (867.9) | (904.2) | |||
| Total liabilities | (1,051.6) | (1,003.9) | (1,057.3) | ||
| Net assets | 618.5 | 555.6 | 585.6 | ||
| EQUITY | |||||
| Share capital | 72.2 | 72.2 | 72.2 | ||
| Share premium account | 158.8 | 158.8 | 158.8 | ||
| Retained earnings | 381.3 | 318.4 | 348.4 | ||
| Other reserves | 6.2 | 6.2 | 6.2 | ||
| Total equity | 618.5 | 555.6 | 585.6 |
The interim accounts were approved by the board of directors and authorised for issue on 14 August 2009 and were signed on its behalf by:
P A Jones, Director
NORTHERN ELECTRIC plc
REGISTERED NUMBER: 2366942
CONDENSED FINANCIAL STATEMENTS- SIX MONTHS ENDED 30 JUNE 2009
CONSOLIDATED CASH FLOW STATEMENT
| | 6 Months ended 30 June 2009 | | 6 Months ended 30 June 2008 | | Year ended 31 December 2008 |
| | Unaudited | | Unaudited | | Audited |
| | £m | | £m | | £m |
| | | | | | |
| Net cash from operating activities | 34.3 | | 44.8 | | 83.8 |
| | | | | | |
| Investing activities | | | | | |
| Dividends received from joint venture | 0.4 | | 0.4 | | 0.4 |
| Proceeds from disposal of property, plant and equipment | 0.1 | | 0.2 | | 0.5 |
| Purchase of property, plant and equipment | (71.5) | | (75.0) | | (151.0) |
| Purchase of intangible assets | (0.2) | | - | | (0.9) |
| Receipt of customer contributions | 16.4 | | 25.4 | | 47.8 |
| | | | | | |
| Net cash used in investing activities | (54.8) | | (49.0) | | (103.2) |
| | | | | | |
| Financing activities | | | | | |
| Movement in loan from parent undertaking | - | | 5.6 | | 7.6 |
| New borrowings raised | - | | - | | 17.0 |
| Repayment of borrowings | (0.8) | | (1.0) | | - |
| | | | | | |
| Net cash (used in)/generated from financing activities | (0.8) | | 4.6 | | 24.6 |
| | | | | | |
| Net (decrease)/increase in cash and cash equivalents | (21.3) | | 0.4 | | 5.2 |
| | | | | | |
| Cash and cash equivalents at beginning of period | 182.0 | | 176.8 | | 176.8 |
| | | | | | |
| Cash and cash equivalents at end of period | 160.7 | | 177.2 | | 182.0 |
NORTHERN ELECTRIC plc
REGISTERED NUMBER: 2366942
CONDENSED FINANCIAL STATEMENTS- SIX MONTHS ENDED 30 JUNE 2009
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 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. Consolidation Adjustments includes pension accounting adjustments.
Sales and purchases between the different segments are made at commercial prices.
NORTHERN ELECTRIC plc
REGISTERED NUMBER: 2366942
CONDENSED FINANCIAL STATEMENTS - SIX MONTHS ENDED 30 JUNE 2009
NOTES TO THE ACCOUNTS (CONTINUED)
1. REVENUE AND SEGMENTAL ANALYSIS (CONTINUED)
| 6 months ended 30 June 2008 (Unaudited) | ||||||||||
| Distribution | Engineering Contracting | Other | Consolidation Adjustments | Total | ||||||
| £m | £m | £m | £m | £m | ||||||
| REVENUE | ||||||||||
| External sales | 107.8 | 25.7 | 4.5 | - | 138.0 | |||||
| Inter-segment sales | 0.2 | - | 3.7 | (3.9) | - | |||||
| Total Revenue | 108.0 | 25.7 | 8.2 | (3.9) | 138.0 | |||||
| SEGMENT RESULTS | ||||||||||
| Operating profit | 40.2 | 1.4 | 1.9 | 25.1 | 68.6 | |||||
| Share of profit after tax of joint venture accounted for using the equity method | 0.2 | |||||||||
| Other gains | 0.1 | |||||||||
| Investment income | 5.9 | |||||||||
| Finance costs | (17.8) | |||||||||
| Profit before tax | 57.0 | |||||||||
| OTHER INFORMATION | ||||||||||
| Capital additions | 64.4 | - | - | (1.9) | 62.5 | |||||
| Depreciation and amortisation | 20.5 | - | - | (0.4) | 20.1 | |||||
| Amortisation of deferred revenue | (5.3) | - | - | - | (5.3) | |||||
"Other" comprises business support units. Consolidation Adjustments includes pension accounting adjustments.
Sales and purchases between the different segments are made at commercial prices.
NORTHERN ELECTRIC plc
REGISTERED NUMBER: 2366942
CONDENSED FINANCIAL STATEMENTS - SIX MONTHS ENDED 30 JUNE 2009
NOTES TO THE ACCOUNTS (CONTINUED)
1. REVENUE AND SEGMENTAL ANALYSIS (CONTINUED)
| Year ended 31 December 2008 (Audited) | |||||||||
| Distribution | Engineering Contracting | Other | Consolidation Adjustments | Total | |||||
| £m | £m | £m | £m | £m | |||||
| REVENUE | |||||||||
| External sales | 214.7 | 49.9 | 6.6 | - | 271.2 | ||||
| Inter-segment sales | 0.4 | - | 7.2 | (7.6) | - | ||||
| Total revenue | 215.1 | 49.9 | 13.8 | (7.6) | 271.2 | ||||
| SEGMENT RESULTS | |||||||||
| Operating profit | 82.4 | 2.3 | 2.1 | 46.9 | 133.7 | ||||
| Share of profit after tax of joint venture accounted for using the equity method | 0.4 | ||||||||
| Other losses | 0.4 | ||||||||
| Investment income | 11.1 | ||||||||
| Finance costs | (35.9) | ||||||||
| Profit before tax | 109.7 | ||||||||
| OTHER INFORMATION | |||||||||
| Capital additions | 147.8 | 0.2 | - | (5.1) | 142.9 | ||||
| Depreciation and amortisation | 41.9 | 0.1 | 0.1 | (1.0) | 41.1 | ||||
| Amortisation of deferred revenue | (10.6) | - | - | - | (10.6) | ||||
"Other" comprises business support units. Consolidation Adjustments includes pension accounting adjustments.
Sales and purchases between the different segments are made at commercial prices.
NORTHERN ELECTRIC plc
REGISTERED NUMBER: 2366942
CONDENSED FINANCIAL STATEMENTS - SIX MONTHS ENDED 30 JUNE 2009
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. Segment result represents 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 2009 £m | 30 June 2008 £m | 31 December 2008 £m | ||
| Unaudited | Unaudited | Audited | ||
| Distribution | 950.9 | 870.1 | 930.6 | |
| Engineering contracting | 6.3 | 15.4 | 11.8 | |
| Other | 243.4 | 242.6 | 212.0 | |
| Consolidation Adjustments | (159.2) | (207.5) | (163.1) | |
| ______________ | ______________ | ______________ | ||
| Total net assets by segment | 1,041.4 | 920.6 | 991.3 | |
| ______________ | ______________ | ______________ | ||
| Unallocated net corporate liabilities | (422.9) | (365.0) | (405.7) | |
| ______________ | ______________ | ______________ | ||
| Total net assets | 618.5 | 555.6 | 585.6 | |
| ============ | ============ | ============ | ||
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 2009
NOTES TO THE ACCOUNTS (CONTINUED)
2. INCOME TAX EXPENSE
| 6 months ended 30 June | 6 months ended 30 June | Year ended 31 December | |||
| 2009 | 2008 | 2008 | |||
| Unaudited | Unaudited | Audited | |||
| £m | £m | £m | |||
| Current tax | 8.6 | 11.1 | 18.5 | ||
| Deferred tax | 5.3 | 5.9 | 14.6 | ||
| Adjustment in relation to prior periods | (1.6) | (16.0) | (16.0) | ||
| Impact of rate change | - | - | 6.6 | ||
| Total income tax expense | 12.3 | 1.0 | 23.7 |
The underlying tax for the interim period is calculated by applying the effective average tax rate of 28% (2008: 28.5%) 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 2009
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 2009 was £1.3m (six month ended 30 June 2008: £5.9m, year ended 31 December 2008: £10.3m). Included within cash and cash equivalents is £160.7m as at 30 June 2009 (30 June 2008: £176.5m, 31 December 2008: £176.8m) 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 2009 was £11.6m (six months ended 30 June 2008: £4.7m, year ended 31 December 2008: £24.6m). Included within borrowings is £126.1m as at 30 June 2009 (30 June 2008: £119.7m, 31 December 2008: 118.5m) 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 2009
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 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 | - | |||
| June 2008: | ||||||
| CE Insurance Services Limited | - | 0.3 | - | |||
| CE UK Gas Holdings Limited | 0.1 | - | - | |||
| Integrated Utility Services Limited (Registered in Eire) | - | 0.5 | - | |||
| Vehicle Lease and Service Limited | 0.1 | 2.7 | - | |||
| Yorkshire Electricity Distribution plc | 6.8 | 2.9 | - |
NORTHERN ELECTRIC plc
REGISTERED NUMBER: 2366942
CONDENSED FINANCIAL STATEMENTS - SIX MONTHS ENDED 30 JUNE 2009
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 2008: | ||||||
| CE Insurance Services Limited | - | 0.7 | - | |||
| CE UK Gas Holdings Limited | 0.3 | - | - | |||
| Integrated Utility Services Limited (Registered in Eire) | - | 1.0 | 0.2 | |||
| Vehicle Lease and Service Limited | 0.2 | 5.5 | 0.2 | |||
| Yorkshire Electricity Distribution plc | 15.6 | 6.7 | - |
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 2009, 3 directors (30 June 2008: 3, 31 December 2008: 3) and 8 key personnel (30 June 2008: 8, 31 December 2008: 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 2008: £0.1m, 31 December 2008: £0.1m) in respect of non-current and £0.1m (30 June 2008: £0.1m, 31 December 2008: £0.1m) in respect of current receivables.
NORTHERN ELECTRIC plc
REGISTERED NUMBER: 2366942
CONDENSED FINANCIAL STATEMENTS - SIX MONTHS ENDED 30 JUNE 2009
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 2009 was £1.3m (six months ended 30 June 2008: £4.6m, year ended 31 December 2008: £8.6m). Included within cash and cash equivalents is £107.2m as at 30 June 2009 (30 June 2008: £70.2m, 31 December 2008: £113.6m) 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 2009 was £2.2m (six months ended 30 June 2008: £3.0m, year ended 31 December 2008: £4.4m). Included within borrowings is £14.1m as at 30 June 2009 (30 June 2008: £16.7m, 31 December 2008: £15.2m) 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 2009
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 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 | - | - | ||||
| June 2008: | |||||||
| CE UK Gas Holdings Limited | 0.1 | - | - | ||||
| Integrated Utility Services Limited | 0.3 | - | - | ||||
| Northern Electric Distribution Limited | 2.7 | 0.1 | - | ||||
| Northern Electric Properties Limited | 0.1 | 0.1 | - | ||||
| Vehicle Lease and Service Limited | - | - | 0.4 | ||||
| Yorkshire Electricity Distribution plc | 2.0 | - | - |
NORTHERN ELECTRIC plc
REGISTERED NUMBER: 2366942
CONDENSED FINANCIAL STATEMENTS - SIX MONTHS ENDED 30 JUNE 2009
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 2008: | |||||||
| CE UK Gas Holdings Limited | 0.3 | - | - | ||||
| Integrated Utility Services Limited | 0.7 | - | 1.7 | ||||
| Northern Electric and Gas Limited | - | - | 6.5 | ||||
| Northern Electric Distribution Limited | 4.8 | 0.3 | 20.0 | ||||
| Northern Electric Genco | - | - | 2.4 | ||||
| Northern Electric Properties Limited | 0.1 | 0.2 | 3.7 | ||||
| UK Distribution Limited | - | - | 2.4 | ||||
| Vehicle Lease and Service Limited | - | - | 0.4 | ||||
| Yorkshire Electricity Distribution plc | 3.1 | - | - |
Sales and purchases from related parties were made at commercial prices.
There are no amounts outstanding to other members of the CE Group.
4. PRIOR PERIOD RESTATEMENT
A prior period restatement has been made in respect of accrued interest on borrowings. This balance has been reclassified from trade and other payables to short-term borrowings on the face of the balance sheet in line with IAS 39 "Financial Instruments: Recognition and Measurement". The effect of this adjustment is to increase borrowings and decrease trade and other payables in the prior period by £3.3m. The adjustment has no impact on prior period profit.
5. ACCOUNTING POLICIES
The Group's accounting policies are the same as the accounting policies which are described in the Group's latest financial statements, with the exception of the changes in the treatment of capitalised interest in line with the amendments to IAS 23: Borrowing Costs, effective from 1 January 2009. The estimated effect of this amendment is disclosed in the latest financial statements of the Group.