Interim Results

29 Sep 2006 11:12

Northern Electric PLC29 September 2006 NORTHERN ELECTRIC plc INTERIM REPORT SIX MONTHS ENDED 30 JUNE 2006 NORTHERN ELECTRIC plc INTERIM REPORT - SIX MONTHS ENDED 30 JUNE 2006 COMMENTARY The interim accounts for the six months ended 30 June 2006 consolidate theresults of the Company and its subsidiaries and are prepared under InternationalFinancial Reporting Standards. The interim accounts do not comprise statutoryaccounts within the meaning of Section 240 of the Companies Act 1985. With the exception of the determination of income tax expense, the accountingpolicies and methods of computation used in the preparation of these interimaccounts are consistent with the policies and methods used in the preparation ofthe Group's statutory accounts for the year ended 31 December 2005. Financial Overview The interim accounts reflect the restructuring of the Group's electricalcontracting subsidiary and the sale to Yorkshire Electricity Distribution plc, arelated party, of the business comprising the provision of connections servicesand work on, and services for the improvement and repair of the electricitydistribution network owned by Yorkshire Electricity Distribution plc. Thebusiness comprising the provision of connections services and work on, andservices for the improvement and repair of the electricity distribution networkowned by Northern Electric Distribution Limited, another subsidiary of theGroup, was sold to Northern Electric Distribution Limited. This means thatrevenues and profits reported for the electrical contracting segment are lowerthan 2005. During the six months ended 30 June 2006 the consolidated profit before tax was£58.5m, which represented an increase of £0.7m when compared with the sameperiod in the prior year. Higher operating profits (£5.5m) reflecting adistribution revenue tariff revision effective from 1 April 2006 and otherimprovements were partly offset by adverse variations due to the non-recurringnature of gains made in the prior year (£4.6m) and higher net financing costs(£0.2m). No ordinary dividends were paid in the period resulting in £39.7m beingtransferred to reserves. On 25 September 2006 the board approved the payment ofan interim dividend for 2006 amounting to £50m. Payment of the dividend was madeon 27 September 2006. Capital expenditure during the period was £50.9m primarily in relation to theelectricity distribution network. Net debt at 30 June 2006 was £98.5m which represented a reduction of £21.2msince 31 December 2005. Cash and cash equivalents were £163.5m as at 30 June 2006. Outlook The Company will continue to invest in its electricity distribution network andfocus on exceeding Ofgem's targets for customer service whilst endeavouring tominimise the level of operating costs. The majority of the Group's distribution revenues for the period to 31 March2010 have been set by Ofgem. Enquiries John Elliott Company Secretary 0191 2235103 NORTHERN ELECTRIC plc INTERIM REPORT - SIX MONTHS ENDED 30 JUNE 2006 CONSOLIDATED INCOME STATEMENT 6 Months ended 6 Months Year ended 30 June 2006 ended 30 June 31 December 2005 2005 Unaudited Unaudited Audited £m £m £m Revenue 137.7 135.8 297.3Cost of sales (34.8) (41.2) (97.3) Gross profit 102.9 94.6 200.0 Distribution costs (25.9) (27.5) (54.4)Administrative expenses (9.1) (4.7) (18.4) Operating profit 67.9 62.4 127.2 Share of profits after tax of joint venture andassociate accounted for using the equity method 0.3 0.3 0.6 Other income 0.1 4.7 4.2Investment income 7.3 8.1 13.1Finance costs (17.1) (17.7) (33.4) Profit before tax 58.5 57.8 111.7 Income tax expense (18.8) (18.7) (36.6) Profit from ordinary activities after tax 39.7 39.1 75.1 CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE - SIX MONTHS ENDED 30JUNE 2006 There is no other income or expense other than the profits reported above. NORTHERN ELECTRIC plc INTERIM REPORT - SIX MONTHS ENDED 30 JUNE 2006 CONSOLIDATED BALANCE SHEET AT 30 JUNE 2006 30 June 30 June 31 December 2006 2005 2005 Unaudited Unaudited Audited £m £m £m Non-current assetsProperty, plant and equipment 1,043.3 964.2 1,009.7Intangibles 4.5 6.1 4.1Investments in joint venture and associate 3.1 3.2 3.4Investments in other companies 13.6 13.6 13.6Long-term securities 100.0 100.0 100.0Trade and other receivables 2.7 4.1 2.8 1,167.2 1,091.2 1,133.6 Current assetsInventories 17.7 21.3 27.9Trade and other receivables 45.6 42.5 53.8Cash and cash equivalents 163.5 203.8 146.5 226.8 267.6 228.2 Total assets 1,394.0 1,358.8 1,361.8 Current liabilitiesTrade and other payables (82.4) (68.6) (82.1)Current income tax liabilities (22.5) (19.0) (16.3)Deferred revenue (8.3) (6.7) (7.0)Borrowings (15.2) (115.5) (19.4)Provisions (3.1) (6.4) (4.7) (131.5) (216.2) (129.5) Net current assets 95.3 51.4 98.7 Non-current liabilitiesBorrowings (346.8) (246.7) (346.8)Deferred income tax liabilities (156.1) (148.3) (154.9)Retirement benefit obligations (17.1) (55.1) (37.3)Deferred revenue (314.9) (291.0) (305.4)Provisions (0.7) (0.3) (0.7) (835.6) (741.4) (845.1) Total liabilities (967.1) (957.6) (974.6) Net assets 426.9 401.2 387.2 EQUITYShare capital 72.2 72.2 72.2Share premium 158.8 158.8 158.8Retained earnings 189.7 164.0 150.0Other reserves 6.2 6.2 6.2 Total equity 426.9 401.2 387.2 The interim accounts were approved by the board of directors and authorised forissue on 29 September 2006 and were signed on its behalf by J M France, Director NORTHERN ELECTRIC plc INTERIM REPORT - SIX MONTHS ENDED 30 JUNE 2006 CONSOLIDATED CASH FLOW STATEMENT 6 Months 6 Months Year ended ended 30 June ended 30 June 31 December 2006 2005 2005 Unaudited Unaudited Audited £m £m £m Net cash from operating activities 60.2 25.7 57.8 Investing activitiesDividends received from joint ventures 0.6 0.2 0.2(Payment)/proceeds from disposal of business unit/subsidiary (5.6) 3.5 2.9Purchase of long term securities - (100.0) (100.0)Proceeds from disposal of property, plant and equipment 0.1 - -Purchase of property, plant and equipment (49.9) (42.0) (104.1)(Purchase)/disposal of intangible assets (0.8) (0.4) 0.4Receipt of customer contributions 16.6 17.8 36.4 Net cash used in investing activities (39.0) (120.9) (164.2) Financing activitiesEquity dividends paid - - (50.0)Movement in loan from parent undertaking 1.8 (3.2) 94.7Repayment of borrowings (6.0) - (100.0)New borrowings raised - 149.3 155.3 Net cash (used in)/from financing activities (4.2) 146.1 100.0 Net increase/(decrease) in cash and cash equivalents 17.0 50.9 (6.4) Cash and cash equivalents at beginning of period 146.5 152.9 152.9 Cash and cash equivalents at end of period 163.5 203.8 146.5 NORTHERN ELECTRIC plc INTERIM REPORT - SIX MONTHS ENDED 30 JUNE 2006 NOTES TO THE ACCOUNTS 1. REVENUE AND SEGMENTAL ANALYSIS The Group operates in two principal areas of activity, that of the distributionof electricity and electrical contracting, predominantly in the United Kingdom. 6 months ended 30 June 2006 (Unaudited) Electrical Distribution Contracting Other Total £m £m £m £m REVENUEExternal 100.2 34.8 2.7 137.7Inter-segment sales 1.0 8.8 (9.8) - Total Revenue 101.2 43.6 (7.1) 137.7 SEGMENT RESULTSOperating profit 46.1 3.7 18.1 67.9Share of profits after tax of jointventure and associate using the equitymethod - - 0.3 0.3 Other income - - 0.1 0.1Investment income 2.3 - 5.0 7.3Finance costs (12.2) - (4.9) (17.1) Profit before tax 36.2 3.7 18.6 58.5 OTHER INFORMATIONCapital additions 54.5 0.2 (3.8) 50.9Depreciation and amortisation 16.4 0.3 (0.3) 16.4Amortisation of deferred revenue (3.5) - - (3.5) "Other" comprises generation, business support units and consolidationadjustments. Interest on loans to and from the different activities is charged at acommercial rate of interest. Sales and purchases between the different activities are made at commercialprices. NORTHERN ELECTRIC plc INTERIM REPORT - SIX MONTHS ENDED 30 JUNE 2006 NOTES TO THE ACCOUNTS (continued) 1. REVENUE AND SEGMENTAL ANALYSIS (continued) 6 months ended 30 June 2005 (Unaudited) Electrical Distribution Contracting Other Total £m £m £m £m REVENUEExternal 92.8 42.4 0.6 135.8Inter-segment sales - 14.1 (14.1) - Total Revenue 92.8 56.5 (13.5) 135.8 SEGMENT RESULTSOperating profit 46.5 5.8 10.1 62.4Share of profits after tax of jointventure and associate using theequity method - - 0.3 0.3Other income - - 4.7 4.7Investment income 0.7 - 7.4 8.1Finance costs (11.8) - (5.9) (17.7) Profit before tax 35.4 5.8 16.6 57.8 OTHER INFORMATIONCapital additions 44.8 0.1 (3.1) 41.8Depreciation and amortisation 15.6 0.2 (0.2) 15.6Amortisation of deferred revenue (3.2) - - (3.2) "Other" comprises generation, business support units and consolidationadjustments. Interest on loans to and from the different activities is charged at acommercial rate of interest. Sales and purchases between the different activities are made at commercialprices. NORTHERN ELECTRIC plc INTERIM REPORT - SIX MONTHS ENDED 30 JUNE 2006 NOTES TO THE ACCOUNTS (continued) 1. REVENUE AND SEGMENTAL ANALYSIS (continued) Year ended 31 December 2005 (Audited) Electrical Distribution Contracting Other Total £m £m £m £m REVENUEExternal sales 191.6 99.7 6.0 297.3Inter-segment sales 2.0 32.5 (34.5) - Total revenue 193.6 132.2 (28.5) 297.3 SEGMENT RESULTSOperating profit 88.9 12.3 26.0 127.2Share of profit after tax of jointventure and associate accounted forusing the equity method - - 0.6 0.6Other income - - 4.2 4.2Investment income 3.1 - 10.0 13.1Finance costs (25.0) (0.1) (8.3) (33.4) Profit before tax 67.0 12.2 32.5 111.7 OTHER INFORMATIONCapital additions 107.9 0.3 (6.4) 101.8Depreciation and amortisation 31.7 0.5 (0.1) 32.1Amortisation of deferred revenue (6.5) - - (6.5) "Other" comprises generation, business support units and consolidationadjustments. Interest on loans to and from the different activities is charged at acommercial rate of interest. Sales and purchases between the different activities are made at commercialprices. NORTHERN ELECTRIC plc INTERIM REPORT - SIX MONTHS ENDED 30 JUNE 2006 NOTES TO THE ACCOUNTS (continued) 2. INCOME TAX EXPENSE 6 months ended 30 6 months ended 30 Year ended June June 31 December 2006 2005 2005 Unaudited Unaudited Audited £m £m £m Current tax 17.8 12.3 23.7 Deferred tax 1.0 6.4 12.9 18.8 18.7 36.6 Tax for the interim period is calculated by applying the effective average taxrate of 30% (2005: 30%) on profit before preference dividends accrued. Preference dividends are included within finance costs. This information is provided by RNS The company news service from the London Stock Exchange