National Grid 2008 Annual Report Download - page 545

BOWNE INTEGRATED TYPESETTING SYSTEM
CRC: 27845
Name: NATIONAL GRID
Date: 17-JUN-2008 03:10:51.35Operator: BNY99999TPhone: [phone]Site: BOWNE OF NEW YORK
Y59930.SUB, DocName: EX-15.1, Doc: 16, Page: 28
Description: EXHIBIT 15.1
0/8224.00.00.00Y59930BNY
[E/O] EDGAR 2 *Y59930/224/8*
BOWNE INTEGRATED TYPESETTING SYSTEM
CRC: 27845
Name: NATIONAL GRID
Date: 17-JUN-2008 03:10:51.35Operator: BNY99999TPhone: [phone]Site: BOWNE OF NEW YORK
Y59930.SUB, DocName: EX-15.1, Doc: 16, Page: 28 Description: EXHIBIT 15.1
0/8224.00.00.00Y59930BNY
[E/O] EDGAR 2 *Y59930/224/8*
Table of Contents
36
Performance a
g
ainst our ob
j
ectives continued
National Grid plc
£11,423m £3,265m £2,595m £2,964m
Revenue Cash generated from
continuing operations
Adjusted operating profit Operating profit
Financial performance
We aim to continue to improve our financial performance, to
deliver returns appropriate to our risk profile and to be
financially disciplined. We also aim to ensure that the value
that we create is reflected in our share price.
The principal measures we use to monitor our financial performance are
adjusted operating profit, adjusted earnings per share and operating
cash flows. Adjusted operating profit and adjusted earnings per share
are operating profit and basic earnings per share before exceptional
items, remeasurements and stranded cost recoveries.
In addition, we monitor the amount of synergy savings we generate
following an acquisition.
We report our financial results and position in accordance
with International Financial Reportin
g
Standards (IFRS).
Continuing and discontinued operations
The financial results of our businesses and segments and of
our other activities (as described on page 14) are presented
within continuin
g
operations.
Our financial results incorporate activities acquired with
KeySpan subsequent to 24 Au
g
ust 2007. In accordance with
the requirements of IFRS we also present, in note 28 to the
financial statements, illustrative pro forma financial
performance information as if we had acquired KeySpan on
1 April 2007. The purpose of these pro forma financial
results is to illustrate the impact on our financial results that
might have occurred had we owned KeySpan for a full year
instead of the seven and a quarter months included in our
actual reported results. However, as we have been required
to make a number of assumptions in preparin
g
the pro forma
results, they do not necessarily reflect the actual results that
would have occurred had we actually acquired KeySpan on
1 April 2007, nor are they necessarily indicative of the future
results of the enlarged National Grid.
The results of our UK and US wireless infrastructure
operations and the Basslink electricity interconnector in
Australia that we sold during the year ended 31 March 2008
are included within discontinued operations.
Discontinued operations also include the results of the
Ravenswood generation station, KeySpan Communications
and KeySpan Engineering Associates from 24 August 2007
onwards, being businesses acquired with KeySpan that we
expect to sell within one year of the acquisition. On 31
March 2008 we agreed to sell the Ravenswood generation
station for $2.9 billion (£1.4 billion). The sale is subject to
approval from the various regulatory bodies concerned, with
completion expected by summer 2008.
Profit and
cash flow
If we achieve our objectives we should be able to
deliver continued improvements in financial
performance, so that we deliver on our
commitment to
g
rowin
g
our dividend each
y
ear.
Measurement of financial performance and use of
adjusted profit measures
In considering the financial performance of our businesses
and segments, we analyse each of our primary financial
measures of operating profit, profit before tax, profit for the
year attributable to equity shareholders and earnings per
share into two components, comprising firstly business
performance, which excludes exceptional items,
remeasurements, stranded cost recoveries, and amortisation
of acquisition-related intangibles, and secondly exceptional
items, remeasurements, stranded cost recoveries and
amortisation of acquisition-related intangibles. Exceptional
items, remeasurements, stranded cost recoveries, and
amortisation of acquisition-related intangibles are excluded
from the measures of business performance used by
management to monitor financial performance as they are
considered to distort the comparability of our reported
financial performance from year to year.
Measures of business performance are referred to in this
Annual Report and Accounts as adjusted profit measures in
order to clearly distinguish them from the comparable total
profit measures of which they are a component. Adjusted
operating profit, adjusted profit before tax, adjusted earnings
and adjusted earnings per share differ from total operating
profit, profit before tax, profit for the year attributable to
equity shareholders, and earnings per share respectively by
the exclusion of exceptional items, remeasurements,
stranded cost recoveries, and amortisation of acquisition-
related intangibles.
Exceptional items, remeasurements, stranded cost
recoveries and amortisation of acquisition-related intan
g
ibles
are items of income and expenditure that, in the judgement
of mana
g
ement, should be disclosed separately on the basis
that they are material, either by virtue of their nature or size,
and are relevant to an understanding of our financial
performance. Items of income or expense that are
considered by management for designation as exceptional
items include such items as significant restructurings, write-
downs or impairments of non-current assets, significant
changes in environmental or decommissioning provisions,
integration of acquired businesses and gains or losses on
disposals of businesses or investments. Remeasurements
comprise gains or losses recorded in the income statement
arisin
g
from chan
g
es in the fair value of commodity contracts
and of derivative financial instruments. These fair values
increase or decrease as a consequence of changes in
commodity and financial indices and prices over which we
have no control. Stranded cost recoveries comprise income
from additional charges that we are allowed to recover from
certain of our US customers arising from the divestiture of
generation activities in the late 1990s. This income is
scheduled to cease lar
g
ely by the end of calendar year 2011.
Amortisation of acquisition-related intangibles arises from