National Grid 2008 Annual Report Download - page 546

BOWNE INTEGRATED TYPESETTING SYSTEM
CRC: 21979
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: 29
Description: EXHIBIT 15.1
0/5225.00.00.00Y59930BNY
[E/O] EDGAR 2 *Y59930/225/5*
BOWNE INTEGRATED TYPESETTING SYSTEM
CRC: 21979
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: 29 Description: EXHIBIT 15.1
0/5225.00.00.00Y59930BNY
[E/O] EDGAR 2 *Y59930/225/5*
Table of Contents
Annual Report and Accounts 2007/08
37
48.0
p
60.5
p
15% 11.8%
Adjusted earnings
p
er share
Earnings per share Growth in ordinary
dividends
Return on equity average
over three
y
ears
intangible assets, principally customer relationships, that are
only recognised as a consequence of the accounting
required for a business combination. In particular, such
amortisation distorts the comparison of the financial
performance of acquired businesses compared with non-
acquired businesses.
Adjusted profit measures are limited in their usefulness
compared with the comparable total profit measures as they
exclude important elements of our underlying financial
performance, namely exceptional items, remeasurements,
stranded cost recoveries, and amortisation of acquisition-
related intangibles. We believe that in separately presenting
financial performance in two components it is easier to read
and interpret financial performance between periods, as
adjusted profit measures are more comparable by excluding
the distorting effect of exceptional items, remeasurements,
stranded cost recoveries and amortisation of acquisition-
related intangibles, and exceptional items, remeasurements,
stranded cost recoveries, and amortisation of acquisition-
related intangibles are more clearly understood if separately
identified and analysed. The presentation of these two
components of financial performance is additional to, and not
a substitute for, the comparable total profit measures
presented.
Management uses adjusted profit measures as the basis for
monitoring financial performance and in communicating
financial performance to investors in external presentations
and announcements of financial results. Internal financial
reports, budgets and forecasts are primarily prepared on the
basis of adjusted profit measures, although planned
exceptional items, such as significant restructurings,
amortisation of acquisition-related intangibles, and stranded
cost recoveries are also reflected in budgets and forecasts.
Management compensates for the limitations inherent in the
use of adjusted profit measures through the separate
monitoring and disclosure of exceptional items,
remeasurements, stranded cost recoveries and amortisation
of acquisition-related intangibles as a component of our
overall financial performance.
Exchange rates
Our financial results are reported in sterlin
g
. Transactions for
our US operations are denominated in US dollars and so the
related amounts that are reported in sterling depend on the
US dollar to sterling exchange rate. As the average rate of
$2.01:£1 in 2007/08 was weaker than the average rate of
$1.91:£1 in 2006/07 (which was in turn weaker than the
average rate of $1.79:£1 in 2005/06), the same amount of
revenue, adjusted operating profit and operating profit in US
dollars earned in 2006/07 would have been reported as
£193 million, £26 million and £51 million lower if earned in
2007/08 (£250 million, £31 million and £58 million lower for
2005/06 if earned in 2006/07).
However, the effect of movements in the US dollar exchange
rate on adjusted operating profit and operating profit in
2007/08 was largely offset by the impact of interest and tax
charges denominated in US dollars, when translated into
sterling. This reflects the effect of derivative financial
instruments that swap debt raised in other currencies into US
dollars as part of the financing of our US operations. As a
result, adjusted profit for the year and profit for the year from
continuing operations for 2006/07 would have been
£4 million and £17 million lower respectively if translated at
the 2007/08 average exchange rate of $2.01:£1 (2005/06:
£10 million and £27 million higher respectively if translated at
the 2006/07 average exchange rate of $1.91:£1).
The balance sheet at the end of the financial year has been
translated at an exchange rate of $1.98:£1 at 31 March 2008
($1.97:£1 at 31 March 2007).
Operating financial performance
Details of the financial results of business segments and
other activities are included in the business reviews on
pages 44 to 73.
KeySpan contributed £368 million and £453 million to the
adjusted operating profit and operating profit for continuing
operations respectively. On a pro forma basis, assuming we
acquired KeySpan on 1 April 2007 our adjusted operating
profit and operating profit for continuing operations would
have been £2,625 million and £2,901 million respectively.