National Grid 2016 Annual Report Download - page 198

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 EPS into two components.
The first of these components is referred to as an adjusted
profit measure, also known as a business performance measure.
This is the principal measure used by management to assess the
performance of the underlying business.
Adjusted results exclude exceptional items and remeasurements.
These items are reported collectively as the second component
of the financial measures. Note 4 on page 111 explains in detail
the items which are excluded from our adjusted profit measures.
Adjusted profit measures have limitations in their usefulness
compared with the comparable total profit measures as they exclude
important elements of our financial performance. However, we believe
that by presenting our financial performance in two components it is
easier to read and interpret financial performance between periods,
as adjusted profit measures are more comparable having removed
the distorting effect of the excluded items. Those items 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, are also reflected
in budgets and forecasts. We separately monitor and disclose the
excluded items as a component of our overall financial performance.
Reconciliation of adjusted operating profit to total
operating profit
Adjusted operating profit is presented on the face of the income
statement under the heading operating profit before exceptional
items and remeasurements.
Year ended 31 March
2016
£m
2015
£m
2014
£m
Adjusted operating profit 4,096 3,863 3,664
Exceptional items (22) – 55
Remeasurements – commodity contracts 11 (83) 16
Total operating profit 4,085 3,780 3,735
Reconciliation of adjusted operating profit to adjusted
earnings and earnings
Adjusted earnings is presented in note 7 to the consolidated
financial statements on page 118.
Year ended 31 March
2016
£m
2015
£m
2014
£m
Adjusted operating profit 4,096 3,863 3,664
Adjusted net finance costs (1,013) (1,033) (1,108)
Share of post-tax results of joint ventures
and associates 59 46 28
Adjusted profit before tax 3,142 2,876 2,584
Adjusted tax (753) (695) (581)
Adjusted profit after tax 2,389 2,181 2,003
Attributable to non-controlling interests (3) 8 12
Adjusted earnings 2,386 2,189 2,015
Exceptional items after tax 278 (97) 388
Remeasurements after tax (73) (73) 73
Earnings 2,591 2,019 2,476
Reconciliation of adjusted EPS to EPS
Adjusted EPS is presented in note 7 to the consolidated
financial statements.
Year ended 31 March
2016
pence
20151
pence
20141
pence
Adjusted EPS 63.5 57.6 53.1
Exceptional items after tax 7.4 (2.6) 10.2
Remeasurements after tax (1.9) (1.8) 1.9
EPS 69.0 53.2 65.2
1. Comparative information has been restated to reflect the additional shares issued as
scrip dividends.
Reconciliation of adjusted operating profit excluding
timing differences to total operating profit
Adjusted operating profit excluding timing differences is discussed
on page 25. There were no major storms in 2014, 2015, or 2016.
Year ended 31 March
2016
£m
2015
£m
2014
£m
Adjusted operating profit excluding
timing differences 4,071 3,927 3,706
Timing differences 25 (64) (42)
Adjusted operating profit 4,096 3,863 3,664
Exceptional items and remeasurements (11) (83) 71
Total operating profit 4,085 3,780 3,735
196 National Grid Annual Report and Accounts 2015/16 Additional Information
Other unaudited financial information
Reconciliations of adjusted profit measures