TIDMNG.
RNS Number : 0520F
National Grid PLC
12 November 2020
London | 12 November
2020:
National Grid, a leading
energy
transmission and distribution
company,
today announces its Half
Year results.
Report for the period ended
30 September 2020
Highlights
-- Delivered safe, reliable networks throughout the COVID-19 pandemic
-- Submitted comprehensive response to Ofgem RIIO-2 draft determination consultation
-- Progressed a way forward on addressing downstate New York gas supply constraints
-- Published our first Responsible Business Charter, setting updated ESG targets for 2030
-- Continued positive discussions with NY PSC on new rates for KEDNY-KEDLI
-- Filed for new rates for Niagara Mohawk
-- Filing for Massachusetts Gas on 13 November
-- Construction of three interconnectors remains on track
Financial Performance
-- Underlying operating profit down 12% to GBP1.1bn
-- Statutory operating profit up 13% to GBP1.1bn
-- Underlying EPS down 14% to 17.2p reflecting higher COVID-19
related costs including US bad debts, storm costs, partly offset by
improved UK Gas Transmission and US revenues
-- Statutory EPS of 17.1p, up 51% reflecting mark-to-market remeasurement gains
-- Capital investment of GBP2.6bn down 6%; stronger investment
offset by the non-recurrence of Geronimo acquisition
-- Interim dividend 17.0p/share in line with policy (16.57p/share in prior period)
-- FY21 outlook: assumed COVID-19 underlying operating profit impact of approximately GBP400m
Financial Summary
Six months ended 30 September - continuing operations
Statutory results Underlying(1)
----------------------------- ------------------------
Unaudited 2020 2019 % change 2020 2019 % change
============================= ------ ---------- ----- ----- ----------
Operating profit (GBPm) 1,135 1,003 13% 1,147 1,301 (12)%
============================== ------ ----- ----- ----- ------
Profit before tax (GBPm) 720 404 78% 717 785 (9)%
============================== ------ ----- ----- ----- ------
Earnings per share (p) 17.1 11.3 51% 17.2 20.0 (14)%
============================== ------ ----- ----- ----- ------
Capital investment (GBPm)(2) 2,560 2,722 (6)% 2,560 2,722 (6)%
============================== ------ ------ ----- ----- ----- ------
(1) 'Underlying' represents statutory results excluding
exceptional items, remeasurements and timing. Further detail and
definitions for all alternative performance measures are provided
on page 44.
(2) Includes additions to PP&E, intangibles, contributions
to joint ventures and associates (excluding St William), investment
in National Grid Partners and total consideration for the National
Grid Renewables LLC (previously known as Geronimo) acquisition.
John Pettigrew
Chief Executive
"In the first half of this year we delivered strong operational
performance whilst managing the impact of COVID-19 costs on our
financial results. We have continued to ensure safe, reliable
networks and have delivered on our investment programme through the
pandemic. With the launch of our Responsible Business Charter, we
have underlined our commitment to our environmental goals, whilst
supporting employees and communities across our jurisdictions.
In the US, we have progressed a way forward on addressing gas
constraints in downstate New York, and we continue positive
discussions with the PSC on new rates for KEDNY and KEDLI. In the
UK, we submitted a robust response to Ofgem's draft determinations,
and have continued to work closely with the regulator to provide
further evidence in support of our RIIO-2 business plans.
Looking ahead, the group is well positioned to manage the
ongoing COVID-19 uncertainty, and our full-year financial guidance
is unchanged. Our focus remains on agreeing regulatory settlements,
and to help shape the energy transition as we look to enable
decarbonisation of power, transport and heat."
Contacts
Investor Relations
+44 (0) 7814 355
Nick Ashworth 590
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Jon Clay +44 (0) 7899 928 247
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James Flanagan +44 (0) 7970 778 952
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Peter Kennedy +44 (0) 7966 200 094
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Media
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Molly Neal +44 (0) 7583 102 727
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+44 (0) 7812 485
Surinder Sian 153
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Teneo
Charles Armitstead +44 (0) 7703 330 269
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Conference call details
An audio call will be held at 09:15 (GMT) today. A webcast link is
available at https://streamstudio.world-television.com/786-1014-25667/en
Please use this link to join via a laptop, smartphone or tablet. Should
you wish to ask a question, please dial in using the details below.
A replay of the webcast will be available soon after the event at
https://investors.nationalgrid.com/results-and-events/results-centre
.
Live telephone coverage of the analyst presentation at 09:15
======================================================================================================================
UK dial in numbers +44 (0) 203 936 2999 (Local)
+44 (0) 800 640 6441 (UK toll free)
=================================================
US dial in numbers +1 646 664 1960 (Local)
+1 855 9796 654 (US toll free)
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All other locations +44 20 3936 2999
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Access Code 498 832
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National Grid image library is available at https://www.nationalgrid.com/media-centre
Use of Alternative Performance Measures
Throughout this release, we use a number of alternative (or
non-IFRS) and regulatory performance measures to provide users with
a clearer picture of the regulated performance of the business.
This is in line with how management monitor and manage the business
day-to-day. Further detail and definitions for all alternative
performance measures are provided on page 44.
OVERVIEW
A solid performance in the first half
National Grid has reported strong operational progress in both
the UK and US for the first six months of the year. However, like
all companies, we have incurred COVID-19 related costs, impacting
our financial performance.
Safety has remained paramount and we continue to focus on
ensuring the public, our employees and contractors are safe. During
the period ended 30 September, our businesses have continued to
deliver good performance with lost time injury frequency rates
(LTIFR) trending down to 0.11 from the year end LTIFR performance
of 0.12. On reliability, our performance has remained good across
our businesses as we have successfully managed low levels of
demand, particularly in the UK, and we have responded well to a
series of large storms across our US regions.
Half-year financial performance
Underlying operating profit at constant currency decreased
GBP147 million (11)% versus the prior period to GBP1,147 million
(down 12% at actual exchange rates). This mainly reflects the
impact of increased COVID-19 related costs including US bad debts,
higher US storm costs, and non-recurrence of prior year MOD
adjustments for UK Electricity Transmission, partly offset by
higher revenue from US rate increases and the timing of UK Gas
Transmission exit capacity income.
Underlying operating profit At actual
Six months ended 30 September exchange rates At constant currency
---------------------------------- ------------------------ ------------------------
(GBP million) 2020 2019 % change 2019 % change
---------------------------------- ----- ----- ---------- ---------- ------------
UK Electricity Transmission 524 583 (10)% 583 (10)%
UK Gas Transmission 108 66 64% 66 64%
US Regulated 403 525 (23)% 518 (22)%
NGV and other activities 112 127 (12)% 127 (12)%
----------------------------------- ----- ----- ------ ---------- -------
Total underlying operating profit 1,147 1,301 (12)% 1,294 (11)%
----------------------------------- ----- ----- ------ ---------- -------
'Underlying results' and a number of other terms and performance
measures are not defined within accounting standards and may be
applied differently by other organisations. For clarity, we have
provided definitions of these terms and, where relevant,
reconciliations on pages 44 to 47.
Capital investment decreased by GBP136 million at constant
currency to GBP2,560 million. This was driven principally by the
non-recurrence of the National Grid Renewables Development LLC
(previously known as Geronimo) acquisition and lower spend in UK
Gas Transmission (lower Feeder-9 expenditure), partly offset by
higher expenditure in UK Electricity Transmission (London Power
Tunnels 2 and Hinkley-Seabank) and in our US regulated electricity
transmission business.
Delivering safe, reliable networks through the COVID-19
pandemic
Throughout the COVID-19 pandemic the Group has adapted to new
ways of working. We have delivered safe, reliable networks, whilst
managing through all the new regulations and restrictions. During
the first half, we have:
-- Delivered on our substantial investment programme by
investing GBP2.6 billion across our networks, broadly in line with
investment in the same period last year;
-- Delivered an outstanding response to a greater number of storms in the US;
-- Maintained our cost discipline, and made good progress
alleviating some of the COVID-19 cost pressure, remaining on track
to deliver on our UK and US efficiency targets;
-- Ensured we behave as a responsible and purpose led business,
with a continued focus on our safety culture, supporting our people
and our communities.
In the US, at the onset of the pandemic, our safety team created
our COVID-19 Health and Safety Plan to act as a guideline for all
employees and contractors. This helped deliver over 400 field
visits across our operations in May to ensure new ways of working
and safety expectations were made clear which has allowed us to
deliver our critical investment with limited disruption. In the UK,
our teams have continued to work through this period, with key
workers going out on site during lockdown to keep gas and
electricity flowing with enhanced safety protocols. We have also
worked closely with our contractors across all projects to minimise
delays associated with COVID-19, including major projects such as
the London Power Tunnels 2 and Hinkley Point projects.
COVID-19 - update on financial impact
During the first half, we estimate that COVID-19 impacted our
underlying operating profit by GBP117 million year-on-year in three
broad areas: (1) an increase in our bad debt provision of
approximately GBP56 million, (2) a shortfall of revenue under
existing regulatory agreements of GBP41 million, and (3) net direct
costs of GBP20 million. In addition to the GBP117 million impact,
the delay to updating rates in KEDNY and KEDLI at the start of
COVID-19 resulted in a further approximate GBP24 million impact in
the first half.
We continue to expect a full year impact from COVID-19 of around
GBP400 million to underlying operating profit given the seasonal
nature of our US regulated business. Whilst we see future
uncertainties from COVID-19, we will continue to find ways to drive
cost efficiencies. On this point, we have made progress to
alleviate much of the direct cost burden, mitigating around GBP60
million of direct COVID-19 costs during the first half.
We also maintain our guidance of up to GBP1 billion of cash flow
impact in the full year. On top of the underlying operating profit
impact, we expect (1) continued weaker demand and lower revenues,
which will be recovered as usual through regulatory true-ups in
later years; (2) lower cash collections from our US customers,
which, whilst below prior year levels, are in line with our
expectations, and; (3) a small impact from revenue deferrals
related to system costs in the UK that we will recover next
year.
In the US, we remain confident that we will be able to recover
the majority of our US COVID-19 related costs through our
regulatory mechanisms. Whilst some of this will be through the
usual course of rate filing negotiations, such as recovering
revenue deferrals, some will be through separate filings. For
example, we have open regulatory proceedings on COVID-19 cost
recovery in both New York and Massachusetts. In June, we filed a
Cost Recovery Plan with other stakeholders with the Massachusetts
regulator, seeking to establish a regulatory asset for incremental
COVID-19 costs; and in July, we joined other utilities in New York
and filed comments with the Public Service Commission (PSC) on the
effects of COVID-19 on our business. We will continue to work with
all stakeholders on this during the second half of FY21.
In the UK, we have seen some limited impact from COVID-19. We
have been working with industry and Ofgem on financial support
packages to support the industry through these unforeseen
circumstances. For Transmission Network Use of System (TNUoS) and
gas charges, we provided GBP11 million as part of a wider industry
scheme to support suppliers over the summer period. These charges
will be recovered in the current financial year. For Balancing
Services Use of System (BSUoS) charges, we provided GBP16m of
temporary support to suppliers and generators to defer the payment
of an element of the summer excess costs which will be recovered in
the next financial year. We will continue to closely monitor this
throughout the duration of the pandemic.
US delivering good performance despite increased storms
We achieved good performance across our US operating companies
during a period with significant storm activity. With the impact of
Tropical Storm Isaias in August and several major storms, the
financial impact of major storms in the first half was $61 million.
We also had a large storm that impacted upstate New York,
Massachusetts, and Rhode Island in early October. Given the
additional storms in October, it is likely we will incur over $100
million of storm costs for the full year.
The October storm was our third most impactful event in the last
15 years, where we saw over 550,000 customers lose power but with
95% fully restored in New York within 64 hours. Tropical Storm
Isaias in early August was our seventh most impactful event in
terms of customer disconnections. We have experienced 18 major
storms in HY21 compared to 8 in HY20. Nevertheless, our operational
response has been strong especially considering the COVID-19 impact
which added complexity to our response efforts and required us to
manage our Incident Command Structure remotely. Our crews have
responded rapidly to restoring over 1 million disconnected
customers during Isaias and the October storms, and there have been
no safety incidents during these storms for our field
workforce.
Storms remain a major focus for us and for our regulators given
the enormous disruption they bring to customers and the cost of
lost productivity to local communities. We continue to work with
regulators to ensure our rate settlements reflect this changing
climate, and we are focused on continuous improvement and are
piloting digital technologies to help improve our performance. For
example, we are using a new digital product called Vegetation
Management Optimisation (VMO) that is capable of utilising
satellite imagery to map the areas where vegetation poses a high
risk to our networks, given trees cause the greatest number of
outages in all our jurisdictions.
Capital investment across our US businesses in the first half
was GBP1,641 million, GBP75 million higher than the prior period at
constant currency. This was driven by higher expenditure in our US
regulated electricity transmission business, partly offset by lower
gas spend due to the COVID-19 impact in downstate New York. We had
work restrictions in place in New York and Massachusetts in the
early part of the year which limited the type of work we could
complete, especially in our Gas Business in New York City and
Boston. For example, we had restrictions in place around the
removal of old gas pipelines in our leak prone pipe replacement
programme. However, this work has accelerated in recent months as
restrictions have eased. In addition, our resource planning and
construction teams have rebalanced our investment portfolio to
deliver the significant investment required across our
networks.
We have continued to make progress on regulatory rate filings.
In July, we filed a request with the New York PSC to update
electric and gas distribution rates for Niagara Mohawk (NIMO), our
upstate New York distribution business. This represents a one-year
filing, with revenue data submitted for two additional years to
help facilitate a multi-year settlement. New rates are expected to
become effective July 2021. It proposes capital investment of $3.6
billion across the three years to help modernise the electric and
gas networks, and fund clean energy infrastructure such as electric
vehicle charging and renewable natural gas projects. This includes
a proposal for a hydrogen demonstration project that would be the
first of its kind in the United States, producing hydrogen from
renewable electricity which could be used, stored and blended into
the network. The filing also proposes funding for 500 new
positions, new performance-based rates and incentives, as well as
earnings adjustment mechanisms, all whilst managing customer bills
and affordability in response to COVID-19.
In downstate New York, we remain in discussions for a multi-year
settlement for our KEDNY and KEDLI gas businesses. Whilst we have
not yet reached a settlement, we have continued a constructive
dialogue with PSC staff and other stakeholders, and have agreed to
extend discussions by two months from the end of November to the
end of January. We remain hopeful that an agreement with PSC staff
and other stakeholders will be reached by the end of the calendar
year that can then be approved by the Commission. We also have a
way forward to solving the short and medium term issues around gas
supply constraints in downstate New York which focuses on
delivering investment to enhance existing CNG and LNG
infrastructure, as well as significant increases in energy
efficiency and demand side response measures.
On 13 November, we plan to file for new rates for our
Massachusetts Gas business, to become effective in November 2021.
As part of our filing, we are proposing a multi-year agreement with
a Performance Based Mechanism similar to that we had agreed for our
Massachusetts Electric business last year. If agreed, this will
help give us longer term visibility for our investments, greater
protection against cost pressures, and more incentives to innovate
and create value for our customers.
From a cost efficiency perspective, we continue to streamline
operations, simplify our supply chain, and rationalise our property
portfolio. We delivered over $30 million of efficiency savings last
year, and committed to delivering $50 million per annum from
2020/21 onwards.
UK businesses focused on efficient delivery
Operationally both our UK Electricity and Gas Transmission
businesses have continued to deliver good levels of performance and
our capital investment programme has continued as expected.
For Electricity Transmission, capital investment reached GBP548
million, up GBP77 million on prior year. This was principally
driven by the London Power Tunnels 2 and Hinkley Point projects,
both of which are progressing well. On Hinkley Point, the project
involves a 46 kilometre connection between Bridgwater and Seabank,
with an expected completion date of 2026. The first foundations
have been completed for the new T-pylons which will be used for
this line.
Gas Transmission capital investment was GBP85 million, GBP82
million lower than prior year. This primarily reflects lower asset
health work at our Bacton and St Fergus gas terminals, the
completion of the tunnel for the Feeder-9 pipeline, and lower
emissions works at Peterborough and Huntingdon. The Feeder-9
pipeline under the Humber estuary is now near commissioning, and
represents our largest gas project in a decade.
We were disappointed with the draft determinations on RIIO-2
when they were published by Ofgem in July. The proposals may result
in a significant reduction in network reliability, and would also
mean lower allowed capital expenditure, lower returns, limited
incentives, and extensive use of uncertainty mechanisms. In
addition, Ofgem has proposed a clawback of GBP556 million from the
T1 price control, and a business plan incentive (BPI) penalty of
GBP93 million. In September, we submitted a comprehensive response
to the draft determinations that highlighted three main areas of
concern, namely that the draft determinations (a) reduce
reliability and resilience across the network, (b) jeopardise net
zero progress, and (c) erode regulatory stability. Our submission
also provided evidence to support our view that both the BPI and
clawback were unjustified. We have provided further evidence to
justify the investment necessary to maintain network safety and
reliability that our stakeholders have asked for. Since our
submission, we have continued to engage with Ofgem on the RIIO-2
framework, including at the Open Meetings in October. We continue
to work towards a settlement that is acceptable for all our
stakeholders and remain hopeful that this is an outcome that can be
achieved in December.
We also continue to work on ways to drive innovation and
efficiencies as we look to the future, building on the GBP100
million of cumulative savings we expect to achieve this year. Our
focus remains on; (1) streamlining our maintenance operating
procedures, (2) further digital innovations to increase
productivity, and (3) making improvements to our back-office
processes. Some of these benefits will come in the way we manage
our day-to-day operations. For example, over the next six months,
we will be launching the first phase of our new digital tool, to
transform work management and scheduling across electricity and gas
transmission, consolidating legacy technology. But we are also
working on ways to deliver larger, scalable, benefits across major
projects, in particular looking at how we use contractors through
the project lifecycle, as well as ways to deliver greater capex
efficiency through our supply chains. Once we have greater clarity
on the RIIO-2 framework, we will be able to understand how much
further we can drive efficiencies.
Electricity System Operator (ESO)
As the UK energy industry continues to evolve, we are working
with the government and regulator to review the most appropriate
structure for the ESO following legal separation last year. The
Board believes it is important that the current external review of
the structure of the ESO results in a stable outcome which best
enables the UK to meet its 2050 net zero commitment and represents
value for consumers.
Further growth for NGV and other activities
NGV and Other activities
Six months ended 30 September Operating profit Capital investment
GBP million 2020 2019 2020 2019
------------------------------- -------- -------- --------- ---------
Total NGV 142 128 261 432
Property 25 46 14 (1)
Corporate and other activities (55) (47) 11 65
-------------------------------- -------- -------- --------- ---------
Total Other (30) (1) 25 64
-------------------------------- -------- -------- --------- ---------
Total NGV and Other activities 112 127 286 496
-------------------------------- -------- -------- --------- ---------
Joint ventures and associates Share of post-tax
Six months ended 30 September profit/(loss)*
GBP million 2020 2019
------------------------------------ --------- --------
Total NGV 33 25
Other 1 1
St William 4 11
------------------------------------- --------- --------
Total joint ventures and associates 38 37
------------------------------------- --------- --------
* Share of post-tax profit/(loss) is before exceptional items
and remeasurements.
We continue to make significant progress on our interconnector
portfolio. In October 2020, IFA2, our second connection to France,
passed an important milestone, entering its energisation phase,
allowing electricity power to run through the cable before going
live later this year. For North Sea Link, we have successfully laid
over 590km of cable as planned and the project remains on track for
completion by the end of 2021. We also began construction work on
Viking Link earlier this year, which is expected to become
operational in late 2023.
On 22 September we announced a co-operation agreement with
TenneT to explore the feasibility of connecting Dutch and British
wind farms to the energy systems of both countries via subsea
electricity cables, called multi-purpose interconnectors. Whilst
there is still a lot of work that needs to be done to determine a
suitable financing structure, the development would be the first of
its kind for the UK and the Netherlands in the North Sea.
Last month, our LNG importation terminal on the Isle of Grain
signed a 25-year agreement with Qatar Petroleum that will provide
the Qatari company with storage and redelivery capacity at Grain
LNG from mid-2025. This marks the conclusion of Grain LNG's
competitive "Open Season" process which began in November 2019. The
agreement will allow National Grid to invest in an additional tank
and associated vaporizer capacity, bringing our future annual
throughput capacity to 25 bcm of natural gas versus current
capacity of 20 bcm. Total capital investment of GBP425 million will
be spread over 5 years, with the project starting in 2021.
We recently launched National Grid Renewables, the new unified
brand for our US renewable energy business within NGV. National
Grid Renewables is focused on developing, owning and operating
large-scale renewable energy assets across the United States, and
brings together a number of our businesses including solar, onshore
wind, and battery energy storage previously taking place under the
NGV and Geronimo Energy brands.
National Grid Renewables continues to expand its clean energy
development pipeline. In April, we signed a Virtual PPA agreement
with Cargill for the 200MW Prairie Wolf Solar Project in Illinois,
which is expected to commission in FY22.
The Property business delivered an operating profit of GBP25
million, down GBP21 million versus the prior period, reflecting the
timing of completion of site sales. During the first half, we sold
21 sites, including two to St William at Ascot and Hertford, all of
which were former gas works sites.
Responsible Business Charter - our commitment
National Grid is fully committed to its role in tackling climate
change and as a responsible company for the communities that we
serve. In October, we reached our next milestone in this journey
with the launch of our Responsible Business Charter.
The Charter describes our long-term goals across five pillars:
(1) the environment, where we have committed to achieve net zero on
our own emissions by 2050, and a new target to reduce scope 3
emissions by 20% by 2030; (2) our communities, where we aim to
provide access to skills development for 45,000 people and
contribute half a million volunteering hours by 2030; (3) our
people, where the safety and well-being of our employees is
paramount, and where we aim to have 50% diversity in our senior
leadership group by 2025; (4) the economy, where our main
contribution is the safe and reliable delivery of energy, but where
we are also committing $250 million into smarter technology that
will benefit society; and (5) the right governance, where we will
embrace diversity and inclusion, allowing all voices to be heard
within our organization and across all our stakeholder groups.
Following publication of the Charter, we will also publish our
first Responsible Business Report next year, alongside our Annual
Report, to demonstrate how we are progressing against the
commitments and ambitions that we have laid out.
To support the delivery of our commitment as a responsible
business in relation to our communities, we have also launched Grid
for Good. This is our flagship community investment programme,
designed to deliver social mobility in the hardest to reach corners
of our communities for disadvantaged youth aged between 16 and 24.
Through the Grid for Good pathway, and with the help of our
employee volunteers, young people have a unique opportunity to
learn about the energy industry, network with one another, gain
valuable skills, receive a mentor, have a chance to gain valuable
work experience, and ultimately achieve meaningful careers with us
and our partners now, or in the future. We believe that fresh
talent and diverse perspectives in our own organisation and our
industry will be a key contributor in achieving a diverse workforce
who will help us to deliver against our net zero ambitions.
Board changes
In September, we announced the appointment of Paula Rosput
Reynolds to succeed Sir Peter Gershon as Chair. Paula will join the
Board on 1 January 2021 as Non-executive Director and Chair
Designate and will assume the role of Chair after a transitionary
period and no later than the conclusion of the 2021 Annual General
Meeting. Sir Peter will remain as Chair until this time.
Paula is currently a Non-executive Director at General Electric
Company and the Senior Independent Director of BP plc where she
also chairs the Remuneration Committee. She is currently also a
Non-executive Director and Chair of the Remuneration Committee of
BAE Systems plc but will step down from BAE prior to 1 January
2021.
In July, we announced that Mark Williamson will step down as
Chair of the Audit Committee, with effect from 10 November 2020.
Liz Hewitt, Independent Non-executive Director of the Company,
stepped into the role on this date.
GROWTH
Balanced portfolio to deliver asset growth and sustainable
dividend
National Grid aims to deliver value to shareholders through
maintaining a portfolio of businesses with strong operational
performance alongside attractive annual asset growth of around 5 to
7% assuming long-run average UK RPI inflation of 3%. The Group aims
to deliver this growth while maintaining an efficient balance sheet
that allows continued funding of its investment programme, and
maintaining the policy of aiming to increase dividend per share by
at least RPI for the foreseeable future.
GBP2.6 billion of capital investment across the Group
We continued to make significant investment in energy
infrastructure in the first six months of the year. Capital
investment across the Group was GBP2,560 million, a decrease of
GBP136 million (5%) compared to the first half of 2019/20 at
constant currency.
Group capital investment At actual
Six months ended 30 September exchange rates At constant currency
------------------------------- ------------------------ ------------------------
(GBP million) 2020 2019 % change 2019 % change
------------------------------- ----- ----- ---------- ---------- ------------
UK Electricity Transmission 548 471 16% 471 16%
UK Gas Transmission 85 167 (49)% 167 (49)%
US Regulated 1,641 1,588 3% 1,566 5%
NGV and other activities 286 496 (42)% 492 (42)%
-------------------------------- ----- ----- ------ ---------- -------
Group capital investment 2,560 2,722 (6)% 2,696 (5)%
-------------------------------- ----- ----- ------ ---------- -------
* NGV and other activities capital investment includes equity
and financing in joint ventures and associates, investment in
National Grid Partners and the National Grid Renewables Development
LLC (previously known as Geronimo) acquisition but excludes GBP15
million of equity contributions to the St William property joint
venture for 2019 (there were no equity contributions in 2020).
Investment in the US Regulated business was GBP1,641 million for
the first six months of this year, an increase of GBP75 million
over the prior period at constant currency. This was driven by
higher expenditure in our US regulated electricity transmission
business, partly offset by lower gas spend due to the COVID-19
impact in downstate New York. Increased levels of investment are
expected to continue, supported by our upcoming rate filings and
settlements, thereby supporting strong levels of rate base growth
over the medium term.
The UK regulated businesses invested GBP633 million, with UK
Electricity Transmission and UK Gas Transmission both investing in
asset health to meet their respective Network Output Measures.
Investment in NGV and other activities during the period was
GBP286 million, GBP206 million lower than prior year on a constant
currency basis. This was principally driven by the National Grid
Renewables Development LLC (previously known as Geronimo)
acquisition in July 2019.
OUTLOOK
For 2020/21, we continue to assume an impact on Group underlying
operating profit, based on the scenario set out in the Forward
Guidance section, of around GBP400 million from COVID-19. This is
driven largely by our US operations where we are expecting higher
levels of bad debt, additional direct COVID-19 costs, and a
shortfall of revenue under existing regulatory agreements. However,
given regulatory mechanisms and precedents, we expect to recover a
large part of this. In the UK, we continue to expect some limited
cost impact from COVID-19. Therefore, whilst COVID-19 will impact
earnings and cash flow in the short term, we continue to anticipate
limited economic impact longer term.
Looking forward, we will remain focused on working with US
regulators to develop the appropriate rate plans for a post
COVID-19 world. We will work towards reaching a positive outcome on
new rates for KEDNY-KEDLI, and submitting separate filings that can
help deliver clean energy investment. In the UK, we continue to
focus on agreeing a fair settlement for RIIO-2 with Ofgem as we
move towards Final Determinations in December. We will continue to
place a sharp emphasis on efficiency across the business, and
through our Responsible Business Charter we have underlined our
commitment to our environmental goals, whilst supporting employees
and communities across our jurisdictions.
National Grid continues to expect asset growth towards the top
end of its target range of 5-7% in the near term, assuming RPI at
3%, with capital investment for FY21 around GBP5 billion. We will
continue to focus on customer affordability, safety and reliability
across our networks as we work with regulators on agreeing new
frameworks in the US and UK. With an efficient balance sheet that
underpins asset and dividend growth, the Group is well positioned
to create value for shareholders.
2020/21 FORWARD GUIDANCE
The forward guidance below assumes no further significant
deterioration in the economic outlook across our territories
through the remainder of FY21. If other scenarios play out during
FY21, then this could have a range of impacts on cashflows and
earnings, which could be different from our current assessment.
The outlook and forward guidance contained in this statement
should be reviewed, together with the forward-looking statements
set out in this release, in the context of the cautionary
statement.
UK Electricity Transmission
Net Revenue (excluding timing) is expected to decrease compared
to 2019/20. Controllable costs are expected to be slightly higher
after taking into account COVID-19 related costs and the benefit of
the ongoing cost efficiency programme.
Depreciation is expected to increase by over GBP40 million
reflecting the ongoing investment programme.
Overall, Return on Equity is expected to be similar to the level
in 2019/20.
UK Gas Transmission
Net Revenue (excluding timing) is expected to increase by
approximately GBP30 million compared to 2019/20, including base
revenue increases and the benefit of RPI inflation. Overall costs,
including depreciation, are expected to be broadly flat on 2019/20
given the benefit of the ongoing cost efficiency programme.
Return on Equity is expected to be lower than 2019/20, with
lower totex performance.
UK Timing
Revenues are likely to be impacted by timing of recoveries
including impacts from prior years and lower volume expectations
for 2020/21 given lower system demand due to COVID-19 and the BSUoS
deferral scheme. This will drive under-recovery of revenues in
Electricity Transmission in 2020/21.
US Regulated operations
Net Revenue (excluding timing) is expected to be around GBP100
million higher, reflecting the first full year of new rates in our
Massachusetts Electric business, and rate increases under existing
rate plans.
However, under our current assumptions, we expect costs to
increase by over GBP150 million year-on-year driven by:
-- continuing higher levels of bad debts, above our current regulatory allowances
-- additional COVID-19 related costs
We expect to recover most of these additional costs through
regulatory mechanisms. The timing of recovery through revenues will
depend on the outcome of negotiations with our regulators.
We expect depreciation to be higher in 2020/21 by around GBP100
million reflecting the higher level of asset growth.
Return on Equity for overall US Regulated operations is expected
to decrease compared to 2019/20. The size of the decrease will be
dependent on the arrangements for recoveries of additional costs
related to the pandemic.
US Timing
Revenues will be impacted by timing of recoveries. We expect
timing to be significantly favourable relative to the timing
outflow seen in FY20.
NGV and Other activities
NGV operating profits are expected to be flat with a benefit of
asset re-lifing at Grain LNG, partly offset by lower meter volumes
and lower interconnector arbitrage. New interconnectors which are
currently under construction are not expected to start contributing
materially to operating profit until 2021/22.
We also expect other activities' underlying operating profit to
be lower year on year driven by lower property operating profit,
and lower National Grid Partners fair value gains resulting from
the current economic climate.
Joint Ventures and Associates
Our share of the profit after tax of joint ventures and
associates is expected to reduce this year, reflecting the timing
of the delivery of property sales from the St William joint
venture.
Interest and Tax
Net finance costs in 2020/21 are expected to be lower than
2019/20, with lower RPI inflation and lower interest rates more
than offsetting the impact of increased net debt and higher 'other
interest' costs.
For the full year 2020/21, the underlying effective tax rate
excluding the share of post-tax profits from joint ventures and
associates, is expected to be around 21%.
Investment, Growth and Net Debt
Overall Group capital investment for 2020/21 is expected to be
around GBP5 billion, on the back of implementing new working
practices to follow government guidelines based on the impacts of
the COVID-19 pandemic.
Asset Growth is expected to be lower than in 2019/20, reflecting
our expectations for lower capex and lower RPI inflation. We still
expect asset growth to be towards the top end of our 5-7% target
range assuming 3% RPI inflation.
Depreciation is expected to increase, reflecting the impact of
continued high levels of capital investment.
Operating cashflow generated from continuing operations is
expected to decrease with lower EBITDA driven primarily by costs
related to COVID-19, and lower levels of working capital due to
slower cash collections.
Net debt is expected to increase (excluding the impact of
foreign exchange) by up to a further GBP1.5 billion in the second
half of the year (from GBP30.1 billion as at 30th September 2020).
We continue to forecast an impact of up to GBP1 billion on net debt
over the full financial year due to COVID-19.
Weighted average number of shares (WAV) is expected to increase
from 3,461 million last year to approximately 3,520 million in
2020/21.
FINANCIAL REVIEW
In managing the business, we focus on various non-IFRS measures
which provide meaningful comparisons of performance between years,
monitor the strength of the Group's balance sheet as well as
profitability, and reflect the Group's regulatory economic
arrangements. Such alternative and regulatory performance measures
are supplementary to, and should not be regarded as a substitute
for, IFRS measures which we refer to as statutory results. We
explain the basis of these measures and, where practicable,
reconcile these to statutory results in 'Alternative performance
measures/non-IFRS reconciliations' on pages 44 to 47. The Group
does not believe that these measures are a substitute for IFRS
measures, however, the Group does believe such information is
useful in assessing the performance of the business on a comparable
basis.
Also, we distinguish between adjusted results, which exclude
exceptional items and remeasurements, and underlying results, which
further take account of: (i) volumetric and other revenue timing
differences arising from our regulatory contracts, and (ii) major
storm costs which are recoverable in future periods, neither of
which give rise to economic gains or losses.
Performance for the six months ended 30 September
Financial summary for continuing
operations
(GBP million) 2020 2019 change %
-------------------------------------- ----- ----- ----------
Statutory results
Operating profit 1,135 1,003 13%
Profit after tax 602 388 55%
Earnings per share (pence) 17.1 11.3 51%
Interim dividend per share (pence) 17.00 16.57 3%
-------------------------------------- ----- ----- ------
Alternative performance measures:
Adjusted operating profit 1,047 1,088 (4)%
Adjusted profit after tax 527 531 (1)%
Underlying operating profit 1,147 1,301 (12)%
Underlying profit after tax 605 686 (12)%
Adjusted earnings per share (pence) 15.0 15.5 (3)%
Underlying earnings per share (pence) 17.2 20.0 (14)%
Capital investment 2,560 2,722 (6)%
-------------------------------------- ----- ----- ------
Statutory operating profit was GBP1,135 million, 13% higher than
in the first six months of last year. There was one exceptional
item in the current year, relating to a GBP15 million gain from the
release of environmental provisions, compared to no exceptional
items in the first six months of last year. In addition, there were
GBP73 million of commodity remeasurement gains in the period
compared to GBP85 million of net losses in the first six months of
last year. Statutory profit after tax was up 55% against the
comparative period, reflecting mark-to-market remeasurements gains
this year compared to remeasurement losses in the first six months
of last year.
Adjusted operating profit (excluding exceptional items and
remeasurements) was down 4%. Higher revenues in our US Regulated
business (rate increases) along with increased revenues in Gas
Transmission helped to partly mitigate the impact of COVID-19 on
our results (higher US bad debt charges and incremental costs)
along with higher levels of 'deferrable' storm costs, and higher
depreciation. Adjusted profit after tax was down 1%, as a result of
the net adverse factors above, partly offset by lower net interest
costs compared to the prior period.
Excluding the GBP100 million of timing under-recovery in the
first six months (compared to a GBP210 million under-recovery at
constant currency in the prior year), underlying operating profit
of GBP1,147 million was down 12% against the comparative
period.
Reconciliation of different measures of profitability and
earnings
The table below reconciles our statutory profit measures for
continuing operations, at actual exchange rates, to adjusted and
underlying versions.
Reconciliation of profit and earnings from continuing operations
Earnings per share
Operating profit Profit after tax (pence)
(GBP million) 2020 2019 2020 2019 2020 2019
---------------------------- -------- -------- -------- -------- ---------- --------
Statutory results 1,135 1,003 602 388 17.1 11.3
Exceptional items
and remeasurements (88) 85 (75) 143 (2.1) 4.2
----------------------------- -------- -------- -------- -------- ---------- --------
Adjusted results 1,047 1,088 527 531 15.0 15.5
Timing 100 213 78 155 2.2 4.5
Major storm costs - - - - - -
---------------------------- -------- -------- -------- -------- ---------- --------
Underlying results 1,147 1,301 605 686 17.2 20.0
----------------------------- -------- -------- -------- -------- ---------- --------
Segmental income statement
The following tables set out the income statement on adjusted
and underlying bases.
Segmental analysis for continuing operations
Adjusted Underlying
change change
GBP million 2020 2019 % 2020 2019 %
---------------------------- ----- ----- -------- ----- ----- --------
UK Electricity Transmission 477 625 (24)% 524 583 (10)%
UK Gas Transmission 95 62 53% 108 66 64%
US Regulated 363 274 32% 403 525 (23)%
NGV and Other 112 127 (12)% 112 127 (12)%
----------------------------- ----- ----- ---- ----- ----- ----
Total operating profit 1,047 1,088 (4)% 1,147 1,301 (12)%
Net finance costs (468) (553) (15)% (468) (553) (15)%
Share of post-tax
results of joint
ventures and associates 38 37 3% 38 37 3%
----------------------------- ----- ----- ---- ----- ----- ----
Profit before tax 617 572 8% 717 785 (9)%
Tax (90) (41) 120% (112) (99) 13%
----------------------------- ----- ----- ---- ----- ----- ----
Profit after tax 527 531 (1)% 605 686 (12)%
----------------------------- ----- ----- ---- ----- ----- ----
EPS (pence) 15.0 15.5 (3)% 17.2 20.0 (14)%
----------------------------- ----- ----- ---- ----- ----- ----
UK Electricity Transmission adjusted operating profit decreased
compared to the same period in 2019/20 primarily driven by an GBP89
million swing in timing recoveries (lower volumes), but also the
benefit of higher allowances (data centres and cyber security; and
legal separation costs) received in the prior period. Higher
depreciation and other costs were partly offset by an increase of
GBP16 million on earned incentives.
UK Gas Transmission adjusted operating profit increased,
primarily as a result of higher exit capacity income driven partly
from revenue phasing (due to pricing) in the prior period, lower
staff and compliance costs and lower depreciation. Timing
under-recoveries of GBP13 million were GBP9 million higher than the
prior period.
US Regulated adjusted operating profit was higher than the same
period last year, primarily as a result of a net GBP40 million
under-recovery compared to a GBP251 million under-recovery for the
same period in 2019/20 (generating a GBP211 million period on
period swing). Increased underlying revenues from rate increases
were more than offset by higher depreciation due to asset growth,
increased bad debt provisions and incremental costs related to
COVID-19 along with higher storm costs.
Operating profit in NGV and Other activities reduced by GBP15
million compared to the same period in 2019/20, due to lower
Property sales, partly offset by a depreciation benefit in Grain
LNG following a review of asset lives.
Financing costs and tax
Net finance costs
Adjusted net finance costs were GBP85 million lower than the
prior period. This was primarily due to lower inflation on
RPI-linked debt, refinancing of maturing debt at lower rates and
buy-back costs on the early redemption of a EUR1.25 billion hybrid
bond in the prior year. These were partly offset by higher interest
on net pension liabilities and increases in other non-cash
interest. The effective interest rate on treasury managed debt was
3.3%, compared to 4.4% for the first six months of 2019/20.
Joint ventures and associates
The Group's share of net profits from joint ventures and
associates was stable year on year on an adjusted basis. On a
statutory basis, it decreased by GBP8 million to GBP30 million,
primarily as a result of fair value losses relating to the Emerald
joint venture.
Tax
The adjusted effective tax rate (excluding profits from joint
ventures and associates) of 15.5% (prior year 7.7%) at the half
year is affected by both seasonality in our US business and the
impact of timing under/over-recoveries. The underlying effective
tax rate (excluding profits from joint ventures and associates) was
16.5% (prior year 13.2%). The effective tax rates for this year are
higher than in the prior period due to the lower value of tax
settlements in the current period.
Net debt
National Grid's balance sheet remains robust, with strong
investment grade credit ratings from Moody's, Standard & Poor's
(S&P) and Fitch. In August, Moody's and S&P placed the
National Grid plc credit ratings on negative outlook reflecting the
Group's exposure to the RIIO-2 regulatory determinations and delays
to US rate increases in the context of limited headroom. We expect
both Moody's and S&P to review this outlook after the RIIO-2
price control arrangements are agreed. During the period, National
Grid plc increased its equity investment in National Grid North
America Inc by $2 billion.
During the first six months of the year, net debt increased to
GBP30.1 billion, GBP1.5 billion higher than at 31 March 2020. This
increase was driven by GBP1.8 billion of operating cash inflows,
offset by nearly GBP2.4 billion of cash outflows for capital
investment, GBP1.5 billion paid in dividends, interest and tax and
GBP0.6 billion of favourable exchange movements on opening net
debt.
National Grid raised over GBP3.5 billion of new long-term
financing in the first half of the year. This includes a $600
million bond issued by Narrangansett Electric, $1.1 billion issued
in Niagara Mohawk Power Company (including a $600 million 'green'
bond), GBP1.6 billion issued in National Grid Electricity
Transmission Plc and GBP460 million issued by National Grid
plc.
Interim Dividend
The Board has approved an interim dividend of 17.00p per
ordinary share ($1.1285 per American Depositary Share). This
represents 35% of the total dividend per share of 48.57p in respect
of the last financial year to 31 March 2020 and is in line with the
Group's dividend policy. The interim dividend is expected to be
paid on 13 January 2021 to shareholders on the register as at 27
November 2020.
Our dividend policy, set out in 2013, aims to grow the ordinary
dividend per share at least in line with RPI inflation each year
for the foreseeable future. As is its usual practice, the Board
reviews this policy regularly, taking into account a range of
factors including expected business performance and regulatory
developments.
The scrip dividend alternative will again be offered in respect
of the 2020/21 interim dividend. As previously announced, we do not
expect to buy back the scrip shares issued during 2020/21.
APPIX
Unless otherwise stated, all financial commentaries in this
results statement are given on an underlying basis at actual
exchange rates for continuing operations. Underlying represents
statutory results excluding exceptional items, remeasurements,
timing and major storm costs. The underlying basis is further
defined on page 44.
Alternative Performance Measures derived from IFRS
The following are terms or metrics that are reconciled to IFRS
measures and are defined on pages 44 to 47:
Net revenue
Adjusted profit measures
Underlying results
Constant currency
Timing impacts
Capital investment
Net debt - defined in note 11 on page 36.
PROVISIONAL FINANCIAL TIMETABLE
Date Event
---------------------------- -------------------------------------------
12 November 2020 2020/21 half year results
============================ ===========================================
25 November 2020 ADRs go ex-dividend
============================ ===========================================
26 November 2020 Ordinary shares go ex-dividend
============================ ===========================================
27 November 2020 Record date for 2020/21 interim dividend
============================ ===========================================
3 December 2020 Scrip reference price announced
============================ ===========================================
14 December 2020 (5pm London Scrip election date for 2020/21 interim
time) dividend
============================ ===========================================
2020/21 interim dividend paid to qualifying
13 January 2021 shareholders
============================ ===========================================
20 May 2021 2020/21 Preliminary Results
============================ ===========================================
3 June 2021 ADRs and Ordinary shares go ex-dividend
============================ ===========================================
4 June 2021 Record date for 2020/21 final dividend
============================ ===========================================
10 June 2021 Scrip reference price announced
============================ ===========================================
21 July 2021 Scrip election date
============================ ===========================================
26 July 2021 2021 AGM
============================ ===========================================
2020/21 final dividend paid to qualifying
18 August 2021 shareholders
---------------------------- -------------------------------------------
CAUTIONARY STATEMENT
This announcement contains certain statements that are neither
reported financial results nor other historical information. These
statements are forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. These
statements include information with respect to National Grid's (the
Company) financial condition, its results of operations and
businesses, strategy, plans and objectives. Words such as 'aims',
'anticipates', 'expects', 'should', 'intends', 'plans', 'believes',
'outlook', 'seeks', 'estimates', 'targets', 'may', 'will',
'continue', 'project' and similar expressions, as well as
statements in the future tense, identify forward-looking
statements. These forward-looking statements are not guarantees of
National Grid's future performance and are subject to assumptions,
risks and uncertainties that could cause actual future results to
differ materially from those expressed in or implied by such
forward-looking statements. Many of these assumptions, risks and
uncertainties relate to factors that are beyond National Grid's
ability to control, predict or estimate precisely, such as the
impact of COVID-19 on its operations, employees, counterparties,
funding and legal and regulatory obligations, but also more widely
in terms of changes in laws or regulations, including any arising
as a result of the United Kingdom's exit from the European Union;
announcements from and decisions by governmental bodies or
regulators, including proposals relating to the RIIO-2 price
control, as well as increased political and economic uncertainty
resulting from COVID-19; the timing of construction and delivery by
third parties of new generation projects requiring connection;
breaches of, or changes in, environmental, climate change and
health and safety laws or regulations, including breaches or other
incidents arising from the potentially harmful nature of its
activities; network failure or interruption, the inability to carry
out critical non-network operations and damage to infrastructure,
due to adverse weather conditions including the impact of major
storms as well as the results of climate change, due to
counterparties being unable to deliver physical commodities, or due
to the failure of or unauthorised access to or deliberate breaches
of National Grid's IT systems and supporting technology; failure to
adequately forecast and respond to disruptions in energy supply;
performance against regulatory targets and standards and against
National Grid's peers with the aim of delivering stakeholder
expectations regarding costs and efficiency savings; and customers
and counterparties (including financial institutions) failing to
perform their obligations to the Company. Other factors that could
cause actual results to differ materially from those described in
this announcement include fluctuations in exchange rates, interest
rates and commodity price indices; restrictions and conditions
(including filing requirements) in National Grid's borrowing and
debt arrangements, funding costs and access to financing;
regulatory requirements for the Company to maintain financial
resources in certain parts of its business and restrictions on some
subsidiaries' transactions such as paying dividends, lending or
levying charges; the delayed timing of recoveries and payments in
National Grid's regulated businesses and whether aspects of its
activities are contestable; the funding requirements and
performance of National Grid's pension schemes and other
post-retirement benefit schemes; the failure to attract, develop
and retain employees with the necessary competencies, including
leadership and business capabilities, and any significant disputes
arising with National Grid's employees or the breach of laws or
regulations by its employees; the failure to respond to market
developments, including competition for onshore transmission, the
threats and opportunities presented by emerging technology; the
failure by the Company to respond to or meet its own commitments as
a leader in relation to climate change development activities
relating to energy transition, including the integration of
distributed energy resources; and the need to grow the Company's
business to deliver its strategy, as well as incorrect or
unforeseen assumptions or conclusions (including unanticipated
costs and liabilities) relating to business development activity.
For further details regarding these and other assumptions, risks
and uncertainties that may impact National Grid, please read the
Strategic Report section and the 'Risk factors' on pages 227 to 230
of National Grid's most recent Annual Report and Accounts. In
addition, new factors emerge from time to time and National Grid
cannot assess the potential impact of any such factor on its
activities or the extent to which any factor, or combination of
factors, may cause actual future results to differ materially from
those contained in any forward-looking statement. Except as may be
required by law or regulation, the Company undertakes no obligation
to update any of its forward-looking statements, which speak only
as of the date of this announcement.
UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL
STATEMENTS
Consolidated income statement
for the six months ended 30
September
2020
GBPm Before exceptional Exceptional
items and items and
Notes remeasurements remeasurements Total
--------------------------------------
Continuing operations
Revenue 2(a),3 6,535 - 6,535
Provision for bad and doubtful
debts 14 (120) - (120)
Other operating costs 4 (5,368) 88 (5,280)
-------------------------------------- ------ ------------------ --------------- -------
Operating profit 2(b),4 1,047 88 1,135
Finance income 4,5 14 14 28
Finance costs 4,5 (482) 9 (473)
Share of post-tax results of
joint ventures and associates 2(b) 38 (8) 30
-------------------------------------- ------ ------------------ --------------- -------
Profit before tax 2(b),4 617 103 720
Tax 4,6 (90) (28) (118)
-------------------------------------- ------ ------------------ --------------- -------
Profit after tax from continuing
operations 4 527 75 602
Attributable to:
Equity shareholders of the
parent 526 75 601
Non-controlling interests from
continuing operations 1 - 1
-------------------------------------- ------ ------------------ --------------- -------
Earnings per share (pence)
Basic earnings per share (continuing) 7 17.1
Diluted earnings per share
(continuing) 7 17.0
Basic earnings per share (continuing
and discontinued) 7 17.1
Diluted earnings per share
(continuing and discontinued) 7 17.0
-------------------------------------- ------ ------------------ --------------- -------
2019
GBPm Before exceptional Exceptional
items and items and
Notes remeasurements remeasurements Total
--------------------------------------
Continuing operations
Revenue 2(a),3 6,289 - 6,289
Provision for bad and doubtful
debts (55) - (55)
Other operating costs 4 (5,146) (85) (5,231)
-------------------------------------- ------ ------------------ --------------- -------
Operating profit/(loss) 2(b),4 1,088 (85) 1,003
Finance income 4,5 31 7 38
Finance costs 4,5 (584) (90) (674)
Share of post-tax results of
joint ventures and associates 2(b) 37 - 37
-------------------------------------- ------ ------------------ --------------- -------
Profit/(loss) before tax 2(b),4 572 (168) 404
Tax 4,6 (41) 25 (16)
-------------------------------------- ------ ------------------ --------------- -------
Profit/(loss) after tax from
continuing operations 4 531 (143) 388
Profit after tax from discontinued
operations 5 1 6
-------------------------------------- ------ ------------------ --------------- -------
Total profit/(loss) for the
period (continuing and discontinued) 536 (142) 394
-------------------------------------- ------ ------------------ --------------- -------
Attributable to:
Equity shareholders of the
parent 535 (142) 393
Non-controlling interests from
continuing operations 1 - 1
-------------------------------------- ------ ------------------ --------------- -------
Earnings per share (pence)
Basic earnings per share (continuing) 7 11.3
Diluted earnings per share
(continuing) 7 11.2
Basic earnings per share (continuing
and discontinued) 7 11.5
Diluted earnings per share
(continuing and discontinued) 7 11.4
-------------------------------------- ------ ------------------ --------------- -------
Consolidated statement of comprehensive income
for the six months ended 30 September
2020 2019
Notes GBPm GBPm
---------------------------------------------------- ----- ----- -------
Profit after tax from continuing operations 602 388
Other comprehensive income/(loss) from continuing
operations
Items from continuing operations that will
never be reclassified to profit or loss:
Remeasurement losses on pension assets and
post-retirement benefit obligations 15 (467) (995)
Net gains on equity instruments designated
at fair value through other comprehensive income 28 6
Net losses on financial liability designated
at fair value through profit and loss attributable
to changes in own credit risk (8) (1)
Net gains in respect of cash flow hedging of
capital expenditure 22 5
Tax on items that will never be reclassified
to profit or loss 54 235
---------------------------------------------------- ----- ----- -----
Total losses from continuing operations that
will never be reclassified to profit or loss (371) (750)
---------------------------------------------------- ----- ----- -----
Items from continuing operations that may be
reclassified subsequently to profit or loss:
Exchange adjustments (482) 579
Net gains/(losses) in respect of cash flow
hedges(1) 13 (65)
Net (losses)/gains in respect of cost of hedging (7) 2
Net gains on investments in debt instruments
measured at fair value through other comprehensive
income 53 7
Share of other comprehensive income/(losses)
of associates, net of tax - (5)
Tax on items that may be reclassified subsequently
to profit or loss (1) 20
---------------------------------------------------- ----- ----- -----
Total (losses)/gains from continuing operations
that may be reclassified subsequently to profit
or loss (424) 538
---------------------------------------------------- ----- ----- -----
Other comprehensive loss for the period, net
of tax, from continuing operations (795) (212)
Other comprehensive income for the period,
net of tax, from discontinued operations(2) - 6
---------------------------------------------------- ----- ----- -----
Other comprehensive loss for the period, net
of tax (795) (206)
---------------------------------------------------- ----- ----- -----
Total comprehensive (loss)/income for the period
from continuing operations (193) 176
Total comprehensive income for the period from
discontinued operations - 12
---------------------------------------------------- ----- ----- -----
Total comprehensive (loss)/income for the period (193) 188
---------------------------------------------------- ----- ----- -----
Attributable to:
Equity shareholders of the parent (193) 186
Non-controlling interests from continuing operations - 2
------------------------------------------------------ ----- ---
1. Within the line item net gains/(losses) in respect of cash
flow hedges, there is an equal and opposite impact of GBP141
million (2019: GBP11 million) relating to spot foreign exchange
movements on derivatives designated in cash flow hedges of foreign
currency risk and interest rates. This has no net impact on the
consolidated statement of comprehensive income. This is consistent
with the Annual Report and Accounts for the year ended 31 March
2020.
2. For the period ended 30 September 2019, the other
comprehensive income for the period, net of tax, from discontinued
operations relates to items of other comprehensive income of Cadent
(investment held through Quadgas Holdco Limited).
Consolidated statement of changes in equity
for the six months ended 30 September
Share Other Total
Share premium Retained equity share-holders' Non-controlling Total
capital account earnings reserves equity interests equity
Notes GBPm GBPm GBPm GBPm GBPm GBPm GBPm
----------------- ----- -------- -------- --------- --------- -------------- --------------- ---------
At 1 April 2020 470 1,301 21,710 (3,919) 19,562 22 19,584
Profit for the
period - - 601 - 601 1 602
Other
comprehensive
loss
for the period - - (401) (393) (794) (1) (795)
----------------- ----- -------- -------- --------- --------- -------------- --------------- -------
Total
comprehensive
income/(loss)
for the period - - 200 (393) (193) - (193)
Equity dividends 8 - - (1,065) - (1,065) - (1,065)
Scrip
dividend-related
share
issue 1 (1) - - - - -
Issue of treasury
shares - - 16 - 16 - 16
Purchase of own
shares - - (2) - (2) - (2)
Share-based
payments - - 10 - 10 - 10
Cash flow hedges
transferred
to the statement
of financial
position, net of
tax - - - (7) (7) - (7)
----------------- ----- -------- -------- --------- --------- -------------- --------------- -------
At 30 September
2020 471 1,300 20,869 (4,319) 18,321 22 18,343
----------------- ----- -------- -------- --------- --------- -------------- --------------- -------
Share Other Total
Share premium Retained equity share-holders' Non-controlling Total
capital account earnings reserves equity interests equity
Notes GBPm GBPm GBPm GBPm GBPm GBPm GBPm
-------- -------- --------- --------- -------------- --------------- ---------
At 1 April 2019 458 1,314 21,814 (4,237) 19,349 20 19,369
Profit for the
period - - 393 - 393 1 394
Other
comprehensive
(loss)/income
for the period - - (752) 545 (207) 1 (206)
----------------- ----- -------- -------- --------- --------- -------------- --------------- -------
Total
comprehensive
(loss)/income
for the period - - (359) 545 186 2 188
Equity dividends 8 - - (557) - (557) - (557)
Scrip
dividend-related
share
issue 8 (8) - - - - -
Issue of treasury
shares - - 15 - 15 - 15
Purchase of own
shares - - (2) - (2) - (2)
Share-based
payments - - 15 - 15 - 15
Cash flow hedges
transferred
to the statement
of financial
position, net of
tax - - - (12) (12) - (12)
----------------- ----- -------- -------- --------- --------- -------------- --------------- -------
At 30 September
2019 466 1,306 20,926 (3,704) 18,994 22 19,016
----------------- ----- -------- -------- --------- --------- -------------- --------------- -------
Consolidated statement of financial position
30 September
2020 31 March 2020
Notes GBPm GBPm
--------------------------------------------- ------ ------------ ---------------
Non-current assets
Goodwill 6,002 6,233
Other intangible assets 2(c) 1,425 1,295
Property, plant and equipment 2(c),9 49,153 48,770
Other non-current assets 322 354
Pension assets 15 1,228 1,849
Financial and other investments 625 543
Investments in joint ventures and associates 1,012 995
Derivative financial assets 10 1,163 1,249
--------------------------------------------- ------ ------------ -------------
Total non-current assets 60,930 61,288
--------------------------------------------- ------ ------------ -------------
Current assets
Inventories and current intangible assets 501 549
Trade and other receivables 2,702 2,986
Current tax assets 109 102
Financial and other investments 11,12 1,315 1,998
Derivative financial assets 10 54 93
Cash and cash equivalents 11,12 164 73
Total current assets 4,845 5,801
--------------------------------------------- ------ ------------ -------------
Total assets 65,775 67,089
--------------------------------------------- ------ ------------ -------------
Current liabilities
Borrowings 11,12 (2,141) (4,072)
Derivative financial liabilities 10 (178) (380)
Trade and other payables (3,322) (3,602)
Contract liabilities (68) (76)
Current tax liabilities (55) (86)
Provisions (367) (348)
--------------------------------------------- ------ ------------ -------------
Total current liabilities (6,131) (8,564)
--------------------------------------------- ------ ------------ -------------
Non-current liabilities
Borrowings 11,12 (29,881) (26,722)
Derivative financial liabilities 10 (663) (954)
Other non-current liabilities (855) (891)
Contract liabilities (1,155) (1,082)
Deferred tax liabilities (4,106) (4,184)
Pensions and other post-retirement benefit
obligations 15 (2,498) (2,802)
Provisions (2,143) (2,306)
--------------------------------------------- ------ ------------ -------------
Total non-current liabilities (41,301) (38,941)
--------------------------------------------- ------ ------------ -------------
Total liabilities (47,432) (47,505)
--------------------------------------------- ------ ------------ -------------
Net assets 18,343 19,584
--------------------------------------------- ------ ------------ -------------
Equity
Share capital 471 470
Share premium account 1,300 1,301
Retained earnings 20,869 21,710
Other equity reserves (4,319) (3,919)
--------------------------------------------- ------ ------------ -------------
Total shareholders' equity 18,321 19,562
Non-controlling interests 22 22
--------------------------------------------- ------ ------------ -------------
Total equity 18,343 19,584
--------------------------------------------- ------ ------------ -------------
Consolidated cash flow statement
for the six months ended 30 September 2020 2019
Notes GBPm GBPm
-------------------------------------------------- ----- ------- ---------
Cash flows from operating activities
Operating profit from continuing operations 2(b) 1,135 1,003
Adjustments for:
Exceptional items, remeasurements and other
fair value movements 4 (94) 85
Depreciation and amortisation 2(c) 853 833
Share-based payment charge 10 15
Changes in working capital 106 370
Changes in provisions (81) (60)
Changes in pensions and other post-retirement
benefit obligations (83) (113)
Cash flows relating to exceptional items (10) (28)
-------------------------------------------------- ----- ------- -------
Cash generated from continuing operations 1,836 2,105
Tax paid (42) (123)
-------------------------------------------------- ----- ------- -------
Net cash flow from operating activities
- continuing operations 1,794 1,982
-------------------------------------------------- ----- ------- -------
Net cash flow used in operating activities
- discontinued operations - (32)
-------------------------------------------------- ----- ------- -------
Cash flows from investing activities
Acquisition of investments (59) (27)
Disposal of investments 43 -
Acquisition of National Grid Renewables
Development LLC (formerly Geronimo) and
Emerald (13) (137)
Disposal of interests in Quadgas HoldCo
Limited - 1,965
Investments in joint ventures and associates (63) (49)
Purchases of intangible assets (211) (118)
Purchases of property, plant and equipment (2,113) (2,133)
Disposals of property, plant and equipment 11 19
Dividends received from joint ventures
and associates 48 27
Interest received 13 19
Net movements in short-term financial investments 674 (1,377)
Net movements in derivatives(1) (40) (83)
-------------------------------------------------- ----- ------- -------
Net cash flow used in investing activities
- continuing operations (1,710) (1,894)
-------------------------------------------------- ----- ------- -------
Net cash flow from investing activities
- discontinued operations - 6
-------------------------------------------------- ----- ------- -------
Cash flows from financing activities
Purchase of own shares (2) (2)
Proceeds from issue of treasury shares 16 15
Proceeds received from loans 3,506 2,460
Repayments of loans (911) (1,674)
Payments of lease liabilities (66) (60)
Net movements in short-term borrowings (1,046) 210
Net movements in derivatives(1) 22 (14)
Interest paid (445) (487)
Dividends paid to shareholders 8 (1,065) (557)
-------------------------------------------------- ----- ------- -------
Net cash flow from/(used in) financing
activities - continuing operations 9 (109)
-------------------------------------------------- ----- ------- -------
Net increase/(decrease) in cash and cash
equivalents 12 93 (47)
Exchange movements (2) 8
Net cash and cash equivalents at start
of period 12 73 252
-------------------------------------------------- ----- ------- -------
Net cash and cash equivalents at end of
period 12 164 213
-------------------------------------------------- ----- ------- -------
1. Certain derivative balances have been represented for the
prior year to reflect a reclassification from financing activities
to investing activities following an accounting policy change
detailed in the Annual Report and Accounts for the year ended 31
March 2020.
Notes to the financial statements
1. Basis of preparation and new accounting standards,
interpretations and amendments
The half year financial information covers the six month period
ended 30 September 2020 and has been prepared in accordance with
IAS 34 'Interim Financial Reporting' as issued by the International
Accounting Standards Board (IASB) and as adopted by the European
Union (EU); and the Disclosure and Transparency Rules of the
Financial Conduct Authority. This condensed set of financial
statements comprises the unaudited financial information for the
half years ended 30 September 2020 and 2019, together with the
audited consolidated statement of financial position as at 31 March
2020.
The financial information for the year ended 31 March 2020 does
not constitute statutory accounts as defined in Section 434 of the
Companies Act 2006. It should be read in conjunction with the
statutory accounts for the year ended 31 March 2020, which were
prepared in accordance with International Financial Reporting
Standards (IFRS) as issued by the IASB and as adopted by the EU,
and have been filed with the Registrar of Companies. The Deloitte
LLP audit report on those statutory accounts was unqualified, did
not contain an emphasis of matter and did not contain a statement
under Section 498 of the Companies Act 2006.
The half year financial information has been prepared in
accordance with the accounting policies expected to be applicable
for the year ending 31 March 2021. The notes to the financial
statements have been prepared on a continuing basis unless
otherwise stated. The half year financial statements have been
prepared on a basis consistent with that applied in the preparation
of the financial statements for the year ended 31 March 2020.
Our consolidated income statement and segmental analysis (see
note 2) separately identify financial results before and after
exceptional items and remeasurements. The Directors believe that
presentation of the results in this way is relevant to an
understanding of the Group's financial performance. Presenting
financial results before exceptional items and remeasurements is
consistent with the way that financial performance is measured by
management and reported to the Board and Executive Committee and
improves the comparability of reported financial performance from
year to year. The profit for the period from continuing operations
before exceptional items and remeasurements forms part of the
incentive target set annually for remunerating certain Executive
Directors and accordingly we believe it is important for users of
the financial statements to understand how this compares to our
results on a statutory basis and period on period. Items which are
classified as exceptional items or remeasurements are defined in
the Annual Report and Accounts for the year ended 31 March
2020.
Areas of judgement and key sources of estimation uncertainty
In preparing this half year financial information, we have
considered the areas where judgement has been exercised by
management in applying the Group's accounting policies and the key
sources of estimation uncertainty as compared to those applied in
the preparation of the Annual Report and Accounts for the year
ended 31 March 2020.
Areas of judgement that have the most significant effect on the
amounts recognised in the financial information:
-- Categorisation of certain items as exceptional items or
remeasurements: We have continued to apply the Group's Exceptional
Items Framework and have recognised an exceptional item in relation
to environmental provisions within continuing operations (see note
4 for details). We continue to treat certain items as
remeasurements as disclosed in note 4.
-- Other areas of judgement applied are consistent with those for the year ended 31 March 2020:
the useful economic lives of our gas networks remaining
appropriate; and
the Electricity System Operator acting as an agent in respect of
certain Transmission Network Use of Service revenues, principally
those collected on behalf of the Scottish and Offshore transmission
operators.
The key sources of estimation uncertainty are consistent with
those for the year ended 31 March 2020:
-- the valuation of liabilities for pensions and other post-retirement benefits; and
-- the cash flows applied in determining environmental provisions.
The COVID-19 pandemic continues to make the valuation of certain
assets and liabilities more subjective, and as described in our
Annual Report and Accounts for the year ended 31 March 2020, we
have paid close attention to the estimation uncertainty in respect
of the valuation of certain pension assets and the recoverability
of customer receivables. Following the stabilisation of markets,
the level of uncertainty on pension asset valuations has decreased
since 31 March 2020. Details on the recoverability of customer
receivables are provided in note 14.
1. Basis of preparation and new accounting standards,
interpretations and amendments (continued)
Going concern
As part of the Directors' consideration of the appropriateness
of adopting the going concern basis in preparing the half year
financial information, the Directors have again considered the
impact of COVID-19 on the Group's operations. The Directors
reviewed analysis performed by management which assessed the
principal risks discussed on page 41 by modelling both a base case
and a reasonable worst case scenario. The analysis also included
additional stress testing considering further items not included in
the reasonable worst case. The base case is consistent with the
latest forecast information presented to the Group's Executive
Committee. The reasonable worst case scenario covers the cash flow
impact associated with a second extended lockdown period in both
the UK and US over a six month period starting in November 2020,
with a phased return to normal operations over the next three
months. The length of any lockdown period and the consequential
impact on cash collections and capital programmes is the key
judgement applied in the analysis. The main cash flow impacts
identified in the reasonable worst case scenario are:
-- A reduction in cash collections driven by lower customer
demand and increased bad debt in our US businesses;
-- Additional working capital required to fund payment term
extensions and charge deferrals in the UK electricity market,
intended to help customers and end-user consumers;
-- Further increases in other costs such as cleaning, safety
equipment and IT; offset by a continued reduction in discretionary
spend across all areas (e.g. recruitment, travel and consultancy
spend).
As part of its assessment the Board considered additional stress
testing performed by management of items not included in the
reasonable worst case alongside potential levers at the Board's
discretion to improve the position identified by the analysis if
the debt capital markets were not accessible. The stress testing
performed specifically analysed the impact of more severe customer
collection issues in our US business, the impact of significant
customers defaulting in the UK, and further storm costs in our US
business. The further levers the Board considered included:
-- The payment of dividends to shareholders;
-- Significant changes in the phasing of the Group's capital
programme with elements of non-essential works and programmes
delayed; and
-- A number of further reductions in operating expenditure
across the Group primarily related to workforce cost reductions in
both the UK and the US.
Having considered the reasonable worst case scenario, the stress
testing performed and further levers at the Board's discretion, the
Group continues to have headroom against its committed facilities
identified in note 13 to the half year financial information.
In addition to the above, the ability to raise new financing was
separately included in the analysis and the Directors noted the
GBP3.5 billion of issuances completed in the period from 1 April to
30 September 2020 as evidence of the Group's ability to continue to
have access to the debt capital markets if needed. Other factors
considered by the Board as part of their Going Concern assessment
included the potential impact of Brexit trade talks, the potential
final determinations of the UK RIIO-2 price control process,
ongoing rate case determinations in the US alongside inherent
uncertainties in cash flow forecasts (such as the impact of storms
on our US business).
Based on the above, the Directors have concluded the Group is
well placed to manage its financing and other business risks
satisfactorily, and have a reasonable expectation that the Group
will have adequate resources to continue in operation for at least
twelve months from the signing date of these consolidated interim
financial statements. They therefore consider it appropriate to
adopt the going concern basis of accounting in preparing the half
year financial information.
New IFRS accounting standards, interpretations and amendments
adopted in the period
There are no new standards, interpretations and amendments,
issued by the IASB or by the IFRS Interpretations Committee
(IFRIC), that are applicable for the period commencing on 1 April
2020 that have had a material impact on the Group's results.
1. Basis of preparation and new accounting standards,
interpretations and amendments (continued)
New IFRS accounting standards, interpretations and amendments
not yet adopted
The following new accounting standards, interpretations and
amendments to existing standards have been issued, since the
publication our Annual Report and Accounts, but are not yet
effective or have not yet been endorsed by the EU:
-- Amendments to IFRS 16: COVID-19 rent concessions;
-- Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16: IBOR reform phase 2;
-- Narrow scope amendments to IAS 16, IAS 37 and IFRS 3; and
-- Annual improvements 2018-20.
The Group is currently assessing the impact of the amendments
but they are not expected to have a material impact. The Group has
not early adopted any standard, amendment or interpretation that
has been issued but is not yet effective.
2. Segmental analysis
Revenue and the results of the business are analysed by
operating segment, based on the information the Board of Directors
uses internally for the purposes of evaluating the performance of
each operating segment and determining resource allocation between
them. The Board is National Grid's chief operating decision maker
(as defined by IFRS 8 'Operating Segments') and assesses the
profitability of operations principally on the basis of operating
profit before exceptional items and remeasurements (see note 4). As
a matter of course, the Board also considers profitability by
segment, excluding the effect of timing. However, the measure of
profit disclosed in this note is operating profit before
exceptional items and remeasurements as this is the measure that is
most consistent with the IFRS results reported within these
financial statements.
The results of our three principal businesses are reported to
the Board of Directors and are accordingly treated as reportable
operating segments. All other operating segments are reported to
the Board of Directors on an aggregated basis. The following table
describes the main activities for each reportable operating
segment:
UK Electricity The high-voltage electricity transmission networks in
Transmission England and Wales and independent Great Britain system
operator.
------------------- ---------------------------------------------------------------
UK Gas Transmission The high-pressure gas transmission networks in Great
Britain and system operator in Great Britain.
------------------- ---------------------------------------------------------------
US Regulated Gas distribution networks, electricity distribution networks
and high-voltage electricity transmission networks in
New York and New England and electricity generation facilities
in New York.
------------------- ---------------------------------------------------------------
The UK Electricity Transmission segment also includes the
independent Electricity System Operator (ESO). Although there is a
separate governance structure including a separate Executive
Committee, the Board receives financial information on an
aggregated UK Electricity Transmission basis, which includes the
results of the ESO, and accordingly the ESO is included within the
UK Electricity Transmission reportable segment.
The US Regulated segment typically experiences seasonal
fluctuations in revenue and operating profit due to higher delivery
volumes during the second half of the financial year, for example
as a result of extreme weather over the winter. These seasonal
fluctuations have a consequential impact on the working capital
balances (primarily trade debtors and accrued income) in the
consolidated statement of financial position at 30 September 2020
when compared to 31 March 2020. The majority of UK revenues are
governed by the arrangements under RIIO, through which revenue is
primarily based on availability of transmission capacity rather
than usage, and therefore are not subject to the same seasonal
fluctuations as in the US.
The National Grid Ventures (NGV) operating segment represents
our key strategic growth area outside our regulated core business
in competitive markets across the UK and the US. The business
comprises all commercial operations in metering, LNG at the Isle of
Grain in the UK, electricity interconnectors and our investment in
National Grid Renewables Development LLC (formerly Geronimo), with
a focus on investment and future activities in emerging growth
areas. NGV does not currently meet the thresholds set out in IFRS 8
to be identified as a separate reportable segment and therefore its
results are not required to be separately presented. However,
certain additional disclosure is included in the footnotes
below.
Other activities that do not form part of any of the segments in
the above table or NGV primarily relate to our UK property business
together with insurance and corporate activities in the UK and US
and the Group's investments in technology and innovation companies
through National Grid Partners.
2. Segmental analysis (continued)
(a) Revenue
Six months ended 30 September 2020 2019
------------------------------- -------------------------------
Sales Sales Sales Sales
Total between to third Total between to third
sales segments(1) parties sales segments(1) parties
GBPm GBPm GBPm GBPm GBPm GBPm
----------------------------------------- ------ ------------ --------- ------ ------------ ---------
Operating segments - continuing
operations:
UK Electricity Transmission 1,888 (5) 1,883 1,708 (7) 1,701
UK Gas Transmission 365 (8) 357 345 (6) 339
US Regulated 3,940 - 3,940 3,876 - 3,876
NGV and Other(2) 356 (1) 355 376 (3) 373
----------------------------------------- ------ ------------ --------- ------ ------------ ---------
Total revenue from continuing operations 6,549 (14) 6,535 6,305 (16) 6,289
----------------------------------------- ------ ------------ --------- ------ ------------ ---------
Geographical areas:
UK 2,542 2,395
US 3,993 3,894
----------------------------------------- ------ ------------ --------- ------ ------------ ---------
Total revenue from continuing operations 6,535 6,289
----------------------------------------- ------ ------------ --------- ------ ------------ ---------
1. Sales between operating segments are priced having regard to
the regulatory and legal requirements to which the businesses are
subject. The analysis of revenue by geographical area is on the
basis of destination.
2. Included within NGV and Other is GBP312 million (2019: GBP291
million) of revenue relating to NGV.
(b) Operating profit
Before exceptional After exceptional
items and remeasurements items and remeasurements
Six months ended 30 September 2020 2019 2020 2019
GBPm GBPm GBPm GBPm
--------------------------------------- ------------- ------------ ------------- --------------
Operating segments - continuing
operations:
UK Electricity Transmission 477 625 477 625
UK Gas Transmission 95 62 95 62
US Regulated 363 274 451 189
NGV and Other(1) 112 127 112 127
--------------------------------------- ------------- ------------ ------------- ------------
Total operating profit from continuing
operations 1,047 1,088 1,135 1,003
--------------------------------------- ------------- ------------ ------------- ------------
Geographical areas
UK 685 829 685 829
US 362 259 450 174
--------------------------------------- ------------- ------------ ------------- ------------
Total operating profit from continuing
operations 1,047 1,088 1,135 1,003
--------------------------------------- ------------- ------------ ------------- ------------
1. Includes GBP142 million (2019: GBP128 million) of operating
profit (both before and after exceptional items and remeasurements)
relating to NGV.
Below we reconcile total operating profit from continuing
operations to profit before tax from continuing operations. The
operating exceptional items and remeasurements income of GBP88
million (2019: GBP85 million expense) relates to US Regulated
operations.
Before exceptional After exceptional
items and remeasurements items and remeasurements
Six months ended 30 September 2020 2019 2020 2019
GBPm GBPm GBPm GBPm
------------------------------------ ------------- ------------ ------------- --------------
Reconciliation to profit before
tax:
Operating profit from continuing
operations 1,047 1,088 1,135 1,003
Share of post-tax results of joint
ventures and associates 38 37 30 37
Finance income 14 31 28 38
Finance costs (482) (584) (473) (674)
------------------------------------ ------------- ------------ ------------- ------------
Profit before tax from continuing
operations 617 572 720 404
------------------------------------ ------------- ------------ ------------- ------------
2. Segmental analysis (continued)
(c) Capital expenditure
Capital expenditure represents additions to property, plant and
equipment and other intangible assets but excludes additional
investments in and loans to joint ventures and associates.
Net book value Capital expenditure Depreciation and
of property, plant amortisation
and equipment and
other intangible
assets
30 September 31 March 30 September 30 September 30 September 30 September
2020 2020 2020 2019 2020 2019
GBPm GBPm GBPm GBPm GBPm GBPm
----------------------- ------------- -------- -------------- ------------ ------------ --------------
Operating segments:
UK Electricity
Transmission 14,067 13,788 548 471 (258) (245)
UK Gas Transmission 4,518 4,513 85 167 (81) (85)
US Regulated 29,670 29,623 1,641 1,588 (459) (383)
NGV and Other(1,2) 2,323 2,141 224 235 (55) (120)
----------------------- ------------- -------- -------------- ------------ ------------ ------------
Total from continuing
operations 50,578 50,065 2,498 2,461 (853) (833)
----------------------- ------------- -------- -------------- ------------ ------------ ------------
Geographical areas:
UK 20,874 20,427 857 832 (393) (402)
US 29,704 29,638 1,641 1,629 (460) (431)
----------------------- ------------- -------- -------------- ------------ ------------ ------------
Total from continuing
operations 50,578 50,065 2,498 2,461 (853) (833)
----------------------- ------------- -------- -------------- ------------ ------------ ------------
By asset type:
Property, plant and
equipment 49,153 48,770 2,282 2,299 (761) (746)
Other intangible
assets 1,425 1,295 216 162 (92) (87)
----------------------- ------------- -------- -------------- ------------ ------------ ------------
Total from continuing
operations 50,578 50,065 2,498 2,461 (853) (833)
----------------------- ------------- -------- -------------- ------------ ------------ ------------
1. Included within NGV and Other are assets with a net book
value of GBP2,259 million (31 March 2020: GBP2,080 million),
capital expenditure of GBP210 million (2019: GBP193 million) and
depreciation and amortisation of GBP45 million (2019: GBP62
million) relating to NGV.
2. In the second half of the year ended 31 March 2020, we
transferred certain software assets and properties in the US which
are outside the US rate base and operate for the benefit of our US
regulated businesses, that were previously included in the NGV and
Other segment into the US Regulated segment. These assets were
included within NGV and Other for the period ended 30 September
2019, and in that period, the costs associated with owning and
operating these assets (principally depreciation and amortisation)
of GBP47 million and an income of GBP25 million were charged to the
US regulated business.
3. Revenue
Under IFRS 15 'Revenue from Contracts with Customers', revenue
is recorded as or when the Group satisfies a performance obligation
by transferring a promised good or service to a customer. A good or
service is transferred when the customer obtains control of that
good or service.
The transfer of control of our distribution or transmission
services coincides with the use of our network, as electricity and
gas pass through our network and reach our customers. The Group
principally satisfies its performance obligations over time and the
amount of revenue recorded corresponds to the amounts billed and
accrued for volumes of gas and electricity delivered/transferred
to/from our customers.
Revenue for the six months
ended 30 September 2020 UK Electricity NGV and
Transmission UK Gas Transmission US Regulated Other Total
GBPm GBPm GBPm GBPm GBPm
------------------------------ -------------- ------------------- ------------ -------- -------
Revenue under IFRS 15:
Transmission 895 247 216 142 1,500
Distribution - - 3,480 - 3,480
System Operator 945 82 - - 1,027
Other(1) 31 10 7 165 213
------------------------------ -------------- ------------------- ------------ -------- -----
Total IFRS 15 revenue 1,871 339 3,703 307 6,220
------------------------------ -------------- ------------------- ------------ -------- -----
Other revenue:
Generation - - 197 - 197
Other(2) 12 18 40 48 118
------------------------------ -------------- ------------------- ------------ -------- -----
Total other revenue 12 18 237 48 315
------------------------------ -------------- ------------------- ------------ -------- -----
Total revenue from continuing
operations 1,883 357 3,940 355 6,535
------------------------------ -------------- ------------------- ------------ -------- -----
Geographic split of revenue
for the six months ended UK Electricity NGV and
30 September 2020 Transmission UK Gas Transmission US Regulated Other Total
GBPm GBPm GBPm GBPm GBPm
------------------------------ -------------- ------------------- ------------ -------- -------
Revenue under IFRS 15:
UK 1,871 339 - 261 2,471
US - - 3,703 46 3,749
------------------------------ -------------- ------------------- ------------ -------- -----
Total IFRS 15 revenue 1,871 339 3,703 307 6,220
------------------------------ -------------- ------------------- ------------ -------- -----
Other revenue:
UK 12 18 - 41 71
US - - 237 7 244
------------------------------ -------------- ------------------- ------------ -------- -----
Total other revenue 12 18 237 48 315
------------------------------ -------------- ------------------- ------------ -------- -----
Total revenue from continuing
operations 1,883 357 3,940 355 6,535
------------------------------ -------------- ------------------- ------------ -------- -----
1. Within NGV and Other, the other IFRS 15 revenue principally
relates to revenue generated from our metering businesses.
2. Other revenue, recognised in accordance with accounting
standards other than IFRS 15, includes property sales by our UK
commercial property business and rental income.
3. Revenue (continued)
Revenue for the six months
ended 30 September 2019 UK Electricity NGV and
Transmission UK Gas Transmission US Regulated Other Total
GBPm GBPm GBPm GBPm GBPm
--------------------------- -------------- ------------------- ------------ -------- -------
Revenue under IFRS 15:
Transmission 976 227 199 151 1,553
Distribution - - 3,430 2 3,432
System Operator 677 86 - - 763
Other(1) 42 10 6 140 198
--------------------------- -------------- ------------------- ------------ -------- -----
Total IFRS 15 revenue 1,695 323 3,635 293 5,946
--------------------------- -------------- ------------------- ------------ -------- -----
Other revenue:
Generation - - 196 - 196
Other(2) 6 16 45 80 147
--------------------------- -------------- ------------------- ------------ -------- -----
Total other revenue 6 16 241 80 343
--------------------------- -------------- ------------------- ------------ -------- -----
Geographic split of revenue
for the six months ended UK Electricity NGV and
30 September 2019 Transmission UK Gas Transmission US Regulated Other Total
GBPm GBPm GBPm GBPm GBPm
------------------------------ -------------- ------------------- ------------ -------- -------
Revenue under IFRS 15:
UK 1,695 323 - 284 2,302
US - - 3,635 9 3,644
------------------------------ -------------- ------------------- ------------ -------- -----
Total IFRS 15 revenue 1,695 323 3,635 293 5,946
------------------------------ -------------- ------------------- ------------ -------- -----
Other revenue:
UK 6 16 - 70 92
US - - 241 10 251
------------------------------ -------------- ------------------- ------------ -------- -----
Total other revenue 6 16 241 80 343
------------------------------ -------------- ------------------- ------------ -------- -----
Total revenue from continuing
operations 1,701 339 3,876 373 6,289
------------------------------ -------------- ------------------- ------------ -------- -----
1. Within NGV and Other, the other IFRS 15 revenue principally
relates to revenue generated from our metering businesses.
2. Other revenue, recognised in accordance with accounting
standards other than IFRS 15, includes property sales by our UK
commercial property business and rental income.
4. Exceptional items and remeasurements
Exceptional items and remeasurements are items of income and
expenditure that, in the judgement of the Directors, should be
disclosed separately on the basis that they are important to an
understanding of our financial performance and may significantly
distort the comparability of financial performance between
periods.
Remeasurements comprise unrealised gains or losses recorded in
the consolidated income statement arising from changes in the fair
value of certain financial assets and liabilities categorised as
held at fair value through profit and loss (FVTPL). Once the fair
value movements are realised (for example, when the derivative
matures), the previously recognised fair value movements are then
reversed through remeasurements and recognised within earnings
before exceptional items and remeasurements. These assets and
liabilities include commodity contracts and derivative financial
instruments to the extent that hedge accounting is either not
achieved or is not effective. We have also classified the
unrealised gains or losses reported in profit and loss on certain
additional assets and liabilities treated at FVTPL within
remeasurements. These relate to the financial assets which fail the
'solely payments of principal and interest test' under IFRS 9, the
money market fund investments used by Group Treasury for cash
management purposes and certain financial liabilities which we
elected to designate at FVTPL. In all cases, these fair values
increase or decrease because of changes in foreign exchange,
commodity or other financial indices over which we have no
control.
4. Exceptional items and remeasurements (continued)
Exceptional
items Remeasurements Total
Six months ended 30 September 2020 GBPm GBPm GBPm
----------- -------------- -------
Included within operating profit from
continuing operations:
Environmental charges 15 - 15
Net gains on commodity contract derivatives - 73 73
------------------------------------------------- ----------- -------------- -----
15 73 88
Included within net finance costs (note
5):
Net losses on derivative financial instruments - (26) (26)
Net gains on FVTPL financial assets - 14 14
Net gains on FVTPL financial liabilities - 35 35
------------------------------------------------- ----------- -------------- -----
- 23 23
Included within share of post-tax results
of joint ventures and associates
Net losses on financial instruments - (8) (8)
------------------------------------------------- ----------- -------------- -----
- (8) (8)
Total included within profit before tax
from continuing operations 15 88 103
Tax (4) (24) (28)
------------------------------------------------- ----------- -------------- -----
Total exceptional items and remeasurements
after tax from continuing operations 11 64 75
------------------------------------------------- ----------- -------------- -----
Exceptional
items Remeasurements Total
Six months ended 30 September 2019 GBPm GBPm GBPm
----------- -------------- -------
Included within operating profit from
continuing operations
Net losses on commodity contract derivatives - (85) (85)
------------------------------------------------- ----------- -------------- -----
- (85) (85)
Included within net finance costs (note
5)
Net losses on derivative financial instruments - (41) (41)
Net gains on FVTPL financial assets - 7 7
Net losses on FVTPL financial liabilities - (49) (49)
- (83) (83)
Total included within profit before tax
from continuing operations - (168) (168)
Tax - 25 25
------------------------------------------------- ----------- -------------- -----
Total exceptional items and remeasurements
after tax from continuing operations - (143) (143)
------------------------------------------------- ----------- -------------- -----
We have recognised an exceptional gain relating to the release
of GBP15 million ($19 million) of environmental provisions relating
to one of our US Superfund sites, for which the original provision
was treated as an exceptional item. The reduction in the provision
arose as a result of the re-evaluation of the Group's share of
estimated costs following the finalisation of discussions on the
scope of the remediation with government authorities. The release
has been recorded as an exceptional item in line with the treatment
of the original provision.
5. Finance income and costs
Six months ended 30 September 2020 2019
Notes GBPm GBPm
----------------------------------------------- ----- ----- -----
Finance income before exceptional items and
remeasurements
Interest income on financial instruments 14 31
----------------------------------------------- ----- ----- -----
14 31
Finance costs before exceptional items and
remeasurements
Net interest payable on pensions and other
post-retirement benefit obligations (21) (13)
Interest expense on financial instruments (477) (599)
Unwinding of discount on provisions (42) (40)
Other interest (1) 6
Less: Interest capitalised 59 62
----------------------------------------------- ----- ----- -----
(482) (584)
Net finance costs before exceptional items
and remeasurements (468) (553)
Total exceptional items and remeasurements 4 23 (83)
----------------------------------------------- ----- ----- -----
Net finance costs including exceptional items
and remeasurements from continuing operations (445) (636)
----------------------------------------------- ----- ----- -----
6. Tax from continuing operations
The tax charge for the six month period is GBP118 million (2019:
GBP16 million), and before tax on exceptional items and
remeasurements, is GBP90 million (2019: GBP41 million). It is based
on management's estimate of the weighted average effective tax rate
by jurisdiction expected for the full year. The effective tax rate
excluding tax on exceptional items and remeasurements is 14.6%
(2019: 7.2%), which includes the impact of our share of post-tax
results of joint ventures and associates.
The half year effective tax rates (before and after exceptional
items and remeasurements) reflects the seasonality of earnings in
the US Group and the closure of an audit in the current period.
For the full year, we expect the Group's effective tax rate to
be around 21% excluding tax on exceptional items and
remeasurements. The effective tax rate for the year ended 31 March
2020 was 18.5% before exceptional items and remeasurements and
27.4% after exceptional items and remeasurements.
On 17 March 2020, the UK government utilised the Provisional
Collection of Taxes Act 1968 to substantively enact a reversal of
the reduction in the main UK corporation tax rate to 17% with
effect from 1 April 2020. The main UK corporation tax rate
therefore remains at 19%. Deferred tax balances were remeasured at
31 March 2020 and continue to be calculated at the enacted rate of
19%.
7. Earnings per share
Earnings per share (EPS), excluding exceptional items and
remeasurements, are provided to reflect the business performance
subtotals used by the Group, as set out in note 1. The earnings per
share calculations are based on profit after tax attributable to
equity shareholders of the parent company which excludes
non-controlling interests.
(a) Basic earnings per share
2020 2020 2019 2019
Six months ended 30 September Earnings EPS Earnings EPS
GBPm Pence GBPm Pence
---------------------------------------------- -------- -------- -------- --------
Profit after tax before exceptional items
and remeasurements - continuing 526 15.0 530 15.5
Exceptional items and remeasurements after
tax - continuing 75 2.1 (143) (4.2)
---------------------------------------------- -------- -------- -------- --------
Profit after tax from continuing operations
attributable to the parent 601 17.1 387 11.3
---------------------------------------------- -------- -------- -------- --------
Profit after tax before exceptional items
and remeasurements - discontinued - - 5 0.2
Exceptional items and remeasurements after
tax - discontinued - - 1 -
---------------------------------------------- -------- -------- -------- --------
Profit after tax from discontinued operations
attributable to the parent - - 6 0.2
---------------------------------------------- -------- -------- -------- --------
Total profit after tax before exceptional
items and remeasurements 526 15.0 535 15.7
Total exceptional items and remeasurements
after tax 75 2.1 (142) (4.2)
---------------------------------------------- -------- -------- -------- --------
Total profit after tax attributable to the
parent 601 17.1 393 11.5
---------------------------------------------- -------- -------- -------- --------
Millions Millions
---------------------------------------------- -------- -------- -------- ----------
Weighted average number of shares - basic 3,513 3,430
---------------------------------------------- -------- -------- -------- --------
(b) Diluted earnings per share
2020 2020 2019 2019
Six months ended 30 September Earnings EPS Earnings EPS
GBPm Pence GBPm Pence
---------------------------------------------- -------- -------- -------- --------
Profit after tax before exceptional items
and remeasurements - continuing 526 14.9 530 15.4
Exceptional items and remeasurements after
tax - continuing 75 2.1 (143) (4.2)
---------------------------------------------- -------- -------- -------- --------
Profit after tax from continuing operations
attributable to the parent 601 17.0 387 11.2
---------------------------------------------- -------- -------- -------- --------
Profit after tax before exceptional items
and remeasurements - discontinued - - 5 0.2
Exceptional items and remeasurements after
tax - discontinued - - 1 -
---------------------------------------------- -------- -------- -------- --------
Profit after tax from discontinued operations
attributable to the parent - - 6 0.2
---------------------------------------------- -------- -------- -------- --------
Total profit after tax before exceptional
items and remeasurements 526 14.9 535 15.6
Total exceptional items and remeasurements
after tax 75 2.1 (142) (4.2)
---------------------------------------------- -------- -------- -------- --------
Total profit after tax attributable to
the parent 601 17.0 393 11.4
---------------------------------------------- -------- -------- -------- --------
Millions Millions
---------------------------------------------- -------- -------- -------- ----------
Weighted average number of shares - diluted 3,530 3,446
---------------------------------------------- -------- -------- -------- --------
8. Dividends
Pence Cash dividend Scrip
per paid dividend
share GBPm GBPm
-------------------------------------------- ------ ------------- ---------
Ordinary dividends
Final dividend in respect of the year ended
31 March 2020 32.00 1,065 54
Final dividend in respect of the year ended
31 March 2019 31.26 557 517
-------------------------------------------- ------ ------------- ---------
The Directors are proposing an interim dividend of 17.00 pence
per share to be paid in respect of the year ending 31 March 2021.
This would absorb approximately GBP598 million of shareholders'
equity.
An interim dividend for the year ended 31 March 2020 of 16.57
pence per share was paid in January 2020. The cash dividend paid
was GBP335 million with an additional GBP241 million settled via a
scrip issue.
9. Property, plant and equipment
Assets
in the Motor vehicles
Land and Plant and course and office
buildings machinery of construction equipment Total
GBPm GBPm GBPm GBPm GBPm
------------------------------- ---------- ---------- ---------------- -------------- --------
Cost
Cost at 1 April 2020 3,897 60,242 4,065 1,036 69,240
Exchange adjustments (82) (1,287) (46) (28) (1,443)
Additions 72 183 2,001 29 2,285
Disposals - (115) (7) (12) (134)
Reclassifications 65 1,121 (1,228) 22 (20)
------------------------------- ---------- ---------- ---------------- -------------- --------
Cost at 30 September 2020 3,952 60,144 4,785 1,047 69,928
------------------------------- ---------- ---------- ---------------- -------------- --------
Accumulated depreciation
Accumulated depreciation at
1 April 2020 (847) (18,961) - (662) (20,470)
Exchange adjustments 13 308 - 17 338
Depreciation charge for the
period (46) (657) - (58) (761)
Disposals (1) 108 - 11 118
Reclassifications (1) (3) - 4 -
------------------------------- ---------- ---------- ---------------- -------------- --------
Accumulated depreciation at
30 September 2020 (882) (19,205) - (688) (20,775)
------------------------------- ---------- ---------- ---------------- -------------- --------
Net book value at 30 September
2020 3,070 40,939 4,785 359 49,153
------------------------------- ---------- ---------- ---------------- -------------- --------
Assets Motor
in the vehicles
Land and Plant and course and office
buildings machinery of construction equipment Total
GBPm GBPm GBPm GBPm GBPm
------------------------------- ---------- ---------- ---------------- ----------- --------
Cost
Cost at 1 April 2019 3,338 54,383 4,425 930 63,076
Impact of transition to IFRS
16 381 67 - 20 468
------------------------------- ---------- ---------- ---------------- ----------- --------
Cost at 1 April 2019 3,719 54,450 4,425 950 63,544
Exchange adjustments 118 1,755 76 40 1,989
Additions 9 142 2,108 39 2,298
Disposals (28) (323) - (15) (366)
Reclassifications 46 1,644 (1,701) 13 2
------------------------------- ---------- ---------- ---------------- ----------- --------
Cost at 30 September 2019 3,864 57,668 4,908 1,027 67,467
------------------------------- ---------- ---------- ---------------- ----------- --------
Accumulated depreciation
Accumulated depreciation at
1 April 2019 (778) (17,794) - (591) (19,163)
Exchange adjustments (18) (436) - (24) (478)
Depreciation charge for the
period (48) (639) - (56) (743)
Disposals 15 314 - 14 343
Reclassifications 1 (1) - 1 1
------------------------------- ---------- ---------- ---------------- ----------- --------
Accumulated depreciation at
30 September 2019 (828) (18,556) - (656) (20,040)
------------------------------- ---------- ---------- ---------------- ----------- --------
Net book value at 30 September
2019 3,036 39,112 4,908 371 47,427
------------------------------- ---------- ---------- ---------------- ----------- --------
10. Fair value measurement
Assets and liabilities measured at fair value
Included in the statement of financial position are certain
financial assets and liabilities which are measured at fair value.
The following table categorises these assets and liabilities by the
valuation methodology applied in determining their fair value using
the fair value hierarchy described on page 192 of the Annual Report
and Accounts for the year ended 31 March 2020.
30 September 2020 31 March 2020
---------------------------- --------------------------------
Level Level Level Total Level Level Level Total
1 2 3 GBPm 1 2 3 GBPm
GBPm GBPm GBPm GBPm GBPm GBPm
----------------------------- ----- ----- ----- ------- ----- ------- ----- ---------
Assets
Investments held at
FVTPL 819 50 118 987 1,278 - 108 1,386
Investments held at
FVOCI 103 353 - 456 83 352 - 435
Investments in associates(1) - - 106 106 - - 103 103
Financing derivatives - 1,147 - 1,147 - 1,257 10 1,267
Commodity contract
derivatives - 25 45 70 - 9 66 75
----------------------------- ----- ----- ----- ------- ----- ------- ----- -------
922 1,575 269 2,766 1,361 1,618 287 3,266
----------------------------- ----- ----- ----- ------- ----- ------- ----- -------
Liabilities
Financing derivatives - (491) (228) (719) - (889) (245) (1,134)
Commodity contract
derivatives - (90) (32) (122) - (136) (64) (200)
Liabilities held at
fair value (725) - - (725) (741) - - (741)
Contingent consideration(2) - - (65) (65) - - (74) (74)
----------------------------- ----- ----- ----- ------- ----- ------- ----- -------
(725) (581) (325) (1,631) (741) (1,025) (383) (2,149)
----------------------------- ----- ----- ----- ------- ----- ------- ----- -------
Total 197 994 (56) 1,135 620 593 (96) 1,117
----------------------------- ----- ----- ----- ------- ----- ------- ----- -------
1. Our level 3 investments in associates include investments
relating to Sunrun Neptune 2016 LLC accounted for at FVTPL.
2. Contingent consideration relates to the acquisition of
National Grid Renewables Development LLC.
The estimated fair value of total borrowings using market values
at 30 September 2020 is GBP37,652 million (31 March 2020: GBP34,174
million).
Our level 1 financial investments and liabilities held at fair
value are valued using quoted prices from liquid markets.
Our level 2 financial investments held at fair value are valued
using quoted prices for similar instruments in active markets, or
quoted prices for identical or similar instruments in inactive
markets. Alternatively, they are valued using models where all
significant inputs are based directly or indirectly on observable
market data.
Our level 2 financing derivatives include cross-currency,
interest rate and foreign exchange derivatives. We value these
derivatives by discounting all future cash flows by externally
sourced market yield curves at the reporting date, taking into
account the credit quality of both parties. These derivatives can
be priced using liquidly traded interest rate curves and foreign
exchange rates, and therefore we classify our vanilla trades as
level 2 under the IFRS 13 framework.
Our level 2 commodity derivatives include over-the-counter gas
swaps and power swaps as well as forward physical gas deals. We
value our contracts based on market data obtained from the New York
Mercantile Exchange (NYMEX) and the Intercontinental Exchange (ICE)
where monthly prices are available. We discount based on externally
sourced market yield curves at the reporting date, taking into
account the credit quality of both parties and liquidity in the
market. Our commodity contracts can be priced using liquidly traded
swaps. Therefore we classify our vanilla trades as level 2 under
the IFRS 13 framework.
Our level 3 investments include equity instruments accounted for
at fair value through profit and loss. These equity holdings are
part of our corporate venture capital portfolio held by National
Grid Partners and comprise a series of small, early stage unquoted
investments where prices or valuation inputs are unobservable. The
majority of these investments are valued based on the latest
transaction price (a price within the last 12 months), either being
the price we paid for the investments or marked to the latest round
of funding and adjusted for our preferential rights. We have six
investments valued with reference to market multiples, using a
combination of techniques such as market multiples and cost to
replace technology.
10. Fair value measurement (continued)
Our level 3 investments in associates include our investment in
Sunrun Neptune 2016 LLC, which is accounted for at fair value. The
investment is fair valued by discounting expected cash flows using
a weighted average cost of capital specific to Sunrun Neptune 2016
LLC.
Our level 3 financing derivatives include cross-currency swaps,
inflation-linked swaps and equity options, where the market is
illiquid. In valuing these instruments we use in-house valuation
models and obtain external valuations to support each reported fair
value.
Our level 3 commodity contract derivatives primarily consist of
our forward purchases of electricity and gas that we value using
proprietary models. Derivatives are classified as Level 3 where
significant inputs into the valuation technique are neither
directly nor indirectly observable (including our own data, which
are adjusted, if necessary, to reflect the assumptions market
participants would use in the circumstances).
The impacts on a post-tax basis of reasonably possible changes
in significant assumptions used in valuing assets and liabilities
classified within level 3 of the fair value hierarchy are as
follows:
Financing derivatives
within net debt
(see note 11)
Six months ended 30 September 2020 2019
GBPm GBPm
+20 basis point increase in Limited Price Index
(LPI) market curve (98) (105)
-20 basis point decrease in LPI market curve 93 99
------------------------------------------------- ---------- -----------
The impacts disclosed above were considered on a contract by
contract basis with the most significant unobservable inputs
identified. A reasonably possible change in assumptions for other
level 3 assets and liabilities would not result in a material
change in fair values.
The changes in fair value of our level 3 financial assets and
liabilities in the six months to 30 September are presented
below:
Financing
derivatives
within net
debt
(see note Commodity
11) contract derivatives Other(1) Total
-------------
2020 2019 2020 2019 2020 2019 2020 2019
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
----------------------------- ------ ------ ------------ --------- ---- ---- ---- -------
At 1 April (235) (214) 2 1 137 152 (96) (61)
Net gains/(losses) through
the consolidated income
statement for the period
(2, 3, 4) 6 (45) (9) (4) - 15 (3) (34)
Purchases(5) - - - (5) 9 16 9 11
Acquisition of National
Grid Renewables Development
LLC - - - - - (70) - (70)
Settlements 1 1 20 17 13 (3) 34 15
----------------------------- ------ ------ ------------ --------- ---- ---- ---- -----
At 30 September (6) (228) (258) 13 9 159 110 (56) (139)
----------------------------- ------ ------ ------------ --------- ---- ---- ---- -----
1. Other comprises our investments in Sunrun Neptune 2016 LLC,
Enbala and the investments made by National Grid Partners, which
are accounted for at fair value through profit and loss and the
contingent consideration arising from the acquisition of National
Grid Renewables Development LLC.
2. Gains of GBP6 million (2019: losses of GBP45 million) are
attributable to derivative financial instruments held at the end of
the reporting period.
3. Gains of GBP10 million (2019: losses of GBP10 million) are
attributable to commodity contract derivative financial instruments
held at the end of the reporting period.
4. Other includes GBP2 million (2019: GBP4 million) of fair
value movements for National Grid Partners.
5. Purchases includes GBP9 million (2019: GBP14 million) of
additional investments made by National Grid Partners.
6. There were no reclassifications in or out of level 3 (2019: none).
11. Net debt
Net debt is comprised as follows:
30 September 31 March
2020 2020
GBPm GBPm
---------------------------------------------- ------------ --------
Cash and cash equivalents 164 73
Current financial investments 1,315 1,998
Borrowings and bank overdrafts (32,022) (30,794)
Financing derivatives(1) 428 133
---------------------------------------------- ------------ --------
Net debt (net of related derivative financial
instruments) (30,115) (28,590)
---------------------------------------------- ------------ --------
1. Includes GBP14 million asset (31 March 2020: GBP3 million
liability) in relation to the hedging of capital expenditure. The
cash flows related to these derivatives are included within
investing activities and not financing activities in the
consolidated cash flow statement.
The following table splits out the total derivative balances on
the face of the consolidated statement of financial position by
category:
30 September 2020 31 March 2020
-------------------------- --------------------------
Assets Liabilities Total Assets Liabilities Total
GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------- ------ ----------- ----- ------ ----------- -----
Financing derivatives 1,147 (719) 428 1,267 (1,134) 133
Commodity contract derivatives 70 (122) (52) 75 (200) (125)
------------------------------- ------ ----------- ----- ------ ----------- -----
Total derivative financial
instruments 1,217 (841) 376 1,342 (1,334) 8
------------------------------- ------ ----------- ----- ------ ----------- -----
12. Changes in net debt
(a). Analysis of changes in net debt
Cash and Financial Financing
cash equivalents investments Borrowings(1) derivatives Total
GBPm GBPm GBPm GBPm GBPm
---------------------------- ----------------- ------------ ------------- ------------ --------
At 1 April 2020 73 1,998 (30,794) 133 (28,590)
Cash flows 93 (681) (1,055) 23 (1,620)
Fair value gains and losses
and exchange movements (2) (9) 397 267 653
Interest income/(charge) - 7 (482) 5 (470)
Other non-cash movements - - (88) - (88)
---------------------------- ----------------- ------------ ------------- ------------ --------
At 30 September 2020 164 1,315 (32,022) 428 (30,115)
---------------------------- ----------------- ------------ ------------- ------------ --------
Cash and Financial Financing
cash equivalents investments Borrowings(1) derivatives Total
GBPm GBPm GBPm GBPm GBPm
----------------------------- ----------------- ------------ ------------- ------------ ----------
At 31 March 2019 252 1,981 (28,730) (32) (26,529)
Impact of transition to IFRS
16 - - (474) - (474)
----------------------------- ----------------- ------------ ------------- ------------ --------
At 1 April 2019 252 1,981 (29,204) (32) (27,003)
Cash flows (47) 1,358 (462) 109 958
Fair value gains and losses
and exchange movements 8 46 (979) (226) (1,151)
Interest income/(charge) - 21 (566) (33) (578)
Acquisition of National Grid
Renewables Development LLC - - (13) - (13)
Other non-cash movements - - (46) - (46)
----------------------------- ----------------- ------------ ------------- ------------ --------
At 30 September 2019 213 3,406 (31,270) (182) (27,833)
----------------------------- ----------------- ------------ ------------- ------------ --------
1. Included within borrowings are lease liabilities amounting to
GBP735 million (30 September 2019: GBP742 million).
12. Changes in net debt (continued)
(b). Reconciliation of cash flows from financing liabilities to
cash flow statement
30 September 30 September
2020 2019
GBPm GBPm
--------------------------------------------------------------- ------------
Cash flows per financing activities section of
cash flow statement:
Proceeds received from loans 3,506 2,460
Repayment of loans (911) (1,674)
Payments of lease liabilities (66) (60)
Net movements in short-term borrowings (1,046) 210
Net movements in derivatives 22 (14)
Interest paid (445) (487)
------------------------------------------------------- ------- ------------
Cash flows per financing activities section of
cash flow statement 1,060 435
Adjustments:
Non-net debt-related items 13 (1)
Derivative cash flows in relation to capital
expenditure (1) 2
Derivative cash flows per investing activities
section of cash flow statement (40) (83)
Cash flows relating to financing liabilities
within net debt 1,032 353
------------------------------------------------------- ------- ------------
Analysis of changes in net debt:
Borrowings 1,055 462
Financing derivatives (23) (109)
------------------------------------------------------- ------- ------------
Cash flow movements relating to financing liabilities
within net debt 1,032 353
------------------------------------------------------- ------- ------------
(c). Reconciliation of changes in liabilities arising from
financing activities
The table below reconciles changes in liabilities arising from
financing activities, including both changes arising from cash
flows and non-cash changes. Liabilities arising from financing
activities are those for which cash flows were, or future cash
flows will be, classified in the statement of cash flows within
financing activities.
Financing
Borrowings derivatives(1) Total
GBPm GBPm GBPm
---------------------------- ---------- --------------- --------
At 1 April 2020 (30,794) 228 (30,566)
Cash flows (1,055) (19) (1,074)
Fair value gains and losses
and exchange movements 397 168 565
Interest (charges)/income (482) 6 (476)
Other non-cash movements (88) - (88)
------------------------------ ---------- --------------- --------
At 30 September 2020 (32,022) 383 (31,639)
------------------------------ ---------- --------------- --------
Financing
Borrowings derivatives(1) Total
GBPm GBPm GBPm
---------------------------------------- ---------- --------------- --------
At 1 April 2019 (28,730) 228 (28,502)
Impact of transition to IFRS
16 (474) - (474)
------------------------------------------ ---------- --------------- --------
At 1 April 2019 (as restated) (29,204) 228 (28,976)
Cash flows (462) 24 (438)
Fair value gains and losses
and exchange movements (979) (52) (1,031)
Interest charges (566) (11) (577)
Acquisition of National Grid Renewables
Development LLC (13) - (13)
Other non-cash movements (46) - (46)
------------------------------------------ ---------- --------------- --------
At 30 September 2019 (31,270) 189 (31,081)
------------------------------------------ ---------- --------------- --------
1. For the purposes of this table, financing derivatives exclude
derivatives associated with our net investment hedges, given that
they are classified in the statement of cash flows within investing
activities.
13. Borrowing facilities
To support our liquidity requirements and provide backup to
commercial paper and other borrowings, we agree loan facilities
with financial institutions over and above the value of borrowings
that may be required. Our undrawn amounts are listed below.
30 September
2020 31 March 2020
GBPm GBPm
------------------------------------------------- ------------ ---------------
Undrawn committed borrowing facilities expiring:
Less than 1 year - -
In 1 to 2 years 1,971 1,940
In 2 to 3 years 1,137 1,668
In 3 to 4 years 1,028 277
In 4 to 5 years 1,605 1,887
More than 5 years - -
------------------------------------------------- ------------ -------------
5,741 5,772
------------------------------------------------- ------------ -------------
In addition, we have the following facilities which are not
included in the table above:
-- For the separately regulated business of National Grid
Electricity System Operator Limited, the Group has a facility of
GBP550 million (31 March 2020: GBP550 million), of which GBP550
million (31 March 2020: GBP550 million is undrawn. This facility is
not available as Group general liquidity support.
-- The Group has Export Credit Agreements (ECAs) totaling
GBP1,443 million (31 March 2020: GBP901 million), of which GBP659
million (31 March 2020: GBP233 million) is undrawn.
14. Trade and other receivables
30 September
2020 31 March 2020
GBPm GBPm
------------------ ------------ ---------------
Trade receivables 1,421 1,551
Accrued income 663 869
Prepayments 408 408
Other receivables 210 158
------------------ ------------ -------------
2,702 2,986
------------------ ------------ -------------
A reconciliation of the provisions for impairment of receivables
for the six month periods are as follows:
Six months Six months
ended ended
30 September
2020 31 March 2020
GBPm GBPm
----------------------------------------- ------------ ---------------
Opening provision 512 385
Exchange adjustments (19) -
Charge for the period, net of recoveries 120 183
Uncollectible amounts written off (34) (56)
----------------------------------------- ------------ -------------
Closing provision 579 512
----------------------------------------- ------------ -------------
GBP1,639 million (31 March 2020: GBP1,806 million) of the trade
receivables and unbilled revenue balance (included within accrued
income) is attributable to retail customers in the US.
In March 2020, the Group's US distribution businesses ceased
certain customer cash collection activities in response to
regulatory instructions and to changes in State, Federal and City
level regulations and guidance, and actions to minimise risk to the
Group's employees. The Group also ceased customer termination
activities as requested by relevant local authorities. In
determining the additional impairment provision to be recognised at
31 March 2020 in light of the moratoriums, we considered the
macroeconomic data including unemployment levels and our previous
experience regarding debtor recoverability during and in the
aftermath of the 2008/09 financial crisis (which impacted all of
our service territories) and that following Superstorm Sandy in
2012 which impacted our downstate New York gas business
specifically.
14. Trade and other receivables (continued)
Throughout the first half of the year the moratoriums have
remained in place, and our aged receivables over 60 days old have
continued to increase. In light of this and the current
macroeconomic data, we have recognised an additional impairment
provision of GBP120 million. The average expected loss rates and
gross balances for the retail customer receivables in our US
operations are set out below:
30 September 2020 31 March 2020
% GBPm % GBPm
----------------- ----- ------------ ---- ---------
Unbilled revenue 6 233 5 395
0 - 30 days 5 506 5 623
30 - 60 days 14 125 14 184
60 - 90 days 29 75 29 105
3 - 6 months 47 174 47 119
6 - 12 months 63 227 63 104
Over 12 months 79 299 79 276
----------------- ----- ------------ ---- ---------
1,639 1,806
----------------- ----- ------------ ---- ---------
15. Pensions and other post-retirement benefit obligations
30 September
2020 31 March 2020
GBPm GBPm
------------------------------------------------- ------------ -------------
Present value of funded obligations (26,643) (24,281)
Fair value of plan assets 25,809 23,748
------------------------------------------------- ------------ -------------
(834) (533)
Present value of unfunded obligations (364) (345)
Other post-employment liabilities (72) (75)
------------------------------------------------- ------------ -------------
Net defined benefit liability (1,270) (953)
------------------------------------------------- ------------ -------------
Presented in consolidated statement of financial
position:
Liabilities (2,498) (2,802)
Assets 1,228 1,849
------------------------------------------------- ------------ -------------
Net defined benefit liability (1,270) (953)
------------------------------------------------- ------------ -------------
30 September
Key actuarial assumptions 2020 31 March 2020
--------------------------------------- -------------- ---------------
Discount rate - UK past service 1.50% 2.35%
Discount rate - US 2.75% 3.30%
Rate of increase in RPI - past service 2.95% 2.65%
--------------------------------------- -------- --- --------- ---
The net pensions and other post-retirement benefit obligations
position, as recorded under IAS 19, at
30 September 2020 was a liability of GBP1,270 million (31 March
2020: GBP953 million liability). The movement of GBP317 million
primarily reflects changes in actuarial assumptions resulting in an
increase in liabilities, partially offset by asset performance
being more than the discount rate, and employer contributions paid
over the accounting period.
Changes in actuarial assumptions, primarily movements in
discount rates, led to an increase in liabilities of
GBP3,038 million (an increase in UK and US liabilities of
GBP2,059 million and GBP979 million respectively) which reflected
decreases in corporate bond yields in both the UK and US. A gain of
GBP2,571 million reflects returns on assets during the period both
in the UK and the US, being more than the discount rate at the
start of the year. The net impact of actuarial gains and losses has
been reflected within the consolidated statement of comprehensive
income. Employer contributions of GBP187 million were paid during
the period.
The pension surpluses in both the UK in relation to the National
Grid UK Pension Scheme of GBP631 million
(31 March 2020: GBP1,165 million) and the National Grid
Electricity Group of the Electricity Supply Scheme of
GBP286 million (31 March 2020: GBP424 million) and the Niagara
Mohawk Plan in the US of GBP311 million (31 March 2020: GBP260
million) continue to be recognised as assets under IFRIC 14 as
explained on page 168 of the Annual Report and Accounts for the
year ended 31 March 2020.
16. Commitments and contingencies
At 30 September 2020, there were commitments for future capital
expenditure contracted but not provided for of GBP3,137 million (30
September 2019: GBP2,643 million).
We also have other commitments relating primarily to commodity
purchase contracts and contingencies in the form of certain
guarantees and letters of credit. These commitments and
contingencies are described in further detail on page 181 of the
Annual Report and Accounts for the year ended 31 March 2020.
Litigation and claims
Through the ordinary course of our operations, we are party to
various litigation, claims and investigations. We do not expect the
ultimate resolution of any of these proceedings to have a material
adverse effect on our results of operations, cash flows or
financial position.
17. Exchange rates
The consolidated results are affected by the exchange rates used
to translate the results of our US operations and US dollar
transactions. The US dollar to pound sterling exchange rates used
were:
Year ended
31 March
30 September 2020 2019 2020
------------------------------------ ---- ---- ----------
Closing rate applied at period end 1.29 1.23 1.24
Average rate applied for the period 1.27 1.25 1.29
------------------------------------ ---- ---- ----------
18. Related party transactions
Related party transactions in the six months ended 30 September
2020 were substantially the same in nature to those disclosed on
page 182 of the Annual Report and Accounts for the year ended 31
March 2020. There were no other related party transactions in the
period that have materially affected the financial position or
performance of the Group.
Principal risks and uncertainties
When preparing the half year financial information the risks as
reported in the Annual Report and Accounts for the year ended 31
March 2020 (principal risks on pages 22-25 and inherent risks on
pages 227-230) were reviewed to ensure that the disclosures
remained appropriate and adequate. Below is a summary of our key
risks as at 30 September 2020:
Operational risks:
-- Failure to prepare and respond to significant disruptive
factors caused by the COVID-19 pandemic;
-- Catastrophic asset failure results in a significant safety and/or environmental event;
-- Major cyber security breach of business, operational
technology and/or critical national infrastructure
systems/data;
-- Failure to predict and respond to a significant disruption of
energy that adversely affects our customers and/or the public;
-- Failure to adequately identify, collect, use and keep private
the physical and digital data required to support Company
operations and future growth;
Strategic and regulatory risks:
-- Failure to influence future energy policy and secure satisfactory regulatory agreements;
-- Failure to deliver our customer, stakeholder and investor
proposition due to increased political and economic
uncertainty;
-- Failure to adequately anticipate and minimise the adverse
impact from disruptive forces such as technology and innovation on
our business model;
People risks:
-- Failure to build sufficient capability and leadership
capacity (including effective succession planning) required to
deliver our vision and strategy;
Climate change risk:
-- Failure to (i) respond/insufficient preparedness to climate
change and (ii) to meet our commitments as a climate change leader,
particularly in relation to the energy transition.
Statement of Directors' Responsibilities
The half year financial information is the responsibility of,
and has been approved by, the Directors. The Directors are
responsible for preparing the half year financial information in
accordance with the Disclosure and Transparency Rules (DTR) of the
United Kingdom's Financial Conduct Authority.
The Directors confirm that to the best of their knowledge:
a) the condensed consolidated interim financial statements have
been prepared in accordance with IAS 34 'Interim Financial
Reporting' as issued by the International Accounting Standards
Board and as adopted by the European Union;
b) the half year management report includes a fair review of the
information required by DTR 4.2.7R (indication of important events
during the first six months and description of principal risks and
uncertainties for the remaining six months of the year); and
c) the half year management report includes a fair review of the
information required by DTR 4.2.8R (disclosure of related parties'
transactions and changes therein).
The Directors of National Grid plc are listed in the Annual
Report and Accounts for the year ended 31 March 2020, with the
exception of the changes in the period which are listed on page
7.
By order of the Board
.......................... ..........................
John Pettigrew Andy Agg
11 November 2020 11 November 2020
Chief Executive Chief Financial Officer
INDEPENT REVIEW REPORT TO NATIONAL GRID PLC
We have been engaged by the Company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 30 September 2020 which comprises the consolidated
income statement, the consolidated statement of comprehensive
income, the consolidated statement of financial position, the
consolidated statement of changes in equity, the consolidated cash
flow statement and related notes 1 to 18. We have read the other
information contained in the half-yearly financial report and
considered whether it contains any apparent misstatements or
material inconsistencies with the information in the condensed set
of financial statements.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the Directors. The Directors are responsible
for preparing the half-yearly financial report in accordance with
the Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
As disclosed in note 1, the annual financial statements of the
Group are prepared in accordance with IFRSs as adopted by the
European Union. The condensed set of financial statements included
in this half-yearly financial report has been prepared in
accordance with International Accounting Standard 34 'Interim
Financial Reporting' as adopted by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 'Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity' issued by the Financial Reporting Council for use in
the United Kingdom. A review of interim financial information
consists of making inquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK) and consequently does not enable us to obtain
assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not
express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
September 2020 is not prepared, in all material respects, in
accordance with International Accounting Standard 34 as adopted by
the European Union and the Disclosure Guidance and Transparency
Rules of the United Kingdom's Financial Conduct Authority.
Use of our report
This report is made solely to the company in accordance with
International Standard on Review Engagements (UK and Ireland) 2410
"Review of Interim Financial Information Performed by the
Independent Auditor of the Entity" issued by the Financial
Reporting Council. Our work has been undertaken so that we might
state to the company those matters we are required to state to it
in an independent review report and for no other purpose. To the
fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the company, for our review
work, for this report, or for the conclusions we have formed.
Deloitte LLP
Statutory Auditor
London, United Kingdom
11 November 2020
Alternative performance measures/non-IFRS reconciliations
Within the Half Year Results Statement, a number of financial
measures are presented. Some of these measures have been
categorised as alternative performance measures (APMs), as per the
European Securities and Markets Authority (ESMA) guidelines and the
Securities and Exchange Commission (SEC) conditions for use of
non-IFRS Financial Measures.
An APM is a financial measure of historical or future financial
performance, financial position, or cash flows, other than a
financial measure defined under IFRS. The Group uses a range of
these measures to provide a better understanding of its underlying
performance. APMs are reconciled to the most directly comparable
IFRS financial measure where practicable.
The Group has defined the following financial measures as APMs
derived from IFRS within the Half Year Results Statement: net
revenue, the various adjusted operating profit, earnings and
earnings per share metrics detailed in the 'adjusted profit
measures' section below and capital investment. For each of these
we present a reconciliation to the most directly comparable IFRS
measure.
Net revenue
'Net revenue' is revenue less pass-through costs, such as system
balancing costs, and gas and electricity commodity costs in the US.
Pass-through costs are fully recoverable from our customers and are
recovered through separate charges that are designed to recover
those costs with no profit. Any over- or under-recovery of these
costs is returned to, or recovered from, our customers.
2020 2019
-------- -------- ----------- -----------------------------------
Pass-
Gross through Gross Pass-through
revenue costs Net revenue revenue costs Net revenue
Six months ended 30 September GBPm GBPm GBPm GBPm GBPm GBPm
-------- -------- ----------- -------- ------------ -----------
UK Electricity Transmission 1,888 (955) 933 1,708 (662) 1,046
UK Gas Transmission 365 (100) 265 345 (105) 240
US Regulated 3,940 (1,318) 2,622 3,876 (1,511) 2,365
NGV and Other 356 - 356 376 - 376
Sales between segments (14) - (14) (16) - (16)
------------------------------ -------- -------- ----------- -------- ------------ -----------
Total 6,535 (2,373) 4,162 6,289 (2,278) 4,011
------------------------------ -------- -------- ----------- -------- ------------ -----------
Adjusted profit measures:
In considering the financial performance of our business and
segments, we use various adjusted profit measures in order to aid
comparability of results year-on-year. The various measures are
presented on page 12 and reconciled below.
Adjusted results, also referred to as Headline results: These
exclude the impact of exceptional items and remeasurements that are
treated as discrete transactions under IFRS and can accordingly be
classified as such. This is a measure used by management that forms
part of the incentive target set annually for remunerating certain
Executive Directors and further details of these items are included
in note 4.
Underlying results: Further adapts our adjusted results to take
account of volumetric and other revenue timing differences arising
due to the in-year difference between allowed and collected
revenues, including revenue incentives, as governed by our rate
plans in the US or regulatory price controls in the UK (but
excluding totex-related allowances and adjustments). As defined on
page 30 of the Annual Report and Accounts for the year ended 31
March 2020, major storm costs are costs (net of certain
deductibles) that are recoverable under our US rate plans but
expensed as incurred under IFRS. Where the total incurred cost
(after deductibles) exceeds $100 million in any given year we also
exclude the net amount from underlying earnings.
Constant currency: 'Constant Currency Basis' refers to the
reporting of the actual results against the results for the same
period last year which, in respect of any US dollar
currency-denominated activity, have been translated using the
weighted average US dollar exchange rate for the six months ended
30 September 2020, which was $1.27 to GBP1.00. The weighted average
rate for the six months ended 30 September 2019, was $1.25 to
GBP1.00. Assets and liabilities as at 30 September 2020 have been
retranslated at the closing rate at 30 September 2020 of $1.29 to
GBP1.00. The closing rate for the balance sheet date 31 March 2020
was $1.24 to GBP1.00.
Alternative performance measures/non-IFRS reconciliations
(continued)
Reconciliation of Statutory, Adjusted and Underlying Profits and
Earnings - At actual exchange rates - Continuing operations
Major
Exceptionals storm
Statutory and remeasurements Adjusted Timing costs Underlying
Six months ended 30 September GBPm GBPm GBPm GBPm GBPm GBPm
2020
--------- ------------------- -------- ------ ------ ----------
UK Electricity Transmission 477 - 477 47 - 524
UK Gas Transmission 95 - 95 13 - 108
US Regulated 451 (88) 363 40 - 403
NGV and Other 112 - 112 - - 112
------------------------------ --------- ------------------- -------- ------ ------ ----------
Total operating profit 1,135 (88) 1,047 100 - 1,147
Net finance costs (445) (23) (468) - - (468)
Share of post -tax results
of JVs and associates 30 8 38 - - 38
------------------------------ --------- ------------------- -------- ------ ------ ----------
Profit before tax 720 (103) 617 100 - 717
Tax (118) 28 (90) (22) - (112)
------------------------------ --------- ------------------- -------- ------ ------ ----------
Profit after tax 602 (75) 527 78 - 605
------------------------------ --------- ------------------- -------- ------ ------ ----------
Major
Exceptionals storm
Statutory and remeasurements Adjusted Timing costs Underlying
Six months ended 30 September GBPm GBPm GBPm GBPm GBPm GBPm
2019
--------- ------------------- -------- ------ ------ ----------
UK Electricity Transmission 625 - 625 (42) - 583
UK Gas Transmission 62 - 62 4 - 66
US Regulated 189 85 274 251 - 525
NGV and Other 127 - 127 - - 127
------------------------------ --------- ------------------- -------- ------ ------ ----------
Total operating profit 1,003 85 1,088 213 - 1,301
Net finance costs (636) 83 (553) - - (553)
Share of post -tax results
of JVs and associates 37 - 37 - - 37
------------------------------ --------- ------------------- -------- ------ ------ ----------
Profit before tax 404 168 572 213 - 785
Tax (16) (25) (41) (58) - (99)
------------------------------ --------- ------------------- -------- ------ ------ ----------
Profit after tax 388 143 531 155 - 686
------------------------------ --------- ------------------- -------- ------ ------ ----------
Reconciliation of Adjusted and Underlying Profits - At constant
currency
At constant currency
------------------------------------
Adjusted
at actual Constant Major
exchange currency Storm
rate adjustment Adjusted Timing costs Underlying
Six months ended 30 September GBPm GBPm GBPm GBPm GBPm GBPm
2019
---------- ----------- -------- ------ ------ ----------
UK Electricity Transmission 625 - 625 (42) - 583
UK Gas Transmission 62 - 62 4 - 66
US Regulated 274 (4) 270 248 - 518
NGV and Other 127 - 127 - - 127
------------------------------ ---------- ----------- -------- ------ ------ ----------
Total operating profit 1,088 (4) 1,084 210 - 1,294
Net finance costs (553) 5 (548) - - (548)
Share of post -tax results
of JVs and associates 37 - 37 - - 37
------------------------------ ---------- ----------- -------- ------ ------ ----------
Profit before tax 572 1 573 210 - 783
------------------------------ ---------- ----------- -------- ------ ------ ----------
Alternative performance measures/non-IFRS reconciliations
(continued)
Earnings per share calculations from continuing operations - At
actual exchange rates
The table below reconciles the profit after tax from continuing
operations per the previous tables back to the earnings per share
from continuing operations for each of the adjusted profit
measures. Earnings per share is only presented for those adjusted
profit measures that are at actual exchange rates, and not for
those at constant currency.
Profit
after tax Weighted
attributable average
Six months ended 30 September Profit Non-controlling to the number Earnings
2020 after tax interest parent of shares per share
GBPm GBPm GBPm Number Pence
------------------------------ ---------- --------------- ------------- ---------- ----------
Statutory 602 (1) 601 3,513 17.1
Adjusted (also referred to
as Headline) 527 (1) 526 3,513 15.0
Underlying 605 (1) 604 3,513 17.2
------------------------------ ---------- --------------- ------------- ---------- ----------
Profit
after tax Weighted
attributable average
Six months ended 30 September Profit Non-controlling to the number Earnings
2019 after tax interest parent of shares per share
GBPm GBPm GBPm Number Pence
------------------------------ ---------- --------------- ------------- ---------- ----------
Statutory 388 (1) 387 3,430 11.3
Adjusted (also referred to
as Headline) 531 (1) 530 3,430 15.5
Underlying 686 (1) 685 3,430 20.0
------------------------------ ---------- --------------- ------------- ---------- ----------
Timing impacts
Under the Group's regulatory frameworks, the majority of the
revenues that National Grid is allowed to collect each year are
governed by a regulatory price control or rate plan. If National
Grid collects more than this allowed level of revenue, the balance
must be returned to customers in subsequent years, and if it
collects less than this level of revenue, it may recover the
balance from customers in subsequent years. These variances between
allowed and collected revenues give rise to 'over and
under-recoveries'. A number of costs in the UK and the US are
pass-through costs (including commodity and energy efficiency costs
in the US), and are fully recoverable from customers. Timing
differences between costs of this type being incurred and their
recovery through revenues are also included in over and
under-recoveries. In the UK, timing differences include an
estimation of the difference between revenues earned under revenue
incentive mechanisms and associated revenues collected. UK timing
balances and movements exclude adjustments associated with changes
to controllable cost (totex) allowances or adjustments under the
totex incentive mechanism. Opening balances of over and
under-recoveries have been restated where appropriate to correspond
with regulatory filings and calculations.
UK Electricity US Regulated
Transmission UK Gas Transmission (1) Total(2)
GBPm GBPm GBPm GBPm
---------------------------------- -------------- ------------------- --------------- --------
31 March 2020 closing balance 19 5 236 260
Opening balance adjustments - - 9 9
---------------------------------- -------------- ------------------- --------------- --------
Restated 1 April 2020 opening
balance 19 5 245 269
Under-recovery (47) (13) (40) (100)
---------------------------------- -------------- ------------------- --------------- --------
30 September 2020 closing balance
to (recover)/return (28) (8) 205 169
---------------------------------- -------------- ------------------- --------------- --------
UK Electricity
Transmission UK Gas Transmission US Regulated(1) Total(2)
GBPm GBPm GBPm GBPm
---------------------------------- -------------- ------------------- --------------- --------
31 March 2019 closing balance (118) 59 477 418
Opening balance adjustments - - - -
---------------------------------- -------------- ------------------- --------------- --------
Restated 1 April 2019 opening
balance (118) 59 477 418
Over/(under)-recovery 42 (4) (248) (210)
---------------------------------- -------------- ------------------- --------------- --------
30 September 2019 closing balance
to (recover)/return (76) 55 229 208
---------------------------------- -------------- ------------------- --------------- --------
1. US Regulated balances have been restated using the average
rate of 1.27 for the period to 30 September 2020.
2. The closing balances as at 30 September 2020 and 30 September
2019 would have been GBP165 million and GBP217 million respectively
had the closing exchange rates been used.
Alternative performance measures/non-IFRS reconciliations
(continued)
Capital investment
'Capital investment' or 'investment' refers to additions to
plant, property and equipment and intangible assets, and
contributions to joint ventures and associates, other than the St
William Homes LLP joint venture. In addition, we include the total
consideration paid for the acquisition of businesses. We also
include the Group's investments by National Grid Partners during
the period (which are classified for IFRS purposes as non-current
financial assets on the Group consolidated statement of financial
position).
Investments made to our St William Homes LLP arrangement are
excluded based on the nature of this joint venture arrangement. We
typically contribute property assets to the joint venture in
exchange for cash and accordingly do not consider these
transactions to be in the nature of capital investment.
At actual exchange
rates At constant currency
------------------------------
2020 2019 2020 2019
% %
Six months ended 30 September GBPm GBPm change GBPm GBPm change
------ ------ ------- ------
UK Electricity Transmission 548 471 16% 548 471 16%
UK Gas Transmission 85 167 (49)% 85 167 (49)%
US Regulated 1,641 1,588 3% 1,641 1,566 5%
NGV and Other 224 235 (5)% 224 234 (4)%
------------------------------ ------ ------ ----- ------- ------ -----
Group capital expenditure 2,498 2,461 2% 2,498 2,438 2%
------------------------------ ------ ------ ----- ------- ------ -----
2020 2019
------------------------------------------------------
Six months ended 30 September - at actual exchange %
rates GBPm GBPm change
------------------------------------------------------ ----- -----
Capital expenditure 2,498 2,461 2%
Equity investment, funding contributions and loans
to joint ventures and associates 52 30 73%
Total consideration paid for the acquisition of
National Grid Renewables Development LLC and Emerald - 209 N/A
Increase in financial assets (National Grid Partners) 10 22 (55)%
------------------------------------------------------ ----- ----- -----
Group capital investment 2,560 2,722 (6)%
------------------------------------------------------ ----- ----- -----
2020 2019
------------------------------------------------------
%
Six months ended 30 September - at constant currency GBPm GBPm change
------------------------------------------------------ ----- -----
Capital expenditure 2,498 2,438 2%
Equity investment, funding contributions and loans
to joint ventures and associates 52 30 73%
Total consideration paid for the acquisition of
National Grid Renewables Development LLC and Emerald - 206 N/A
Increase in financial assets (National Grid Partners) 10 22 (55)%
------------------------------------------------------ ----- ----- -----
Group capital investment 2,560 2,696 (5)%
------------------------------------------------------ ----- ----- -----
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