Operating and Financial Review
Financial Review
- Introduction
- Operating Review
- Financial Review
- Basis of accounting
- Financial performance
- Segmental reporting
- Dividends
- Dividend policy
- Liquidity, resources and capital expenditure
- Treasury policy
- Commodity price hedging
- Commitments and contingencies
- Critical accounting policies
- Related party transactions
- Changes and developments
- Going concern
- US GAAP reporting
- Other matters
Segmental reporting
In addition to presenting the overall results and financial position in the financial statements, we provide a breakdown of those results and balances into a number of different business segments. The presentation of segment information is based on the management responsibilities that existed at 31 March 2005. Our principal business segments consist of UK electricity and gas transmission, US electricity transmission, UK gas distribution, US electricity and gas distribution, US stranded cost recoveries and Wireless infrastructure, with our other businesses being aggregated within Other activities. Our geographical segments principally reflect the Group's activities in the UK and the US.
The new Wireless infrastructure segment combines the acquired UK operations of Crown Castle International Corp. with our existing Gridcom businesses in the UK and the US. These had previously been included within Other activities. We have also changed the segments in our US operations, consolidating our US gas distribution and US electricity distribution activities into a single segment called US electricity and gas distribution, but separately identifying US stranded costs recoveries as a new segment. The Directors believe that the economic characteristics of gas distribution and electricity distribution in the US are similar as they receive revenues under similar regulatory schemes. Moreover gas distribution is a minor activity within the context of the combined US electricity and gas distribution activity, comprising only 14% of its turnover.
The treatment of US stranded cost recoveries as a separate segment enhances their visibility. Stranded costs are various generation-related costs that we incurred prior to the divestiture of generation assets beginning in the late 1990s, and we are recovering these costs unevenly over the period up to 2011.
Comparative figures for 2003/04 and 2002/03 have been restated to reflect the changes in business segments.
A review of the operational and financial performance of the reporting segments is contained in the Operating Review together with additional financial and performance information relating to the segments, including a discussion of changes in turnover, operating costs, adjusted operating profit and operating profit.