Note 2 – Segmental analysis
- a) Turnover
- b) Operating profit
- c) Information relating to businesses to be disposed
- d) Total and net assets
- e) Other segmental information
Segmental information is presented in accordance with the management responsibilities and economic characteristics of the Group’s business activities.
As a result of the acquisition of the UK operations of Crown Castle International Corp. (Crown Castle UK) as described in note 15, a new business segment has been presented. The results of Crown Castle UK have been combined with similar activities of the existing operations of the Group and presented as a new segment shown as ‘Wireless infrastructure’ below. The comparative numbers relating to this segment were previously reported within ‘Other activities’.
We have changed the segments in our US operations, combining our US electricity distribution and US gas distribution activities to form a new segment: ‘US electricity and gas distribution’. The Directors believe that their economic characteristics are similar as they receive revenues under similar regulatory schemes. We have also created a new ‘US stranded cost recoveries’ segment in order to enhance the visibility of this activity.
The following table describes the main activities for each business segment:
| UK ele ctricity and gas transmission | High-voltage electricity transmission networks and the gas National Transmission System in the UK |
|---|---|
| US electricity transmission | High-voltage electricity transmission networks and management of electricity transmission operations for other utilities in the US |
| UK gas distribution | The majority of Britain’s gas distribution system |
| US electricity and gas distribution | Electricity and gas distribution in New York and electricity distribution in New England |
| US stranded cost recoveries | The recovery of stranded costs from US customers as permitted by regulatory agreements |
| Wireless infrastructure | Broadcast and mobile telephony infrastructure in the UK and US |
‘Continuing operations – Other activities’ primarily relates to: UK based gas metering activities; our UK liquefied natural gas storage activities; the electricity interconnectors business; and Advantica, the energy technology and systems solutions business.
Included within the continuing operations of the UK gas distribution activity are amounts relating to four gas distribution networks that the Group has agreed to sell. These amounts have been disclosed in the analyses of continuing operations of Group undertakings below as ‘Existing businesses – businesses to be disposed’.
Discontinued operations include: the results of Citelec, an Argentinian joint venture, for all years presented and telecom joint ventures in 2003 which are included within the results of joint ventures; and the results of EnMO for 2004 and 2003 together with The Leasing Group and 186k Limited for 2003 which are included within the results of Group undertakings.
The Group assesses the performance of its businesses principally on the basis of operating profit before exceptional items and goodwill amortisation.
a) Turnover
| Total sales 2005 £m |
Sales between businesses 2005 £m |
Sales to third parties 2005 £m |
Total sales 2004 (restated) £m |
Sales between businesses 2004 (restated) £m |
Sales to third parties 2004 (restated) £m |
Total sales 2003 (restated) £m |
Sales between businesses 2003 (restated) £m |
Sales to third parties 2003 (restated) £m |
|
|---|---|---|---|---|---|---|---|---|---|
| Turnover, including share of joint ventures’ |
|||||||||
| - continuing operations |
9,063 | 493 | 8,570 | 9,385 | 462 | 8,923 | 9,276 | 370 | 8,906 |
| - discontinued operations |
13 | – | 13 | 181 | – | 181 | 679 | 19 | 660 |
| Less: share of joint ventures’ turnover |
|||||||||
| - continuing operations |
(49) | – | (49) | (48) | – | (48) | (73) | – | (73) |
| - discontinued operations |
(13) | – | (13) | (23) | – | (23) | (93) | – | (93) |
| Group turnover | 9,014 | 493 | 8,521 | 9,495 | 462 | 9,033 | 9,789 | 389 | 9,400 |
| Continuing operations | |||||||||
| UK electricity and gas transmission |
1,930 | 37 | 1,893 | 1,867 | 35 | 1,832 | 1,893 | 29 | 1,864 |
| US electricity transmission |
283 | 45 | 238 | 318 | 48 | 270 | 407 | 5 | 402 |
| UK gas distribution | 2,215 | 135 | 2,080 | 2,245 | 120 | 2,125 | 2,089 | 47 | 2,042 |
| US electricity and gas distribution |
3,114 | 2 | 3,112 | 3,494 | 1 | 3,493 | 3,306 | 1 | 3,305 |
| US stranded cost recoveries |
420 | – | 420 | 507 | – | 507 | 586 | – | 586 |
| Wireless infrastructure | 208 | – | 208 | 72 | – | 72 | 61 | – | 61 |
| Other activities | 844 | 274 | 570 | 834 | 258 | 576 | 861 | 288 | 573 |
| 9,014 | 493 | 8,521 | 9,337 | 462 | 8,875 | 9,203 | 370 | 8,833 | |
| Discontinued operations | – | – | – | 158 | – | 158 | 586 | 19 | 567 |
| Group turnover | 9,014 | 493 | 8,521 | 9,495 | 462 | 9,033 | 9,789 | 389 | 9,400 |
| UK | 4,723 | 4,736 | 5,096 | ||||||
| US | 3,798 | 4,297 | 4,304 | ||||||
| 8,521 | 9,033 | 9,400 | |||||||
| Continuing operations of Group undertakings comprise: | |||||||||
| Existing businesses | |||||||||
| - businesses to be disposed |
1,102 | 73 | 1,029 | 1,115 | 63 | 1,052 | 1,031 | 24 | 1,007 |
| - other | 7,764 | 420 | 7,344 | 8,222 | 399 | 7,823 | 8,172 | 346 | 7,826 |
| Acquisition (Crown Castle UK) |
148 | – | 148 | – | – | – | – | – | – |
| 9,014 | 493 | 8,521 | 9,337 | 462 | 8,875 | 9,203 | 370 | 8,833 | |
The analysis of turnover by geographical area is on the basis of origin. Turnover on a destination basis would not be materially different. There is no turnover between the UK and US geographical areas.
Approximately 14% (2004: 15%) of the Group’s turnover for the year ended 31 March 2005 amounting to approximately £1.2bn (2004: £1.4bn) derives from a single customer, the Centrica Group. The majority of this turnover is in the UK gas distribution segment with lesser amounts in other activities and the UK electricity and gas transmission segment.
b) Operating profit
| Operating profit | ||||||||
|---|---|---|---|---|---|---|---|---|
| Before exceptional items and goodwill amortisation |
After exceptional items and goodwill amortisation |
|||||||
| |
2005 £m |
2004 (restated) £m |
2003 (restated) £m |
2005 £m |
2004 (restated) £m |
2003 (restated) £m |
||
| Group undertakings - continuing operations | ||||||||
| UK electricity and gas transmission | 809 | 759 | 809 | 807 | 745 | 763 | ||
| US electricity transmission | 123 | 133 | 128 | 102 | 105 | 103 | ||
| UK gas distribution | 570 | 716 | 547 | 390 | 627 | 436 | ||
| US electricity and gas distribution | 374 | 362 | 401 | 286 | 194 | 290 | ||
| US stranded cost recoveries | 121 | 134 | 170 | 121 | 136 | 172 | ||
| Wireless infrastructure | 46 | 6 | (23) | 10 | (6) | (50) | ||
| Other activities | 162 | 96 | 147 | 129 | 29 | 52 | ||
| 2,205 | 2,206 | 2,179 | 1,845 | 1,830 | 1,766 | |||
| Group undertakings - discontinued operations | – | – | (26) | – | – | (194) | ||
| Operating profit of Group undertakings | 2,205 | 2,206 | 2,153 | 1,845 | 1,830 | 1,572 | ||
| Joint ventures - continuing operations (electricity activities) | 6 | 7 | 9 | 6 | 7 | 9 | ||
| Joint ventures - discontinued operations | 1 | – | (14) | 1 | – | 115 | ||
| Operating profit/(loss) of joint ventures | 7 | 7 | (5) | 7 | 7 | 124 | ||
| Total operating profit | 2,212 | 2,213 | 2,148 | 1,852 | 1,837 | 1,696 | ||
| UK | 1,583 | 1,576 | 1,444 | 1,336 | 1,416 | 1,011 | ||
| US | 623 | 631 | 704 | 510 | 415 | 549 | ||
| Latin America | 1 | – | (7) | 1 | – | 128 | ||
| Rest of the World | 5 | 6 | 7 | 5 | 6 | 8 | ||
| 2,212 | 2,213 | 2,148 | 1,852 | 1,837 | 1,696 | |||
| Continuing operations of Group undertakings comprise: | ||||||||
| Existing businesses | ||||||||
| - businesses to be disposed | 345 | 407 | 326 | 271 | 351 | 269 | ||
| - other | 1,821 | 1,799 | 1,853 | 1,558 | 1,479 | 1,497 | ||
| Acquisition (Crown Castle UK) | 39 | – | – | 16 | – | – | ||
| 2,205 | 2,206 | 2,179 | 1,845 | 1,830 | 1,766 | |||
c) Information relating to businesses to be disposed
Included within the continuing operations of the UK gas distribution activity are the following amounts relating to four gas distribution networks that the Group has agreed to sell:
| |
2005 £m |
2004 £m |
2003 £m |
|||
|---|---|---|---|---|---|---|
| Turnover | 1,102 | 1,115 | 1,031 | |||
| Depreciation | (97) | (98) | (90) | |||
| Payroll costs | (132) | (133) | (152) | |||
| Other operating charges | ||||||
| - Purchases of gas | (28) | (20) | (25) | |||
| - Rates and property taxes | (84) | (82) | (89) | |||
| - Replacement expenditure | (235) | (201) | (199) | |||
| - Exceptional operating items | (74) | (56) | (57) | |||
| - Other non-;exceptional operating charges | (181) | (174) | (150) | |||
| (602) | (533) | (520) | ||||
| Operating profit | 271 | 351 | 269 |
The above results include shared service centre expenditure in 2005 of £27m (2004: £27m; 2003: £28m) that will continue to be recharged for a period of 18 months following completion of the sales.
d) Total and net assets
| Total assets | Net assets | |||||
|---|---|---|---|---|---|---|
| |
2005 £m |
2004 (restated) £m |
2005 £m |
2004 (restated) £m |
||
| Group undertakings - continuing operations | ||||||
| UK electricity and gas transmission | 6,448 | 6,284 | 5,735 | 5,472 | ||
| US electricity transmission | 1,469 | 1,539 | 1,439 | 1,465 | ||
| UK gas distribution | 5,167 | 4,928 | 3,559 | 3,403 | ||
| US electricity and gas distribution | 5,311 | 5,423 | 4,245 | 4,448 | ||
| US stranded cost recoveries | 2,311 | 2,598 | 1,693 | 1,834 | ||
| Wireless infrastructure | 1,462 | 156 | 1,215 | 103 | ||
| Other activities | 1,818 | 1,734 | 898 | 837 | ||
| 23,986 | 22,662 | 18,784 | 17,562 | |||
| Group undertakings - discontinued operations | – | – | – | (7) | ||
| Group undertakings | 23,986 | 22,662 | 18,784 | 17,555 | ||
| Joint ventures - continuing operations (electricity activities) | 17 | 19 | 17 | 19 | ||
| Unallocated | 708 | 716 | (17,410) | (16,303) | ||
| 24,711 | 23,397 | 1,391 | 1,271 | |||
| UK | 14,494 | 12,846 | 11,053 | 9,565 | ||
| US | 9,229 | 9,679 | 7,499 | 7,854 | ||
| Rest of the World | 280 | 156 | 249 | 155 | ||
| Unallocated | 708 | 716 | (17,410) | (16,303) | ||
| 24,711 | 23,397 | 1,391 | 1,271 | |||
| Continuing operations of Group undertakings comprise: | ||||||
| Existing businesses | ||||||
| - businesses to be disposed | 2,888 | 2,707 | 2,075 | 1,903 | ||
| - other | 19,799 | 19,955 | 15,611 | 15,659 | ||
| Acquisition (Crown Castle UK) | 1,299 | – | 1,098 | – | ||
| 23,986 | 22,662 | 18,784 | 17,562 | |||
The analysis of total assets and net assets by business segment includes all attributable goodwill and excludes inter—business balances. Unallocated total assets include current asset investments, cash, tax and taxation related regulatory assets. Unallocated net liabilities include net borrowings, tax, interest, dividends and tax related regulatory assets.
e) Other segmental information
| Capital expenditure | Depreciation and amortisation | |||||||
|---|---|---|---|---|---|---|---|---|
| |
2005 £m |
2004 (restated) £m |
2003 (restated) £m |
2005 £m |
2004 (restated) £m |
2003 (restated) £m |
||
| Group undertakings - continuing operations | ||||||||
| UK electricity and gas transmission | 522 | 584 | 567 | 279 | 276 | 243 | ||
| US electricity transmission | 74 | 53 | 49 | 61 | 67 | 71 | ||
| UK gas distribution | 272 | 293 | 380 | 191 | 195 | 185 | ||
| US electricity and gas distribution | 234 | 277 | 249 | 254 | 279 | 290 | ||
| US stranded costs recoveries | – | – | – | 136 | 118 | 103 | ||
| Wireless infrastructure | 19 | 2 | 7 | 54 | 9 | 18 | ||
| Other activities | 310 | 272 | 173 | 157 | 173 | 152 | ||
| 1,431 | 1,481 | 1,425 | 1,132 | 1,117 | 1,062 | |||
| Group undertakings - discontinued operations | – | – | 95 | – | – | 26 | ||
| Group undertakings | 1,431 | 1,481 | 1,520 | 1,132 | 1,117 | 1,088 | ||
| UK | 981 | 1,071 | 1,172 | 675 | 644 | 613 | ||
| US | 312 | 332 | 298 | 457 | 473 | 475 | ||
| Rest of the World | 138 | 78 | 50 | – | – | – | ||
| 1,431 | 1,481 | 1,520 | 1,132 | 1,117 | 1,088 | |||
| Continuing operations of Group undertakings comprise: | ||||||||
| Existing businesses | ||||||||
| - businesses to be disposed | 152 | 168 | 211 | 97 | 98 | 90 | ||
| - others | 1,265 | 1,313 | 1,214 | 989 | 1,019 | 972 | ||
| Acquisition (Crown Castle UK) | 14 | – | – | 46 | – | – | ||
| 1,431 | 1,481 | 1,425 | 1,132 | 1,117 | 1,062 | |||
Capital expenditure comprises additions to tangible and intangible fixed assets (excluding goodwill) amounting to £1,431m (2004: £1,479m; 2003: £1,519m) and £nil (2004: £2m; 2003: £1m) respectively.
Depreciation and amortisation includes depreciation of tangible fixed assets, amortisation of intangible fixed assets and amortisation of regulatory assets.
Depreciation and amortisation includes amortisation of goodwill of £109m (2004: £99m; 2003: £102m). Amortisation of goodwill has arisen in the following segments: US electricity transmission £18m (2004: £19m; 2003: £21m); US electricity and gas distribution £68m (2004: £75m; 2003: £81m); Wireless infrastructure £23m (2004: £4m; 2003: £nil); and Other activities £nil (2004: £1m; 2003: £nil).