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Financial Statements

2. Segmental analysis

Segmental information is presented in accordance with the management responsibilities and economic characteristics, including consideration of risks and returns, of business activities. The Company assesses the performance of its businesses principally on the basis of operating profit before exceptional items and remeasurements. The primary reporting format is by business and the secondary reporting format is by geographical area.

The following table describes the main activities for each business segment:

Other activities primarily relate to: UK-based gas metering activities; UK property management; a UK LNG import terminal; engineering consulting and software; together with corporate activities, including business development.

Discontinued operations comprise broadcast and mobile telephone infrastructure solutions in the UK and the US and an electricity interconnector in Australia. The wireless infrastructure operations in the UK were sold on 3 April 2007. Discontinued operations also include the operations of the four UK gas distribution networks that were sold on 1 June 2005 and the results of Citelec, an Argentinian joint venture sold during August 2004. The results for discontinued operations are disclosed in note 11.

Our segments have changed from that previously reported as a consequence of: changes in organisational and management structure; the classification of wireless infrastructure (previously a segment) and our Australian interconnector business as discontinued; and the acquisition from Southern Union Company of its gas distribution network in Rhode Island on 24 August 2006. In particular, our US electricity distribution and US gas distribution operations are now reported as separate segments. The segment results for the years ended 31 March 2006 and 31 March 2005 have been re-presented to reflect these changes.

Sales between businesses are priced having regard to the regulatory and legal requirements to which the businesses are subject.

a) Revenue

See results for 2007 | 2006 | 2005

*Comparatives have been adjusted to reclassify amounts relating to discontinued operations

The table above represents revenue from continuing operations only, as disclosed in the consolidated income statement. Revenue from discontinued operations for the year ended 31 March 2007 was £383m (2006: £493m; 2005: £1,313m). See note 11 for additional disclosures relating to discontinued operations.

The analysis of revenue by geographical area is on the basis of destination. There are no material sales between the UK and US geographical areas.

Approximately 9% (2006: 9%; 2005: 9%) of revenue for the year ended 31 March 2007 amounting to approximately £0.8bn (2006: £0.9bn; 2005: £0.7bn) derives from a single customer, the Centrica group. The majority of this revenue is in the Gas Distribution - UK segment with lesser amounts in Other activities and the Transmission - UK segment.

b) Operating profit

The table above represents operating profit from continuing operations only, as disclosed in the consolidated income statement, and excludes the results of discontinued operations. Operating profit before exceptional items and remeasurements for discontinued operations for the year ended 31 March 2007 was £117m (2006: £131m; 2005: £552m). Operating profit after exceptional items and remeasurements for discontinued operations for the year ended 31 March 2007 was £62m (2006: £111m; 2005: £465m). See note 11 for additional disclosures on discontinued operations.

c) Share of post-tax results of joint ventures

d) Total assets and total liabilities

*Comparatives have been adjusted to reclassify amounts relating to discontinued operations

The analysis of total assets and total liabilities includes all attributable goodwill and excludes inter-business balances. Unallocated total assets comprise cash and cash equivalents, taxation, current financial investments and derivative financial assets. Unallocated total liabilities comprise bank overdrafts, borrowings, derivative financial liabilities and taxation.

e) Other segmental information

*Comparatives have been adjusted to reclassify amounts relating to discontinued operations

Capital expenditure comprises additions to property, plant and equipment and other intangible assets amounting to £2,343m (2006: £2,093m; 2005: £1,827m) and £32m (2006: £15m; 2005: £78m) respectively.

Depreciation and amortisation includes depreciation of property, plant and equipment and amortisation of other intangible assets amounting to £889m (2006: £908m; 2005: £950m) and £54m (2006: £57m; 2005: £45m) respectively.

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