Notes to the consolidated financial statements - analysis of items in the primary statements
1. Segmental analysis
The Board of Directors is National Grid’s chief operating decision making body (as defined by IFRS 8). The segmental analysis is based on the information the Board of Directors uses internally for the purposes of evaluating the performance of operating segments and determining resource allocation between segments. The performance of operating segments is assessed principally on the basis of operating profit before exceptional items, remeasurements and stranded cost recoveries. The following table describes the main activities for each operating segment:
| Transmission UK | High voltage electricity transmission networks, the gas transmission network in Great Britain, UK liquefied natural gas (LNG) storage activities and the French electricity interconnector. |
| Transmission US | High voltage electricity transmission networks in New York and New England. |
| Gas Distribution UK | Four of the eight regional networks of Great Britain’s gas distribution system. |
| Gas Distribution US | Gas distribution in New York and New England. |
| Electricity Distribution & Generation US | Electricity distribution in New York and New England and electricity generation in New York. |
Other activities primarily relate to non-regulated businesses and other commercial operations not included within the above segments, including: UK-based gas and electricity metering activities; UK property management; a UK LNG import terminal; other LNG operations; US unregulated transmission pipelines; US gas fields; together with corporate activities.
For the year ended 31 March 2009, discontinued operations comprise the Ravenswood generation station in New York City and the engineering and communications operations in the US acquired as part of the KeySpan acquisition. These businesses were sold during the year ended 31 March 2009 except for two engineering companies which were sold subsequent to the year end. For the year ended 31 March 2008, discontinued operations also include the wireless infrastructure and communications operations in the UK and the US and an electricity interconnector in Australia, all of which were disposed of during 2007. For additional disclosures relating to discontinued operations, refer to note 7.
Sales between operating segments are priced having regard to the regulatory and legal requirements to which the businesses are subject.
(a) Revenue
| Total sales 2010 £m | Sales between segments 2010 £m | Sales to third parties 2010 £m | Total sales 2009 £m | Sales between segments 2009 £m | Sales to third parties 2009 £m | Total sales 2008 £m | Sales between segments 2008 £m | Sales to third parties 2008 £m |
|
|---|---|---|---|---|---|---|---|---|---|
| Operating segments – continuing operations | |||||||||
| Transmission UK | 3,460 | 6 | 3,454 | 3,487 | 2 | 3,485 | 2,956 | 16 | 2,940 |
| Transmission US | 405 | 74 | 331 | 420 | 83 | 337 | 299 | 61 | 238 |
| Gas Distribution UK | 1,517 | 70 | 1,447 | 1,466 | 79 | 1,387 | 1,383 | 70 | 1,313 |
| Gas Distribution US | 3,708 | 5 | 3,703 | 4,786 | 3 | 4,783 | 2,845 | 2 | 2,843 |
| Electricity Distribution & Generation US | 4,339 | 1 | 4,338 | 4,972 | 1 | 4,971 | 3,508 | 2 | 3,506 |
| Other activities | 738 | 23 | 715 | 719 | 58 | 661 | 642 | 59 | 583 |
| 14,167 | 179 | 13,988 | 15,850 | 226 | 15,624 | 11,633 | 210 | 11,423 | |
| Total excluding stranded cost recoveries | 13,612 | 15,189 | 11,041 | ||||||
| Stranded cost recoveries | 376 | 435 | 382 | ||||||
| 13,988 | 15,624 | 11,423 | |||||||
| Geographical areas | |||||||||
| UK | 5,524 | 5,334 | 4,787 | ||||||
| US | 8,464 | 10,290 | 6,636 | ||||||
| 13,988 | 15,624 | 11,423 |
The table above represents revenue from continuing operations only.
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.
In accordance with the Company’s accounting policy on revenue recognition, where revenue received or receivable exceeds the maximum amount permitted by regulatory agreement and adjustments will be made to future prices to reflect the over-recovery, no liability is recognised. Similarly, no asset is recognised where a regulatory agreement permits adjustments to be made to future prices in respect of an under-recovery. In the UK, there was an under-recovery of £100m at 31 March 2010 (2009: £52m; 2008: £23m). In the US, under-recoveries and other regulatory entitlements to future revenue (including stranded cost recoveries) amounted to £2,333m at 31 March 2010 (2009: £2,289m; 2008: £1,652m).
A reconciliation of the operating segments’ measure of profit to total profit before taxation is provided below. Further details of the exceptional items, remeasurements and stranded cost recoveries are provided in note 3.
(b) Operating profit
| Before exceptional items, remeasurements and stranded cost recoveries | After exceptional items, remeasurements and stranded cost recoveries |
||||||
|---|---|---|---|---|---|---|---|
| 2010 £m | 2009 £m | 2008 £m | 2010 £m | 2009 £m | 2008 £m |
||
| Operating segments – continuing operations | |||||||
| Transmission UK | 1,311 | 1,126 | 1,021 | 1,252 | 1,063 | 1,013 | |
| Transmission US | 153 | 175 | 128 | 151 | 173 | 122 | |
| Gas Distribution UK | 723 | 672 | 595 | 682 | 629 | 574 | |
| Gas Distribution US | 414 | 612 | 392 | 448 | 226 | 487 | |
| Electricity Distribution & Generation US | 374 | 265 | 330 | 701 | 531 | 696 | |
| Other activities | 146 | 65 | 129 | 59 | 1 | 72 | |
| 3,121 | 2,915 | 2,595 | 3,293 | 2,623 | 2,964 | ||
| Geographical areas | |||||||
| UK | 2,180 | 1,875 | 1,752 | 2,007 | 1,729 | 1,667 | |
| US | 941 | 1,040 | 843 | 1,286 | 894 | 1,297 | |
| 3,121 | 2,915 | 2,595 | 3,293 | 2,623 | 2,964 | ||
| Reconciliation to profit before tax: | |||||||
| Operating profit | 3,121 | 2,915 | 2,595 | 3,293 | 2,623 | 2,964 | |
| Interest income and similar income | 1,005 | 1,315 | 1,275 | 1,005 | 1,315 | 1,275 | |
| Interest expense and other finance costs | (2,160) | (2,465) | (2,045) | (2,113) | (2,549) | (2,061) | |
| Share of post-tax results of joint ventures and associates | 8 | 5 | 4 | 8 | 5 | 4 | |
| Profit before tax – continuing operations | 1,974 | 1,770 | 1,829 | 2,193 | 1,394 | 2,182 | |
The table above represents operating profit from continuing operations only, as disclosed in the consolidated income statement, and excludes the results of discontinued operations.
(c) Capital expenditure and depreciation
| Capital expenditure | Depreciation and amortisation | ||||||
|---|---|---|---|---|---|---|---|
| 2010 £m | 2009 £m | 2008 £m | 2010 £m | 2009 £m | 2008 £m |
||
| Operating segments – continuing operations | |||||||
| Transmission UK | 1,254 | 1,259 | 1,600 | 373 | 353 | 372 | |
| Transmission US | 240 | 182 | 111 | 59 | 56 | 40 | |
| Gas Distribution UK | 670 | 598 | 514 | 201 | 177 | 181 | |
| Gas Distribution US | 409 | 421 | 188 | 173 | 172 | 91 | |
| Electricity Distribution & Generation US | 372 | 355 | 257 | 215 | 223 | 146 | |
| Other activities | 307 | 427 | 383 | 173 | 146 | 164 | |
| 3,252 | 3,242 | 3,053 | 1,194 | 1,127 | 994 | ||
| Discontinued operations | – | – | 1 | – | – | – | |
| 3,252 | 3,242 | 3,054 | 1,194 | 1,127 | 994 | ||
| Geographical areas | |||||||
| UK | 2,187 | 2,270 | 2,493 | 733 | 679 | 709 | |
| US | 1,065 | 972 | 560 | 461 | 448 | 285 | |
| Rest of the world | – | – | 1 | – | – | – | |
| 3,252 | 3,242 | 3,054 | 1,194 | 1,127 | 994 | ||
Capital expenditure comprises additions to property, plant and equipment and other non-current intangible assets amounting to £3,148m (2009: £3,164m; 2008: £3,009m) and £104m (2009: £78m; 2008: £45m) respectively.
Depreciation and amortisation includes expensed depreciation of property, plant and equipment and amortisation of other intangible assets amounting to £1,131m (2009: £1,058m; 2008: £940m) and £63m (2009: £69m; 2008: £54m) respectively.
(d) Total assets
| Total assets | ||
|---|---|---|
| 2010 £m | 2009 £m |
|
| Operating segments | ||
| Transmission UK | 11,085 | 10,451 |
| Transmission US | 2,467 | 2,238 |
| Gas Distribution UK | 6,592 | 6,158 |
| Gas Distribution US | 9,454 | 10,112 |
| Electricity Distribution & Generation US | 7,289 | 7,854 |
| Other activities | 2,557 | 2,289 |
| 39,444 | 39,102 | |
| Joint ventures | 250 | 168 |
| Unallocated | 3,859 | 5,197 |
| 43,553 | 44,467 | |
| Geographical areas | ||
| UK | 19,720 | 18,527 |
| US | 19,974 | 20,743 |
| Unallocated | 3,859 | 5,197 |
| 43,553 | 44,467 | |
The analysis of total assets includes all attributable goodwill and excludes inter segment balances. Unallocated total assets comprise cash and cash equivalents, taxation, current financial investments and total derivative financial assets.