-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MVII4wqPM5oSNgfSe6QGa9UJNzpuB5PM+xNC1k/ne/yXG6guTO5++D+Bqs+YmIaA 0k/3jQ1YDPiKOnLd8MSOmg== 0000081018-97-000016.txt : 19970616 0000081018-97-000016.hdr.sgml : 19970616 ACCESSION NUMBER: 0000081018-97-000016 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19970401 ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19970613 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: PUBLIC SERVICE CO OF COLORADO CENTRAL INDEX KEY: 0000081018 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC & OTHER SERVICES COMBINED [4931] IRS NUMBER: 840296600 STATE OF INCORPORATION: CO FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-03280 FILM NUMBER: 97624019 BUSINESS ADDRESS: STREET 1: 1225 17TH ST STE 300 CITY: DENVER STATE: CO ZIP: 80202 BUSINESS PHONE: 3035717511 MAIL ADDRESS: STREET 1: P O BOX 840 STE 300 CITY: DENVER STATE: CO ZIP: 80201 8-K/A 1 AMENDED 8-K FOR YORKSHIRE ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K/A CURRENT REPORT PURSUANT TO SECTION 13 or 15(d) of the SECURITIES EXCHANGE ACT OF 1934 Date of report (Date of earliest event reported) April 1, 1997 PUBLIC SERVICE COMPANY OF COLORADO ---------------------------------------- (Exact Name of Registrant as Specified in Charter) Colorado -------------------- (State or Other Jurisdiction of Incorporation) 1-3280 84-0296600 ---------------- ----------------- (Commission File No.) (IRS Employer Identification No.) 1225 Seventeenth Street, Denver, Colorado 80202 --------------------------------------------------------------- (Address of Principal Executive Offices) (Zip Code) Registrant's telephone number, including area code(303) 571-7511 ================================================================================ ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS (a) Financial statements of business acquired. The audited consolidated balance sheets of Yorkshire Electricity Group plc ("Yorkshire Electricity") as of March 31, 1996 and 1995 and the related consolidated profit and loss accounts, statements of total recognized gains and losses and statements of group cash flows for the years ended March 31, 1996, 1995, and 1994, together with the Report of Independent Public Accountants, as well as the unaudited Yorkshire Electricity Group balance sheets as of September 30,1996 and 1995 and the related summarized group profit and loss accounts, statements of total recognized gains and losses and summarized group cash flows statements for the six months ended September 30, 1996 and 1995 are attached hereto as Exhibit 99 and are incorporated herein by reference. (b) Pro forma financial information. Description of the transaction The following is a description of the pro forma effects on the historical consolidated financial statements of Public Service Company of Colorado (the "Company") of the acquisition of Yorkshire Electricity by Yorkshire Holdings, a joint venture between the Company and American Electric Power ("AEP"). Total consideration paid by Yorkshire Holdings is approximately $2.4 billion (1.5 billion pounds sterling). Yorkshire Holdings is a wholly-owned subsidiary of Yorkshire Power Group Ltd. ("Yorkshire Power"), which is equally owned by subsidiary companies of the Company and AEP. The acquisition has been financed through a combination of approximately 25% equity and 75% debt, including the assumption of the existing debt of Yorkshire Electricity. The funds for the acquisition have been obtained from the Company's and AEP's investment in Yorkshire Power of approximately $360 million (220 million pounds sterling) each, with the remainder obtained by Yorkshire Power through the issuance of non-recourse debt. The Company has initially funded its entire equity investment in Yorkshire Power through $250 million of publicly issued medium-term notes with varying maturities and drawings of $110 million on its short-term lines of credit pursuant to its short-term credit agreement with Bank of America as agent. The investment will be accounted for under the equity method of accounting. A limited number of adjustments are required to reflect the pro forma effects of the transaction; therefore, as permitted by Article 11 of Regulation S-X, the information required herein is presented in a narrative format. Periods presented Unaudited pro forma income statement information is provided for the twelve months ended December 31, 1996 and for the three months ended March 31, 1997 as if the transaction had been consummated on January 1, 1996 and January 1, 1997, respectively. Unaudited pro forma balance sheet information is provided as of March 31,1997 as if the transaction had been consummated on such date. The pro forma income statement information for the three months ended March 31, 1997 includes the Company's income statement for the three months ended March 31, 1997 and its equity in earnings of Yorkshire Power for the three months ended December 31, 1996. Effects of pro forma adjustments on the Company's statements of income The pro forma adjustments necessary to reflect the acquisition of Yorkshire Electricity on the Company's income statement include the recognition of equity in earnings of Yorkshire Power as well as an adjustment for interest expense on debt associated with the Company's investment in Yorkshire Power, net of related income taxes. The earnings of Yorkshire Power include the historical earnings of Yorkshire Electricity adjusted for the effects of purchase accounting (primarily the amortization of goodwill and higher depreciation on the revalued fixed assets) and interest expense on debt issued by Yorkshire Power associated with the acquisition, net of related income taxes. The Company's equity in the resulting earnings is 50%, the same as its ownership interest in Yorkshire Power. Yorkshire Electricity's earnings, on the basis of United Kingdom generally accepted accounting principles, totaled 102.4 million pounds sterling ($159.8 million) for the twelve months ended December 31, 1996 and 19.6 million pounds sterling ($32.1 million) for the three months ended December 31, 1996. After giving effect to the preliminary allocation of the purchase price, the conversion of Yorkshire Power's earnings to United States generally accepted accounting principles and the impact of U.S. income tax benefits, the Company's earnings reflect an increase of approximately $19.3 million and $0.6 million for the twelve months ended December 31, 1996 and the three months ended March 31, 1997, respectively. The historic earnings of Yorkshire Electricity include the effect of a nonrecurring adjustment related to the write-off of certain computer development costs. Such costs, assuming United Kingdom generally accepted accounting principles, totaled 24.2 million pounds sterling (22.2 million pounds sterling, net of tax) for the twelve months and three months ended December 31, 1996. Included in the Company's share of Yorkshire Power's earnings, among other things, are: 1) $5.2 million and $1.4 million, respectively, of increased depreciation due to the revaluation of Yorkshire Power's fixed assets; 2) $21.1 million and $5.4 million, respectively, of amortization of goodwill; 3) $62.4 million and $16.4 million, respectively, of interest expense associated with debt issued by Yorkshire Power in connection with the acquisition, and 4) $18.9 million associated with the nonrecurring write-off of certain computer development costs for the twelve months ended December 31, 1996 and the three months ended March 31, 1997. (All dollar amounts have been converted using the average exchange rates for the twelve months period and the three month period of $1.561/pound sterling and $1.636/pound sterling, respectively.) The following table details the effect of the aforementioned pro forma adjustments (including the effect of interest expense related to the Company's equity investment in Yorkshire Power which has been initially funded with debt) on the Company's earnings available for common stock and earnings per share. Twelve months ended Three months ended December 31, 1996 March 31, 1997 ------------------------------------------------- Earnings Earnings Earnings Earnings available per share available per for common (1) for common share(1) stock stock (millions) (millions) Public Service Company $ 178.5 $2.78 $59.9 $0.92 of Colorado Pro forma adjustments: Equity in earnings of 19.3 0.6 Yorkshire Power, net of U.S. tax benefits (2) Interest expense, net of tax (13.8) (3.4) Pro forma result $184.0 $2.87 $57.1 $0.88 (1) Based on the average number of common shares outstanding of 64,187,000 and 65,122,000 for the twelve months ended December 31, 1996 and the three months ended March 31, 1997, respectively. (2) Includes a $18.9 million ($11.7 million after-tax or $0.18 per share) nonrecurring write-off of certain computer development costs for the twelve months ended December 31, 1996 and the three months ended March 31, 1997 Effects of Pro forma adjustments on the Company's balance sheet While the acquisition of Yorkshire Power had not been completed at March 31, 1997, the Company had issued the $360 million in securities necessary to complete the transaction and included such proceeds in cash on the Company's consolidated balance sheet. Therefore, the Company's unaudited balance sheet at March 31, 1997 effectively reflects the investment in Yorkshire Power and no further adjustments would be required, except for a reclassification of approximately $360 million from cash to investments, at cost. At March 31, 1997, the Company's unaudited balance sheet reported total assets of approximately $4,913.0 million, notes payable and commercial paper of approximately $295.4 million and long-term debt of approximately $1,482.8 million. (C) Exhibits. The following exhibits are filed herewith: 23 Consent of Independent Public Accountants 99 Yorkshire Electricity Group plc Report and Financial Statements at March 31, 1996 and the Interim Financial Statements at September 30, 1996 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. PUBLIC SERVICE COMPANY OF COLORADO /s/R. C. Kelly ----------------------------- R. C. Kelly Senior Vice President, Finance, Treasurer and Chief Financial Officer Date: June 13, 1997 Exhibit 23 INDEPENDENT AUDTIORS' CONSENT We consent to the incorporation by reference in Registration Statement Nos. 33-62233, 33-37431, 33-51167, and 33-54877 of Public Service Company of Colorado on Form S-3 and Registration Statement No. 33-55432 of Public Service Company of Colorado on Form S-8 of our report (on the consolidated financial statements of Yorkshire Electricity Group plc) dated 9 June 1997, appearing in this Interim Report on Form 8-K/A of Public Service Company of Colorado. /s/ Deloitte & Touche Deloitte & Touche Leeds United Kingdom 9 June 1997 Exhibit 99 YORKSHIRE ELECTRICITY GROUP PLC Report and Financial Statements 31 March 1996 Deloitte & Touche Chartered Accountants 10-12 East Parade Leeds LS1 2AJ United Kingdom YORKSHIRE ELECTRICITY GROUP PLC TABLE OF CONTENTS Page Statement of Directors' responsibilities 3 Auditors' report 4 Consolidated profit and loss account 5 Consolidated balance sheet 6 Consolidated cash flow statement 7 Statement of total recognised gains and losses 8 Notes to the accounts 9 YORKSHIRE ELECTRICITY GROUP PLC STATEMENT OF DIRECTORS' RESPONSIBILITIES The following statement, which should be read in conjunction with the auditors' statement of respective responsibilities of Directors and auditors, is made with a view to distinguishing for shareholders the respective responsibilities of the Directors and of the auditors in relation to the financial statements. The Directors are required by the Companies Act 1985 to prepare financial statements for each financial year which give a true and fair view of the state of affairs of the Company and the Group as at the end of the financial year and of the profit or loss for the financial year. The Directors consider that, in preparing the financial statements on pages 5 to 39 on a going concern basis, the Company has used appropriate accounting policies, consistently applied and supported by reasonable and prudent judgements and estimates, and that all accounting standards which they consider to be applicable have been followed. The Directors have responsibility for ensuring that the Company keeps accounting records which disclose with reasonable accuracy the financial position of the Company and which enable them to ensure that the financial statements comply with the Companies Act 1985. The Directors have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities. AUDITORS' REPORT TO THE DIRECTORS OF YORKSHIRE ELECTRICITY GROUP PLC We have audited the accompanying consolidated balance sheets of Yorkshire Electricity Group plc and subsidiaries as at 31 March 1996 and 1995 and the related consolidated profit and loss accounts, statements of total recognised gains and losses and group cash flow statements for the years ended 31 March 1996, 1995 and 1994, all expressed in pounds sterling, which have been prepared under the historical cost convention, as modified by the revaluation of certain fixed assets, and the accounting policies set out in the notes to the financial statements. Respective responsibilities of Directors and auditors As described on page 3, these financial statements are the responsibility of the Company's Directors. It is our responsibility to form an independent opinion, based on our audits, on these financial statements and to report our opinion to you. Basis of opinion We conducted our audits in accordance with generally accepted auditing standards in the United Kingdom. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether caused by fraud or other irregularity or error. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. It also includes an assessment of the significant estimates and judgements made by the Directors, and of whether the accounting policies are appropriate to the circumstances of the Company and the Group, consistently applied and adequately disclosed, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. We planned and performed our audits so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the financial statements. Opinion In our opinion, the consolidated financial statements referred to above, present fairly, in all material respects, the financial position of Yorkshire Electricity Group plc and subsidiaries as at 31 March 1996 and 1995 and the results of their operations and their cash flows for the three years ended 31 March 1996 in conformity with generally accepted accounting principles in the United Kingdom (which differ in certain material respects from accounting principles generally accepted in the United States of America - see note 26). /s/Deloitte & Touche Deloitte & Touche Chartered Accountants 10-12 East Parade Leeds LS1 2AJ 9 June 1997 YORKSHIRE ELECTRICITY GROUP PLC CONSOLIDATED PROFIT AND LOSS ACCOUNT Year ended 31 March 1996 1995 1994 NGG Pre Excep- Excep- tional tional Items Note Items (Note 4) Total Total Total (pound)millions - -------------------------------------------------------------------------------- TURNOVER 2 1,426.0 (93.7) 1,332.3 1,459.3 1,307.9 Cost of sales 969.1 (8.5) 960.6 991.7 880.4 ----- ---- ----- ----- ----- Gross profit 456.9 (85.2) 371.7 467.6 427.5 Distribution costs 157.3 - 157.3 154.5 140.5 Administrative expenses 88.6 13.0 101.6 108.2 136.1 Other operating income 3(b) (5.4) - (5.4) (22.8) (8.4) ---- ---- --- ----- ---- OPERATING PROFIT/(LOSS) 2&3 216.4 (98.2) 118.2 227.7 159.3 ----- ----- ----- ----- ----- Share of (losses)/profits of associated undertakings: Continuing (3.5) - (3.5) 0.3 (2.2) Discontinued - - - (17.8) (20.3) ---- ---- ---- ----- ----- (3.5) - (3.5) (17.5) (22.5) Income from investment in NGG 8.9 118.3 127.2 18.6 17.4 Loss on disposal of subsidiary undertakings (2.5) - (2.5) - - ---- ---- ---- ---- ---- PROFIT ON ORDINARY ACTIVITIES BEFORE INTEREST 219.3 20.1 239.4 228.8 154.2 ----- ---- ----- ----- ----- Net interest payable 5 (20.1) - (20.1) (11.8) (5.2) PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION 199.2 20.1 219.3 217.0 149.0 ----- ---- ----- ----- ----- Taxation 7 52.1 37.5 89.6 55.3 41.1 PROFIT/(LOSS) ON ORDINARY ACTIVITIES AFTER TAXATION 147.1 (17.4) 129.7 161.7 107.9 ----- ----- ----- ----- ----- Equity minority interests 1.2 - 1.2 0.8 1.0 PROFIT/(LOSS) FOR THE FINANCIAL YEAR 145.9 (17.4) 128.5 160.9 106.9 ----- ----- ----- ----- ----- NGG distribution on equity shares 8 - 289.1 289.1 - - ---- ----- ----- ---- ---- Special dividend on equity shares 8 184.9 - 184.9 188.0 - ----- ---- ----- ----- ---- Ordinary dividends on equity shares 8 61.6 - 61.6 56.0 48.7 ---- ---- ---- ---- ---- RETAINED (DEFICIT)/PROFIT FOR THE FINANCIAL YEAR 20 (100.6) (306.5) (407.1) (83.1) 58.2 ------ ------ ------ ----- ---- Earnings per ordinary share 9 81.7p 71.9p 79.1p 51.5p ==== ==== ==== ==== Turnover and operating profit for 1996, 1995 and 1994 are in respect of continuing operations. YORKSHIRE ELECTRICITY GROUP PLC CONSOLIDATED BALANCE SHEET As at 31 March Note 1996 1995 (pound)m (pound)m -------- -------- FIXED ASSETS Tangible assets 10 772.0 759.1 Investments 11 104.3 132.9 ----- ----- 876.3 892.0 ===== ===== CURRENT ASSETS Stocks 12 4.3 5.3 Debtors 13 252.4 299.5 Investments 14 287.4 178.0 Cash at bank and in hand 1.1 7.5 --- --- 545.2 490.3 CREDITORS: amounts falling due within one year 15&16 (429.4) (402.7) ------ ------ NET CURRENT ASSETS 115.8 87.6 ----- ---- TOTAL ASSETS LESS CURRENT LIABILITIES 992.1 979.6 CREDITORS: amounts falling due after more than one year 15&16 (423.7) (304.5) Provisions for liabilities and charges 17&18 (47.3) (47.4) ----- ----- NET ASSETS 2 521.1 627.7 ===== ===== CAPITAL AND RESERVES Called up share capital 19 108.1 104.5 Share premium account 20 10.5 3.4 Investment property revaluation reserve 20 1.7 10.9 Revaluation reserve 20 23.1 71.7 Capital redemption reserve 20 0.1 0.0 Profit and loss account 20 377.5 435.4 ----- ----- EQUITY SHAREHOLDERS' FUNDS 521.0 625.9 Equity minority interests 0.1 1.8 --- --- 521.1 627.7 ===== ===== YORKSHIRE ELECTRICITY GROUP PLC CONSOLIDATED CASH FLOW STATEMENT Year ended 31 March Note 1996 1995 1994 (pound)m (pound)m (pound)m ------- ------- ------- Net cash inflow from operating activities 21(a) 225.8 214.4 278.2 Returns on investments and servicing of finance Interest received 25.1 13.5 12.5 Interest paid (45.9) (18.6) (24.5) Dividends received 114.9 14.4 12.2 Dividends paid (242.5) (239.0) (44.2) ------ ------ ----- Net cash outflow from returns on investment and servicing of finance (148.4) (229.7) (44.0) Taxation Corporation tax (including ACT) (97.6) (23.4) (40.2) ----- ----- ----- Tax paid (97.6) (23.4) (40.2) Investing activities Payments to acquire tangible fixed assets (101.1) (88.5) (146.2) Receipts from sale of tangible fixed assets 33.4 2.6 8.8 Purchase of associated undertakings - (11.4) (20.6) Purchase of other investments (25.0) (30.3) (0.8) Receipts from sale of subsidiary undertakings 21(e) 32.5 - - Loans to associated undertakings 11(c) 2.0 (23.7) (10.3) Receipts from sale of PSB 52.6 - - Money market investments with a maturity greater than 3 months (3.5) 49.7 (31.8) ---- ----- ---- Net cash outflow from investing activities (9.1) (101.6) (200.9) ---- ------ ------ Net cash outflow before financing (29.3) (140.3) (6.9) ----- ------ ---- Financing Issue of share capital 10.9 2.9 1.3 Repurchase of own shares (0.4) (0.4) - New borrowings 163.7 196.4 90.9 Repayment of borrowings (47.1) (16.5) (65.9) Issue/(repayment) of commercial paper 41.3 (8.8) (7.3) Repayment of government debenture - - (126.0) Repayment of bills of exchange - - (5.0) ---- ---- ---- Net cash inflow/(outflow) from financing 21(d) 168.4 173.6 (112.0) ----- ----- ------ Increase/(decrease) in cash and cash equivalents 21(b)&(c) 139.1 33.3 (118.9) ===== ===== ====== YORKSHIRE ELECTRICITY GROUP PLC STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES Year ended 31 March 1996 1995 1994 (pound)m (pound)m (pound)m ------- ------- ------ Profit for the financial year 128.5 160.9 106.9 Unrealised (deficit)/surplus on revaluation of investment properties (6.6) 8.1 2.8 Gain on deemed disposal of part holding in associated undertaking 4.8 - - Surplus on revaluation of investment in NGG 233.2 - - Surplus on revaluation of investment in PSB 56.1 - - ---- ---- ---- Total recognised gains and losses for the year 416.0 169.0 109.7 ===== ===== ===== NOTE OF HISTORICAL COST PROFIT Year ended 31 March 1996 1995 1994 (pound)m (pound)m (pound)m Reported profit on ordinary activities before taxation 219.3 217.0 149.0 Investment property disposal 2.6 - - Adjustment of administrative expenses to cost 6.9 - - Realisation of investment in PSB 56.1 - - ---- ---- ---- Historical cost profit on ordinary activities before taxation 284.9 217.0 149.0 Taxation (89.6) (55.3) (41.1) Equity minority interests (1.2) (0.8) (1.0) Dividends on equity shares (535.6) (244.0) (48.7) Adjustment to restate NGG distribution to cost 274.9 - - ----- ---- ---- Historical cost (deficit)/profit for the year (66.6) (83.1) 58.2 ===== ===== ==== YORKSHIRE ELECTRICITY GROUP PLC NOTES TO THE ACCOUNTS Year ended 31 March 1996 1. ACCOUNTING POLICIES These financial statements have been prepared in accordance with applicable accounting standards generally accepted in the United Kingdom (which differ in certain material respects from accounting principles generally accepted in the United States of America - see note 26). The particular accounting policies adopted are described below. Basis of preparation The financial statements have been prepared under the historical cost convention (as modified by the revaluation of certain fixed asset investments and investment properties). Compliance with Statement of Standard Accounting Practice (SSAP) No. 19 `Accounting for investment properties' requires departure from the requirements of the Companies Act 1985 relating to depreciation and an explanation of the departure is given in note 1(v). Basis of consolidation The Group financial statements consolidate the financial statements of the Company and all its subsidiary undertakings. The results of subsidiaries acquired during the year are included from the date of acquisition. The accounts of subsidiary and associated undertakings are co-terminous with those of Yorkshire Electricity Group plc apart from those of certain subsidiaries and associated undertakings which have accounting reference dates between 30 April and 31 December for commercial reasons. Management accounts made up to 31 March 1996 are used for consolidation of such subsidiary and associated undertakings. Associated undertakings Investments, excluding those classified as subsidiaries, are regarded as associated undertakings where the Group has a long term interest in more than 20% of the equity and is in a position to exercise a significant influence over their affairs on a continuing basis. These are stated in the consolidated balance sheet at the Group's share of net assets after adjustment for goodwill or discount on acquisition. The consolidated profit and loss account includes the Group's share of the pre-tax profits and attributable taxation of the associated undertakings. Turnover Turnover represents the value of electricity and gas consumption during the year, which includes an estimate of the sales value of units supplied to customers between the date of the last meter reading and the year end and the invoice value of other goods and services provided, exclusive of value added tax. Under/over recovery of regulated income Where there is an over recovery of supply or distribution business revenues against the regulated maximum allowable amount, such over recoveries are deferred. The deferred amount is deducted from turnover and included in creditors. Where there is an under recovery, no anticipation of any potential future recovery is made. Tangible fixed assets and depreciation (i) Tangible fixed assets Tangible fixed assets, other than investment properties are stated at cost less accumulated depreciation. Interest is capitalised for defined project finance. YORKSHIRE ELECTRICITY GROUP PLC NOTES TO THE ACCOUNTS Year ended 31 March 1996 1. ACCOUNTING POLICIES (continued) (ii) Depreciation The charge for depreciation is calculated to write off assets over their estimated useful lives commencing in the year following acquisition or completion. The lives of each major class of depreciable asset are as follows: Distribution assets 40 years Depreciation is charged at 3% for 20 years followed by 2% for the remaining 20 years Generation assets 20 years Non-operational assets Buildings - freehold Up to 60 years - leasehold Lower of lease period or remaining economic life up to 60 years Fixtures and equipment Up to 10 years Vehicles and mobile plant Up to 10 years Freehold land is not depreciated (iii) Capital contributions Capital contributions on distribution assets are credited to the profit and loss account over a 40 year period at a rate of 3% for the first 20 years followed by 2% for the remaining 20 years. (iv) Property clawback Arrangements have been put in place to entitle HM Government to a proportion of any property gain (above certain thresholds) accruing as a result of disposals, or events treated as disposals for clawback purposes, occurring after 31 March 1990 in relation to land in which the Company had an interest at that date (and, in certain circumstances, land in which the Company acquires an interest thereafter from other members of the electricity industry) and any buildings on that land. These arrangements will last until 31 March 2000. A provision for clawback in respect of property disposals is made only to the extent that it is probable that a liability will crystallise. Such a liability will crystallise when an actual or deemed disposal occurs. (v) Investment properties In accordance with SSAP 19 investment properties are revalued annually and the aggregate surplus or deficit is transferred to a revaluation reserve with the exception of any permanent diminution below historic cost which is taken to the profit and loss account. No depreciation is provided in respect of investment properties. The Companies Act 1985 requires all properties to be depreciated. However, this requirement conflicts with the generally accepted accounting principle set out in SSAP 19. The Directors consider that, because these properties are not held for consumption, but for their investment potential, to depreciate them would not give a true and fair view, and that is necessary to adopt SSAP 19 in order to give a true and fair view. If this departure from the Act had not been made, the profit for the financial year would have been reduced by depreciation. However, the amount of depreciation cannot reasonably be quantified because depreciation is only one of many factors reflected in the annual valuation and the amount which might otherwise have been shown cannot be separately identified or quantified. YORKSHIRE ELECTRICITY GROUP PLC NOTES TO THE ACCOUNTS Year ended 31 March 1996 1. ACCOUNTING POLICIES (continued) Investments Fixed asset investments are stated at cost or valuation. Current asset investments are stated at the lower of cost and net realisable value. Investment income is included in the accounts of the year for which it is receivable. Stocks Stocks are valued at the lower of cost and net realisable value. The valuation of work in progress is based on the cost of labour plus appropriate overheads and the cost of materials. Research and development Research and general development expenditure is written off in the year in which it is incurred. Expenditure on the development of specific projects is carried forward when its recoverability can be foreseen with reasonable assurance and is amortised in line with the future life of the project. Deferred taxation Deferred taxation arises in respect of items where there is a timing difference between their treatment for accounting purposes and their treatment for taxation purposes. Provision for deferred taxation, using the liability method, is made to the extent that it is probable that the liability or asset will crystallise in the foreseeable future. Leases (i) As LESSEE rental costs under operating leases are charged to the profit and loss account in equal annual amounts over the periods of the leases. (ii) As LESSOR the Group's net investment in finance leases is stated at the total value of rentals receivable less finance charges allocated to future periods. Total gross earnings from finance leases are allocated so as to give a constant periodic rate of return on the net cash investment. Pension costs The pension costs incurred in respect of the Electricity Supply Pension Scheme are charged to the profit and loss account so as to spread the cost over the employees' estimated remaining working lives with the Group. Contributions to the Yorkshire Electricity Pension Plan, a defined contributions scheme, are charged to the profit and loss account as incurred. Goodwill Goodwill arising on consolidation, representing the excess of the purchase consideration of the businesses over the fair value of the net assets acquired, is set off against reserves in the year of acquisition. Capital instruments Capital instruments are initially carried at the amount of the net proceeds. The finance costs and issue expenses are allocated to the profit and loss account over the life of the debt at a constant rate on the carrying amount. Reporting the substance of transactions In accordance with Financial Reporting Standard (FRS) No. 5, transactions entered into by the Group are recorded in the financial statements taking into account their full commercial substance. YORKSHIRE ELECTRICITY GROUP PLC NOTES TO THE ACCOUNTS Year ended 31 March 1996 2. TURNOVER, OPERATING PROFIT AND NET ASSETS Turnover for 1995/96 is all in respect of sales from continuing businesses to United Kingdom customers. Turnover, operating profit and net assets are attributable to the following activities: Turnover Operating profit Net assets ------------------------------------------------------------------------------------------------------
31 March 31 March 31 March 1996 1995 1994 1996 1995 1994 1996 1995 1994 (pound)m (pound)m (pound)m (pound)m (pound)m (pound)m (pound)m (pound)m (pound)m Distribution 334.4 362.3 347.8 164.7 173.3 134.9 520.5 494.6 452.7 Electricity supply 1,308.7 1,343.2 1,220.0 30.5 21.9 14.0 36.9 54.2 (4.0) Other (including effects of NGG customer discounts) 63.8 156.8 162.4 (77.0) 32.5 10.4 105.5 114.5 141.4 Less: Inter-activity sales* (374.6) (403.0) (422.3) - - - - - - Non-allocated net assets - - - - - - (141.8) (35.6) 107.5 ---- ---- ---- ---- ---- ---- ------ ----- ----- 1,332.3 1,459.3 1,307.9 118.2 227.7 159.3 521.1 627.7 697.6 ======= ======= ======= ===== ===== ===== ===== ===== =====
*Inter-activity sales relate mainly to sales by the Distribution business for use of system to the Supply business and also include transfer pricing sales made between the different businesses. Turnover in respect of the Supply and Distribution businesses excludes revenues in excess of the regulated maximum allowed amount. YORKSHIRE ELECTRICITY GROUP PLC NOTES TO THE ACCOUNTS Year ended 31 March 1996 3. OPERATING PROFIT 1996 1995 1994 (pound)m (pound)m (pound)m ------- ------- ------- (a) Operating profit is stated after charging/(crediting): Employment costs (note6(a)) 72.9 93.3 99.1 Depreciation 40.9 39.5 32.9 Profit on sale of tangible assets (2.4) (1.8) (0.3) Other operating lease rentals 5.4 7.6 8.2 Rationalisation costs - 8.7 43.5 Research and development 1.1 4.2 4.7 Investment property write downs - 3.5 - Auditors' remuneration Audit fees 0.1 0.1 0.1 Other fees 0.4 0.2 0.1 === === === (b) Other operating income consists of: Compensation payment from Stockholm Stadshus AB - 17.1 - Investment property rental 5.3 5.5 2.7 Ancillary services 0.1 0.2 - Participation premium - - 5.7 --- --- --- 5.4 22.8 8.4 === ==== === 4. NATIONAL GRID GROUP PLC At 1 April 1995 the Group held 9.2% of the issued share capital of National Grid Group plc ("NGG"), formerly National Grid Holding plc, which was held in the balance sheet at (pound)71.7m. During the year the majority of the investment was realised and distributed to shareholders, in addition domestic customers received a discount. The transactions which comprise the NGG distribution were: (a) In December 1995 special dividends of (pound)118.3m (gross) were paid by NGG to the Group. (pound)15.8m of which was re-subscribed for additional shares. (b) In December 1995 NGG became a company listed on the London Stock Exchange. The Group revalued its investment to market value of (pound)320.7m. (c) During December 1995 the Group made a distribution in specie to its shareholders of approximately 90% of its interest in NGG's issued ordinary share capital, with a market value of (pound)289.1m. (d) Following the Listing of NGG, domestic customers received a discount of approximately (pound)50 (plus VAT) during the early part of 1996. This resulted in a reduction in gross profit of (pound)85.2m. (e) On 17 November 1995 a specie dividend of NGG's holding in PSB Holdings Limited ("PSB") was made. Following this the Group's investment in PSB was recognised at its estimated market value of (pound)56.1m. Subsequently, on 21 December 1995 this investment was realised. YORKSHIRE ELECTRICITY GROUP PLC NOTES TO THE ACCOUNTS Year ended 31 March 1996 4. NATIONAL GRID GROUP PLC (continued) (f) In order that holders of options in Yorkshire Electricity shares were not disadvantaged by the above arrangements, the Directors established a new employee share trust. The trustee has purchased NGG shares from the Company. Upon the exercise of options (granted prior to 8 December 1995) under the Savings-Related Share Option Scheme and Executive Share Option Scheme, the trustee transfers to the relevant option holder such number of NGG shares (or if required by the option holder Yorkshire Electricity shares of equivalent value) as the option holder would have been entitled to receive had the shares under option been issued and allotted on the date of the distribution. This compensation along with other costs related to the distribution, resulted in a charge to the profit and loss account for the year of(pound)13.0m. The number of shares held by the trust at 31 March 1996 was 642,819 NGG ordinary 10p shares, with a market value of(pound)1,234,212 and 811 Yorkshire Electricity Group plc ordinary 68 2/11p shares with a market value of(pound)6,593. The charge to the profit and loss account in respect of taxation on the above transactions is (pound)37.5m. This comprises a corporation tax charge arising from the distribution of (pound)49.4m, tax on NGG dividends of (pound)20.6m, offset by corporation tax reductions relating to the customer discount and other expenses of (pound)32.5m. 5. NET INTEREST PAYABLE 1996 1995 1994 (pound)m (pound)m (pound)m ------ ------- ------- Interest payable: On bank loans, overdrafts and other loans (wholly repayable within five years) (36.4) (13.6) (14.7) On other loans (9.3) (9.7) (9.2) Less amounts capitalised - - 5.9 ---- ---- --- (45.7) (23.3) (18.0) Interest receivable 25.6 11.5 12.8 ---- ---- ---- (20.1) (11.8) (5.2) ===== ===== ==== YORKSHIRE ELECTRICITY GROUP PLC NOTES TO THE ACCOUNTS Year ended 31 March 1996 6. DIRECTORS AND EMPLOYEES 1996 1995 1994 (pound)m (pound)m (pound)m ------- ------- ------- (a) Employment costs The aggregate remuneration of all employees, including the Directors of the Company, comprised: Wages and salaries 87.7 95.7 104.3 Social security costs 9.1 7.9 8.7 Other pension costs 6.7 11.2 14.9 --- ---- ---- 103.5 114.8 127.9 Less: Charged as capital expenditure (30.6) (21.5) (28.8) ----- ----- ----- Charged to the profit and loss account 72.9 93.3 99.1 ==== ==== ==== (b) Number of employees (i) The average number of employees (headcount), including Directors, during the year was: 1996 1995 1994 No. No. No. --- --- --- Distribution and Electricity Supply 3,482 3,625 3,978 Other 812 1,299 1,786 --- ----- ----- 4,294 4,924 5,764 ----- ----- ----- (ii)The full time equivalent number of employees, including Directors, as at 31 March was: Distribution and Electricity Supply 3,262 3,403 3,680 Other 645 1,164 1,463 --- ----- ----- 3,907 4,567 5,143 ----- ----- ----- (c) Directors The following table shows the aggregate of Directors' emoluments and other payments 1996 1995 1994 (pound)thousands ---------------- Fees 170.5 147.2 127.0 Fixed remuneration 597.5 535.0 557.1 Performance-related incentives 155.4 214.0 127.5 Taxable benefits/expenses 122.1 83.2 45.6 Pension contributions 65.8 91.0 80.4 ---- ---- ---- 1,111.3 1,070.4 937.6 ======= ======= ===== YORKSHIRE ELECTRICITY GROUP PLC NOTES TO THE ACCOUNTS Year ended 31 March 1996 6. DIRECTORS AND EMPLOYEES (continued) The following table shows emoluments, including bonuses, of individual Directors for the year ended 31 March.
1996 1995 1994 Performance incentives Fees/fixed Share Taxable Pension remuneration Bonus incentive* benefits/expenses contributions Total Total Total (pound)/thousands (pound)/thousands (pound)thousands (pound)thousands (pound)thousands (pound)thousands Chairman C Hampson 100.0 - - 32.5 - 132.5 70.9 - J S Tysoe - - - - - - 34.7 124.7 Executive Directors J M Chatwin 207.5 12.5 41.5 24.7 22.8 309.0 316.9 262.9 A W J Coleman 140.0 8.4 28.0 22.2 15.4 214.0 211.4 174.7 G J Hall 125.0 7.5 25.0 21.9 13.8 193.2 187.9 154.2 P B Morgan 125.0 7.5 25.0 20.8 13.8 192.1 185.8 149.1 Non-Executive Directors Lady Eccles 21.0 - - - - 21.0 18.9 18.0 J N Hardman 21.0 - - - - 21.0 18.8 18.0 J A Rigg 7.1 - - - - 7.1 18.9 18.0 Sir Philip Beck 17.9 - - - - 17.9 6.2 - J V H Robins 3.5 - - - - 3.5 - - D B Clark - - - - - - - 18.0 ----------------------------------------------------------------------------------------------------------- 768.0 35.9 119.5 122.1 65.8 1,111.3 1,070.4 937.6 ===========================================================================================================
*Share Incentive - this figure represents the amount payable to the Trustee of the Share Incentive Scheme (described below) in respect of the year and is based on a multiplier of 1.0, whereas accrued rights in accordance with the Scheme relate in each case to only 50% of the shares acquired by the Trustee. YORKSHIRE ELECTRICITY GROUP PLC NOTES TO THE ACCOUNTS Year ended 31 March 1996 6. DIRECTORS AND EMPLOYEES (continued) Mr J M Chatwin was the highest paid Director for both years. Sir Philip Beck and Mr J V H Robins were appointed as Non-Executive Directors of the Company on 25 May 1995 and on 25 January 1996 respectively. Mr J A Rigg retired on 1 August 1995, Mr J S Tysoe was Chairman until 30 September 1994. Mr C Hampson was appointed Chairman from 1 October 1994. The Directors' remuneration (including taxable benefits but excluding employer's pension contributions) was in the ranges: 1996 1995 1994 No. No. No. --- --- --- (pound)0,001 - (pound)5,000 1 - - (pound)5,001 - (pound)10,000 1 1 - (pound)15,001 - (pound)20,000 1 3 4 (pound)20,001 - (pound)25,000 2 - - (pound)30,001 - (pound)35,000 - 1 - (pound)70,001 - (pound)75,000 - 1 - (pound)120,001 - (pound)125,000 - - 1 (pound)130,001 - (pound)135,000 1 - 1 (pound)135,001 - (pound)140,000 - - 1 (pound)155,001 - (pound)160,000 - - 1 (pound)165,001 - (pound)170,000 - 2 - (pound)175,001 - (pound)180,000 2 - - (pound)190,001 - (pound)195,000 - 1 - (pound)195,001 - (pound)200,000 1 - - (pound)230,001 - (pound)235,000 - - 1 (pound)280,001 - (pound)285,000 - 1 - (pound)285,001 - (pound)290,000 1 - - --- --- --- 10 10 9 === === === The beneficial interests of each Director in the ordinary shares of the Company according to the register kept by the Company under Section 325 of the Companies Act 1985 are set out in the tables below: 31 March 1996 1 April 1995 or date of retirement or date of appointment Sharesave Under Sharesave Under Issued Scheme option Issued Scheme option ------ ------ ------ ------ ------ ------ C Hampson 3,000 - - 1,000 - - J M Chatwin 28,958 629 111,482 34,496 5,100 111,482 A W J Coleman 12,690 629 61,718 24,092 5,100 61,718 G J Hall 27,972 629 54,928 32,447 5,100 54,928 P B Morgan 37,947 629 51,289 10,926 5,100 98,158 Lady Eccles 2,933 - - 3,520 - - J N Hardman 1,867 - - 242 - - Sir Philip Beck 2,573 - - 88 - - J V H Robins 1,000 - - - - - J A Rigg 880 - - 880 - - YORKSHIRE ELECTRICITY GROUP PLC NOTES TO THE ACCOUNTS Year ended 31 March 1996 6. DIRECTORS AND EMPLOYEES (continued) Except as indicated below, there have been no changes in the interests of the Directors in the ordinary shares of the Company between the year end and 4 June 1996: Sharesave Under Issued Scheme option ------ ------ ------ J M Chatwin 29,376 629 111,482 P B Morgan 38,338 629 51,289 The number of ordinary shares held in trust under the Share Incentive Scheme and the movements in the year were: Adjustment Dividends due to Paid At Investment received consolidation to At 1 April in respect and of share Direc 31 March 1995 of 1994/95 reinvested captial tors 1996 ------ ---------- ---------- ----------- ----- ------- J M Chatwin - 6,151 2,506 (1,278) - 7,379 A W J Coleman - 4,046 1,643 (840) - 4,849 G J Hall - 3,561 1,443 (739) - 4,265 P B Morgan - 3,561 1,443 (739) - 4,265 Accrued rights in accordance with the Scheme relate in each case to only 50% of the number of shares shown above. YORKSHIRE ELECTRICITY GROUP PLC NOTES TO THE ACCOUNTS Year ended 31 March 1996 6. DIRECTORS AND EMPLOYEES (continued) Share options including share options granted to or exercised in 1995/96 by the Directors were as follows:
Number of share Market Date At options At price at from 1 April during the year 31 March Exercise date of which Expiry 1995 Granted Exercised 1996 Price exercise exercisable date J M Chatwin 88,930 - - 88,930# 478.0p - 21/12/95 21/12/02 22,552 - - 22,552# 782.0p - 23/01/98 23/01/05 5,100* - 5,100+ - 175.0p 793.5p 01/03/96 31/08/96 - 629* - 629* 548.0p - 22/03/01 21/09/01 AWJ Coleman 56,465 - - 56,465# 478.0p - 21/12/95 21/12/02 5,253 - - 5,253# 782.0p - 23/01/98 23/01/05 5,100* - 5,100+ - 175.0p 793.5p 01/03/96 31/08/96 - 629* - 629* 548.0p - 22/03/01 21/09/01 G J Hall 48,759 - - 48,759# 478.0p - 21/12/95 21/12/02 6,169 - - 6,169# 782.0p - 23/01/98 23/01/05 5,100* - 5,100+ - 175.0p 793.5p 01/03/96 31/08/96 - 629* - 629* 548.0p - 22/03/01 21/09/01 P B Morgan 16,771 - 16,771 - 287.0p 828.0p 23/01/94 23/01/01 30,098 - 30,098 - 371.0p 828.0p 28/01/95 28/01/02 42,394 - - 42,394# 478.0p - 21/12/95 21/12/02 8,895 - - 8,895# 782.0p - 23/01/98 23/01/05 5,100* - 5,100+ - 175.0p 793.5p 01/03/96 31/08/96 - 629* - 629* 548.0p - 22/03/01 21/09/01
*Grant of options under the Savings-Related Share Options Scheme. +Upon exercise of the Yorkshire Electricity options, the option holder also received 3,858 NGG shares (or Yorkshire Electricity shares of equivalent value), as described in note 4 (page 13). At the date of exercise NGG shares had a market value of 195.5p. The total value of the NGG shares has been included in taxable benefits/expenses above. #Upon exercise of these options, the option holder will receive 0.7566 NGG shares for every Yorkshire Electricity share option exercised (or Yorkshire Electricity shares of equivalent value). The market value of NGG shares at 29 March 1996 was 194.8p per share. The opening price of Yorkshire Electricity's ordinary shares on 3 April 1995 was 606.0p per share and the closing price on 29 March 1996 was 813.0p per share. The lowest and highest market prices per Yorkshire Electricity share during the year were 604.0p and 954.0p respectively. YORKSHIRE ELECTRICITY GROUP PLC NOTES TO THE ACCOUNTS Year ended 31 March 1996 6. DIRECTORS AND EMPLOYEES (continued) Further details of Employee Share Schemes generally are set out in note 19. Bonus Scheme and Share Incentive Scheme During 1994/95 Yorkshire Electricity introduced new bonus and share incentive schemes for Executive Directors. These schemes were designed to reflect real growth in earnings per share (eps) and, in the case of the share incentive scheme, longer-term overall shareholder value. The schemes were scheduled to operate from 1994 to 1998 and are subject to the overall discretion of the Remuneration Committee, (inter alia) to amend the schemes to take account of any changes in circumstances following adoption. The bonus scheme operates on an annual basis to reflect real growth in eps over the previous year based on the audited accounts of the Company. No bonus is to be paid unless eps shows real growth over the previous year and payment can range from 0 to 20 per cent of base salary. Bonus payments do not form part of pensionable earnings. The Executive Long Term Share Incentive Scheme (the "Share Incentive Scheme") was designed to operate so that amounts calculated by reference to a formula based on real growth in eps but not exceeding 20 per cent of base salary could be transferred to independent trustees to be utilised in the purchase of shares in the market. The formula recognised that performance in any one year may not necessarily reflect the longer-term achievements and therefore incorporated provisions designed to balance the eps over a four-year period. It was intended that, at the conclusion of the four-year period, a multiplier would be applied to the total number of shares accumulated. It was intended that the multiplier would be determined on the basis of a further formula to establish the position of Yorkshire Electricity in a league table of Regional Electricity Companies, such league table reflecting overall shareholder value through growth in market value over the period plus dividends. The multiplier used would vary from 0.5 to 2.0 and it was intended that any shares resulting from the scheme would only be transferred to the Executive Directors after the accounts for 1997/98 had been audited. Details of the bonus scheme to operate from 1996/97 are set out in the Report of the Remuneration Committee. It is proposed that the share incentive scheme should be revised in accordance with the principles set out in the Report of the Remuneration Committee. Any accrued rights under the scheme would therefore be transferred at the end of the year three and would (if applicable) be incorporated into the number of shares to be transferred pursuant to the revised arrangements. The costs of the schemes are charged against profit. The treatment of the share incentive scheme is complicated by the output relative performance criteria and each year the Directors will, on the basis of information available, make the appropriate provision in the accounts. For the years 1994/95 and 1995/96 provisions are made on the basis of the existing scheme and, subject to shareholders' approval of the revised scheme, any adjustments to the provisions required in relation to the revised scheme for such years will be made in 1996/97. For the second year of the scheme the provision has been based on a multiplier of 1.0. YORKSHIRE ELECTRICITY GROUP PLC NOTES TO THE ACCOUNTS Year ended 31 March 1996 7. TAX ON PROFIT ON ORDINARY ACTIVITIES 1996 1995 1994 (pound)m (pound)m (pound)m Taxation on profit for the year: UK corporation tax at 33% (1994 and 1995 - 33%) 53.5 57.4 39.0 Tax on franked investment income 1.8 3.7 3.6 Associated undertakings 0.2 0.9 (1.1) --- --- ---- 55.5 62.0 41.5 Adjustment in respect of earlier years: Parent and subsidiary undertakings (4.5) (6.7) (0.4) Associated undertakings 1.1 - - --- --- --- 52.1 55.3 41.1 Tax on NGG transactions 37.5 - - ---- --- --- 89.6 55.3 41.1 ==== ==== ==== The tax charge for the year has increased as it includes corporation tax of(pound)49.4m (1995 and 1994 - nil) attributable to the taxable gain arising from the distribution of NGG shares. This charge has been included within the Group profit and loss account for the year so that the full costs of the distribution are reflected therein. The tax charge has reduced by (pound)12.3m (1995 - (pound)15.3m; 1994 - (pound)23.8m) as a result of accelerated capital allowances and increased by (pound)6.9m (1995 - (pound)5.8m; 1994 - (pound)20.0m) as a result of provisions disallowed for corporation tax purposes. No deferred tax has been provided in respect of these items. 8. DIVIDENDS 1996 1995 1994 (pound)m (pound)m (pound)m NGG distribution 289.1 - - Special dividend of 100.00p per 56 9/11p ordinary share (1995 90.00p per 50p ordinary share; 1994 - nil) 184.9 188.0 - Interim dividend of 11.88p per consolidated ordinary share (1995 9.00p; 10.80p on an equivalent basis; 1994 6.90p; 9.41p on an equivalent basis) 18.3 16.6 14.3 Proposed final dividend of 27.30p per consolidated ordinary share payable on 1 October 1996 (1995 21.42p; 25.70p on an equivalent basis; 1994 16.58p; 22.61p on an equivalent basis) 43.3 39.4 34.4 ---- ---- ---- 535.6 244.0 48.7 ===== ===== ==== In January 1996 the share capital was consolidated on the basis of 5 new 68 2/11p ordinary shares for every six existing 56 9/11p ordinary shares. YORKSHIRE ELECTRICITY GROUP PLC NOTES TO THE ACCOUNTS Year ended 31 March 1996 9. EARNINGS PER ORDINARY SHARE During the year the Company paid a special dividend of (pound)184.9m and at the same time carried out a consolidation of its share capital. These transactions were designed and intended to achieve the same overall effect on the Company's capital structure as a general buy-back of shares but in a way in which all shareholders could participate. Accordingly, the Directors consider it appropriate to present the Company's earnings per share on the basis that in substance a share buy-back has occurred. The weighted average number of shares in issue during the period has been calculated on this basis. Earnings per share are based on the earnings in the year of (pound)128.5m (1995 - (pound)160.9m; 1994 - (pound)106.9m) and calculated on the weighted average number of 178,601,814 ordinary shares in issue (1995 - 203,383,198; 1994 - 207,450,851). The earnings per share would have been 83.4p (1995 - 105.2p; 1994 - 70.3p) if it had been calculated on the basis that the share consolidation had occurred at the commencement of the period. Earnings per share, pre NGG exceptional items, is based on earnings of (pound)145.9m and calculated on the weighted average number of 178,601,814 ordinary shares in issue. The earnings figure has been adjusted for the NGG exceptional items as shown in the profit and loss account. YORKSHIRE ELECTRICITY GROUP PLC NOTES TO THE ACCOUNTS Year ended 31 March 1996 10. TANGIBLE FIXED ASSETS Invest- Non Op Deduct: ment Land and Capital ` Proprer- Genera- Distri- Build- Contri- ties tion bution ings Other butions Total (pound)m (pound)m (pound)m (pound)m (pound)m (pound)m Cost or valuation At 1 April 1995 75.1 129.0 1,007.7 46.6 125.2 (202.9) 1,180.7 Additions 1.8 1.1 84.5 6.6 23.6 26.2) 91.4 Disposals (28.8) - (3.7) (1.4) (5.2) 0.1 (39.0) Reclassification 2.7 (1.7) - (2.3) 1.3 - - Revaluation adjustment (6.6) - - - - - (6.6) ---- ----- ---- ---- ---- ---- ---- At 31 March 1996 44.2 128.4 1,088.5 49.5 144.9 (229.0) 1,226.5 ---- ----- ------- ---- ----- ------ ------- Depreciation At 1 April 1995 - 6.2 369.8 11.4 77.8 (43.6) 421.6 Disposals - - (3.7) (0.3) (4.1) 0.1 (8.0) Reclassification - (0.2) - - 0.2 - - Charge for the year - 6.3 27.1 0.9 12.6 (6.0) 40.9 ---- --- ---- --- ---- ---- ---- At 31 March 1996 - 12.3 393.2 12.0 86.5 (49.5) 454.5 ---- ---- ----- ---- ---- ----- ----- Net book amount At 31 March 1996 44.2 116.1 695.3 37.5 58.4 (179.5) 772.0 ==== ===== ===== ==== ==== ====== ===== At 31 March 1995 75.1 122.8 637.9 35.2 47.4 (159.3) 759.1 ==== ===== ===== ==== ==== ====== ===== Included in fixed assets at 31 March 1996 are assets in the course of construction amounting to (pound)16.7m (31 March 1995(pound)14.7m) and land of(pound)6.3m (31 March 1995(pound)5.6m) which are not depreciated. Capitalised net interest of(pound)10.9m (31 March 1995(pound)10.9m) is included in fixed assets at 31 March 1996. YORKSHIRE ELECTRICITY GROUP PLC NOTES TO THE ACCOUNTS Year ended 31 March 1996 10. TANGIBLE FIXED ASSETS (continued) The net book amount of non-operational land and buildings comprises: 31 March 31 March 1996 1995 (pound)m (pound)m Freehold 28.4 25.8 Long leasehold 9.1 9.4 --- --- 37.5 35.2 ==== ==== Investment Properties are revalued annually by employees of the Group who are members of either the Royal Institution of Chartered Surveyors or the Incorporated Society of Valuers and Auctioneers. The basis of the valuation is open market value in existing use. The aggregate surplus or deficit is transferred to a revaluation reserve with the exception of any permanent diminution below historic cost which is taken to the profit and loss account. In compliance with the requirements of SSAP 19 no depreciation or amortisation is provided in respect of freehold and leasehold investment properties. If the properties included at valuation had been included at historical cost this would have resulted in a decrease in value of(pound)1.7m (31 March 1995 (pound)10.9m). YORKSHIRE ELECTRICITY GROUP PLC NOTES TO THE ACCOUNTS Year ended 31 March 1996 11. FIXED ASSET INVESTMENTS (a) Fixed asset investments 31 March 31 March 1996 1995 (pound)m (pound)m National Grid Group plc at valuation 24.4 71.7 Subsidiary undertakings - - Associated undertakings 14.0 29.9 Other investments at cost 65.8 31.3 Own shares 0.1 - --- ---- 104.3 132.9 (b) National Grid Group plc and other investments NGG Other (pound)m (pound)m At 1 April 1995 71.7 31.3 Additions 15.8 11.3 Reclassification from associated undertaking - 23.2 Revaluation 233.2 - Distribution to shareholders (289.1) - Compensation to option holders (7.2) - ---- ---- At 31 March 1996 24.4 65.8 ==== ==== The Company's shareholding in National Grid Group plc at 31 March 1995 was at Directors' valuation, with the original cost of the shareholding being nil. During the year, the shareholding was revalued to its market value prior to the distribution in specie of approximately 90% to shareholders. The historic cost of the shares held as at 31 March 1996 was (pound)1.3m. The shares are listed on the London Stock Exchange and the market value at 29 March 1996 was (pound)22.5m. The Group's interest in Ionica L3 Ltd has been reclassified as an investment following the reduction in its shareholding to below 20% (see note 11(c)). During the year, the Group invested a further (pound)11.0m in the Armada Gas Field. YORKSHIRE ELECTRICITY GROUP PLC NOTES TO THE ACCOUNTS Year ended 31 March 1996 11. FIXED ASSET INVESTMENTS (continued) (c) Associated undertakings Share of net assets Loans Total (pound)m (pound)m (pound)m At 1 April 1995 3.2 35.9 39.1 Additions at cost - 7.2 7.2 Reclassification 21.4 (21.4) - Deemed sale proceeds 6.3 - 6.3 Loss for the year (6.0) - (6.0) Repaid - (9.2) (9.2) Dividends received (0.2) - (0.2) Reclassification to other investments (23.2) - (23.2) ----- ---- ----- At 31 March 1996 1.5 12.5 14.0 === ==== ==== Provisions At 1 April 1995 - (9.2) (9.2) Utilised in year - 1.2 1.2 Reclassification as provisions for liabilities and charges - 8.0 8.0 ---- --- --- At 31 March 1996 - - - ==== ==== ==== Net book value At 31 March 1996 1.5 12.5 14.0 === ==== ==== At 31 March 1995 3.2 26.7 29.9 === ==== ==== During the year the Group reduced its interest in Ionica L3 Ltd from 27.14% to 19.3%, as a consequence of not participating in the latest issue of equity finance, giving rise to a deemed disposal. The deemed sale proceeds, being the difference between the carrying amount of net assets of the associate attributable to the Group's interest before the reduction and after the reduction was (pound)6.3m. This resulted in a gain on the deemed disposal of (pound)4.8m, after attributing goodwill previously written off against reserves of (pound)1.5m. On 7 May 1995 the business and certain assets of our retailing joint venture, Homepower Retail Ltd were sold. The brought forward provision against the investment in associated undertakings relates to the investment in Homepower Retail Ltd, part of which has now been reclassified as provisions for liabilities and charges (note 17). The aggregate net losses retained for associated undertakings were (pound)36.8m (31 March 1995 (pound)30.8m). YORKSHIRE ELECTRICITY GROUP PLC NOTES TO THE ACCOUNTS Year ended 31 March 1996 11. FIXED ASSET INVESTMENTS (continued) (d) Principal subsidiary and associated undertakings The principal subsidiary and associated undertakings incorporated and operating in the United Kingdom (unless otherwise indicated) at 31 March 1996 are shown below: Class of %equity capital held Principal activities Principal subsidiary undertaking Scarcroft Insurance Ltd (Registered in Guernsey) Ordinary 100% Insurance Yorkshire Electric Power Ltd Ordinary 100% Holding company for generation activities Regional Power Generators Ltd Ordinary 75%* Operation of CCGT generation station Yorkshire Energy Ltd Ordinary 100%* Gas investment and supply Cyril Exelby Ltd Ordinary 100% Electrical and mechanical construction and design Scarcroft Leasing Ltd's Ordinary 100% Leasing (various) Scarcroft Investments Ltd Ordinary 100% Holding company Scarcroft Holdings Ordinary 100% Holding company YE Gas Ltd Ordinary 100% Supply of gas Yorkshire Cogen Ltd Ordinary 100%* Construction and operation of CHP generating plants Principal associated undertaking Yorkshire Windpower Ltd Ordinary 50%* Construction and operation of windfarms Torch Communications Ltd Ordinary 50%*Development of telecommunications services Shareholdings in the companies marked * are held by subsidiaries of Yorkshire Electricity Group plc. 12. STOCKS 31 March 31 March 1996 1995 (pound)m (pound)m Raw materials and consumables 3.2 4.0 Work in progress 1.1 1.3 --- --- 4.3 5.3 === === YORKSHIRE ELECTRICITY GROUP PLC NOTES TO THE ACCOUNTS Year ended 31 March 1996 13. DEBTORS 31 March 31 March 1996 1995 (pound)m (pound)m Amounts falling due within one year: Trade debtors 188.6 208.9 Amounts owed by group undertakings - - Amounts owed by associated undertakings 0.2 0.4 Credit sale instalments not yet due 0.1 0.8 Other debtors 22.7 8.8 Prepayments and accrued income 11.0 3.2 Dividends receivable 0.7 10.0 Purchase of electricity 1.2 - Investment in finance leases 1.3 4.2 --- --- 225.8 236.3 Amounts falling due after more than one year: ACT recoverable on proposed dividends 11.4 7.4 Credit sale instalments not yet due 0.1 0.1 Investment in finance leases 15.1 55.7 ---- ---- 252.4 299.5 ----- ----- Included in trade debtors are the following amounts for unbilled consumption 99.3 88.7 ==== ==== The cost of assets acquired for the purpose of leasing under finance leases was(pound)3.1m (1995 - (pound)21.8m). Rentals receivable were(pound)9.4m (1995-(pound)13.6m). 14. INVESTMENTS 31 March 31 March 1996 1995 (pound)m (pound)m Money market investments 287.4 178.0 ===== ===== YORKSHIRE ELECTRICITY GROUP PLC NOTES TO THE ACCOUNTS Year ended 31 March 1996 15. CREDITORS 31 March 31 March 1996 1995 (pound)m (pound)m Creditors (amounts falling due within one year): Bank loans and overdrafts 7.6 3.2 Loan stock 2007 (note 16) 3.0 3.0 Secured loans (note 16) - 4.8 Unsecured loans (note 16) 2.2 - Payments received in advance 54.7 30.4 Other trade creditors 16.8 10.9 Bills of exchange - 44.0 Amounts owed to group undertakings - - Commercial paper 77.5 36.2 Purchase of electricity 74.9 60.4 Corporation tax 56.8 84.3 Taxation and social security 5.3 9.2 Other creditors 21.9 21.1 Accruals and deferred income 52.4 49.9 Over recovery of regulated income 13.0 4.7 Proposed dividend 43.3 39.4 Amounts owed to associated undertakings - 1.2 ---- --- 429.4 402.7 ===== ===== Creditors (amounts falling due after more than one year): 10 year 8 5/8% Eurobond (note 16) 148.6 - 25 year 9 1/4% Eurobond (note 16) 196.5 196.4 Secured long term loans (note 16) - 92.5 Unsecured long term loans (note 16) 78.6 15.6 Amounts owed to group undertakings - - ---- ---- 423.7 304.5 ===== ===== YORKSHIRE ELECTRICITY GROUP PLC NOTES TO THE ACCOUNTS Year ended 31 March 1996 16. LOANS AND DEBENTURES Loans outstanding are repayable as follows: Unsecured loans and Secured loans and loan stocks loan stocks 31 March 31 March 31 March 31 March 1996 1995 1996 1995 (pound)m (pound)m (pound)m (pound)m Within one year, or on demand 5.2 3.0 - 4.8 Between one and two years 4.6 - - 5.1 Between two and five years 28.7 9.8 - 14.9 Over five years 390.4 202.2 - 72.5 ----- ----- --- ---- 428.9 215.0 - 97.3 ===== ===== === ==== 31 March 31 March 1996 1995 (pound)m (pound)m Unsecured loans and loan stocks: 10 year 8 5/8% Eurobond 148.6 - 25 year 9 1/4% Eurobond 196.5 196.4 7.52% credit facility due 1999-2002 15.0 - 6.55% credit facility due 1997-2000 15.0 15.0 0% unsecured loan due 2004 0.6 0.6 Unsecured loan stock LIBOR minus 0.5% due 2007 3.0 3.0 Fixed rate 8.05% due 2009 50.2 - ---- ---- 428.9 215.0 ===== ===== YORKSHIRE ELECTRICITY GROUP PLC NOTES TO THE ACCOUNTS Year ended 31 March 1996 16. LOANS AND DEBENTURES (continued) The unsecured loan stock 2007 may be redeemed at not less than six months notice in writing. In July 1995 the Group raised (pound)150m by means of a 10 year 8 5/8% Eurobond Issue. 31 March 31 March 1996 1995 (pound)m (pound)m Secured loans and loan stocks: Floating rate (LIBOR plus 0.85%-0.95%) - 43.3 Fixed rate (8.05%) - 52.4 Subordinated convertible loan stock(15%) due 2014 - 1.6 ---- ---- - 97.3 ==== ==== The subordinated convertible loan stock was redeemed at par. As part of its risk management policy, the Group employs a range of financial instruments for current and future borrowing requirements and income streams. This includes agreements under which counterparties have undertaken to pay amounts to the Group equal to variable interest obligations in consideration of amounts payable by the Group equivalent to fixed rates of interest. The agreements have a notional value of (pound)89.0m and are at fixed rates varying between 6.64% and 10.98%. The time remaining to maturity on the agreements varies between 2 and 9 years. 17. PROVISIONS FOR LIABILITIES AND CHARGES Pensions Other (pound)m (pound)m Balance at 1 April 1995 3.1 44.3 Utilised/paid in the year (1.1) (17.4) Provided in the year - 10.4 Reclassification from investments (note 11) - 8.0 --- ---- Balance at 31 March 1996 2.0 45.3 === ==== YORKSHIRE ELECTRICITY GROUP PLC NOTES TO THE ACCOUNTS Year ended 31 March 1996 17. PROVISIONS FOR LIABILITIES AND CHARGES (continued) Other provisions comprise: 31 March 31 March 1996 1995 (pound)m (pound)m Rationalisation costs 17.2 31.9 Third party claims 4.7 5.0 Homepower related costs 8.0 - Other 15.4 7.4 ---- --- 45.3 44.3 ==== ==== Following the pension scheme valuation (note 22) the pensions provision is being released to the profit and loss account in accordance with SSAP 24. (pound)8m of the provision against the investment in Homepower Retail Ltd has been reclassified from investments to provisions for liabilities and charges. This is due to the fact that costs will be incurred directly by the Company rather than by Homepower Retail Ltd. 18. DEFERRED TAXATION No provision for deferred tax is required at 31 March 1996 (31 March 1995: nil). Total potential deferred tax liabilities computed at the current rate of corporation tax of 33% (1995 - 33%) are as follows: 31 March 31 March 1996 1995 (pound)m (pound)m Capital allowances in excess of depreciation 197.3 178.0 Capital gains tax on revalued assets 4.0 - Other timing differences (7.6) (14.0) ---- ----- 193.7 164.0 ===== ===== 19. CALLED UP SHARE CAPITAL 31 March 31 March 1996 1995 (pound)m (pound)m Authorised: 220,000,000 ordinary shares of 68 2/11p each (1995 264,000,000 ordinary shares of 56 9/11p each) 150.0 150.0 ===== ===== Allotted and fully paid: 158,555,100 ordinary shares of 68 2/11p each (1995 183,898,175 ordinary shares of 56 9/11p each) 108.1 104.5 ===== ===== YORKSHIRE ELECTRICITY GROUP PLC NOTES TO THE ACCOUNTS Year ended 31 March 1996 19. CALLED UP SHARE CAPITAL (continued) 609,111 shares of 56 9/11p and 302,202 shares of 68 2/11p were allotted through the year as a result of the exercise of options in special circumstances under the Savings-Related Share Option Scheme (note 19(b)). 426,662 shares of 56 9/11p and 40,396 shares of 68 2/11p were allotted through the year as a result of the exercise of options under the Executive Share Option Scheme (note 19(c)). In January 1996 the share capital was consolidated on the basis of five new 68 2/11p ordinary shares for every six existing 56 9/11p ordinary shares. 350,366 fractional shares of a nominal value of 11 4/11p, arising as a consequence of the consolidation were repurchased by the Company on 22 January 1996, at an aggregate cost of (pound)420,439 (being 120p for each fractional share). The fractional shares represented 0.03% of the issued share capital of the Company existing immediately prior to the consolidation. Between 1 March 1996 and 31 March 1996, 4,159,273 shares of 68 2/11p were allotted as a result of the maturity of the 1990 Sharesave Scheme. Employee share schemes Under arrangements put in place for employees the number of participants and the number of share options under each of the share schemes at 31 March 1996 were: (a) The Yorkshire Electricity Profit Sharing Scheme Under the Free and Matching Offer at privatisation the shares were held in trust for two years (until December 1992) unless the employee ceased employment on account of injury, disability or redundancy or the employee reached state pensionable age. At this stage shares purchased under the matching offer were transferred to the shareholder. The free shares remained in trust for a further three years. On 11 December 1995 the shares were transferred to the shareholder. (b) Savings-Related Share Option Scheme Participants 240 Shares subject to options to purchase 192,289 Price per share (pound)1.75 Date of grant 11 December 1990 Period of option At the end of 5 years Options exercised in special circumstances* 951,709 * Special circumstances include leaving employment because of injury, disability or redundancy, or at contractual retirement age or state pensionable age. During the year a new grant of options under the Savings-Related Share Option Scheme was made as follows: Sharesave Scheme 1996 Participants 2,767 Shares subject to options to purchase 1,534,193 Price per share (pound)5.48 Date of grant 16 February 1996 Period of option At the end of 5 years YORKSHIRE ELECTRICITY GROUP PLC NOTES TO THE ACCOUNTS Year ended 31 March 1996 19. CALLED UP SHARE CAPITAL (continued) (c) Executive Share Option Scheme Options outstanding: 31 March 1996 31 March 1995 Price Period No. of No. of Date granted per of partic- No. of partic- No. of share option ipants shares ipants shares 23 January 1991 (pound)2.87 3-10 yrs - - 1 16,771 28 January 1992 (pound)3.71 3-10 yrs - - 1 30,098 21 December 1992 (pound)4.78 3-10 yrs 27 563,633 49 977,652 23 January 1995 (pound)7.82 3-10 yrs 5 45,636 5 45,636 26 January 1996 (pound)6.85 3-10 yrs 18 116,066 - - During the year: 1 participant exercised options over 16,771 shares at an option price of (pound)2.87 per share. 1 participant exercised options over 30,098 shares at an option price of (pound)3.71 per share. 22 participants exercised options over 414,019 shares at an option price of (pound)4.78 per share. (d) Long Term Incentive Scheme Under the Long Term Incentive Scheme shares are held in trust until 1998 when the relevant number of shares will be transferred to the Executives. The operation of the Scheme is described in note 6. The costs of the trust are charged to the profit and loss account. The number of shares held in trust at 31 March 1996 was 23,951 at an aggregate market value of (pound)194,722. The dividends on these shares were received by the trust. (e) The YEG (NGG) Trust The purpose and operation of the trust are explained in note 4(f). 20. RESERVES (a) Reconciliation of movement in equity shareholders' funds 31 March 31 March 1996 1995 (pound)m (pound)m Profit for the financial year 128.5 160.9 Dividends (535.6) (244.0) ------ ------ Retained deficit for the financial year (407.1) (83.1) Other recognised gains and losses for the year 287.5 8.1 Shares issued 10.9 2.9 Purchase of own shares (0.3) (0.4) Goodwill 4.1 1.8 --- --- Net decrease in shareholders' funds for the year (104.9) (70.7) Equity shareholders' funds at 1 April 625.9 696.6 ----- ----- Equity shareholders' funds at 31 March 521.0 625.9 ===== ===== YORKSHIRE ELECTRICITY GROUP PLC NOTES TO THE ACCOUNTS Year ended 31 March 1996 20. RESERVES (continued) (b) Reserves Investment property Capital Profit Share revalua- Revalua redemp- and premium tion tion tion loss account reserve reserve reserve account Total (pound)m (pound)m (pound)m (pound)m (pound)m (pound)m Balance at 1 April 1995 3.4 10.9 71.7 - 435.4 521.4 Movement/(deficit) for the financial year 7.3 (6.6) - - (407.1) (406.4) Revaluation of NGG - - 233.2 - - 233.2 Revaluation of PSB - - 56.1 - - 56.1 Realisation of NGG revaluation - - (281.8) - 281.8 - Realisation of PSB revaluation - - (56.1) - 56.1 - Amortisation of bond finance costs (0.2) - - - 0.2 - Investment property disposal - (2.6) - - 2.6 - Release of associate goodwill - - - - 1.5 1.5 Release of subsidary goodwill - - - - 2.6 2.6 Gain on deemed disposal - - - - 4.8 4.8 Purchase of own shares - - - 0.1 (0.4) (0.3) --- --- ---- --- ---- ---- Balance at 31 March 1996 10.5 1.7 23.1 0.1 377.5 412.9 ---- --- ---- --- ----- ----- The profit for the financial year dealt with in the accounts of the Company was(pound)135.1m (1995 - (pound)154.8m; 1994 -(pound)88.3m). As allowed by section 230(1) of the Companies Act 1985, the Company has not presented its own profit and loss account. The Company's profit and loss account was approved by the Board on 13 June 1996. The cumulative goodwill set off to reserves is(pound)3.9m (1995 -(pound)8.0m; 1994(pound)9.8m). YORKSHIRE ELECTRICITY GROUP PLC NOTES TO THE ACCOUNTS Year ended 31 March 1996 21. CASH FLOW STATEMENT (a) Reconciliation of operating profit to net cash inflow from operating activities 1996 1995 1994 pound)m (pound)m (pound)m Operating profit 118.2 227.7 159.3 Depreciation 40.9 39.5 32.9 Investment property write downs - 3.5 - Profit on sale of tangible assets (2.4) (1.8) (0.3) Release of subsidiary goodwill 2.6 - - Compensation of option holders 7.2 - - (Decrease)/increase in provisions (9.5) (7.4) 25.2 Decrease/(increase) in debtors 9.7 (47.0) (2.8) Increase/(decrease) in creditors 58.4 (0.4) 57.4 Decrease in stocks 0.7 0.3 6.5 --- --- --- Net cash inflow from operating activities 225.8 214.4 278.2 ===== ===== ===== (b) Analysis of changes in cash and cash equivalents during the year 1996 1995 1994 (pound)m (pound)m (pound)m Balance at 1 April 104.8 71.5 190.4 Net cash inflow/(outflow) 139.1 33.3 (118.9) ----- ---- ------ Balance at 31 March 243.9 104.8 71.5 ===== ===== ==== (c) Analysis of cash and cash equivalents as shown in the balance sheet Increase/(decrease) in year ----------------------------- 1996 1995 1996 1995 1994 (pound)m (pound)m (pound)m (pound)m (pound)m Cash at bank and in hand 1.1 7.5 (6.4) (12.0) (14.1) Money market investments 250.4 144.5 105.9 44.8 (88.4) Bank loans and overdrafts (7.6) (3.2) (4.4) 6.5 (3.4) Bills of exchange - (44.0) 44.0 (6.0) (13.0) --- ----- ---- ---- ----- 243.9 104.8 139.1 33.3 (118.9) ===== ===== ===== ==== ====== In accordance with FRS 1 investments and borrowings maturing over three months after their inception are excluded from cash and cash equivalents. The amounts excluded are: 1996 1995 1994 (pound)m pound)m (pound)m Money market investments 37.0 33.5 83.2 ==== ==== ==== YORKSHIRE ELECTRICITY GROUP PLC NOTES TO THE ACCOUNTS Year ended 31 March 1996 21. CASH FLOW STATEMENT (continued) (d) Analysis of changes in financing during the year 1996 Secured and Commercial Share unsecured Paper capital loans (pound)m (pound)m (pound)m Balance at 1 April 1995 36.2 107.9 312.3 Cash flows from financing 41.3 10.9 116.6 Amortisation of bond finance costs - (0.2) - --- ---- ---- Balance at 31 March 1996 77.5 118.6 428.9 ==== ===== ===== 1995 Secured and Commercial Share unsecured Paper capital loans (pound)m (pound)m (pound)m Balance at 1 April 1994 45.0 105.0 132.4 Cash flows from financing (8.8) 2.9 179.9 ---- --- ----- Balance at 31 March 1995 36.2 107.9 312.3 ==== ===== ===== 1994 Govern- Secured ment and Bills of deben- Commercial Share unsecured exchange ture paper capital loans (pound)m (pound)m (pound)m (pound)m (pound)m Balance at 1 April 1993 5.0 126.0 52.3 103.7 107.4 Cash flows from financing (5.0) (126.0) (7.3) 1.3 25.0 ---- ------ ---- --- ---- Balance at 31 March 1994 0.0 0.0 45.0 105.0 132.4 === === ==== ===== ===== In addition to the above, (pound)0.4m (1995 - (pound)0.4m; 1994 - nil) has been set off against profit and loss reserves in connection with the purchase of own shares. YORKSHIRE ELECTRICITY GROUP PLC NOTES TO THE ACCOUNTS Year ended 31 March 1996 21. CASH FLOW STATEMENT (continued) (e) Analysis of net inflow of cash and cash equivalents in respect of the disposal of subsidiary undertakings 1996 (pound)m Cash consideration 32.5 Cash balances of subsidiary undertakings - --- Net inflow of cash and cash equivalents in respect of the disposal of subsidiaries 32.5 ==== 22. PENSION COMMITMENTS Most of the Group's employees are members of the Electricity Supply Pension Scheme which provides pension and other related benefits based on final pensionable pay to employees throughout the Electricity Supply Industry. The assets of the Scheme are held in a separate trustee administered fund. The pension cost to the Group for the year was (pound)6.7m (1995 - (pound)11.2m; 1994 - (pound)14.9m). The latest actuarial valuation of the Group's section of the Scheme was carried out as at 31 March 1995. The projected unit method was used for the valuation, the principal actuarial assumptions adopted being an investment return of 9% per annum, salary increases (exclusive of merit awards) of 6.5% per annum, price inflation of 5% per annum and equity dividend growth of 4.5% per annum. At the date of the latest actuarial valuation the market value of the Group's section of the Scheme was (pound)576.4m and the actuarial value of the assets was sufficient to cover 106.4% of the benefits that had accrued to members. The resultant past service surplus of (pound)33.8m is being utilised partly to pay benefits to members from 1 April 1996, with the remaining balance (net of the capital cost of ex gratia and supplementary pensions) being released to the profit and loss account over the expected remaining working lives of members. Contributions payable by the Group to the Scheme during the year were (pound)7.8m (1995 - (pound)11.6m; 1994 - (pound)15.4m). The balance outstanding to the Scheme at 31 March 1996 was (pound)0.1m (31 March 1995 (pound)0.0m). The next actuarial valuation is due as at 31 March 1998. From 1 April 1995 new employees are only eligible to join the Yorkshire Electricity Pension Plan, which is a defined contribution scheme. The contributions payable by the Group to the Scheme during the year were (pound)0.0m (1995 - (pound)0.0m). YORKSHIRE ELECTRICITY GROUP PLC NOTES TO THE ACCOUNTS Year ended 31 March 1996 23. LEASE OBLIGATION The Group has the following annual commitments under operating leases for equipment and vehicles which expire: 31 March 31 March 1996 1995 (pound)m (pound)m Within one year 2.2 1.1 In the second to fifth year inclusive 1.4 3.8 --- --- 3.6 4.9 === === Operating lease rentals charged to the profit and loss account were: 1996 1995 1994 (pound)m (pound)m (pound)m Land and buildings 0.4 0.4 0.4 Plant and machinery 5.0 7.2 7.8 --- --- --- 5.4 7.6 8.2 === === === 24. COMMITMENTS (a) Capital commitments 31 March 31 March 1996 1995 (pound)m (pound)m Contracted 30.0 29.6 ==== ==== (b) Other commitments The Group has long term contracts in both its gas and generation businesses for the supply of gas. These contracts are for a total of 1,241m therms and for periods of up to 12 years. The Company has a contract with its subsidiary, Regional Power Generators Ltd relating to the purchase of electricity which expires in 2008. 25. POST BALANCE SHEET EVENTS Yorkshire Electricity sold its 50% shareholding in Torch Telecom, a joint venture with Kingston Communications of Hull, on 9 October 1996. This resulted in a profit to the Group of (pound)14.5m. After the year end the Company completed the sale of most of its investment properties for (pound)27.7m. YORKSHIRE ELECTRICITY GROUP PLC NOTES TO THE ACCOUNTS Year ended 31 March 1996 26. SUMMARY OF DIFFERENCES BETWEEN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES IN THE UNITED KINGDOM AND THE UNITED STATES OF AMERICA The financial statements are prepared in accordance with generally accepted accounting principles in the United Kingdom ("UK GAAP"), which differ in certain material respects from those generally accepted accounting principles in the United States of America ("US GAAP"). The differences that are material to Yorkshire Electricity relate to the following items and the necessary adjustments are shown in the tables that follow: Accounting for the National Grid transactions (a) In October 1995, the shareholders of the National Grid Group, consisting of the 12 Regional electrical companies (RECs) and Her Majesty's Government (owning one special share) agreed to seek a listing for the NGG shares on the London Stock Exchange. As part of the agreement among the shareholders of NGG, each REC agreed to provide a one-off discount to each of their respective domestic customers (see note 4) and, in order to compensate the RECs for the cost of the discount and other costs associated with the listing, NGG paid a special dividend shortly before the listing. Under UK GAAP, the discount was reported as a deduction of turnover and the special dividend was included in dividends from fixed asset investments. Under US GAAP, the discount and dividend would have been recorded on a net basis in the income statement. (b) On 17 November 1995, a specie dividend of NGG's holding in PSB was made. The company recorded the receipt of the PSB shares through the dividend at no value. Following this the Group's investment was revalued to the estimated market value through the revaluation reserve. Subsequently on 21 December 1995 the investment was realised and the revaluation surplus was transferred in reserves to the profit and loss account. Under US GAAP the fair value of the interest in PSB would be recorded as dividend income in the income statement. (c) In December 1995 the Group made a distribution in specie to its shareholders of approximately 90% of its interest in NGG's issued ordinary share capital. The amount of revaluation surplus which was realised upon distribution of the shares was transferred through reserves to the profit and loss account. Under US GAAP the realised gain upon distribution of the shares would be reported in the income statement. (d) In order not to disadvantage holders of options in Yorkshire Electricity shares the amount of NGG shares each option holder would have been entitled to receive had the shares under option been issued were put in trust to distribute to the option holders upon exercise of the option. The Group recorded an expense for the value of these NGG shares. Under US GAAP this would be an equity transaction and would not be reflected on the income statement. YORKSHIRE ELECTRICITY GROUP PLC NOTES TO THE ACCOUNTS Year ended 31 March 1996 26. SUMMARY OF DIFFERENCES BETWEEN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES IN THE UNITED KINGDOM AND THE UNITED STATES OF AMERICA (continued) Deferred Taxation Under UK GAAP, deferred taxation is provided at the rates at which the taxation is expected to become payable. No provision is made for amounts which are not expected to become payable in the foreseeable future. Under US GAAP, deferred taxation is provided on all temporary differences under the liability method at rates at which the taxation would be payable in the relevant future years. Dividends from fixed asset investments Under UK GAAP, dividends from the National Grid Group and other fixed asset investments have been recorded in the profit for the year to which they pertain. Under US GAAP, dividends are recorded in the financial statements of the year in which they are declared. Dividends payable Under UK GAAP, dividends are recorded in the financial statements for the year to which they pertain. Under US GAAP, dividends are recorded in the financial statements in the period in which they are declared. Stock-based compensation expense Under UK GAAP, on the granting of share options, no amounts are normally attributed to employee remuneration. Under US GAAP, upon the granting of share options to employees, the employer recognises as employee compensation the difference between the market value of the shares and the amount the employees are required to pay. Pension Costs Under both UK GAAP and US GAAP pension costs are provided so as to provide for future pension liabilities. However, there are differences in the prescribed methods of valuation which give rise to GAAP adjustments to the pension cost and the pension prepayment. Investment properties Under UK GAAP, investment properties are revalued annually in the balance sheet to open market value and are not depreciated. Under US GAAP investment properties are recorded at cost and their cost less residual value is depreciated over their estimated useful lives in a systematic and rational manner. Goodwill Under UK GAAP, it is acceptable to eliminate purchased goodwill directly against reserves. Under US GAAP goodwill is recorded as an asset and amortised to earnings over its estimate life. YORKSHIRE ELECTRICITY GROUP PLC NOTES TO THE ACCOUNTS Year ended 31 March 1996 26. SUMMARY OF DIFFERENCES BETWEEN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES IN THE UNITED KINGDOM AND THE UNITED STATES OF AMERICA (continued) Statement of Cash Flows The group's statement of cash flows is prepared in accordance with UK Financial Reporting Standard 1 (FRS 1), the objectives and principles of which are similar to those set out in US GAAP under Statement of Financial Accounting Standard No. 95, "Statement of Cash Flows" (SFAS 95). The significant differences between FRS 1 and SFAS 95 relate to classification. Under FRS1, a reconciliation of profit from operations to flows from operating activities is presented in a note, and cash paid for interest and income taxes are presented separately from cash flows from operating activities. Under SFAS 95, cash flows from operating activities are based on net profit, include interest and income taxes, and are presented on the face of the statement. UK GAAP requires cash and cash equivalents to be presented net of overdrafts, SFAS 95 treats overdrafts within financing activities. The approximate effect of the differences between UK GAAP and US GAAP on profit for the financial year, equity shareholders' funds and total assets are as follows: 1996 1995 1994 (pound)m (pound)m (pound)m Profit for the financial year 128.5 160.9 106.9 under UK GAAP Items increasing / (decreasing) profit: Realised gain on NGG shares 215.8 - - Dividend from NGG of PSB shares 56.1 - - NGG share expense related to option holders 8.7 - - Deferred taxation (23.1) (23.2) (9.0) Dividends from fixed asset investments 11.6 (0.6) (1.6) Tax credits on dividends receiveable (2.3) 0.1 0.1 Stock-based compensation (0.6) (1.5) (1.4) Pension costs (2.8) 6.4 (1.0) Investment properties 1.6 (0.5) (0.3) Goodwill (0.1) (0.2) (0.3) ---- ---- ---- Net income under US GAAP 393.4 141.4 93.4 ===== ===== ==== YORKSHIRE ELECTRICITY GROUP PLC NOTES TO THE ACCOUNTS Year ended 31 March 1996 26. SUMMARY OF DIFFERENCES BETWEEN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES IN THE UNITED KINGDOM AND THE UNITED STATES OF AMERICA (continued) 1996 1995 (pound)m (pound)m Equity shareholders' funds under UK GAAP 521.0 625.9 Items increasing /(decreasing) shareholders' equity: Deferred taxation (164.3) (137.4) Dividends from fixed asset (0.7) (10.0) investments Dividends payable 43.3 39.4 Pension costs 6.5 9.3 Investment properties (3.5) (11.7) Provision for stock based (1.6) (5.4) compensation Goodwill - 7.3 Other (1.8) - --- --- Stockholders' equity under US GAAP 398.9 517.4 ===== ===== 1996 1995 (pound)m (pound)m Total assets under UK GAAP 1,421.5 1,382.3 Items increasing /(decreasing) total assets: ACT Recoverable (11.4) (7.4) Dividends from fixed asset (0.7) (10.0) investments Pension costs 4.6 6.3 Investment properties (3.5) (11.7) Goodwill - 7.3 Other (1.8) - ---- --- Total assets under US GAAP 1,408.7 1,366.8 ======= ======= YORKSHIRE ELECTRICITY GROUP PLC SUMMARISED GROUP PROFIT AND LOSS ACCOUNT Six months ended 30 September 1996 6 months ended 12 months ended 30 Sept 30 Sept 31 March 1996 1995 1996 (Excluding NGG Exceptional Items) (pound)m (pound)m (pound)m Turnover - continuing operations 608.3 620.1 1,426.0 ----- ----- ------- Operating profit - continuing operations 94.8 112.0 216.4 ---- ----- ----- Share of (losses)/profits of associated undertakings (1.7) 1.6 (3.5) Income from investments 0.6 8.0 8.9 Loss on disposal of subsidiary undertakings - - (2.5) --- --- ---- Profit on ordinary activities before interest 93.7 121.6 219.3 Net interest payable (12.9) (11.0) (20.1) ----- ----- ----- Profit on ordinary activities before taxation 80.8 110.6 199.2 Taxation 17.8 27.3 52.1 ---- ---- ---- Profit on ordinary activities after taxation 63.0 83.3 147.1 Equity minority interests 0.6 0.4 1.2 --- --- --- Profit for the period 62.4 82.9 145.9 Ordinary dividend on equity shares 25.1 18.2 61.6 Special dividend on equity shares - - 184.9 --- --- ----- Retained profit/(deficit)for the period 37.3 64.7 (100.6) ==== ==== ====== Earnings per ordinary share 39.3p 45.0p 81.7p ==== ==== ==== Ordinary dividend per ordinary share 15.80p 11.88p 39.18p ----- ----- ----- YORKSHIRE ELECTRICITY GROUP PLC GROUP BALANCE SHEET Six months ended 30 September 1996 30 Sept 30 Sept 31 March 1996 1995 1996 (pound)m (pound)m (pound)m FIXED ASSETS Tangible assets 768.4 776.5 772.0 Investments 105.4 140.8 104.3 ----- ----- ----- 873.8 917.3 876.3 ===== ===== ===== CURRENT ASSETS Stocks 5.0 4.4 4.3 Debtors 210.2 255.9 252.4 Investments 364.2 429.1 287.4 Cash at bank and in hand 33.1 6.8 1.1 ---- --- --- 612.5 696.2 545.2 CREDITORS: amounts falling due within one year (463.3) (427.6) (429.4) NET CURRENT ASSETS 149.2 268.6 115.8 TOTAL ASSETS LESS CURRENT LIABILITIES 1,023.0 1,185.9 992.1 CREDITORS: amounts falling due after more than one year (422.4) (450.2) (423.7) Provisions for liabilities and charges (41.4) (41.9) (47.3) ----- ----- ----- NET ASSETS 559.2 693.8 521.1 ===== ===== ===== CAPITAL AND RESERVES Called up share capital 108.5 104.7 108.1 Share premium account 12.2 4.1 10.5 Investment property revaluation reserve 1.7 10.9 1.7 Revaluation reserve 18.1 71.7 23.1 Capital redemption reserve 0.1 - 0.1 Profit and loss account 417.9 500.2 377.5 ----- ----- ----- EQUITY SHAREHOLDERS' FUNDS 558.5 691.6 521.0 Equity minority interests 0.7 2.2 0.1 --- --- --- 559.2 693.8 521.1 ===== ===== ===== YORKSHIRE ELECTRICITY GROUP PLC SUMMARISED GROUP CASH FLOW STATEMENT Six months ended 30 September 1996 12 months 6 months ended ended 30 Sept 30 Sept 31 March 1996 1995 1996 (Restated)(Restated) (pound)m (pound)m (pound)m Cash flow from operating activities 110.6 175.4 228.1 Returns on investments and servicing of finance - (1.1) 94.1 Taxation 7.3 (19.4) (97.6) Capital expenditure and financial investment (14.1) (49.1) (38.1) Acquisitions and disposals - - 32.5 Equity dividends paid - - (242.5) --- --- ------ Cash flow before use of liquid resources and financing 103.8 105.8 (23.5) Management of liquid resources (79.1) (301.9) (153.6) Financing 6.9 188.8 168.4 --- ----- ----- Increase/(decrease) in cash 31.6 (7.3) (8.7) ==== ==== ==== YORKSHIRE ELECTRICITY GROUP PLC STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES Six months ended 30 September 1996 12 months 6 months ended ended 30 Sept 30 Sept 31 March 1996 1995 1996 (pound)m (pound)m (pound)m Profit for the period 62.4 82.9 128.5 Unrealised deficit on revaluation of investment properties - - (6.6) Gain on deemed disposal of part holding in associated undertaking - - 4.8 (Deficit)/surplus on revaluation of investment in NGG (4.1) - 233.2 Surplus on revaluation of investment in PSB 3.0 - 56.1 --- --- ---- Total recognised gains and losses for the period 61.3 82.9 416.0 ==== ==== ===== YORKSHIRE ELECTRICITY GROUP PLC NOTES Six months ended 30 September 1996 1. BASIS OF PREPARATION The interim results to 30 September 1996 and 30 September 1995 are unaudited. The interim financial statements, which were approved by the Directors on 10 December 1996, were prepared on the historical cost basis (as modified by the revaluation of certain fixed assets) consistent with the accounting policies adopted for the year ended 31 March 1996 as set out in the Company's Annual Report and Accounts. The financial information contained in this interim statement does not constitute statutory accounts within the meaning of Section 240 of the Companies Act 1985. The results for the year ended 31 March 1996 are abridged from the full accounts for that year, which contain an unqualified auditor's report and have been delivered to the Registrar of Companies. To facilitate comparison, the results for the year ended 31 March 1996 are presented before NGG exceptional items, which arose in the second half of 1995/96. The summarised Cash Flow Statement has been prepared in accordance with FRS1 (Revised). Comparative figures for September 1995 and March 1996 have been restated on the same basis. 2. DIVIDEND An interim dividend of 15.80p (net) per ordinary share will be paid on 25 March 1997. The shares will be marked ex-dividend on 27 January 1997 and the record date will be 4 February 1997. 3. TAXATION The taxation charge is derived by applying the forecast effective rate for the year. 4. EARNINGS PER SHARE Earnings per share are based on earnings for the period of (pound)62.4m (1995: (pound)82.9m) and calculated on 158.9m shares being the weighted average number in issue during the interim period to 30 September 1996 (1995: 184.1m). A consolidation of shares took place in January 1996 and the earnings per share figure for 1995 would have been 54.0p (153.4m shares) if it had been calculated on the basis that the consolidation had occurred at the commencement of the period. 5. ANALYSIS OF TURNOVER AND OPERATING PROFIT BY BUSINESS ACTIVITY: Turnover Operating profit Sept Sept Sept Sept 1996 1995 1996 1995 (pound)m (pound)m (pound)m (pound)m Distribution 142.8 155.8 60.1 77.0 Supply 545.1 566.6 24.1 21.1 Other businesses 99.4 78.7 10.6 13.9 Inter activity sales (179.0) (181.0) - - ------ ------ --- --- Total 608.3 620.1 94.8 112.0 ===== ===== ==== ===== Share of associated undertakings (1.7) 1.6 Income from investments 0.6 8.0 --- --- Profit before interest and tax 93.7 121.6 ==== ===== YORKSHIRE ELECTRICITY GROUP PLC NOTES Six months ended 30 September 1996 6. SUMMARY OF DIFFERENCES BETWEEN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES IN THE UNITED KINGDOM AND THE UNITED STATES OF AMERICA The financial statements are prepared in accordance with generally accepted accounting principles in the United Kingdom ("UK GAAP"), which differ in certain material respects from those generally accepted accounting principles in the United States of America ("US GAAP"). The differences that are material to Yorkshire Electricity relate to the following items and the necessary adjustments are shown in the tables that follow: Audited Unaudited 6 months to 12 months 30 Sept 30 Sept 31 March 1996 1995 1996 (pound)m (pound)m (pound)m Profit for the financial year under UK GAAP 62.4 82.9 128.5 Items increasing/(decreasing) profit: Realised gain on NGG shares 0.5 - 215.8 Dividend from NGG of PSB shares 3.0 - 56.1 NGG share expense related to option - - 8.7 holders Deferred taxation (10.6) (10.9) (23.1) Dividends from fixed asset investments 0.9 12.5 11.6 Tax credits on dividends receivable (0.2) (2.5) (2.3) Investment properties 0.9 (0.7) 1.6 Goodwill - (0.1) (0.1) Stock-based compensation (0.3) - (0.6) Pension costs 0.2 (1.5) (2.8) --- ---- ---- Net income under US GAAP 56.8 79.7 393.4 ==== ==== ===== Audited Unaudited 6 months to 12 months 30 Sept 30 Sept 31 March 1996 1995 1996 (pound)m (pound)m (pound)m Equity shareholders' funds under UK GAAP 558.5 691.6 521.0 Items increasing/(decreasing) shareholders' equity: Deferred taxation (173.5) (148.3) (164.3) Dividends from fixed asset investments - - (0.7) Dividends payable - - 43.3 Investment properties (2.6) (12.4) (3.5) Goodwill - 7.2 - Provision for stock-based compensation (0.9) (5.2) (1.6) Pension costs 6.7 7.8 6.5 Other (1.8) - (1.8) ---- --- ---- Stockholders' equity under US GAAP 386.4 540.7 398.9 ===== ===== ===== YORKSHIRE ELECTRICITY GROUP PLC NOTES Six months ended 30 September 1996 6. SUMMARY OF DIFFERENCES BETWEEN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES IN THE UNITED KINGDOM AND THE UNITED STATES OF AMERICA (continued) Audited Unaudited 6 months to 12 months 30 Sept 30 Sept 31 March 1996 1995 1996 (pound)m (pound)m (pound)m Total assets under UK GAAP 1,486.3 1,613.5 1,421.5 Items increasing/(decreasing) total assets: Dividends from fixed asset investments - - (0.7) ACT recoverable - - (11.4) Investment properties (2.6) (12.4) (3.5) Goodwill - 7.2 - Pension costs 6.7 5.4 4.6 Other (1.8) - (1.8) ---- --- ---- Total assets under US GAAP 1,488.6 1,613.7 1,408.7 ======= ======= ======= -----END PRIVACY-ENHANCED MESSAGE-----