-----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, WusbcXMI9YoduY+JAzBPLYy6OfiK/MicpL+Maff9Gnk+GBRa71w72RCrEj0ga51i I93sATpO0/mfLNvgz2zZ5g== 0000092122-95-000101.txt : 19951004 0000092122-95-000101.hdr.sgml : 19951004 ACCESSION NUMBER: 0000092122-95-000101 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950918 ITEM INFORMATION: Acquisition or disposition of assets ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19951003 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: SOUTHERN CO CENTRAL INDEX KEY: 0000092122 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 580690070 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-03526 FILM NUMBER: 95578376 BUSINESS ADDRESS: STREET 1: 64 PERIMETER CTR EAST CITY: ATLANTA STATE: GA ZIP: 30346 BUSINESS PHONE: 4043930650 8-K 1 SOUTHERN 8-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported) September 18, 1995 ---------------------- THE SOUTHERN COMPANY ----------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 1-3526 58-0690070 ----------------------------------------------------------------------- (State or other jurisdiction (Commission (IRS Employer of incorporation) File Number) Identification No.) 64 Perimeter Center East, Atlanta, Georgia 30346 ----------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (770) 393-0650 ------------------- N/A ----------------------------------------------------------------------- (Former name or former address, if changed since last report.) Item 2. Acquisition or Disposition of Assets. ------------------------------------ On September 18, 1995, Southern Electric International, Inc. ("Southern Electric"), a wholly-owned subsidiary of The Southern Company ("Southern"), announced that a recommended revised cash offer (the "Revised Offer") for the acquisition of the whole of the ordinary share capital of South Western Electricity plc, a public limited company organized under the laws of England and Wales ("SWEB"), not already owned by Southern and its subsidiaries and subsidiary undertakings (the "Southern Group") had been declared wholly unconditional in all respects and that, as a result of an unconditional bid, Southern Electric had acquired control of SWEB. The terms of the Revised Offer are described in the Current Report on Form 8-K of Southern dated August 25, 1995, to which reference is hereby made. As of October 2, 1995, the Southern Group owned 33,294,904 SWEB Shares, constituting approximately 29.9% of SWEB's issued share capital, and had received pursuant to the Revised Offer acceptances in respect of an additional 70,960,871 SWEB Shares (approximately 63.8% of SWEB's issued share capital). The consideration paid or to be paid in respect of the acquisition of SWEB Shares is currently estimated to consist of approximately (Pound Sterling)1.1 billion (U.S. $1.8 billion) in cash and (Pound Sterling)14.8 million nominal value of Loan Notes* of Southern Investments UK Public Limited Company, a public limited company organized under the laws of England and Wales and a wholly-owned subsidiary of Southern ("Southern UK"). It is currently expected that no GRID Bonds* will be issued. The sources of such cash consideration include the proceeds from the proposed issuance and sale by Southern UK of up to (Pound Sterling)627,070,000 nominal value of its Secured Floating Rate Bonds Due 2000 (the "Bonds"). The balance of the cash has been or will be provided by Southern from borrowings under uncommitted arrangements with Banca di Roma, Bank of America National Trust and Savings Association, Bank South, Bank of Tokyo, Dai-Ichi Kanyo Bank, Limited, Fuji Bank, Limited, Industrial Bank of Japan, Limited, Mellon Bank, N.A., Morgan Guaranty Trust Company of New York, Sanwa Bank, Tokai Bank and The Toronto-Dominion Bank, and from the proposed issuance and sale by Southern of its commercial paper notes. - -------------------- * Loan Notes and GRID Bonds are defined and described in the Current Report on Form 8-K of Southern dated August 25, 1995. 2 SWEB is one of the twelve regional electricity companies in the United Kingdom that came into existence in 1990 as a result of the restructuring and subsequent privatization of the U.K. Central Electricity Generating Board. SWEB's main business is the distribution of electricity to customers in the Southwest of England. SWEB is also a supplier of electricity to franchise customers in its authorized area and to customers in the competitive second-tier market. Through its 7.7% equity investment in Teesside Power Limited, a combined cycle gas turbine plant with a capacity of 1,875 megawatts, SWEB is involved in power generation. In addition, SWEB is involved in certain non-regulated activities which include gas supply and telecommunications. In the year ended March 31, 1995, SWEB reported turnover of (Pound Sterling)874.9 million and consolidated profit before tax of (Pound Sterling)111.5 million after an exceptional charge of (Pound Sterling)20.0 million. Basic earnings per share were 72.4p, and net dividends per share amounted to 29.0p. SWEB owns approximately 6.3% of the issued share capital of The National Grid Holdings plc ("NGH"), which, through its subsidiary The National Grid Company plc, operates the electrical transmission system in England and Wales and the interconnection assets that link such national grid with the transmission systems in Scotland and France. In the year ended March 31, 1995, NGH reported a consolidated profit before tax of (Pound Sterling)610.6 million on turnover of (Pound Sterling)1,428.2 million. Net dividends for the year amounted to (Pound Sterling)162.0 million. References herein to "(Pound Sterling)" and "p" are to British pounds sterling and British pence, respectively. THE REVISED OFFER IS NOT BEING MADE, DIRECTLY OR INDIRECTLY, IN OR INTO, OR BY USE OF THE MAILS OF, OR BY ANY MEANS OR INSTRUMENTALITY (INCLUDING, WITHOUT LIMITATION, FACSIMILE TRANSMISSION, TELEX OR TELEPHONE) OF INTERSTATE OR FOREIGN COMMERCE OF, OR OF ANY FACILITY OF A NATIONAL SECURITIES EXCHANGE OF, THE UNITED STATES AND THE REVISED OFFER CANNOT BE ACCEPTED BY ANY SUCH USE, MEANS, INSTRUMENTALITY OR FACILITY OR FROM WITHIN THE UNITED STATES, CANADA OR AUSTRALIA. THE BONDS, THE LOAN NOTES, THE GRID BONDS AND THE SHARES INTO WHICH THE GRID BONDS MAY BE EXCHANGEABLE HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"). ACCORDINGLY, THE BONDS, THE LOAN NOTES, THE GRID BONDS AND THE SHARES INTO WHICH THE GRID BONDS MAY BE EXCHANGEABLE MAY NOT BE OFFERED, SOLD OR EXCHANGED IN THE UNITED STATES OR TO U.S. PERSONS EXCEPT PURSUANT TO AN APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. TERMS USED IN THIS PARAGRAPH HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT. 3 Item 7. Financial Statements, Pro Forma Financial Information and Exhibits. (a) Financial statements of businesses acquired. The financial statements of SWEB and the auditors' report thereon required by Item 7(a) are filed as a part of this report. (b) Pro forma financial information. It is impracticable to provide the pro forma financial information required by Item 7(b) relative to the acquired business described in Item 2 hereof at the time this report is filed. The required pro forma financial information will be filed as soon as practicable, but not later than the date by which such information is required to be filed. (c) Exhibits. Exhibit No. Description 23 Consent of Ernst & Young 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. THE SOUTHERN COMPANY By:/s/ Tommy Chisholm Name: Tommy Chisholm Title: Secretary Date: October 3, 1995 4 Item 7(a) To the Board of Directors South Western Electricity plc We have audited the accompanying consolidated balance sheet of South Western Electricity plc as of 31 March 1995 and the related consolidated profit and loss account and statement of cash flows for the year ended 31 March 1995. These financial statements are the responsibility of the company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with United Kingdom auditing standards which do not differ in any significant respect from United States generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurances about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of South Western Electricity plc at 31 March 1995, and the consolidated results of its operations and its cash flows for the year ended 31 March 1995 in conformity with accounting principles generally accepted in the United Kingdom. /s/ ERNST & YOUNG ERNST & YOUNG Chartered Accountants Registered Auditor Bristol 19 June 1995 1
Group profit and loss account For the year ended 31 March 1995 There are no recognised gains or losses other than the profit for the year, and accordingly a statement of recognised gains and losses is not presented. - --------------------------------------------------------------------------------------------------------------------- 1995 1994 Note (pound)m (pound)m Turnover 3 Continuing operations 797.8 827.0 Discontinued operations 77.1 72.6 - --------------------------------------------------------------------------------------------------------------- 874.9 899.6 Operating costs 4 (755.4) (791.0) - ---------------------------------------------------------------------------------------------------------------- Operating profit 3 Continuing operations 118.2 106.5 Discontinued operations 1.3 2.1 ----- ----- 119.5 108.6 Exceptional Item - discontinued operations 3 (20.0) - Income from interests in associated undertakings 1.2 0.9 Income from fixed asset investments 3 15.3 14.4 - --------------------------------------------------------------------------------------------------------------- Profit on ordinary activities before Interest and tax 116.0 123.9 Interest 5 (4.5) (7.1) - ---------------------------------------------------------------------------------------------------------------- Profit on ordinary activities before tax 111.5 116.8 Tax on profit on ordinary activities 6 (25.6) (23.9) - ---------------------------------------------------------------------------------------------------------------- Profit for the financial year 85.9 92.9 Dividend 7 (32.2) (28.9) - ---------------------------------------------------------------------------------------------------------------- Retained profit for the year 21 53.7 64.0 - --------------------------------------------------------------------------------------------------------------- Earnings per ordinary share: 8 Before non-operating exceptional item 83.7p 75.4p Basic 72.4p 75.4p
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Balance sheets At 31 March 1995 Group Company 1995 1994 1995 1994 Note (pound)m (pound)m (pound)m (pound)m Fixed assets Tangible assets 12 540.7 509.6 501.7 463.7 Investments 13 74.3 68.9 76.1 76.0 - ------------------------------------------------------------------------------------------------------------- 615.0 578.5 577.8 539.7 Current assets Stocks 14 18.5 17.3 2.1 2.5 Debtors 15 187.2 153.9 226.3 190.0 Investments 16 43.8 126.9 21.2 107.2 Cash at bank and in hand 4.1 2.9 1.5 2.5 - ------------------------------------------------------------------------------------------------------------- 253.6 301.0 251.1 302.2 Creditors Amounts falling due within one year 17 (242.7) (204.5) (203.3) (173.7) - -------------------------------------------------------------------------------------------------------------- Net current assets 10.9 96.5 47.8 128.5 - ------------------------------------------------------------------------------------------------------------- Total assets less current liabilities 625.9 675.0 625.6 668.2 Creditors Amounts falling due after more than one year 17 (94.9) (92.3) (94.9) (92.3) Provisions for liabilities and charges 18 (37.1) (39.7) (31.4) (31.5) - ------------------------------------------------------------------------------------------------------------- 493.9 543.0 499.3 544.4 Minority Interest (all equity) (0.1) (0.1) - - - ------------------------------------------------------------------------------------------------------------- Net assets 493.8 542.9 499.3 544.4 - ------------------------------------------------------------------------------------------------------------- Capital and reserves Called up share capital 20 55.5 61.6 55.5 61.6 Share premium account 21 0.5 0.3 0.5 0.3 Revaluation reserve 21 49.1 49.1 49.1 49.1 Capital redemption reserve 21 6.2 - 6.2 - Profit and loss account 21 382.5 431.9 388.0 433.4 - ------------------------------------------------------------------------------------------------------------- Shareholders' funds (all equity) 493.8 542.9 499.3 544.4 - ------------------------------------------------------------------------------------------------------------- Reconciliation of movements in shareholders' funds For the year ended 31 March 1995 1995 1994 Group (pound)m (pound)m Profit for the financial year 85.9 92.9 Dividends (32.2) (28.9) - ------------------------------------------------------------------------------------------------------------- 53.7 64.0 Shares issued in the year - share capital 0.1 - - share premium 0.2 0.1 Purchase of own shares (note 20(a)) (103.1) - - ------------------------------------------------------------------------------------------------------------- Net addition to shareholders' funds (49.1) 64.1 Opening shareholders' funds 542.9 478.8 - ------------------------------------------------------------------------------------------------------------- Closing shareholders' funds 493.8 542.9 The accounts on pages 2 to 28 were approved by the Board of Directors on 19 June 1995 and were signed on its behalf by: J J Seed Chief Executive J E Sellers Finance Director
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Group statement of cash flows For the year ended 31 March 1995 Cash flow 1995 1994 note (pound)m (pound)m (pound)m (pound)m - --------------------------------------------------------------------------------------------------------------------------- Cash inflow from operating activities A 124.2 245.0 Returns on investments and servicing of finance Interest received 6.4 2.7 Interest paid (10.5) (10.4) Dividends received 12.3 8.5 Dividends paid (30.0) (26.0) ----- ----- Net cash outflow from returns on investments and servicing of finance (21.8) (25.2) Tax Corporation tax paid (32.7) (10.5) Investing activities - long term Payments to acquire tangible fixed assets (78.5) (71.2) Receipts from sales of tangible fixed assets 0.7 0.8 Consumers' contributions received 10.8 10.3 Payments to acquire fixed asset investments (4.6) (0.1) ------ ----- Net cash outflow from long term investing activities (71.6) (60.2) - --------------------------------------------------------------------------------------------------------------------------- Net cash (outflow)/inflow before short term investment and financing (1.9) 149.1 Investing activities - short term Purchase of current investments - other than cash equivalents (61.8) (52.4) Sale of current investments - other than cash equivalents 66.5 37.7 ------ -------- Net cash inflow/(outflow) from short term Investing activities 4.7 (14.7) Net cash outflow from investing activities (66.9) (74.9) - --------------------------------------------------------------------------------------------------------------------------- Net cash inflow before financing 2.8 134.4 Financing Issue of ordinary share capital 0.3 0.1 Purchase of own shares (103.1) - - --------------------------------------------------------------------------------------------------------------------------- Net cash (outflow)/inflow from financing (102.8) 0.1 - --------------------------------------------------------------------------------------------------------------------------- (Decrease)/Increase in cash and cash equivalents B (100.0) 134.5 - ---------------------------------------------------------------------------------------------------------------------------
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Notes to the statement of cash flows For the year ended 31 March 1995 A Reconciliation of operating profit to cash flows - ------------------------------------------------------------------------------- Reconciliation of operating profit to net cash inflow from operating activities: 1995 1994 (pound)m (pound)m Operating profit 119.5 108.6 Depreciation 31.9 29.6 Loss on sale of tangible fixed assets 1.1 0.2 Increase in operating stocks (3.3) (1.9) (Increase)/decrease in operating debtors (7.9) 27.7 Increase/(decrease) in operating creditors (excluding customer prepayments below) 14.2 (1.4) Increase in operating provisions 0.7 25.2 - ----------------------------------------------------------------------------------------------------------------- Net cash inflow from ordinary activities 156.2 188.0 Customer receipts ahead of VAT on fuel - (utilised)/received (32.0) 57.0 - ----------------------------------------------------------------------------------------------------------------- Net cash inflow from operating activities 124.2 245.0 The above movements relate solely to operating activities. The balance sheet headings include other items shown separately in the statement of cash flows. The 1995 exceptional item appears after operating profit and so has been excluded from the above operating analysis.
B Cash and cash equivalents Analysis of balances shown in the Group balance sheet and changes during the current and previous year: Change Change 1995 in year 1994 in year 1993 (pound)m (pound)m (pound)m (pound)m (pound)m Cash at bank and in hand 4.1 1.2 2.9 (2.4) 5.3 Short term deposits 23.2 (77.0) 100.2 100.2 - Short term borrowings (24.6) (24.2) (0.4) 36.7 (37.1) - ------------------------------------------------------------------------------------------------------------------ 2.7 (100.0) 102.7 134.5 (31.8)
5 Notes to the accounts For the year ended 31 March 1995 1. Accounting policies - ------------------------------------------------------------------------------- Basis of preparation The accounts have been prepared using historical cost accounting principles, modified to include the revaluation of certain fixed asset investments, and comply with the Companies Act 1985 and with all applicable accounting standards. Historical cost accounting (HCA) is used by most companies. However, assets in the electricity industry have long lives (typically 40 years) so that HCA understates the current value of assets employed and therefore the depreciation charge to the profit and loss account. To ensure that the operating capability of the business is maintained, due regard must be paid to the current cost accounting (CCA) results; these have been prepared and are summarised in note 23. These accounts are the result of the consolidation of the accounts of the Company and its subsidiary undertakings drawn up to 31 March in each year. Turnover Turnover is stated net of value added tax. The value of electricity and gas sold during the year includes an estimate of the sales value of units supplied to customers between the date of the last meter reading and the year end. Remaining sales relate to the invoice value of other goods and services provided. Charges in respect of retail sales made on credit are apportioned in the trading accounts over the period of the sales agreements. Price regulation Where there is an overrecovery of supply or distribution business revenues against the regulated maximum allowable amount, revenues are deferred equivalent to the overrecovered amount. The deferred amount is deducted from turnover and included within creditors. Where there is an underrecovery, no income is taken into account in respect of any potential future recovery until such income is received. Tangible fixed assets Tangible fixed assets are stated at cost less amounts provided to write off the cost less anticipated residual value of the assets over their useful economic lives, which are as follows: Years - ------------------------------------------------------------------------------ Distribution network assets 40 Generation assets 15-40 Buildings - freehold Up to 60 - leasehold Lower of lease period or 60 years Fixtures and equipment Up to 20 Vehicles and mobile plant Up to 10 6 Notes to the accounts For the year ended 31 March 1995 Depreciation on distribution network assets is charged at 3% for 20 years followed by 2% for the remaining 20 years. Other assets are depreciated on a straight line basis. Consumers' contributions and capital grants towards distribution network assets are credited to the profit and loss account over the life of the distribution network assets to which they relate. The unamortised amount of such contributions and grants is shown as a deduction from fixed assets. Leases Rents for operating leases are charged to the profit and loss account in equal annual amounts over the period of the lease. Pension costs The Group operates two pension schemes. Contributions to the defined contribution pension scheme are charged to the profit and loss account as they become payable in accordance with the rules of the scheme. Contributions to the defined benefit pension scheme are charged to the profit and loss account so as to spread the cost of pensions over employees' working lives with the Group. The capital cost of ex gratia and supplementary pensions is charged to the profit and loss account in the accounting period in which they are granted. Research and development Expenditure on research and development is written off to the profit and loss account in the year in which it is incurred. IT consultancy and development costs IT consultancy and development costs are charged to the profit and loss account in the year in which they are incurred. Tax Corporation tax payable is provided on taxable profits at the current rate of corporation tax. The taxable profits of some Group companies are reduced because they are able to utilise tax losses from consortia in which the Group has invested. The extent to which the benefit of losses surrendered from consortia is required to be paid for is shown in the `consortium tax creditor' (note 17). Deferred tax has been calculated using the liability method. Deferred tax is provided on timing differences which are expected to reverse without being replaced at the rates of tax likely to be in force at the time of reversal. Deferred tax is not provided on timing differences which, in the opinion of the Directors, are not expected to reverse without being replaced. The amount of all deferred tax, including that which has not been provided, is shown in note 19 to the accounts. 7 Notes to the accounts For the year ended 31 March 1995 Property Properties surplus to operational requirements are stated at the lower of cost and net realisable value. Profits are taken when properties are sold. Sales are accounted for when there is an unconditional exchange of contracts. There is an arrangement in place whereby HM Government is entitled to a share in the profits realised by the Company on certain property disposals made up to March 2000. Full provision for such clawback liabilities is made as soon as the sale is recognised. Investments Investment income is included in the accounts of the year in respect of which it is receivable. Fixed asset investments are stated at cost less provisions for permanent diminution in value with the exception of The National Grid Holding plc which is stated at the Group's share of the net asset value at 31 March 1990. Current asset investments are valued at the lower of cost and net realisable value. Stocks and work in progress 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, less foreseeable losses; progress invoices are deducted in arriving at the amounts stated. A prudent estimate of profits attributable to work completed on continuing contracts is recognised once the outcome can be assessed with reasonable certainty. 2 Price regulation - ------------------------------------------------------------------------------- At 31 March 1995, the electricity supply business had a cumulative overrecovery (i.e. higher than the regulated maximum allowable) of (pound)6.0m (excluding (pound)0.4m notional interest) and a provision has been made in the accounts for this amount as a reduction of reported income. At 31 March 1994, the overrecovery had been (pound)5.4m (excluding notional interest of (pound)0.4m). At 31 March 1995, the electricity distribution business had a cumulative underrecovery (i.e. lower than the regulated maximum allowable) of (pound)6.1m (excluding (pound)0.4m notional interest); at 31 March 1994, income had exactly matched entitlement. 8
Notes to the accounts For the year ended 31 March 1995 3 Segmental analysis - ------------------------------------------------------------------------------------------------------------------- Distribution involves the delivery of electricity across the Group's network. Supply sells electricity to customers and negotiates terms for the bulk purchase of electricity. Retailing relates to the sale and servicing of electrical appliances. Other activities broadly fall within the two categories of energy related businesses (such as Western Gas and generation) and utility related (such as telecommunications). Profit before Turnover interest and tax Net assets 1995 1994 1995 1994 1995 1994 (pound)m (pound)m (pound)m (pound)m (pound)m (pound)m - ------------------------------------------------------------------------------------------------------------------- Electricity distribution 274.0 249.8 95.7 76.6 457.0 434.3 Electricity supply 724.8 757.1 15.3 10.9 (8.9) (37.7) Electricity supply - prior year income - 14.5 - 14.5 Less intra business sales - electricity use of system (227.9) (229.7) - ---------------------------------------------------------------------------------------------------------------- Electricity total 770.9 791.7 111.0 102.0 448.1 396.6 Retailing - discontinued 77.1 72.6 1.3 2.1 34.8 34.5 - continuing 5.3 6.4 - (1.6) 0.2 0.2 Other activities 83.6 77.8 8.5 10.1 73.3 65.9 Less intra Group sales (62.0) (48.9) (1.3) - Restructuring costs - (4.0) - ---------------------------------------------------------------------------------------------------------------- Operating profit 119.5 108.6 Exceptional item - discontinued operations (20.0) - Associated undertakings 1.2 0.9 3.3 2.5 Fixed asset investments: The National Grid Holding plc 12.7 11.9 49.1 49.1 Teesside Power Limited 2.6 2.5 16.7 16.4 Eurobell (South West) Limited - - 4.3 - Unallocated items (136.0) (22.3) - ---------------------------------------------------------------------------------------------------------------- 874.9 899.6 116.0 123.9 493.8 542.9 Turnover is all in respect of sales to customers in the United Kingdom. Prior year income in respect of supply relates to recovery of regulatory entitlement in respect of previous periods. Turnover and costs are allocated directly to the activity to which they relate wherever possible; however because of the integrated nature of the Company's activities it is necessary to apportion or recharge certain costs between activities. The non-operating exceptional item in 1995 relates to the costs (including provisions) associated with the withdrawal from the electrical retailing business, and includes severance costs and the write down of asset values. The restructuring costs in 1994 relate mainly to severance costs associated with the appliance servicing activity. Unallocated items include dividends, tax, and financing which are not apportioned to separate activities.
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Notes to the accounts For the year ended 31 March 1995 4 Operating costs - ---------------------------------------------------------------------------------------------------------------------- The Directors consider that the nature of the business is such that the analysis of expenses shown below is more informative than that set out in the formats in the Companies Act 1985. Discontinued Continuing operations operations 1995 1994 (pound)m (pound)m (pound)m (pound)m Cost of sales 53.4 497.2 550.6 570.0 Other operating costs: Employee costs (note 9) 10.0 61.2 71.2 77.7 Severance costs (note 9) - 7.6 7.6 18.1 Materials and purchase of services 9.2 57.1 66.3 68.9 External IT consultancy and development - 11.8 11.8 12.2 Rates 1.2 13.7 14.9 14.3 Depreciation (net of profit or loss on disposal) 1.9 31.1 33.0 29.8 - ---------------------------------------------------------------------------------------------------------------------- Operating costs 75.7 679.7 755.4 791.0 Materials and purchase of services include the following: Operating lease rentals: Plant, machinery and equipment 0.6 0.5 Other assets 5.5 5.2 Research and development 0.8 1.0 Auditors' remuneration: Audit fees and expenses 0.2 0.2 Other fees and expenses 0.2 0.1 - --------------------------------------------------------------------------------------------------------------------- 5 Interest - --------------------------------------------------------------------------------------------------------------------- 1995 1994 (pound)m (pound)m - --------------------------------------------------------------------------------------------------------------------- Interest payable and similar charges: On borrowings totally repayable within five years 1.1 0.9 On HM Treasury bonds 9.9 9.9 Interest payable/(receivable) on pension liabilities 0.3 (0.6) Interest receivable (6.8) (3.1) - ---------------------------------------------------------------------------------------------------------------------- 4.5 7.1
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Notes to the accounts For the year ended 31 March 1995 6 Tax on profit on ordinary activities - ------------------------------------------------------------------------------------------------------------------ 1995 1994 (pound)m (pound)m - ------------------------------------------------------------------------------------------------------------------ Payable in the United Kingdom: Corporation tax at 33% (1994: 33%) 32.8 24.7 Tax on investment income 2.5 2.5 Deferred tax (note 19) (7.7) 13.3 Adjustment to current tax in respect of prior years (2.4) (17.0) Share of tax of associated undertakings 0.4 0.4 - ----------------------------------------------------------------------------------------------------------------- 25.6 23.9 The effective tax rate on the profit for the year was 23% (1994: 20%). The deferred tax credit in the year relates principally to the closure of SWEB Retail and to redundancy provisions. 7 Dividend - ------------------------------------------------------------------------------------------------------------------ 1995 1994 (pound)m (pound)m - ------------------------------------------------------------------------------------------------------------------ Interim declared 8.7p (1994: 7.0p) 10.2 8.6 Adjustment in respect of interim dividend on repurchased shares (0.5) - Final dividend proposed 20.3p (1994: 16.5p) 22.5 20.3 - ------------------------------------------------------------------------------------------------------------------ 32.2 28.9 8 Earnings per ordinary share - ------------------------------------------------------------------------------------------------------------------ 1995 1994 - ------------------------------------------------------------------------------------------------------------------ Before non-operating exceptional item 83.7p 75.4p Effect of non-operating exceptional item (11.3)p - Basic 72.4p 75.4p Basic earnings per share have been calculated on the basis of Financial Reporting Standard 3 "Reporting Financial Performance". Basic earnings per share have been calculated by dividing profit after tax of (pound)85.9m (1994: (pound)92.9m) by 118.7m being the weighted average number of ordinary shares in issue during the year (1994: 123.2m). Earnings per share before the non-operating exceptional item have been calculated as above, but adjusted to eliminate the (pound)20.0m costs and associated tax credit of (pound)6.6m relating to the withdrawal from appliance retailing since, in the opinion of the Directors, this gives a better understanding of the result. If all outstanding options under the Company's employee share schemes had been exercised, the dilution in earnings per share would not have been material.
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Notes to the accounts For the year ended 31 March 1995 9 Employee costs and numbers (including directors) - ------------------------------------------------------------------------------------------------------------------- 1995 1994 (a) Employee costs (pound)m (pound)m - ------------------------------------------------------------------------------------------------------------------- Total employee costs during the year amounted to: Wages and salaries 87.7 93.1 Social security costs 7.3 8.0 Pension costs (including severance arrangements) 14.8 8.6 Other severance costs 10.4 15.8 - ------------------------------------------------------------------------------------------------------------------ 120.2 125.5 Employee costs were allocated to: Operating costs (note 4): Cost of sales 12.3 8.1 Other operating costs 71.2 77.7 Severance costs 7.6 18.1 Non-operating exceptional item 8.5 - Capital expenditure 20.6 21.6 - ------------------------------------------------------------------------------------------------------------------ 120.2 125.5 Head count Full time equivalent (b) The average number of employees during the year was: 1995 1994 1995 1994 - ------------------------------------------------------------------------------------------------------------------ Electricity supply and distribution 2,983 3,253 2,874 3,125 Retailing 924 1,012 719 806 Other activities: Contracting 560 548 555 543 Other 298 324 279 303 Central services 154 171 144 161 Corporate 86 92 85 91 - ------------------------------------------------------------------------------------------------------------------ 5,005 5,400 4,656 5,029 The 1994 numbers have been restated to reflect the reclassification of the Central Accounting Office Customer Accounting function. This has transferred 117 employees (average full time equivalent) from central services to electricity supply and distribution.
12 Notes to the accounts For the year ended 31 March 1995 10 Pension commitments - ------------------------------------------------------------------------------- The Group operates two schemes, one based on defined contributions and a second based on defined benefits. (a) The defined contribution scheme was established during 1993/94. The cost, which represents contributions payable by the Group, amounted to (pound)89,000 (1994: (pound)22,000). The assets of the scheme are held separately from those of the Group in an independently administered fund. (b) The Electricity Supply Pension Scheme provides pension and other related defined 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 latest full actuarial valuation of the Group's share of the Scheme was carried out by Bacon & Woodrow, consulting actuaries, as at 31 March 1992 and the results of this valuation have been used as the basis for assessing pension cost. The attained age method was used for the valuation and the principal actuarial assumptions adopted were that the investment return would average 9.5% per annum, equity dividend growth would average 5% per annum, salary increases (exclusive of merit awards) would average 7.5% per annum, pension increases would average 5.5% per annum, and that inflation would average 5.5% per annum. The valuation showed that the actuarial value of the assets of the Group's share of the Scheme as at 31 March 1992 represented 105.2% of the actuarial value of the accrued benefits. After allowing for benefit improvements granted as a result of the valuation and the provision made from the surplus to cover contingencies and anticipated short term early retirement costs, the actuarial value of the assets is at the same level as the actuarial value of the accrued benefits. The accrued benefits include all benefits for pensioners and other former members as well as benefits based on service completed to date for active members, allowing for future salary rises. The total market value of the assets of the Scheme at 31 March 1992 was (pound)9,491.9m of which (pound)480.2m represented the share of the Scheme which relates to the members and beneficiaries of the Group. Contributions payable by the Group to the Scheme during the year were (pound)9.8m (1994: (pound)9.6m). (c) The latest actuarial valuation did not allow for the possible additional liabilities which may arise as a result of the European Court of Justice's decision on 17 May 1990 in the case of Barber v Guardian Royal Exchange, which related to the equal treatment of men and women under occupational pension schemes. The ruling was not specific as to whether equalisation should be retrospective before May 1990. The legal position has now been clarified although the precise cost to the Group cannot be ascertained until the next formal Scheme valuation. The provision at 31 March 1995 amounted to (pound)5.2m (31 March 1994: (pound)4.4m). Following advice from actuaries Bacon & Woodrow, a provision at the rate of 0.7% of pensionable salaries was provided during the year. 13 Notes to the accounts For the year ended 31 March 1995 11 Directors' emoluments and interests - ------------------------------------------------------------------------------- (a) Directors' emoluments The remuneration of the executive directors comprises four elements: (i) a basic salary together with benefits-in-kind; (ii) a performance related bonus which rewards the directors based on improvements in earnings per share and specific performance within those functions for which the directors are individually responsible including the achievement of customer service quality improvements; (iii) long term incentives, which consist of share option schemes to encourage directors to enhance share values; (iv) a contribution to the Electricity Supply Pension Scheme. The terms and conditions of employment of the executive directors are determined by the Executive Remuneration Committee which consists solely of non-executive directors. The Committee takes into account independent expert advice on equivalent market salaries. During the year, the Committee reviewed the executive Directors' Service Agreements. As a consequence the four executive directors have Agreements which, from 1 June 1995, provide for the Company to terminate the Agreement by giving the director two years' notice in writing (previously three years). The director may terminate the Agreement by giving the Company six months' notice in writing. Fees paid to non-executive directors reflect the knowledge and experience which they bring to the Group.
The remuneration of the directors was as follows: Basic salary or fees Benefits Bonuses Total 1995 1994 1995 1994 1995 1994 1995 1994 (pound)000 (pound)000 (pound)000 (pound)000 (pound)000 (pound)000 (pound)000 (pound)000 - ----------------------------------------------------------------------------------------------------------------------- Executive directors: J A G Bonner 103 100 11 10 24 23 138 133 M J Carson 101 97 5 16 22 21 128 134 A W Nicol - 86 - 6 - - - 92 J J Seed 177 163 11 11 44 39 232 213 J E Sellers 98 95 8 8 21 21 127 124 Non-executive directors: C M Fisher 22 22 - - - - 22 22 J O Gough 22 22 - - - - 22 22 A P Hichens 22 22 - - - - 22 22 M E Warren 100 80 12 8 - - 112 88 - ------------------------------------------------------------------------------------------------------------------------ 645 687 47 59 111 104 803 850 Pension contributions to the Electricity Supply Pension Scheme in respect of the directors amounted to (pound)68,000 (1994: (pound)76,000) of which (pound)25,000 (1994: (pound)23,000) was paid in respect of J J Seed as Chief Executive and highest paid director. J J Seed's salary increase reflects his first full year as Chief Executive.
14 Notes to the accounts For the year ended 31 March 1995 Two Chairmen served during the year to 31 March 1994, the current non-executive Chairman, M E Warren, succeeding the previous executive Chairman, A W Nicol, on 9 August 1993. A W Nicol resigned as a director on 31 August 1993; as executive Chairman, he received (pound)79,000 in remuneration and (pound)10,000 was paid on his behalf to the Electricity Supply Pension Scheme. During the year to 31 March 1994, M E Warren as non-executive Chairman received remuneration of (pound)71,000. Being non-executive, M E Warren does not receive a performance related element of salary nor is he entitled to any pension benefits. In addition to the amounts disclosed above, charges of (pound)142,559 were incurred in the year to 31 March 1994 in connection with the retirement of A W Nicol mainly by way of a contribution to the Electricity Supply Pension Scheme which was made in accordance with its early retirement rules applicable to all members of the Scheme. (b) Directors' interests The beneficial interests of the directors and their families in the shares of the Company at 31 March 1995 are detailed below. There were no changes between 31 March 1995 and 19 June 1995 other than for J A G Bonner whose notifiable interests stand at 21,741 ordinary shares following a matched sale and repurchase of shares through the SWEB PEP on 4 April 1995. At 31 March 1995 At 1 April 1994 Ordinary shares Number Number M E Warren 5,000 5,000 J J Seed 27,404 9,978 J A G Bonner 21,768 16,768 M J Carson 21,589 16,589 C M Fisher 4,695 4,695 J O Gough 250 250 A P Hichens 22,000 22,000 J E Sellers 21,000 15,000 15
Notes to the accounts For the year ended 31 March 1995 Number Number Number Number Exercise Normal at granted exercised at price period of Share options 1.4.94 in year in year 31.3.95 (pound) exercise - ------------------------------------------------------------------------------------------------------------------- J J Seed *2,528 2,528 1.75 1996 17,460 17,460 - 3.15 12,168 12,168 4.52 1996-2003 31,529 31,529 7.485 1997-2004 - ------------------------------------------------------------------------------------------------------------------- 32,156 31,529 17,460 46,225 J A G Bonner *2,528 2,528 1.75 1996 13,333 13,333 - 3.15 9,292 9,292 4.52 1996-2003 6,060 6,060 6.93 1997-2004 13,760 13,760 7.485 1997-2004 5,026 5,026 8.355 1998-2005 - ------------------------------------------------------------------------------------------------------------------- 31,213 18,786 13,333 36,666 M J Carson 13,333 13,333 - 3.15 9,292 9,292 4.52 1996-2003 6,060 6,060 6.93 1997-2004 13,493 13,493 7.485 1997-2004 5,026 5,026 8.355 1998-2005 - ------------------------------------------------------------------------------------------------------------------- 28,685 18,519 13,333 33,871 J E Sellers *2,528 2,528 1.75 1996 13,333 6,000 7,333 3.15 1995-2002 9,292 9,292 4.52 1996-2003 6,060 6,060 6.93 1997-2004 13,092 13,092 7.485 1997-2004 5,026 5,026 8.355 1998-2005 - ------------------------------------------------------------------------------------------------------------------- 31,213 18,118 6,000 43,331 The options above are under the terms of the Executive Share Option Schemes, except as marked * which are under the terms of the Sharesave Scheme. All options exercised during the year were exercised on the same day, when the market price was (pound)8.11. The market price at 31 March 1995 was (pound)6.27.
16
Notes to the accounts For the year ended 31 March 1995 12 Tangible fixed assets - --------------------------------------------------------------------------------------------------------------------------------- Non- network Vehicles & Deduct: Distribution land & Fixtures & mobile consumers' Generation network buildings equipment plant contributions Total Group (pound)m (pound)m (pound)m (pound)m (pound)m (pound)m (pound)m - -------------------------------------------------------------------------------------------------------------------------------- Cost At 1 April 1994 2.0 750.1 45.9 91.0 23.4 (135.7) 776.7 Additions - 58.1 0.2 19.5 2.1 (10.8) 69.1 Disposals - (4.4) - (9.5) (2.0) - (15.9) - -------------------------------------------------------------------------------------------------------------------------------- At 31 March 1995 2.0 803.8 46.1 101.0 23.5 (146.5) 829.9 Depreciation At 1 April 1994 1.2 227.3 7.6 54.0 10.4 (33.4) 267.1 Charge for the year 0.1 20.8 0.7 12.1 2.7 (3.9) 32.5 Disposals - (2.4) - (6.3) (1.7) - (10.4) - -------------------------------------------------------------------------------------------------------------------------------- At 31 March 1995 1.3 245.7 8.3 59.8 11.4 (37.3) 289.2 Net book value At 31 March 1995 0.7 558.1 37.8 41.2 12.1 (109.2) 540.7 - -------------------------------------------------------------------------------------------------------------------------------- At 31 March 1994 0.8 522.8 38.3 37.0 13.0 (102.3) 509.6 Vehicles & Deduct: Distribution Fixtures & mobile consumers' network equipment plant contributions Total Company (pound)m (pound)m (pound)m (pound)m (pound)m - -------------------------------------------------------------------------------------------------------------------------------- Cost At 1 April 1994 750.1 79.8 23.4 (135.7) 717.6 Additions 59.1 17.5 2.3 (10.8) 68.1 Transfers between Group undertakings - 2.0 (0.2) - 1.8 Disposals (4.4) (4.7) (2.0) - (11.1) - -------------------------------------------------------------------------------------------------------------------------------- At 31 March 1995 804.8 94.6 23.5 (146.5) 776.4 Depreciation At 1 April 1994 227.3 49.6 10.4 (33.4) 253.9 Charge for the year 20.8 10.0 2.8 (3.9) 29.7 Transfers between Group undertakings - 0.7 (0.1) - 0.6 Disposals (2.4) (5.4) (1.7) - (9.5) - -------------------------------------------------------------------------------------------------------------------------------- At 31 March 1995 245.7 54.9 11.4 (37.3) 274.7 Net book value At 31 March 1995 559.1 39.7 12.1 (109.2) 501.7 - -------------------------------------------------------------------------------------------------------------------------------- At 31 March 1994 522.8 30.2 13.0 (102.3) 463.7
17
Notes to the accounts For the year ended 31 March 1995 12 Tangible fixed assets (continued) - -------------------------------------------------------------------------------------------------------------------------- The net book value of land and buildings comprises: Group Group and Non- Company network Network land and land and buildings buildings 1995 1994 1995 1994 (pound)m (pound)m (pound)m (pound)m Freehold 33.5 34.0 32.1 27.8 Long leasehold 0.3 0.3 - - Short leasehold 4.0 4.0 - 0.1 - --------------------------------------------------------------------------------------------------------------------------- 37.8 38.3 32.1 27.9 Included within the Group's fixed assets are assets in the course of construction amounting at 31 March 1995 to (pound)3.4m (1994: (pound)16.7m) and land at a cost of (pound)11.2m (1994: (pound)8.4m).
13 Fixed asset investments - -------------------------------------------------------------------------------------------------------------------------- Group Company Shares in Unlisted Group Unlisted Associated invest- under- invest- undertakings ments Total takings ments Total (pound)m (pound)m pound)m (pound)m (pound)m (pound)m - --------------------------------------------------------------------------------------------------------------------------- Balance at 1 April 1994 2.5 66.4 68.9 26.2 49.8 76.0 Additions - 4.6 4.6 0.1 - 0.1 Share of profit retained by associated undertakings 0.8 - 0.8 - - - - --------------------------------------------------------------------------------------------------------------------------- Balance at 31 March 1995 3.3 71.0 74.3 26.3 49.8 76.1 The principal subsidiaries and associated undertakings are listed on page 28. 14 Stocks and work in progress Group Company 1995 1994 1995 1994 (pound)m (pound)m (pound)m (pound)m Raw materials and consumables 3.6 3.9 1.7 2.2 Work in progress 0.9 0.9 0.4 0.3 Goods for resale 14.0 12.5 - - - --------------------------------------------------------------------------------------------------------------------------- 18.5 17.3 2.1 2.5
18 15 Debtors - ------------------------------------------------------------------------------- Group Company 1995 1994 1995 1994 - ------------------------------------------------------------------------------- Amounts falling due within one year: Trade debtors 41.9 41.9 37.4 35.0 Unbilled consumption 55.9 51.8 51.1 48.9 Credit sales instalments not yet due 14.8 13.6 - 0.1 Pensions prepayment 2.0 2.8 2.0 2.8 Advance corporation tax recoverable 33.0 8.4 33.0 8.4 Amounts owed by Group undertakings - - 88.4 77.6 Amounts recoverable on long term contracts 1.7 2.2 - - Dividends receivable 6.8 6.5 8.4 7.9 Other debtors 6.6 10.7 4.7 8.8 Prepayments and accrued income 7.2 4.4 1.3 0.5 - ------------------------------------------------------------------------------- 169.9 142.3 226.3 190.0 Amounts falling due after more than one year: Credit sales instalments not yet due 17.2 11.6 - - Other debtors 0.1 - - - - ------------------------------------------------------------------------------- Total debtors 187.2 153.9 226.3 190.0 19
16 Current asset investments - ------------------------------------------------------------------------------------------------------------------- Group Company 1995 1994 1995 1994 (pound)m (pound)m (pound)m (pound)m - ------------------------------------------------------------------------------------------------------------------- Listed: UK Government securities 14.6 23.0 - 8.1 Fixed income investments overseas 1.8 1.8 - - Own shares 3.7 1.4 3.7 1.4 - ------------------------------------------------------------------------------------------------------------------- 20.1 26.2 3.7 9.5 Unlisted: Short term deposits 23.2 100.2 17.0 97.2 Tax certificate of deposit 0.5 0.5 0.5 0.5 - ------------------------------------------------------------------------------------------------------------------- 43.8 126.9 21.2 107.2 Own shares are held by South Western Electricity Share Scheme Trustees (Guernsey) Limited (note 20(e)) and have a market value of (pound)3.9m (1994: (pound)2.5m). In accordance with the requirements of Financial Reporting Standard 5 "Reporting the Substance of Transactions", the Company has recognised the assets and liabilities of the Trust as assets and liabilities of the Company and revalued the shares to the lower of cost or net realisable value.
20
17 Creditors - ------------------------------------------------------------------------------------------------------------------- Group Company 1995 1994 1995 1994 (pound)m (pound)m (pound)m (pound)m - -------------------------------------------------------------------------------------------------------------------- Amounts falling due within one year: Bank loans and overdrafts 24.6 0.4 24.6 0.4 Amounts owing for purchase of electricity 35.9 38.3 35.9 38.3 Overrecovery on regulated income 6.4 5.8 6.4 5.8 Other trade creditors 26.8 24.1 17.8 15.3 Corporation tax 25.0 18.4 27.1 17.5 Advance corporation tax payable 17.8 4.9 17.8 4.9 Amounts owed to Group undertakings - - 1.9 - Taxation and social security 8.5 7.2 2.7 2.8 Payments received on account 8.9 6.8 1.1 0.1 Dividends proposed 22.5 20.3 22.5 20.3 Other creditors 23.2 13.1 7.4 9.6 Accruals and deferred income 18.1 8.2 14.4 3.7 Customer receipts ahead of VAT on fuel 25.0 57.0 23.7 55.0 - ------------------------------------------------------------------------------------------------------------------- 242.7 204.5 203.3 173.7 Amounts falling due after more than one year: Repayable between one and two years: Long term loan 4.0 - 4.0 - Repayable between two and five years: Long term liability - 4.0 - 4.0 Long term loan 0.5 0.5 0.5 0.5 Repayable in five years or more: HM Treasury bonds 80.0 80.0 80.0 80.0 Consortium tax creditor 10.3 7.5 10.3 7.5 Other creditors 0.1 0.3 0.1 0.3 - ------------------------------------------------------------------------------------------------------------------- 94.9 92.3 94.9 92.3 On 22 October 1990, the Company issued (pound)80.0m 12.365% bonds to HM Treasury which are due for repayment at par in 2008; no interest is payable on other items.
18 Provisions for liabilities and charges - --------------------------------------------------------------------------------------------------------------------- Group Company Pensions Other Total Pensions Other Total (pound)m (pound)m pound)m (pound)m (pound)m (pound)m - --------------------------------------------------------------------------------------------------------------------- Balance at 1 April 1994 4.4 35.3 39.7 4.4 27.1 31.5 Arising during the year 1.3 2.6 3.9 1.3 2.8 4.1 Utilised during the year - (6.5) (6.5) - (4.2) (4.2) - --------------------------------------------------------------------------------------------------------------------- Balance at 31 March 1995 5.7 31.4 37.1 5.7 25.7 31.4 Other provisions relate principally to deferred tax (note 19), reorganisation costs including severance, insurance claims, and accrued holiday entitlement.
21 Notes to the accounts For the year ended 31 March 1995 19 Deferred tax - ------------------------------------------------------------------------------- In calculating the amount of profits subject to tax, UK tax legislation requires that certain adjustments are made to the profits as shown in these accounts. The major element of such adjustments arises because the rates at which assets are depreciated for tax purposes differ from the rates at which they are depreciated in the accounts. In circumstances where the tax depreciation is greater than the amount of depreciation in the accounts, part of the Group's tax liability is deferred. Deferred tax has been provided at 33% (1994: 33%) to the extent that the Directors have concluded that it is probable that a liability will crystallise taking into account a prudent view of future capital expenditure and average asset lives.
Group Company 1995 1994 1995 1994 (pound)m (pound)m (pound)m (pound)m - ----------------------------------------------------------------------------------------------------------------------- Deferred tax provided on capital allowances in excess of depreciation 13.3 12.5 13.3 12.5 Deferred tax in respect of other timing differences (7.7) 0.8 (4.7) - - ----------------------------------------------------------------------------------------------------------------------- 5.6 13.3 8.6 12.5 The amounts of unprovided deferred tax are as follows: Capital allowances in excess of depreciation 122.7 117.5 119.9 113.7 Other timing differences (2.1) (5.4) (2.1) (4.4) - ----------------------------------------------------------------------------------------------------------------------- 120.6 112.1 117.8 109.3 20 Called up share capital - ----------------------------------------------------------------------------------------------------------------------- 1995 1994 (pound) (pound) - ----------------------------------------------------------------------------------------------------------------------- Authorised: 200,000,000 ordinary shares of 50p each 100,000,000 100,000,000 One special rights redeemable preference share of(pound)1 - 1 Allotted and fully paid: 111,108,769 (1994: 123,258,043) ordinary shares of 50p each 55,554,385 61,629,021 One special rights redeemable preference share of(pound)1 - 1 (a) Under the authority of a special resolution passed at the 1994 Annual General Meeting, the Company purchased 12.3m of its own shares during the year which were subsequently cancelled. The total consideration was (pound)103.1m.
22 Notes to the accounts For the year ended 31 March 1995 20 Called up share capital (continued) - ------------------------------------------------------------------------------ (b) During the year, 176,526 ordinary shares were issued under South Western Electricity's sharesave scheme to employees who had left the Company. The shares were fully paid up at an exercise price of (pound)1.75 per ordinary share. The average market price of the Company's shares during the year was (pound)7.14. (c) The special rights redeemable preference share, held by the Secretary of State, was redeemed at par on 30 March 1995 in accordance with the Company's Articles of Association. (d) At 31 March 1995 outstanding options granted under share option schemes were as follows: Year Options Price Normal dates Scheme granted outstanding (pound) of exercise - ------------------------------------------------------------------------------- Sharesave 1990 3,485,279 1.75 1996 Executive Directors & 1991 6,000 3.16 1994-2001 senior employees 1992 7,333 3.15 1995-2002 1992 11,306 3.98 1995-2002 1992 12,352 4.25 1995-2002 1993 47,344 4.52 1996-2003 1993 8,088 6.80 1996-2003 1994 22,941 6.93 1997-2004 1994 42,173 6.90 1997-2004 1994 388,868 7.485 1997-2004 1994 12,699 8.545 1997-2004 1995 27,728 8.355 1998-2005 (e) An Employee Share Ownership Trust was established in 1991 the object of which is to purchase shares in the Company on the open market which will be used to satisfy, in part, share option schemes. At 31 March 1995 this Trust held 622,282 shares (1994: 378,617). (f) 1,077,712 ordinary shares of the Company were held in a separate trust at 31 March 1995 on behalf of employees who were beneficially entitled to the shares under special arrangements made at the time of the offer for sale in November 1990. 23
Notes to the accounts For the year ended 31 March 1995 21 Reserves - ------------------------------------------------------------------------------------------------------------------- Group Group and Company Company Profit Share Capital Profit & loss premium redemption Revaluation & loss account account reserve reserve account (pound)m (pound)m (pound)m (pound)m (pound)m - ------------------------------------------------------------------------------------------------------------------- Balance at 1 April 1994 431.9 0.3 - 49.1 433.4 Additions - 0.2 - - - Purchase of own shares (103.1) - 6.2 - (103.1) Retained profit for the year 53.7 - - - 57.7 - ------------------------------------------------------------------------------------------------------------------- Balance at 31 March 1995 382.5 0.5 6.2 49.1 388.0
The revaluation reserve is in respect of the Company's investment in The National Grid Holding plc. The share premium account arises on the issue of shares under share option schemes. The capital redemption reserve arises on the purchase of its own shares by the Company (note 20(a)). As allowed by section 230 of the Companies Act 1985, the Company has not presented its own profit and loss account. The profit for the financial year attributable to shareholders, dealt with in the accounts of the parent Company, was (pound)89.9m (1994: (pound)87.5m). The Group's share of accumulated reserves of associated undertakings was (pound)1.5m (1994: (pound)0.6m). Eurobell (South West) Limited, of which the Group holds 30% of its issued share capital, declared a loss after tax for the period to 31 December 1994 of (pound)0.9m; its capital and reserves at that date totalled (pound)3.1m. 24 Notes to the accounts For the year ended 31 March 1995
22 Capital and other commitments - ----------------------------------------------------------------------------------------------------------------------- (a) There are annual commitments under operating leases for equipment and vehicles which expire: Group and Company 1995 1994 (pound)m (pound)m - ----------------------------------------------------------------------------------------------------------------------- Within one year 1.2 1.4 In the second to fifth year inclusive 0.8 1.0 - ----------------------------------------------------------------------------------------------------------------------- 2.0 2.4 (b) There are annual commitments under operating leases for land and buildings which expire: Group 1995 1994 (pound)m (pound)m - ----------------------------------------------------------------------------------------------------------------------- Within one year 0.3 - In the second to fifth year inclusive - 0.3 In more than five years 3.5 3.3 - ----------------------------------------------------------------------------------------------------------------------- 3.8 3.6 (c) In common with normal commercial practice, the Group has commitments to pay rentals for leasehold land and buildings through to the end of the lease term. This obligation potentially continues to the end of the lease, whether or not the lease is assigned to a third party. If a lease has been assigned to a third party, then the original lessee is ultimately responsible for any default in the rent payment. However, no material liability is anticipated. (d) Fixed asset expenditure authorised by the Directors but not provided for at 31 March 1995 amounted to (pound)19.8m for the Group (1994: (pound)18.4m) and (pound)19.3m for the Company (1994: (pound)17.4m). The amount contracted for but not provided in the accounts was (pound)1.2m for the Group (1994: (pound)4.7m) and (pound)0.7m for the Company (1994: (pound)3.7m). (e) The Group has entered into a contract relating to 200 megawatts of the Teesside Power Limited capacity for a period of 15 years from 1 April 1993. It also has contracts with National Power plc and PowerGen plc relating to the purchase price of electricity, which expire on 31 March 1998. (f) The Group is committed to provide a shareholder loan of up to (pound)11.0m to Eurobell (South West) Limited at rates of interest favourable to the Group. No drawings against this facility had been made at 31 March 1995.
25 Notes to the accounts For the year ended 31 March 1995 23 Abridged current cost accounting (CCA) information - ------------------------------------------------------------------------------ (a) Summary current cost group profit and loss account For the year ended 31 March 1995 1995 1994 (pound)m (pound)m - ------------------------------------------------------------------------------ Historical cost operating profit 119.5 108.6 Current cost adjustments (26.1) (29.7) - ------------------------------------------------------------------------------ CCA operating profit 93.4 78.9 Exceptional item - discontinued operations (20.0) - Income from interests in associated undertakings 1.2 0.9 Income from fixed asset investments 15.3 14.4 - ------------------------------------------------------------------------------ CCA profit on ordinary activities before interest and tax 89.9 94.2 Interest (4.5) (7.1) Gearing adjustment 1.1 2.0 - ------------------------------------------------------------------------------- CCA profit on ordinary activities before tax 86.5 89.1 Tax on profit on ordinary activities (25.6) (23.9) - ------------------------------------------------------------------------------ CCA profit for the financial year 60.9 65.2 Dividend (32.2) (28.9) - ------------------------------------------------------------------------------- CCA retained profit for the year 28.7 36.3 (b) Current cost group net assets At 31 March 1995 1995 1994 (pound)m (pound)m - ------------------------------------------------------------------------------ Fixed assets Tangible assets 899.9 854.7 Investments 222.9 217.5 - ------------------------------------------------------------------------------ 1,122.8 1,072.2 Net current assets 11.2 96.7 - ------------------------------------------------------------------------------ Total assets less current liabilities 1,134.0 1,168.9 Long term liabilities and provisions (132.1) (132.1) - ------------------------------------------------------------------------------- Net assets 1,001.9 1,036.8 26 Notes to the accounts For the year ended 31 March 1995 (c) Basis of preparation - ------------------------------------------------------------------------------- Assets in the electricity industry have long lives (typically 40 years) so that, due to the impact of inflation, historical cost accounting understates the current value of assets employed and therefore the depreciation charge to the profit and loss account. To maintain the operating capability of the business, prices set for electricity and also the dividend policy recognise the current cost accounting (CCA) results. CCA is not a system of accounting for general inflation, but allows for price changes specific to the business when reporting assets employed and profits. The current cost profit is determined after allowing for the impact of price changes on the funds needed to maintain net operating assets. The impact of price changes is reflected as follows: (i) Depreciation is calculated on the basis of historical cost of tangible fixed assets adjusted to current values. (ii) A cost of sales adjustment is charged to allow for the impact of price changes on stock used in the year. (iii) A monetary working capital adjustment is charged to represent the amount of additional finance needed for working capital as a result of changes in the input prices of goods and services used by the Group. (iv) A gearing adjustment reduces the effect of the current cost adjustments in the profit and loss account as set out in (i) to (iii) above. This adjustment takes account of the benefit to shareholders of financing the business partly by net borrowings. The values of tangible fixed assets, the cost of sales adjustment and the monetary working capital adjustment are calculated principally by applying appropriate indices to historical cost. Certain land and buildings are professionally valued on a cyclical basis. Consumers' contributions are indexed in line with the related assets. The Group's investment in The National Grid Holding plc has been valued on a dividend yield basis, taking into account its status as an unlisted investment. (d) Current cost accounting adjustments A summary of the current cost accounting adjustments in the profit and loss account is given below:
1995 1994 (pound)m (pound)m - ------------------------------------------------------------------------------------------------------------------- Operating costs: Depreciation (25.9) (27.8) Cost of sales (0.2) - Monetary working capital - (1.9) - ------------------------------------------------------------------------------------------------------------------- (26.1) (29.7) Gearing 1.1 2.0 - ------------------------------------------------------------------------------------------------------------------- (25.0) (27.7) (e) Group current cost statement of total recognised gains and losses 1995 1994 (pound)m (pound)m - ------------------------------------------------------------------------------------------------------------------- Retained profit for the financial year 28.7 36.3 Unrealised surplus on revaluation of tangible fixed assets 40.0 1.5 Unrealised surplus on revaluation of fixed asset investments - 57.0 Unrealised surplus on revaluation of stocks 0.3 0.2 - ------------------------------------------------------------------------------------------------------------------- 69.0 95.0
27
Principal subsidiaries and unlisted investments - ----------------------------------------------------------------------------------------------------------------------------- Country of Proportion Name operation Principal activity Holding held % - ----------------------------------------------------------------------------------------------------------------------------- Subsidiary undertakings South Western Power Limited England Power generation Ordinary shares 100 South Western Power Investments Investment in Limited England power generation Ordinary shares * 100 South Western Electricity England (Connect) Limited and Wales Electrical contracting Ordinary shares 100 SWEB Property Investments Limited England Property management Ordinary shares 100 SWEB Property Developments Limited England Property development Ordinary shares 100 SWEB Retail Limited England Appliance retailing Ordinary shares 100 and Wales & servicing Preference shares 100 Aztec Insurance Limited Guernsey Insurance Ordinary shares 100 SWEB Insurance Limited Guernsey Insurance Ordinary shares 100 SWEB Investments Limited England Investment company Ordinary shares 100 South Western Electricity Share Scheme Trustees Limited England Trustee Ordinary shares 100 Western Gas Limited England Gas supply Ordinary shares 75 Associated undertakings Croeso Systems Development England Development of a new Limited and Wales billing system Ordinary shares * 50 Wind Resources Limited England Investment in generation projects Ordinary shares * 45 Carland Cross Limited England Power generation Ordinary shares * 45 Coal Clough Limited England Power generation Ordinary shares * 45 Unlisted investments The National Grid Holding plc England and Wales Holding company Ordinary shares 6 Teesside Power Limited England Power generation Ordinary shares * 8 Eurobell (South West) Limited** England Telecommunications Ordinary shares * 30 Windelectric Limited England Investment in Ordinary shares * 12 generation projects Redeemable 1998 preference shares * 16 Convertible B non- redeemable preference shares * 100 The companies listed are those which were active during the year. A full list including dormant companies will be annexed to the next annual return to be filed with Registrar of Companies. All undertakings are registered in England and Wales, with the exception of the two insurance companies which are incorporated in Guernsey. The proportion of shares held in ordinary shares represents the proportion of voting rights. *Held by subsidiary undertakings. **Eurobell (South West) Limited was Incorporated during the year. Although the Group holds more than 20% of the ordinary shares, it has been included as a trade investment under the Companies Act 1985 as no significant influence is exerted.
28 EX-23 2 EXHIBIT 23 CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference of our report dated 19 June 1995, with respect to the financial statements of South Western Electricity plc included in the Current Report on Form 8-K of The Southern Company dated 18 September 1995 in the Registration Statements (Form S-8 Nos 2-78617, 33-23152, 33-30171, 33-54415, 33-58371 and 33-60427) pertaining to The Southern Company employee benefit plans listed on the facing sheets thereof and (Form S-3 Nos 33-3546, 33-23153, 33-51433 and 33-57951) of The Southern Company for the registration of its Common Stock of $5 par value per share. /s/ ERNST & YOUNG ERNST & YOUNG Chartered Accountants Registered Auditor Bristol 2 October 1995 -----END PRIVACY-ENHANCED MESSAGE-----