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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
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<PAGE>
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.
<PAGE>
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.)
<PAGE>
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.
<PAGE>
(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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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.
<PAGE>
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
<PAGE>
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.
<PAGE>
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
===== =====
<PAGE>
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)
===== ===== ======
<PAGE>
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
===== ===== ====
<PAGE>
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.
<PAGE>
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.
<PAGE>
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.
<PAGE>
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:
<TABLE>
Turnover Operating profit Net assets
------------------------------------------------------------------------------------------------------
<CAPTION>
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
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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
======= ======= ======= ===== ===== ===== ===== ===== =====
</TABLE>
*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.
<PAGE>
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.
<PAGE>
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)
===== ===== ====
<PAGE>
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
======= ======= =====
<PAGE>
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.
<TABLE>
<CAPTION>
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
<S> <C> <C> <C> <C> <C> <C> <C> <C>
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
===========================================================================================================
</TABLE>
*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.
<PAGE>
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 - -
<PAGE>
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.
<PAGE>
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:
<TABLE>
<CAPTION>
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
<S> <C> <C> <C> <C> <C> <C> <C> <C>
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
</TABLE>
*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.
<PAGE>
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.
<PAGE>
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.
<PAGE>
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.
<PAGE>
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.
<PAGE>
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).
<PAGE>
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.
<PAGE>
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).
<PAGE>
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
=== ===
<PAGE>
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
===== =====
<PAGE>
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
===== =====
<PAGE>
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
===== =====
<PAGE>
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
=== ====
<PAGE>
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
===== =====
<PAGE>
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
<PAGE>
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
===== =====
<PAGE>
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).
<PAGE>
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
==== ==== ====
<PAGE>
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.
<PAGE>
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).
<PAGE>
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.
<PAGE>
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.
<PAGE>
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.
<PAGE>
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
===== ===== ====
<PAGE>
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
======= =======
<PAGE>
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
----- ----- -----
<PAGE>
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
===== ===== =====
<PAGE>
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)
==== ==== ====
<PAGE>
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
==== ==== =====
<PAGE>
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
==== =====
<PAGE>
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
===== ===== =====
<PAGE>
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
======= ======= =======
