Note 2 - Segmental analysis

Segmental information is presented in accordance with the management responsibilities and economic characteristics of the Group’s business activities. Management responsibilities changed during the year ended 31 March 2004. Segmental reporting has been aligned to reflect the changes in responsibilities, resulting in a restatement of segmental results for the years ended 31 March 2003 and 31 March 2002. The principal effect of this is to reclassify the results of the UK Interconnectors and LNG Storage businesses from ‘UK electricity and gas transmission’ to ‘Other activities’.

The US electricity distribution segment shown below includes the recovery of stranded costs.

‘Continuing operations – Other activities’ primarily relates to: gas metering activities; liquefied natural gas storage activities; the UK electricity interconnector business; Advantica – the energy technology and systems solutions business; and Gridcom which provides telecommunications infrastructure to operators in the UK and the US.

Discontinued operations comprise activities formerly within Other activities. Discontinued operations primarily include EnMO for all years presented, The Leasing Group and 186k Limited for 2003 and 2002 in Group undertakings, and telecom joint ventures and an associate in 2003 and 2002.

In the 2002 segmental analysis of turnover and operating profit, the repayment of £267m of surplus entry capacity auction revenue, that was rebated to shippers through distribution tariffs, has been reported within the UK electricity and gas transmission segment.

a) Turnover

		Sales	Sales		Sales	Sales		Sales	Sales
	Total	between	to third	Total	between	to third	Total	between	to third
	sales	businesses	parties	sales	businesses	parties	sales	businesses	parties
	2004	2004	2004	2003	2003	2003	2002	2002	2002
				(restated)	(restated)	(restated)	(restated)	(restated)	(restated)
	£m	£m	£m	£m	£m	£m	£m	£m	£m
Turnover, including share
of joint ventures'
– continuing operations	9,408	462	8,946	9,302	370	8,932	7,509	290	7,219
– discontinued operations	158	–	158	653	19	634	639	37	602
Less: share of joint
ventures’ turnover
– continuing operations	(71)	–	(71)	(99)	–	(99)	(141)	–	(141)
– discontinued operations	–	–	–	(67)	–	(67)	(126)	–	(126)
Group turnover	9,495	462	9,033	9,789	389	9,400	7,881	327	7,554
Continuing operations
UK gas distribution	2,245	120	2,125	2,089	47	2,042	2,013	–	2,013
UK electricity and gas transmission	1,867	35	1,832	1,893	29	1,864	1,799	45	1,754
US electricity transmission	318	48	270	407	5	402	278	1	277
US electricity distribution	3,537	1	3,536	3,446	1	3,445	2,282	5	2,277
US gas distribution	464	–	464	446	–	446	104	–	104
Other activities	906	258	648	922	288	634	892	239	653
	9,337	462	8,875	9,203	370	8,833	7,368	290	7,078
Discontinued operations	158	–	158	586	19	567	513	37	476
Group turnover	9,495	462	9,033	9,789	389	9,400	7,881	327	7,554
UK			4,736			5,096			4,865
US			4,297			4,304			2,689
			9,033			9,400			7,554

The analysis of turnover by geographical area is on the basis of origin. Turnover on a destination basis would not be materially different. There is no turnover between the UK and US geographical areas.

Approximately 15% (2003: 16%) of the Group’s turnover for the year ended 31 March 2004 amounting to approximately £1.4bn (2003: £1.5bn) derives from a single customer, the Centrica Group. The majority of this turnover is in the UK gas distribution segment with lesser amounts in other activities and the UK electricity and gas transmission segment.

b) Operating profit

	Operating profit
	Before exceptional items and goodwill amortisation			After exceptional items and goodwill amortisation
	2004	2003	2002	2004	2003	2002
		(restated)	(restated)		(restated)	(restated)
	£m	£m	£m	£m	£m	£m
Group undertakings – continuing operations
UK gas distribution	729	554	548	640	443	504
UK electricity and gas transmission	769	820	756	755	774	713
US electricity transmission	133	128	87	105	103	64
US electricity distribution	449	513	266	294	413	149
US gas distribution	48	58	17	37	49	8
Other activities	103	143	206	24	24	120
	2,231	2,216	1,880	1,855	1,806	1,558
Group undertakings – discontinued operations	–	(26)	(62)	–	(194)	(498)
Operating profit of Group undertakings	2,231	2,190	1,818	1,855	1,612	1,060
Joint ventures and associate – continuing operations
Electricity activities	7	15	36	7	15	36
Other activities	–	–	(17)	–	–	(65)
	7	15	19	7	15	(29)
Joint ventures and associate – discontinued operations	–	(20)	(54)	–	109	(672)
Operating profit/(loss) of joint ventures and associate	7	(5)	(35)	7	124	(701)
Total operating profit	2,238	2,185	1,783	1,862	1,736	359
UK	1,600	1,481	1,420	1,440	1,051	440
US	632	704	377	416	549	224
Latin America	–	(7)	(19)	–	128	(310)
Rest of the World	6	7	5	6	8	5
	2,238	2,185	1,783	1,862	1,736	359

c) Total and net assets

	Total assets		Net assets
	2004	2003	2004	2003
		(restated)		(restated)
	£m	£m	£m	£m
Group undertakings – continuing operations
UK gas distribution	4,928	4,998	3,403	3,480
UK electricity and gas transmission	6,284	5,737	5,472	4,994
US electricity transmission	1,539	1,736	1,465	1,656
US electricity distribution	7,200	8,507	5,548	6,405
US gas distribution	821	930	734	778
Other activities	1,890	2,189	940	1,359
	22,662	24,097	17,562	18,672
Group undertakings – discontinued operations	–	109	(7)	(2)
Group undertakings	22,662	24,206	17,555	18,670
Joint ventures – continuing operations
Electricity activities	19	42	19	42
Other activities	–	2	–	2
Joint ventures	19	44	19	44
Unallocated	716	654	(16,311)	(17,517)
	23,397	24,904	1,263	1,197
UK	12,846	12,974	9,565	9,774
US	9,679	11,209	7,854	8,873
Rest of the World	156	67	155	67
Unallocated	716	654	(16,311)	(17,517)
	23,397	24,904	1,263	1,197

The analysis of total assets and net assets by business segment includes all attributable goodwill and excludes inter-business balances. Unallocated total assets include current asset investments, cash, taxation and taxation related regulatory assets. Unallocated net liabilities include net borrowings, taxation, interest, dividends and taxation related regulatory assets.

d) Other segmental information

	Capital expenditure			Depreciation and amortisation
	2004	2003	2002	2004	2003	2002
		(restated)	(restated)		(restated)	(restated)
	£m	£m	£m	£m	£m	£m
Group undertakings – continuing operations
UK gas distribution	293	380	455	195	185	176
UK electricity and gas transmission	584	567	613	276	243	233
US electricity transmission	53	49	38	67	71	46
US electricity distribution	227	209	141	365	359	192
US gas distribution	50	40	3	32	34	6
Other activities	274	180	204	182	170	173
	1,481	1,425	1,454	1,117	1,062	826
Group undertakings – discontinued operations	–	95	393	–	26	50
Group undertakings	1,481	1,520	1,847	1,117	1,088	876
UK	1,071	1,172	1,638	644	613	619
US	332	298	203	473	475	257
Rest of the World	78	50	6	–	–	–
	1,481	1,520	1,847	1,117	1,088	876

Capital expenditure comprises additions to tangible and intangible fixed assets (excluding goodwill) amounting to £1,479m (2003: £1,519m; 2002: £1,840m) and £2m (2003: £1m; 2002: £7m) respectively.

Depreciation and amortisation includes depreciation of tangible fixed assets, amortisation of intangible fixed assets and amortisation of regulatory assets.