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The Group’s excellent performance has been
combined with major progress in the
establishment of a culture that seeks continual
operational improvements, high service standards
and, above all, safety.
Strong earnings growth
The Group’s financial performance for the year
ended 31 March 2004 was particularly strong,
with adjusted earnings per share* increasing
by 23% from 28.3 pence to 34.7 pence.
Adjusted operating profit* rose by 2% from
£2,185 million to £2,238 million, equivalent
to 4% at constant US dollar/pound exchange
rates. We have delivered significant reductions
in controllable costs, improved the performance
of Gridcom, and benefited from exiting from a
number of non-core businesses. A particularly
strong operating performance and increased
revenues in UK Gas Distribution more than offset
the adverse impact of year to year weather
patterns in the US, increased UK pensions costs,
and lower profits from the recovery of US
stranded costs.
A combination of lower effective interest rates
and a weaker US dollar also contributed to strong
growth in adjusted profit before tax* . Net debt at
31 March 2004 was reduced to £12,632 million
from £13,878 million with £674 million attributable
to the weaker dollar.
Increased dividend
Our financial strength, as demonstrated by these
results, combined with our confidence in the future
prospects of our businesses enables the Board to
recommend a final dividend of 11.87 pence per
ordinary share. This brings the total dividend for
the year to 19.78 pence per ordinary share, a
15% increase in the dividend this year. We are
targeting 7% per annum dividend growth for
each of the next four years to March 2008.
The final dividend per American Depositary Share
(ADS) proposed by the Board is $1.0500,
bringing the total dividend for the year to $1.7190
per ADS.
Governance
Our vision for National Grid Transco is of a
modern, progressive, forward-looking company
that benefits all our stakeholders. We are
committed to the highest standards of corporate
governance and to operating our businesses in
a sustainable and responsible manner.
The composition of the Board and its committees
and the Board’s oversight of strategy, financial
performance, health, safety, environment and
social involvement all fulfil the requirements of
the latest amendments to the Combined Code
on Corporate Governance and meet best practice.
We believe that all significant risks within the
Group are thoroughly assessed and managed
through our systems of risk management and
strong financial control. As laid out in our
‘Framework for Responsible Business’, we remain
committed to the highest standards of behaviour
in the conduct of our day-to-day affairs.
We are proud that our achievements in
these important areas were recognised when
National Grid Transco was placed 1st in the
Business in the Community 2003 Corporate
Responsibility Index.
Safety
Safety, in everything we do, remains of paramount
importance. During the year, we invested over
£396 million as part of programmes in both the
UK and US to replace older metallic gas
distribution pipes with polyethylene pipes.
We firmly believe that world-class safety
performance starts at the top. During the year,
the Executive Directors, Deputy Chairman and
I received training from DuPont Safety Resources
on safety leadership.
During the year, 13% fewer employees were away
from work as a result of injuries received at work
than in 2002/03.
Reliability of supply
We continue to invest in the maintenance and
enhancement of our infrastructure to increase
efficiency and ensure operational reliability. 2003
saw an unprecedented series of major blackouts
in the US and Continental Europe and, while each
of these occurrences involved unique and specific
factors, it is clear that all parties in the electricity
industry can learn lessons for the reliability of
supply in the future. Although on a much smaller
scale, we deeply regret the two power cuts that
occurred during last summer, affecting parts of
South London, causing disruption to rail services,
and separately parts of the West Midlands. We
continue to work with Ofgem on its investigation
which is expected to conclude this summer.
Despite these incidents, our UK electricity reliability
performance remains at world-class levels –
delivering 99.9997% of the energy demanded
during the year.
Investing in the community
We place great emphasis on our relationships with
the local communities we serve and the wider
social needs of the societies in which we operate.
In the US, we are a strong supporter of ‘United
Way’, an organisation that brings local
communities together to focus on the most
important human needs including helping children
and young people succeed, strengthening and
supporting families, building vital and safe
neighbourhoods, and supporting vulnerable and
ageing populations.
In the UK, we have a strong track record of
community investment, particularly through
the National Grid Transco Foundation. The
Training Scheme for Young Offenders and the
Creative Education programme (CRED) both
achieved national recognition by winning Business
in the Community Awards for Excellence.
National Grid Transco people
We have achieved much this year; none of it
would have been possible without the skills and
dedication of everyone in the Group. I would like
to thank all our employees for their enthusiasm,
commitment and willingness to embrace change.
During the year, John Wybrew retired from the
Board and it was announced that Rick Sergel will
be retiring this summer. We thank them both for
their contributions to the Board and wish them
well for the future. We welcome Mike Jesanis,
formerly National Grid USA’s Chief Operating
Officer, to the Board as Rick’s replacement.
Bonnie Hill, a much valued Non-executive Director,
also retired during the year and we welcome Maria
Richter in her stead. The Board is already
benefiting from her extensive knowledge and
experience of US financial and energy markets.
Outlook
Our merger synergy and restructuring
programmes have been highly successful. We
have created a very strong Group, well placed to
deliver benefits to all our shareholders. We look
forward with confidence to further developments
in our businesses on both sides of the Atlantic.
* Excludes the impact of exceptional items and goodwill amortisation.
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