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Non-regulated businesses and other

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• UK Property
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  businesses and other
• Performance against
  our objectives
• Financial
  performance

The results for non-regulated businesses, other operations and corporate activities for the years ended 31 March 2008, 2007 and 2006 were as follows:

	Years ended 31 March
Continuing operations	2008 £m	2007 £m	2006 £m
Revenue	642	567	701
Other operating income	67	71	74
Operating costs excluding exceptional items	(580)	(505)	(625)
Adjusted operating profit	129	133	150
Exceptional items	(57)	(1)	18
Operating profit	72	132	168

 

2007/08 compared with 2006/07

The principal movements between 2007/08 and 2006/07 can be summarised as follows:

	Revenue and other operating income £m	Operating costs £m	Operating profit £m
2006/07 results	638	(506)	132
Add back exceptional items	–	1	1
2006/07 adjusted results	638	(505)	133
Metering	14	(13)	1
Property	–	7	7
Grain LNG	3	–	3
Advantica	(37)	34	(3)
US non-regulated business	49	(51)	(2)
Fulcrum and other activities	42	(52)	(10)
2007/08 adjusted results	709	(580)	129
2007/08 exceptional items	–	(57)	(57)
2007/08 results	709	(637)	72

Revenue and other operating income from non-regulated businesses and other operations increased by £71 million from £638 million in 2006/07 to £709 million in 2007/08. The principal reasons for this increase were the inclusion of £49 million with respect to seven months of non-regulated activities acquired with KeySpan and an increase of £14 million in our metering businesses, reflecting portfolio growth at OnStream. Increased revenue for our other operations principally relates to Fulcrum. This was partially offset by a £37 million reduction in revenue following the disposal of Advantica in August 2007.

Operating costs excluding exceptional items were £75 million higher in 2007/08 compared with 2006/07, comprising an increase of £51 million from non-regulated activities acquired with KeySpan and an increase of £13 million in our metering businesses as a result of increased volumes, together with £52 million from Fulcrum and other activities, partially offset by a reduction in costs following the disposal of Advantica of £34 million.

Contributions from non-regulated businesses to adjusted operating profit comprised £104 million (2006/07: £103 million) from Metering; £93 million (2006/07: £86 million) from Property; £12 million (2006/07: £9 million) from Grain LNG; a £1 million loss (2006/07: profit £2 million) from Advantica and a loss of £2 million (2006/07: n/a) from US non-regulated businesses acquired with KeySpan.

Exceptional items of £57 million in 2007/08 includes £44 million arising from an increase in the provision for environmental remediation of historically contaminated sites in the UK following a review conducted during the year, £15 million relating to costs incurred with respect to the potential disposal of the UK property business and £4 million of restructuring costs, partially offset by a £6 million gain on the disposal of Advantica. This compared with £1 million in exceptional items in 2006/07.

As a consequence, adjusted operating profit excluding exceptional items, for other activities decreased by £4 million and operating profit decreased by £60 million.

2006/07 compared with 2005/06

The principal movements between 2006/07 and 2005/06 can be summarised as follows:

	Revenue and other operating income £m	Operating costs £m	Operating profit £m
2005/06 results	775	(607)	168
Add back exceptional items	–	(18)	(18)
2005/06 adjusted results	775	(625)	150
Metering	19	(13)	6
Property	(20)	18	(2)
Grain LNG	11	(8)	3
Fulcrum	(134)	125	(9)
Insurance and other	(13)	(2)	(15)
2006/07 adjusted results	638	(505)	133
2006/07 exceptional items	–	(1)	(1)
2006/07 results	638	(506)	132

Revenue and other operating income from non-regulated businesses and other operations reduced from £775 million in 2005/06 to £638 million in 2006/07. The principal reason for this fall was £134 million lower revenue at Fulcrum, reflecting the full year impact of the loss of business from the four regional gas distribution networks disposed of in 2005/06. Revenue and other operating income was £20 million lower in our property business, reflecting the impact of the revised planning guidance for development of sites in close proximity to hazardous installations issued by the HSE. Partially offsetting these reductions, revenue was £19 million higher in our metering businesses, reflecting growth in OnStream, and revenue and other operating income at Grain LNG was £11 million higher, reflecting the first full year of Phase I operations.

Operating costs excluding exceptional items were £120 million lower in 2006/07 compared with 2005/06. Within Fulcrum, operating costs were £125 million lower as a result of the loss of business from the disposed gas networks.

Operating costs were also £18 million lower in our property business due to the expected reduction in stock sales. These decreases were partially offset by operating cost increases in our metering and Grain LNG businesses of £13 million and £8 million respectively as a result of the increased volumes in these businesses.

Contributions from non-regulated businesses to the adjusted operating profit for other activities comprised £103 million in 2006/07 from Metering, £86 million from Property, £9 million from Grain LNG and £2 million from Advantica (2005/06: £97 million, £88 million, £6 million and £1 million loss respectively).

The exceptional item of £1 million in 2006/07 related to the non-regulated businesses and other operations’ share of restructuring costs incurred during the year. This compared with a net £18 million gain in 2005/06. As a consequence, adjusted operating profit excluding exceptional items reduced by £17 million and operating profit reduced by £36 million.