Notes to the consolidated financial statements – analysis of items in the primary statements

1. Segmental analysis	10. Earnings per share	19. Trade and other receivables
2. Other operating income	11. Goodwill	20. Cash and cash equivalents
3. Operating costs	12. Other intangible assets	21. Borrowings
4. Exceptional items, remeasurements and stranded cost recoveries	13. Property, plant and equipment	22. Trade and other payables
5. Pensions and other post-retirement benefits	14. Other non-current assets	23. Other non-current liabilities
6. Finance income and costs	15. Financial and other investments	24. Provisions
7. Taxation	16. Deferred tax assets and liabilities	25. Share capital
8. Discontinued operations	17. Derivative financial instruments	26. Reconciliation of movements in total equity
9. Dividends	18. Inventories and current intangible assets	27. Consolidated cash flow statement

1. Segmental analysis

The following table describes the main activities for each business segment:

Transmission UK	High-voltage electricity transmission networks, the gas transmission network in the UK, the UK liquefied natural gas (LNG) storage activities and the French electricity interconnector.
Transmission US	High-voltage electricity transmission networks in New York and New England.
Gas Distribution UK	Four of the eight regional networks of Great Britain’s gas distribution system.
Gas Distribution US	Gas distribution in New York and New England.
Electricity Distribution & Generation US	Electricity distribution in New York and New England, and electricity generation in New York.

Other activities primarily relate to non-regulated businesses and other commercial operations not included within the above segments, including UK-based gas metering activities; UK property management; a UK LNG import terminal; other LNG operations; US unregulated transmission pipelines; US home services; US gas fields; together with corporate activities, including business development.

Discontinued operations comprise wireless infrastructure and communications operations in the UK and the US, an electricity interconnector in Australia, the Ravenswood generation station in New York City and the engineering and communications operations in the US acquired as part of the KeySpan acquisition. The wireless infrastructure operations in the UK were sold on 3 April 2007; the US wireless operations were sold on 15 August 2007; and the Basslink electricity interconnector in Australia was sold on 31 August 2007. The results for discontinued operations are disclosed in note 8.

Our segments are unchanged from those reported in the financial statements for the year ended 31 March 2007, except for our former US Electricity Distribution segment, which, as a consequence of the acquisition of KeySpan on 24 August 2007, has been expanded to incorporate the operations of KeySpan’s generation business and is now reported as Electricity Distribution & Generation US. In addition, in line with our management structure, the recovery of stranded costs from US electricity distribution customers as permitted by regulatory agreements is no longer presented as a separate segment but is reported within Electricity Distribution & Generation US. Prior year comparatives have been adjusted to conform with the current year classification.

Sales between businesses are priced having regard to the regulatory and legal requirements to which the businesses are subject.

(a) Revenue

	Total sales 2008 £m	Sales between businesses 2008 £m	Sales to third parties 2008 £m	Total sales 2007 £m	Sales between businesses 2007 £m	Sales to third parties 2007 £m	Total sales 2006 £m	Sales between businesses 2006 £m	Sales to third parties 2006 £m
Business segments – continuing operations
Transmission UK	2,956	16	2,940	2,816	18	2,798	2,710	15	2,695
Transmission US	299	61	238	270	47	223	310	48	262
Gas Distribution UK	1,383	70	1,313	1,193	92	1,101	1,222	86	1,136
Gas Distribution US	2,845	2	2,843	638	–	638	571	–	571
Electricity Distribution & Generation US*	3,508	2	3,506	3,430	2	3,428	3,651	2	3,649
Other activities	642	59	583	567	60	507	701	146	555
	11,633	210	11,423	8,914	219	8,695	9,165	297	8,868
Total excluding stranded cost recoveries			11,041			8,269			8,351
Stranded cost recoveries			382			426			517
			11,423			8,695			8,868
Geographical segments
UK			4,787			4,397			4,374
US			6,636			4,298			4,494
			11,423			8,695			8,868

*Comparatives have been adjusted to present items on a basis consistent with the current year classification

The table above represents revenue from continuing operations only, as disclosed in the consolidated income statement. For additional disclosures relating to discontinued operations, refer to note 8.

The analysis of revenue by geographical area is on the basis of destination. There are no material sales between the UK and US geographical areas.

Approximately 9% (2007: 9%; 2006: 9%) of revenue for the year ended 31 March 2008 amounting to approximately £1.0bn (2007: £0.8bn; 2006: £0.9bn) derives from a single customer, the Centrica group. The majority of this revenue is in the Gas Distribution UK segment with lesser amounts in the Transmission UK segment and in other activities.

In accordance with the Company’s accounting policy on revenue recognition, where revenue received or receivable exceeds the maximum amount permitted by regulatory agreement and adjustments will be made to reflect the over-recovery, no liability is recognised. Similarly, no asset is recognised where a regulatory agreement permits adjustments to be made to future prices in respect of an under-recovery. In the UK, there was an under-recovery of £23m at 31 March 2008 (2007: £33m). In the US, under-recoveries and other regulatory entitlements to future revenue (including stranded cost recoveries) amounted to £1,652m at 31 March 2008 (2007: £1,930m).

(b) Operating profit

	Before exceptional items, remeasurements and stranded			After exceptional items, remeasurements and stranded
	2008 £m	2007 £m	2006 £m	2008 £m	2007 £m	2006 £m
Business segments – continuing operations
Transmission UK	1,021	946	844	1,013	936	843
Transmission US	128	108	127	122	107	127
Gas Distribution UK	595	409	483	574	412	432
Gas Distribution US	392	71	47	487	67	47
Electricity Distribution & Generation US*	330	364	317	696	859	757
Other activities	129	133	150	72	132	168
	2,595	2,031	1,968	2,964	2,513	2,374
Geographical segments
UK	1,752	1,491	1,478	1,667	1,482	1,423
US	843	540	490	1,297	1,031	930
Rest of the world	–	–	–	–	–	21
	2,595	2,031	1,968	2,964	2,513	2,374

*Comparatives have been adjusted to present items on a basis consistent with the current year classification

The table above represents operating profit from continuing operations only, as disclosed in the consolidated income statement, and excludes the results of discontinued operations. For additional disclosures relating to discontinued operations, refer to note 8.

(c) Capital expenditure and depreciation

	Capital expenditure			Depreciation and amortisation
	2008 £m	2007 £m	2006 £m	2008 £m	2007 £m	2006 £m
Business segments – continuing operations
Transmission UK	1,600	1,235	849	372	352	377
Transmission US	111	108	91	40	41	45
Gas Distribution UK	514	490	444	181	170	161
Gas Distribution US	188	36	25	91	24	19
Electricity Distribution & Generation US	257	218	219	146	127	126
Other activities	383	258	279	164	157	160
	3,053	2,345	1,907	994	871	888
Discontinued operations	1	30	201	–	72	77
	3,054	2,375	2,108	994	943	965
Geographical segments
UK	2,493	2,007	1,697	709	739	771
US	560	365	340	285	196	194
Rest of the world	1	3	71	–	8	–
	3,054	2,375	2,108	994	943	965

Capital expenditure comprises additions to property, plant and equipment and other non-current intangible assets amounting to £3,009m (2007: £2,343m; 2006: £2,093m) and £45m (2007: £32m; 2006: £15m) respectively.

Depreciation and amortisation includes expensed depreciation of property, plant and equipment and amortisation of other intangible assets amounting to £940m (2007: £889m; 2006: £908m) and £54m (2007: £54m; 2006: £57m) respectively.

(d) Total assets and total liabilities

	Total assets		Total liabilities
	2008 £m	2007 £m	2008 £m	2007 £m
Business segments – continuing operations
Transmission UK*	10,076	8,060	(1,455)	(1,434)
Transmission US	1,534	1,481	(38)	(19)
Gas Distribution UK	5,765	5,404	(1,222)	(1,192)
Gas Distribution US	7,031	1,109	(1,254)	(231)
Electricity Distribution & Generation US*	5,525	4,536	(2,226)	(1,697)
Other activities*	2,517	1,478	(1,023)	(603)
	32,448	22,068	(7,218)	(5,176)
Discontinued operations	1,508	1,968	(83)	(477)
	33,956	24,036	(7,301)	(5,653)
Joint ventures – continuing operations	71	5	–	–
Unallocated	3,795	4,348	(25,141)	(18,600)
	37,822	28,389	(32,442)	(24,253)
Geographical segments
UK	17,533	16,405	(3,365)	(3,683)
US	16,494	7,288	(3,936)	(1,966)
Rest of the world	–	348	–	(4)
Unallocated	3,795	4,348	(25,141)	(18,600)
	37,822	28,389	(32,442)	(24,253)

*Comparatives have been adjusted to present items on a basis consistent with the current year classification

The analysis of total assets and total liabilities includes all attributable goodwill and excludes inter-business balances. Unallocated total assets comprise cash and cash equivalents, taxation, current financial investments and derivative financial assets. Unallocated total liabilities comprise bank overdrafts, borrowings, derivative financial liabilities and taxation.

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