1.         GENERAL INFORMATION

The information included within these condensed financial statements that refer to the year ended 31 December 2020, does not constitute statutory accounts as defined in section 434 of the Companies Act 2006. A copy of the statutory accounts for that year has been delivered to the Registrar of Companies. The auditor reported on those accounts and that report was unqualified, did not draw attention to any matters by way of emphasis and did not contain a statement under section 498(2) or (3) of the Companies Act 2006.

2.         ACCOUNTING POLICIES

Basis of preparation

The annual financial statements of the Group are prepared in accordance with International Financial Reporting Standards as adopted by the International Accounting Standards Board ("IASB"). The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the IASB.

Going concern

In the Company's latest annual reports and accounts for the year to 31 December 2020 the directors set out a number of factors they took into account when they considered continuing to adopt the going concern basis in preparing those annual reports and accounts. The directors confirm that no events have occurred during the six months to 30 June 2021, which alter the view expressed in the annual reports and accounts to 31 December 2020.

Changes in accounting policy

The Company's accounting policies and methods of computation are the same as the accounting policies which are described in the Company's financial statements for the year ended 31 December 2020, with the only changes being outlined below.

Application of new and revised IFRS

In the current year, the company has a number of amendments to IFRS by the IASB that are mandatorily effective for an accounting period that begins on or after 1 January 2021:

None of the standards, interpretations and amendments which are effective for periods beginning 1 January 2021 has had a material effect on the financial statements:

·    Amendments to IFRS 16 - COVID 19 related rent concessions;

·    Amendments to IAS 1 - Presentation of financial statements; and

·    Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 - Interest rate benchmark reform.

3.   SEGMENTAL ANALYSIS

The Group operates in three principal areas of activity, those of the distribution of electricity, engineering contracting and smart meter rental in the United Kingdom.

The Group is separated unto the following segments:

Distribution: Northern Powergrid (Northeast) plc

Contracting: Integrated Utility Services Limited

Metering: Northern Powergrid Metering Services Limited

Other: Includes support activities

The following is an analysis of the Group's revenue and results by reportable segment in the six months ended 30 June 2021 (unaudited):

External sales to E.ON plc in the six months ended 30 June 2021 represented 19.49% of revenue within the Distribution segment.

External sales to British Gas Ltd in the six months ended 30 June 2021 represented 11.02% of revenue within the Distribution segment.

3.         SEGMENTAL ANALYSIS (CONTINUED)

The following is an analysis of the Group's revenue and results by reportable segment in the six months ended 30 June 2020 (unaudited) (Restated):

External sales to RWE Npower plc in the six months ended 30 June 2020 represented 14.52% of revenue within the Distribution segment.

External sales to British Gas Ltd in the six months ended 30 June 2020 represented 11.31% of revenue within the Distribution segment.

Sales and purchases between the different segments are made at commercial prices.

3.         SEGMENTAL ANALYSIS (CONTINUED)

The accounting policies of the reportable segments are the same as the Group's accounting policies which are described in the Group's latest annual financial statements. The segment results represent the profit earned by each segment without allocation of the share of profits of joint ventures, associates, finance income and finance costs and income tax expense.

4.   INCOME TAX EXPENSE

Tax for the six month period ended 30 June 2021 is charged at 19.7% (six months ended 30 June 2020: 19.7%) which represents the best estimate of the average annual effective tax rate expected for the full year, as applied to the pre-tax income of the six month period. However, due to the tax rate change discussed below, the effective tax rate for the six month period to June 2021 is 68.3%.

Finance Bill 2020 was enacted in July 2020 and as a result, the rate of corporation tax has been held at 19% as the Finance Bill 2020 effectively removed the proposed reduction to 17% which was included within Finance Bill 2016.

In the In addition, the March 2021 Budget announced that the corporation tax rate will increase from 19% to 25% from 1 April 2023. This increase in tax rate was included within Finance Bill 2021 which was substantively enacted on 24 May 2021 and received Royal Assent on 10 June 2021. As a result, deferred tax balances have been re-measured at the 25% rate and this remeasurement has given rise to an increased deferred tax liability of 38.6m which is reflected within the above tax charge.

5.   RETIREMENT BENEFIT SCHEMES

The defined benefit obligation as at 30 June 2021 is calculated on a year-to-date basis, using the annual actuarial valuation as at 31 December 2020. The latest triennial valuation carried out by AON was on the 31 March 2019 and was concluded in 2020. There have not been any significant fluctuations or one-time events since that time that would require adjustment to the actuarial assumptions made at June 2021.

6.   FINANCIAL INSTRUMENTS

Except as detailed in the following table, the directors consider that the carrying value amounts of financial assets and financial liabilities are approximately equal to their fair values:

*2026 £124m Amortising Loan is 90% swapped at a fixed rate of 3.0682%, with the remaining 10% floating at 3 month LIBOR plus 2.00%.

**2026 £ 27m Amortising Loan is a Floating rate loan at 3 month LIBOR plus 2.00%.

7.   RELATED PARTY TRANSACTIONS

Group

Transactions entered into with related parties and balances outstanding were as follows:

7.         RELATED PARTY TRANSACTIONS (CONTINUED)

Group - continued

Sales and purchases from related parties were made at commercial prices.

Interest on loans to/from Group companies is charged at a commercial rate.

7.         RELATED PARTY TRANSACTIONS (CONTINUED)

Company

Transactions entered into with related parties and balances outstanding were as follows: