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Managing Networks Around the Clock Managing networks around the clock Annual Report and Accounts 2000 Lattice Group Annual Report and Accounts 2000 IFC Lattice Group overview Contents Financial highlights IFC Financial highlights Holding companies Turnover £3,087m Operating companies 02 Chairman’s statement 04 Chief Executive’s review 06 Business review Total operating profit £1,010m 08 Transco 13 Telecoms 16 Advantica, The Leasing Group Profit for the year £383m 17 Lattice Energy Services, Lattice Property, Eastlands 18 Health, Safety and the Proposed final dividend 3.5p Environment 20 Social initiatives 22 Operating and financial review 30 The Board of Directors 32 Contents to the financial section 33 Regulation 38 Directors’ report Holding companies Transco Holdings sub-group Lattice Group Holdings sub-group Turnover £2,975m Turnover £208m Total operating profit £958m Total operating loss £(38)m Employees (average) 14,261 Employees (average) 1,313 The accounts have been prepared on a merger basis, as if the Group had been in existence throughout the period. A reconciliation of the Group results to those above is shown on page 86. Lattice Group plc is divided into the two sub-groups noted above. Transco Holdings owns Transco plc. Lattice Group Holdings owns the Group’s other operating companies. Operating companies 8 Transco is the owner, operator and 186k is a newly formed Lattice Group A 50:50 joint venture has been formed Advantica is a business which has developer of the majority of Britain's gas company set up to provide fibre-optic with the US-based SpectraSite to create created substantial value providing transportation system. Its network infrastructure and related telecom- a mobile telecommunications towers technology and engineering solutions for supplies almost half the country’s energy munications services. As a first stage, business. This business will be the gas industry in Britain. By blending needs, more in winter. 186k is investing some £450 million in competing to meet the increasing need science, technology and engineering to the construction of a state-of-the-art for infrastructure support for the fast- deliver commercial advantage, the Transco receives gas from seven coastal backbone fibre-optic network connecting growing mobile communications industry company has developed a leading reception terminals around Great Britain, 12 major centres of demand. In addition, as it expands and adopts the third position improving business and and transports it to the meters of more 186k will provide transmission and generation of mobile phones in the UK operating performance for Transco than 20 million industrial, commercial and managed data services as well as IP and Continental Europe. and customers in gas, pipelines and domestic consumers. Its network is made (Internet Protocol) services across Britain. associated industries internationally. up of around 275,000 km of pipeline. The SpectraSite Transco JV will acquire or construct and lease out Transco’s three call centres answered communications towers and rooftop 6.3 million calls last year – 2.9 million to masts and provide expert services in the freephone national gas emergency planning, maintaining and managing service (0800 111 999). The business wireless networks. responded to 1.3 million gas escape reports. 01 Lattice Group is one of the three successor companies to what was formerly British Gas plc. Based on the unrivalled gas network expertise of Transco, our purpose is the safe and reliable provision of infrastructure networks – in gas, telecoms and other utilities. The safety, quality and performance targets of Lattice businesses can only be achieved with the commitment and dedication of our expert workforce. In this Annual Report we feature their work. Managing networks – around the clock. Eastlands provides a range of Lattice Energy Services provides larger Lattice Property manages the Group's The Leasing Group offers leasing and professional and administrative support energy consumers and developers with extensive occupied estate and surplus vehicle management services to the services to Lattice Group companies, a range of multi-utility infrastructure property portfolio. Its main activities are Lattice Group as well as third party pension scheme trustees and other services. These include new gas, water the reclamation and disposal of former customers. It currently controls a fleet of external customers. Specialist areas of and electricity connections, conversions gas works sites and the provision of more than 23,000 cars and commercial operation are pensions administration, to gas, and installation of combined heat property services to Group companies vehicles with approximately half its payroll bureau services, management and power generation units. Higher to meet their occupational requirements. business being for non-Group accounting and financial accounting. energy prices, increasing environmental customers. Supplementary services offered include pressure (including the Climate Change In addition, Lattice Property is using its database administration and managed Levy) and the liberalisation of Britain’s property management expertise to In November 2000, The Leasing Group mailing services. Eastlands will continue utilities all underpin its growth strategy. procure facilities for Lattice's telecoms signed a major Private Finance Initiative to expand its business as an outsourcing businesses, either from the Group's contract with the London Fire and service provider. existing land portfolio or from the Emergency Planning Authority. Under the external market. 20 year contract, worth over £300 million, The Leasing Group will provide and maintain some 540 Authority vehicles and 20,000 items of operational equipment. Lattice Group Annual Report and Accounts 2000 02 Chairman’s statement Lattice is a family of businesses – each focused on the challenges and opportunities of its own business environment. As Chairman of the newly created As regards the future creation of shareholder Lattice Group may I welcome you value, the most significant achievement last to our first Annual Report. Lattice year was our demerger. This will provide Group was formed in October 2000 greater scope for us to develop a portfolio through its demerger from the of profitable growing businesses free of BG Group. It has a portfolio of utility price regulation, both in Great operating companies of which Britain and, over time, overseas. Transco Transco is substantially the largest. will provide the platform for us to do this by maintaining its leading standards of As one of the three successor companies practice, performance and customer service. to the former British Gas plc, we have unrivalled experience and expertise in the This Annual Report provides a picture gas transportation sector. Transco not only of impressive progress and achievement owns and operates one of the largest and underlying the headline numbers which, most complex gas transportation systems at this stage in Transco’s five year cycle of in the world, but also consistently achieves price regulation, are necessarily depressed. high standards of customer service and Importantly, Transco’s underlying cost base reliability. As pioneers in the development in 2000 was held constant. This was in spite of the complex commercial rules and of a 10% growth in the volume of gas information systems needed to open up transported, ongoing measures to prepare the British gas market fully to competition for future performance improvement and and consumer choice, Transco’s expertise a number of other adverse factors. is unique and world-leading. Consistent with the dividend policy Building on this heritage, the Lattice declared at the time of demerger, the Board Group’s core business is the provision, is proposing a final dividend of 3.5p per management and servicing of infrastructure ordinary share, giving a notional total networks – especially those complex dividend for 2000 of 7p per ordinary share. information-based networks which provide the basis for the competitive utility markets Crucially, Transco’s high standards of now formed in the UK, and increasingly in financial performance were matched in other advanced economies. Already we are customer service and supply reliability, applying our network management skills to and in its successful drive to improve the provision of state-of-the-art occupational health and employee safety. infrastructure for the telecoms industry as it We deeply regret that there were two fatal expands to serve the new mass markets for gas explosions during the year. These are broadband and internet-based services. still the subject of enquiries by the investigating authorities. 03 This tragic reminder of the intrinsically performance targets for each business. Last year’s demerger has given us the hazardous nature of gas operations Sharing the same purpose, ours will be a freedom to pursue our own course at underscores our overriding commitment to family of businesses – each focused on the a time of exceptional change and be at the forefront of good practice as challenges and opportunities of its own opportunity. First and foremost, we are regards all aspects of safety – and, business environment; each equipped with concentrating on delivering three prime equally, of occupational health and the resources, capabilities and cultural objectives: sustaining Transco’s drive for environmental improvement. Thus, while qualities to be competitive in its own field; operational and capital efficiency; the full Board is already actively
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