Glasgow, UK , July 23, 2003 (PRIMEZONE) -- Scottish Power plc: (NYSE:SPI)(LSE:SPW)
2003/04 1st QUARTER RESULTS TO 30 JUNE 2003
- Earnings per share* of 8.1 pence, an increase of 30% year-on-year
- Investment of GBP187 million, including GBP77 million (41%) for
growth
- Net debt GBP57 million higher than the prior year end at GBP4.4
billion
- Dividend per share of 4.75 pence in line with our previously stated
aim
Full Year Quarter 1
2002/03 GBP million 2003/04 2002/03
5,273.8 Turnover 1,245.4 1,237.6
945.9 Operating profit 232.5 186.4
1,084.9 Operating profit excluding goodwill 265.8 223.1
696.8 Profit before tax 170.7 115.4
835.8 Profit before tax excluding goodwill 204.0 152.1
26.2 Earnings per share (pence) 6.3 4.2
Earnings per share excluding
33.7 goodwill (pence) 8.1 6.2
28.708 Dividends per share (pence) 4.75 7.177
*ScottishPower management assesses the performance of its businesses by adjusting UK GAAP statutory results to exclude items it considers to be non-recurring or non-operational in nature. In the periods presented goodwill amortisation has been excluded. Therefore, ScottishPower has focused its discussion of business performance on the results excluding goodwill amortisation.
ScottishPower Chief Executive, Ian Russell, said:
"I am pleased with this strong start to the year with earnings per share* up 30% to 8.1 pence. Each of our four businesses delivered performance improvements in the quarter and we continue to invest in our company for future growth."
FINANCIAL OVERVIEW
Group turnover for the first quarter to 30 June 2003, was up by GBP8 million to GBP1,245 million compared to the same period last year. Turnover in the UK was up as a result of increased revenues from our Infrastructure Division's new connections business and higher revenues from our UK Division's sales in England & Wales. Turnover from the US reduced because of the weaker dollar, offset in part by revenue growth in both PacifiCorp and PPM.
Each of our four businesses delivered higher operating profit for the quarter, particularly PacifiCorp which delivered a substantial improvement over the same period in the previous year. Group operating profit overall increased by GBP46 million to GBP233 million. Excluding goodwill amortisation, operating profit was up by 19% to GBP266 million. There was no contribution from discontinued operations in the quarter, while last year's results included operating profit of GBP14 million from Southern Water.
Profit before tax, excluding goodwill amortisation, increased by GBP52 million to GBP204 million compared to the first quarter of last year. Of this increase, GBP59 million was due to improved operational performance across all our continuing businesses including associates and joint ventures, partly offset by a GBP14 million reduction in discontinued operations, with the remaining GBP7 million due to lower interest charges. As expected, reduced benefits from prior period tax planning resulted in a higher effective tax rate for the quarter at 27%. Earnings per share increased by 48% over the same period last year to 6.3 pence. Excluding goodwill amortisation, the increase was 30% to 8.1 pence.
Improved operational performances led to an increase in operating cash flow of GBP43 million to GBP295 million. Net capital expenditure totalled GBP212 million, of which GBP187 million was invested in assets, including GBP77 million (41%) for growth; and GBP25 million related to a non-cash increase in fixed assets in respect of expected costs for future mine reclamation. Interest, tax and dividend payments were GBP257 million. After benefits from the weaker US dollar of GBP104 million, net debt was GBP4,378 million at the end of the quarter, GBP57 million higher than at 31 March 2003. In June 2003 we launched a convertible bond which raised $700 million to support planned organic investment in our businesses. The funds were received in July 2003. The convertible bond provides efficient long-term financing on attractive terms.
In line with our previously stated aim, the first quarter dividend of 2003/04 will be 4.75 pence per share, payable on 15 September 2003. The ADS dividend is confirmed in a separate announcement today.
BUSINESS OVERVIEW
PacifiCorp
PacifiCorp is our regulated US business. Its strategic priorities are to:
- Achieve ROE target/$1 billion EBIT by 2004/05 - Manage energy risk and supply/demand balance - Deliver excellent customer service - Invest to grow the regulatory asset base, including delivery of the integrated resource plan
In PacifiCorp, operating profit increased by GBP38 million to GBP137 million in the first quarter. Excluding goodwill amortisation, PacifiCorp's operating profit increased in the quarter by GBP34 million to GBP169 million.
Above normal temperatures and customer growth increased retail demand by approximately 5% over last year, due in part to the increased use of air conditioning. The higher volumes, including new customers, increased revenues by GBP17 million. Increases from regulatory rate orders of GBP11 million also contributed to the higher retail revenues. In addition, improved generation plant performance and availability largely offset the impact of higher market prices on net power costs, which were higher by GBP2 million. Delivery of efficiency benefits remain ahead of schedule with GBP10 million reported in the quarter. The unfavourable translation effect of the weaker US dollar was substantially offset by our hedging activities.
Net capital investment for the quarter was GBP100 million, with GBP43 million (43%) invested in network growth, including projects to meet load growth and improve network reliability for customers. Approximately GBP38 million was invested on network and generation refurbishment, including planned overhauls at the Dave Johnston and Jim Bridger coal-fired plants in Wyoming, and GBP19 million on other capital projects, including information technology and hydro plant relicencing. Following completion of a recent study, an additional provision of GBP25 million was also made for the future reclamation of the Bridger coal mine in Wyoming. PacifiCorp continues to make capital investments in support of system safety, reliability and improved performance, including targeted infrastructure investments, particularly along Utah's high-growth Wasatch Front area where there is increasing demand for electricity. This $200 million investment programme through to 2005 is designed to meet future load demands and includes approximately $67 million invested to date to increase distribution capacity by over 180 MW, including the addition of one new substation and the expansion of five substations, among other transmission and distribution projects.
During the quarter, PacifiCorp filed a $41.8 million rate case in Wyoming to seek to recover rising costs for insurance, pension funding and health care, network growth, and other related costs. A similar general rate case is underway in Oregon to recover $57.9 million. In addition, PacifiCorp notified the Utah Public Service Commission that it would file a rate case by 31 July 2003 with a maximum request of $125 million and a proposed effective date of 1 January 2004. On 15 July 2003, the Washington Utilities and Transportation Commission (WUTC) approved PacifiCorp's request to file a general rate case before July 2005, the earliest that had been allowed under the existing rate plan. As part of its rulings, the WUTC also denied PacifiCorp recovery of up to $16 million related to excess power costs from June 2002 through to May 2003.
PacifiCorp's focus on customer service was recently recognised when its overall company satisfaction ranking improved three places, moving our business into the top three out of 60 utilities in a 2003 survey of large industrial and commercial customers performed by TQS Research of Atlanta.
Consistent with the Integrated Resource Plan, PacifiCorp issued the first of four Requests For Proposals to address the need for new resources in the eastern portion of its service territory and to address residential growth in those regions. The states of Idaho and Utah have acknowledged the plan and Oregon is in the final stages of its review. During the quarter, PacifiCorp also acquired 41 MW per year of wind power in Oregon from a third party as part of a 10-year agreement in support of renewable power.
In June 2003, the Federal Energy Regulatory Commission (FERC) ruled on several western US market energy crisis issues, requesting further information from the majority of energy companies and denying refunds in certain cases. PacifiCorp continues to respond fully to all information requests from the FERC, as well as to seek recoveries related to refunds on its forward contracts.
Infrastructure Division
Infrastructure Division is our regulated UK wires business. Its strategic priorities are to:
- Invest consistently to add future value, including supporting renewables - Optimise our position through the 2005 price control reviews and the introduction of BETTA - Deliver cost-effective, high quality customer service
Infrastructure Division's operating profit increased by GBP11 million to GBP90 million for the quarter, as a result of lower net operating costs of GBP5 million and gains from property sales of GBP6 million.
The Infrastructure Division invested net capital expenditure of GBP58 million during the quarter, with GBP13 million (22%) invested in new connections and reinforcement of our network, GBP42 million on network refurbishment and GBP3 million on other capital projects. The Berwick and Borders Investment Programme, which represents an investment of GBP11 million, is progressing to schedule, with the accelerated overhead line build programme on target for completion by March 2004. Major system reinforcement in Dumfries and Galloway remains on schedule for completion, with plant being installed and commissioned at Gretna and, in our Manweb area, the Ince 132 kV substation is currently undergoing commissioning work.
The price control reviews of SP Transmission, SP Distribution and SP Manweb have continued during the quarter, with Ofgem's Historic Business Planning Questionnaires now received. We welcome Ofgem's approach to the next price review, including the recognition of the recovery of prudently incurred pension costs. We continue to work with Ofgem and the rest of the industry to develop the framework of price controls applying to all network monopoly companies, with a focus on the provision of a sufficient and stable return that will allow all companies to attract and retain funding from capital markets.
UK Division
The UK Division is our competitive integrated generation and supply business. Its strategic priorities are to:
- Enhance margins through our integrated operations - Increase the value of our customer base through targeted sales growth and improved customer service - Progress towards achieving 10% of electricity supply from renewable sources by 2010
The UK Division reported an operating profit of GBP1 million in the quarter, compared to a loss of GBP10 million for the equivalent period last year. Excluding goodwill amortisation, the Division's operating profit was GBP2 million, up GBP11 million on last year. This was due to improved profitability in electricity supply and generation, including the benefit from the renegotiation of the Nuclear Energy Agreement and higher gas margins.
During the quarter, the UK Division invested GBP12 million in capital projects, with GBP5 million (42%) invested in growth of new generation, including the 30 MW Cruach Mhor windfarm in Argyll. A further GBP7 million was invested in generation plant overhaul and refurbishment primarily at Cruachan and Longannet.
Customer numbers continue to grow and now total 3.75 million, an increase of 100,000 in the quarter. The growth has been helped by the continued success of our new product development programme and improvements in the quality of our sales processes. We successfully rolled-out a capped price product and a new "Green H2O" product and featured our on-line products in TV campaigns, reinforcing the diversity of our product offering.
We have signed the contract for the new coal logistics arrangements, announced at our preliminary results, which will lead to our costs being GBP10 million lower in each of the next seven years.
The recent confirmation by Ofgem of the delay in the British Electricity Trading and Transmission Arrangements (BETTA) to April 2005 will not have a material effect on our results in 2003/04. Although the financial impact of the BETTA Bill is broadly neutral for ScottishPower, zonal charges for transmission access and for losses would have a negative impact on the UK Division's generation business. We therefore welcome the Department of Trade and Industry's statement that the Minister was not minded to agree to the extension of zonal loss charges into Scotland as part of a GB-wide market. Against this background we regret the decision of the High Court not to grant permission for a judicial review of Ofgem's decision to introduce zonal transmission losses in England and Wales and, along with other companies, have decided to appeal against the decision.
PPM
PPM is our competitive US energy company. PPM's strategic priorities are to:
- Continue to be a leading provider of renewable energy products - Grow natural gas storage and hub services business - Create additional value by optimising the returns from our capability across gas and power
PPM's operating profit for the quarter was GBP5 million, an increase of GBP1 million on last year, mainly as a result of favourable returns from energy management activities, contribution from new generation resources being in service and increased contributions from our expanded gas storage operations, including Katy. This was partially offset by increased depreciation charges and operating costs.
PPM's net capital expenditure for the quarter was GBP17 million, and included growth investment of GBP16 million in new wind project construction and the additional ownership interest purchased in the Alberta Hub gas storage business, as well as further investment in information technology.
In support of its goal to be a leading provider of renewable energy products, construction is nearly complete at the 146 MW High Winds Energy Center in California, and a further 16 MW have been approved to be added to the site. Approximately half of the output has been placed in long-term contracts with California public utilities, including the cities of Sacramento, Pasadena and Anaheim.
PPM is also building the Moraine and Flying Cloud windfarms in the midwestern US. Together, these projects will add 95 MW, bringing PPM's total to more than 560 MW of wind power in operation or under construction at the end of the quarter. PPM is well on its way towards its aspirational goal of 2,000 MW of wind power by 2010 and continues to pursue further wind opportunities in a number of western and midwestern states.
PPM also increased the scope and scale of its gas storage business in the quarter, adding 17% to its previous 40% ownership interest in the Alberta Hub gas storage facility purchased from a Chevron Texaco subsidiary. PPM now has a total of approximately 44 BCF of gas storage in North America. PPM has several natural gas development projects under consideration.
Outlook
Whilst we have enjoyed a strong first quarter, we expect the second quarter's results to be affected by higher interest charges than last year as a result of lower hedging benefits and, as mentioned above, a higher effective tax rate this year compared to last year. At present, our expectations for the full year remain unchanged.
Investor Timetable
25 July 2003 Annual General Meeting
30 July 2003 Shares go ex-dividend for the first quarter
1 August 2003 Last date for registering transfers to
receive the first quarter dividend
15 September 2003 First quarter dividend payable
4 November 2003 Announcement of results for the half year
and quarter ending 30 September 2003
Safe Harbor
Some statements contained herein are forward-looking statements within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. These include statements with respect to us, our corporate plans, strategies and beliefs and other statements that are not historical facts. These statements can be identified by the use of the forward-looking terminology such as "may," "will," "expect," "anticipate," "intend," "estimate," "continue," "plan" or other similar words. These statements are based on our management's assumptions and beliefs in light of the information available to us. These assumptions involve risks and uncertainties which may cause the actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.
We wish to caution readers, and others to whom forward-looking statements are addressed, that any such forward-looking statements are not guarantees of future performance and that actual results may differ materially from estimates in the forward-looking statements. We undertake no obligation to revise these forward-looking statements to reflect events or circumstances after the date hereof. Important factors that may cause results to differ from expectations include, for example:
- any regulatory changes (including changes in environmental
regulations) that may increase the operating costs of the
group, may require the group to make unforeseen capital
expenditures or may prevent the regulated business of the
group from achieving acceptable returns;
- future levels of industry generation and supply, demand and
pricing, political stability, competition and economic growth
in the relevant areas in which the group has operations;
- the availability of acceptable fuel at favorable prices;
- the availability of operational capacity of plants;
- the success of reorganizational and cost-saving efforts; and
- development and use of technology, the actions of competitors,
natural disasters and other changes to business conditions.
Further Information:
Andrew Jamieson Head of Investor Relations 0141 636 4527
Colin McSeveny Group Media Relations Manager 0141 636 4515
Group Profit and Loss Account
for the three months ended 30 June 2003
Three months ended 30 June
Continuing
operations
and Continuing Discontinued
Total operations operations Total
2003 2002 2002 2002
Notes GBPm GBPm GBPm GBPm
------------------------------------------------------------------
Turnover:
group and
share of
joint
ventures
and associates 1,252.7 1,214.6 26.7 1,241.3
Less: share
of turnover
in joint
ventures (7.1) (3.6) - (3.6)
Less: share
of turnover
in associates (0.2) (0.1) - (0.1)
----------------------------------------------
Group
turnover 2 1,245.4 1,210.9 26.7 1,237.6
Cost of
sales (741.7) (749.4) (11.4) (760.8)
----------------------------------------------
Gross
profit 503.7 461.5 15.3 476.8
Transmission
and distribution
costs (122.8) (118.7) - (118.7)
Administrative
expenses
(including
goodwill
amortisation) (156.8) (175.7) (1.3) (177.0)
Other
operating
income 8.4 5.3 - 5.3
----------------------------------------------
Operating
profit
before
goodwill
amortisation 265.8 209.1 14.0 223.1
Goodwill
amortisation (33.3) (36.7) - (36.7)
----------------------------------------------
Operating
profit 2 232.5 172.4 14.0 186.4
Share of
operating
loss in
joint
ventures (0.1) (1.8) - (1.8)
Share of
operating
profit in
associates 0.1 - - -
----------------------------------------------
Profit on
ordinary
activities
before
interest 232.5 170.6 14.0 184.6
Net interest
and similar
charges
- Group (60.5) (64.7) (3.0) (67.7)
- Joint
ventures (1.3) (1.5) - (1.5)
----------------------------------------------
(61.8) (66.2) (3.0) (69.2)
----------------------------------------------
Profit on
ordinary
activities
before
goodwill
amortisation
and
taxation 204.0 141.1 11.0 152.1
Goodwill
amortisation (33.3) (36.7) - (36.7)
----------------------------------------------
Profit on
ordinary
activities
before
taxation 170.7 104.4 11.0 115.4
Taxation 3 (55.1) (33.1) (3.4) (36.5)
----------------------------------------------
Profit
after
taxation 115.6 71.3 7.6 78.9
Minority
interests (1.0) (1.2) - (1.2)
----------------------------------------------
Profit for
the period 114.6 70.1 7.6 77.7
Dividends 5 (87.5) (132.5) - (132.5)
----------------------------------------------
Profit
/(loss)
retained 27.1 (62.4) 7.6 (54.8)
----------------------------------------------
Earnings
per ordinary
share 4 6.26p 3.81p 0.41p 4.22p
Adjusting
item -
goodwill
amortisation 1.82p 1.99p - 1.99p
----------------------------------------------
Earnings
per ordinary
share before
goodwill
amortisation 4 8.08p 5.80p 0.41p 6.21p
----------------------------------------------
Diluted
earnings
per ordinary
share 4 6.25p 4.21p
Adjusting
item -
goodwill
amortisation 1.81p 1.99p
-------- --------
Diluted
earnings
per ordinary
share before
goodwill
amortisation 4 8.06p 6.20p
-------- --------
Dividend
per ordinary
share 5 4.75p 7.177p
-------- --------
The Notes on pages x to x form part of these Accounts.
Group Cash Flow Statement
for the three months ended
30 June 2003 Three months ended 30 June
2003 2002
GBPm GBPm
------------------------------------------------------------------
Cash inflow from operating activities 295.4 252.7
Returns on investments and servicing of
finance (76.4) (81.5)
Taxation (48.3) (36.0)
---------------------
Free cash flow 170.7 135.2
Capital expenditure and financial
investment (194.6) (194.1)
---------------------
Cash flow before acquisitions and
disposals (23.9) (58.9)
Acquisitions and disposals (1.3) 1,946.5
Equity dividends paid (132.2) (126.1)
---------------------
Cash (outflow)/ inflow before use of
liquid resources and financing (157.4) 1,761.5
Management of liquid resources (8.9) (847.0)
Financing
- Issue of ordinary share capital 2.8 3.5
- Redemption of preferred stock of PacifiCorp (4.6) (5.1)
- Increase/(decrease) in debt 144.0 (708.5)
---------------------
142.2 (710.1)
---------------------
(Decrease)/increase in cash in period (24.1) 204.4
---------------------
Free cash flow represents cash flow from operating activities after adjusting for returns on investments and servicing of finance and taxation.
Reconciliation of Net Cash Flow to Movement in Net Debt
for the three months ended 30 June 2003 Three months ended 30 June
2003 2002
GBPm GBPm
-------------------------------------------------------------------
(Decrease)/increase in cash in period (24.1) 204.4
Cash (inflow) /outflow from
(increase)/decrease in debt (144.0) 708.5
Cash outflow from movement in liquid
resources 8.9 847.0
-------------------------
Change in net debt resulting from cash
flows (159.2) 1,759.9
Net debt disposed - 100.0
Foreign exchange movement 104.0 190.3
Other non-cash movements (2.2) (0.2)
-------------------------
Movement in net debt in period (57.4) 2,050.0
Net debt at end of previous period (4,321.0) (6,208.4)
-------------------------
Net debt at end of period (4,378.4) (4,158.4)
-------------------------
The Notes on pages x to x form part of these Accounts.
Group Balance Sheet
as at 30 June 2003
30 June 30 June 31 March
2003 2002 2003
Notes GBPm GBPm GBPm
-------------------------------------------------------------------
Fixed Assets
Intangible assets
- goodwill 2,156.1 2,455.2 2,280.6
Tangible assets 8,920.0 8,877.0 9,028.7
Investments
- Investments in
joint ventures:
Share of gross assets 109.6 110.6 111.9
Share of gross liabilities (109.5) (110.5) (111.8)
------------------------------------
0.1 0.1 0.1
- Loans to joint
ventures 39.6 38.8 40.2
------------------------------------
39.7 38.9 40.3
------------------------------------
- Investments in
associates 2.9 3.4 2.8
- Other
investments 268.9 264.1 247.3
------------------------------------
311.5 306.4 290.4
------------------------------------
11,387.6 11,638.6 11,599.7
Current assets
Stocks 201.4 171.4 154.6
Debtors
- Gross debtors 1,689.7 1,476.4 1,684.5
- Less
non-recourse
financing (140.8) (239.7) (148.2)
------------------------------------
1,548.9 1,236.7 1,536.3
Short-term bank
and other
deposits 698.8 1,405.8 664.6
------------------------------------
2,449.1 2,813.9 2,355.5
------------------------------------
Creditors:
amounts falling
due within one year
Loans and other
borrowings (376.0) (547.4) (208.5)
Other creditors (1,576.5) (1,678.4) (1,785.7)
------------------------------------
(1,952.5) (2,225.8) (1,994.2)
------------------------------------
Net current assets 496.6 588.1 361.3
------------------------------------
Total assets less
current liabilities 11,884.2 12,226.7 11,961.0
Creditors:
amounts falling
due after more
than one year
Loans and other
borrowings (4,701.2) (5,016.8) (4,777.1)
Provisions for
liabilities and
charges
- Deferred tax (1,290.1) (1,280.5) (1,301.9)
- Other
provisions (611.1) (679.6) (610.9)
------------------------------------
(1,901.2) (1,960.1) (1,912.8)
Deferred income (567.6) (518.7) (558.9)
------------------------------------
Net assets 2 4,714.2 4,731.1 4,712.2
Called up share capital 928.3 926.8 928.0
Share premium 2,266.9 2,257.1 2,264.4
Revaluation reserve 43.1 45.0 43.5
Capital redemption
reserve 18.3 18.3 18.3
Merger reserve 406.4 406.4 406.4
Profit and loss account 985.3 1,001.5 977.7
------------------------------------
Equity
shareholders' funds 4,648.3 4,655.1 4,638.3
Minority
interests (including
non-equity) 65.9 76.0 73.9
------------------------------------
Capital employed 4,714.2 4,731.1 4,712.2
------------------------------------
Net asset value
per ordinary share 4 248.4p 250.5p 249.2p
------------------------------------
The Notes on pages x to x form part of these Accounts.
Approved by the Board on 24 July 2003 and signed on its behalf by
Charles Miller Smith David Nish Chairman Finance Director
Notes to the Quarterly Accounts for the three months ended 30 June 2003
1 Basis of preparation
(a) These quarterly Accounts have been prepared on the basis of accounting policies consistent with those set out in the Directors' Report and Accounts for the year ended 31 March 2003.
(b) The quarterly Accounts are unaudited but have been formally reviewed by the auditors and their report to the company is set out on page x. The information shown for the year ended 31 March 2003 does not constitute statutory Accounts within the meaning of Section 240 of the Companies Act 1985 and has been extracted from the full Accounts for the year ended 31 March 2003 filed with the Registrar of Companies. The report of the auditors on these Accounts was unqualified and did not contain a Statement under either Section 237(2) or Section 237(3) of the Companies Act 1985.
(c) The relevant exchange rates applied in the preparation of these quarterly Accounts were $1.62/GBP (average rate for the three month period to 30 June 2003), $1.65/GBP(closing rate as at 30 June 2003), $1.46/GBP (average rate for the three month period to 30 June 2002), $1.52/GBP (closing rate as at 30 June 2002) and $1.58/GBP (closing rate as at 31 March 2003).
2 Segmental information
(a) Turnover by segment Three months ended 30 June
Total Inter-segment External
turnover turnover turnover
2003 2002 2003 2002 2003 2002
Note GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------------------------------------------
United
Kingdom -
continuing
operations
UK Division
- Integrated
Generation
and Supply 508.8 434.8 (7.9) (8.3) 500.9 426.5
Infrastructure
Division -
Power
Systems 160.7 157.3 (80.7) (84.1) 80.0 73.2
----------------------------------------------
United
Kingdom
total -
continuing
operations 580.9 499.7
United
States -
continuing
operations
US Division
PacifiCorp 597.1 646.5 (0.6) (0.7) 596.5 645.8
PPM 70.6 65.8 (2.6) (0.4) 68.0 65.4
----------------------------------------------
United
States total
- continuing
operations 664.5 711.2
----------------------------------------------
Total
continuing
operations 1,245.4 1,210.9
----------------------------------------------
United
Kingdom -
discontinued
operations
Southern Water - 26.7 - - - 26.7
----------------------------------------------
United
Kingdom
total -
discontinued
operations - 26.7
----------------------------------------------
Total (i) 1,245.4 1,237.6
----------------------------------------------
(b) Operating profit/(loss) by segment
Three months ended 30 June
Before Before
goodwill Goodwill goodwill Goodwill
amorti amorti amorti amorti
-sation -sation -sation -sation
2003 2003 2003 2002 2002 2002
GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------------------------------------------
United
Kingdom -
continuing
operations
UK Division
- Integrated
Generation
and Supply 2.1 (1.2) 0.9 (8.4) (1.3) (9.7)
Infrastructure
Division -
Power Systems 90.0 - 90.0 79.0 - 79.0
--------------------------------------------------
United
Kingdom
total -
continuing
operations 92.1 (1.2) 90.9 70.6 (1.3) 69.3
--------------------------------------------------
United
States -
continuing
operations
US Division
PacifiCorp 168.5 (32.0) 136.5 134.1 (35.4) 98.7
PPM 5.2 (0.1) 5.1 4.4 - 4.4
--------------------------------------------------
United
States total
- continuing
operations 173.7 (32.1) 141.6 138.5 (35.4) 103.1
--------------------------------------------------
Total
continuing
operations 265.8 (33.3) 232.5 209.1 (36.7) 172.4
--------------------------------------------------
United
Kingdom -
discontinued
operations
Southern
Water - - - 14.0 - 14.0
--------------------------------------------------
United
Kingdom
total -
discontinued
operations - - - 14.0 - 14.0
--------------------------------------------------
Total 265.8 (33.3) 232.5 223.1 (36.7) 186.4
(c) Net assets by segment
30 June 30 June 31 March
2003 2002 2003
Note GBPm GBPm GBPm
--------------------------------------------------------------------
United Kingdom -
continuing
operations
UK Division -
Integrated
Generation and
Supply 894.3 866.2 908.4
Infrastructure
Division - Power
Systems 2,216.9 2,092.6 2,175.4
-------------------------------------
United Kingdom
total - continuing
operations 3,111.2 2,958.8 3,083.8
-------------------------------------
United States -
continuing
operations
US Division
PacifiCorp 6,554.3 7,048.9 6,787.2
PPM 416.5 252.9 375.8
-------------------------------------
United States
total - continuing
operations 6,970.8 7,301.8 7,163.0
-------------------------------------
Total continuing
operations 10,082.0 10,260.6 10,246.8
Unallocated net
liabilities (ii) (5,367.8) (5,529.5) (5,534.6)
-------------------------------------
Total 4,714.2 4,731.1 4,712.2
-------------------------------------
(i) In the segmental analysis turnover is shown by geographical
origin. Turnover analysed by geographical destination is not
materially different.
(ii) Unallocated net liabilities include net debt, dividends
payable, tax liabilities and investments.
3 Taxation
The charge for taxation, including deferred tax, for the three
months ended 30 June 2003 reflects the anticipated effective rate
for the year ending 31 March 2004 of 27% on the profit before
goodwill amortisation and taxation. The charge for the three
months ended 30 June 2002 reflected the anticipated effective
rate for the year ending 31 March 2003 of 24% on the profit
before goodwill amortisation and taxation as detailed below:
Three months ended 30 June
2003 2002
GBPm GBPm
-------------------------------------------------------------------
Profit on ordinary activities before taxation 170.7 115.4
Adjusting item - goodwill amortisation 33.3 36.7
------- ------
Profit on ordinary activities before goodwill
amortisation and taxation 204.0 152.1
------- ------
4 Earnings and net asset value per ordinary share
(a) Earnings per ordinary share have been calculated for both
periods by dividing the profit for the period by the weighted
average number of ordinary shares in issue during the period,
based on the following information:
Three months ended 30 June
2003 2002
-------------------------------------------------------------------
Profit for the period (GBP million) 114.6 77.7
Basic weighted average share capital
(number of shares, million) 1,830.5 1,842.2
Diluted weighted average share capital
(number of shares, million) 1,834.3 1,845.6
--------------------------
The difference between the basic and the diluted weighted average
share capital is wholly attributable to outstanding share options
and shares held in trust in respect of certain of the group's
employee share schemes. These share options are dilutive by
reference to continuing operations and accordingly a diluted EPS
has been calculated which has the impact of reducing the net
earning per ordinary share.
(b) The calculation of earnings per ordinary share, on a basis
which excludes goodwill amortisation, is based on the following
adjusted earnings:
Three months ended 30 June
Continuing
operations Continuing Discontinued
and Total operations operations Total
2003 2002 2002 2002
GBPm GBPm GBPm GBPm
-------------------------------------------------------------------
Profit for
the period 114.6 70.1 7.6 77.7
Adjusting
item -
goodwill
amortisation 33.3 36.7 - 36.7
----------------------------------------------
Adjusted
earnings 147.9 106.8 7.6 114.4
----------------------------------------------
ScottishPower management assess the performance of the group by
adjusting earnings per share, calculated in accordance with FRS
14, to exclude items they consider to be non-recurring or
non-operational in nature. Management believes that the exclusion
of such items provides a better comparison of business
performance. Consequently, an adjusted earnings per share figure
is presented for both periods.
(c) Net asset value per ordinary share has been calculated based
on the following net assets and the number of shares in issue at
the end of the respective financial periods (after adjusting for
the effect of shares held in trust).
30 June 30 June 31 March
2003 2002 2003
-------------------------------------------------------------------
Net assets (as adjusted)
(GBP million) 4,540.9 4,615.0 4,600.1
Number of ordinary shares in
issue at the period end (as
adjusted) (number of shares,
million) 1,828.3 1,842.4 1,845.6
-------------------------------------------------------------------
5 Dividend per ordinary share
The first interim dividend of 4.75 pence per ordinary share is
payable on 15 September 2003 to shareholders on the register at 1
August 2003. A first interim dividend of 7.177 pence per share
was declared in respect of the three months ended 30 June 2002.
6 Statement of total recognised gains and losses
Three months ended 30 June
2003 2002
GBPm GBPm
-------------------------------------------------------------------
Profit for the period 114.6 77.7
Exchange movement on translation of
overseas results and net assets (152.4) (242.6)
Translation differences on foreign currency
hedging 132.5 217.6
-------------------
Total recognised gains and losses for the
period 94.7 52.7
-------------------
7 Summary of differences between UK and US Generally Accepted
Accounting Principles ('GAAP')
The consolidated Accounts of the group are prepared in accordance
with UK GAAP which differs in certain significant respects from
US GAAP. The effect of the US GAAP adjustments to profit for the
period and equity shareholders' funds are set out in the tables
below.
Three months ended 30 June
2003 2002
(a)Reconciliation of profit for the financial GBPm GBPm
period to US GAAP:
-------------------------------------------------------------------
Profit for the financial period under UK GAAP 114.6 77.7
US GAAP adjustments:
Amortisation of goodwill 33.3 36.7
US regulatory net assets (21.4) (30.0)
Pensions 4.9 (14.5)
Depreciation on revaluation uplift 0.4 0.5
Decommissioning and mine reclamation
liabilities (2.3) 2.6
PacifiCorp Transition Plan costs (14.6) (4.4)
FAS 133 36.6 116.3
Other 8.6 (5.0)
-----------------
160.1 179.9
Deferred tax effect of US GAAP adjustments 11.5 (9.0)
-----------------
Profit for the period under US GAAP before
cumulative adjustment for FAS 143(2002 C15
and C16) 171.6 170.9
Cumulative adjustment for FAS 143 (2002 C15
and C16) (0.6) 141.1
-----------------
Profit for the period under US GAAP 171.0 312.0
-----------------
Earning per share under US GAAP 9.34p 16.94p
-----------------
Diluted earnings per share under US GAAP 9.32p 16.91p
-----------------
The cumulative adjustment to the profit under US GAAP for the
three months ended 30 June 2003 of GBP(0.6) million (net of tax)
represents the cumulative effect on US GAAP earnings of adopting
FAS 143 'Accounting for Asset Retirement Obligations' effective
from 1 April 2003.
The cumulative adjustment to profit under US GAAP for the three
months ended 30 June 2002 of GBP141.1 million (net of tax)
represented the cumulative effect on US GAAP earnings of adopting
revised FAS 133 guidance effective from 1 April 2002 issued by
the Derivatives Implementation Group ('DIG') under Issue C15
'Normal Purchase and Normal Sales Exception for Certain
Option-Type Contracts and Forward Contracts in Electricity' and
Issue C16 'Applying the Normal Purchases and Normal Sales
Exception to Contracts that Combine a Forward Contract and
Purchased Option Contract'.
(b) Effect on equity shareholders' funds of differences between UK
GAAP and US GAAP:
30 June 30 June 31 March
2003 2002 2003
GBPm GBPm GBPm
-------------------------------------------------------------------
Equity shareholders' funds
under UK GAAP 4,648.3 4,655.1 4,638.3
US GAAP adjustments:
Goodwill 572.3 572.3 572.3
Business combinations (217.3) (163.5) (226.3)
Amortisation of goodwill 77.9 (49.4) 51.0
ESOP shares held in trust (29.8) (40.1) (38.2)
US regulatory net assets 963.0 979.0 1,007.9
Pensions (400.8) 210.8 (412.8)
Dividends 87.5 132.5 132.2
Revaluation of fixed assets (54.0) (54.0) (54.0)
Depreciation on revaluation
uplift 10.9 9.0 10.5
Decommissioning and mine
reclamation liabilities (4.6) 42.9 0.4
PacifiCorp Transition Plan costs 39.4 73.5 56.1
FAS 133 (61.7) (61.8) (66.8)
Other 0.1 (7.1) (12.1)
Deferred tax:
Effect of US GAAP adjustments (137.3) (403.5) (157.4)
Effect of differences in
methodology (26.7) (24.9) (21.4)
---------------------------------
Equity shareholders' funds
under US GAAP 5,467.2 5,870.8 5,479.7
---------------------------------
The FAS 133 adjustment represents the difference between
accounting for derivatives under UK and US GAAP. FAS 133 requires
all derivatives, as defined by the standard, to be marked to
market value, except those which qualify for specific exemption
under the standard or associated DIG guidance, for example those
defined as normal purchases and normal sales. The derivatives
which are marked to market value in accordance with FAS 133
include only certain of the group's commercial contractual
arrangements as many of these arrangements are outside the scope
of FAS 133. In addition, the effect of these changes in the fair
value of certain long-term contracts entered into to hedge
PacifiCorp's future retail energy resource requirements, which
are being marked to market value in accordance with FAS 133, are
subject to regulation in the US and are therefore deferred as
regulatory assets or liabilities pursuant to FAS 71 'Accounting
for the Effects of Certain Types of Regulation'. The FAS 133
adjustment included within equity shareholders' funds at 30 June
2003 of GBP61.7 million is offset by a US regulatory net asset of
GBP331.1 million included within 'US regulatory net assets' above.
8 Contingent liabilities
There have been no material changes to the group's contingent
liabilities disclosed in the 2002/03 Annual Report & Accounts.
Independent Review Report to Scottish Power plc
Introduction
We have been instructed by the company to review the financial
information, contained in the quarterly report, which comprises
the Group Profit and Loss Account, the Group Cash Flow Statement,
the Reconciliation of Net Cash Flow to Movement in Net Debt, the
Group Balance Sheet and the related notes. We have read the other
information contained in the quarterly report and considered
whether it contains any apparent misstatements or material
inconsistencies with the financial information.
Directors' responsibilities
The quarterly report, including the financial information
contained therein, is the responsibility of, and has been
approved by, the directors. The Listing Rules of the Financial
Services Authority require that the accounting policies and
presentation applied to the quarterly figures should be
consistent with those applied in preparing the preceding annual
accounts except where any changes, and the reasons for them, are
disclosed.
Review work performed
We conducted our review in accordance with guidance contained in
Bulletin 1999/4 issued by the Auditing Practices Board for use in
the United Kingdom. A review consists principally of making
enquiries of group management and applying analytical procedures
to the financial information and underlying financial data and,
based thereon, assessing whether the accounting policies and
presentation have been consistently applied unless otherwise
disclosed. A review excludes audit procedures such as tests of
controls and verification of assets, liabilities and
transactions. It is substantially less in scope than an audit
performed in accordance with United Kingdom Auditing Standards
and therefore provides a lower level of assurance than an audit.
Accordingly we do not express an audit opinion on the financial
information. This report, including the conclusion, has been
prepared for and only for the company for the purpose of the
Listing Rules of the Financial Services Authority and for no
other purpose. We do not, in producing this report, accept or
assume responsibility for any other purpose or to any other
person to whom this report is shown or into whose hands it may
come save where expressly agreed by our prior consent in writing.
Review conclusion
On the basis of our review we are not aware of any material
modifications that should be made to the financial information as
presented for the three months ended 30 June 2003.
PricewaterhouseCoopers LLP
Chartered Accountants
Glasgow
24 July 2003