GLASGOW, UK -- (MARKET WIRE) -- November 14, 2006 --14 November 2006
SCOTTISHPOWER DELIVERS STRONG HALF YEAR RESULTS
Results for the six months ended 30 September 2006
Adjusted results*
Sep-06 Sep-05
Operating profit GBP517m GBP326m +59%
Profit before tax GBP483m GBP273m +77%
Profit from continuing GBP330m GBP237m +39%
operations
Continuing earnings per share 21.05p 12.83p +64%
Group earnings per share 21.05p 20.50p +3%
Cash generated from GBP600m GBP179m
operations
Dividend 11.4p 10.4p
Reported results
Sep-06 Sep-05
Operating profit GBP396m GBP197m
Profit before tax GBP271m GBP17m
Profit from continuing GBP181m GBP88m
operations
Continuing earnings per share 11.54p 4.72p
Group earnings per share 11.54p 12.53p
Cash generated from GBP600m GBP179m
operations
Dividend 11.4p 10.4p
- Energy Networks adjusted operating profit GBP245m* - up GBP4m
Regulated revenue growth, strong cost management and improved network
performance
- Energy Retail & Wholesale adjusted operating profit GBP216m* - up
GBP126m
Strong generation returns particularly from coal, and benefits from our
forward commodity procurement strategy. Also delivering improved
customer service, better debt management and initiatives to help
the 'fuel poor'
- PPM Energy adjusted operating profit GBP68m* - up GBP58m
Benefiting from wind development activities and good growth in gas
storage and energy management
- Cash generated from operations increased by GBP421m to GBP600m after
GBP102m special contribution to pension fund
Strong operational performance and working capital improvements
- Capital investment of GBP460m; 60% for growth principally in UK and US
wind farms
Philip Bowman, ScottishPower Chief Executive, said:
"These are excellent results and the first reported from the newly
restructured and re-focused ScottishPower, since the sale of PacifiCorp
in March this year. They demonstrate the transformation of the Group and
the benefits of the actions we have taken to enhance operational
performance and generate attractive returns from our investment
programme. As a result, we have achieved strong performances across all
business areas, particularly from the Energy Retail & Wholesale business
and PPM Energy. In addition, our increased focus on cash generation and
better working capital management is already delivering results with an
additional GBP421 million of cash from operations during the period."
Note: Items marked * throughout this document represent our reported
results adjusted to: exclude the effects of certain IAS 39
remeasurements; exclude exceptional items in relation to 2005/06; and to
include depreciation charges in relation to PacifiCorp incurred from 24
May 2005 to 30 September 2005. Further details, are given in the
Financial Review section.
For further information:
Media enquiries:
Colin McSeveny, Media Relations Director +44 (0) 141 636 4515
Anthony Cardew, Cardew Group +44 (0) 20 7930 0777
Investor enquiries:
Peter Durman, Investor Relations Director +44 (0) 141 636 4527
Presentation material:
The results presentation will be available on the corporate website
www.scottishpower.com from 09.00 (UK time) on Tuesday 14 November 2006.
Presentation webcast/audio broadcast:
A live webcast of the presentation to analysts will be available on the
investor relations section of
www.scottishpower.com at 09.30 (UK time) on
Tuesday 14 November. A recording of the webcast will be available from
around 14.00 (UK time).
A live audio broadcast of the presentation and question and answer
session will also be available. The presentation can be accessed by dialling:
UK: 0500 551 077
International: +44 (0)20 7162 0025
US/Canada: 1 877 491 0064
Conference call:
A conference call will be held for analysts and investors at 16.00 (UK
time) on Tuesday 14 November. The call can be accessed by dialling:
UK: 0800 953 1444
International: +44 (0)1452 561 365
US/Canada: 1 866 220 1431
A recording of the conference call will be available until 21 November 2006:
International: +44 (0)1452 550 000 Access code: 9341258#
Photography:
Photographs will be sent to picture desks on Tuesday 14 November.
Photograph enquiries should be directed to +44 (0)141 636 4557.
CHIEF EXECUTIVE'S REVIEW
ScottishPower has delivered a strong first half performance with adjusted
operating profit up by 59% to GBP517 million*, adjusted profit before tax
up by 77% to GBP483 million* and adjusted profit from continuing operations up 39% to GBP330 million*. On a reported basis, operating
profit was GBP396 million, profit before tax was GBP271 million and
profit from continuing operations was GBP181 million. The difference
between the adjusted and reported results relate to certain IAS 39
remeasurements, further details of which are given in the Financial
Review.
All our businesses have delivered good performances with the non-regulated
energy businesses in the UK and US, in particular, contributing to the
strong growth. Of the GBP191 million increase in adjusted operating
profit, GBP126 million came from Energy Retail & Wholesale and GBP58
million was from PPM Energy in the US. The key drivers for the growth in
operating profit were:
- The successful optimisation and flexible performance of our UK
generation fleet, especially our coal-fired plant;
- The benefit of our rolling commodity hedging programme and energy
management activities in the UK, together with increased retail
tariffs, which have helped to offset the impact of high wholesale
prices and environmental compliance costs;
- The contribution from our investment in wind farms in the UK;
- Good growth at PPM Energy driven by a full six month contribution from
wind farm developments completed in the past 12 months, the sale of
Leaning Juniper wind farm through its first 'build-to-sell'
transaction, and by its gas storage and energy management activities;
and
- Cost efficiencies resulting from the restructuring programme that began
last year.
Energy Networks continues to perform well with profit growth from an
increase in regulated revenues and strong cost management. Our targeted
investment programme and operational improvements have delivered a
further improvement in network performance.
We have continued to drive operating efficiencies through our
restructuring programme which commenced last year and delivered a further
GBP20 million of savings during this first half, bringing the total
delivered to date to GBP30 million. We are on track to deliver the
remainder of the programme by 2008, which totals GBP60 million of savings.
Our strong operational performance and increased focus on working capital
management and improved cash conversion have contributed to an increase
of GBP421 million in cash generated from operations to GBP600 million, after the GBP102 million special pension contribution. In particular, we
have delivered working capital efficiencies through better inventory
control and customer debt management initiatives, and have also benefited
from a significant reduction in margin deposits in PPM Energy.
Capital investment during the half year of GBP460 million was driven by
our wind farm development programme in the UK and US; the upgrade and
reinforcement of our generation and network assets in the UK; and the
start of the Flue Gas Desulphurisation (FGD) installation project at
Longannet power station in Scotland.
We are actively engaged with the UK Government through the Energy
Review. We welcome the Review's recognition that significant investment
to replace and modernise the UK's generation and infrastructure assets is
essential to address energy supply security and environmental concerns.
We support the development of mechanisms, such as the EU Emissions
Trading Scheme and the UK Renewables Obligation, that provide industry
with the long-term certainty necessary to underpin investment. However,
we are concerned that unexpected revisions to these mechanisms could
damage investor confidence. UK competitiveness may also be undermined by
the inconsistent approaches EU Member States have adopted to setting
Phase II carbon emissions allocations. The measures under the Energy
Efficiency Commitment (EEC) alone will not meet the Government's aims to
improve the energy efficiency of the UK's housing stock or to reduce
energy demand. We believe that smart metering technology can make a
major contribution to demand reduction, and that it is now ready to be
rolled out on a national basis.
ScottishPower has a strong blend of high-growth competitive and low-risk
regulated businesses; each well positioned in its market and well placed
for future growth and investment. Our strategy to grow shareholder value
in each business is clear:
- In Energy Networks, we plan to deliver returns at, or in excess of, the
level of allowed cost of capital on our expanding regulated asset base,
through continued improvement in our asset and operational management.
- In Energy Retail & Wholesale, we are focusing on maximising returns
from the integrated business through: optimising and expanding our
diversified generation fleet; effective energy management activities;
improving customer service; operational efficiencies; improved cash
conversion; and as a leading developer of renewable energy.
- In PPM Energy, we are continuing to build leading positions in wind
generation and independent gas storage, and expand our energy
management and origination businesses.
This has been a period of significant change for the Group with major
restructuring and re-focusing of the business. Against this background of
change, we are delivering our investment programme and associated returns
whilst continuing the process of cost reduction across the business. We
set out this year to continue the rapid and effective implementation of
our strategy to enhance the performance of all our operations. We have
sought to become leaner and more responsive - to speed up decision-making
and to push accountability out into the business. This will enable us to
be more competitive and to respond more quickly to our customers and
changing market conditions. The effective implementation of our strategy
is already delivering improved results with strong profit growth and cash
generation. The Operational Review describes some of the many different
initiatives underway across our business which are reducing cost,
improving working capital, enhancing network performance and delivering
better customer service and experience. The transformation of
ScottishPower is creating a solid platform to grow shareholder value.
OPERATIONAL REVIEW
Energy Networks
- Adjusted operating profit up GBP4 million to GBP245 million*
- Invested GBP157 million to expand and improve our network performance
- Network performance improved by 5%
- Engaging with Ofgem on Transmission Price Control Review
Energy Networks adjusted operating profit rose by GBP4 million to GBP245
million* for the half year. This reflects an increase in regulated
revenues of GBP7 million and ongoing reductions in controllable costs,
partly offset by a slight rise in pension costs and the year-on-year
effect of property sales income which benefited the same period last year
by GBP3 million.
For the half year, net capital investment was GBP157 million, with 32%
invested for growth. The growth investment has been directed to network
reinforcement programmes, particularly in Liverpool and Central Scotland,
and investment to support new renewable infrastructure. Refurbishment
investment of GBP107 million included substation and overhead line
expenditure designed to improve network resilience and system
performance. In addition, we have accelerated our programme to install
network controllable points, which will allow us to quickly isolate
faults in the network and thereby enable services to be restored to
customers more rapidly and efficiently. As a result, 5,000 of these
points will be installed across our 112,000 km network by the Summer of
2008, ahead of our original timetable of 2010, and we aim to install over
a quarter of these by the end of this financial year.
Section 37 applications for the Beauly-Denny transmission line and the
Denny North substation have been lodged; and the public inquiry is due to
commence in February. In addition, we have agreed with Ofgem the level
of investment required to upgrade the Scotland-England interconnector.
Work has now begun to upgrade this interconnector to 2,800 MW of capacity
by 2010.
Network performance continues to benefit from our targeted investment
programme and improved operating practices. Network performance measured
in terms of Customer Interruptions and Customer Minutes Lost improved by
an average of 5% against the same period last year. Targeted investment
in infrastructure, such as network controllable points and telecontrol
systems, and maintenance activities, such as tree-cutting, will help to
drive further improvements in network performance. In addition, the
continued roll-out of better mobile information technology and satellite
navigation for our field-based response teams will help us to respond
more effectively to network faults. We have combined our Scottish
distribution and transmission network control centres on one site at
Kirkintilloch. This will provide further focus on improved network
performance and customer service. We have also established, as part of
Ofgem's Innovation Funding Initiative, a range of research and
development projects designed to improve network performance including a
project to examine network designs and the implications of distributed
generation.
We continue to work with Ofgem on the next Transmission Price Control
Review, which will apply for the five year period from April 2007. Our
objective is to achieve a fair outcome with sufficient and timely funding
for the considerable increase in capital investment required to maintain
a safe and reliable network and to support the development and connection
of the growing renewable generation capacity. In particular, we believe
the cost of capital should be sufficient to ensure that we are able to
finance our business effectively at a time when significant investment is
required to meet the Government's targets for renewables and to ensure
security of supply. We strongly disagree with the report by Ofgem's
advisers that assumes that the forward-looking leveraged beta will be
below unity, particularly at a time of high investment levels and
increased risk. Our investment allowance should also be sufficient to
fund new connections and to enhance our transmission capacity to support
the additional renewable connections. In addition, this significant
investment programme comes at a time when growth in the global
infrastructure market is causing inflationary pressures, which needs to
be taken into account as part of this Review.
Energy Retail & Wholesale
- Adjusted operating profit up GBP126 million to GBP216 million*
- Strong generation returns particularly from coal-fired plant
- Robust commodity procurement strategy
- Investment in renewables delivering returns
- Customer service improved and customer numbers held stable in volatile
market
- Continue to shield customers from the full brunt of wholesale prices
- Customer debt management delivering working capital efficiencies
- Range of measures introduced to help 'fuel poor'
Adjusted operating profit increased by GBP126 million to GBP216 million*
for the half year. The key growth drivers have been strong generation
returns, particularly from our coal-fired plant; the benefits of our
rolling commodity procurement strategy and energy management; returns
from the investment in our renewables programme; and a GBP15 million gain
on the sale of Knapton power station. In addition, our cost efficiency
initiatives and tight control of operating costs resulted in lower net
operating costs.
High gas and electricity wholesale prices have resulted in better spreads,
particularly for our coal plant. Our investment in flexible generation
and ability to secure low sulphur coal were key to delivering strong
returns in these market conditions. We have increased our coal plant
running by 74% to 6.8 TWh whilst at the same time reduced output from our
gas plant by 44% to 2.9 TWh, optimising economic running and
availability. This ability to react to changing market conditions comes
from our diversified fuel mix and ability to flex the plant operation.
We retained our position as one of the top performers in the Balancing
Mechanism with a contribution of GBP14 million. Strong returns from
generation will support future investment including the installation of
FGD equipment at our largest coal plant, Longannet.
Against a background of high commodity prices and unprecedented market
volatility, we continue to benefit from our forward commodity procurement
strategy, which has delivered a weighted average cost of gas and
electricity below current wholesale market rates. We are 98% hedged for
the remainder of this financial year but have an increasing exposure
beyond this Winter in order to manage our average cost base in the event
that wholesale prices fall. This will allow us to remain competitive in
terms of our retail cost base. Our successful commodity procurement
strategy has also provided a direct benefit for our customers as we have
been able to protect them from the high price increases seen in the
wholesale commodity market. We estimate this to have benefited a
typical dual fuel customer by GBP200 a year on average, over the past two
years.
The returns from our retail business at market rates remained poor due to
rising commodity and environmental compliance costs, which in the half
year have more than offset recent retail tariff increases. As a result,
we have deliberately constrained customer growth and our customer numbers
have been held broadly stable during the period at 5.2 million.
A key area of focus for Energy Retail has been customer service where we
have delivered improvements through our new call centre telephony system
and re-organisation of customer service operations, which are delivering
better first-time call resolution for customers. Our actions to provide
improved customer service and better complaint handling have helped
deliver a 40% reduction in Energywatch complaints over the same period
last year.
Another key area of focus is the management of working capital where we
are increasing the proportion of customers on payment methods such as
direct debit and 'pay-as-you-go' using key meter technology. This has
improved debtors' cash flow and helped manage debt write-off
performance. Direct debit penetration has increased further this year
and we have introduced quarterly assessment for direct debit customers,
which will help to ensure that the payments more accurately track
consumption patterns and tariff changes. Earlier this year we commenced
the introduction of key meters for 'pay-as-you-go' customers, which will
improve the service offering to these customers and cash collection.
Around 40,000 key meters have now been installed and, to enhance further
the benefits of this initiative, we expect to accelerate its roll-out.
We continue to deliver working capital efficiencies and maintain our
strong and effective performance in debt management by focusing on key
operational improvements in the meter to cash process. Improved meter
reader access, together with continued proactive customer contact to
obtain meter reads has reduced estimation levels resulting in more
accurate billing. This, coupled with enhancements to our debt management
systems and processes, has offset economic pressure on debt management
and collection and delivered a year-on-year improvement in customer
debtor days outstanding. Some of these activities are now being
benchmarked with leading international companies.
We are also involved in several other initiatives to address fuel poverty
including our GBP3 million investment in the ScottishPower Energy People
Trust, which we established last year. So far, GBP1.6 million has been
awarded to 47 projects to help over 31,000 homes.
These results also reflect the benefit of our investment in wind farms.
The completion of two additional projects, Black Law II (27 MW) and Beinn
Tharsuinn (29 MW) increased operational capacity to 344 MW, reinforcing
our position as the UK's leading onshore wind developer. In addition, we
have begun construction on Whitelee (322 MW) and Wether Hill (18 MW).
Whitelee will be the largest onshore wind farm in Europe. We currently
have 464 MW under construction or with planning consents. As a result,
we either operate or have approvals for 808 MW, representing over 80% of
our 2010 target.
Looking to the future, net capital investment was GBP123 million for the
half year, with 45% invested in growth projects such as wind farm
developments and the FGD project at Longannet. Our GBP170 million
programme to install FGD equipment at Longannet will use seawater-based
technology and will help us maintain a balanced generation portfolio. In
addition, our programme of refurbishment and overhaul expenditure
continued to focus on improving plant performance and availability at our
coal stations and on increasing the flexibility of our CCGT plant.
In August, we announced the sale of Knapton power station to RGS Energy
Limited for GBP15 million in cash. This arrangement includes favourable
long-term power purchase and gas supply agreements with RGS.
PPM Energy
- Adjusted operating profit up GBP58 million to GBP68 million*
- Contribution from wind business up GBP37 million from new wind
development
- Strong returns from wholesale energy optimisation and trading
- Improved contribution from owned and contracted gas storage
PPM Energy delivered strong growth in the half year with adjusted
operating profit up by GBP58 million to GBP68 million*. These results
demonstrate the benefit from our positions in attractive, high-growth
market segments and strong returns from our investment strategy. The key
profit drivers have been a full six month contribution from new wind
farms along with the new profit stream from our wind 'build-to-sell'
activities, good growth in gas storage and a strong performance in energy
management.
Operating profit growth reflects the additional 516 MW of wind generation
that has been developed over the last 12 months and the contribution from
the sale of Leaning Juniper wind farm (100 MW) which was our first 'build-
to-sell' project. 'Build-to-sell' is a new product offering where we
construct wind farms for sale to large utilities. These projects are
commercially attractive as they capitalise on PPM Energy's wind
development capabilities in turbine procurement and construction and its
development assets. We will continue to pursue further 'build-to-sell'
opportunities, as they arise. Given the development timescales, we do
not anticipate a further 'build-to-sell' in the second half.
The majority of our half year net capital investment of GBP180 million was
invested in wind farms, including the Big Horn wind farm in Washington
(200 MW) and the successful completion of Maple Ridge Ia in New York
adding 17 MW of renewable generation. This brings the total operational
wind farm generation, under our control, to 1,620 MW, with approximately
90% of this output sold under long-term contracts. Construction is also
underway at four further wind projects: the 45 MW Maple Ridge II wind
farm in New York, the 150 MW MinnDakota wind farm in Minnesota and South
Dakota, the 75 MW Twin Buttes wind farm in Colorado and the 221 MW
Klondike III wind farm in Oregon.
We have secured wind turbines for the financial years ending March 2008
and March 2009 at competitive prices from manufacturers including GE,
Siemens and Mitsubishi. This supply of turbines is consistent with our
development objectives of 500-600 MW of new wind power per year. We have
also announced our intention to expand our wind development activities to
Canada as a natural extension of our development skills into a market
with considerable momentum for adding renewable resources to its energy
mix.
We also successfully completed our first and second wind portfolio
transactions (Aeolus I and II) in May and November 2006, which represent
a combined 657 MW of wind generation. This structure enables us to
realise the value of tax benefits associated with our wind projects and
release capital for reinvestment through an upfront cash payment and contracted future cash flows from equity investors. Most of the value of
the tax benefits in the wind portfolio transactions are now recognised
within pre-tax profit. The wind farms remain consolidated within our
results and we retain significant ownership rights and operational
control of the facilities. We are working on the third wind portfolio
transaction representing 320 MW of wind generation in which there is
continued strong market interest.
Results from our energy management activities, focusing on the management
of core assets and the optimisation of wholesale energy positions and
trading activities, increased by GBP22 million. These activities
benefited from market volatility and our established market presence and
systems' capabilities. Our contracted gas storage business operates a
hedging programme, which is put in place during the first half of the
year when we store gas, and secures profit which is realised during the
second half of the year when the gas is withdrawn under forward gas
sales. Contracted gas has benefited in the half year from lower realised
hedge losses compared to the same period last year.
Our owned gas storage again showed good growth, as a result of continued
high storage volumes and spreads, as well as a full six months of
operations at Grama Ridge. Investment in our gas storage facilities
continued, with the ongoing construction of 9.5 BCF Waha and the Phase I
1.5 BCF expansion of Grama Ridge facility. In addition, the 15 BCF
Houston Hub project continues to progress through the permitting phase.
FINANCIAL REVIEW
The Group's results and comparatives have been prepared in accordance
with IFRS. Items marked * represent adjusted results, further details of
which are given below. These adjustments have been made in order to
present the results on a more comparable basis and we believe that this
provides a better indication of underlying business performance.
Half year
2006/07 2005/06 Change
Adjusted results*
Operating profit (GBPm) 517.0 325.8 191.2
Profit before tax (GBPm) 482.8 273.3 209.5
Profit from continuing operations (GBPm) 329.5 236.7 92.8
Continuing earnings per share (pence) 21.05 12.83 8.22
Group earnings per share (pence) 21.05 20.50 0.55
Reported results
Operating profit (GBPm) 395.8 197.3 198.5
Profit before tax (GBPm) 271.2 16.5 254.7
Profit from continuing operations (GBPm) 180.6 87.6 93.0
Continuing earnings per share (pence) 11.54 4.72 6.82
Group earnings per share (pence) 11.54 12.53 (0.99)
Cash generated from operations 600.2 179.6 420.6
Unless otherwise stated 'half year' and 'interim results' relate to the
six months to 30 September 2006.
Items marked * represent the results of our operations adjusted to: (i)
exclude the effects of certain IAS 39 remeasurements, specifically fair
value losses or gains on operating and financing derivatives; and, in
relation to 2005/06, adjusted to: (ii) exclude exceptional items; and
(iii) include depreciation and amortisation charges in relation to
PacifiCorp incurred from 24 May 2005 to 30 September 2005, which, under
IFRS, were not recognised in the Group's results. The sale of PacifiCorp
was completed on 21 March 2006 and PacifiCorp was reported as a
discontinued operation during 2005/06. Reconciliations from the reported
to the adjusted results are provided in Notes 2 and 14 to the Interim
Accounts.
Adjusted results* - half year
Our businesses delivered a strong half year financial performance, with
adjusted operating profit up 59% to GBP517 million. This growth was
driven by: strong coal plant performance in the UK and benefits arising
from our commodity procurement and trading strategy; the wind development
activities within PPM Energy, along with growth in their energy
management and gas storage activities, and a modest net increase in
Energy Networks regulatory activities.
Adjusted net finance costs were GBP34 million; GBP18 million lower than
for the same period last year. The improvement was largely as a result
of lower average net debt and an increased net pension finance credit.
Average net debt reduced due to the proceeds from the sale of PacifiCorp
being held for approximately nine weeks until the majority of the cash
was returned to shareholders at the beginning of June. The residual
proceeds along with improved operational cash flows and the timing of
capital spend also contributed to lower average net debt. Net finance
income associated with our retirement benefit obligations increased
largely as a result of higher expected returns on retirement benefit
assets.
Adjusted profit before tax increased by 77% to GBP483 million. The
profit growth was driven largely by our strong operational results, and
also by lower financing costs, described above.
The adjusted income tax charge was GBP153 million compared to GBP37
million for the same period last year; and the adjusted effective rate of
tax was 31.8% compared to 13.4%. Last year's charge benefited from a
GBP42 million settlement of outstanding tax claims, which had a
disproportionate effect on the interim adjusted effective rate of tax.
Disregarding the impact of the settlement and other smaller adjustments
made in respect of prior years, the underlying rates are broadly similar.
Adjusted profit from continuing operations improved by 39% to GBP330
million as a result of the strong operational performance of the
businesses and lower interest costs, partly offset by an increase in the
tax charge - as discussed above. Adjusted continuing earnings per share
(EPS) increased by 64% to 21.05 pence reflecting both the enhanced
operational performance and the benefit from a reduction in share numbers
following the capital reorganisation on the return of cash.
Adjusted Group EPS of 21.05 pence increased by 3%, with the benefits of
the strong growth in continuing operations and the capital reorganisation
being offset by the loss of earnings following the sale of PacifiCorp.
On a like-for-like basis, last year's adjusted Group EPS of 20.50 pence
per share would be rebased to 15.05 pence reflecting the loss of earnings
from PacifiCorp (-7.67 pence) and the capital reorganisation (+2.22
pence). Against this rebased figure, this year's adjusted Group EPS of
21.05 pence per share has grown by 40%.
Reported results - half year
The Group's reported results include the impact of IAS 39 on operating
profit and net finance costs and any associated tax. Last year, the
Group's reported results also included a number of exceptional items and,
in relation to PacifiCorp, excluded depreciation charges from 24 May
2005. There are no exceptional items in the current half year and
PacifiCorp was disposed of on 21 March 2006.
Reported operating profit was GBP396 million, reflecting our strong
operational performance, offset by net fair value losses on operating
derivatives. These amounted to GBP121 million and comprised mark-to-
market losses of GBP102 million and the unwind of opening balance sheet
positions of GBP31 million, partly offset by favourable hedge
ineffectiveness of GBP12 million. This compared to last year's interim
reported operating profit of GBP197 million, which included net fair
value losses on operating derivatives of GBP161 million and net
favourable exceptional items of GBP32 million. The exceptional items in
the prior period comprised the gain on sale of Byley, offset by the first
tranche of restructuring costs and an impairment provision relating to
the retained US non-regulated business's historic aircraft lease
portfolio.
Reported net finance costs were GBP56 million lower at GBP125 million,
largely due to lower net fair value losses on financing derivatives of
GBP90 million compared to GBP128 million for the same period last year.
These fair value losses are largely due to the impact of the rise in our
share price over the half year on the fair value of the embedded
derivative within the $700 million convertible bonds.
Reported profit before tax increased by GBP255 million to GBP271 million
due to our strong operational results and a GBP77 million reduction in
net fair value losses, partly offset by the net exceptional credit of
GBP32 million recognised in last year's interim results.
Reported profit from continuing operations increased by 106% to GBP181
million reflecting the strong underlying performance as discussed above
and also an upside from lower net fair value losses compared to the same
period last year, partly offset by last year's favourable exceptional
items. These factors, along with the benefit from the reduction in share
numbers following the capital reorganisation, resulted in a 144% increase
in reported continuing EPS to 11.54 pence.
Reported Group EPS of 11.54 pence was 0.99 pence lower than last year
with the loss of earnings from PacifiCorp and the impact of last year's
exceptional items more than offsetting this year's strong operational
performance, the impact of net fair value losses and the benefit of the
capital reorganisation.
Cash and net debt
Cash generated from operations increased by GBP421 million to GBP600
million for the half year, with operating cash flows of GBP549 million
and favourable working capital movements of GBP51 million. Working
capital movements improved by GBP324 million compared to the same period
last year reflecting a significant reduction in margin deposits within
PPM Energy and the benefit from our increased group-wide focus on
operational cash management. This included favourable inventory
movements and the impact of debt management initiatives.
Opening net debt of GBP83 million at 31 March 2006 included GBP2,768
million of net proceeds from the sale of PacifiCorp, which completed in
March 2006. During the half year GBP2,204 million of the disposal
proceeds were returned to shareholders, with a further GBP46 million due
to be returned. The GBP46 million relates to the outstanding B shares,
which are classified as net debt; further details are given below.
Largely as a result of this, net debt increased by GBP2,201 million to
GBP2,284 million at 30 September 2006.
Excluding the return of cash, net debt reduced by GBP49 million. Cash
generated from operations of GBP600 million comprised GBP702 million less
the GBP102 million special contribution to our pension schemes. This was
absorbed by: GBP133 million of net tax and interest payments; GBP438
million of capital investment; and GBP139 million of dividend payments.
Other net favourable movements were GBP159 million and included
favourable non-cash foreign exchange.
The GBP2.2 billion return of cash financed from the $5.1 billion (GBP2.8
billion) net cash proceeds from the PacifiCorp disposal, took place in
June. Shareholders were able to elect from three alternatives and, as a
result, approximately GBP1.3 billion was returned via a single B share
dividend and approximately GBP0.9 billion of B shares were repurchased.
A number of shareholders, representing approximately 2% of the B shares
issued, elected to retain their B shares and will be entitled to receive
a non-cumulative preferential dividend. It is expected there will be an
opportunity for shareholders to sell these shares to the company at
certain future dates. These remaining B shares (GBP46 million) are,
therefore, classified as financial liabilities and are included within
net debt.
Dividend
The interim dividend for the six months to September 2006 will be 11.4
pence per ordinary share, payable on 28 December 2006. The ADS dividend
will be confirmed in a separate announcement today. As previously
announced, we are aiming to deliver an annual increase in the dividend
this year of at least 7% from last year's base of 25.0 pence per ordinary
share. We have also announced that dividends will be paid bi-annually in
December and June.
INVESTOR TIMETABLE
Ex dividend date for interim dividend 22 November 2006
Record date for interim dividend 24 November 2006
Interim dividend payable 28 December 2006
Preliminary results announced 23 May 2007
Final dividend payable June 2007
Safe Harbor
Some statements contained herein may include statements regarding our
assumptions, projections, expectations or beliefs about future events.
These statements are intended as "Forward-Looking Statements" within the
meaning of the "safe harbor" provisions of the Private Securities
Litigation Reform Act of 1995. All statements with respect to us, our
corporate plans, future financial condition, future results of
operations, future business plans, strategies, objectives and beliefs and
other statements that are not historical facts are forward looking.
Statements containing the words "may", "expect", "anticipate", "believe",
"intend", "estimate", "continue", "plan", "project", "target", "on
track to", "strategy", "aim", "seek", or other similar words are also
forward-looking. 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:
- the success of reorganizational and cost-saving or other strategic
efforts;
- any regulatory changes (including changes in environmental regulations
and legislation or regulatory outcomes) 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;
- weather and weather-related impacts;
- the availability of operational capacity of plants;
- adequacy and accuracy of load and price forecasts that could impact
the hedging strategy and costs to balance electricity load and supply;
- unanticipated construction delays, changes in costs, receipt of
required permits and authorizations, and other factors that could
affect future generation plants and infrastructure additions;
- the impact of interest rates and investment performance on pension and
post-retirement expense;
- the impact of new accounting pronouncements on results of operations;
and
- development and use of technology, the actions of competitors, natural
disasters and other changes to business conditions.
Click on the link below to view the full results announcement;
http://www.rns-pdf.londonstockexchange.com/rns/0141m_-2006-11-14.pdf
This information is provided by RNS
The company news service from the London Stock Exchange