GLASGOW, U.K., Nov. 4, 2003 (PRIMEZONE) -- SCOTTISH POWER plc
2003/04 HALF YEAR RESULTS including 2nd Quarter to 30 September 2003
- Profit before tax(see Note A) increased by 17% to GBP393 million
- Earnings per share(see Note A) of 15.6 pence, an increase of 15%
- Investment of GBP387 million, including GBP155 million (40%) for
organic growth
- Dividend per share of 4.75 pence for the quarter, in line with our
previously stated aim
Quarter 2 Half Year
2003/04 2002/03 GBP million 2003/04 2002/03
1,280 1,209 Turnover 2,525 2,447
220 193 Operating profit 452 380
Operating profit
253 228 excluding goodwill 519 451
156 150 Profit before tax 327 265
Profit before tax
189 185 excluding goodwill 393 337
5.7 5.5 Earnings per share (pence) 11.9 9.7
Earnings per share
7.5 7.3 excluding goodwill (pence) 15.6 13.6
4.75 7.177 Dividends per share (pence) 9.50 14.354
ScottishPower Chief Executive, Ian Russell, said:
"I am pleased to report another set of good results with earnings per share(see Note A) up 15%. These results reflect the benefit of our continued focus on improving operational performance and investing in our business. Of the GBP387 million invested in the six months, GBP155 million was invested for growth.
Our strategy is to continue to make further operational improvements and to invest in initiatives with a range of attractive returns that will deliver organic growth. The markets in which we operate have good underlying growth in demand, particularly in the US. We also see increasing opportunities to build on the strengths of our business and increase our market share. As a result we will continue to invest in the expansion of our generation, networks and gas storage assets. We will also consider making selective acquisitions of smaller operations that complement our existing business and accelerate our organic growth.
As part of this strategy, we expect capital investment this year to rise to GBP1 billion of which half will be invested to deliver organic growth. We have today announced a major investment in our US regulated business with our decision to build a 525 MW gas-fired plant at Currant Creek, Utah, in addition to our recently announced 50% share in a new 160 MW wind farm in Colorado."
Note A: Excluding goodwill amortisation
FINANCIAL OVERVIEW
Group turnover for the quarter to 30 September 2003 increased by GBP70 million to GBP1,280 million and by GBP78 million to GBP2,525 million for the half year. The increase in UK turnover was driven primarily by higher sales in England and Wales in the UK Division and higher new connection and regulated revenues from Infrastructure Division. In PacifiCorp higher retail revenues due to increased average prices, load and customer growth supported by investment in network expansion, was offset by reduced wholesale revenues as a result of lower sales volumes and the translation impact of the weaker US dollar. In PPM turnover increased, driven by the investment in gas storage and windfarms.
Operating profit for each of our four businesses increased in the first six months. In the half year both PacifiCorp and UK Division delivered substantial improvements over last year, of GBP43 million and GBP27 million excluding goodwill amortisation respectively, due to improved operational performance and the benefit of investment. Group operating profit increased to GBP220 million in the quarter and to GBP452 million in the half year. Excluding goodwill amortisation, operating profit was GBP253 million in the quarter, up GBP25 million, and GBP519 million for the half year, up GBP68 million. The contribution to last year's operating profit from discontinued operations was GBP14 million in the half year.
Half year profit before tax was up GBP61 million at GBP327 million. Excluding goodwill amortisation, profit before tax increased by GBP57 million to GBP393 million. Continuing operations, including associates and joint ventures, contributed an additional GBP85 million to operating profit excluding goodwill amortisation offset in part by the GBP14 million reduction in discontinued operations. Interest was higher by GBP14 million, due principally to lower hedging benefits. The effective rate of tax increased to 27% as expected. Earnings per share increased by 2.2 pence to 11.9 pence for the half year and were marginally ahead of last year at 5.7 pence for the quarter. Excluding goodwill amortisation, earnings per share increased by 2.0 pence (15%) to 15.6 pence for the half year, with the improvement comprising 2.4 pence in the six months from continuing operations, offset by 0.4 pence from discontinued operations reported last year.
Operating cash flow for the half year improved by GBP70 million to GBP690 million. Interest, tax and dividend payments totalled GBP445 million while other net inflows which impact net debt, other than capital expenditure, were GBP63 million. This provided cash of GBP308 million, which was sufficient to cover all of our refurbishment and upgrade capital spend and contributed GBP79 million towards our investment in growth projects. After the benefit from the weaker dollar, net debt at 30 September 2003 was GBP4,280 million, GBP41 million lower than at 31 March 2003. Gearing (net debt/shareholders' funds) of 92%, was in line with 31 March 2003. Proceeds from our $700 million convertible bond issue were received in July 2003.
Note: ScottishPower 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 the periods reviewed, goodwill amortisation has been excluded. We have, therefore, focused our presentation of business performance on the results excluding goodwill amortisation. Unless otherwise stated, "half year" relates to the six months to 30 September 2003, and "quarter" relates to the three months to 30 September 2003.
INVESTMENT
Our investment strategy is to support the growth and development of our regulated and competitive businesses through a balanced programme of capital investment which will deliver organic growth. This growth will come from investing in new generation, networks and gas storage assets. We will also consider making selective acquisitions of operations that complement our business and will accelerate our organic growth. We will create value for shareholders by investing for growth to deliver returns ranging from allowed rates of return in our regulated businesses to higher returns in our competitive businesses. All investments are assessed on a risk adjusted returns basis, are expected to be earnings enhancing and should support our aim to retain our A- credit rating for our principal operating businesses.
We invested GBP387 million in the half year, including GBP155 million (40%) to deliver sustained organic growth for shareholders, of which 68% was invested in the US and 32% in the UK. Including new investments announced for PacifiCorp and PPM, capital investment across the group in the full year and next year is expected to average around GBP1.1 billion per annum, of which some 50% will be invested for growth in generation, networks and gas storage and the remainder in refurbishing our asset base. The growth capital includes construction of a new 525 MW gas-fired plant located south of Salt Lake City, Utah. In the longer term we see the potential for increased investment opportunities which, provided they fit our strict criteria for growth, will create shareholder value.
DIVIDEND
In line with our previously stated aim, the second quarter dividend of 2003/04 will be 4.75 pence per share, payable on 15 December 2003, taking the half year dividends to 9.50 pence per share. The ADS dividend rate will be confirmed in a separate announcement today.
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
PacifiCorp remains on track to achieve $1 billion EBIT by 2004/05. In the quarter PacifiCorp reported operating profit of GBP118 million, up by GBP10 million, bringing operating profit for the half year to GBP254 million, up GBP48 million compared to the equivalent period last year. Excluding goodwill amortisation, operating profit was GBP150 million for the quarter, an increase of GBP9 million and GBP318 million for the six months, an increase of GBP43 million.
Growth in our retail sales improved operating profit by GBP51 million at the half year, primarily as a result of increased customer usage, favourable weather conditions and regulatory recoveries. Lower net power costs and other gross margin movements contributed GBP4 million and operating efficiencies delivered GBP20 million of benefits. Offsetting these improvements were additional costs of GBP16 million, mainly labour related, and higher depreciation of GBP8 million. The unfavourable translation effect of the weaker US dollar was GBP8 million.
PacifiCorp continues to pursue general rate cases to ensure invested costs are appropriately reflected in revenue. In August 2003 PacifiCorp was granted an annual revenue increase of approximately $8.5 million in Oregon as part of a general rate case, and a further one-off amount of $12 million by early removal of a merger credit. Early implementation of the new rates will benefit revenues by $5 million in the current financial year.
PacifiCorp also confirmed with regulators in Utah its rate request for $125 million driven by capital investments and increased costs needed to support system growth. On average, the requested net increase is approximately 13.4% over rates currently in effect.
In September 2003, PacifiCorp made regulatory filings in Oregon, Utah, Wyoming and Idaho as part of its Multi-State Process (MSP) to address existing and future issues regarding allocation of costs and benefits in the states served by PacifiCorp. The filings outline an interstate allocation method for PacifiCorp's generation, power supply, transmission and administrative costs for retail customers and have been the subject of intensive meetings with regulators over the past two years. The filings combined elements from several proposals to address specific needs of each state. MSP filings in Washington and California are expected to be coordinated with pending and future rate case activities in those states.
PacifiCorp successfully managed power demand during the summer of 2003 through a robust combination of existing physical resources, hedge products, peaking generation facilities, and new interruptible industrial customer contracts. PacifiCorp remains well-positioned and has essentially balanced resources and expected demand for the winter of 2003/04. We entered into a new weather-related hedge to minimise partially the risk associated with an extremely cold winter and associated high prices, and implemented a natural gas purchasing strategy to minimise risks associated with price volatility. PacifiCorp's electricity and natural gas positions for the summer of 2004 are fully hedged based on current demand forecasts.
Focus on customer service was recognised when PacifiCorp's overall customer satisfaction ranking improved three places among large customers to a top three position out of 60 US utilities based on a 2003 survey by TQS Research of Atlanta.
Net investment in assets for the half year was GBP197 million, with GBP70 million (36%) in network expansion, particularly along the Wasatch Front in Utah where growth in demand remains high. Network and generation refurbishment expenditure was GBP87 million, including GBP21 million on major overhauls at the Dave Johnston and Jim Bridger coal-fired plants in Wyoming, which will contribute to improved operating efficiency and plant availability, and reduce exposure to short-term power markets. A further GBP40 million was invested in other projects including information technology and hydro relicensing. As reported in the first quarter, a provision of GBP25 million was also made for the future reclamation of the Bridger coal mine in Wyoming. We expect all prudently incurred investments to earn their regulatory rate of return, and contribute to an increase in the rate base of PacifiCorp.
As part of assessing future power resource needs under its integrated resource plan (IRP), PacifiCorp is currently reviewing the results from the first requests for proposals (RFP) for new resources primarily in the eastern service territory. PacifiCorp has determined that the construction of a new 525 MW gas-fired plant, located at Currant Creek, Utah, 75 miles south of Salt Lake City, would be the lowest cost resource to meet energy needs. The cost of the plant will be approximately $350 million and is expected to be on-line in two phases, 280 MW in 2005 and 245 MW in 2006. We are pleased to see the IRP action plan being implemented, with the construction of this new power plant being an important step forward to help meet future demand in the eastern part of PacifiCorp's service territory.
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 improved by GBP8 million to GBP179 million for the half year, with operating profit lower by GBP3 million in the quarter at GBP89 million. Property sale gains, reported in quarter one, contributed GBP6 million to the increase in the half year operating profit, with regulated revenues and favourable net operating costs adding GBP1 million each. In the quarter, net operating costs were higher by GBP3 million mainly as a result of a non-recurring item in the prior year.
Net capital expenditure for the half year was GBP119 million. Growth capital of GBP31 million (26%) was invested in new customer connections and expenditure on reinforcement of the network. The remaining GBP88 million was spent mainly on refurbishing the network.
The efficient and focused delivery of our capital programme supports our position to the 2005 price control reviews. We have completed the replacement of over 400 distribution switchgear units in the half year. This will improve network reliability, customer service and lower maintenance costs. We have installed some 50 automatic switching schemes and modernised over 100 km of overhead lines to improve network performance and to accelerate the restoration of interrupted supply. We have nearly completed network reinforcement at Gretna, which mitigates for the imminent closure of BNFL's Chapelcross power station, and the replacement of the poorly performing 132 kV switchgear at the Ince substation in Cheshire, both of which will improve performance and lower maintenance costs.
We continue to work with Ofgem and the rest of the industry to develop the framework of price controls, with a continued focus on the provision of a sufficient and stable return that will allow all companies to attract and retain funding from capital markets. Further, we welcome Ofgem's consultation on ways of allowing transmission companies to invest in networks to support the Government's planned expansion of renewable generation.
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 GBP4 million for the quarter, an improvement of GBP16 million, and GBP5 million for the half year, an increase of GBP27 million. Excluding goodwill amortisation, the operating profit was GBP5 million for the quarter and GBP7 million for the half year, up GBP16 million and GBP27 million, respectively. This improved performance included the benefit of growing customer numbers and the renegotiated Nuclear Energy Agreement, which contributed to the increase in electricity margins of GBP22 million in the quarter and GBP39 million for the half year. Gas margins reduced, down GBP2 million in the quarter and GBP3 million for the half year, as a result of higher transportation costs. Other business activities, including our waste derived fuel plant, contributed operating profit of GBP1 million in the quarter and GBP3 million for the half year. Operating costs increased by GBP5 million in the quarter and GBP12 million for the half year, driven by investment in energy efficiency and customer capture.
We have continued to grow successfully customer numbers with some 250,000 gained in the half year to total 3.9 million. In the half year our direct debit penetration increased by 3 percentage points and sales of our recently launched Capped Price product will lead to further improved retention of customers. We have lowered our cost to serve and improved customer retention performance with a further reduction in overall churn by 3 percentage points compared to the six months to March 2003. Further energy sales are being generated through a deal announced in August 2003 with Lloyds TSB which provides a nationally recognised channel to market. This deal complements that already in place with the Sainsbury supermarket chain.
The UK Division invested GBP35 million in capital projects, with GBP19 million (54%) invested in growth. Of this, GBP7 million was spent on an ongoing project to upgrade the 400 MW Cruachan pumped storage hydro station. The upgrade, expected to be completed in April 2004, will add 40 MW of additional capacity at this very flexible facility, creating greater capability under the NETA Balancing Mechanism.
Capital of GBP8 million was invested in the continuing refurbishment of our Longannet generation plant to help deliver improved flexibility. We are increasing the capability to start up from low or no load at the station which will allow us to capture peak prices and higher margins, resulting in improved financial performance.
GBP8 million was invested on the 30 MW Cruach Mhor windfarm and GBP4 million on other windfarm developments. Cruach Mhor will qualify for Renewable Obligation Certificates and is expected to deliver attractive returns with a relatively short cash payback period. The windfarm is due to come on line by March 2004.
We continue to address the issues raised by BAA relating to radar at our proposed windfarm at Whitelee.
Our engineers have provided extensive technical analysis to BAA regarding its objection to the proposed Black Law windfarm on the grounds of potential airport radar interference and we are pleased that this has now led to the major objection being withdrawn. We are working to resolve other final planning matters and expect to begin construction of around 96 MW of capacity in Spring 2004.
Finally, we have focused strongly on reducing sales complaints and have achieved first position in the energywatch league table for lowest Direct Selling complaints.
PPM
PPM is our competitive US energy company. Its 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
Operating profit for PPM was GBP10 million in the quarter and GBP15 million for the half year, improvements of GBP3 million and GBP4 million respectively. The improvements in the half year were due to increased returns from our energy management activities, including optimisation benefits around PPM's assets of GBP3 million, and higher contributions from our Katy and Alberta Hub gas storage facilities of GBP4 million. Other activities, including new generation resources, added a further GBP5 million to operating profit, including GBP2 million from new wind power as plant at the High Winds Energy Center came on-line during the quarter. As expected, operating costs to support business growth, including depreciation, increased by GBP7 million in the first six months. The unfavourable translation effect of the weaker dollar was GBP1 million.
PPM is positioned as the second largest provider of wind power in the US, with wind power under its control of approximately 830 MW, including projects under construction. PPM remains committed to its goal of 2,000 MW of wind power by 2010.
Capital investment for the half year was GBP36 million, including growth investment in new wind projects currently under construction and an additional 17% ownership interest purchased in the Alberta Hub gas storage facility, increasing PPM's ownership interest to 57%. The wind projects under construction are the Moraine and Flying Cloud windfarms in the midwest, the Mountain View III windfarm in the western US and the Colorado windfarm described below.
In October 2003, PPM made a $28 million investment in a 50-50 joint venture with Shell Wind Energy Inc., to acquire a windfarm, currently under construction, in southeastern Colorado from GE Wind Energy. All output from this project, which could be up to 162 MW, is being sold under a 15-year power supply agreement with Public Service Company of Colorado. Construction is well underway and the ultimate investment is contingent on the scheduled completion of turbines by GE Wind Energy by 31 December 2003. The total project cost is expected to be approximately $210 million, and will be funded by 40% equity and 60% limited recourse project debt. PPM's equity contribution at full construction will be $42 million, with an attractive return on equity and relatively short cash payback period. PPM has the option to expand the project by a further 200 MW.
Construction is underway on the 22 MW Mountain View III wind project in southern California, and is expected to be operational by the end of December 2003, with the entire output sold under a long-term contract to a utility based in San Diego. In addition, the first 146 MW of the 162 MW High Winds Energy Center began commercial operation in September 2003 and approximately two thirds of the High Winds output is already under long-term contract. PPM has also agreed to purchase the output of a 144 MW windfarm in southwestern Wyoming, owned by FPL Energy, and is actively marketing the output, consistent with PPM's business objective to lock in margin under long term contracts.
PPM's gas storage and hub services business manages a total of 44 BCF of capacity. Commercial activity at the Alberta and Katy gas storage and hub services facilities continues to exceed expectations against original business projections and provides attractive returns on the capital invested.
In addition to existing storage and hub services, PPM continues to evaluate several gas storage development sites in key trading locations across North America that could come on line in 2004 or later. PPM is evaluating further investment in the Alberta hub gas storage facility in Canada to further improve operating efficiencies.
OUTLOOK
These results reflect our strong start to the year. We remain focused on improving the operational performance of our business and investing for organic growth. We are confident that our expectations for the full year will be delivered.
INVESTOR TIMETABLE
12 November 2003 Shares go ex-dividend for the second quarter
14 November 2003 Last date for registering transfers to receive
the second quarter dividend
15 December 2003 Second quarter dividend payable
4 February 2004 Announcement of results for the third quarter
and nine months ending 31 December 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.
Group Profit and Loss Account
for the three months ended 30 September 2003
Three months ended 30 September
Continuing Continuing
operations operations
and Total and Total
2003 2002
Notes GBPm GBPm
---------------------------------------- ------------------------
Turnover: group and share of
joint ventures and associates 1,287.7 1,215.6
Less: share of turnover in joint
ventures (7.8) (6.0)
Less: share of turnover in
associates (0.1) (0.2)
---------- ----------
Group turnover 2 1,279.8 1,209.4
Cost of sales (785.8) (760.8)
---------- ----------
Gross profit 494.0 448.6
Transmission and distribution
costs (128.5) (117.8)
Administrative expenses
(including goodwill amortisation) (149.1) (144.2)
Other operating income 3.2 6.6
---------- ----------
Operating profit before goodwill
amortisation 253.1 227.8
Goodwill amortisation (33.5) (34.6)
---------- ----------
Operating profit 2 219.6 193.2
Share of operating loss in joint
ventures (0.4) (1.2)
---------- ----------
Profit on ordinary activities
before interest 219.2 192.0
Net interest and similar charges
- Group (62.0) (40.6)
- Joint ventures (1.3) (1.5)
---------- ----------
(63.3) (42.1)
---------- ----------
Profit on ordinary activities
before goodwill amortisation
and taxation 189.4 184.5
Goodwill amortisation (33.5) (34.6)
---------- ----------
Profit on ordinary activities
before taxation 155.9 149.9
Taxation 3 (51.1) (47.7)
---------- ----------
Profit after taxation 104.8 102.2
Minority interests (1.6) (1.5)
---------- ----------
Profit for the period 103.2 100.7
Dividends 5 (87.4) (132.7)
---------- ----------
Profit /(loss) retained 15.8 (32.0)
---------- ----------
Earnings per ordinary share 4 5.65p 5.46p
Adjusting item - goodwill
amortisation 1.83p 1.88p
---------- ----------
Earnings per ordinary share
before goodwill amortisation 4 7.48p 7.34p
---------- ----------
Diluted earnings per ordinary
share 4 5.58p 5.46p
Adjusting item - goodwill
amortisation 1.79p 1.87p
---------- ----------
Diluted earnings per ordinary
share before goodwill
amortisation 4 7.37p 7.33p
---------- ----------
Dividend per ordinary share 5 4.75p 7.177p
---------- ----------
The Notes on pages x to x form part of these Accounts.
Group Profit and Loss Account
for the six months ended 30 September 2003
Six months ended 30 September
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 2,540.4 2,430.2 26.7 2,456.9
Less: share
of turnover
in joint
ventures (14.9) (9.6) - (9.6)
Less: share
of turnover
in associates (0.3) (0.3) - (0.3)
----------------------------------------------
Group turnover 2 2,525.2 2,420.3 26.7 2,447.0
Cost of sales (1,527.5) (1,510.2) (11.4) (1,521.6)
----------------------------------------------
Gross profit 997.7 910.1 15.3 925.4
Transmission
and distribution
costs (251.3) (236.5) - (236.5)
Administrative
expenses (including
goodwill amortisation) (305.9) (319.9) (1.3) (321.2)
Other
operating income 11.6 11.9 - 11.9
----------------------------------------------
Operating profit
before goodwill
amortisation 518.9 436.9 14.0 450.9
Goodwill amorisation (66.8) (71.3) - (71.3)
----------------------------------------------
Operating profit 2 452.1 365.6 14.0 379.6
Share of
operating
loss in
joint ventures (0.5) (3.0) - (3.0)
Share of
operating
profit in
associates 0.1 - - -
----------------------------------------------
Profit on
ordinary activities
before interest 451.7 362.6 14.0 376.6
Net interest
and similar charges
- Group (122.5) (105.3) (3.0) (108.3)
- Joint venntures (2.6) (3.0) - (3.0)
----------------------------------------------
(125.1) (108.3) (3.0) (111.3)
----------------------------------------------
Profit on
ordinary activities
before goodwill
amortisation
and taxation 393.4 325.6 11.0 336.6
Goodwill amortisation (66.8) (71.3) - (71.3)
Profit on
ordinary activities
before taxation 326.6 254.3 11.0 265.3
Taxation 3 (106.2) (80.8) (3.4) (84.2)
----------------------------------------------
Profit after
taxation 220.4 173.5 7.6 181.1
Minority interests (2.6) (2.7) - (2.7)
----------------------------------------------
Profit for
the period 217.8 170.8 7.6 178.4
Dividends 5 (174.9) (265.2) - (265.2)
----------------------------------------------
Profit
/(loss)
retained 42.9 (94.4) 7.6 (86.8)
----------------------------------------------
Earnings per
ordinary share 4 11.91p 9.27p 0.41p 9.68p
Adjusting item -
goodwill
amortisation 3.65p 3.87p - 3.87p
----------------------------------------------
Earnings per
ordinary
share before
goodwill
amortisation 4 15.56p 13.14p 0.41p 13.55p
----------------------------------------------
Diluted
earnings per
ordinary share 4 11.83p 9.66p
Adjusting item -
goodwill
amortisation 3.60p 3.86p
---------- ----------
Diluted
earnings per
ordinary
share before
goodwill
amortisation 4 15.43p 13.52p
---------- ----------
Dividends
per ordinary
share 5 9.50p 14.354p
---------- ----------
The Notes on pages x to x form part of these Accounts.
Statement of Total Recognised Gains and Losses
for the six months ended 30 September 2003
Six months ended 30 September
2003 2002
GBPm GBPm
-------------------------------------------- --------- ---------
Profit for the period 217.8 178.4
Exchange movement on translation of overseas
results and net assets (177.3) (375.6)
Translation differences on foreign currency
hedging 152.9 316.3
-------------------------------------------- --------- ---------
Total recognised gains and losses for the
period 193.4 119.1
-------------------------------------------- --------- ---------
Reconciliation of Movements in Shareholders' Funds
for the six months ended 30 September 2003
Six months ended 30 September
2003 2002
GBPm GBPm
-------------------------------------------- --------- ---------
Profit for the period 217.8 178.4
Dividends (174.9) (265.2)
-------------------------------------------- --------- ---------
Profit/(loss) retained 42.9 (86.8)
Exchange movement on translation of overseas
results and net assets (177.3) (375.6)
Translation differences on foreign currency
hedging 152.9 316.3
Share capital issued 5.4 6.4
-------------------------------------------- --------- ---------
Net movement in shareholders' funds 23.9 (139.7)
Opening shareholders' funds 4,638. 3 4,731.4
-------------------------------------------- --------- ---------
Closing shareholders' funds 4,662.2 4,591.7
-------------------------------------------- --------- ---------
The Notes on pages x to x form part of these Accounts.
Group Cash Flow Statement
for the six months ended 30 September 2003
Six months ended 30 September
2003 2002
Notes GBPm GBPm
-------------------------------------------- --------- ---------
Cash inflow from operating activities 6 690.4 620.5
Dividends received from joint ventures 0.2 0.7
Returns on investments and servicing
of finance (128.5) (162.0)
Taxation (96.8) (117.9)
-------------------------------------------- --------- ---------
Free cash flow 465.3 341.3
Capital expenditure and financial
investment (387.7) (349.8)
-------------------------------------------- --------- ---------
Cash flow before acquisitions and
disposals 77.6 (8.5)
Acquisitions and disposals (3.5) 1,907.9
Equity dividends paid (219.7) (258.6)
-------------------------------------------- --------- ---------
Cash (outflow)/inflow before use of liquid
resources and financing (145.6) 1,640.8
Management of liquid resources 7 (40.8) (807.5)
Financing
- Issue of ordinary share capital 5.4 6.4
- Redemption of preferred stock of
PacifiCorp (4.6) (5.1)
- Cancellation of swaps 76.1 -
- Increase/(decrease) in debt 7 421.5 (811.3)
-------------------------------------------- --------- ---------
498.4 (810.0)
-------------------------------------------- --------- ---------
Increase in cash in period 7 312.0 23.3
-------------------------------------------- --------- ---------
Free cash flow represents cash flow from operating activities after
adjusting for dividends received from joint ventures, returns on
investments and servicing of finance and taxation.
Reconciliation of Net Cash Flow to Movement in Net Debt
for the six months ended 30 September 2003
Six months ended 30 September
2003 2002
Note GBPm GBPm
-------------------------------------------- --------- ---------
Increase in cash in period 312.0 23.3
Cash (inflow)/outflow from
(increase)/decrease in debt (421.5) 811.3
Cash outflow from movement in
liquid resources 40.8 807.5
--------- ---------
Change in net debt resulting from
cash flows (68.7) 1,642.1
Net debt disposed - 100.0
Foreign exchange movement 115.6 273.6
Other non-cash movements (5.9) (1.3)
--------- ---------
Movement in net debt in period 41.0 2,014.4
Net debt at end of previous period (4,321.0) (6,208.4)
--------- ---------
Net debt at end of period 7 (4,280.0) (4,194.0)
--------- ---------
The Notes on pages x to x form part of these Accounts.
Group Balance Sheet
as at 30 September 2003
30 30 31
September September March
2003 2002 2003
Notes GBPm GBPm GBPm
----------------------------- --------- ---------- ----------
Fixed Assets
Intangible assets -
goodwill 2,109.9 2,347.4 2,280.6
Tangible assets 8,984.9 8,771.3 9,028.7
Investments
- Investments in
joint ventures:
Share of gross assets 108.4 107.9 111.9
Share of gross
liabilities (108.3) (107.8) (111.8)
----------------------------------
0.1 0.1 0.1
- Loans to joint
ventures 38.2 35.8 40.2
----------------------------------
38.3 35.9 40.3
- Investments in
associates 2.8 3.4 2.8
- Other investments 269.6 254.0 247.3
----------------------------------
310.7 293.3 290.4
----------------------------------
11,405.5 11,412.0 11,599.7
----------------------------------
Current assets
Stocks 225.5 182.3 154.6
Debtors
- Gross debtors 1,528.5 1,371.6 1,684.5
- Less non-recourse
financing (139.8) (163.3) (148.2)
----------------------------------
1,388.7 1,208.3 1,536.3
Short-term bank and
other deposits 1,007.4 1,224.5 664.6
----------------------------------
2,621.6 2,615.1 2,355.5
----------------------------------
Creditors: amounts
falling due within
one year
Loans and other
borrowings (304.4) (587.8) (208.5)
Other creditors (1,553.0) (1,520.8) (1,785.7)
----------------------------------
(1,857.4) (2,108.6) (1,994.2)
----------------------------------
Net current assets 764.2 506.5 361.3
----------------------------------
Total assets less
current liabilities 12,169.7 11,918.5 11,961.0
Creditors: amounts
falling due after
more than one year
Loans and other
borrowings (including
convertible bonds) (4,983.0) (4,830.7) (4,777.1)
Provisions for
liabilities and
charges
- Deferred tax (1,292.7) (1,271.3) (1,301.9)
- Other provisions (592.0) (624.3) (610.9)
----------------------------------
(1,884.7) (1,895.6) (1,912.8)
Deferred income (573.6) (526.5) (558.9)
----------------------------------
Net assets 2 4,728.4 4,665.7 4,712.2
----------------------------------
Called up share
capital 928.7 927.2 928.0
Share premium 2,269.1 2,259.6 2,264.4
Revaluation reserve 42.6 44.5 43.5
Capital redemption
reserve 18.3 18.3 18.3
Merger reserve 406.4 406.4 406.4
Profit and loss
account 997.1 935.7 977.7
----------------------------------
Equity shareholders' funds 4,662.2 4,591.7 4,638.3
Minority interests
(including non-equity) 66.2 74.0 73.9
----------------------------------
Capital employed 4,728.4 4,665.7 4,712.2
----------------------------------
Net asset value per
ordinary share 4 249.1p 247.0p 249.2p
----------------------------------
The Notes on pages x to x form part of these Accounts.
Approved by the Board on 4 November 2003 and signed on its behalf by
Charles Miller Smith David Nish
Chairman Finance Director
Notes to the Interim Accounts for the six months ended
30 September 2003
1 Basis of preparation
(a) These interim 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 interim 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
interim Accounts are detailed in Note 10.
2 Segmental information
(a) Turnover by segment
Three months ended 30 September
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 509.6 430.7 (8.4) (8.3) 501.2 422.4
Infrastructure
Division
- Power
Systems 156.2 157.6 (77.9) (82.2) 78.3 75.4
------------------------------- ------ ------
United
Kingdom total
- continuing
operations 579.5 497.8
------------------------------- ------ ------
United
States -
continuing
operations
US Division
PacifiCorp 625.8 649.6 (0.5) (1.0) 625.3 648.6
PPM 77.7 65.2 (2.7) (2.2) 75.0 63.0
------------------------------- ------ ------
United
States total
- continuing
operations 700.3 711.6
Total
continuing
operations (i) 1,279.8 1,209.4
------------------------------- ------ ------
Six months ended 30 September
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 1,018.4 865.5 (16.3) (16.6) 1,002.1 848.9
Infrastructure
Division -
Power
Systems 316.9 314.9 (158.6) (166.3) 158.3 148.6
--------------------------------- ------ ------
United
Kingdom
total -
continuing
operations 1,160.4 997.5
--------------------------------- ------ ------
United
States -
continuing
operations
US Division
PacifiCorp 1,222.9 1,296.1 (1.1) (1.7) 1,221.8 1,294.4
PPM 148.3 131.0 (5.3) (2.6) 143.0 128.4
--------------------------------- ------- -------
United
States total
- continuing
operations 1,364.8 1,422.8
--------------------------------- ------- -------
Total
continuing
operations 2,525.2 2,420.3
--------------------------------- ------- -------
United
Kingdom -
discontinued
operations
Southern
Water - 26.7 - - - 26.7
--------------------------------- ------- -------
United
Kingdom
total -
discontinued
operations - 26.7
--------------------------------- ------- -------
Total (i) 2,525.2 2,447.0
--------------------------------- ------- -------
(b) Operating profit/(loss) by segment
Three months ended 30 September
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 4.9 (1.2) 3.7 (11.2) (1.3) (12.5)
Infrastructure
Division -
Power
Systems 88.6 - 88.6 91.4 - 91.4
------ -------- ------ --------- --------- --------
United
Kingdom
total -
continuing
operations 93.5 (1.2) 92.3 80.2 (1.3) 78.9
------ -------- ------ --------- --------- --------
United
States -
continuing
operations
US Division
PacifiCorp 149.7 (32.1) 117.6 140.8 (33.3) 107.5
PPM 9.9 (0.2) 9.7 6.8 - 6.8
------ -------- ------ --------- --------- --------
United
States total
- continuing
operations 159.6 (32.3) 127.3 147.6 (33.3) 114.3
------ -------- ------ --------- --------- --------
Total
continuing
operations 253.1 (33.5) 219.6 227.8 (34.6) 193.2
------ -------- ------ --------- --------- --------
Six months ended 30 September
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 7.0 (2.4) 4.6 (19.6) (2.6) (22.2)
Infrastructure
Division -
Power Systems 178.6 - 178.6 170.4 - 170.4
------ -------- ------ --------- --------- --------
United
Kingdom
total -
continuing
operations 185.6 (2.4) 183.2 150.8 (2.6) 148.2
------ -------- ------ --------- --------- --------
United
States -
continuing
operations
US Division
PacifiCorp 318.2 (64.1) 254.1 274.9 (68.7) 206.2
PPM 15.1 (0.3) 14.8 11.2 - 11.2
------ -------- ------ --------- --------- --------
United
States
total -
continuing
operations 333.3 (64.4) 268.9 286.1 (68.7) 217.4
------ -------- ------ --------- --------- --------
Total
continuing
operations 518.9 (66.8) 452.1 436.9 (71.3) 365.6
------ -------- ------ --------- --------- --------
United
Kingdom -
discontinued
operations
Southern
Water - - - 14.0 - 14.0
------ -------- ------ --------- --------- --------
United
Kingdom
total -
discontinued
operations - - - 14.0 - 14.0
------ -------- ------ --------- --------- --------
Total 518.9 (66.8) 452.1 450.9 (71.3) 379.6
------ -------- ------ --------- --------- --------
(c) Net assets by segment
30 Sept 30 Sept 31 March
2003 2002 2003
Note GBPm GBPm GBPm
------------------------------- -------- --------- ---------
United Kingdom -
continuing operations
UK Division -
Integrated Generation
and Supply 845.7 793.2 908.4
Infrastructure
Division - Power
Systems 2,248.5 2,127.1 2,175.4
------------------------------- -------- --------- ---------
United Kingdom total -
continuing operations 3,094.2 2,920.3 3,083.8
------------------------------- -------- --------- ---------
United States -
continuing operations
US Division
PacifiCorp 6,539.2 6,844.3 6,787.2
PPM 423.5 260.5 375.8
------------------------------- -------- --------- ---------
United States total -
continuing operations 6,962.7 7,104.8 7,163.0
------------------------------- -------- --------- ---------
Total continuing
operations 10,056.9 10,025.1 10,246.8
------------------------------- -------- --------- ---------
Unallocated net
liabilities (ii) (5,328.5) (5,359.4) (5,534.6)
------------------------------- -------- --------- ---------
Total 4,728.4 4,665.7 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 six month
period ended 30 September 2003 reflects the anticipated effective
rate for the year ending 31 March 2004 of 27% (2003: 25%) on the
profit before goodwill amortisation and taxation as detailed below:
Six months ended 30 September
2003 2002
GBPm GBPm
---------------------------------------------- -------- -------
Profit on ordinary activities before taxation 326.6 265.3
Adjusting item - goodwill amortisation 66.8 71.3
---------------------------------------------- -------- -------
Profit on ordinary activities before goodwill
amortisation and taxation 393.4 336.6
---------------------------------------------- -------- -------
4 Earnings and net asset value per ordinary share
(a) Earnings per ordinary share have been calculated for all
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 Six months ended
30 September 30 September
2003 2002 2003 2002
------------------------- -------- -------- -------- --------
Basic earnings per share
Profit for the period
(GBP million) 103.2 100.7 217.8 178.4
Weighted average share
capital (number of
shares, million) 1,828.5 1,843.1 1,829.5 1,842.7
------------------------- -------- -------- -------- --------
Diluted earnings per
share
Profit for the period
(GBP million) 104.7 100.7 219.3 178.4
Weighted average share
capital (number of
shares, million) 1,874.0 1,846.1 1,854.4 1,846.4
------------------------- -------- -------- -------- --------
The difference between the basic and the diluted weighted average
share capital is attributable to outstanding share options and
shares held in trust in respect of certain of the group's employee
share schemes and the convertible bonds.
(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 September Six months ended 30 September
Continuing Continuing Continuing
operations operations operations Continuing Discontinued
and and and operations operations Total
Total Total Total
2003 2002 2003 2002 2002 2002
GBPm GBPm GBPm GBPm GBPm GBPm
--------- ----- ------- -------- --------- ----------- -----
Profit
for the
period 103.2 100.7 217.8 170.8 7.6 178.4
Adjusting
item -
goodwill
amort-
isation 33.5 34.6 66.8 71.3 - 71.3
--------- ----- ------- -------- --------- ----------- -----
Adjusted
earnings 136.7 135.3 284.6 242.1 7.6 249.7
--------- ----- ------- -------- --------- ----------- -----
ScottishPower assesses the performance of the group by adjusting
earnings per share, calculated in accordance with FRS 14, to exclude
items it considers to be non-recurring or non-operational in nature
and believes that the exclusion of such items provides a better
comparison of business performance. Consequently, an adjusted
earnings per share figure is presented for all 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 Sept 30 Sept 31 March
2003 2002 2003
---------------------------------- -------- -------- ---------
Net assets (as adjusted) (GBP
million) 4,555.1 4,555.1 4,600.1
Number of ordinary shares in issue
at the period end (as adjusted)
(number of shares, million) 1,828.7 1,844.5 1,845.6
---------------------------------- -------- -------- ---------
5 Dividends per ordinary share
The second interim dividend of 4.75 pence per ordinary share is
payable on 15 December 2003 to shareholders on the register at 14
November 2003. This dividend, together with the first interim
dividend for the quarter ended 30 June 2003 of 4.75 pence per
ordinary share, represents total dividends of 9.50 pence per
ordinary share for the first half of the financial year. In the
previous year, a second interim dividend of 7.177 pence was declared
for the quarter ended 30 September 2002, representing total
dividends of 14.354 pence per ordinary share for the first half of
the financial year.
6 Reconciliation of operating profit to net cash inflow from
operating activities
Six months ended 30 September
2003 2002
GBPm GBPm
-------------------------------------------- -------- --------
Operating profit 452.1 379.6
Depreciation and amortisation 286.0 301.2
Profit on sale of tangible fixed assets (5.2) (0.8)
Release of deferred income (10.0) (6.0)
Movements in provisions for liabilities and
charges (33.1) (53.0)
Increase in stocks (76.5) (30.8)
Decrease in debtors 200.8 17.3
(Decrease)/increase in creditors (123.7) 13.0
-------------------------------------------- -------- --------
Net cash inflow from operating activities 690.4 620.5
-------------------------------------------- -------- --------
7 Analysis of net debt
At Other At 30
1 April non-cash September
2003 Cash Exchange changes 2003
flow
GBPm GBPm GBPm GBPm GBPm
----------- -------- -------- -------- --------- ----------
Cash at
bank 430.1 308.3 (6.1) - 732.3
Overdrafts (21.1) 3.7 0.8 - (16.6)
--------
312.0
Debt due
after 1
year (4,759.6) (421.1) 110.7 103.7 (4,966.3)
Debt due
within 1
year (187.4) (0.4) 9.6 (109.6) (287.8)
Finance
leases (17.5) - 0.8 - (16.7)
--------
(421.5)
Other
deposits 234.5 40.8 (0.2) - 275.1
----------- -------- -------- -------- --------- ----------
Total (4,321.0) (68.7) 115.6 (5.9) (4,280.0)
----------- -------- -------- -------- --------- ----------
'Other non-cash changes' to net debt represents the movement in debt
of GBP109.6 million due after more than one year to due within one
year, amortisation of finance costs of GBP1.4 million and finance
costs of GBP4.5 million representing the effects of the Retail Price
Index (RPI) on bonds carrying an RPI coupon.
8 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.
Six months ended 30 September
2003 2002
(a)Reconciliation of profit for the financial GBPm GBPm
period to US GAAP:
------------------------------------------------ ------- --------
Profit for the financial period under UK GAAP 217.8 178.4
US GAAP adjustments:
Amortisation of goodwill 66.8 71.3
US regulatory net assets (45.3) (49.1)
Pensions 4.3 (7.4)
Depreciation on revaluation uplift 0.9 1.0
Decommissioning and mine reclamation liabilities (4.9) (13.5)
PacifiCorp Transition Plan costs (22.7) (8.3)
FAS 133 67.1 196.2
Other (0.2) (12.1)
------- --------
283.8 356.5
Deferred tax effect of US GAAP adjustments 21.6 1.1
------- --------
Profit for the period under US GAAP before
cumulative adjustment for FAS 143 (2002 C15 and
C16) 305.4 357.6
Cumulative adjustment for FAS 143 (2002 C15 and
C16) (0.6) 141.1
------- --------
Profit for the period under US GAAP 304.8 498.7
------- --------
Earnings per share under US GAAP 16.66p 27.06p
------- --------
Diluted earnings per share under US GAAP 16.52p 27.01p
------- --------
The adjustment described as 'FAS 133' comprises FAS 133 and
subsequent revising standards, FAS 138 and FAS 149, together with
guidance issued by the Derivatives Implementation Group ('DIG').
The cumulative adjustment to the profit under US GAAP for the six
months ended 30 September 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 the profit under US GAAP for the six
months ended 30 September 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
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 Sept 30 Sept 31 March
2003 2002 2003
GBPm GBPm GBPm
--------------------------------- --------- --------- ---------
Equity shareholders' funds under 4,662.2 4,591.7 4,638.3
UK GAAP
US GAAP adjustments:
Goodwill 572.3 572.3 572.3
Business combinations (215.9) (158.7) (226.3)
Amortisation of goodwill 109.5 (16.3) 51.0
ESOP shares held in trust (30.1) (36.6) (38.2)
US regulatory net assets 967.9 1,001.6 1,007.9
Pensions (400.5) 218.8 (412.8)
Dividends 87.4 132.7 132.2
Revaluation of fixed assets (54.0) (54.0) (54.0)
Depreciation on revaluation uplift 11.4 9.5 10.5
Decommissioning and mine
reclamation liabilities (7.2) 25.6 0.4
PacifiCorp Transition Plan costs 31.3 67.4 56.1
FAS 133 (57.4) (93.2) (66.8)
Other (7.1) (15.5) (12.1)
Deferred tax:
Effect of US GAAP adjustments (135.1) (393.8) (157.4)
Effect of differences in (23.3) (18.3) (21.4)
methodology
--------------------------------- --------- --------- ---------
Equity shareholders' funds under
US GAAP 5,511.4 5,833.2 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 September 2003 of GBP57.4 million is offset by a US regulatory
net asset of GBP362.3 million included within 'US regulatory net
assets' above.
9 Contingent liabilities
There have been no material changes to the group's contingent
liabilities disclosed in the 2002/03 Annual Report & Accounts.
10 Exchange rates
The exchange rates applied in the preparation of the interim
Accounts were as follows:
Six months ended 30 September
2003 2002
--------------------------------- ----------- -----------
Average rate for quarters ending
30 June $1.62/GBP $1.46/GBP
30 September $1.61/GBP $1.55/GBP
--------------------------------- ----------- -----------
Closing rate as at 30 September $1.66/GBP $1.57/GBP
--------------------------------- ----------- -----------
The closing rate for 31 March 2003 was $1.58/GBP.
Independent Review Report to Scottish Power plc
Introduction
We have been instructed by the company to review the financial information, contained in the interim report, which comprises the Group Profit and Loss Accounts, the Statement of Total Recognised Gains and Losses, the Reconciliation of Movements in Shareholders' Funds, 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 interim report and considered whether it contains any apparent misstatements or material inconsistencies with the financial information.
Directors' responsibilities
The interim report, including the financial information contained therein, is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the interim report in accordance with the Listing Rules of the Financial Services Authority which require that the accounting policies and presentation applied to the interim 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 September 2003 and for the six months ended 30 September 2003.
PricewaterhouseCoopers LLP Chartered Accountants Glasgow 4 November 2003